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Published: 2008-03-26

Agreement and Plan of Reorganization - eToys Inc. and BabyCenter Inc.



                        AGREEMENT AND PLAN OF REORGANIZATION
                                          
                                    BY AND AMONG
                                          
                                     ETOYS INC.
                                          
                                 BABYCENTER, INC.,
                                          
                       AND, WITH RESPECT TO ARTICLE VII ONLY,
                                          
                                    PAT KENEALY
                                          
                           AS STOCKHOLDER REPRESENTATIVE
                                          
                             DATED AS OF APRIL 18, 1999



                                          
                        AGREEMENT AND PLAN OF REORGANIZATION
                                          

        This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of April 18, 1999 by and among eToys Inc., a Delaware
corporation ("Buyer"), BabyCenter, Inc., a Delaware corporation (the "Company"),
and, with respect to Article VII only, Pat Kenealy as Stockholder
Representative.

                                       RECITALS

        WHEREAS, the Boards of Directors of each of the Company and Buyer
believe it is in the best interests of each company and their respective
Stockholders that Buyer acquire the Company through the statutory merger of a
to-be-formed, wholly owned subsidiary of Buyer with and into the Company (the
"Merger") and, in furtherance thereof, have approved the Merger.   

        WHEREAS, pursuant to the Merger, among other things, all of the issued
and outstanding shares of capital stock of the Company shall be converted into
the right to receive shares of common stock of Buyer.    

        WHEREAS, a portion of the shares of common stock of Buyer otherwise
issuable by Buyer in connection with the Merger shall be placed in escrow by
Buyer for purposes of satisfying damages, losses, expenses and other similar
charges which result from breaches of the representations, warranties and
covenants of the Company contained herein. 

        WHEREAS, the parties intend that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"). 

        WHEREAS, the Company and Buyer desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.   

        NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:   

                                     ARTICLE I

                                    THE MERGER

        1.1.         FORMATION OF MERGER SUBSIDIARY.  

             1.1.1.  As promptly as practicable following the execution
                     of this Agreement, Buyer shall cause BCI
                     Acquisition Company, a Delaware corporation
                     ("Merger Sub"), to be organized for the sole
                     purpose of effectuating the Merger contemplated
                     hereby. 

             1.1.2.  The Certificate of Incorporation and Bylaws of
                     Merger Sub shall be in such forms as shall be
                     determined by Buyer.




             1.1.3.  The unauthorized capital stock of Merger Sub shall
                     initially consist of 1,000 shares of common stock,
                     $.0001 par value per share, which shall be issued
                     to Buyer at a price of $1.00 per share.

             1.1.4.  As promptly as practicable following the execution
                     of this Agreement and the organization of Merger
                     Sub, Buyer shall (i) elect the directors of Merger
                     Sub, (ii) cause the directors of Merger Sub to
                     elect the officers of Merger Sub, and (iii) cause
                     the directors of Merger Sub to ratify and approve
                     this Agreement and to approve the form of the
                     Merger Agreement (as defined below).

        1.2. THE MERGER.   At the Effective Time (as defined in Section 1.3) 
             and subject to and upon the terms and conditions of this Agreement 
             and the applicable provisions of the Delaware General Corporation 
             Law ("DGCL"), Merger Sub shall be merged with and into the 
             Company, the separate corporate existence of Merger Sub shall 
             cease and the Company shall continue as the surviving corporation 
             and as a wholly-owned subsidiary of Buyer. The surviving 
             corporation after the Merger is hereinafter sometimes referred 
             to as the "Surviving Corporation."

        1.3. EFFECTIVE TIME.   Unless this Agreement is earlier terminated 
             pursuant to Section 8.1, the closing of the Merger (the "Closing") 
             will take place as promptly as practicable, but no later than 
             two (2) business days following the approval of the Merger by 
             either (i) written consent of the Company's Stockholders or 
             (ii) consent of the Company's Stockholders at the Company 
             Stockholders Meeting (as described in Section 5.1) and the 
             satisfaction or waiver of the conditions set forth in 
             Article VI, at the offices of Irell & Manella LLP, 333 South 
             Hope Street, Suite 3300, Los Angeles, California, 90071 unless 
             another place or time is agreed to in writing by Buyer and the 
             Company.  The date upon which the Closing actually occurs is 
             herein referred to as the "Closing Date." On the Closing Date, 
             the parties hereto shall cause the Merger to be consummated by 
             filing an Agreement of Merger (or like instrument) substantially 
             in the form attached hereto as Exhibit A (the "Merger Agreement") 
             with the Secretary of State of the State of Delaware, in 
             accordance with the applicable provisions of the DGCL (the time 
             of acceptance by such Secretary of State of such filing being 
             referred to herein as the "Effective Time").

        1.4. EFFECT OF THE MERGER.   At the Effective Time, the effect of the 
             Merger shall be as provided in the applicable provisions of 
             Delaware law.  Without limiting the generality of the foregoing, 
             and subject thereto, at the Effective Time, all the property, 
             rights, privileges, powers and franchises of the Company and 
             Merger Sub shall vest in the Surviving Corporation, and all debts,
             liabilities and duties of the Company and Merger Sub shall become
             the debts, liabilities and duties of the Surviving Corporation.  

                                      -3-




        1.5. CERTIFICATE OF INCORPORATION; BYLAWS. 

             1.5.1.  Unless otherwise determined by Buyer prior to the
                     Effective Time, at the Effective Time, the
                     Certificate of Incorporation of Merger Sub shall be
                     the Certificate of Incorporation of the Surviving
                     Corporation until thereafter amended as provided by
                     law and such Certificate of Incorporation.

             1.5.2.  Unless otherwise determined by Buyer prior to the
                     Effective Time, the Bylaws of Merger Sub, as in
                     effect immediately prior to the Effective Time,
                     shall be the Bylaws of the Surviving Corporation
                     until thereafter amended.    

        1.6. DIRECTORS AND OFFICERS.   The directors of Merger Sub
             immediately prior to the Effective Time shall be the
             directors of the Surviving Corporation immediately after the
             Effective Time, each to hold the office of director of the
             Surviving Corporation in accordance with the provisions of
             the applicable laws of the State of Delaware and the
             Certificate of Incorporation and Bylaws of the Surviving
             Corporation until their successors are duly qualified and
             elected. The officers of Merger Sub immediately prior to the
             Effective Time shall be the officers of the Surviving
             Corporation immediately after the Effective Time, each to
             hold office in accordance with the provisions of the Bylaws
             of the Surviving Corporation.  In particular, Matthew
             Glickman shall be the Chief Executive Officer of the
             Surviving Corporation and Mark Selcow shall be President of
             the Surviving Corporation.

        1.7. CERTAIN DEFINITIONS.   For all purposes of this Agreement,
             the following terms shall have the following meanings:

             "Buyer Common Stock" shall mean shares of the common stock,
             $.0001 par value per share, of Buyer.

             "Buyer IPO" shall mean the initial public offering of Buyer
             Common Stock to be made pursuant to the Buyer Registration
             Statement, which is anticipated to be consummated prior to
             the consummation of the Merger.

             "Buyer Registration Statement" means Amendment No. 1 to the
             Registration Statement on Form S-1 of Buyer pertaining to
             the Buyer IPO, which was filed with the SEC on April 5,
             1999.

             "Buyer Stock Split" shall mean the 3-for-1 stock split of
             Buyer Common Stock that is expected to be effected
             concurrently with the consummation of the Buyer IPO.  All
             references to numbers of shares of Buyer Common Stock herein
             are to numbers of such shares before consummation of the
             Buyer Stock Split.

             "Code" shall mean the Internal Revenue Code of 1986, as
             amended.

             "Company Capital Stock" shall mean all shares of Company
             Common Stock, Company Preferred Stock and any other capital
             stock of the Company.

                                      -4-




             "Company Common Stock" shall mean shares of the Common Stock
             of the Company.

             "Company Option Plan" shall mean the BabyCenter, Inc. 1997
             Stock Plan.

             "Company Options" shall mean all issued and outstanding
             options, warrants and other rights to acquire or receive
             Company Capital Stock (whether or not vested).

             "Company Preferred Stock" shall mean shares of the Series A
             Preferred Stock, the Series B Preferred Stock, the Series C
             Preferred Stock and any other Series of preferred stock of
             the Company.

             "Exchange Act" shall mean the Securities Exchange Act of
             1934, as amended.

             "Exchange Ratio" shall equal the quotient obtained by
             dividing (i) 6,240,000 by (ii) the sum of: (x) the aggregate
             number of Total Outstanding Company Shares and (y) the
             aggregate number of shares of Company Capital Stock subject
             to Company Options (in the case of Company Options, if any,
             exercisable for convertible securities, computed on a
             Company Common Stock equivalent basis, giving effect to the
             conversion ratio governing each such convertible security)
             outstanding immediately prior to the Effective Time.

             "GAAP" shall mean generally accepted accounting principles
             in effect from time to time in the United States, applied on
             a consistent basis for the relevant entity.

             "Knowledge" of a person shall mean the actual knowledge of
             the person, and knowledge of a corporation shall mean the
             actual knowledge of an officer or director of the
             corporation, in each case following reasonable
             investigation. 

             "Material Adverse Effect" shall mean any change, event or
             effect that is materially adverse to the business, assets
             (including intangible assets), financial condition, results
             of operations or prospects of the entity referred to.    

             "Related Agreements" shall mean all such ancillary
             agreements required in this Agreement to be executed and
             delivered in connection with the transactions contemplated
             hereby. 

             "SEC" shall mean the Securities Exchange Commission. 

             "Securities Act" shall mean the Securities Act of 1933, as
             amended.    

             "Stockholder" shall mean each holder of any Company Capital
             Stock immediately prior to the Effective Time.

             "Total Outstanding Company Shares" shall be the aggregate
             number of shares of Company Capital Stock outstanding
             immediately prior to the Effective Time (in the case of
             convertible securities, computed on a Company Common Stock

                                      -5-




             equivalent basis, giving effect to the conversion ratio
             governing each such convertible security).

        1.8. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
             CORPORATIONS. 

             1.8.1.  EFFECT ON COMPANY CAPITAL STOCK.   At the Effective
                     Time, by virtue of the Merger and without any
                     action on the part of Merger Sub, the Company or
                     the Stockholders, each share of Company Capital
                     Stock issued and outstanding immediately prior to
                     the Effective Time (other than any Dissenting
                     Shares (as defined in Section 1.8.6)) will be
                     canceled and extinguished and be converted
                     automatically into the right to receive, upon
                     surrender of the certificate representing such
                     share of Company Capital Stock in the manner
                     provided for in this Section 1.8.1, a fraction of a
                     share of Buyer Common Stock (subject to
                     Section 1.8.5) equal to the Exchange Ratio.  In the
                     case of Company Capital Stock consisting of
                     convertible securities (including, without
                     limitation, shares of Company Preferred Stock that
                     remain outstanding immediately prior to the
                     Effective Time), the Exchange Ratio shall be
                     applied to such shares on a Company Common Stock
                     equivalent basis, giving effect to the conversion
                     ratio governing each such convertible security. 
                     All shares of Buyer Common Stock issued in exchange
                     for shares of Company Capital Stock subject to
                     Company repurchase rights or vesting schedules
                     shall be subject to the same repurchase rights
                     and/or vesting schedules and other terms as
                     applicable to such shares of Company Capital Stock,
                     with Buyer succeeding to the rights of the Company
                     thereunder and with a proportionate adjustment to
                     any per share repurchase price applicable to such
                     shares to reflect the Exchange Ratio.
                     Notwithstanding anything contained in this Section
                     1.8.1 to the contrary, each share of Company
                     Capital Stock issued and held in the Company's
                     treasury immediately prior to the Effective Time
                     shall, by virtue of the Merger, cease to be
                     outstanding and shall be canceled and retired
                     without payment of any consideration therefor.

             1.8.2.  EFFECT ON COMPANY OPTIONS; AGREEMENT CONCERNING
                     WARRANTS.   At the Effective Time, each Company
                     Option will, in connection with the Merger, be
                     assumed by Buyer. Each Company Option so assumed by
                     Buyer under this Agreement shall continue to have,
                     and be subject to, the same terms and conditions,
                     including vesting, applicable thereto prior to the
                     Effective Time, except that (A) such assumed
                     Company Option will be exercisable for that number
                     of whole shares of Buyer Common Stock equal to the
                     product obtained by multiplying the number of
                     shares of Company Capital Stock that were issuable
                     upon exercise in full of such assumed Company
                     Option immediately prior to the Effective Time (in
                     the case of Company Options, if any, exercisable
                     for convertible securities, computed on a Company
                     Common Stock equivalent basis, giving effect to the
                     conversion ratio governing each such convertible
                     security) by the Exchange Ratio, rounded down to
                     the nearest whole number of shares of 

                                      -6-




                     Buyer Common Stock and (B) the per share exercise price 
                     for the shares of Buyer Common Stock issuable upon 
                     exercise of such assumed Company Option shall be equal 
                     to the quotient obtained by dividing the exercise
                     price per share of Company Capital Stock at which
                     such Company Option was exercisable immediately
                     prior to the Effective Time (in the case of Company
                     Options, if any, exercisable for convertible
                     securities, computed on a Company Common Stock
                     equivalent basis, giving effect to the conversion
                     ratio governing each such convertible security) by
                     the Exchange Ratio, rounded up to the nearest whole
                     cent.  It is the intention of the parties that
                     options issued by Buyer following the Closing will,
                     to the extent permitted by applicable law, qualify
                     as incentive stock options as defined in Section
                     422 of the Code, to the extent Company Options in
                     respect of which Buyer options were issued
                     qualified as incentive stock options immediately
                     prior to the Closing. The Company agrees to use its
                     commercially reasonable efforts to cause all other
                     warrants to acquire Company Capital Stock
                     (including without limitation that certain Warrant
                     Agreement dated as of October 28, 1998 issued to
                     Comdisco, Inc., a Delaware corporation) to be
                     exercised in full or otherwise cancelled (without
                     the payment of any consideration) prior to the
                     Effective Time, and to provide evidence thereof
                     reasonably satisfactory to the Buyer prior to or at
                     the Closing.  Notwithstanding anything herein to
                     the contrary, prior to the Effective Time, the
                     Company shall cause all commitments to issue or
                     grant options or similar rights to purchase or
                     receive Company Capital Stock to be terminated or,
                     to the extent the Company elects not to or is
                     unable to terminate such commitments, to be treated
                     as outstanding Company Options for purposes of
                     computing the Exchange Ratio; PROVIDED, HOWEVER,
                     that the Company covenants to terminate prior to
                     the Effective Time the commitment previously made
                     to Mr. Steve Fram relating to the possible issuance
                     to him of up to .25% equity interest in the
                     Company.

             1.8.3.  EFFECT ON CAPITAL STOCK OF MERGER SUB.   Each share
                     of common stock, $.0001 par value per share, of
                     Merger Sub issued and outstanding immediately prior
                     to the Effective Time shall be converted into and
                     exchanged for one validly issued, fully paid and
                     nonassessable share of common stock, $.0001 par
                     value per share, of the Surviving Corporation. Each
                     stock certificate of Merger Sub evidencing
                     ownership of any such shares shall continue to
                     evidence ownership of such shares of capital stock
                     of the Surviving Corporation.

             1.8.4.  ADJUSTMENT TO BUYER COMMON STOCK.   The number of
                     shares of Buyer Common Stock issuable hereunder
                     shall be adjusted to reflect fully the effect of
                     any stock split (including, without limitation, the
                     anticipated Buyer Stock Split, if consummated prior
                     to the consummation of the Merger), reverse split,
                     stock dividend (including any dividend or
                     distribution of securities convertible into Buyer
                     Common Stock or Company Capital Stock),
                     reorganization, recapitalization or other like

                                      -7-




                     change with respect to Buyer Common Stock or
                     Company Capital Stock occurring after the date
                     hereof and prior to the Effective Time. 

             1.8.5.  FRACTIONAL SHARES.  Notwithstanding anything to the
                     contrary in this Agreement, no fractional shares of
                     Buyer Common Stock shall be issued pursuant to the
                     Merger. In lieu of the issuance of any fractional
                     share of Buyer Common Stock pursuant to the Merger,
                     cash adjustments will be paid to holders in respect
                     of any fractional share of Company Capital Stock
                     that would otherwise be issuable, and the amount of
                     such cash adjustment shall be equal to the product
                     of (a) such fractional amount and (b) either (i) if
                     Buyer Common Stock is then publicly traded, the
                     average closing price of Buyer Common Stock on the
                     Nasdaq National Market for the five (5) trading
                     days ending on the trading day prior to the
                     Effective Time or (ii) if Buyer Common Stock is not
                     then publicly traded, the fair market value of a
                     share of Buyer Common Stock as determined by the
                     Buyer's Board of Directors in good faith. 

             1.8.6.  DISSENTING SHARES.  Notwithstanding any provision
                     of this Agreement to the contrary, any shares of
                     Company Capital Stock issued and outstanding
                     immediately prior to the Effective Time that are
                     held by a Stockholder who has exercised and
                     perfected appraisal rights for such shares in
                     accordance with the DGCL and who, as of the
                     Effective Time, has not effectively withdrawn or
                     lost such appraisal rights ("Dissenting Shares"),
                     shall not be converted into or represent a right to
                     receive Buyer Common Stock pursuant to Section
                     1.8.1, but the holder thereof shall only be
                     entitled to such rights as are granted by the DGCL.
                     Notwithstanding the provisions of this Section, if
                     any holder of Dissenting Shares shall effectively
                     withdraw or lose (through failure to perfect or
                     otherwise) his or her appraisal rights, then, as of
                     the later of the Effective Time and the occurrence
                     of such event, such holder's shares shall
                     automatically be converted into and represent only
                     the right to receive the shares of Buyer Common
                     Stock to which such Stockholder would otherwise be
                     entitled under Section 1.8.1 (less the number of
                     shares allocable to such Stockholder that have been
                     deposited into the Escrow Fund on such holder's
                     behalf pursuant to Article VII), upon surrender of
                     the certificate representing such shares.  The
                     Company shall give Buyer (i) prompt notice of any
                     written demand for appraisal received by the
                     Company pursuant to the applicable provisions of
                     the DGCL and (ii) the opportunity to participate in
                     all negotiations and proceedings with respect to
                     such demands. The Company shall not, except with
                     the prior written consent of Buyer, voluntarily
                     make any payment with respect to any such demands
                     or offer to settle or settle any such demands. To
                     the extent that the Company makes any payments in
                     respect of any Dissenting Shares prior to the
                     Effective Time, Buyer shall be entitled to recover
                     under the terms of Article VII hereof the aggregate
                     amount by which such payment or payments exceed the
                     aggregate consideration that otherwise would have

                                      -8-




                     been payable in respect of such shares (for this
                     purpose, valued in the same manner specified in
                     Section 7.2.5(b) below).  

             1.8.7.  SURRENDER OF CERTIFICATES.  

                     (a)      Buyer shall appoint a reputable
                              institution to serve as exchange agent
                              (the "Exchange Agent") in the Merger.

                     (b)      Within three (3) business days after the
                              Effective Time, Buyer shall make available
                              to the Exchange Agent for exchange in
                              accordance with this Article I the shares
                              of Buyer Common Stock issuable pursuant to
                              Section 1.8.1 in exchange for all the
                              outstanding shares of Company Capital
                              Stock; provided, however, that on behalf
                              of the Stockholders, pursuant to Section
                              7.2 hereof, Buyer shall deposit into an
                              escrow account 100,000 of the shares of
                              Buyer Common Stock otherwise issuable to
                              the Stockholders pursuant to Section 1.8.1
                              (the "Escrow Amount"). The portion of the
                              Escrow Amount contributed on behalf of
                              each Stockholder shall be in proportion to
                              the aggregate number of shares which such
                              Stockholder would otherwise be entitled to
                              receive in the Merger by virtue of
                              ownership of outstanding shares of Company
                              Capital Stock unless so otherwise agreed
                              by certain Stockholders.

                     (c)      On the Closing Date or promptly
                              thereafter, the Stockholders will
                              surrender the certificates representing
                              their Company Capital Stock (the
                              "Certificates") to the Exchange Agent for
                              cancellation together with a letter of
                              transmittal in such form and having such
                              provisions as Buyer may reasonably
                              request. Buyer shall provide such letter
                              of transmittal to the Stockholders on the
                              Closing Date or as promptly thereafter as
                              practicable. Upon surrender of a
                              Certificate for cancellation to the
                              Exchange Agent, together with such letter
                              of transmittal, duly completed and validly
                              executed in accordance with the
                              instructions thereto, the Exchange Agent
                              will promptly deliver to the holder of
                              such Certificate in exchange therefor a
                              certificate representing the number of
                              whole shares of Buyer Common Stock (less
                              the number of shares of Buyer Common Stock
                              to be deposited in the Escrow Fund on such
                              holder's behalf pursuant to
                              Section 1.8.7(b) and Article VII) to which
                              such Stockholder is entitled pursuant to
                              Section 1.8.1, and the Certificate so
                              surrendered shall forthwith be canceled.
                              Until so surrendered, each outstanding
                              Certificate that, prior to the Effective
                              Time, represented shares of Company
                              Capital Stock will be deemed from and
                              after the Effective Time, for all
                              corporate purposes, other than the payment
                              of dividends, to evidence only the right
                              to receive the number of full shares of
                              Buyer Common Stock into which such shares
                              of Company Capital Stock shall have been
                              converted pursuant to this Article I
                              (except as may otherwise 

                                      -9-




                              be provided under the DGCL with respect to 
                              Dissenting Shares), together with any cash in 
                              lieu of fractional shares.  As soon as 
                              practicable after the Effective Time, and subject
                              to and in accordance with the provisions of
                              Article VII hereof, Buyer shall cause to
                              be distributed to the Escrow Agent (as
                              defined in Article VII) a certificate or
                              certificates representing that number of
                              shares of Buyer Common Stock equal to the
                              Escrow Amount, which shall be registered
                              in the name of the Escrow Agent. Such
                              shares shall be beneficially owned by the
                              holder on whose behalf such shares were
                              deposited in the Escrow Fund and shall be
                              available to compensate Buyer as provided
                              in Article VII.  

                     (d)      No dividends or other distributions
                              declared or made after the Effective Time
                              with respect to Buyer Common Stock with a
                              record date after the Effective Time will
                              be paid to any holder of any unsurrendered
                              Certificate with respect to the shares of
                              Buyer Common Stock represented thereby
                              until the holder of record of such
                              Certificate shall surrender such
                              Certificate. Subject to applicable law,
                              following surrender of any such
                              Certificate, there shall be paid to the
                              record holder of the certificates
                              representing whole shares of Buyer Common
                              Stock issued in exchange therefor, without
                              interest, at the time of such surrender,
                              the amount of dividends or other
                              distributions with a record date after the
                              Effective Time theretofore paid with
                              respect to such whole shares of Buyer
                              Common Stock. 

                     (e)      If any certificate for shares of Buyer
                              Common Stock is to be issued in a name
                              other than that in which the certificate
                              surrendered in exchange therefor is
                              registered, it will be a condition to the
                              issuance thereof that the certificate so
                              surrendered will be properly endorsed and
                              otherwise in proper form for transfer and
                              that the person requesting such exchange
                              will have paid to Buyer or any agent
                              designated by it any transfer or other
                              taxes required by reason of the issuance
                              of a certificate for shares of Buyer
                              Common Stock in any name other than that
                              of the registered holder of the
                              certificate surrendered, or established to
                              the satisfaction of Buyer or any agent
                              designated by it that such tax has been
                              paid or is not payable.   

                     (f)      In the event any certificates evidencing
                              shares of Company Capital Stock shall have
                              been lost, stolen or destroyed, the
                              Exchange Agent shall issue in exchange for
                              such lost, stolen or destroyed
                              certificates, upon the making of an
                              affidavit of that fact by the holder
                              thereof, the number of shares of Buyer
                              Common Stock, if any, as may be required
                              pursuant to Section 1.8.1; provided,
                              however, that Buyer may, in its discretion
                              and as a condition precedent to the
                              issuance thereof, require the owner of
                              such lost,


                                      -10-





                                     stolen or destroyed certificates to 
                                     deliver a bond in such sum as it may 
                                     reasonably direct against any claim that 
                                     may be made against Buyer or the Exchange 
                                     Agent with respect to the certificates 
                                     alleged to have been lost, stolen or 
                                     destroyed. 

                            (g)      Notwithstanding anything to the contrary
                                     in this Section 1.8, none of the Exchange
                                     Agent, the Surviving Corporation or any
                                     party hereto shall be liable to a holder
                                     of shares of Buyer Common Stock or Company
                                     Capital Stock for any amount properly paid
                                     to a public official pursuant to any
                                     applicable abandoned property, escheat or
                                     similar law.

                            (h)      All shares of Buyer Common Stock issued
                                     upon the surrender for exchange of shares
                                     of Company Capital Stock in accordance
                                     with the terms hereof shall be deemed to
                                     be issued in full satisfaction of all
                                     rights pertaining to such shares of
                                     Company Capital Stock, and there shall be
                                     no further registration of transfers on
                                     the records of the Surviving Corporation
                                     of shares of Company Capital Stock that
                                     were outstanding immediately prior to the
                                     Effective Time. If, after the Effective
                                     Time, Certificates are presented to the
                                     Surviving Corporation for any reason, they
                                     shall be canceled and exchanged as
                                     provided in this Article I.

                            (i)      Dissenting Shares, if any, after payments
                                     of fair value in respect thereto have been
                                     made to dissenting Stockholders of the
                                     Company pursuant to the DGCL and this
                                     Article I, shall be canceled.
        
                    1.8.8.  TAX CONSEQUENCES.  It is intended by the parties
                            hereto that the Merger shall constitute a
                            reorganization within the meaning of Section 368 of
                            the Code.  Each party has consulted with its own
                            tax advisors with respect to the tax consequences
                            of the Merger. 

                    1.8.9.  FURTHER ASSURANCES.  If, at any time after the
                            Effective Time, any further action is necessary or
                            desirable to consummate the Merger, to carry out
                            the purposes of this Agreement and to vest the
                            Surviving Corporation with full right, title and
                            possession to all assets, property, rights,
                            privileges, powers and franchises of the Company
                            and Merger Sub, the officers and directors of the
                            Company and Buyer are fully authorized in the name
                            of their respective corporations or otherwise to
                            take, and will take, all such lawful and necessary
                            action. 

                                      ARTICLE II        

                    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

        The Company hereby represents and warrants to Buyer, subject to such
exceptions as are specifically disclosed in the disclosure schedule referencing
the appropriate section and paragraph numbers (provided that the failure to
refer to a particular section or paragraph will not 


                                      -11-





affect the applicability of a disclosure to such section or paragraph if the 
nature of such disclosure makes reasonably clear the applicability thereof to 
the subject matter of such section or paragraph) supplied by the Company to 
Buyer (the "Disclosure Schedule") and dated as of the date hereof, that on 
the date hereof and as of the Effective Time as though made at the Effective 
Time as follows: 

        2.1.        ORGANIZATION OF THE COMPANY.   The Company is a corporation
                    duly organized, validly existing and in good standing under
                    the laws of the State of Delaware.  The Company has the
                    corporate power to own its properties and to carry on its
                    business as now being conducted. The Company is duly
                    qualified to do business and in good standing as a foreign
                    corporation in each jurisdiction in which the failure to be
                    so qualified would be reasonably likely to have a Material
                    Adverse Effect. The Company has delivered a true and correct
                    copy of its Certificate of Incorporation and Bylaws, each as
                    amended to date, to Buyer. Section 2.1 of the Disclosure
                    Schedule lists the directors and officers of the Company.
                    The operations now being conducted by the Company have not
                    been conducted under any other name.

        2.2.        SUBSIDIARIES.   The Company does not have, and has never
                    had, any subsidiaries or affiliated companies and does not
                    otherwise own, and has not otherwise owned, any shares in
                    the capital of or any interest in, or control, directly or
                    indirectly, any corporation, partnership, association, joint
                    venture or other business entity.

        2.3.        COMPANY CAPITAL STRUCTURE.

                    2.3.1.  The authorized capital stock of the Company
                            consists of (i) 11,000,000 shares of Company Common
                            Stock, of which 2,297,096 shares were outstanding
                            as of March 31, 1999; (ii) 1,307,693 shares of
                            Series A Preferred Stock, of which 1,202,046 shares
                            are outstanding; (iii) 1,860,672 shares of Series B
                            Preferred Stock, of which 1,693,884 shares are
                            outstanding; and (iv) 2,500,000 shares of Series C
                            Preferred Stock, of which 2,000,000 shares are
                            outstanding.  In addition, there are outstanding
                            warrants exercisable for 120,000 shares of Common
                            Stock and 22,000 shares of Series C Preferred
                            Stock.  The Company Capital Stock is held by the
                            persons, with the domicile addresses and in the
                            amounts set forth in Section 2.3.1 of the
                            Disclosure Schedule.  All outstanding shares of
                            Company Capital Stock are duly authorized, validly
                            issued, fully paid and nonassessable and not
                            subject to preemptive rights created by statute,
                            the Certificate of Incorporation or Bylaws of the
                            Company or any agreement to which the Company is a
                            party or by which it is bound and have been issued
                            in compliance with federal and state securities
                            laws.  There are no declared or accrued unpaid
                            dividends with respect to any shares of the Company
                            Capital Stock.  The Company has no other capital
                            stock authorized, issued or outstanding.  

                    2.3.2.  Except for the Company Option Plan, the Company has
                            never adopted or maintained any stock option plan
                            or other plan providing for equity 


                                      -12-





                            compensation of any person. The Company has 
                            reserved 2,261,500 shares of Company Capital Stock 
                            for issuance to employees and consultants pursuant 
                            to the Company Option Plan.  Of such shares, as of
                            March 31, 1999, 537,958  have been issued upon
                            exercise of Company Options and 893,608 shares are
                            subject to outstanding unexercised options. Section
                            2.3.2.1 of the Disclosure Schedule sets forth for
                            each outstanding Company Option, the name of the
                            holder of such option, the domicile address of such
                            holder, the number and class or series of shares of
                            Company Capital Stock subject to such option, the
                            exercise price of such option, the vesting schedule
                            for such option, including the extent vested to
                            date and whether the exercisability of such option
                            will be accelerated by the transactions
                            contemplated by this Agreement, and whether such
                            option is intended to qualify as an incentive stock
                            option as defined in Section 422 of the Code.
                            Except for the Company Options as set forth in
                            Section 2.3.2.2 of the Disclosure Schedule, there
                            are no options, warrants, calls, convertible
                            securities (other than the Company Preferred
                            Stock), exchangeable securities, rights,
                            commitments or agreements of any character, written
                            or oral, to which the Company is a party or by
                            which it is bound obligating the Company to issue,
                            deliver, sell, repurchase or redeem, or cause to be
                            issued, delivered, sold, repurchased or redeemed,
                            any shares of Company Capital Stock or obligating
                            the Company to grant, extend, accelerate the
                            vesting of, change the price of, otherwise amend or
                            enter into any such option, warrant, call,
                            convertible security, exchangeable security, right,
                            commitment or agreement. Except as set forth on
                            Section 2.3.2.3 of the Disclosure Schedule, there
                            is no outstanding Company Capital Stock which is
                            subject to vesting. Section 2.3.2.3 of the
                            Disclosure Schedule sets forth the name of the
                            holder of any Company Capital Stock subject to
                            vesting, the number of shares of Company Capital
                            Stock subject to vesting and the vesting schedule
                            for such Company Capital Stock, including the
                            extent vested to date and whether the vesting of
                            such shares of Company Capital Stock will be
                            accelerated by the transactions contemplated by
                            this Agreement. 

                    2.3.3.  There are no outstanding or authorized stock
                            appreciation, phantom stock, profit participation,
                            or other similar rights with respect to the
                            Company.  The Company is not a party to and, to the
                            Company's knowledge, there are no voting trusts,
                            proxies, or other agreements or understandings with
                            respect to the voting stock of the Company. 

                    2.3.4.  As a result of the Merger, Buyer will be the record
                            and sole beneficial owner of all outstanding
                            Company Capital Stock and all rights to acquire or
                            receive any Company Capital Stock, whether or not
                            such Company Capital Stock is outstanding.  

        2.4.        AUTHORITY.  The Company has all requisite power and
                    authority to enter into this Agreement and the Related
                    Agreements to which it is a party and to consummate the
                    transactions contemplated hereby and thereby. The execution
                    and delivery of 


                                      -13-






                    this Agreement and any Related Agreements to which it is a 
                    party and the consummation of the transactions contemplated
                    hereby and thereby have been duly authorized by all 
                    necessary corporate action on the part of the Company, and 
                    no further action is required on the part of the Company to
                    authorize this Agreement, any Related Agreements to which
                    it is a party and the transactions contemplated hereby and
                    thereby, subject only to the approval of this Agreement by
                    the Stockholders and the receipt of required third party
                    consents (which material third party consents are identified
                    in Section 2.6 of the Disclosure Schedule). This Agreement,
                    the Merger and any Related Agreements to which the Company
                    is a party have been unanimously approved by the Board of
                    Directors of the Company. This Agreement has been, and any
                    Related Agreements to which the Company is a party have been
                    or will have been prior to the Effective Time, duly executed
                    and delivered by the Company and, assuming the due
                    authorization, execution and delivery by the other parties
                    hereto and thereto, constitute the valid and binding
                    obligation of the Company, enforceable in accordance with
                    their respective terms, except as such enforceability may be
                    limited by principles of public policy and subject to the
                    laws of general application relating to bankruptcy,
                    insolvency and the relief of debtors and to rules of law
                    governing specific performance, injunctive relief or other
                    equitable remedies.  

        2.5.        NO CONFLICT.  Except as set forth in Section 2.5 of the
                    Disclosure Schedule, the execution and delivery of this
                    Agreement and any Related Agreements to which it is party by
                    the Company do not, and, the consummation of the
                    transactions contemplated hereby and thereby will not,
                    conflict with, or result in any violation of, or default
                    under (with or without notice or lapse of time, or both), or
                    give rise to a right of termination, cancellation,
                    modification or acceleration of any obligation or loss of
                    any benefit (any such event, a "Conflict") under (i) any
                    provision of the Certificate of Incorporation and Bylaws of
                    the Company, (ii) any mortgage, indenture, lease, contract
                    or other agreement or instrument, permit, concession,
                    franchise or license to which the Company or any of its
                    properties or assets are subject, or (iii) any judgment,
                    order, decree, statute, law, ordinance, rule or regulation
                    applicable to the Company or its properties or assets;
                    except for a Conflict under subsection (ii) or (iii) above
                    that would not have a Material Adverse Effect on the Company
                    or on the ability of the parties to consummate the Merger or
                    the other transactions contemplated by this Agreement and
                    the Related Agreements.

        2.6.        CONSENTS.  Except as set forth in Section 2.6 of the
                    Disclosure Schedule, no consent, waiver, approval, order or
                    authorization of, or registration, declaration or filing
                    with, any court, administrative agency or commission or
                    other federal, state, county, local or other foreign
                    governmental authority, instrumentality, agency or
                    commission ("Governmental Entity") or any third party,
                    including a party to any agreement with the Company (so as
                    not to trigger any Conflict), is required by or with respect
                    to the Company in connection with the execution and delivery
                    of this Agreement and any Related Agreements to which the
                    Company is a party or the consummation of the transactions
                    contemplated hereby and thereby, except for (i) 


                                      -14-






                    such consents, waivers, approvals, orders, authorizations,
                    registrations, declarations and filings as may be required
                    under applicable securities laws, (ii) any applicable
                    filings required under the Hart-Scott-Rodino Antitrust
                    Improvements Act of 1976, as amended (the "HSR Act"), (iii)
                    the filing of the Merger Agreement with the Secretary of
                    State of the State of Delaware, (iv) the approval of the
                    Merger by the Company's Stockholders, (v) any other filings
                    or approvals as may be required under Delaware state law,
                    and (vi) consents, waivers, approvals, orders,
                    authorizations, registrations, declarations and filings
                    which, if not obtained or made, would not have a Material
                    Adverse Effect on the Company or on the ability of the
                    parties to consummate the Merger or the other transactions
                    contemplated by this Agreement.

        2.7.        COMPANY FINANCIAL STATEMENTS.   Section 2.7 of the
                    Disclosure Schedule sets forth the Company's unaudited
                    balance sheets as of January 31, 1999, December 31, 1998 and
                    September 30, 1998 and the Company's unaudited statements of
                    income and cash flow for the one-month period ended
                    January 31, 1999, three-month period ended December 31, 1998
                    and the year ended September 30, 1998 (collectively, the
                    "Financials"). The Financials are correct in all material
                    respects and have been prepared in accordance with GAAP,
                    applied on a basis consistent throughout the periods
                    indicated and consistent with each other (except that the
                    interim period Financials may not contain all the notes that
                    may be required by GAAP). The Financials present fairly the
                    financial condition and operating results of the Company as
                    of the dates and during the periods indicated therein,
                    subject to normal year-end adjustments, which will not be
                    material in amount or significance. The Company's Balance
                    Sheet as of January 31, 1999 shall be hereinafter referred
                    to as the "Current Balance Sheet." 

        2.8.        NO UNDISCLOSED LIABILITIES.  Except as set forth in
                    Section 2.8 of the Disclosure Schedule, the Company has no
                    liability, indebtedness, obligation, expense, claim,
                    deficiency, guaranty or endorsement of any type, whether
                    accrued, absolute, contingent, matured, unmatured or
                    otherwise (collectively, "Contingent Liabilities") (whether
                    or not required to be reflected in financial statements in
                    accordance with GAAP), other than (i) Contingent Liabilities
                    that are reserved or otherwise reflected expressly in the
                    Current Balance Sheet and (ii) Contingent Liabilities that
                    have arisen in the ordinary course of business consistent
                    with past practices since January 31, 1999 (which, in the
                    aggregate, are not material in amount or significance).  

        2.9.        NO CHANGES.   Except as set forth in Section 2.9 of the
                    Disclosure Schedule or as contemplated by this Agreement or
                    the Related Agreements, from January 31, 1999 through the
                    date of this Agreement, there has not been, occurred or
                    arisen any: 

                            (a)      amendments or changes to the Certificate
                                     of Incorporation or Bylaws of the Company;


                                      -15-






                            (b)      capital expenditure or commitment by the
                                     Company, either individually exceeding
                                     $50,000 or in the aggregate exceeding
                                     $100,000;

                            (c)      destruction of, damage to or loss of any
                                     material assets, business or customer of
                                     the Company (whether or not covered by
                                     insurance);

                            (d)      labor trouble or claim of wrongful
                                     discharge or other unlawful labor practice
                                     or action;

                            (e)      change in accounting methods or practices
                                     (including any change in depreciation,
                                     revenue recognition or amortization
                                     policies or rates) by the Company;

                            (f)      revaluation by the Company of any of its
                                     assets;

                            (g)      declaration, setting aside or payment of a
                                     dividend or other distribution with
                                     respect to the Company Capital Stock or
                                     any direct or indirect redemption,
                                     purchase or other acquisition by the
                                     Company of Company Capital Stock;

                            (h)      increase in the salary or other
                                     compensation payable or to become payable
                                     by the Company to any of its officers,
                                     directors, employees or advisors, or the
                                     declaration, payment or commitment or
                                     obligation of any kind for the payment, by
                                     the Company, of a bonus or other
                                     additional salary or compensation to any
                                     such person;

                            (i)      any agreement, contract, covenant,
                                     instrument, lease, license or commitment
                                     to which the Company is a party or by
                                     which it or any of its assets are bound or
                                     any termination, extension, amendment or
                                     modification of the terms of any
                                     agreement, contract, covenant, instrument,
                                     lease, license or commitment to which the
                                     Company is a party or by which it or any
                                     of its assets are bound other than in the
                                     ordinary course of the Company's business,
                                     consistent with past practice;

                            (j)      sale, lease, license or other disposition
                                     of any of the assets or properties of the
                                     Company or any creation of any security
                                     interest in such assets or properties
                                     other than in the ordinary course of the
                                     Company's business, consistent with past
                                     practice;

                            (k)      loan by the Company to any person or
                                     entity, incurring by the Company of any
                                     indebtedness, guaranteeing by the Company
                                     of any indebtedness, issuance or sale of
                                     any debt securities of the Company or
                                     guaranteeing of any debt securities of
                                     others, except for advances to employees
                                     for travel and business expenses in the
                                     ordinary course of business, consistent
                                     with past practice;


                                      -16-






                            (l)      incurrence by the Company of any liability
                                     in excess of $50,000 individually or
                                     $100,000 in the aggregate;

                            (m)      waiver or release of any right or claim of
                                     the Company including any write-off or
                                     other compromise of any account receivable
                                     of the Company (other than compromises of
                                     invoices with customers in the ordinary
                                     course of business consistent with past
                                     practice, which compromises are not in the
                                     aggregate material in amount or
                                     significance);

                            (n)      the commencement or notice or threat of
                                     any lawsuit or proceeding or investigation
                                     against the Company or its affairs; 

                            (o)      notice of any claim or potential claim of
                                     ownership by any person other than the
                                     Company of the Company Intellectual
                                     Property (as defined in Section 2.13) or
                                     of infringement by the Company of any
                                     other person's Intellectual Property (as
                                     defined in Section 2.13);

                            (p)      issuance or sale, or contract to issue or
                                     sell, by the Company of any shares of
                                     Company Capital Stock or securities
                                     exchangeable, convertible or exercisable
                                     therefor, or any securities, warrants,
                                     options or rights to purchase any of the
                                     foregoing, except for options to purchase
                                     capital stock of the Company granted to
                                     employees of and consultants to the
                                     Company in the ordinary course of business
                                     consistent with past practice;

                            (q)      (i) selling or entering into any material
                                     license agreement with respect to the
                                     Company Intellectual Property with any
                                     third party or (ii) buying or entering
                                     into any material license agreement with
                                     respect to the Intellectual Property of
                                     any third party;

                            (r)      any event or condition of any character
                                     that has had a Material Adverse Effect on
                                     the Company;

                            (s)      any transaction by the Company except in
                                     the ordinary course of business as
                                     conducted on that date and consistent with
                                     past practices; or

                            (t)      negotiation or agreement by the Company or
                                     any officer thereof to do any of the
                                     things described in the preceding clauses
                                     (a) through (s) (other than negotiations
                                     with Buyer and its representatives
                                     regarding the transactions contemplated by
                                     this Agreement).

        2.10.       TAX MATTERS.  

                    2.10.1. DEFINITION OF TAXES.   For the purposes of this
                            Agreement, "Tax" or, collectively, "Taxes", means
                            (i) any and all federal, state, local and foreign
                            taxes, assessments and other governmental charges,
                            duties, impositions 


                                      -17-






                            and liabilities, including taxes based upon or 
                            measured by gross receipts, income, profits, sales,
                            use and occupation, and value added, ad valorem, 
                            transfer, franchise, withholding, payroll, 
                            recapture, employment, excise and property taxes, 
                            together with all interest, penalties and additions
                            imposed with respect to such amounts; (ii) any 
                            liability for the payment of any amounts of the type
                            described in clause (i) as a result of being a 
                            member of an affiliated, consolidated, combined or 
                            unitary group for any period; and (iii) any 
                            liability for the payment of any amounts of the 
                            type described in clause (i) or (ii) as a result of
                            any express or implied obligation to indemnify any 
                            other person or as a result of any obligations 
                            under any agreements or arrangements with any other
                            person with respect to such amounts and including 
                            any liability for taxes of a predecessor entity.  

                    2.10.2. TAX RETURNS AND AUDITS.  

                            (a)      As of the Effective Time, the Company will
                                     have prepared and timely filed all
                                     required federal, state, local and foreign
                                     returns, estimates, information statements
                                     and reports ("Returns") relating to any
                                     and all Taxes concerning or attributable
                                     to the Company or its operations and such
                                     Returns are true and correct and have been
                                     completed in accordance with applicable
                                     law (other than Taxes not yet due for
                                     which adequate reserves may have been
                                     established on the Current Balance Sheet).

                            (b)      As of the Effective Time, the Company (A)
                                     will have paid all Taxes it is required to
                                     pay and will have withheld with respect to
                                     its employees all federal and state income
                                     taxes, Federal Insurance Contribution Act
                                     ("FICA"), Federal Unemployment Tax Act
                                     ("FUTA") and other Taxes required to be
                                     withheld, (other than Taxes not yet due
                                     for which adequate reserves may have been
                                     established on the Current Balance Sheet)
                                     and (B) will have accrued on the Current
                                     Balance Sheet all unpaid Taxes (whether or
                                     not due) attributable to all periods
                                     through the date of the Current Balance
                                     Sheet and will not have incurred any
                                     liability for Taxes for the period from
                                     the date of the Current Balance Sheet to
                                     the Effective Time other than in the
                                     ordinary course of business, consistent
                                     with past practice.

                            (c)      The Company has not been delinquent in the
                                     payment of any Tax (other than items for
                                     which adequate reserves may have been
                                     established on the Current Balance Sheet)
                                     nor is there any Tax deficiency
                                     outstanding, assessed or proposed against
                                     the Company, nor has the Company executed
                                     any waiver of any statute of limitations
                                     on or extending the period for the
                                     assessment or collection of any Tax.


                                      -18-






                            (d)      No audit or other examination of any
                                     Return of the Company is presently in
                                     progress, nor has the Company been
                                     notified of any request for such an audit
                                     or other examination.

                            (e)      No adjustment relating to any Returns
                                     filed by the Company has been proposed
                                     formally or informally by any Tax
                                     authority to the Company or any
                                     representative thereof.

                            (f)      The Company has no liabilities for unpaid
                                     federal, state, local and foreign Taxes
                                     which have not been accrued or reserved
                                     against in accordance with GAAP on the
                                     Current Balance Sheet, whether asserted or
                                     unasserted, contingent or otherwise, and
                                     the Company has not incurred any liability
                                     for Taxes since the date of the Current
                                     Balance Sheet other than in the ordinary
                                     course of business, consistent with past
                                     practice.

                            (g)      The Company has made available to Buyer or
                                     its legal counsel, copies of all foreign,
                                     federal and state income and all state
                                     sales and use Returns for the Company
                                     filed for all periods since its inception.

                            (h)      There are (and immediately following the
                                     Effective Time there will be) no liens,
                                     pledges, charges, claims, restrictions on
                                     transfer, mortgages, security interests or
                                     other encumbrances of any sort
                                     (collectively, "Liens") on the assets of
                                     the Company relating to or attributable to
                                     Taxes other than Liens for Taxes not yet
                                     due and payable.

                            (i)      None of the Company's assets are treated
                                     as "tax-exempt use property," within the
                                     meaning of Section 168(h) of the Code.

                            (j)      The Company is not subject to any
                                     contract, agreement, plan or arrangement,
                                     including but not limited to the
                                     provisions of this Agreement, covering any
                                     employee or  former employee of the
                                     Company that, individually or
                                     collectively, could give rise to the
                                     payment of any amount that would not be
                                     deductible by the Company as an expense
                                     under applicable law (including, without
                                     limitation, Sections 280G, 404 and 162(m)
                                     of the Code).

                            (k)      The Company has not filed any consent
                                     agreement under Section 341(f) of the Code
                                     or agreed to have Section 341(f)(4) of the
                                     Code apply to any disposition of a
                                     subsection (f) asset (as defined in
                                     Section 341(f)(4) of the Code) owned by
                                     the Company.

                            (l)      The Company is not a party to any tax
                                     sharing, indemnification or allocation
                                     agreement nor does the Company owe any
                                     amount under any such agreement.


                                      -19-






                            (m)      The Company is not, and has not been at
                                     any time, a "United States Real Property
                                     Holding Corporation" within the meaning of
                                     Section 897(c)(2) of the Code.

        2.11.       RESTRICTIONS ON BUSINESS ACTIVITIES.  Except as set forth on
                    Section 2.11 of the Disclosure Schedule, to the Company's
                    Knowledge, there is no agreement (noncompete or otherwise),
                    commitment, judgment, injunction, order or decree to which
                    the Company is a party or otherwise binding upon the Company
                    which has or may have the effect of prohibiting or impairing
                    any business practice of the Company, any acquisition of
                    property (tangible or intangible) by the Company or the
                    conduct of business as currently run by the Company. Without
                    limiting the foregoing, the Company has not entered into any
                    agreement under which the Company is restricted from
                    selling, licensing or otherwise distributing any of its
                    technology or products to or providing services to,
                    customers or potential customers or any class of customers,
                    in any geographic area, during any period of time or in any
                    segment of the market.

        2.12.       TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES;
                    CONDITION OF EQUIPMENT.

                    2.12.1. The Company does not own any real property, and has
                            never owned any real property. Section 2.12.1 of
                            the Disclosure Schedule sets forth a list of all
                            real property currently leased by the Company, the
                            name of the lessor and the date of the lease and
                            each amendment thereto. All such current leases are
                            in full force and effect, are valid and effective
                            in accordance with their respective terms, and
                            there is not, under any of such leases, any
                            existing default or event of default (or event
                            which with notice or lapse of time, or both, would
                            constitute a default).

                    2.12.2. The Company has good and valid title to, or, in the
                            case of leased properties and assets, valid
                            leasehold interests in, all of its tangible
                            properties and assets, real, personal and mixed,
                            used or held for use in its business, free and
                            clear of any Liens, except as reflected in the
                            Current  Balance Sheet and except for Liens for
                            Taxes not yet due and payable and such
                            imperfections of title and encumbrances, if any,
                            which are not material in character, amount or
                            extent, and which do not detract from the value, or
                            interfere with the present use, of the property
                            subject thereto or affected thereby.

                    2.12.3. All material items of equipment (the "Equipment")
                            owned or leased by the Company are (i) adequate for
                            the conduct of the business of the Company as
                            currently conducted and (ii) in acceptable
                            operating condition, regularly and properly
                            maintained, subject to normal wear and tear.

                    2.12.4. The Company has not transferred rights to customer
                            or end-user files or other customer or end-user
                            information it compiles relating to customers or
                            end-users of the Company's current and former
                            customers or end-users


                                      -20-











                            (the "Customer Information").  To the Company's
                            Knowledge, no person other than the Company
                            possesses any claims or rights with respect to use
                            of the Customer Information.

        2.13.       INTELLECTUAL PROPERTY.

                    2.13.1. For the purposes of this Agreement, the following
                            terms have the following definitions:

                            (a)      "Intellectual Property" shall mean any or
                                     all of the following and all rights in,
                                     arising out of, or associated therewith:
                                     (i) all United States and foreign patents
                                     and applications therefor and all
                                     reissues, divisions, renewals, extensions,
                                     provisionals, continuations and
                                     continuations-in-part thereof; (ii) all
                                     inventions (whether patentable or not),
                                     invention disclosures, improvements, trade
                                     secrets, proprietary information, know
                                     how, technology, technical data and
                                     customer lists, and all documentation
                                     relating to any of the foregoing; (iii)
                                     all copyrights, copyrights registrations
                                     and applications therefor and all other
                                     rights corresponding thereto throughout
                                     the world; (iv) all mask works, mask work
                                     registrations and applications therefor;
                                     (v) all industrial designs and any
                                     registrations and applications therefor
                                     throughout the world; (vi) all trade
                                     names, logos, common law trademarks and
                                     service marks; trademark and service mark
                                     registrations and applications therefor
                                     and all goodwill associated therewith
                                     throughout the world; (vii) all databases
                                     and data collections and all rights
                                     therein throughout the world; (viii) all
                                     computer software including all source
                                     code, object code, firmware, development
                                     tools, files, records and data, all media
                                     on which any of the foregoing is recorded,
                                     all Internet and Worldwide Web addresses,
                                     URLs, sites and domain names; (ix) any
                                     similar, corresponding or equivalent
                                     rights to any of the foregoing; and (x)
                                     all documentation related to any of the
                                     foregoing.

                            (b)      "Company Intellectual Property" shall mean
                                     any Intellectual Property that is owned by
                                     or exclusively licensed to the Company.

                            (c)      "Registered Intellectual Property" shall
                                     mean all United States, international and
                                     foreign: (i) patents, patent applications
                                     (including provisional applications); (ii)
                                     registered trademarks, applications to
                                     register trademarks, intent-to-use
                                     applications, or other registrations or
                                     applications related to trademarks; (iii)
                                     registered copyrights and applications for
                                     copyright registration; (iv) any mask work
                                     registrations and applications to register
                                     mask works; and (v) any other Company
                                     Intellectual Property that is the subject
                                     of an application, certificate, filing,
                                     registration or other document


                                      -21-




                                     issued by, filed with, or recorded by, any
                                     state, government or other public legal
                                     authority.

                    2.13.2. Section 2.13.2 of the Disclosure Schedule lists all
                            Registered Intellectual Property owned by, or filed
                            in the name of, the Company (the "Company
                            Registered Intellectual Property") and lists any
                            proceedings or actions before any court, tribunal
                            (including the United States Patent and Trademark
                            Office (the "PTO") or equivalent authority anywhere
                            in the world) related to any of the Company
                            Registered Intellectual Property Rights.

                    2.13.3. Except as set forth in Section 2.13.3 of the
                            Disclosure Schedule, each item of Company
                            Intellectual Property, including all Company
                            Registered Intellectual Property listed in Section
                            2.13.3 of the Disclosure Schedule and all
                            Intellectual Property licensed to the Company, is
                            free and clear of any Liens other than subject to
                            existing UCC's, which UCC's are listed on Section
                            2.13.3 of the Disclosure Schedule.  The Company has
                            rights to the trademarks, trade names and
                            copyrights used in connection with the operation or
                            conduct of the business of the Company that are
                            sufficient to enable the Company to conduct its
                            business as the business is currently conducted,
                            including the sale of any products or technology or
                            the provision of any services by the Company (other
                            than with respect to products acquired from third
                            parties). The Company, to its knowledge, owns
                            exclusively, and has good title to, all copyrighted
                            works that are Company products or other works of
                            authorship that the Company otherwise purports to
                            own.

                    2.13.4. To the extent that any Intellectual Property has
                            been developed or created by any person other than
                            the Company for which the Company has, directly or
                            indirectly, paid, the Company has a written
                            agreement with such person with respect thereto and
                            the Company thereby has obtained ownership of, and
                            is the exclusive owner of, by operation of law or
                            by valid assignment, all such Intellectual
                            Property.

                    2.13.5. Except as set forth in Section 2.13.5 of the
                            Disclosure Schedule, the Company has not
                            transferred ownership of or granted any license of
                            or right to use or authorized the retention of any
                            rights to use any Intellectual Property that is or
                            was Company Intellectual Property, to any other
                            person.

                    2.13.6. The Company Intellectual Property constitutes all
                            the Intellectual Property used in and/or necessary
                            to the conduct of its business as it currently is
                            conducted, including, without limitation, the
                            design, development, manufacture, use, import and
                            sale of the products, technology and services of
                            the Company (including products, technology or
                            services currently under development).


                                      -22-




                    2.13.7. Except as listed in Section 2.13.7 of the
                            Disclosure Schedule, to the Company's Knowledge, no
                            person who has licensed Intellectual Property from
                            the Company has ownership in such Intellectual
                            Property.

                    2.13.8. To the Company's Knowledge, Section 2.13.8 of the
                            Disclosure Schedule lists all contracts, licenses
                            and agreements between the Company and any other
                            person wherein or whereby the Company has agreed
                            to, or assumed, any obligation or duty to assume or
                            incur any obligation or liability or provide a
                            right of rescission with respect to the
                            infringement or misappropriation by the Company or
                            such other person of the Intellectual Property of
                            any person other than the Company.

                    2.13.9. To the Company's Knowledge, the operation of the
                            business of the Company as it currently is
                            conducted, including but not limited to the
                            Company's design, development, use, import,
                            manufacture and sale of the Company's website and
                            the Company's products, technology or services
                            (including portions of the Company's website or the
                            Company's products, technology or services
                            currently under development) does not infringe or
                            misappropriate any Intellectual Property of any
                            person, violate the rights of any person (including
                            rights to privacy or publicity), or constitute
                            unfair competition or trade practices under the
                            laws of any jurisdiction.  The Company has not
                            received any notice from any person that the
                            operation of the business of the Company as it
                            currently is conducted, including but not limited
                            to the Company's design, development, use, import,
                            manufacture and sale of the products, technology or
                            services (including products, technology or
                            services currently under development) of the
                            Company infringes or misappropriates the
                            Intellectual Property (other than trademarks, trade
                            names and service marks) of any person or
                            constitutes unfair competition or trade practices
                            under the laws of any jurisdiction.

                    2.13.10.         All necessary registration, maintenance
                            and renewal fees in connection with such Registered
                            Intellectual Property have been paid and all
                            necessary documents and certificates in connection
                            with such Company Registered Intellectual Property
                            have been filed with the relevant patent,
                            copyright, trademark or other authorities in the
                            United States or foreign jurisdictions, as the case
                            may be, for the purposes of maintaining such
                            Registered Intellectual Property.

                    2.13.11.         To the Company's knowledge, there are no
                            contracts, licenses or agreements between the
                            Company and any other person with respect to
                            Company Intellectual Property under which there is
                            any dispute known to the Company regarding the
                            scope of such agreement, or performance under such
                            agreement including with respect to any payments to
                            be made or received by the Company thereunder.


                                      -23-




                    2.13.12.         To the Company's Knowledge, as of the date
                            of this Agreement, no person is infringing or
                            misappropriating any Company Intellectual Property.

                    2.13.13.         The Company has, and enforces, a policy
                            requiring each employee, consultant and contractor
                            to execute proprietary information, confidentiality
                            and assignment agreements substantially in the
                            Company's standard forms, and all current
                            employees, consultants and contractors of the
                            Company have executed such an agreement.

                    2.13.14.         To the Company's Knowledge, as of the date
                            of this Agreement, no Company Intellectual Property
                            or product, technology or service of the Company,
                            including its website, is subject, or may
                            reasonably  be expected to become subject to, any
                            proceeding or outstanding decree, order, judgment,
                            agreement or stipulation that restricts in any
                            manner the use, transfer or licensing thereof by
                            the Company or may affect the validity, use or
                            enforceability of such Company Intellectual
                            Property.

                    2.13.15.         To the Company's Knowledge, no: (i)
                            product, technology, service or publication of the
                            Company, including its website, (ii) material
                            published or distributed by the Company, including
                            its website, or (iii) conduct or statement of
                            Company constitutes obscene material, a defamatory
                            statement or material false advertising.

                    2.13.16.         Except as set forth in Section 2.13.16 of
                            the Disclosure Schedule, all of the Company's
                            products (including its website and products
                            currently under development) will record, store,
                            process, calculate and present calendar dates
                            falling on and after (and if applicable, spans of
                            time including) January 1, 2000, and will calculate
                            any information dependent on or relating to such
                            dates in the same manner, and with the same
                            functionality, data integrity and performance, as
                            the products record, store, process, calculate and
                            present calendar dates on or before December 31,
                            1999, or calculate any information dependent on or
                            relating to such dates.

        2.14.       AGREEMENTS, CONTRACTS AND COMMITMENTS.

                    2.14.1. Except as set forth in Section 2.14.1 of the
                            Disclosure Schedule, as of the date of this
                            Agreement, the Company is not a party to nor is it
                            bound by:

                            (a)      any employment or consulting agreements,
                                     contracts or commitments with employees or
                                     individual consultants or salespersons or
                                     consulting or sales agreements, contracts
                                     or commitments with a firm or other
                                     organization, which agreements, contracts
                                     or commitments are not terminable by the
                                     Company without further liability upon
                                     payment in the aggregate of more than
                                     $50,000 with respect to all such
                                     agreements, contracts and


                                      -24-




                                     commitments; and the Company has no
                                     employment agreements providing for
                                     employment other than on an at-will basis;

                            (b)      any agreement or plan, including, without
                                     limitation, any stock option plan, stock
                                     appreciation rights plan or stock purchase
                                     plan, any of the benefits of which will be
                                     increased, or the vesting of benefits of
                                     which will be accelerated, by the
                                     occurrence of any of the transactions
                                     contemplated by this Agreement or the
                                     value of any of the benefits of which will
                                     be calculated on the basis of any of the
                                     transactions contemplated by this
                                     Agreement;

                            (c)      any fidelity or surety bond or completion
                                     bond;

                            (d)      any lease of personal property with fixed
                                     annual rental payments in excess of
                                     $100,000;

                            (e)      any agreement, contract or commitment
                                     containing any covenant limiting the
                                     freedom of the Company to engage in any
                                     line of business or to compete with any
                                     person;

                            (f)      any agreement, contract or commitment
                                     relating to capital expenditures and
                                     involving future payments in excess of
                                     $50,000 either individually or $100,000 in
                                     the aggregate;

                            (g)      any agreement, contract or commitment
                                     relating to the disposition or acquisition
                                     of assets or any interest in any business
                                     enterprise outside the ordinary course of
                                     the Company's business;

                            (h)      any mortgages, indentures, loans or credit
                                     agreements, security agreements or other
                                     agreements or instruments relating to the
                                     borrowing of money or extension of credit;

                            (i)      any purchase order or contract for the
                                     purchase of materials involving in excess
                                     of $50,000 individually or $100,000 in the
                                     aggregate;

                            (j)      any construction contracts;

                            (k)      any agreement for the provision of
                                     advertising content or space or for the
                                     licensing of content from third parties
                                     for inclusion in the Company's website, or
                                     any other dealer, distribution, joint
                                     marketing or development agreement;

                            (l)      any sales representative, original
                                     equipment manufacturer, value added
                                     reseller, remarketer or other agreement
                                     for distribution of the Company's products
                                     or services; or


                                      -25-




                            (m)      any other agreement, contract or
                                     commitment that involves $100,000 or more
                                     or is not cancelable without penalty
                                     within forty-five (45) days.

                    2.14.2. To its knowledge, the Company is in compliance with
                            and has not breached, violated or defaulted under,
                            or received notice that it has breached, violated
                            or defaulted under, any of the terms or conditions
                            of any agreement, contract, covenant, instrument,
                            lease, license or commitment to which the Company
                            is a party or by which it is bound (collectively a
                            "Contract"), nor is the Company aware of any event
                            that would constitute such a breach, violation or
                            default with the lapse of time, giving of notice or
                            both. Each Contract is in full force and effect and
                            is not subject to any default thereunder by any
                            party obligated to the Company pursuant thereto.

        2.15.       INTERESTED PARTY TRANSACTIONS.   No officer, director or
                    Stockholder of the Company (nor any ancestor, sibling,
                    descendant or spouse of any of such persons, or any trust,
                    partnership or corporation in which any of such persons has
                    or has had an interest), has or has had, directly or
                    indirectly, (i) an interest in any entity which furnished or
                    sold, or furnishes or sells, services, products or
                    technology that the Company furnishes or sells, or proposes
                    to furnish or sell, or (ii) any interest in any entity that
                    purchases from or sells or furnishes to the Company any
                    goods or services, or (iii) a beneficial interest in any
                    Contract; provided, that ownership of no more than one
                    percent (1%) of the outstanding voting stock of a publicly
                    traded corporation shall not be deemed an "interest in any
                    entity" for purposes of this Section 2.15.

        2.16.       GOVERNMENTAL AUTHORIZATION.  The Company has obtained all
                    necessary consents, licenses, permits, grants or other
                    authorizations necessary to operate or conduct its business
                    as currently conducted or hold any interest in its
                    properties or assets (collectively "Company
                    Authorizations").

        2.17.       LITIGATION. There is no action, suit or proceeding of any
                    nature pending nor has the Company received notice (oral or
                    written) of any actions, suits or proceedings threatened
                    against the Company, its properties or any of its officers
                    or directors, nor to the Company's Knowledge as of the date
                    of this Agreement is there any reasonable basis therefor. To
                    the Company's Knowledge, there is no investigation pending
                    or threatened against the Company, its properties or any of
                    its officers or directors by or before any Governmental
                    Entity, nor to the Company's Knowledge as of the date of
                    this Agreement is there any reasonable basis therefor. No
                    Governmental Entity has at any time challenged or questioned
                    the legal right of the Company to conduct its operations as
                    presently or previously conducted.

        2.18.       ACCOUNTS RECEIVABLE. All accounts receivable, including,
                    without limitation, all accounts receivable derived from
                    advertising, charter sponsorships and merchandise sales of
                    the Company arose in the ordinary course of business, are
                    carried at values determined in accordance with GAAP
                    consistently applied and


                                      -26-




                    are collectible except to the extent of reserves therefor
                    set forth in the Current Balance Sheet.  No person has any
                    lien, encumbrance or other similar right with respect to any
                    of such accounts receivable and no request or agreement for
                    deduction or discount has been made with respect to any of
                    such Accounts Receivable.

        2.19.       MINUTE BOOKS.  The minutes of the Company made available to
                    counsel for Buyer are the only minutes of the Company and
                    contain a reasonably accurate summary of all meetings of the
                    Board of Directors (or committees thereof) of the Company
                    and its Stockholders or actions by written consent since the
                    incorporation of the Company.

        2.20.       ENVIRONMENTAL MATTERS.

                    2.20.1. To the Company's knowledge, the Company has not
                            transported, stored, used, manufactured, disposed
                            of, released or exposed its employees or others to
                            Hazardous Materials in violation of any law in
                            effect on or before the Effective Time, nor has the
                            Company disposed of, transported, sold, or
                            manufactured any product containing a Hazardous
                            Material (any or all of the foregoing being
                            collectively referred to as "Hazardous Materials
                            Activities") in violation of any rule, regulation,
                            treaty or statute promulgated by any Governmental
                            Entity in effect prior to or as of the date hereof
                            to prohibit, regulate or control Hazardous
                            Materials or any Hazardous Material Activity.

                    2.20.2. To the Company's knowledge, the Company currently
                            holds all environmental approvals, permits,
                            licenses, clearances and consents (the
                            "Environmental Permits") necessary for the conduct
                            of the Company's Hazardous Material Activities,
                            respectively, and other businesses of the Company
                            as such activities and businesses are currently
                            being conducted.

                    2.20.3. No action, proceeding, revocation proceeding,
                            amendment procedure, writ, injunction or claim is
                            pending nor has the Company received notice (oral
                            or written) of any action, proceeding, revocation
                            proceeding, amendment procedure, writ, injunction
                            or claim threatened concerning any Environmental
                            Permit, Hazardous Material or any Hazardous
                            Materials Activity of the Company. 

        2.21.       BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as
                    set forth in Section 2.21 of the Disclosure Schedule, the
                    Company has not incurred, nor will it incur, directly or
                    indirectly, any liability for brokerage or finders' fees or
                    agents' commissions or any similar charges in connection
                    with this Agreement or any transaction contemplated hereby. 
                    Section 2.21 of the Disclosure Schedule sets forth the
                    principal terms and conditions of any agreement, written or
                    oral, with respect to such fees.  Section 2.21 of the
                    Disclosure Schedule also sets forth the Company's current
                    estimate of Third Party Expenses (as defined in Section
                    5.4.1) expected to be incurred by the Company in connection
                    with the negotiation and


                                      -27-




                    effectuation of the terms and conditions of this Agreement
                    and the transactions contemplated hereby.

        2.22.       EMPLOYEE MATTERS AND BENEFIT PLANS.

                    2.22.1. DEFINITIONS. With the exception of the definition
                            of "Affiliate" set forth in Section 2.22.1(a) below
                            (which definition shall apply only to this Section
                            2.22), for purposes of this Agreement, the
                            following terms shall have the meanings set forth
                            below: 

                            (a)      "Affiliate" shall mean any other person or
                                     entity under common control with the
                                     Company within the meaning of Section
                                     414(b), (c), (m) or (o) of the Code and
                                     the regulations issued thereunder;

                            (b)      "Company Employee Plan" shall mean any
                                     plan, program, policy, practice, contract,
                                     agreement or other arrangement providing
                                     for compensation, severance, termination
                                     pay, deferred compensation, performance
                                     awards, stock or stock-related awards,
                                     fringe benefits or other employee benefits
                                     or remuneration of any kind, whether
                                     written or unwritten or otherwise, funded
                                     or  unfunded, including without
                                     limitation, each "employee benefit plan,"
                                     within the meaning of Section 3(3) of
                                     ERISA which is or has been maintained,
                                     contributed to, or required to be
                                     contributed to, by the Company or any
                                     Affiliate for the benefit of any Employee,
                                     or with respect to which the Company or
                                     any Affiliate has or may have any
                                     liability or obligation;

                            (c)      "COBRA" shall mean the Consolidated
                                     Omnibus Budget Reconciliation Act of 1985,
                                     as amended;

                            (d)      "DOL" shall mean the Department of Labor;

                            (e)      "Employee" shall mean any current or
                                     former employee, consultant or director of
                                     the Company or any Affiliate;

                            (f)      "Employee Agreement" shall mean each
                                     management, employment, severance,
                                     consulting, relocation, repatriation,
                                     expatriation, visas, work permit or other
                                     agreement, contract or understanding
                                     between the Company or any Affiliate and
                                     any Employee;

                            (g)      "ERISA" shall mean the Employee Retirement
                                     Income Security Act of 1974, as amended;

                            (h)      "FMLA" shall mean the Family Medical Leave
                                     Act of 1993, as amended;


                                      -28-




                            (i)      "International Employee Plan" shall mean
                                     each Company Employee Plan that has been
                                     adopted or maintained by the Company or
                                     any Affiliate, whether informally or
                                     formally, or with respect to which the
                                     Company or any Affiliate will or may have
                                     any liability, for the benefit of
                                     Employees who perform services outside the
                                     United States;

                            (j)      "IRS" shall mean the Internal Revenue
                                     Service;

                            (k)      "Multiemployer Plan" shall mean any
                                     "Pension Plan" (as defined below) which is
                                     a "multiemployer plan," as defined in
                                     Section 3(37) of ERISA;

                            (l)      "PBGC" shall mean the Pension Benefit
                                     Guaranty Corporation; and

                            (m)      "Pension Plan" shall mean each Company
                                     Employee Plan which is an "employee
                                     pension benefit plan," within the meaning
                                     of Section 3(2) of ERISA.

                    2.22.2. SCHEDULE. Schedule 2.22.2 contains an accurate and
                            complete list of each Company Employee Plan.  The
                            Company has no agreements with employees other than
                            the offer letters substantially similar in form to
                            that previously provided to the Buyer.  The Company
                            does not have any plan or commitment to establish
                            any new Company Employee Plan or Employee
                            Agreement, to modify any Company Employee Plan or
                            Employee Agreement (except to the extent required
                            by law or to conform any such Company Employee Plan
                            or Employee Agreement to the requirements of any
                            applicable law, in each case as previously
                            disclosed to Buyer in writing, or as required by
                            this Agreement), or to enter into any Company
                            Employee Plan or Employee Agreement.

                    2.22.3. DOCUMENTS. The Company has provided to Buyer: (i)
                            correct and complete copies of all documents
                            embodying each Company Employee Plan and each
                            Employee Agreement including (without limitation)
                            all amendments thereto and all related trust
                            documents; (ii) the most recent annual actuarial
                            valuations, if any, prepared for each Company
                            Employee Plan; (iii) the three (3) most recent
                            annual reports (Form Series 5500 and all schedules
                            and financial statements attached thereto), if any,
                            required under ERISA or the Code in connection with
                            each Company Employee Plan; (iv) if the Company
                            Employee Plan is funded, the most recent annual and
                            periodic accounting of Company Employee Plan
                            assets; (v) the most recent summary plan
                            description together with the summary(ies) of
                            material modifications thereto, if any, required
                            under ERISA with respect to each Company Employee
                            Plan; (vi) all IRS determination, opinion,
                            notification and advisory letters, and all
                            applications and correspondence to or from the IRS
                            or the DOL with respect to any such application or


                                      -29-





                            letter; (vii) all material written agreements and
                            contracts relating to each Company Employee Plan,
                            including, but not limited to, administrative
                            service agreements, group annuity contracts and
                            group insurance contracts; (viii) all
                            communications material to any Employee or
                            Employees relating to any Company Employee Plan and
                            any proposed Company Employee Plans, in each case,
                            relating to any amendments, terminations,
                            establishments, increases or decreases in benefits,
                            acceleration of payments or vesting schedules or
                            other events which would result in any liability to
                            the Company; (ix) all correspondence to or from any
                            governmental agency relating to any Company
                            Employee Plan; (x) all COBRA forms and related
                            notices; (xi) all policies pertaining to fiduciary
                            liability insurance covering the fiduciaries for
                            each Company Employee Plan; (xii) all
                            discrimination tests for each Company Employee Plan
                            for the most recent plan year, if required; and
                            (xiii) all registration statements, annual reports
                            Form 11-K and all attachments thereto) and
                            prospectuses prepared in connection with each
                            Company Employee Plan.

                    2.22.4. EMPLOYEE PLAN COMPLIANCE. (i) The Company has
                            performed all material obligations required to be
                            performed by it under, is not in default or
                            violation of, and has no knowledge of any material
                            default or violation by any other party to each
                            Company Employee Plan, and each Company Employee
                            Plan has been established and maintained in
                            accordance with its terms and in material
                            compliance with all applicable laws, statutes,
                            orders, rules and regulations, including but not
                            limited to ERISA or the Code; (ii) each Company
                            Employee Plan intended to qualify under Section
                            401(a) of the Code and each trust intended to
                            qualify under Section 501(a) of the Code has either
                            received a favorable determination, opinion,
                            notification or advisory letter from the IRS with
                            respect to each such Plan as to its qualified
                            status under the Code, including all amendments to
                            the Code effected by the Tax Reform Act of 1986 and
                            subsequent legislation, or has remaining a period
                            of time under applicable Treasury regulations or
                            IRS pronouncements in which to apply for such a
                            letter and make any amendments necessary to obtain
                            a favorable determination as to the qualified
                            status of each such Company Employee Plan; (iii) no
                            "prohibited transaction," within the meaning of
                            Section 4975 of the Code or Sections 406 and 407 of
                            ERISA, and not otherwise exempt under Section 408
                            of ERISA, has occurred with respect to any Company
                            Employee Plan; (iv) there are no actions, suits or
                            claims pending or threatened or reasonably
                            anticipated (other than routine claims for
                            benefits) against any Company Employee Plan or
                            against the assets of any Company Employee Plan;
                            (v) each Company Employee Plan can be amended,
                            terminated or otherwise discontinued after the
                            Effective Time in accordance with its terms,
                            without liability to Buyer, the Surviving
                            Corporation, the Company or any Affiliate (other
                            than ordinary administration expenses); (vi) there
                            are no audits, inquiries or proceedings pending or,
                            to the Knowledge of the Company or any Affiliates,
                            threatened by the IRS or DOL with respect to any
                            Company Employee Plan; and (vii) neither the
                            Company nor any


                                      -30-




                            Affiliate is subject to any penalty or tax with
                            respect to any Company Employee Plan under Section
                            502(i) of ERISA or Sections 4975 through 4980 of the
                            Code.

                    2.22.5. PENSION PLAN. Neither the Company nor any Affiliate
                            has ever maintained, established, sponsored,
                            participated in, or contributed to, any Pension
                            Plan which is subject to Title IV of ERISA or
                            Section 412 of the Code.

                    2.22.6. MULTIEMPLOYER PLANS. At no time has the Company or
                            any Affiliate contributed to or been required to
                            contribute to any Multiemployer Plan.

                    2.22.7. NO POST-EMPLOYMENT OBLIGATIONS. No Company Employee
                            Plan provides, or reflects or represents any
                            liability to provide, retiree life insurance,
                            retiree health or other retiree employee welfare
                            benefits to any person for any reason, except as
                            may be required by COBRA or other applicable
                            statute, and the Company has never represented,
                            promised or contracted (whether in oral or written
                            form) to any Employee (either individually or to
                            Employees as a group) or any other person that such
                            Employee(s) or other person would be provided with
                            retiree life insurance, retiree health or other
                            retiree employee welfare benefit, except to the
                            extent required by statute.

                    2.22.8. COBRA. Neither the Company nor any Affiliate has,
                            prior to the Effective Time, violated any of the
                            health care continuation requirements of COBRA, the
                            requirements of FMLA or any similar provisions of
                            state law applicable to its Employees where such
                            violation could result in material liability to the
                            Company.

                    2.22.9. EFFECT OF TRANSACTION.  (i) The execution of this
                            Agreement and the consummation of the transactions
                            contemplated hereby will not constitute an event
                            under any Company Employee Plan, Employee
                            Agreement, trust or loan that will or may result in
                            any payment (whether of severance pay or
                            otherwise), acceleration, forgiveness of
                            indebtedness, vesting, distribution, increase in
                            benefits or obligation to fund benefits with
                            respect to any Employee (excluding from this
                            representation the effect of any termination of an
                            Existing Employee under Section 5.11.2 or 5.11.3 of
                            this Agreement).  (ii) No payment or benefit which
                            will or may be made by the Company or its
                            Affiliates with respect to any Employee as a result
                            of the transactions contemplated by this Agreement
                            or otherwise will be characterized as a "parachute
                            payment," within the meaning of Section 280G(b)(2)
                            of the Code (but without regard to clause (ii)
                            thereof). 

                    2.22.10.         EMPLOYMENT MATTERS. The Company: (i) is in
                            material compliance in all respects with all
                            applicable foreign, federal, state and local laws,
                            rules and regulations respecting employment,
                            employment practices, terms and conditions of
                            employment and wages and hours, in


                                      -31-




                            each case, with respect to Employees; (ii) has
                            withheld and reported all amounts required by law or
                            by agreement to be withheld and reported with
                            respect to wages, salaries and other payments to
                            Employees; (iii) is not liable for any arrears of
                            wages or any taxes or any penalty for failure to
                            comply with any of the foregoing; and (iv) is not
                            liable for any payment to any trust or other fund
                            governed by or maintained by or on behalf of any
                            governmental authority, with respect to unemployment
                            compensation benefits, social security or other
                            benefits or obligations for Employees (other than
                            routine payments to be made in the normal course of
                            business and consistent with past practice). There
                            are no pending, or to the Knowledge of the Company,
                            threatened or reasonably anticipated claims or
                            actions against the Company under any worker's
                            compensation policy or long-term disability policy.

                    2.22.11.         LABOR. No work stoppage or labor strike
                            against the Company is pending, threatened or
                            reasonably anticipated. The Company does not know
                            of any activities or proceedings of any labor union
                            to organize any Employees. There are no actions,
                            suits, claims, labor disputes or grievances pending
                            or threatened or reasonably anticipated against the
                            Company relating to any labor, safety or
                            discrimination matters involving any Employee,
                            including, without limitation, charges of unfair
                            labor practices or discrimination complaints,
                            which, if adversely determined, would, individually
                            or in the  aggregate, result in any liability to
                            the Company, Buyer, the Surviving Corporation or
                            any Affiliate. Neither the Company nor any of its
                            subsidiaries has engaged in any unfair labor
                            practices within the meaning of the National Labor
                            Relations Act. The Company is not presently, nor
                            has it been in the past, a party to, or bound by,
                            any collective bargaining agreement or union
                            contract with respect to Employees and no
                            collective bargaining agreement is being negotiated
                            by the Company.

                    2.22.12.         NO INTERFERENCE OR CONFLICT.  To the
                            Company's knowledge, no officer, director,
                            consultant or employee of the Company is obligated
                            under any contract or agreement subject to any
                            judgement, decree or order of any court or
                            administrative agency that would interfere with
                            such person's efforts to promote the interests of
                            the Company or that would interfere with the
                            Company's business. Neither the execution nor
                            delivery of this Agreement, nor the carrying on of
                            the Company's business as presently conducted or
                            proposed to be conducted nor any activity of such
                            officers, directors, employees or consultants in
                            connection with the carrying on of the Company's
                            business as presently conducted or proposed to be
                            conducted, will conflict with or result in a breach
                            of the terms, conditions or provisions of, or
                            constitute a default under, any contract or
                            agreement under which any of such officers,
                            directors, employees or consultants is now bound.


                                      -32-




        2.23.       INSURANCE.  Section 2.23 of the Disclosure Schedule lists
                    all insurance policies and fidelity bonds covering the
                    assets, business, equipment, properties, operations,
                    employees, officers and directors of the Company.  There is
                    no claim pending under any of such policies or bonds as to
                    which coverage has been questioned, denied or disputed by
                    the underwriters of such policies or bonds. All premiums due
                    and payable under all such policies and bonds have been
                    paid, and the Company and any covered parties are otherwise
                    in compliance with the terms of such policies and bonds (or
                    other policies and bonds providing substantially similar
                    insurance coverage).

        2.24.       COMPLIANCE WITH LAWS.  To the Company's knowledge, the
                    Company has complied with, in all material respects, is not
                    in violation of, and has not received any notices of
                    violation with respect to, any foreign, federal, state or
                    local statute, law or regulation.

        2.24        WARRANTIES;  INDEMNITIES.  Except for the warranties and
                    indemnities contained in those contracts  and agreements set
                    forth in Section 2.24 of the Disclosure Schedule, the
                    Company has not issued any warranties or indemnities
                    relating to products or technology sold or licensed or
                    services rendered by the Company, other than warranties and
                    indemnities that are not in the aggregate, reasonably
                    expected to have a Material Adverse Effect.

        2.25.       PROXY STATEMENT AND STOCKHOLDER INFORMATION STATEMENT. The
                    information supplied by the Company for inclusion in (x) the
                    Proxy Statement or the Stockholder Information Statement or
                    the Form S-4 Registration Statement (each as defined below)
                    or any application filed in connection with a "fairness
                    hearing" pursuant to Section 5.1 hereof, will not on the
                    date it (or any amendment or supplement thereto) is first
                    sent to Stockholders, on either (i) the date of circulation
                    of the written consent or (ii) the date of the Company's
                    Stockholder Meeting and at the Effective Time, and (y) the
                    Buyer Registration Statement (or any amendment or supplement
                    thereto) will not at any time prior to the Effective Time,
                    contain any statement which, at such time and in light of
                    the circumstances under which it is made, is false or
                    misleading with respect to any material fact, or will omit
                    to state any material fact necessary in order to make the
                    statements therein not false or misleading. If at any time
                    prior to the Effective Time any event relating to the
                    Company or any of its respective affiliates, officers or
                    directors should be discovered by the Company which should
                    be set forth in an amendment or a supplement to the Proxy
                    Statement or the Stockholder Information Statement or the
                    Form S-4 Registration Statement or the Buyer Registration
                    Statement, the Company will promptly inform the Buyer.
                    Notwithstanding the foregoing, the Company makes no
                    representation or warranty with respect to any information
                    supplied by Buyer that is contained in any of the foregoing
                    documents.

        2.26        VOTING AGREEMENTS. The Stockholders delivering to Buyer
                    executed Stockholder Agreements (as defined in Section 5.18
                    of this Agreement) simultaneously with the execution and
                    delivery of this Agreement possess sufficient voting power


                                      -33-




                    to approve (without the consent or approval of any other
                    Stockholders) this Agreement, the Merger and all of the
                    other transactions contemplated by this Agreement and the
                    Stockholder Agreements, and such Stockholder Agreements
                    constitute the due and valid approval thereof.

        2.27        REPRESENTATIONS COMPLETE.  None of the representations or
                    warranties made by the Company (as modified by the
                    Disclosure Schedule), nor any statement made in any schedule
                    or certificate furnished by the Company pursuant to this
                    Agreement or furnished in or in connection with documents
                    mailed or delivered to the Shareholders for use in
                    soliciting their consent to this Agreement and the Merger
                    contains or will contain at the Effective Time (when read
                    together with the Proxy Statement or Shareholder Information
                    Statement (as amended or supplemented) and the Form S-4
                    Registration Statement at the Effective Time), any untrue
                    statement of a material fact, or omits or will omit at the
                    Effective Time (when read together with the Proxy Statement
                    or Shareholder Information Statement) (as amended or
                    supplemented) and the Form S-4 Registration Statement at the
                    Effective Time), to state any material fact necessary in
                    order to make the statements contained herein or therein, in
                    the light of the circumstances under which made, not
                    misleading.

                                     ARTICLE III        

                       REPRESENTATIONS AND WARRANTIES OF BUYER

        Buyer represents and warrants to the Company that on the date hereof
and, except as expressly provided otherwise below and except as may be modified
to appropriately reflect the transactions contemplated hereby, the Buyer IPO and
the Buyer Stock Split, and as of the Effective Time as though made at the
Effective Time as follows:

        3.1.        ORGANIZATION, STANDING AND POWER. Buyer is a corporation
                    duly organized, validly existing and in good standing under
                    the laws of the State of Delaware. As of the Effective Time,
                    Merger Sub will be a corporation duly organized, validly
                    existing and in good standing under the laws of the State of
                    Delaware. Buyer has the corporate power to own its
                    properties and to carry on its business as now being
                    conducted and is duly qualified to do business and is in
                    good standing as a foreign corporation in each jurisdiction
                    in which the failure to be so qualified would have a
                    Material Adverse Effect on the ability of Buyer to
                    consummate the Merger or the other transactions contemplated
                    hereby.

        3.2.        CHARTER AND BYLAWS. The Certificate of Incorporation and
                    Bylaws of Buyer filed as exhibits to the Buyer Registration
                    Statement are complete and accurate copies thereof and are
                    in full force and effect. Buyer is not in violation of any
                    of the provisions of its Certificate of Incorporation or
                    Bylaws.

        3.3.        AUTHORITY.

                    3.3.1.  Buyer has all requisite power and authority to
                            enter into this Agreement and any Related
                            Agreements to which it is a party and to consummate
                            the


                                      -34-




                            transactions contemplated hereby and thereby.
                            The execution and delivery of this Agreement and
                            any Related Agreements to which it is a party and
                            the consummation of the transactions contemplated
                            hereby and thereby have been duly authorized by all
                            necessary corporate action on the part of Buyer,
                            and no further action is required on the part of
                            Buyer to authorize this Agreement, any Related
                            Agreements to which it is a party or the
                            transactions contemplated hereby and thereby. Buyer
                            has duly executed and delivered this Agreement and,
                            as of the Effective Time, will have duly executed
                            and delivered each Related Agreement to which it is
                            a party. Assuming the due authorization, execution
                            and delivery by the other parties hereto and
                            thereto, this Agreement and such Related Agreements
                            constitute or, as of the Effective Time in the case
                            of the Related Agreements, will constitute, the
                            valid and binding obligations of Buyer, enforceable
                            in accordance with their respective terms, except
                            as such enforceability may be limited by principles
                            of public policy and subject to the laws of general
                            application relating to bankruptcy, insolvency and
                            the relief of debtors and rules of law governing
                            specific performance, injunctive relief or other
                            equitable remedies.

                    3.3.2.  As of the Effective Time, Merger Sub will have all
                            requisite power and authority to enter into any
                            Related Agreements to which it is a party and to
                            consummate the transactions contemplated hereby and
                            thereby. As of the Effective Time, the execution
                            and delivery of any Related Agreements to which it
                            is a party and the consummation of the transactions
                            contemplated hereby and thereby will have been duly
                            authorized by all necessary corporate action on the
                            part of Merger Sub, and no further action will be
                            required on the part of Merger Sub to authorize any
                            Related Agreements to which it is a party or the
                            transactions contemplated hereby and thereby
                            (except that, with respect to Section 5.19 of this
                            Agreement, Buyer will be required to obtain the
                            consent of certain of its Stockholders to an
                            increase in the size of Buyer's Board of Directors,
                            in order to permit the election of the
                            representative of the Company in accordance with
                            such Section 5.19).  As of the Effective Time,
                            Merger Sub will have duly executed and delivered
                            each Related Agreement to which it is a party. 
                            Assuming the due authorization, execution and
                            delivery by the other parties thereto, as of the
                            Effective Time such Related Agreements will
                            constitute the valid and binding obligations of
                            Merger Sub, enforceable in accordance with their
                            respective terms, except as such enforceability may
                            be limited by principles of public policy and
                            subject to the laws of general application relating
                            to bankruptcy, insolvency and the relief of debtors
                            and rules of law governing specific performance,
                            injunctive relief or other equitable remedies.

                    3.3.3.  MERGER SHARES.  The shares of Buyer Common Stock to
                            be issued pursuant to the Merger will be duly
                            authorized, validly issued, fully paid,
                            non-assessable and will be issued in compliance with
                            all applicable federal and state securities laws.


                                      -35-




        3.4.        NO CONFLICT. The execution and delivery of this Agreement
                    and any Related Agreement to which Buyer or Merger Sub is or
                    will be a party by Buyer or Merger Sub, as the case may be,
                    do not, and the consummation of the transactions
                    contemplated hereby and thereby will not, conflict with, or
                    result in any violation of, or default under (with or
                    without notice or lapse of time, or both), or give rise to a
                    Conflict under (i) any provision of the Certificate of
                    Incorporation or Bylaws of Buyer or Merger Sub, (ii) any
                    mortgage, indenture, lease, contract or other agreement or
                    instrument, permit, concession, franchise or license to
                    which Buyer or Merger Sub or any of their respective
                    properties or assets are subject and that has been filed as
                    an exhibit to the Buyer Registration Statement, or (iii) any
                    judgment, order, decree, statute, law, ordinance, rule or
                    regulation applicable to Buyer or Merger Sub or their
                    respective properties or assets, except for a Conflict under
                    subsection (ii) or (iii) above that would not have a
                    Material Adverse Effect on the ability of the parties to
                    consummate the Merger or the other transactions contemplated
                    by this Agreement.

        3.5.        CONSENTS. No consent, waiver, approval, order or
                    authorization of, or registration, declaration or filing
                    with, any Governmental Entity or any third party is
                    required, including a party to any agreement with Buyer or
                    Merger Sub (so as not to trigger any Conflict), by or with
                    respect to Buyer or Merger Sub in connection with the
                    execution and delivery of this Agreement and any Related
                    Agreements to which Buyer or Merger Sub is or will be a
                    party or the consummation of the transactions contemplated
                    hereby and thereby, except for (i) such consents, waivers,
                    approvals, orders, authorizations, registrations,
                    declarations and filings as may be required under applicable
                    securities laws, (ii) any applicable filings required under
                    the HSR Act, (iii) the filing of the Merger Agreement with
                    the Secretary of State of the State of Delaware, (iv) any
                    other filings or approvals as may be required under Delaware
                    state law, and (v) consents, waivers, approvals, orders,
                    authorizations, registrations, declarations and filings
                    which, if not obtained or made, would not have a Material
                    Adverse Effect on Buyer or on the ability of the parties to
                    consummate the Merger or the other transactions contemplated
                    by this Agreement.

        3.6.        PROXY STATEMENT AND STOCKHOLDER INFORMATION STATEMENT. The
                    information supplied by Buyer for inclusion in the Proxy
                    Statement or Stockholder Information Statement and the Form
                    S-4 Registration Statement or any application filed in
                    connection with "fairness hearing" pursuant to Section 5.1
                    hereof will not, on the date it (or any amendment or
                    supplement thereto) is first mailed to Stockholders, at the
                    time of the Company Stockholders Meeting and at the
                    Effective Time, contain any statement which, at such time
                    and in light of the circumstances under which it is made, is
                    false or misleading with respect to any material fact, or
                    will omit to state any material fact necessary in order to
                    make the statements therein not false or misleading. If at
                    any time prior to the Effective Time any event relating to
                    Buyer, Merger Sub or any of their respective affiliates,
                    officers or directors should be discovered by Buyer or
                    Merger Sub which should be set forth in an amendment or a
                    supplement to the Proxy Statement or Stockholder Information
                    Statement, Buyer or Merger Sub will promptly inform


                                      -36-




                    the Company. Notwithstanding the foregoing, Buyer and Merger
                    Sub make no representation or warranty with respect to any
                    information supplied by the Company that is contained in any
                    of the foregoing documents.

        3.7.        MERGER SUB. Merger Sub will be formed for the sole purpose
                    of effecting the Merger and, except as contemplated by this
                    Agreement, Merger Sub will not conduct any business
                    activities and will not have any material liabilities or
                    obligations.

        3.8         SEC FILINGS; FINANCIAL STATEMENTS.

                    3.8.1   The Buyer Registration Statement (including,
                    without limitation information concerning capitalization
                    included on pages 5 and 19 therein) (i) at the time it was
                    filed, complied as to form in all material respects with the
                    requirements of the Securities Act and (ii) did not at the
                    time it was filed (or if amended or superseded by a filing
                    prior to the date of this Agreement, then on the date of
                    such filing) contain any untrue statement of a material fact
                    or omit to state a material fact required to be stated
                    therein or necessary in order to make the statements
                    therein, in light of the circumstances under which they were
                    made, not misleading. 

                    3.8.2   The financial statements (including, in each case,
                    any related notes thereto) (the "Buyer Financial
                    Statements") contained in the Buyer Registration Statement
                    have been prepared in accordance with GAAP applied on a
                    consistent basis throughout the period involved (except as
                    may be indicated in the notes thereto) and fairly present in
                    all material respects the financial position of Buyer as at
                    the respective dates thereof and the results of its
                    operations and cash flows for the periods indicated, except
                    that any unaudited interim financial statements were or are
                    subject to normal and recurring year-end adjustments which
                    were not or are not expected to be, individually or in the
                    aggregate, materially adverse to Buyer.

                                      ARTICLE IV

                         CONDUCT PRIOR TO THE EFFECTIVE TIME

        4.1.        CONDUCT OF BUSINESS OF THE COMPANY. During the period from
                    the date of this Agreement and continuing until the earlier
                    of the termination of this Agreement or the Effective Time,
                    the Company agrees (except to the extent that Buyer shall
                    otherwise consent in writing), to carry on the Company's
                    business in the usual, regular and ordinary course in
                    substantially the same manner as heretofore conducted, to
                    pay the debts and Taxes of the Company when due, to pay or
                    perform other obligations when due consistent with the past
                    practices of the Company, and, to the extent consistent with
                    such business, use its commercially reasonable efforts
                    consistent with past practice and policies to preserve
                    intact the Company's present business organizations, keep
                    available the services of the Company's present officers and
                    key employees and preserve the Company's relationships with
                    customers, advertisers, suppliers, distributors, licensors,


                                      -37-




                    licensees, and others having business dealings with it, all
                    with the goal of preserving unimpaired the Company's
                    goodwill and ongoing businesses at the Effective Time. The
                    Company shall promptly notify Buyer of any event or
                    occurrence or emergency not in the ordinary course of
                    business of the Company and any material event involving the
                    Company. Except as expressly contemplated by this Agreement
                    or as set forth in Section 4.1 of the Disclosure Schedule,
                    the Company shall not, without the prior written consent or
                    e-mail of Buyer:

                    4.1.1.  Except in the ordinary course of business and
                            consistent with past practice, (i) sell or enter
                            into any license agreement with respect to the
                            Company Intellectual Property with any person or
                            entity or (ii) buy or enter into any license
                            agreement with respect to the Intellectual Property
                            of any person or entity;

                    4.1.2.  Except in the ordinary course of business and
                            consistent with past practice, transfer to any
                            person or entity any rights to the Company
                            Intellectual Property;

                    4.1.3.  Enter into or amend any single Contract (or series
                            of related Contracts) with a potential obligation
                            or value of $750,000 or more or multiple Contracts
                            in any calendar month with aggregate potential
                            obligations or value of $1,500,000 or more,
                            excluding the entering into of charter sponsorship
                            arrangements in the ordinary course of business
                            consistent with past practice;

                    4.1.4.  Amend or otherwise modify (or agree to do so),
                            except in the ordinary course of business, or
                            violate, in any material respect, the terms of, any
                            of the Contracts set forth or described in the
                            Disclosure Schedule, (for this purpose, an
                            amendment to the agreement with Blue Shield of
                            California dated October 4, 1998, shall not be
                            deemed in the ordinary course of business);

                    4.1.5.  Commence any litigation or settle: (I) any
                            litigation for $50,000 or more or (ii) any
                            litigation relating to intellectual property
                            rights; provided that the Company shall have the
                            right to settle litigation outstanding as of the
                            date hereof, so long as the terms of such
                            settlement involve no monetary obligation or other
                            liability imposed on the Company;

                    4.1.6.  Declare, set aside or pay any dividends on or make
                            any other distributions (whether in cash, stock or
                            property) in respect of any of its capital stock,
                            or split, combine or reclassify any of its capital
                            stock or issue or authorize the issuance of any
                            other securities in respect of, in lieu of or in
                            substitution for shares of capital stock of the
                            Company, or repurchase, redeem or otherwise
                            acquire, directly or indirectly, any shares of the
                            capital stock of the Company or options, warrants
                            or other rights exercisable therefor (except for
                            the Company's repurchase of Company


                                      -38-




                            Capital Stock from its employees at the purchase
                            price paid by such employees for such stock);

                    4.1.7.  Issue, grant, deliver or sell, contract to issue,
                            grant, deliver or sell, or authorize or propose the
                            issuance, grant, delivery or sale of, or purchase
                            or propose the purchase of, any shares of its
                            capital stock (other than the exercise of currently
                            outstanding stock options and the exercise of
                            outstanding warrants) or securities convertible
                            into or exchangeable for, or subscriptions, rights,
                            warrants or options to acquire, or other agreement
                            or commitments of any character obligating it to
                            issue or purchase any such shares or other
                            convertible securities (excluding employee and
                            consultant stock options or exercises thereof and
                            grants of restricted stock pursuant to the Company
                            Option Plan);

                    4.1.8.  Cause or permit any amendments to its Certificate
                            of Incorporation or Bylaws or other organizational
                            documents;

                    4.1.9.  Acquire or agree to acquire any assets or business
                            which are material, individually or in the
                            aggregate, to the Company's business;

                    4.1.10. Make any capital expenditures in excess of $750,000
                            individually or $1,500,000 in the aggregate;

                    4.1.11. Sell, lease, license or otherwise dispose of any of
                            its properties or assets, except in the ordinary
                            course of business and consistent with past
                            practices;

                    4.1.12. Incur any indebtedness for borrowed money or
                            guarantee any such indebtedness or issue or sell
                            any debt securities or guarantee any debt
                            securities of others or issue or become subject to
                            any fidelity, surety or completion bond, except
                            pursuant to existing agreements set forth on the
                            Disclosure Schedule;

                    4.1.13. Incur liabilities outside of the ordinary course of
                            business in excess of $50,000 individually or
                            $100,000 in the aggregate;

                    4.1.14. Grant any loans to others outside ordinary course
                            of business or purchase debt securities of others
                            or amend the terms of any outstanding loan
                            agreement;

                    4.1.15. Grant (or enter into or amend any contract or
                            arrangement providing for) any severance or
                            termination pay: (i) to any director or officer or
                            (ii) to any other employee except payments made
                            pursuant to written agreements outstanding on the
                            date hereof and disclosed in the Disclosure
                            Schedule;

                    4.1.16. Adopt any employee benefit plan, or enter into any
                            employment contract or pay or agree to pay any
                            special bonus or special remuneration to any
                            director;


                                      -39-






                    4.1.17. Revalue any of its assets, including without
                            limitation writing down the value of inventory or
                            writing off notes or accounts receivable other than
                            in the ordinary course of business;

                    4.1.18. Pay, discharge or satisfy, in an amount in excess
                            of $50,000 (in any one case) or $100,000 (in the
                            aggregate), any claim, liability or obligation
                            (absolute, accrued, asserted or unasserted,
                            contingent or otherwise), other than the payment,
                            discharge or satisfaction in the ordinary course of
                            business of liabilities reflected or reserved
                            against in the Current Balance Sheet;

                    4.1.19. Make or change any material election in respect of
                            Taxes, adopt or change any accounting method in
                            respect of Taxes, enter into any closing agreement,
                            settle any claim or assessment in respect of Taxes,
                            or consent to any extension or waiver of the
                            limitation period applicable to any claim or
                            assessment in respect of Taxes provided that Buyer
                            shall not unreasonably withhold its consent for any
                            of the foregoing;

                    4.1.20. Enter into any strategic alliance or joint
                            marketing arrangement or agreement that (i) would
                            substantially change any line of business in which
                            the Company operates or (ii) relates to any
                            business segment of the Buyer, including toys,
                            videos, video game books and software;

                    4.1.21. Accelerate the vesting schedule of any of the
                            outstanding Company Options or Company Capital
                            Stock;

                    4.1.22. (i) Terminate any officer or key employee, (ii)
                            hire an employee with an annual salary in excess of
                            $130,000, (iii) hire an officer or (iv) hire any
                            material number of employees (for these purposes,
                            an increase of 30% or more in the size of the
                            Company's workforce shall be deemed material);

                    4.1.23  Agree in writing to take any of the actions
                            described in Sections 4.1.1 through 4.1.22; or 

                    4.1.24  Take, or agree in writing to take any other action
                            that would prevent the Company from performing or
                            cause the Company not to perform its covenants
                            hereunder.

        4.2.        NO SOLICITATION. 

                    4.2.1.  For purposes of this Section 4.2, the following
                            terms shall have the following meanings:

                            (a)      "Acquisition Proposal" shall mean any
                                     offer or proposal (other than an offer or
                                     proposal by Buyer) contemplating or
                                     otherwise relating to any Company
                                     Acquisition Transaction.


                                      -40-






                            (b)      A party's "Associates" shall include such
                                     party's subsidiaries and other affiliates
                                     and the respective directors, officers,
                                     employees, agents, representatives,
                                     consultants, accountants, attorneys and
                                     financial advisors of such party and its
                                     affiliates.

                            (c)      "Company Acquisition Transaction" shall
                                     mean any transaction not contemplated by
                                     this Agreement involving:  (A) any sale,
                                     lease, exchange, transfer or other
                                     disposition of the assets of the Company
                                     or any subsidiary of the Company
                                     constituting more than 5% of the assets of
                                     the Company or accounting for more than 5%
                                     of the revenues of the Company in any one
                                     transaction or in a series of related
                                     transactions; or (B) any offer to
                                     purchase, tender offer, exchange offer or
                                     any similar transaction or series of
                                     related transactions made by any person,
                                     group or entity involving more than 5% of
                                     the outstanding shares of capital stock of
                                     the Company; or (C) any merger,
                                     consolidation, business combination, share
                                     exchange, reorganization or similar
                                     transaction or series of related
                                     transactions involving the Company other
                                     than any transaction which results in the
                                     Stockholders of the Company before the
                                     transaction continuing to hold at least
                                     95% of the outstanding voting securities
                                     of the Company after such transaction.

                            (d)      "Termination Date" shall mean the earlier
                                     of (i) the Effective Time, or (ii) the
                                     date that this Agreement is terminated in
                                     accordance with its terms.

                    4.2.2.  The Company agrees that prior to and through the
                            Termination Date, it shall not, directly or
                            indirectly, and shall not authorize or permit any
                            Associate of the Company to (i) solicit, initiate,
                            encourage or induce the making, submission or
                            announcement of any Acquisition Proposal or take
                            any action that could reasonably be expected to
                            lead to an Acquisition Proposal, (ii) furnish any
                            information regarding the Company or any subsidiary
                            of the Company to any person, group or entity in
                            connection with or in respect to any Acquisition
                            Proposal, (iii) continue or engage in discussions
                            with any person, group or entity with respect to
                            any Acquisition Proposal, (iv) approve, endorse or
                            recommend any Acquisition Proposal or (v) enter
                            into any letter of intent, term sheet or similar
                            document or any contract, commitment or other
                            obligation of any kind contemplating or otherwise
                            relating to any Company Acquisition Transaction
                            (other than with Buyer and Merger Sub). Without
                            limiting the generality of the foregoing, the
                            Company acknowledges and agrees that any violation
                            of any of the restrictions set forth in the
                            preceding sentence by an Associate of the Company
                            shall be deemed to constitute a breach of this
                            Section 4.2. In addition, the Company agrees that
                            any negotiations with respect to any of the above
                            activities (other than negotiations with Buyer and
                            Merger Sub) in progress as of the date hereof will
                            be suspended during the period from the date hereof
                            through the Termination Date. In 


                                      -41-






                            the event that the Company receives, directly or 
                            indirectly, any Acquisition Proposal, the Company 
                            shall immediately notify Buyer thereof, including 
                            information as to the identity of the offeror or 
                            the party making any such Acquisition Proposal and 
                            the specific terms of such Acquisition Proposal. 
                            The Company agrees that its obligations under this 
                            Section 4.2 are necessary and reasonable in order 
                            to protect Buyer and its business, and expressly 
                            agrees that monetary damages would be inadequate 
                            to compensate Buyer for any breach of this 
                            Section 4.2. Accordingly, the Company agrees and
                            acknowledges that any such violation or 
                            threatened violation will cause irreparable injury 
                            to Buyer and that, in addition to any other 
                            remedies that may be available in law, in equity or
                            otherwise, Buyer shall be entitled to obtain 
                            injunctive relief against the threatened breach of 
                            this Agreement or the continuation of any such 
                            breach, without the necessity of proving damages.


                                      ARTICLE V 
                                ADDITIONAL AGREEMENTS


        5.1.        FAIRNESS HEARING; PROXY STATEMENT AND STOCKHOLDER
                    INFORMATION STATEMENT; REGISTRATION STATEMENTS.    

                    5.1.1.  Notwithstanding anything in this Agreement to the
                            contrary, the parties agree to use commercially
                            reasonable efforts to qualify the issuance of Buyer
                            Common Stock in the Merger under the exemption
                            provided by Section 3(a)(10) of the Securities Act. 
                            Consistent therewith, the parties agree to
                            cooperate with one another, commencing promptly
                            following the date hereof, to prepare and file with
                            the Commissioner of Corporations of the State of
                            California an application for qualification of the
                            Buyer Common Stock in the Merger pursuant to a
                            "fairness hearing" procedure, and to take such
                            other actions as may be reasonably necessary to
                            perfect such exemption.  If, despite the parties'
                            commercially reasonable efforts, such qualification
                            is denied or such exemption cannot otherwise be
                            perfected by June 30, 1999, (a "Fairness Hearing
                            Failure") then the provisions of this Agreement
                            calling for registration of the Buyer Common Stock
                            to be issued in the Merger on Form S-4 (or another
                            appropriate form) under the Securities Act shall
                            immediately be invoked and complied with in order
                            to have such registration declared effective at the
                            earliest practicable time.  All references in this
                            Agreement to the Form S-4 Registration Statement
                            (as hereinafter defined), the filing thereof with
                            the SEC and similar matters shall be deemed
                            applicable only following a Fairness Hearing
                            Failure, notwithstanding anything in this Agreement
                            to the contrary.  The foregoing limitation shall
                            not, however, otherwise affect the parties'
                            obligations with respect to the Stockholder
                            Information Statement and the Proxy Statement. 
                            Subject to the foregoing, Buyer and the Company
                            shall jointly prepare and cause to be filed with
                            the SEC preliminary Stockholder solicitation
                            materials, which shall be in the form of a
                            Stockholder information statement (the "Stockholder


                                      -42-







                            Information Statement") or a proxy statement (the
                            "Proxy Statement"), as determined jointly by Buyer
                            and the Company, for the solicitation of approval
                            of the Stockholders of the Company of this
                            Agreement, the Merger and the transactions
                            contemplated hereby.  Buyer shall also prepare and
                            cause to be filed with the SEC a Registration
                            Statement on Form S-4 (or other appropriate form)
                            of Buyer pertaining to the shares of Buyer Common
                            Stock to be issued pursuant to the Merger (the
                            "Form S-4 Registration Statement"), in which the
                            Stockholder Information Statement or Proxy
                            Statement, as the case may be, will be included as
                            a prospectus. Each of Buyer and the Company shall
                            provide promptly to the other such information
                            concerning its business and financial statements
                            and affairs as, in the reasonable judgment of the
                            providing party or its counsel, may be required or
                            appropriate for inclusion in the Stockholder
                            Information Statement or Proxy Statement, as the
                            case may be, or in any amendments or supplements
                            thereto, and to cause its counsel and auditors to
                            cooperate with the other's counsel and auditors in
                            the preparation of the Stockholder Information
                            Statement or Proxy Statement, as the case may be.
                            The Stockholder Information Statement or Proxy
                            Statement, as the case may be, shall include
                            information regarding the Company, the terms of the
                            Merger and this Agreement and the unanimous
                            recommendation of the Board of Directors of the
                            Company in favor of the Merger. Each of Buyer and
                            the Company shall use all reasonable efforts to
                            cause the Form S-4 Registration Statement and the
                            Stockholder Information Statement or Proxy
                            Statement, as the case may be, to comply with
                            applicable law and the rules and regulations
                            promulgated by the SEC and to cause the Stockholder
                            Information Statement or Proxy Statement, as the
                            case may be, to be mailed to the Company's
                            Stockholders as promptly as practicable  If any
                            event relating to Buyer or the Company occurs, or
                            if Buyer or the Company becomes aware of any
                            information, that should be disclosed in an
                            amendment or supplement to the Stockholder
                            Information Statement or Proxy Statement, as the
                            case may be, then Buyer or the Company, as
                            applicable, shall inform the other thereof and
                            shall cooperate with each other in completing such
                            amendment or supplement, and, if appropriate, in
                            mailing such amendment or supplement to the
                            Company's Stockholders.

                    5.1.2.  Prior to the Effective Time, Buyer shall use
                            commercially reasonable efforts to obtain all
                            regulatory approvals needed to ensure that the
                            Buyer Common Stock to be issued in the Merger: (i)
                            will be registered or qualified under the
                            securities law of every jurisdiction of the United
                            States in which any registered holder of the
                            Company Capital Stock who is receiving shares of
                            registered Buyer Common Stock has an address of
                            record or be exempt from such registration; and
                            (ii) will be approved for quotation at the
                            Effective Time on the Nasdaq National Market;
                            provided, however, that, in the case of clause (i)
                            above, Buyer shall not, pursuant to the foregoing,
                            be required (I) to qualify to do business as a
                            foreign corporation in any jurisdiction in which it
                            is not currently qualified or (II) to file a
                            general consent to service of process in any
                            jurisdiction with 


                                      -43-






                            respect to matters unrelated to the issuance of 
                            Buyer Common Stock pursuant hereto.

                    5.1.3.  Each of Buyer and the Company (in respect of the
                            information respectively  supplied by it) agrees
                            that:  (i) none of the information to be supplied
                            by it or its Affiliates for inclusion in the
                            Stockholder Information Statement or Proxy
                            Statement, as the case may be, will, at the time
                            such document is mailed to the Stockholders of the
                            Company, or as of the Effective Time, contain any
                            untrue statement of a material fact or omit to
                            state any material fact required to be stated
                            therein or necessary in order to make the
                            statements therein, in light of the circumstances
                            under which they were made, not misleading; and
                            (ii) as to matters respecting it, the Stockholder
                            Information Statement or the Proxy Statement, as
                            the case may be, will comply as to form in all
                            material respects with the provisions of the
                            Securities Act and the Exchange Act, as applicable,
                            and the rules and regulations promulgated by the
                            SEC thereunder, except that no covenant,
                            representation or warranty is made by Buyer with
                            respect to statements made or incorporated by
                            reference therein based on information supplied by
                            the Company for inclusion or incorporation by
                            reference therein and no covenant, representation
                            or warranty is made by the Company with respect to
                            statements made or incorporated by reference
                            therein based on information supplied by Buyer for
                            inclusion or incorporation by reference therein.

                    5.1.4.  The Company shall promptly after the date hereof
                            take all action necessary in accordance with
                            applicable law and its Certificate of Incorporation
                            and Bylaws to approve this transaction by written
                            consent of the stockholders.  It is understood and
                            intended by the parties hereto that the Stockholder
                            Agreements and the irrevocable proxies delivered to
                            Buyer by the Company are sufficient to approve the
                            transactions contemplated hereby by the Company's
                            Stockholders, and the Company shall not in any way
                            challenge the validity, enforceability or
                            effectiveness of the Stockholder Agreements or
                            proxies. 

                    5.1.5.  The Company and Buyer will prepare and file any
                            other filings required under any Blue Sky laws
                            relating to the Merger and the transactions
                            contemplated by this Agreement (the "Other
                            Filings"). Each of the Company and Buyer will
                            notify the other promptly upon the receipt of any
                            correspondence or communications from any
                            government officials concerning the Stockholder
                            Information Statement, the Proxy Statement or any
                            Other Filing and will supply the other with copies
                            of all correspondence between such party or any of
                            its representatives, on the one hand, and any other
                            government officials, on the other hand, with
                            respect to the Stockholder Information Statement,
                            the Proxy Statement, the Merger or any Other
                            Filing. The Proxy Statement, the Stockholder
                            Information Statement and the Other Filings will
                            comply in all material


                                      -44-






                            respects with all applicable requirements of law 
                            and the rules and regulations promulgated 
                            thereunder. 

                    5.1.6.  Promptly after the date of this Agreement, the
                            Company shall provide to Buyer such information
                            concerning its business and financial statements
                            and affairs as, in the reasonable judgment of Buyer
                            and its counsel, may be required or appropriate for
                            inclusion in the Buyer Registration Statement or in
                            any amendments or supplements thereto in order to
                            reflect the transactions contemplated hereby and
                            other information concerning the Company, and to
                            cause the Company's counsel and auditors to
                            cooperate with Buyer's counsel and auditors in the
                            preparation of the Buyer Registration Statement or
                            any amendments or supplements thereto.  The Company
                            shall use all reasonable efforts to ensure that the
                            information provided by it for inclusion in the
                            Buyer Registration Statement complies with
                            applicable law and the rules and regulations
                            promulgated by the SEC, to assist Buyer in
                            responding promptly to any comments of the SEC or
                            its staff, and to assist Buyer in having the Buyer
                            Registration Statement declared effective under the
                            Securities Act as promptly as practicable.  If any
                            event relating to the Company occurs, or if the
                            Company becomes aware of any information, that
                            should be disclosed in an amendment or supplement
                            to the Buyer Registration Statement, then the
                            Company shall inform Buyer thereof and shall
                            cooperate with Buyer in filing such amendment or
                            supplement with the SEC.  The Company represents
                            and warrants to Buyer that all information provided
                            by the Company for inclusion in the Buyer
                            Registration Statement shall not, at the time it
                            was provided, contain any untrue statement of a
                            material fact or omit to state a material fact
                            required to be stated therein or necessary in order
                            to make the statements therein, in light of the
                            circumstances under which they were made, not
                            misleading.  

        5.2.        COOPERATION; ACCESS TO INFORMATION.  The Company shall
                    afford Buyer and its accountants, counsel and other
                    representatives, reasonable access during normal business
                    hours and upon reasonable notice during the period prior to
                    the Effective Time to (a) all of the Company's properties,
                    books, contracts, commitments and records, (b) all other
                    information concerning the business, properties and
                    personnel (subject to restrictions imposed by applicable
                    law) of the Company as Buyer may reasonably request and (c)
                    all officers and, as scheduled through officers, key
                    employees of the Company.  The Company agrees to provide to
                    Buyer and its accountants, counsel and other representatives
                    copies of internal financial statements (including by
                    returns and supporting documentation) promptly upon 
                    request. No information or knowledge obtained in any 
                    investigation pursuant to this Section 5.2 shall affect or 
                    be deemed to modify any representation or warranty 
                    contained herein or the conditions to the obligations of 
                    the parties to consummate the Merger.

        5.3.        CONFIDENTIALITY.  Each of the parties hereto hereby agrees
                    that the information obtained in any investigation pursuant
                    to Section 5.2, or pursuant to the 


                                      -45-






                    negotiation and execution of this Agreement or the 
                    effectuation of the transaction contemplated hereby, shall 
                    be governed by the terms of the Confidentiality Agreement 
                    effective as of April 15, 1999 between the Company and 
                    Buyer.

        5.4.        EXPENSES.

                    5.4.1.  Whether or not the Merger is consummated, except as
                            set forth in Section 5.4.2, all fees and expenses
                            incurred in connection with the Merger including,
                            without limitation, all legal, accounting,
                            investment banking, broker, financial advisory,
                            consulting and all other fees and expenses of third
                            parties ("Third Party Expenses") incurred by a
                            party in connection with the negotiation and
                            effectuation of the terms and conditions of this
                            Agreement and the transactions contemplated hereby,
                            shall be the obligation of the respective party
                            incurring such fees and expenses; provided, however
                            that Buyer and the Company shall share equally in
                            all fees and expenses, other than Third Party
                            Expenses, incurred in relation to any 3(a)(10)
                            filing or filing of the Form S-4 Registration
                            Statement any required HSR filings and printing the
                            Proxy Statement or Stockholder Information
                            Statement (as the case may be and the Form S-4
                            Registration Statement, if required).

                    5.4.2.  In the event that the Merger is consummated, Buyer
                            agrees to pay those Third Party Expenses incurred
                            by the Company, provided that Buyer shall have full
                            recourse to the Escrow Fund (as defined herein) for
                            payment of all Third Party Expenses incurred by the
                            Company exceeding $400,000 (excluding the expense
                            of the Company's accounting professionals to
                            prepare an audit of the Company's 
                            post-September 30, 1998 financial statements, if
                            required for the Buyer Registration Statement).

        5.5.        PUBLIC DISCLOSURE.  Unless otherwise required by law, prior
                    to the Effective Time, no disclosure (whether or not in
                    response to an inquiry) of the subject matter of this
                    Agreement shall be made by any party hereto unless approved
                    by Buyer and Company prior to release. Any public
                    announcement by Buyer regarding the subject matter of this
                    Agreement shall be delivered to and approved by the Company
                    prior to release (such approval to not be unreasonably
                    withheld).

        5.6.        CONSENTS. The Company shall use reasonable commercial
                    efforts to obtain the consents, waivers, assignments and
                    approvals under any of the Contracts set forth in Section
                    2.6 of the Disclosure Schedule so as to preserve all rights
                    of, and benefits to, the Company thereunder.

        5.7.        FIRPTA COMPLIANCE.  On the Closing Date, the Company shall
                    deliver to Buyer a properly executed statement in a form
                    reasonably acceptable to Buyer for purposes of satisfying
                    Buyer's obligations under Treasury Regulation Section
                    1.1445-2(c)(3).


                                      -46-






        5.8.        REASONABLE EFFORTS. Subject to the terms and conditions
                    provided in this Agreement, each of the parties hereto shall
                    use commercially reasonable efforts to take promptly, or
                    cause to be taken, all actions, and to do promptly, or cause
                    to be done, all things necessary, proper or advisable under
                    applicable laws and regulations to consummate and make
                    effective the transactions contemplated hereby, to obtain
                    all necessary waivers, consents and approvals and to effect
                    all necessary registrations and filings and to remove any
                    injunctions or other impediments or delays, legal or
                    otherwise, in order to consummate and make effective the
                    transactions contemplated by this Agreement for the purpose
                    of securing to the parties hereto the benefits contemplated
                    by this Agreement (including, without limitation the Buyer
                    IPO); provided that Buyer shall not be required to agree to
                    any divestiture by Buyer or the Company or any of Buyer's
                    subsidiaries or affiliates of shares of capital stock or of
                    any business, assets or property of Buyer or its
                    subsidiaries or affiliates or of the Company, its
                    affiliates, or the imposition of any material limitation on
                    the ability of any of them to conduct their businesses or to
                    own or exercise control of such assets, properties and
                    stock.

        5.9.        NOTIFICATION OF CERTAIN MATTERS. The Company and Buyer shall
                    give prompt notice to the other of: (i) the occurrence or
                    nonoccurrence of any event, the occurrence or nonoccurrence
                    of which is likely to cause any representation or warranty
                    contained in this Agreement to be untrue or inaccurate at or
                    prior to the Effective Time and (ii) any failure to comply
                    with or satisfy any covenant, condition or agreement to be
                    complied with or satisfied by it hereunder; provided,
                    however, that the delivery of any notice pursuant to this
                    Section 5.9 shall not limit or otherwise affect any remedies
                    available to the party receiving such notice and no
                    disclosure pursuant to this Section 5.9 shall be deemed to
                    amend or supplement the disclosure schedules or prevent or
                    cure any misrepresentations, breach of warranty or breach of
                    covenant.

        5.10.       ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES.  Each party
                    hereto, at the request of another party hereto, shall use
                    reasonable commercial efforts to execute and deliver such
                    other instruments and do and perform such other acts and
                    things as may be necessary in the written opinion of counsel
                    to the requesting party for effecting the consummation of
                    this Agreement and the transactions contemplated hereby.

        5.11.       CERTAIN EMPLOYEE MATTERS.  

                    5.11.1. FOR PURPOSES OF THIS SECTION 5.11:

                            (a)      "Applicable Company Options" shall mean
                                     any Company Options granted to an Existing
                                     Employee at any time prior to the
                                     Effective Time.

                            (b)      "Approved by Senior Management" shall mean
                                     an action has been approved in writing or
                                     by e-mail by (i) the Chief Executive
                                     Officer 


                                      -47-






                                     of Buyer and (ii) both Matt Glickman and 
                                     Mark Selcow (or, if only one such officer 
                                     shall remain employed by the Surviving 
                                     Corporation or Buyer, that remaining 
                                     officer, or if neither such officer 
                                     remains employed by the Surviving 
                                     Corporation or Buyer, then neither such
                                     officer).

                            (c)       "Cause" exists if any one or more of the
                                     following should occur as determined in
                                     good faith by Buyer: An Existing Equity
                                     Employee's (i) failure to perform his or
                                     her duties or failure to follow the
                                     directions of any supervisor, after a
                                     written warning except in the case of a
                                     willful failure to perform his or her
                                     duties, in each such case provided that
                                     Matt Glickman and Mark Selcow acknowledge
                                     such failure in writing, (ii) breach of
                                     his or her fiduciary duties to Buyer
                                     and/or the Surviving Corporation, as
                                     evidenced by a written acknowledgement or
                                     opinion regarding such breach by Buyer's
                                     counsel, or (iii) conviction by a court of
                                     competent jurisdiction of a felony or
                                     other serious crime.

                            (d)      "Constructive Termination" shall mean
                                     (i) providing an Existing Employee with a
                                     base salary, an amount or level of
                                     employee benefits or a title, position or
                                     responsibility that is not reasonably
                                     comparable to the base salary, amount and
                                     level of employee benefits or title,
                                     position or responsibility that such
                                     Existing Employee enjoyed as of the date
                                     of this Agreement if employed as of such
                                     date or as of the Effective Time if hired
                                     after the date of this Agreement (for this
                                     purpose, disregarding any enhancement in
                                     the salary, benefits, title, position or
                                     responsibility of comparably positioned
                                     employees at any time between the date of
                                     this Agreement and the Effective Time
                                     outside of the ordinary course of business
                                     consistent with past practice) or
                                     (ii) requiring any Existing Employee to
                                     relocate outside of the San Francisco Bay
                                     Area.

                            (e)      "Existing Employee" shall mean each
                                     Company employee who, as of the Closing
                                     Date, is actively employed by the Company
                                     on a full-time basis.  Without limiting
                                     the generality of the foregoing, for
                                     purposes of clarification, an "Existing
                                     Employee" would not include any part-time
                                     employee (i.e., a person hired for less
                                     than 1000 hours per year or less than 20
                                     hours per week), any person on disability
                                     leave, leave of absence or other 
                                     non-active status (other than any person 
                                     on maternity, paternity or family leave), 
                                     or any person who is merely an independent
                                     contractor or consultant of the Company or
                                     in any comparable non-employee
                                     relationship with the Company.


                                      -48-






                    5.11.2. No Existing Employee may be terminated without
                            Cause or pursuant to a Constructive Termination
                            prior to the second anniversary of the Closing Date
                            unless such termination has been approved by Senior
                            Management.

                    5.11.3. In the event that, at any time prior to the second
                            anniversary of the Closing Date, notwithstanding
                            Section 5.11.2 hereof, Buyer terminates the
                            employment of any Existing Employee (i) without
                            Cause or pursuant to a Constructive Termination and
                            (ii) without such termination having been Approved
                            by Senior Management, then the terminated Existing
                            Employee shall be entitled either to (i) enforce
                            the terms of this Section 5.11 as a third-party
                            beneficiary hereof and seek damages from Buyer or
                            (ii) obtain the following benefits as liquidated
                            damages for such employee's claims hereunder, in
                            which event the following shall be the sole and
                            exclusive remedy of the terminated Existing
                            Employee:  (i) all Applicable Company Options held
                            by such Existing Employee as of the date of such
                            termination will vest an additional 24 months
                            following the date of such termination or in the
                            event such termination is by a successor to or
                            acquiror of Buyer, then all Applicable Company
                            Options held by such Existing Employee shall have
                            their vesting fully accelerated; and (ii) if such
                            Existing Employee has a title of Vice President or
                            above, such Existing Employee shall also be paid by
                            Buyer a cash severance payment equal to one
                            (1) year's base salary as of the date of
                            termination.

                    5.11.4. Nothing contained in this Section 5.11 shall
                            create, or be deemed to create or imply, any
                            specified term of employment, any promise of
                            continued employment or any other agreement
                            regarding duration of employment or the necessity
                            for "Cause" for purposes of terminating employment
                            with respect to any Existing Employee.  Following
                            the Closing Date, all employees of the Company will
                            be employed on an at-will basis, unless otherwise
                            specified in a written agreement between the
                            respective employee and the Company or Buyer.

                    5.11.5. The provisions of this Section 5.11 shall be
                            binding upon any successor to Buyer or Buyer's
                            business by way of merger, consolidation,
                            reorganization, sale of substantially all of
                            Buyer's assets or other comparable transaction.

        5.12.       NON-DISCLOSURE AGREEMENTS.  The Company agrees to use its
                    commercially reasonable efforts to cause all of its current
                    employees and consultants to execute, to the extent they
                    have not already done so, a Non-Disclosure Agreement (with
                    Intellectual Property assignment provisions) in
                    substantially the form currently used by the Company.

        5.13.       AFFILIATE AGREEMENTS. Schedule 5.13 sets forth those persons
                    who, in the Company's reasonable judgment, are or may be
                    "affiliates" of the Company within the meaning of Rule 145
                    (each such person a "Rule 145 Affiliate") promulgated under
                    the Securities Act ("Rule 145"). The Company shall provide


                                      -49-





                    Buyer such information and documents as Buyer shall
                    reasonably request for purposes of reviewing such list. The
                    Company shall deliver or cause to be delivered to Buyer,
                    concurrently with the execution of this Agreement (and in
                    any case prior to the Closing Date) from each of the Rule
                    145 Affiliates of the Company, an executed Affiliate
                    Agreement ("Affiliate Agreement") in the form attached
                    hereto as Exhibit B, each of which will be in full force and
                    effect as of the Effective Time.  Buyer shall be entitled to
                    place appropriate legends on the certificates evidencing any
                    Buyer Common Stock to be received by such Affiliates
                    pursuant to the terms of this Agreement, and to issue
                    appropriate stop transfer instructions to the transfer agent
                    for Buyer Common Stock, consistent with the terms of such
                    Affiliate Agreements.

        5.14.       TAX-FREE REORGANIZATION. The parties intend to adopt this
                    Agreement and the Merger as a tax-free plan of
                    reorganization under Section 368(a)(1)(A) of the Code by
                    virtue of the provisions of Section 368(a)(2)(E) of the
                    Code. The Buyer Common Stock issued in the Merger will be
                    issued solely in exchange for the Company Capital Stock, and
                    no other transaction other than the Merger represents,
                    provides for or is intended to be an adjustment to the
                    consideration paid for the Company Capital Stock.  No
                    consideration that could constitute "other property" within
                    the meaning of Section 356(b) of the Code is being
                    transferred by Buyer for the Company Capital Stock in the
                    Merger.  The parties shall not take a position on any tax
                    return inconsistent with this Section 5.14.  From and after
                    the Closing, neither Buyer nor the Surviving Corporation
                    shall take any action that could reasonably be expected to
                    cause the Merger not to be treated as a reorganization
                    within the meaning of Section 368 of the Code.

        5.15.       POOLING ACCOUNTING. Buyer may, following consultation with
                    the Company, to the extent it deems advisable in its sole
                    discretion, cause or attempt to cause the business
                    combination to be effected by the Merger to be accounted for
                    as a pooling of interests.  In the event that Buyer
                    determines at any time, in its sole discretion, for any
                    reason or no reason (and no reason need be given), that it
                    is not possible, expedient, advisable or convenient to
                    obtain such pooling treatment, then Buyer may cease any and
                    all efforts to obtain such pooling treatment without any
                    liability hereunder and without being deemed in breach of
                    this Agreement.  The Company acknowledges and agrees that
                    the business combination to be effected by the Merger may be
                    accounted for either as a pooling of interests or as a
                    purchase, which determination shall be made by Buyer in its
                    sole discretion.  However, the Company shall not take any
                    actions, and it shall, to the extent possible, cause its
                    Affiliates not to take any actions that would adversely
                    affect the ability of Buyer to account for the business
                    combination to be effected by the Merger as a pooling of
                    interests.

        5.16.       DIRECTORS' AND OFFICERS' INDEMNIFICATION.  From and after
                    the Effective Time, Buyer shall (i) assume, as of the
                    Effective Time, all obligations of the Company under Article
                    VII(B) of the Company's Certificate of Incorporation, as
                    currently in effect and the Company's Indemnification
                    Agreements with the Company's officers and directors, and
                    (ii) pay or cause the Surviving Corporation to pay all


                                      -50-




                    amounts that become due and payable under such provisions. 
                    This Section 5.16 shall survive the consummation of the
                    Merger, is intended to benefit the Company, the Surviving
                    Corporation and each indemnified party, shall be binding,
                    jointly and severally, on all successors and assigns of the
                    Surviving Corporation and Buyer, and shall be enforceable by
                    the indemnified parties.

        5.17.       BOARD REPRESENTATION. Prior to the Effective Time, Buyer
                    will take such action as may be required so that Matthew
                    Glickman, if he is then ready and willing so to serve, will
                    be elected effective as of the Effective Time as a member of
                    Buyer's Board of Directors. 

        5.18.       VOTING AGREEMENTS.  The Company has delivered to Buyer,
                    concurrently with the execution of this Agreement, an
                    executed Voting and Lock-Up Agreement substantially in the
                    form attached hereto as Exhibit C (the "Stockholder
                    Agreement"), duly executed and delivered by a majority in
                    interest of the Stockholders (as described in Section 2.26
                    hereof).  The Company agrees to obtain and deliver to Buyer
                    duly authorized and executed Stockholder Agreements from
                    additional Stockholders such that, within ten (10) business
                    days following the date of this Agreement, Buyer shall have
                    received Agreements from Stockholders owning not less than
                    ninety-five percent (95%) of the Total Outstanding Company
                    Shares (the "Stockholder Requirement").  Further, the
                    Company agrees to commence to seek, promptly following the
                    date hereof, from the holders of all outstanding Company
                    Options a lock-up agreement or arrangement identical to that
                    contained in the Stockholder Agreement or provided by
                    Buyer's underwriters in the Buyer IPO (a "Lock-Up").  The
                    parties agree to condition any opportunity of a Company
                    Option holder to purchase directed shares in the Buyer IPO
                    that is made available to such holder by the Company or
                    Buyer upon such holder's execution and delivery to Buyer of
                    a Lock-Up.

        5.19.       REGULATORY FILINGS.  As soon as may be reasonably
                    practicable, to the extent required by applicable law, Buyer
                    and the Company each shall file with the United States
                    Federal Trade Commission (the "FTC") and the Antitrust
                    Division of the United States Department of Justice ("DOJ")
                    Notification and Report Forms relating to the transactions
                    contemplated herein as required by the HSR Act, as well as
                    comparable pre-merger notification forms required by the
                    merger notification or control laws and regulations of any
                    applicable jurisdiction, as agreed to by the parties. Buyer
                    and the Company each shall promptly (a) supply the other
                    with any information which may be required in order to
                    effectuate such filings and (b) supply any additional
                    information which reasonably may be required by the FTC, the
                    DOJ or the competition or merger control authorities of any
                    other jurisdiction and which the parties may reasonably deem
                    appropriate.

        5.20.       DIRECTOR ACTION WITH RESPECT TO OPTION PLANS. Prior to the
                    Effective Time, the Board of Directors of the Company shall
                    take such actions as shall ensure that Company Options do
                    not have their vesting accelerated as a result of the
                    consummation of the Merger and the transactions contemplated
                    hereby other than


                                      -51-




                    pursuant to agreements in existence prior to the date of
                    this agreement as set forth in the Disclosure Schedule.

        5.21.       MAINTENANCE OF BUSINESS LINES. Buyer agrees that, during the
                    twelve-month period following the Closing, it will not
                    (unless Approved By Senior Management) materially change or
                    cause to be discontinued any of the Company's or Surviving
                    Corporation's current business lines (i.e., charter sponsors
                    and advertising, e-commerce and Consumer Health
                    Interactive).

        5.22        LEGAL OPINIONS.  Buyer agrees to use commercially reasonable
                    efforts to cause Irell & Manella LLP to deliver a legal
                    opinion in substantially the Form of Exhibit D.  The Company
                    agrees to use commercially reasonable efforts to cause
                    Venture Law Group, A Professional Corporation, to deliver a
                    legal opinion in substantially the Form of Exhibit E.

        5.23        EMPLOYMENT AGREEMENTS; COVENANTS NOT TO COMPETE.  Each of
                    the parties hereto, as applicable,  and each of Matthew
                    Glickman and Mark Selcow agree to execute and deliver at the
                    Closing (i) an Employment Agreement for each of Matthew
                    Glickman and Mark Selcow in the form attached hereto as
                    Exhibit F and (ii) a Covenant Not to Compete for each of
                    Matthew Glickman and Mark Selcow in the form attached hereto
                    as Exhibit G.

        5.24        PIGGYBACK REGISTRATION RIGHTS.  Buyer agrees to use
                    commercially reasonable efforts to cause the parties to the
                    Company's Amended and Restated Investors' Rights Agreements
                    to be added to Buyer's existing registration rights
                    agreement effective upon the Effective Date, or to provide
                    upon the Effective Date substantially similar registration
                    rights to such persons.

        5.25        ADVICE CONCERNING CERTAIN TRANSACTIONS.  Prior to the
                    Effective Time, in the event that Buyer's management
                    proposes to make a formal presentation to Buyer's Board of
                    Directors concerning a transaction that would result in a
                    change of control of Buyer or the sale of twenty percent
                    (20%) or more of Buyer's assets or the issuance (in
                    connection with the acquisition of another business) of
                    securities representing twenty percent (20%) or more of
                    Buyer's outstanding securities, then Matthew Glickman shall
                    be entitled to notice of such presentation and to be present
                    for such presentation (provided that in Buyer's sole
                    discretion, Buyer may condition the foregoing on the receipt
                    of a confidentiality agreement from Mr. Glickman reasonably
                    satisfactory in form and substance to Buyer).  This
                    provision shall terminate upon the Effective Time or upon
                    the termination of this Agreement in accordance with its
                    terms.

                                      ARTICLE VI

                               CONDITIONS TO THE MERGER

        6.1.        CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
                    MERGER.  The respective obligations of each party to this
                    Agreement to effect the Merger shall be subject to the
                    satisfaction at or prior to the Effective Time of the
                    following conditions:


                                      -52-




                    6.1.1.  NO INJUNCTION OR RESTRAINTS; ILLEGALITY.  No
                            temporary restraining order, preliminary or
                            permanent injunction or other order issued by any
                            court of competent jurisdiction or other legal
                            restraint or prohibition preventing the
                            consummation of the Merger shall be in effect, nor
                            shall any proceeding brought by an administration,
                            agency or commission or other governmental
                            authority or instrumentality, domestic or foreign,
                            seeking any of the foregoing be pending; nor shall
                            there be any action taken, or any statute, rule,
                            regulation or order enacted, entered, enforced or
                            deemed applicable to the Merger, which makes the
                            consummation of the Merger illegal.

                    6.1.2.  GOVERNMENTAL APPROVAL.  No Governmental Approval
                            shall be required to be obtained which, if not so
                            obtained, would render consummation of the Merger
                            illegal.

                    6.1.3.  NO ORDER; HSR ACT.  No Governmental Entity shall
                            have enacted, issued, promulgated, enforced or
                            entered any statute, rule, regulation, executive
                            order, decree, injunction or other order (whether
                            temporary, preliminary or permanent) which is in
                            effect and which has the effect of making the
                            Merger illegal or otherwise prohibiting
                            consummation of the Merger. All waiting periods
                            under the HSR Act relating to the transactions
                            contemplated hereby (if any) will have expired or
                            terminated early.

                    6.1.4.  TAX OPINIONS. Buyer and the Company shall each have
                            received written opinions from their respective tax
                            counsel (Irell & Manella LLP and Venture Law Group,
                            A Professional Corporation, respectively), in form
                            and substance reasonably satisfactory to them, to
                            the effect that the Merger will constitute a
                            reorganization within the meaning of Section 368(a)
                            of the Code and such opinions shall not have been
                            withdrawn; provided, however, that if counsel to
                            either Buyer or the Company does not render such
                            opinion, this condition shall nonetheless be deemed
                            to be satisfied with respect to such party if the
                            other party's counsel renders such opinion to such
                            party. The parties to this Agreement agree to make
                            reasonable representations as requested by such
                            counsel for the purpose of rendering such opinions.

        6.2.        ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.  The
                    obligations of the Company to consummate and effect this
                    Agreement and the transactions contemplated hereby shall be
                    subject to the satisfaction at or prior to the Closing Date
                    of each of the following conditions, any of which may be
                    waived, in writing, exclusively by the Company:

                    6.2.1.  REPRESENTATIONS, WARRANTIES AND COVENANTS. The
                            representations and warranties of Buyer in this
                            Agreement shall be true and correct in all material
                            respects (except that in the case of any
                            representation or warranty that is itself qualified
                            by reference to materiality, such representation or
                            warranty shall be true and correct) on and as of
                            the Effective Time as


                                      -53-



                            though such representations and warranties were made
                            on and as of such time and Buyer shall have
                            performed and complied in all material respects with
                            all covenants of this Agreement (including without
                            limitation those in Article IV) required to be
                            performed and complied with by it as of the
                            Effective Time; PROVIDED, HOWEVER, that any
                            inaccuracies in such representations, warranties or
                            failure to observe such covenants shall not
                            constitute a failure of this condition unless the
                            aggregate of such matters would reasonably be likely
                            to have a Material Adverse Effect valued at $25
                            million or more (the "$25 Million Condition"),
                            PROVIDED, FURTHER, that for purposes of this Section
                            6.2.1., any change, event, effect or condition on or
                            of the business in the existing business of the
                            Buyer that is primarily attributable (i) to the
                            Merger or the announcement or effects of
                            announcement of the Merger or (ii) to general
                            industry-wide changes in such existing lines of
                            business shall be disregarded.  The $25 Million
                            Condition shall not be applicable, however, in the
                            case of a knowing and intentional breach of any
                            covenant of Buyer in this Agreement by or at the
                            direction or pursuant to the authorization of Edward
                            Lenk, Steve Schoch or Peter Juzwiak (it being
                            understood that each of those individuals has
                            reviewed and is fully familiar with all of the terms
                            included in this Agreement; however, the parties do
                            not intend for any of such named individuals to have
                            personal liability as a result of the foregoing
                            provision.).

                    6.2.2.  CERTIFICATE OF BUYER.  The Company shall have been
                            provided with a certificate executed on behalf of
                            Buyer by the Chief Financial Officer or Chief
                            Executive Officer of Buyer certifying (i) as to
                            compliance with the matters set forth in Section
                            6.2.1 above and (ii) that all covenants (including
                            without limitation those in Article IV) of this
                            Agreement to be performed by Buyer on or before
                            such date have been so performed in all material
                            respects.

                    6.2.3   NO MATERIAL ADVERSE CHANGES. Except as set forth in
                            the Disclosure Schedule, there shall not have
                            occurred any material adverse change in the
                            business, assets (including intangible assets),
                            results of operations, liabilities (contingent or
                            accrued), prospects or financial condition of the
                            Buyer since the date of this Agreement; PROVIDED,
                            HOWEVER, that any such material adverse changes
                            shall not constitute a failure of this condition
                            unless such matters in the aggregate would be
                            reasonably likely to have a Material Adverse Effect
                            valued at $700 million or more, and PROVIDED
                            FURTHER that no third party litigation claim (other
                            than any claim asserted by a governmental agency or
                            authority) shall constitute material adverse
                            changes for purposes of this Section 6.2.3.

                    6.2.4   BUYER IPO CONSUMMATED.  The Buyer IPO shall have
                            closed.

        6.3.        ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER.  The
                    obligations of Buyer to consummate and effect this Agreement
                    and the transactions contemplated


                                      -54-




                    hereby shall be subject to the satisfaction at or prior to
                    the Effective Time of each of the following conditions, any
                    of which may be waived, in writing, exclusively by Buyer:

                    6.3.1.  REPRESENTATIONS, WARRANTIES AND COVENANTS.  The
                            representations and warranties of the Company (as
                            modified by the Disclosure Schedule) in this
                            Agreement shall be true and correct in all material
                            respects (except that in the case of any
                            representation or warranty that is itself qualified
                            by reference to materiality, such representation or
                            warranty shall be true and correct) on and as of
                            the Effective Time as though such representations
                            and warranties were made on and as of the Effective
                            Time, the Company shall have performed and complied
                            in all material respects with all covenants of this
                            Agreement (including without limitation those in
                            Article IV) required to be performed and complied
                            with by it as of the Effective Time and each of
                            Matthew Glickman and Mark Selcow shall have
                            executed and delivered the agreements specified
                            above in Section 5.23; PROVIDED, HOWEVER, that any
                            inaccuracies in such representations and warranties
                            or failure to observe such covenants shall not
                            constitute a failure of this condition unless the
                            aggregate of such matters would reasonably be
                            likely to have a Material Adverse Effect valued at
                            $25 million or more (the "$25 Million Condition"),
                            PROVIDED; FURTHER, that for purposes of this
                            Section 6.3.1., any change, event, effect or
                            condition on or of the business in the existing
                            lines of the Company that is primarily attributable
                            (i) to the Merger or the announcement or effects of
                            the announcement of the Merger or (ii) to general
                            industry-wide changes in such existing lines of
                            business shall be disregarded.  The $25 Million
                            Condition shall not be applicable, however, in the
                            case of a knowing and intentional breach of any
                            covenant of the Company in this Agreement by or at
                            the direction or pursuant to the authorization of
                            Matthew Glickman, Mark Selcow or Jason Lemkin (it
                            being understood that each of those individuals has
                            reviewed and is fully familiar with all of the
                            terms included in this Agreement; however, the
                            parties do not intend for any of such named
                            individuals to have personal liability as a result
                            of the foregoing provision).

                    6.3.2.  NO MATERIAL ADVERSE CHANGES. Except as set forth in
                            the Disclosure Schedule, there shall not have
                            occurred any material adverse change in the
                            business, assets (including intangible assets),
                            results of operations, liabilities (contingent or
                            accrued), prospects or financial condition of the
                            Company since the date of this Agreement; PROVIDED,
                            HOWEVER, that any such material adverse changes
                            shall not constitute a failure of this condition
                            unless such matters in the aggregate would be
                            reasonably likely to have a Material Adverse Effect
                            valued at $100 million or more, and PROVIDED
                            FURTHER that no third party litigation claim (other
                            than any claim asserted by a governmental agency or
                            authority) shall constitute material adverse
                            changes for purposes of this Section 6.3.2.


                                      -55-




                    6.3.3.  STOCKHOLDER APPROVAL.  The Stockholders of the
                            Company shall have approved this Agreement, the
                            Merger and the transactions contemplated hereby;
                            the Stockholder Requirement shall have been
                            satisfied and Lock-Ups shall have been obtained
                            from holders of Company Options representing 85% of
                            the shares issuable upon exercise of such options. 

                    6.3.4.  CERTIFICATE OF THE COMPANY.  Buyer shall have been
                            provided with a certificate executed on behalf of
                            the Company by its Chief Executive Officer or its
                            Chief Financial Officer certifying (i) as to
                            compliance with the matters set forth in Section
                            6.3.1 above and (ii) that all covenants (including
                            without limitation those in Article IV) of this
                            Agreement to be performed by the Company on or
                            before such date have been so performed in all
                            material respects.

                    6.3.5.  LISTING; EFFECTIVENESS OF REGISTRATION STATEMENT.  
                            The shares of Buyer Common Stock to be issued in
                            the Merger shall have been approved for listing
                            (subject to notice of issuance) on the Nasdaq
                            National Market.  In addition, either (i) the
                            issuance of Buyer Common Stock pursuant to the
                            Merger contemplated hereby shall be qualified for
                            the exemption provided under Section 3(a)(10) of
                            the Securities Act or (ii) the Form S-4
                            Registration Statement shall have become effective
                            in accordance with the provisions of the Securities
                            Act, and no stop order shall have been issued by
                            the SEC with respect to the Form S-4 Registration
                            Statement.  Further, no proceeding similar to a
                            stop order in respect of the Proxy Statement or
                            Information Statement (as the case may be), shall
                            have been initiated or threatened in writing by the
                            SEC.

                                     ARTICLE VII        

                     SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
                                   INDEMNIFICATION

        7.1.        SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
                    Company's representations and warranties in this Agreement
                    or in any instrument delivered pursuant to this Agreement
                    shall survive the Merger and continue until the date that is
                    six (6) months following the Closing Date (the "Expiration
                    Date"). All of Buyer's representations and warranties
                    contained herein or in any instrument delivered pursuant to
                    this Agreement shall terminate on the Closing Date.

        7.2.        INDEMNIFICATION; ESCROW ARRANGEMENTS.    

                    7.2.1.  INDEMNIFICATION. The Company (on behalf of itself
                            and the Stockholders) agrees to indemnify and hold
                            Buyer and its officers, directors and affiliates
                            (the "Indemnified Parties") harmless against all
                            claims, losses, liabilities, damages, deficiencies,
                            costs and expenses, including reasonable attorneys'
                            fees and expenses of investigation (hereinafter
                            individually a "Loss" and collectively "Losses")
                            incurred by the Indemnified Parties directly or
                            indirectly as a result of: (i) any inaccuracy or
                            breach of a representation or


                                      -56-




                            warranty of the Company set forth in this Agreement
                            or in any certificate of any officer of the Company
                            delivered pursuant to this Agreement, (ii) any
                            failure by the Company to perform or comply with any
                            covenant (including, without limitation, those
                            contained in Article IV) contained in this
                            Agreement, and (iii) the Third Party Expenses
                            incurred by the Company exceeding $400,000
                            (excluding the expense of the Company's accounting
                            professionals to prepare an audit of the Company's
                            March 31, 1999 financial statements or any other
                            supplemental auditing work for a post-September 30,
                            1998 audit, if required for the Buyer Registration
                            Statement); PROVIDED, HOWEVER, that (x) the
                            aggregate amount recoverable by the Indemnified
                            Parties pursuant to this Article VII shall not
                            exceed the amount deposited in the Escrow Fund (as
                            defined below), and (y) the Indemnified Parties
                            shall not be entitled to indemnification hereunder
                            (1) with respect to any individual claim for less
                            than $5,000 ($25,000 in the case of breach of solely
                            Section 2.8) in value, or (2) unless the aggregate
                            amount for which valid indemnification claims are
                            made exceeds $100,000, in which case the Indemnified
                            Parties shall be entitled to indemnification from
                            the first dollar of indemnification claims.  The
                            Escrow Fund shall be available to compensate the
                            Indemnified Parties for any such Losses.  Nothing
                            herein shall limit the liability of the Company for
                            any breach of any representation, warranty or
                            covenant if the Merger is not consummated.

                    7.2.2.  ESCROW FUND. As security for the indemnity provided
                            for in Section 7.2.1 and by virtue of this
                            Agreement, as soon as practicable after the
                            Effective Time, the Escrow Amount, without any act
                            of the Company, will be deposited with an
                            institution selected by Buyer and approved by the
                            Stockholder Representative (as defined in Section
                            7.2.9(L)) as Escrow Agent (the "Escrow Agent"),
                            provided that Stockholder Representative shall not
                            withhold such approval if Buyer selects a third
                            party that is unrelated to Buyer and that is
                            generally engaged in the escrow industry or the
                            financial services industry.  The Escrow Agent will
                            either execute an acknowledgement and agreement to
                            the terms of this Article VII or enter into a
                            separate agreement that sets forth substantially
                            the same terms provided herein.  The deposit of the
                            Escrow Amount will constitute an escrow fund (the
                            "Escrow Fund") to be governed by the terms set
                            forth herein.  The Escrow Amount shall be
                            contributed on behalf of each Stockholder of the
                            Company in proportion to the aggregate Buyer Common
                            Stock which each such holder would otherwise be
                            entitled to under Section 1.8 hereof.  The
                            Stockholders of the Company will be deemed to have
                            received and deposited with the Escrow Agent (as
                            defined below) the Escrow Amount (plus any
                            additional shares as may be issued upon any stock
                            split, stock dividend or recapitalization effected
                            by Buyer after the Effective Time with respect to
                            the Escrow Amount) without any act of any
                            Stockholder.


                                      -57-




                    7.2.3.  ESCROW PERIOD; DISTRIBUTION UPON TERMINATION OF
                            ESCROW PERIODS.  Subject to the following
                            requirements, the Escrow Fund shall be in existence
                            immediately following the Effective Time and shall
                            terminate at 5:00 p.m., Los Angeles, California
                            local time on the Expiration Date (the "Escrow
                            Period"); provided, however, that the Escrow Period
                            shall not terminate with respect to any amount
                            which, in the reasonable judgment of Buyer, is
                            necessary to satisfy any unsatisfied claims
                            specified in any Officer's Certificate (as defined
                            below) delivered to the Escrow Agent prior to
                            termination of such Escrow Period with respect to
                            facts and circumstances existing prior to the
                            termination of such Escrow Period. As soon as all
                            such claims have been resolved, the Escrow Agent
                            shall deliver to the Stockholders of the Company
                            the remaining portion of the Escrow Fund not
                            required to satisfy such claims. Deliveries of
                            Escrow Amounts to the Stockholders of the Company
                            pursuant to this Section 7.2 shall be made in
                            proportion to their respective original
                            contributions to the Escrow Fund.

                    7.2.4.  PROTECTION OF ESCROW FUND.

                            (a)      The Escrow Agent shall hold and safeguard
                                     the Escrow Fund during the Escrow Period,
                                     shall treat such fund as a trust fund in
                                     accordance with the terms of this
                                     Agreement and not as the property of Buyer
                                     and shall hold and dispose of the Escrow
                                     Fund only in accordance with the terms
                                     hereof.

                            (b)      Any shares of Buyer Common Stock or other
                                     equity securities issued or distributed by
                                     Buyer (including shares issued upon a
                                     stock split) ("New Shares") in respect of
                                     Buyer Common Stock in the Escrow Fund
                                     which have not been released from the
                                     Escrow Fund shall be added to the Escrow
                                     Fund and become a part thereof. New Shares
                                     issued in respect of shares of Buyer
                                     Common Stock which have been released from
                                     the Escrow Fund shall not be added to the
                                     Escrow Fund but shall be distributed to
                                     the record holders thereof. Cash dividends
                                     on Buyer Common Stock shall not be added
                                     to the Escrow Fund but shall be
                                     distributed to the record holders thereof.

                            (c)      Each Stockholder shall have voting rights
                                     and the right to distributions of cash
                                     dividends with respect to the shares of
                                     Buyer Common Stock contributed to the
                                     Escrow Fund by such Stockholder (and on
                                     any voting securities added to the Escrow
                                     Fund in respect of such shares of Buyer
                                     Common Stock). As the record holder of
                                     such shares, the Escrow Agent shall vote
                                     such shares in accordance with the
                                     instructions of the Stockholders having
                                     the beneficial interest therein and shall
                                     promptly deliver copies of all proxy
                                     solicitation materials to such
                                     Stockholders.


                                      -58-




                    7.2.5.  CLAIMS UPON ESCROW FUND.

                            (a)      (a) Upon receipt by the Escrow Agent at
                                     any time on or before the last day of the
                                     Escrow Period of a certificate signed by
                                     any officer of Buyer (an "Officer's
                                     Certificate"): (A) stating that Buyer has
                                     paid or properly accrued or, with respect
                                     to third-party claims of which Buyer, the
                                     Company or the Surviving Corporation has
                                     received notice, reasonably anticipates
                                     that it will have to pay or accrue Losses,
                                     and (B) specifying in reasonable detail
                                     the individual items of Losses included in
                                     the amount so stated, the date each such
                                     item was paid or properly accrued, or the
                                     basis for such anticipated liability, and
                                     the nature of the misrepresentation,
                                     breach of warranty or covenant to which
                                     such item is related, the Escrow Agent
                                     shall deliver to Buyer out of the Escrow
                                     Fund, as promptly as practicable subject
                                     to Section 7.2.6, shares of Buyer Common
                                     Stock held in the Escrow Fund with a value
                                     equal to such Losses; provided, however,
                                     that in the event of a third party claim
                                     that is the subject of the demand on the
                                     Escrow Fund, no shares shall be delivered
                                     out of the Escrow Fund until the claim is
                                     settled or adjudicated.    

                            (b)      For the purposes of determining the number
                                     of shares of Buyer Common Stock to be
                                     delivered to Buyer out of the Escrow Fund
                                     as indemnity pursuant to Section 7.2.5(a)
                                     hereof, the shares of Buyer Common Stock
                                     shall be valued at $33 per share, unless
                                     the average closing price of the Buyer
                                     Common Stock for any five (5) consecutive
                                     trading days during the thirty (30) day
                                     period preceding the assertion of a
                                     particular indemnity claim exceeds $50 per
                                     share, in which case the shares of Buyer
                                     shall be valued at $50 per share or, if
                                     the average closing price of the Buyer
                                     Common Stock for any five (5) consecutive
                                     days during the thirty (30) day period
                                     preceding the assertion of a particular
                                     indemnity claim is less than $16 per
                                     share, then the shares of Buyer shall be
                                     valued at $16 per share (subject to in
                                     each case to the adjustment as a result of
                                     the Buyer Stock Split).

                    7.2.6.  OBJECTIONS TO CLAIMS. At the time of delivery of
                            any Officer's Certificate to the Escrow Agent, a
                            duplicate copy of such certificate shall be
                            delivered to the Stockholder Representative, and
                            for a period of thirty (30) days after such
                            delivery, the Escrow Agent shall make no delivery
                            to Buyer of any Escrow Amounts pursuant hereto
                            unless the Escrow Agent shall have received written
                            authorization from the Stockholder Representative
                            to make such delivery. After the expiration of such
                            thirty (30) day period, the Escrow Agent shall make
                            delivery of shares of Buyer Common Stock from the
                            Escrow Fund in accordance herewith; provided,
                            however, that no such payment or delivery may be
                            made if the Stockholder Representative shall object
                            in a written statement to the claim made in the
                            Officer's 

                                      -59-




                            Certificate, and such statement shall have been 
                            delivered to the Escrow Agent prior to the 
                            expiration of such thirty (30) day period.

                    7.2.7.  RESOLUTION OF CONFLICTS; ARBITRATION.  

                    (a)              In case the Stockholder Representative
                            shall object in writing to any claim or claims made
                            in any Officer's Certificate, the Stockholder
                            Representative and Buyer shall attempt in good
                            faith to agree upon the rights of the respective
                            parties with respect to each of such claims. If the
                            Stockholder Representative and Buyer should so
                            agree, a memorandum setting forth such agreement
                            shall be prepared and signed by both parties and
                            shall be furnished to the Escrow Agent. The Escrow
                            Agent shall be entitled to rely on any such
                            memorandum and distribute shares of Buyer Common
                            Stock from the Escrow Fund in accordance with the
                            terms thereof.    

                            (b)      If no such agreement can be reached after
                                     good faith negotiation, either Buyer or
                                     the Stockholder Representative may demand
                                     arbitration of the matter unless the
                                     amount of the damage or Loss is at issue
                                     in pending litigation with a third party,
                                     in which event arbitration shall not be
                                     commenced until such amount is ascertained
                                     or both parties agree to arbitration; and
                                     in either such event the matter shall be
                                     settled by arbitration conducted by one
                                     arbitrator mutually agreeable to Buyer and
                                     the Stockholder Representative. In the
                                     event that within forty-five (45) days
                                     after submission of any dispute to
                                     arbitration, Buyer and the Stockholder
                                     Representative cannot mutually agree on
                                     one arbitrator, Buyer and the Stockholder
                                     Representative shall each select one
                                     arbitrator, and the two arbitrators so
                                     selected shall select a third arbitrator.
                                     The arbitrator or arbitrators, as the case
                                     may be, shall set a limited time period
                                     and establish procedures designed to
                                     reduce the cost and time for discovery
                                     while allowing the parties an opportunity,
                                     adequate in the sole judgment of the
                                     arbitrator or majority of the three
                                     arbitrators, as the case may be, to
                                     discover relevant information from the
                                     opposing parties about the subject matter
                                     of the dispute. The arbitrator or a
                                     majority of the three arbitrators, as the
                                     case may be, shall rule upon motions to
                                     compel or limit discovery and shall have
                                     the authority to impose sanctions,
                                     including attorneys' fees and costs, to
                                     the same extent as a competent court of
                                     law or equity, should the arbitrators or a
                                     majority of the three arbitrators, as the
                                     case may be, determine that discovery was
                                     sought without substantial justification
                                     or that discovery was refused or objected
                                     to without substantial justification. The
                                     decision of the arbitrator or a majority
                                     of the three arbitrators, as the case may
                                     be, as to the validity and amount of any
                                     claim in such Officer's Certificate shall
                                     be binding and conclusive upon the parties
                                     to this Agreement. Such decision shall 

                                      -60-



                                     be written and shall be supported by 
                                     written findings of fact and conclusions 
                                     which shall set forth the award, judgment,
                                     decree or order awarded by the
                                     arbitrator(s).

                            (c)      Judgment upon any award rendered by the
                                     arbitrator(s) may be entered in any court
                                     having jurisdiction. Any such arbitration
                                     shall be held in Los Angeles County,
                                     California, under the rules then in effect
                                     of the American Arbitration Association.
                                     The arbitrator(s) shall determine how all
                                     expenses relating to the arbitration shall
                                     be paid, including without limitation, the
                                     respective expenses of each party, the
                                     fees of each arbitrator and the
                                     administrative fee of the American
                                     Arbitration Association.

                    7.2.8.  THIRD-PARTY CLAIMS. In the event Buyer becomes
                            aware of a third-party claim which Buyer believes
                            may result in a demand against the Escrow Fund,
                            Buyer shall notify the Stockholder Representative
                            of such claim. Buyer may not settle any such claim
                            without the consent of the Stockholder
                            Representative, which consent shall not be
                            unreasonably withheld or delayed. In the event that
                            the Stockholder Representative has consented to any
                            such settlement, the Stockholders shall have no
                            power or authority to object under any provision of
                            this Article VII to the amount of any claim by
                            Buyer against the Escrow Fund with respect to such
                            settlement.

                    7.2.9.  ESCROW AGENT.

                                     (A)  The Escrow Agent shall be
                                          obligated only for the
                                          performance of such duties as
                                          are specifically set forth
                                          herein, and as set forth in any
                                          additional written escrow
                                          instructions which the Escrow
                                          Agent may receive after the date
                                          of this Agreement which are
                                          signed by an officer of Buyer
                                          and the Stockholder
                                          Representative, and may rely and
                                          shall be protected in relying or
                                          refraining from acting on any
                                          instrument reasonably believed
                                          to be genuine and to have been
                                          signed or presented by the
                                          proper party or parties. The
                                          Escrow Agent shall not be liable
                                          for any act done or omitted
                                          hereunder as Escrow Agent while
                                          acting in good faith and in the
                                          exercise of reasonable judgment,
                                          and any act done or omitted
                                          pursuant to the advice of
                                          counsel shall be conclusive
                                          evidence of such good faith.    

                                     (B)  The Escrow Agent is hereby
                                          expressly authorized to
                                          disregard any and all warnings
                                          given by any of the parties
                                          hereto or by any other person,
                                          excepting only orders or process
                                          of courts of law or of the
                                          arbitrator(s) appointed pursuant
                                          to Section 7.2.7, and is hereby
                                          expressly authorized to comply
                                          with and obey orders, judgments
                                          or decrees of any 

                                      -61-



                                          court or of the arbitrator(s) 
                                          appointed pursuant to Section 7.2.7.
                                          In case the Escrow Agent obeys or
                                          complies with any such order,
                                          judgment or decree of any court
                                          or of the arbitration panel
                                          appointed by Section 7.2.7, the
                                          Escrow Agent shall not be liable
                                          to any of the parties hereto or
                                          to any other person by reason of
                                          such compliance, notwithstanding
                                          any such order, judgment or
                                          decree being subsequently
                                          reversed, modified, annulled,
                                          set aside, vacated or found to
                                          have been entered without
                                          jurisdiction.    

                                     (C)  The Escrow Agent shall not be
                                          liable in any respect on account
                                          of the identity, authority or
                                          rights of the parties executing
                                          or delivering or purporting to
                                          execute or deliver this
                                          Agreement or any documents or
                                          papers deposited or called for
                                          hereunder.    

                                     (D)  The Escrow Agent shall not be
                                          liable for the expiration of any
                                          rights under any statute of
                                          limitations with respect to this
                                          Agreement or any documents
                                          deposited with the Escrow Agent.

                                     (E)  In performing any duties under
                                          this Agreement, the Escrow Agent
                                          shall not be liable to any party
                                          for damages, losses, or
                                          expenses, except for negligence
                                          or willful misconduct on the
                                          part of the Escrow Agent. The
                                          Escrow Agent shall not incur any
                                          such liability for any action
                                          taken or omitted in reliance
                                          upon any instrument, including
                                          any written statement of
                                          affidavit provided for in this
                                          Agreement that the Escrow Agent
                                          shall in good faith believe to
                                          be genuine, nor will the Escrow
                                          Agent be liable or responsible
                                          for forgeries, fraud,
                                          impersonations, or determining
                                          the scope of any representative
                                          authority. In addition, the
                                          Escrow Agent may consult with
                                          legal counsel in connection with
                                          Escrow Agent's duties under this
                                          Agreement and shall be fully
                                          protected in any act taken,
                                          suffered, or permitted by
                                          him/her in good faith in
                                          accordance with the advice of
                                          counsel. The Escrow Agent is not
                                          responsible for determining and
                                          verifying the authority of any
                                          person acting or purporting to
                                          act on behalf of any party to
                                          this Agreement.

                                     (F)  If any controversy arises
                                          between the parties to this
                                          Agreement, or with any other
                                          party, concerning the subject
                                          matter of this Agreement, its
                                          terms or conditions, the Escrow
                                          Agent will not be required to
                                          determine the controversy or to
                                          take any action regarding it.
                                          The Escrow Agent may hold all
                                          documents and shares of Buyer
                                          Common Stock and may wait for
                                          settlement of any such
                                          controversy by final appropriate

                                      -62-





                                          legal proceedings or other means
                                          as, in the Escrow Agent's
                                          discretion, may be required,
                                          despite what may be set forth
                                          elsewhere in this Agreement. In
                                          such event, the Escrow Agent
                                          will not be liable for damage.
                                          Furthermore, the Escrow Agent
                                          may at its option, file an
                                          action of interpleader requiring
                                          the parties to answer and
                                          litigate any claims and rights
                                          among themselves. The Escrow
                                          Agent is authorized to deposit
                                          with the clerk of the court all
                                          documents and shares of Buyer
                                          Common Stock held in escrow,
                                          except in respect of all costs,
                                          expenses, charges and reasonable
                                          attorney fees incurred by the
                                          Escrow Agent due to the
                                          interpleader action and which
                                          the parties jointly and
                                          severally agree to pay. Upon
                                          initiating such action, the
                                          Escrow Agent shall be fully
                                          released and discharged of and
                                          from all obligations and
                                          liability imposed by the terms
                                          of this Agreement.    

                                     (G)  The parties and their respective
                                          successors and assigns agree
                                          jointly and severally to
                                          indemnify and hold Escrow Agent
                                          harmless against any and all
                                          losses, claims, damages,
                                          liabilities, and expenses,
                                          including reasonable costs of
                                          investigation, counsel fees,
                                          including allocated costs of 
                                          in-house counsel and disbursements
                                          that may be imposed on Escrow
                                          Agent or incurred by Escrow
                                          Agent in connection with the
                                          performance of his/her duties
                                          under this Agreement, including
                                          but not limited to any
                                          litigation arising from this
                                          Agreement or involving its
                                          subject matter other than
                                          arising out of the Escrow
                                          Agent's negligence or willful
                                          misconduct.    

                                     (H)  The Escrow Agent may resign at
                                          any time upon giving at least
                                          thirty (30) days written notice
                                          to the parties; provided,
                                          however, that no such
                                          resignation shall become
                                          effective until the appointment
                                          of a successor escrow agent
                                          which shall be accomplished as
                                          follows: the parties shall use
                                          their commercially reasonable
                                          efforts to mutually agree on a
                                          successor escrow agent within
                                          thirty (30) days after receiving
                                          such notice. If the parties fail
                                          to agree upon a successor escrow
                                          agent within such time, the
                                          Escrow Agent shall have the
                                          right to appoint a successor
                                          escrow agent authorized to do
                                          business in the State of
                                          California. The successor escrow
                                          agent shall execute and deliver
                                          an instrument accepting such
                                          appointment and it shall,
                                          without further acts, be vested
                                          with all the estates,
                                          properties, rights, powers, and
                                          duties of the predecessor escrow
                                          agent as if originally named as
                                          escrow agent. Upon appointment
                                          of a successor escrow agent, the
                                          Escrow Agent shall be discharged
                                          from any further duties and
                                          liability under this Agreement.  

                                      -63-





                                     (I)  All fees of the Escrow Agent for
                                          performance of its duties
                                          hereunder shall be paid by Buyer
                                          in accordance with the standard
                                          fee schedule of the Escrow
                                          Agent. It is understood that the
                                          fees and usual charges agreed
                                          upon for services of the Escrow
                                          Agent shall be considered
                                          compensation for ordinary
                                          services as contemplated by this
                                          Agreement. In the event that the
                                          conditions of this Agreement are
                                          not promptly fulfilled, or if
                                          the Escrow Agent renders any
                                          service not provided for in this
                                          Agreement, or if the parties
                                          request a substantial
                                          modification of its terms, or if
                                          any controversy arises, or if
                                          the Escrow Agent is made a party
                                          to, or intervenes in, any
                                          litigation pertaining to the
                                          Escrow Fund or its subject
                                          matter, the Escrow Agent shall
                                          be reasonably compensated for
                                          such extraordinary services and
                                          reimbursed for all costs,
                                          attorney's fees, including
                                          allocated costs of in-house
                                          counsel, and expenses occasioned
                                          by such default, delay,
                                          controversy or litigation.

                                     (J)  In no event shall the Escrow
                                          Agent be liable for special,
                                          indirect or consequential loss
                                          or damage of any kind whatsoever
                                          (including but not limited to
                                          lost profits), even if the
                                          Escrow Agent has been advised of
                                          the likelihood of such loss or
                                          damage and regardless of the
                                          form of action.    

                                     (K)  Any corporation into which the
                                          Escrow Agent in its individual
                                          capacity may be merged or
                                          converted or with which it may
                                          be consolidated, or any
                                          corporation resulting from any
                                          merger, conversion or
                                          consolidation to which the
                                          Escrow Agent in its individual
                                          capacity shall be a party, or
                                          any corporation to which
                                          substantially all the corporate
                                          trust business of the Escrow
                                          Agent in its individual capacity
                                          may be transferred, shall be the
                                          Escrow Agent under this Escrow
                                          Agreement without further act.

                                     (L)  In the event that the Merger is
                                          approved, upon the Effective
                                          Time, and without further act of
                                          any Stockholder, Pat Kenealy
                                          shall be appointed as agent and
                                          attorney-in-fact (the
                                          "Stockholder Representative")
                                          for each Stockholder, for and on
                                          behalf of the Stockholders, to
                                          give and receive notices and
                                          communications, to authorize
                                          delivery to Buyer of shares of
                                          Buyer Common Stock from the
                                          Escrow Fund in satisfaction of
                                          claims by Buyer, to object to
                                          such deliveries, to agree to,
                                          negotiate, enter into
                                          settlements and compromises of,
                                          and demand arbitration and
                                          comply with orders of courts and
                                          awards of arbitrators with
                                          respect to such claims, and to
                                          take all actions necessary or
                                          appropriate in the judgment of
                                          the Stockholder Representative
                                          for the accomplishment of the

                                      -64-




                                          foregoing. Such agency may be
                                          changed by the Stockholders from
                                          time to time upon not less than
                                          thirty (30) days prior written
                                          notice to Buyer; provided,
                                          however, that the Stockholder
                                          Representative may not be
                                          removed unless holders of a
                                          majority in interest in the
                                          Escrow Fund agree to such
                                          removal and to the identity of
                                          the substituted agent. Any
                                          vacancy in the position of
                                          Stockholder Representative may
                                          be filled by approval of the
                                          holders of a majority in
                                          interest in the Escrow Fund. No
                                          bond shall be required of the
                                          Stockholder Representative, and
                                          the Stockholder Representative
                                          shall not receive compensation
                                          for his or her services. Notices
                                          or communications to or from the
                                          Stockholder Representative shall
                                          constitute notice to or from
                                          each of the Stockholders.  The
                                          Stockholder Representative shall
                                          not be liable for any act done
                                          or omitted hereunder as
                                          Stockholder Representative while
                                          acting without gross negligence,
                                          bad faith and willful
                                          misconduct. The Stockholders on
                                          whose behalf the Escrow Amount
                                          was contributed to the Escrow
                                          Fund shall severally indemnify
                                          the Stockholder Representative
                                          and hold the Stockholder
                                          Representative harmless against
                                          any loss, liability or expense
                                          incurred without gross
                                          negligence, bad faith or willful
                                          misconduct on the part of the
                                          Stockholder Representative and
                                          arising out of or in connection
                                          with the acceptance or
                                          administration of the
                                          Stockholder Representative's
                                          duties hereunder, including the
                                          reasonable fees and expenses of
                                          any legal counsel retained by
                                          the Stockholder Representative. 
                                          A decision, act, consent or
                                          instruction of the Stockholder
                                          Representative shall constitute
                                          a decision of all Stockholders
                                          for whom a portion of the Escrow
                                          Amount otherwise issuable to
                                          them are deposited in the Escrow
                                          Fund and shall be final, binding
                                          and conclusive upon each of such
                                          Stockholders, and the Escrow
                                          Agent and Buyer may rely upon
                                          any such decision, act, consent
                                          or instruction of the
                                          Stockholder Representative as
                                          being the decision, act, consent
                                          or instruction of each and every
                                          such Stockholder. The Escrow
                                          Agent and Buyer are hereby
                                          relieved from any liability to
                                          any person for any acts done by
                                          them in accordance with such
                                          decision, act, consent or
                                          instruction of the Stockholder
                                          Representative.    

        7.3.        MAXIMUM PAYMENTS; REMEDY. From and after the Effective Time,
                    this Article VII shall provide the sole and exclusive remedy
                    for any and all damages or other liability sustained or
                    incurred by the Indemnified Parties or their successors and
                    assigns as the result of any breach of any representation,
                    warranty or covenant contained in this Agreement or any
                    claim of negligent misrepresentation against the Company in
                    connection with this Agreement or the Merger.  No
                    Stockholder 

                                      -65-




                    shall have any right to contribution from the  Company for 
                    any claim made by Buyer after the Effective Time. 

                                     ARTICLE VIII       

                          TERMINATION, AMENDMENT AND WAIVER

        8.1.        TERMINATION.  Except as provided in Section 8.2, this
                    Agreement may be terminated and the Merger abandoned at any
                    time prior to the Effective Time:

                            (a)      by mutual written consent of the Company
                                     and Buyer;

                            (b)      by Buyer or the Company if the Effective
                                     Time has not occurred by December 31,
                                     1999; provided, however, that the right to
                                     terminate this Agreement under this
                                     Section 8.1(b) shall not be available to
                                     any party whose action or failure to act
                                     has been a principal cause of or resulted
                                     in the failure of the Merger to occur on
                                     or before such date and such action or
                                     failure to act constitutes a breach of
                                     this Agreement;    

                            (c)      by Buyer or the Company if (i) there shall
                                     be a final nonappealable order of a
                                     federal or state court in effect
                                     preventing consummation of the Merger; or
                                     (ii) there shall be any statute, rule,
                                     regulation or order enacted, promulgated
                                     or issued or deemed applicable to the
                                     Merger by any Governmental Entity that
                                     would make consummation of the Merger
                                     illegal;

                            (d)      by Buyer if there shall be any action
                                     taken, or any statute, rule, regulation or
                                     order enacted, promulgated or issued or
                                     deemed applicable to the Merger by any
                                     Governmental Entity, which would: (i)
                                     prohibit Buyer's or Merger Sub's ownership
                                     or operation of any portion of the
                                     business of the Company or (ii) compel
                                     Buyer or the Company to dispose of or hold
                                     separate all or a portion of the business
                                     or assets of the Company or Buyer as a
                                     result of the Merger;

                            (e)      by Buyer if it is not in material breach
                                     of its obligations under this Agreement
                                     and there has been a breach of any
                                     representation, warranty or covenant
                                     contained in this Agreement on the part of
                                     the Company, or if any representation or
                                     warranty on the part of the Company has
                                     become untrue, in either case such that
                                     the condition set forth in Section 6.3.1
                                     would not be satisfied as of the time of
                                     such breach or as of the time such
                                     representation or warranty shall have
                                     become untrue and such inaccuracy in such
                                     representation or warranty or breach shall
                                     not have been cured within thirty (30)
                                     calendar days after written notice to the
                                     Company; provided, however, that, no cure
                                     period shall be required for a breach
                                     which by its nature cannot be cured;

                                      -66-




                            (f)      by the Company if it is not in material
                                     breach of its obligations under this
                                     Agreement and there has been a breach of
                                     any representation, warranty or covenant
                                     contained in this Agreement on the part of
                                     Buyer, or if any representation or
                                     warranty on the part of Buyer has become
                                     untrue, in either case such that the
                                     condition set forth in Section 6.2.1 would
                                     not be satisfied as of the time of such
                                     breach or as of the time such
                                     representation or warranty shall have
                                     become untrue and such inaccuracy in such
                                     representation or warranty or breach shall
                                     not have been cured within thirty (30)
                                     calendar days after written notice to
                                     Buyer; provided, however, that, no cure
                                     period shall be required for a breach
                                     which by its nature cannot be cured;

                            (g)      by Buyer if a majority of the Stockholders
                                     of the Company vote against the Merger at
                                     the Company Stockholders Meeting;

                            (h)      by Buyer if an event having a Material
                                     Adverse Effect on the Company shall have
                                     occurred after the date of this Agreement,
                                     such that the condition set forth in
                                     Section 6.3.2 would not be satisfied; or

                            (i)      by the Company if the Buyer IPO (whether
                                     pursuant to the Buyer Registration
                                     Statement or any other registration
                                     statement declared effective under the
                                     Securities Act) has not been consummated
                                     by October 15, 1999.    

        8.2.        EFFECT OF TERMINATION.  In the event of termination of this
                    Agreement as provided in Section 8.1, this Agreement shall
                    forthwith become void and there shall be no liability or
                    obligation on the part of Buyer or the Company or their
                    respective officers, directors or Stockholders, provided
                    that each party shall remain liable for any breaches of this
                    Agreement prior to its termination; provided further that
                    the provisions of Sections 5.3 (confidentiality), 5.4
                    (expenses), 8.2 (effect of termination), 8.3 (termination
                    fees) and 9 (notices) shall remain in full force and effect
                    and survive any termination of this Agreement.  

        8.3.        TERMINATION FEES.  If this Agreement is terminated by (i)
                    Buyer pursuant to its rights under Section 8.1(e) or (ii)
                    the Company pursuant to its rights under Section 8.1(f),
                    then the terminating party shall be entitled, at its option,
                    to demand payment as  liquidated damages from the 
                    non-terminating party in the amount of $15 million in
                    immediately available funds. The parties agree that, if the
                    terminating party elects to demand such payment from the
                    non-terminating party, such payment shall be treated for all
                    purposes as a liquidated damage award and as the terminating
                    party's sole and exclusive remedy for any breach of any
                    representation, warranty, covenant or agreement by the 
                    non-terminating party under this Agreement.  Notwithstanding
                    anything to the contrary contained in this Section 8.3, if
                    one party fails to pay to the other any fee due hereunder
                    within 5 business days of the event giving rise to the
                    payment of such fees, in addition to

                                      -67-




                    any amounts paid or payable pursuant to this Section, the 
                    defaulting party shall pay the out-of-pocket costs and 
                    expenses (including reasonable legal fees and expenses) 
                    in connection with any action, including the filing of any 
                    lawsuit or other legal action, taken to collect payment 
                    together with interest on the amount of any unpaid fee at 
                    the publicly announced prime rate of Citibank N.A. from 
                    the date such fee was required to be paid.

        8.4.        AMENDMENT. This Agreement may be amended by the parties
                    hereto at any time by execution of an instrument in writing
                    signed on behalf of each of the parties hereto.    

        8.5.        EXTENSION; WAIVER. At any time prior to the Effective Time,
                    Buyer and the Company may, to the extent legally allowed,
                    (i) extend the time for the performance of any of the
                    obligations of the other party hereto, (ii) waive any
                    inaccuracies in the representations and warranties made to
                    such party contained herein or in any document delivered
                    pursuant hereto, and (iii) waive compliance with any of the
                    agreements or conditions for the benefit of such party
                    contained herein. Any agreement on the part of a party
                    hereto to any such extension or waiver shall be valid only
                    if set forth in an instrument in writing signed on behalf of
                    such party.

                                      ARTICLE IX        

                                  GENERAL PROVISIONS

        9.1.        NOTICES. All notices and other communications hereunder
                    shall be in writing and shall be deemed given if delivered
                    personally or by commercial messenger or courier service, or
                    mailed by registered or certified mail (return receipt
                    requested) or sent via facsimile (with acknowledgment of
                    complete transmission) to the parties at the following
                    addresses (or at such other address for a party as shall be
                    specified by like notice), provided, however, that notices
                    sent by mail will not be deemed given until received:

        If to Buyer:

                    eToys Inc.
                    2850 Ocean Park Drive, Suite 225
                    Santa Monica, CA  90405
                    Attention:       Steven Schoch
                                     Peter Juzwiak, Esq.
                    Telephone No.: (310) 664-8100
                    Facsimile No: (310) 664-8101

                                      -68-




        with a copy to:

                    Irell & Manella LLP
                    333 South Hope Street, Suite 3300
                    Los Angeles, CA 90071
                    Attention: Anthony T. Iler, Esq.
                    Telephone No.: (213) 620-1555
                    Facsimile No.: (213) 229-0515

        If to the Company:

                    BabyCenter, Inc.
                    539 Bryant, Suite 200
                    San Francisco, CA  94107
                    Attention:  Matt Glickman
                    Telephone No.:  (415) 537-0900
                    Facsimile No:  (415) 537-0909

        with a copy to:

                    Venture Law Group
                    A Professional Corporation
                    2800 Sand Hill Road
                    Menlo Park, CA 94025
                    Attention:  Mark B. Weeks
                    Telephone No.:  650/854-4488
                    Facsimile No:  650/854-1121

If to the Stockholder Representative:


with a copy to:


        9.2.        INTERPRETATION. The words "include," "includes" and
                    "including" when used herein shall be deemed in each case to
                    be followed by the words "without limitation." The table of
                    contents and headings contained in this Agreement are for
                    reference purposes only and shall not affect in any way the
                    meaning or interpretation of this Agreement.

        9.3.        COUNTERPARTS. This Agreement may be executed in one or more
                    counterparts, all of which shall be considered one and the
                    same agreement and shall become effective when one or more
                    counterparts have been signed by each of the parties and
                    delivered to the other party, it being understood that all
                    parties need not sign the same counterpart.

                                      -69-




        9.4.        ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Exhibits
                    hereto, the Disclosure Schedule, and the documents and
                    instruments and other agreements among the parties hereto
                    referenced herein: (a) constitute the entire agreement among
                    the parties with respect to the subject matter hereof and
                    supersede all prior agreements and understandings both
                    written and oral, among the parties with respect to the
                    subject matter hereof; (b) except as specifically provided
                    herein, are not intended to confer upon any other person any
                    rights or remedies hereunder; and (c) shall not be assigned
                    (other than by operation of law).

        9.5.        SEVERABILITY.  In the event that any provision of this
                    Agreement or the application thereof becomes or is declared
                    by a court of competent jurisdiction to be illegal, void or
                    unenforceable, the remainder of this Agreement will continue
                    in full force and effect and the application of such
                    provision to other persons or circumstances will be
                    interpreted so as reasonably to effect the intent of the
                    parties hereto. The parties further agree to replace such
                    void or unenforceable provision of this Agreement with a
                    valid and enforceable provision that will achieve, to the
                    extent possible, the economic, business and other purposes
                    of such void or unenforceable provision. 

        9.6.        EQUITABLE REMEDIES; CUMULATIVE REMEDIES. The parties hereto
                    acknowledge that monetary damages may be inadequate to
                    compensate a party for a breach of this Agreement by the
                    other party.  Accordingly, each party hereto shall be
                    entitled to seek equitable relief, including, without
                    limitation, the remedy of specific performance, in the event
                    of a breach of this Agreement by the other party.  Except as
                    otherwise provided herein, any and all remedies herein
                    expressly conferred upon a party will be deemed cumulative
                    with and not exclusive of any other remedy conferred hereby,
                    or by law or equity upon such party, and the exercise by a
                    party of any one remedy will not preclude the exercise of
                    any other remedy.

        9.7.        GOVERNING LAW. This Agreement shall be governed by and
                    construed in accordance with the laws of the State of
                    California, regardless of the laws that might otherwise
                    govern under applicable principles of conflicts of laws
                    thereof.

        9.8.        RULES OF CONSTRUCTION. The parties hereto agree that they
                    have been represented by counsel during the negotiation and
                    execution of this Agreement and, therefor, waive the
                    application of any law, regulation, holding or rule of
                    construction providing that ambiguities in an agreement or
                    other document will be construed against the party drafting
                    such agreement or document.

                                      -70-




     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed, all as of the date first written above.

                              eToys Inc.,
                              
                              a Delaware corporation


                              By /s/ Edward C. Lenk
                                 ----------------------
                                   Name:
                                   Title:


                              BabyCenter, Inc.,
                              a Delaware corporation


                              By /s/ Matthew Glickman
                                 ----------------------
                                   Name:
                                   Title:


                              Stockholder Representative:

                              /s/ Pat Kenealy
                              -------------------------
                              Pat Kenealy

                              /s/ Matthew Glickman 
                              -------------------------
                              Matthew Glickman 
                              (solely with respect to Section 5.23)
                              
                              /s/ Mark Selcow 
                              -------------------------
                              Mark Selcow 
                              (solely with respect to Section 5.23)






Exhibit A = Certificate of Merger

Exhibit B = 145 Letter

Exhibit C = Lock-up Agreement

Exhibit D = Irell & Manella LLP Opinion  [intentionally omitted]

Exhibit E = Venture Law Group Opinion  [intentionally omitted]

Exhibit F =  Employment Agreement

Exhibit G = Covenant Not to Compete


The Disclosure Schedules have been intentionally omitted.




                                                                      Exhibit A
                              CERTIFICATE OF MERGER
                                     MERGING
                                 BABYCENTER, INC.
                                   WITH AND INTO
                                    ETOYS INC.

                          Pursuant to Section 251 of the
                         Delaware General Corporation Law

     The undersigned, being the __________________ of eToys Inc., a 
corporation organized and existing under and by virtue of the General 
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY AS FOLLOWS:

     FIRST:     That the names and states of incorporation of each of the 
constituent corporations of the merger is as follows:

     NAME                                               STATE OF INCORPORATION
 
     BabyCenter, Inc.                                            Delaware
     eToys Inc.                                                  [Delaware]

     SECOND:     That the Agreement and Plan of Reorganization, dated as of 
_________, 1996, by and among eToys Inc., BabyCenter, Inc. and [_________] as 
of ____________, 1999, has been approved, adopted, certified, executed and 
acknowledged by each of the constituent corporations in accordance with the 
requirements of Section 251 of the General Corporation Law of the State of 
Delaware.

     THIRD:     That eToys Inc. shall be the surviving corporation of the 
merger.

     FOURTH:     That the certificate of incorporation of eToys Inc. shall be 
the certificate of incorporation of the surviving corporation.

     FIFTH:     That the executed Agreement and Plan of Reorganization is on 
file at the principal place of business of the surviving corporation.  The 
address of said principal place of business is [____________], California 
[_____].

     SIXTH:     That a copy of the aforesaid Agreement and Plan of 
Reorganization, will be furnished by the aforesaid surviving corporation, on 
request, and without cost, to any stockholder of each of the aforesaid 
constituent corporations.

     IN WITNESS WHEREOF, eToys Inc. has caused this Certificate of Merger to 
be signed by _____________, its _______________ this ____ day of _________, 
1999.

                                       ETOYS INC.


                                       By:____________________________
                                          Name:
                                          Title:



                                                                    EXHIBIT B


                        [Form of Affiliate Agreement]


____________, 1999


[Toy]

__________________

__________________, California, ________


Ladies and Gentlemen:

          The undersigned has been advised that as of the date hereof the
undersigned may be deemed to be an "affiliate" of [Toy], a Delaware corporation
("Toy"), or [Blue]., a Delaware corporation ("Blue"), as the term "affiliate" is
(i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), and/or (ii) used in and for purposes of Accounting Series Releases 130
and 135, as amended, of the Commission.  Pursuant to the terms of the Agreement
and Plan of Merger and Reorganization, dated as of [_____], 1999 (the
"Agreement"), between Toy and Blue, at the Effective Time (as defined in the
Agreement) Blue will be merged with and into Toy, with Toy remaining as the
surviving corporation.

     As a result of the Merger (as defined in the Agreement), the undersigned
may receive shares of Common Stock, par value $___ per share of Toy ("Toy Common
Stock").  The undersigned would receive such shares in exchange for shares of
capital stock of Blue owned by the undersigned.

     The undersigned hereby represents and warrants to, and covenants with, Toy
that in the event the undersigned receives any Toy Common Stock in the Merger:

     (A)  The undersigned shall not make any sale, transfer or other disposition
of (including a reduction of interest in or risk relating to) the Toy Common
Stock in violation of the Act or the Rules and Regulations.

     (B)  The undersigned has carefully read this letter and discussed its
requirements and other applicable limitations upon the undersigned's ability to
sell, transfer or otherwise 





dispose of the Toy Common Stock, to the extent the undersigned has felt it 
necessary, with the undersigned's counsel.

     (C)  The undersigned has been advised that the issuance of shares of Toy
Common Stock to the undersigned in the Merger may be registered under the Act by
a Registration Statement on Form S-4 or qualified for issuance under the
exemption provided by Section 3(a)(10) of the Act.  However, the undersigned has
also been advised and agrees that because (i) at the time of the Merger's
submission for a vote of the stockholders of Blue or Toy the undersigned may be
deemed an affiliate of Blue or Toy, as the case may be, and (ii) the
distribution by the undersigned of the Toy Common Stock has not been registered
under the Act, the undersigned may not sell, transfer or otherwise dispose of
Toy Common Stock issued to the undersigned in the Merger unless (a) such sale,
transfer or other disposition has been registered under the Act, (b) such sale,
transfer or other disposition is made in conformity with the volume and other
applicable limitations imposed by Rule 145 under the Act, or (c) in the opinion
of counsel reasonably acceptable to Toy, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.

     (D)  The undersigned understands that Toy will be under no obligation to
register the sale, transfer or other disposition of the Toy Common Stock by the
undersigned or on the undersigned's behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available.

     (E)  The undersigned understands that stop transfer instructions will be
given to Toy's transfer agent with respect to the Toy Common Stock owned by the
undersigned and that there may be placed on the certificates for the Toy Common
Stock issued to the undersigned, or any substitutions therefor, a legend stating
in substance:

              "The shares represented by this certificate were issued in a
              transaction to which Rule 145 under the Securities Act of 1933
              applies.  The shares represented by this certificate may only be
              transferred in accordance with the terms of a letter agreement 
              dated __________, 1999, a copy of which agreement is on file at 
              the principal offices of [Toy]."

     (F)  The undersigned also understands that unless the transfer by the
undersigned of the undersigned's Toy Common Stock has been registered under the
Act or is a sale made in conformity with the provisions of this letter, Toy
reserves the right, in its sole discretion, to place the following legend on the
certificates issued to any transferee of shares from the undersigned:

              "The shares represented by this certificate have not been 
              registered under the Securities Act of 1933 and were acquired 
              from a person who received such shares in a transaction to 
              which Rule 145 under the Securities Act of 1933 applies.  The 
              shares have been acquired by the holder not with a view to, or 
              for resale in connection with, any distribution thereof within 
              the meaning of the Securities Act of 1933 and may not be 
              offered, sold, pledged or otherwise transferred except in 
              accordance with an exemption from the registration requirements 
              of the Securities Act of 1933."


                                      -2-




     It is understood and agreed that the legend set forth in paragraph E or F
above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Toy (i) a copy of a letter
from the staff of the Commission, or an opinion of counsel, in form and
substance reasonably satisfactory to Toy to the effect that such legend is not
required for purposes of the Act or (ii) reasonably satisfactory evidence or
representations that the shares represented by such certificates are being or
have been transferred in a transaction made in conformity with the provisions of
Rule 145.

     This agreement shall be governed by and construed in accordance with the
laws of the State of California, without giving effect to principles of
conflicts of laws.  This agreement shall be binding on the undersigned's
successors and assigns, including his or her heirs, executors and
administrators.

                                                    Very truly yours,


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

                                                    ---------------------------
                                                    Print name


Acknowledged this ____ day

of _____________, 1999.

TOY


By: 
    -------------------------
Name:

Its:


                                      -3-






                                                                  EXHIBIT C


                         VOTING AND LOCK-UP AGREEMENT

     THIS VOTING AND LOCK-UP AGREEMENT is made and entered into as of April __,
1999 (this "Voting Agreement"), by and between [Toy], a Delaware corporation
("Buyer"), and the party identified on the signature page hereto
("Stockholder").

                                   RECITALS

     A.   Buyer and [Blue], a Delaware corporation (the "Company"), have
contemporaneously with the execution of this Voting Agreement entered into an
Agreement and Plan of Reorganization dated as of even date herewith (the "Merger
Agreement") which provides, among other things, that a wholly-owned subsidiary
of Buyer to be formed ("Merger Sub") shall be merged (the "Merger") with and
into the Company pursuant to the terms and conditions thereof;

     B.   As an essential condition and inducement to Buyer to enter into the
Merger Agreement and in consideration therefor, Stockholder and Buyer have
agreed to enter into this Voting Agreement; and

     C.   As of the date hereof, the Stockholder owns of record and beneficially
the shares of common stock, par value $0.001 per share ("Company Common Stock")
and, if applicable, the shares of preferred stock, par value $0.001 per share
("Company Preferred Stock"), of the Company (collectively, the Company Common
Stock and the Company Preferred Stock are referred to herein as the "Company
Stock") set forth on the signature page hereto and desires to enter into this
Agreement with respect to such shares of Company Stock.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and in the Merger Agreement, the parties hereto
agree as follows:

                                   ARTICLE I

     1.   VOTING OF SHARES; CONVERSION OF SHARES.

          1.1  VOTING AGREEMENT.  Stockholder hereby agrees to (a) appear, or
cause the holder of record on any applicable record date (the "Record Holder")
to appear for the purpose of obtaining a quorum at any annual or special meeting
of stockholders of the Company and at any adjournment thereof at which matters
relating to the Merger, the Merger Agreement or any transaction contemplated
thereby are considered and (b) vote, or cause the Record Holder to vote, in
person or by proxy, all of the shares of  Company Stock owned by Stockholder, or
with respect to which such Stockholder has or shares voting power or control,
and all of the shares of Company Stock which shall, or with respect to which
voting power or control shall, hereafter be acquired by Stockholder
(collectively, the "Shares") (i) in favor of the Merger, the Merger Agreement
and the transactions contemplated by the Merger Agreement and (ii) against any
amendment of the Company's certificate of incorporation or by-laws or other
proposal or transaction involving the Company, which would be reasonably likely
to impede, frustrate, prevent or nullify the 





Merger, the Merger Agreement or any of the other transactions contemplated by 
the Merger Agreement or change in any manner the voting rights of any class 
of Company Stock.  In the event written consents are solicited or otherwise 
sought from stockholders of the Company with respect to approval or adoption 
of the Merger Agreement, with respect to the approval of the Merger or with 
respect to any of the other actions contemplated by the Merger Agreement, 
Stockholder shall (unless otherwise directed by Buyer) execute, or cause the 
Record Holder to execute, with respect to all Shares, a written consent or 
written consents to such proposed action.

          1.2  GRANT OF PROXY.  In furtherance of the foregoing, Stockholder, 
by this Agreement, with respect to all Shares now owned of record or that may 
hereafter be acquired by Stockholder at anytime prior to the Effective Time 
(as defined in the Merger Agreement), does hereby constitute and appoint 
Buyer and Merger Sub, or any nominee of Buyer and Merger Sub, with full power 
of substitution, from the date hereof to the earlier to occur of the 
termination of this Voting Agreement or the Effective Time, as its true and 
lawful attorney-in-fact and proxy (its "Proxy"), for and in its name, place 
and stead, to demand that the Secretary of the Company call a special meeting 
of stockholders of the Company for the purpose of considering any action 
related to the Merger Agreement and to vote each of such Shares as its Proxy 
at every annual, special or adjourned meeting of stockholders of the Company, 
including the right to sign its name (as stockholder) to any consent, 
certificate or other document relating to the Company that the law of the 
State of Delaware may permit or require, in favor of the Merger, the Merger 
Agreement and the transactions contemplated by the Merger Agreement.  This 
Proxy and power of attorney is irrevocable to the fullest extent permitted by 
the law of the State of Delaware and is coupled with an interest.

          1.3  FURTHER ASSURANCES.  Stockholder shall perform such further acts
and execute such further documents and instruments as may reasonably be required
to vest in Buyer and Merger Sub the power to carry out and give effect to the
provisions of this Voting Agreement.

          1.4  NO OWNERSHIP INTEREST.  Nothing contained in this Voting
Agreement shall be deemed to vest in Buyer any direct or indirect ownership or
incidence of ownership of or with respect to any Shares.  All rights, ownership
and economic benefits of and relating to the Shares shall remain and belong to
Stockholder, and Buyer shall have no authority to manage, direct, superintend,
restrict, regulate, govern, or administer any of the policies or operations of
the Company or exercise any power or authority to direct Stockholder in the
voting of any of the Shares, except as otherwise provided herein, or the
performance of Stockholder's duties or responsibilities as a stockholder of the
Company.

          1.5  DOCUMENTS DELIVERED.  Stockholder acknowledges receipt of copies
of the following document:  the Merger Agreement and all Exhibits and Schedules
thereto.

          1.6  NO INCONSISTENT AGREEMENTS.  Each Stockholder hereby covenants
and agrees that, except as contemplated by this Voting Agreement and the Merger
Agreement, the Stockholder (a) has not entered, and shall not enter at any time
while this 


                                      -2-




Voting Agreement remains in effect, into any voting agreement and (b) has not 
granted, and shall not grant at any time while this Voting Agreement remains 
in effect, a proxy or power of attorney.

          1.7  CONVERSION OF SHARES; OTHER ACTIONS.  The Stockholder agrees to
take, or cause to be taken, all actions (including, without limitation, by
causing any director designee of such Stockholder to cause the Company to take
action) necessary to:

               (a)  terminate, not later than the Effective Time, the Amended
and Restated Investors Rights Agreement dated as of October 13, 1998 (as amended
to the date hereof) without requiring any payment, performance or obligation by
the Company;

               (b)  terminate, not later than the Effective Time, any other
agreement or arrangement between the Stockholder and the Company or
between/among the Stockholder and any other stockholder of the Company
restricting the registration, voting or transfer of Shares, or granting the
Stockholder registration rights without requiring any payment, performance or
obligation by the Company;

               (c)  convert, not later than the Effective Time, all shares of
Company Preferred Stock owned or held by the Stockholder into Company Common
Stock pursuant to Section 5(a) of the Company's Fourth Amended and Restated
Articles of Incorporation and to cause the automatic conversion of all
outstanding shares of Company Preferred Stock as a class into Company Common
Stock pursuant to, and by giving the consents required by, Section 5(b) of said
articles; PROVIDED, HOWEVER, that the effectiveness of each of the foregoing
actions described in clauses (a) - (c) shall be contingent upon consummation of
the Merger.

     The Stockholder also agrees to provide Buyer with reasonably satisfactory
evidence of all of the preceding actions.

                                   ARTICLE II

     2.   TRANSFER.

          2.1  TRANSFER OF TITLE.

               (a)  Stockholder hereby covenants and agrees that Stockholder
will not, prior to the termination of this Voting Agreement, either directly or
indirectly, sell, assign, pledge, hypothecate, transfer, exchange, or dispose
("Transfer") of any Shares or options to purchase Company Stock ("Options") or
any other securities or rights convertible into or exchangeable for shares of
Company Stock, owned either directly or indirectly by Stockholder or with
respect to which Stockholder has the power of disposition, whether now or
hereafter acquired, without the prior written consent of Buyer; PROVIDED that
nothing contained herein will be deemed to restrict the exercise of Option; and
PROVIDED FURTHER that the foregoing requirements shall not prohibit any Transfer
to any person or entity where as a pre-condition to such Transfer the transferee
agrees to be bound by all the terms and conditions of this Voting Agreement and
deliver a duly executed copy of the Voting Agreement to Toy to evidence such
agreement.


                                      -3-




               (b)  Stockholder hereby agrees and consents to the entry of stop
transfer instructions by the Company against the transfer of any Shares or
Options consistent with the terms of Section 2.1(a) hereof.

                                  ARTICLE III

     3.   REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.  Stockholder hereby
represents and warrants to Buyer as follows:

          3.1  AUTHORITY RELATIVE TO THIS AGREEMENT.  Stockholder is competent
to execute and deliver this Voting Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.  This Voting
Agreement has been duly and validly executed and delivered by Stockholder and,
assuming the due authorization, execution and delivery by Buyer, constitutes a
legal, valid and binding obligation of Stockholder, enforceable against
Stockholder in accordance with its terms.  If the Stockholder is a natural
person and is married, and the Shares and Options held or owned by the
Stockholder constitute community property or otherwise need spousal or other
approval for this Voting Agreement to be legal, valid and binding, this
Agreement has been duly authorized, executed and delivered by, and (making the
same assumption in the preceding sentence) constitutes a valid and binding
agreement of, the Stockholder's spouse, enforceable against such spouse in
accordance with its terms.  No trust of which such Stockholder is a trustee
requires the consent of any beneficiary to the execution and delivery of this
Voting Agreement or to the consummation of the transactions contemplated hereby.

          3.2  NO CONFLICT.  The execution and delivery of this Voting Agreement
by Stockholder does not, and the performance of this Voting Agreement by
Stockholder shall not, 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 Shares or Options pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Stockholder is a party or by which Stockholder or the Shares
or Options are bound or affected.

          3.3  TITLE TO THE SHARES.  The Stockholder is the record and
beneficial owner of, and has good and marketable title to, the Shares and
Options set forth on the signature page hereto, and the Shares and Options held
by Stockholder are owned free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Stockholder's voting rights, charges and other encumbrances of any nature
whatsoever, and Stockholder has not appointed or granted any proxy, which
appointment or grant remains effective, with respect to the Shares (other than
under this Voting Agreement).

                                   ARTICLE IV

     4.   LOCK-UP.  Stockholder acknowledges that Buyer is currently in
registration with the Securities and Exchange Commission for the initial public
offering (the "IPO") of 


                                      -4-




shares of Buyer's Common Stock, par value $.0001 per share ("Buyer Common 
Stock").  Stockholder further acknowledges that, in connection with the IPO, 
certain stockholders of Buyer will become bound by a 180-day lock-up 
arrangement with the underwriters in the IPO that restricts the ability of 
such stockholders to sell or otherwise transfer any interest in shares of 
Buyer Common Stock held by them during such time period following the IPO 
(the "Lock-Up").  As additional consideration for Buyer's agreement to enter 
into and consummate the transactions contemplated by the Merger Agreement, 
Stockholder agrees to be bound by the Lock-Up effective as of the Effective 
Time of the Merger (as defined in the Merger Agreement) and continuing 
through the end of such 180-day Lock-Up period, as if Stockholder were a 
direct party thereto with the underwriters in the IPO, with respect to all 
shares of Buyer Common Stock that may have been or are acquired by 
Stockholder at any time, whether pursuant to the exchange of shares in the 
Merger or otherwise.

                                   ARTICLE V

     5.   MISCELLANEOUS.

          5.1  NO SOLICITATION.  From the date hereof until the Effective Time
or, if earlier, the termination of the Merger Agreement, Stockholder shall not
(whether directly or indirectly through advisors, agents or other
intermediaries) engage in any discussions or take any actions that, if engaged
in or taken by the Company, would violate Section 4.2 of the Merger Agreement.

          5.2  TERMINATION.  This Agreement shall terminate upon the earliest to
occur of (a) the termination of the Merger Agreement in accordance with its
terms or (b) the Effective Time.  Upon such termination, no party shall have any
further obligations or liabilities hereunder other than as provided in Section 4
hereof, PROVIDED that no such termination shall relieve any party from liability
for any breach of this Voting Agreement prior to such termination.

          5.3  ENFORCEMENT OF AGREEMENT.  The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Voting Agreement were not performed in accordance with its specified terms or
were otherwise breached.  It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Voting
Agreement and to specific performance of the terms and provisions hereof in
addition to any other remedy to which they are entitled at law or in equity.

          5.4  SUCCESSORS AND AFFILIATES.  This Voting Agreement shall inure to
the benefit of and shall be binding upon the parties hereto and their respective
heirs, legal representatives and permitted assigns.  If Stockholder shall at any
time hereafter acquire ownership of, or voting power with respect to, any
additional Shares in any manner, whether by the exercise of any options or any
securities or rights convertible into or exchangeable for shares of Company
Stock, by operation of law or otherwise, such Shares shall be held subject to
all of the terms and provisions of this Voting Agreement.  Without limiting the
foregoing, Stockholder specifically agrees that the obligations of Stockholder


                                      -5-




hereunder shall not be terminated by operation of law, whether by death or
incapacity of Stockholder or otherwise.

          5.5  ENTIRE AGREEMENT.  This Voting Agreement together with the
Affiliates Agreements, in the form attached as EXHIBIT B to the Merger
Agreement, if and to the extent entered into by Stockholder and Buyer,
constitutes the entire agreement among Buyer and Stockholder with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, among Buyer and Stockholder with respect to the subject
matter hereof.

          5.6  CAPTIONS AND COUNTERPARTS.  The captions in this Voting Agreement
are for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Voting Agreement.  This
Voting Agreement may be executed in several counterparts, each of which shall
constitute one and the same instrument.

          5.7  AMENDMENT.  This Voting Agreement may not be amended except by an
instrument in writing signed by the parties hereto.

          5.8  WAIVERS.  Except as provided in this Voting Agreement, no action
taken pursuant to this Voting Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Voting Agreement.  The
waiver by any party hereto of a breach of any provision hereunder shall not
operate or be construed as a wavier of any prior or subsequent breach of the
same or any other provision hereunder.

          5.9  SEVERABILITY.  If any term or other provision of this Voting
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Voting 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 hereto shall negotiate in good faith to modify this Voting
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in a mutually
acceptable manner in order that the terms of this Voting Agreement remain as
originally contemplated to the fullest extent possible.

          5.10 NOTICES.  All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made and shall be effective upon receipt, if delivered personally, upon
receipt of a transmission confirmation if sent by facsimile (with a confirming
copy sent by overnight courier) and on the next business day if sent by Federal
Express, United Parcel Service, Express Mail or other reputable overnight
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by notice):

     If to Stockholder:  At the address set forth opposite Stockholder's name on
                         the signature page hereto


                                      -6-




     With a copy to:     
                         ----------------------------

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

                         ----------------------------
                         Attention: 
                                    -----------------
                         Telephone: 
                                    -----------------
                         Telecopy No.: 
                                       --------------

     If to Buyer or
     Merger Sub:         [Toy]

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

                         ----------------------------
                         Attention: 
                                    -----------------
                         Telephone: 
                                    -----------------
                         Telecopy No.: 
                                       --------------

     With a copy to:     Irell & Manella LLP
                         333 South Hope Street, Suite 3300
                         Los Angeles, CA  90071
                         Attention:  Anthony T. Iler
                         Telephone:  (213) 620-1555
                         Telecopy No.:  (213) 229-0515

          5.11 GOVERNING LAW.  This Voting Agreement shall be governed by, and
construed in accordance with, the laws of the State of California regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.

          5.12 DEFINITIONS.  Capitalized terms used and not defined herein shall
have the meaning set forth in the Merger Agreement.

          5.13 OFFICERS AND DIRECTORS.  No person who is or becomes (during the
term hereof) a director or officer of the Company makes any agreement or
understanding herein in his or her capacity as such director or officer, and
nothing herein will limit or affect, or give rise to any liability to
Stockholder by virtue of, any actions taken by any Stockholder in his or her
capacity as an officer or director of the Company in exercising its rights under
the Merger Agreement.

          5.14 INTERPRETATION.  The parties have participated jointly in the
negotiation of this Voting Agreement.  In the event that an ambiguity or
question of intent or interpretation arises, this Voting Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of the provisions of this Voting Agreement.

          5.15 VOIDABILITY.  If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action, this Voting Agreement, the Merger Agreement
and the transactions contemplated hereby and thereby, so that by the execution
and delivery hereof Buyer or Merger Sub would become, or could reasonably be
expected to become, an 


                                      -7-




"interested stockholder" with whom the Company would be prevented for any 
period pursuant to Section 203 of the Delaware General Corporation Law from 
engaging in any "business combination" (as such terms are defined in Section 
203 of the Delaware General Corporation Law), then this Voting Agreement 
shall be void and unenforceable until such time as such authorization and 
approval shall have been duly and validly obtained.


                                      -8-




     IN WITNESS WHEREOF, each of the parties hereto have caused this Voting
Agreement to be duly executed as of the date first written above.

                                       [TOY]


                                       By:
                                          ----------------------------------

                                       Name:
                                            --------------------------------

                                       Title:
                                             -------------------------------


                                       STOCKHOLDER


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


                                       By:
                                          ----------------------------------

                                       Name:
                                            --------------------------------

                                       Title:
                                             -------------------------------
                                       Address:
                                               -----------------------------
                                               -----------------------------
                                               -----------------------------

                                       -------------------------------------
                                       Spouse (if necessary)




Number of Shares of Company
Common Stock owned:
                    -------------------------

Number of Shares of Company
Preferred Stock owned:   Series A:___________;
                         Series B:___________;
                         Series C:___________

Number of Options:
                   --------------------------


                                      -9-





                                                                EXHIBIT F

                                EMPLOYMENT AGREEMENT

       This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of  _______, 1999,
is made and entered by and among Matthew Glickman [Mark Selcow] (the
"Executive"), eToys Inc., a Delaware corporation ("Parent"), and BabyCenter,
Inc., a Delaware corporation and wholly owned subsidiary of Parent (the
"Company").  

                                       RECITALS

       WHEREAS, pursuant to an Agreement and Plan of Reorganization dated as of 
April __, 1999 (the "Merger Agreement"), between the Company and Parent, as of
the date hereof Parent has acquired the Company by way of a merger;

       WHEREAS, Parent and the Company desire to be assured of the continued
provision of services by the Executive and therefore wish to have the Company
employ the Executive in the capacity and on the terms set forth below; 

       WHEREAS, the Executive desires to commit himself to serve the Company on
the terms set forth below;

       NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the parties hereto agree as follows:

1.     EMPLOYMENT PERIOD.  The Company shall employ the Executive and the
       Executive shall continue in the employ of the Company for the period
       commencing on the date of this Agreement, and ending on ______________,
       2004, unless sooner terminated in accordance with the provisions of this
       Agreement or otherwise (the "Initial Term").  This Agreement may be
       renewed or extended for one or more additional periods after the Initial
       Term only by mutual written agreement to that effect by the parties
       (each, a "Renewal Period"); provided, that any such Renewal Period may be
       terminated as provided herein.  The "Term" shall mean the period
       beginning on the date hereof and ending on the date of termination of
       Executive's services for the Company.  Upon expiration of the Term,
       except as expressly set forth herein (including in Section 6), this
       Agreement and all of its provisions shall terminate and shall cease to
       have any force or effect.

2.     DUTIES

       (a)    During the Term, the Executive shall serve as the Chief Executive
              Officer [President in the case of Selcow] of the Company, with
              such authority and duties as are assigned to him from time to time
              by the Board of Directors of the Company or the Board of Directors
              of Parent, that are consistent with the customary duties
              associated with such title and position.  During the Term,
              Executive shall report to the Chief Executive Officer of Parent or
              the Board of Directors of the Company and/or Parent, as determined
              by the Company or Parent from time to time.  




       (b)    During the Term, the Executive shall devote substantially all his
              working time, attention, skill and efforts to the business and
              affairs of the Company, will use his best efforts to promote the
              success of the Company's business, and shall not enter the employ
              of or serve as a consultant to, or in any way perform any
              services, with or without compensation, for any other person,
              enterprise, business, company, corporation, partnership, firm,
              association or organization.

3.     COMPENSATION AND RELATED MATTERS

       (a)    SALARY.  During the Term, the Executive shall receive a salary at
              the rate of $150,000 per annum, payable in accordance with the
              Company's regular payroll practices.  Executive's annual base
              salary shall be subject to review from time to time for possible
              increases by the Board of Directors of the Company or of Parent. 
              (Executive's base salary, as increased from time to time, shall be
              referred to as the "Base Salary.")

       (b)    EXPENSES.  The Company shall reimburse the Executive for all
              reasonable travel and other reasonable out-of-pocket business
              expenses incurred by the Executive in the performance of his
              duties under this Agreement upon evidence of payment and otherwise
              in accordance with the Company's procedures in effect from time to
              time.  

       (c)    EMPLOYEE BENEFITS.  During the Term, except as provided in Section
              2(d) below, the Executive shall be entitled to participate in or
              receive benefits under any employee health benefit plan or other
              arrangement made available by the Company or its subsidiaries to
              its employees ("Health Benefit Plan") on terms no less favorable
              than those generally applicable to other employees of the Company
              or its subsidiaries, subject to and on a basis consistent with the
              terms, conditions and overall administration of such Health
              Benefit Plan.  The Executive shall also be entitled to participate
              in or receive benefits under any other employee benefit plans on
              terms no less favorable than those generally applicable to
              employees of the Company or its subsidiaries, subject to and on a
              basis consistent with the terms, conditions and overall
              administration of such other employee benefit plans.

       (d)    VACATION.  The Executive shall be entitled to three weeks vacation
              during each year of the Term.

       (e)    DEDUCTIONS AND WITHHOLDINGS.  All amounts payable or which become
              payable hereunder shall be subject to all deductions and
              withholding required by law.

       (f)    STOCK OPTIONS.  On the date hereof, the Board of Directors of
              Parent shall cause to be issued to Executive, from Parent's 1999
              Employee Stock Option Plan, options (the "Executive Options") to
              purchase ____ [insert the product of 50,000 multiplied by the
              ratio of the stock split effected in connection with the Parent
              IPO] shares of the common stock, par value $.0001 per share, of

                                     -2-



              Parent ("Parent Common Stock").  Such options shall have an
              exercise price equal to the closing sales price of the Parent
              Common Stock on the Nasdaq National Market on the date of this
              Agreement.  All other terms of the options, including the 
              four-year vesting schedule, shall be as specified in the 1999 
              Employee Stock Option Plan.

       (g)    ACCELERATED VESTING UNDER CERTAIN CIRCUMSTANCES.  Parent agrees
              that, in the event of a Change of Control of Parent (as defined
              below), if Executive is terminated without Cause or pursuant to a
              Constructive Termination (each as defined below) at any time prior
              to the second anniversary of such Change of Control, then the
              vesting of all options to acquire shares of Parent Common Stock
              held by Executive shall be immediately accelerated and all such
              options shall become exercisable in full

4.     TERMINATION. The Executive's services for the Company and the Term of
       this Agreement may be terminated under the following circumstances:

       (a)    DEATH.  The Executive's services hereunder shall terminate upon
              his death.  In the case of the Executive's death, the Company
              shall pay to the Executive's beneficiaries or estate, as
              appropriate, after his death, his then current accrued and unpaid
              Base Salary as well as 100% of any earned and unpaid bonus for any
              years preceding the year of termination ("Unpaid Bonus") and other
              benefits and payments then due (including, without limitation,
              reimbursement of amounts under Section 3) to which the Executive
              is then entitled hereunder.  Executive and his beneficiaries, as
              appropriate, shall be entitled to no other compensation under this
              Agreement following, or as a result of, a termination under these
              circumstances.

       (b)    DISABILITY

              (i)    If a Disability (as defined below) of the Executive occurs
                     during the Term, the Company may give the Executive written
                     notice of its intention to terminate his employment.  In
                     such event, the Executive's services with the Company shall
                     terminate on the effective date specified in such notice. 
                     In the case of a termination as a result of a Disability,
                     the Company shall pay to the Executive after his
                     termination his then current accrued and unpaid Base
                     Salary, Unpaid  Bonus and other benefits and payments then
                     due (including, without limitation, reimbursement of
                     amounts under Section 3 to which the Executive is entitled
                     hereunder).  Executive and his beneficiaries, as
                     appropriate, shall be entitled to no other compensation
                     under this Agreement following, or as a result of, a
                     termination under these circumstances.

              (ii)   For the purpose of this subsection 4(b), "Disability" shall
                     mean the Executive's inability to perform his duties to the
                     Company on a full-time basis for 90 consecutive days or a
                     total of 120 days in any twelve 

                                     -3-



                     month period as reasonably determined by the Board of 
                     Directors of the Company or of Parent.

       (c)    TERMINATION BY THE COMPANY FOR CAUSE
              
              The Company may terminate the Executive's services hereunder 
              for Cause (as defined below) at any time upon written notice 
              to the Executive.  In such event, the Executive's services 
              shall terminate on the effective date specified in such 
              notice.  In the case of the Executive's termination for Cause, 
              the Company shall promptly pay to the Executive his then 
              current accrued and unpaid Base Salary and other benefits and 
              payments then due (including, without limitation, 
              reimbursement of amounts under Section 3 (other than payments 
              under any bonus plan for the year of termination)) to which 
              the Executive is entitled hereunder. The Executive and his 
              beneficiaries, as appropriate, shall be entitled to no other 
              compensation under this Agreement following, or as a result 
              of, a termination under these circumstances.  For purposes of 
              this Agreement, the Company shall have "Cause" to terminate 
              Executive's services hereunder in the event the Company or 
              Parent shall determine in good faith that any of the following 
              has occurred: (A) acts or omissions by the Executive which 
              constitute material misconduct or a knowing violation of a 
              material written policy of the Company or any of its 
              subsidiaries (provided Executive has been provided with a copy 
              of such material written policy), (B) the Executive or any 
              affiliated or related person or entity receiving a benefit in 
              money, property or services from the Company or any of its 
              subsidiaries or from another person dealing with the Company 
              or any of its subsidiaries, in material violation of 
              applicable law or Company policy, (C) an act of fraud, 
              conversion, misappropriation, or embezzlement by the Executive 
              or his conviction of, or entering a guilty plea or plea of no 
              contest with respect to, a felony, or the equivalent thereof, 
              (D) a material breach by the Executive of any of the 
              provisions of Section 6 or Section 7 hereof, (E) the 
              Executive's failure or refusal (whether intentional, reckless 
              or negligent) to perform his duties under this Agreement or 
              (F) any other breach by the Executive of this Agreement in any 
              material respect.

       (d)    TERMINATION BY THE EXECUTIVE.  The Executive may terminate his
              employment hereunder, PROVIDED that Executive first gives the
              Company a written notice of termination at least 30 calendar days
              prior to the effective date of any such termination.  In the event
              the Executive terminates his employment, the Company shall pay to
              the Executive his then current accrued and unpaid Base Salary and
              other benefits and payments then due (including, without
              limitation, reimbursement of amounts under Section 3 (other than
              payments under any bonus plan for the year of termination)) to
              which the Executive is entitled hereunder.  The Executive and his
              beneficiaries shall be entitled to no other compensation under
              this Agreement following, or as a result of, a termination under
              these circumstances.  

       (e)    TERMINATION BY THE COMPANY WITHOUT CAUSE AND CONSTRUCTIVE
              TERMINATION.   The Company may terminate the Executive's services
              hereunder without 

                                     -4-



              Cause at any time upon 30 days' written notice to the 
              Executive.  Further, in the event that the Company either (i) 
              requires, as a condition of his employment and without his 
              consent, that Executive relocate outside of the San Francisco 
              Bay Area, or (ii) re-assigns Executive to a position, or 
              delegates to Executive duties and responsibilities, that are 
              materially less than those generally associated with the title 
              specified in Section 2(a) hereof for an executive in a company 
              that is reasonably comparable in size and nature of business to 
              the Company (either clause (i) or clause (ii), a "Constructive 
              Termination"), then Executive shall be entitled to elect to 
              treat such events specified in clause (i) or (ii) as a 
              constructive termination of his employment hereunder by 
              providing written notice of such election to the Company.  In 
              the event that Executive is terminated without Cause or 
              pursuant to a Constructive Termination as provided herein, 
              Executive's services shall terminate on the effective date 
              specified in the respective notice specified above, all options 
              to acquire Parent Common Stock held by Executive will become 
              fully vested and immediately exerciseable, and the Company 
              shall pay to the Executive (A) his current accrued and unpaid 
              Base Salary, Unpaid Bonus and other benefits and payments 
              (including, without limitation, reimbursement of amounts under 
              Section 3) to which the Executive is entitled hereunder as of 
              such effective date and (B) either (x) if such termination 
              occurs at any time prior to the second anniversary of the date 
              hereof, 18 months of the Executive's then applicable Base 
              Salary, or (y) if such termination occurs at any time from the 
              second anniversary of the date hereof through and including the 
              fifth anniversary of the date hereof, 12 months of the 
              Executive's then applicable Base Salary (provided, however, 
              that under no circumstance shall any severance payment be made 
              in respect of any month that follows the fifth anniversary of 
              the date hereof), in each case subject to the Executive's 
              compliance with the terms of Section 6 and Section 7 hereof.  
              Notwithstanding the foregoing subclause (B), in the event that 
              Executive becomes employed in a position that is reasonably 
              comparable to his position with the Company in terms of base 
              salary and level of duties and responsibilities, then the 
              Company shall no longer be required to make the payments under 
              subclause (B) from and after the date of Employee's 
              commencement of such alternative employment.  The Executive and 
              his beneficiaries shall be entitled to no other compensation 
              under this Agreement following, or as a result of, a 
              termination without Cause or a Constructive Termination under 
              this paragraph.  Salary and bonus payments referred to in this 
              Section 4(e) will be paid in accordance with Sections 3(a) and 
              3(c), as applicable.  

5.     LIMITATIONS ON STOCK TRANSFER.

       (a)    DEFINED TERMS.  For purposes of this Section 5, the following
              terms shall have the following meanings:

              "Change of Control" shall mean (a) a sale of all or substantially
              all of the assets of Parent or (b) a merger, consolidation,
              reorganization, combination or other comparable business
              transaction involving Parent following which 

                                     -5-



              the shareholders of Parent immediately prior to such transaction 
              cease to own at least a majority of the outstanding voting 
              power of all classes of Parent capital stock following such 
              transaction.

              "Exchange Ratio" shall have the meaning specified therefor in the
              Merger Agreement.

              "Subject Shares" means a number of shares of Parent Common Stock
              owned by Executive as of the date hereof equal to the product of
              (A) 875,199 [875,198 in the case of Selcow] MULTIPLIED BY (B) the
              Exchange Ratio MULTIPLIED BY (C) 0.666667, rounded down to the
              nearest even number.  The number of Subject Shares shall be
              adjusted from time to time to reflect any stock split, stock
              dividend, reverse stock split or other comparable transaction of
              Parent following the date hereof, and such adjusted number of
              shares shall be subject to the terms of this Section 5.

              "Transfer" means to sell, offer to sell, contract to sell, assign,
              pledge, hypothecate, transfer, exchange, grant any option to
              purchase or otherwise transfer or dispose of.

       (b)    LIMITATION ON TRANSFERS OF SUBJECT SHARES. 

              (i)    LOCK-UP.  Executive hereby agrees that, without Parent's
                     prior written consent, he will not, directly or indirectly,
                     Transfer (A) any of the Subject Shares at any time prior to
                     the first anniversary of the date of this Agreement or (B)
                     more than one-half of the Subject Shares at any time from
                     the first anniversary of the date of this Agreement through
                     and including the second anniversary of the date of this
                     Agreement; PROVIDED, HOWEVER, that the foregoing provisions
                     shall become null and void and of no further force or
                     effect in the event that (i) Parent terminates Executive
                     without Cause or pursuant to a Constructive Termination or
                     (ii) Parent experiences a Change of Control.

              (ii)   STOP TRANSFER; LEGEND. Executive hereby agrees and consents
                     to the entry of stop transfer instructions by Parent
                     against the Transfer of the Subject Shares consistent with
                     the terms of this Section 5.  In addition, Executive hereby
                     agrees and consents to the placement of a legend on any
                     certificate representing the Subject Shares stating that
                     the Transfer of such Subject Shares is restricted by the
                     terms of this Agreement.

              (iii)  NO OWNERSHIP INTEREST BY PARENT.  Nothing contained in this
                     Section 5 shall be deemed to vest in Parent any direct or
                     indirect ownership or incidence of ownership of or with
                     respect to any Subject Shares.  All rights of ownership and
                     economic benefits of and relating to the Subject Shares,
                     including, without limitation, the right to vote the
                     Subject Shares and to receive dividends thereon, shall
                     remain and 

                                     -6-



                     belong to Executive, subject only to the Transfer 
                     restrictions contained in this Section 5. 

       (c)    CERTAIN TRANSFERS OF SHARES OF PARENT COMMON STOCK.  Executive
              agrees that, if Executive elects at any time to Transfer 100,000
              or more shares of Parent Common Stock in any single transaction or
              series of related transactions, then Executive and Parent will
              retain a nationally recognized investment banking firm, which
              shall be approved in writing by both Executive and Parent, such
              approval not to be unreasonably withheld by either party (the
              "Investment Bank").  Executive and Parent will request that the
              Investment Bank provide Executive and Parent with advice regarding
              the manner of Transferring the respective shares that will most
              effectively achieve the two goals of maximizing Executive's price
              for the respective shares and minimizing any negative impact of
              such Transfer on the public trading price of Parent Common Stock. 
              Each of Executive and Parent agrees to follow such advice of the
              Investment Bank in connection with any such Transfer; provided
              that, if the Investment Bank recommends a registered, underwritten
              secondary offering of the respective shares, then Parent shall be
              entitled to decline to follow such advice, in which event
              Executive shall be entitled to sell the respective shares in a
              manner designed solely to maximize the price paid to Executive for
              the respective shares.  All sales commissions payable to the
              Investment Bank in connection with any Transfer under this
              paragraph shall be paid by Executive, and the reasonable expenses
              of the Investment Bank in connection with providing such services
              to Executive and Parent will be paid by Parent.

6.     CONFIDENTIAL AND PROPRIETARY INFORMATION.

(a)    The parties agree and acknowledge that during the course of the
       Executive's employment, the Executive has been given and will have access
       to and be exposed to trade secrets and confidential information in
       written, oral, electronic and other forms regarding Parent, the Company
       and their subsidiaries (which includes but is not limited to all of its
       business units, divisions and subsidiaries) and their business,
       equipment, products and employees, including, without limitation:  the
       identities of Parent's and the Company's and their subsidiaries'
       customers and key accounts and potential customers and key accounts
       (hereinafter referred to collectively as "Customers"), including, without
       limitation, the identity of Customers the Executive cultivates or
       maintains while providing services at Parent, the Company or any of their
       subsidiaries using Parent's the Company's, or any of their subsidiaries'
       products, name and infrastructure, and the identities of contact persons
       at those Customers; the particular preferences, likes, dislikes and needs
       of those Customers and contact persons with respect to product types,
       pricing, sales calls, timing, sales terms, rental terms, lease terms,
       service plans, and other marketing terms and techniques; Parent's and the
       Company's and their subsidiaries' business methods, practices,
       strategies, forecasts, pricing, and marketing techniques; the identities
       of 

                                     -7-



       Parent's and the Company's and their subsidiaries' licensors, vendors 
       and other suppliers and the identities of Parent's and the Company's 
       and their subsidiaries' contact persons at such licensors, vendors and 
       other suppliers; the identities of Parent's and the Company's and 
       their subsidiaries' key sales representatives and personnel and other 
       employees; advertising and sales materials; research, computer 
       software and related materials; and other facts and financial and 
       other business information concerning or relating to the Parent and 
       the Company or any of their subsidiaries and their business, 
       operations, financial condition, results of operations and prospects.  
       The Executive expressly agrees to use such trade secrets and 
       confidential information only for purposes of carrying out his duties 
       for the Company and its subsidiaries, and not for any other purpose, 
       including, without limitation, not in any way or for any purpose 
       detrimental to Parent, the Company or any of their subsidiaries.  The 
       Executive shall not at any time, either during the course of his 
       employment hereunder or after the termination of such employment, use 
       for himself or others, directly or indirectly, any such trade secrets 
       and confidential information, and, except as required by law, the 
       Executive shall not disclose such trade secrets and confidential 
       information, directly or indirectly, to any other person or entity; 
       PROVIDED THAT the obligations under this sentence will not be 
       construed to restrict the Executive from calling on or otherwise 
       maintaining a relationship with Customers or suppliers of Parent, the 
       Company or any of their subsidiaries during or after the termination 
       of the Executive's employment with the Company.  Trade secret and 
       confidential information hereunder shall not include any information 
       which (i) is already in or subsequently enters the public domain, 
       other than as a result of any direct or indirect disclosure by the 
       Executive, (ii) becomes available to the Executive on a 
       non-confidential basis from a source other than the Company or any of 
       its subsidiaries, PROVIDED THAT such source is not subject to a 
       confidentiality agreement or other obligation of secrecy or 
       confidentiality (whether pursuant to a contract, legal or fiduciary 
       obligation or duty or otherwise) to the Company or any of its 
       subsidiaries or any other person or entity or (iii) is approved for 
       release by the Company or any of its subsidiaries or which the Company 
       or any of its subsidiaries makes available to third parties without an 
       obligation of confidentiality.

(b)    All physical property and all notes, memoranda, files, records, writings,
       documents and other materials of any and every nature, written or
       electronic, which the Executive shall prepare or receive in the course of
       his employment with the Company and which relate to or are useful in any
       manner to the business now or hereafter conducted by Parent, the Company
       or any of their subsidiaries are and shall remain the sole and exclusive
       property of the Company and its subsidiaries, as applicable.  The
       Executive shall not remove from the Company's premises any such physical
       property, the original or any reproduction of any such materials nor the
       information contained therein except for the purposes of carrying out his
       duties to the Company or any of its subsidiaries and all such property
       (except for any items of personal property not owned by the Company or
       any of its subsidiaries), materials and information in his possession or
       under his custody or control upon the termination of his employment shall
       be immediately turned over to the Company and its subsidiaries, as
       applicable.

(c)    All inventions, improvements, trade secrets, reports, manuals, computer
       programs, tapes and other ideas and materials developed or invented by
       the Executive during the period of his employment, either solely or in
       collaboration with others, which 

                                     -8-



       relate to the actual or anticipated business or research of Parent, 
       the Company or any of their subsidiaries which result from or are 
       suggested by any work the Executive may do for Parent, the Company or 
       any of their subsidiaries or which result from use of Parent's, the 
       Company's or any of their subsidiaries' premises or property 
       (collectively, the "Developments") shall be the sole and exclusive 
       property the Company and its subsidiaries, as applicable.  The 
       Executive assigns and transfers to the Company his entire right and 
       interest in any such Development, and the Executive shall execute and 
       deliver any and all documents and shall do and perform any and all 
       other acts and things necessary or desirable in connection therewith 
       that the Company or any of its subsidiaries may reasonably request.  
       This paragraph does not apply to any inventions which the Executive 
       made prior to his employment by the Company (all of which are listed 
       on Exhibit A, which the Executive has attached hereto).

(d)    The provisions of this Section 6 shall survive any termination of this
       Agreement and termination of the Executive's employment with the Company
       for any reason or no reason.

7.     NO SOLICITATION OF EMPLOYEES.  The Executive acknowledges and agrees that
       he has gained and during the time of his employment with the Company,
       will gain, valuable information about the identity, qualifications and
       on-going performance of the employees of Parent, the Company and their
       subsidiaries.  During the Term and for a period of one year thereafter,
       except pursuant to Executive's duties as an employee of the Company, the
       Executive shall not directly or indirectly (i) seek to hire or employ any
       of Parent's, the Company's or any of their subsidiaries' employees, (ii)
       solicit or encourage any such employee to seek or accept employment with
       any other person or entity or (iii) disclose any information, except as
       required by law, about such employee to any prospective employer.  

8.     INJUNCTIVE RELIEF.  The Executive and the Company (a) intend that the
       provisions of Sections 6 and 7 be and become valid and enforceable, (b)
       acknowledge and agree that the provisions of Sections 6 and 7 are
       reasonable and necessary to protect the legitimate interests of Parent,
       the Company and their business and (c) agree that any violation of
       Section 6 or 7 will result in irreparable injury to Parent, the Company
       and their subsidiaries, the exact amount of which will be difficult to
       ascertain and the remedies at law for which will not be reasonable or
       adequate compensation to Parent, the Company and their subsidiaries for
       such a violation.  Accordingly, the Executive agrees that if the
       Executive violates the provisions of Section 6 or 7, in addition to any
       other remedy which may be available at law or in equity, the Company
       shall be entitled to specific performance and injunctive relief, without
       posting bond or other security, and without the necessity of proving
       actual damages.

9.     ASSIGNMENT; SUCCESSORS AND ASSIGNS.  The Executive agrees that he shall
       not assign, sell, transfer, delegate or otherwise dispose of, whether
       voluntarily or involuntarily, any rights or obligations under this
       Agreement, nor shall the Executive's rights hereunder be subject to
       encumbrance of the claims of creditors.  Any purported assignment,
       transfer, delegation, disposition or encumbrance in violation of this
       Section 9 shall be null and void and of no force or effect.  Nothing in
       this Agreement 

                                     -9-



       shall prevent the consolidation or merger of Parent or the Company 
       with or into any other entity, or the sale by Parent or the Company of 
       all or any portion of its properties or assets, or the assignment by 
       Parent or the Company of this Agreement and the performance of the 
       Company's obligations hereunder to any successor in interest or any 
       affiliated entity, and the Executive hereby consents to any and all 
       such assignments.  Subject to the foregoing, this Agreement shall be 
       binding upon and shall inure to the benefit of the parties and their 
       respective heirs, legal representatives, successors, and permitted 
       assigns, and, except as expressly provided herein, no other person or 
       entity shall have any right, benefit or obligation under this 
       Agreement as a third party beneficiary or otherwise.

10.    GOVERNING LAW; JURISDICTION AND VENUE, WAIVER OF JURY TRIAL.  This
       Agreement shall be governed, construed, interpreted and enforced in
       accordance with the substantive laws of the State of California without
       regard to the conflicts of law principles thereof.  Suit to enforce this
       Agreement or any provision or portion thereof may be brought in the
       federal courts located in Los Angeles, California, unless subject matter
       jurisdiction is lacking, in which case suit may be brought in the state
       courts located in Los Angeles, California.  EACH OF THE PARTIES HEREBY
       IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
       PROCEEDING ARISING OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
       CONTEMPLATED HEREBY.

11.    SEVERABILITY OF PROVISIONS.  In the event that any provision or any
       portion thereof should ever be adjudicated by a court of competent
       jurisdiction to exceed the time or other limitations permitted by
       applicable law, as determined by such court in such action, then such
       provisions shall be deemed reformed to the maximum time or other
       limitations permitted by applicable law, the parties hereby acknowledging
       their desire that in such event such action be taken.  In addition to the
       above, the provisions of this Agreement are severable, and the invalidity
       or unenforceability of any provision or provisions of this Agreement or
       portions thereof shall not affect the validity or enforceability of any
       other provision, or portion of this Agreement, which shall remain in full
       force and effect as if executed with the unenforceable or invalid
       provision or portion thereof eliminated.  Notwithstanding the foregoing,
       the parties hereto affirmatively represent, acknowledge and agree that it
       is their intention that this Agreement and each of its provisions are
       enforceable in accordance with their terms and expressly agree not to
       challenge the validity or enforceability of this Agreement or any of its
       provisions, or portions or aspects thereof, in the future.  The parties
       hereto are expressly relying upon this representation, acknowledgement
       and agreement in determining to enter into this Agreement.

12.    WARRANTY.  As an inducement to the Company to enter into this Agreement,
       the Executive represents and warrants that he is not a party to any other
       agreement or obligation for personal services, and that there exists no
       impediment or restraint, contractual or otherwise, on his power, right or
       ability to enter into this Agreement and to perform his or her duties and
       obligations hereunder.  As an inducement to the Executive to enter into
       this Agreement, Company represents and warrants that the person signing
       this Agreement for the Company has been duly authorized to do so by all
       necessary corporate action and has the corporate power and authority to
       execute 

                                     -10-



       this Agreement on the Company's behalf.  The execution and delivery of 
       this Agreement and the consummation of the transactions contemplated 
       have been duly and effectively authorized by all necessary corporate 
       action of the Company.

13.    NOTICES.  All notices, requests, demands and other communications which
       are required or may be given under this Agreement shall be in writing and
       shall be deemed to have been duly given when received if personally
       delivered; when transmitted if transmitted by telecopy, electronic or
       digital transmission method upon receipt of telephonic or electronic
       confirmation; the day after it is sent, if sent for next day delivery to
       a domestic address by recognized overnight delivery service (E.G.,
       Federal Express); and upon receipt, if sent by certified or registered
       mail, return receipt requested.  In each case notice will be sent to:

       If to the Company:

       (a)    BabyCenter, Inc.
              c/o eToys Inc.
              2850 Ocean Park Blvd., Suite 225
              Santa Monica, CA  90405
              Attention:  __________________
              Telephone No. _______________
              Telecopy No. ________________

              with a copy to:

              Irell & Manella LLP
              333 South Hope Street
              Suite 3300
              Los Angeles, California  90071
              Attention:  Anthony T. Iler
              Telephone No.  (213) 620-1555
              Telecopy:  (213) 229-0515

       (b)    if to the Executive, to:

              Matthew Glickman
              ___________________________
              ___________________________

       or to such other place and with other copies as either party may
       designate as to itself or himself by written notice to the others.

14.    CUMULATIVE REMEDIES.  All rights and remedies of either party hereto are
       cumulative of each other and of every other right or remedy such party
       may otherwise have at law or in equity, and the exercise of one or more
       rights or remedies shall not prejudice or impair the concurrent or
       subsequent exercise of other rights or remedies.

                                     -11-



15.    COUNTERPARTS.  This Agreement may be executed in several counterparts,
       each of which will be deemed to be an original, but all of which together
       shall constitute one and the same Agreement.

16.    ENTIRE AGREEMENT.  The terms of this Agreement are intended by the
       parties to be the final expression of their agreement with respect to the
       employment of the Executive by the Company and supersede, and may not be
       contradicted by, modified or supplemented by, evidence of any prior or
       contemporaneous agreement.  The parties further intend that this
       Agreement shall constitute the complete and exclusive statements of its
       terms and that no extrinsic evidence whatsoever may be introduced in any
       judicial, administrative or other legal proceeding to vary the terms of
       this Agreement.

17.    AMENDMENTS; WAIVERS.  This Agreement may not be modified, amended, or
       terminated except by an instrument in writing, approved by the Company
       and signed by the then existing parties hereto.  No waiver of any of the
       provisions of this Agreement, whether by conduct or otherwise, in any one
       or more instances, shall be deemed to be construed as a further,
       continuing or subsequent waiver of any such provision or as a waiver of
       any other provision of this Agreement.  No failure to exercise and no
       delay in exercising any right, remedy or power hereunder shall preclude
       any other or further exercise of any other right, remedy or power
       provided herein or by law or in equity.

18.    REPRESENTATION OF COUNSEL; MUTUAL NEGOTIATION.  Each party has had the
       opportunity to be represented by counsel of its choice in negotiating
       this Agreement.  This Agreement shall therefore be deemed to have been
       negotiated and prepared at the joint request, direction and construction
       of the parties, at arm's-length, with the advice and participation of
       counsel, and shall be interpreted in accordance with its terms without
       favor to any party.
                                          
                             [signature page to follow]

                                     -12-




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

                                       BabyCenter, Inc.
       
       
       
                                       By: 
                                           -------------------------------
                                           Name: 
                                           Title:  
       

                                       eToys Inc.
       
       
       
       
                                       By:
                                           -------------------------------
                                           Name: 
                                           Title:  
       

                                       EXECUTIVE
       
       
       
       
                                       -----------------------------------
                                            Name:

                                      -13-



                                     Exhibit A
                                  
                                          
                        INVENTIONS MADE PRIOR TO EMPLOYMENT
                                          
                                          
[List]




                                     -14-




                                                                    EXHIBIT G
                                          
                            COVENANT NOT TO COMPETE
                                          
     THIS COVENANT NOT TO COMPETE (the "Agreement"), dated as of ______, 1999,
by and between eToys Inc., a Delaware corporation (including its subsidiaries,
"Buyer"), and Matthew Glickman [Mark Selcow], an individual ("Stockholder"), is
to evidence the following agreements and understandings.  Capitalized terms used
herein have the respective meanings in the Merger Agreement (as hereinafter
defined) unless otherwise specified herein.

                                    RECITALS

     WHEREAS, prior to the date hereof, Stockholder was a stockholder of
BabyCenter, Inc., a Delaware Corporation (the "Company");

     WHEREAS, the Company carries on the business of advertising, marketing,
promoting, distributing and selling, through the online medium of the Internet,
a variety of products, services and content about or related to infants,
children, parents and families, including but not limited to commerce (i.e.,
merchandise sales), content (i.e., information), community (i.e., e-mail and
other interactive elements), and advertising and sponsorship components, as well
as website creation and hosting services for third parties, together with
various other related operations and services (the "Business");

     WHEREAS, as of the date hereof, pursuant to that certain Agreement and Plan
of Reorganization, dated as of April ___, 1999 (the "Merger Agreement"), between
Buyer and the Company, Buyer acquired the Company by way of a merger, and as a
result the Business and associated goodwill as a going concern of the Company
was acquired by Buyer;

     WHEREAS, as the holder of a significant equity position in the Company,
Stockholder is deriving substantial value from the transactions contemplated by
the Merger Agreement;

     WHEREAS, by agreeing to enter into the Merger Agreement and consummate the
Merger, Buyer desires and is seeking to acquire the Business, including the
business and goodwill as a going concern of the Business; and if Stockholder
were able to compete with Buyer in any manner that is hereinafter proscribed or
to engage in any of the other activities that are hereinafter proscribed, then
Buyer would be deprived of a substantial portion of the goodwill and going
concern value sought to be obtained through the Merger;

     WHEREAS, pursuant to Section _____ of the Merger Agreement, Stockholder is
required to enter into this Agreement;






     WHEREAS, Stockholder now desires to enter into this Agreement as required
under the Merger Agreement, and the parties desire to set forth the terms,
conditions and provisions of Stockholder's ongoing obligations during the Term
(as defined below);

     NOW, THEREFORE, in consideration of the mutual promises, covenants,
agreements, representations and warranties hereinafter set forth and set forth
in the Merger Agreement and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, all subject to the
completion of the closing of the Merger, the parties hereto agree as follows:

     1.   DEFINITION OF TERM.  The Term of this Agreement shall commence on the
date hereof and shall continue throughout the term of Stockholder's employment
with the Company under the Employment Agreement of even date herewith among
Buyer, the Company and Stockholder (the "Employment Agreement") and for a period
following the termination of Stockholder's employment under the Employment
Agreement equal to either (A) 18 months, in the event that Stockholder's
employment under the Employment Agreement terminates for any reason at any time
prior to the second anniversary of the date hereof or (B) 12 months, in the
event that Stockholder's employment under the Employment Agreement terminates
for any reason (including termination of the Employment Agreement in accordance
with its terms) at any time from or after the second anniversary of the date
hereof (the "Term"); provided, however, that (i) under no circumstances shall
the Term of this Agreement extend beyond the fifth anniversary of the date
hereof and (ii) in the event of a Change of Control (as defined in the
Employment Agreement) of Buyer, if Stockholder's employment under the Employment
Agreement is terminated without Cause or pursuant to a Constructive Termination
(each as defined in the Employment Agreement) following such Change of Control,
then the Term of this Agreement shall terminate immediately.


                                      -2-





     2.   AGREEMENT NOT TO COMPETE.  As a condition to the transactions being
completed as of the Effective Time pursuant to the Merger Agreement, and as a
means reasonably designed to protect the intellectual property, confidential and
proprietary information concerning the Business during the Term, Stockholder
will not, without the prior written consent of Buyer, directly or indirectly,
engage in, assist (financially or otherwise), associate with, or perform
services (other than on behalf of Buyer or any of its Affiliates) in any
Restricted Business (as hereinafter defined), including, without limitation,
whether such engagement, assistance, association or performance is as an
individual, principal, officer, director, consultant, advisor, proprietor,
employee, partner, stockholder or other investor (other than as a holder of less
than one percent (1%) of the outstanding capital stock or other equity interest
of or in any corporation or other business enterprise, provided that
Stockholder's participation therein is solely as a passive investor and does not
include any role as director, officer, manager or other service provider),
creditor, guarantor, agent, sales representative or other participant.  For
purposes of this Agreement, "Affiliate" shall mean any person, partnership,
limited liability company, joint venture, trust, corporation or other entity,
directly or indirectly, controlling, controlled by or under common control with
such person, partnership, limited liability company, joint venture, trust,
corporation or other entity.  For purposes of this Agreement, "Restricted
Business" shall mean (a) the Business together with any other business or
industry being considered or proposed to be conducted or engaged in by the
Company as of the date of this Agreement and (b) the business of Amazon.com,
Toys R Us and iVillage, together with any of their respective subsidiaries,
Affiliates or related parties.  For purposes of clarification, "Restricted
Business" shall not include the business of any entity that is engaged
principally in the healthcare industry, notwithstanding the fact that such
entity may be incidentally or insubstantially involved in any Restricted
Business.

     3.   NON-INTERFERENCE.  During the Term, Stockholder will not, without the
prior written consent of Buyer or any of its Affiliates, directly, indirectly or
as an agent on behalf of or in conjunction with any person, firm, partnership,
corporation or other entity (a) solicit, encourage the resignation of, or in any
other manner seek to engage or seek to employ, any person who is as of the
Effective Time, or within the prior three (3) months had been, an employee of
Buyer, the Company or any of their Affiliates, whether or not for compensation
and whether as an officer, employee, consultant, adviser, independent sales
representative, vendor, independent contractor or participant, or (b) contact,
solicit or service, in connection with the operation of any Restricted Business,
any person or entity with whom Buyer, the Company or any of their Affiliates
have a former, current or prospective (as of the Effective Time) business
relationship or who is or was at any time during the Term a customer or client
of Buyer, the Company or any of their Affiliates, or a prospective (as of the
Effective Time) customer or client to which Buyer, the Company or any of their
Affiliates have made a business proposal.  


                                      -3-





     4.   CONFIDENTIALITY.  Stockholder agrees not to disclose, use, transfer or
sell any intellectual property, confidential or proprietary information
concerning the Business, whether Stockholder has such information in his or her
memory or embodied in writing or other physical form, unless such activities are
on behalf of Buyer, the Company or any of their Affiliates.  For purposes of
this Agreement, the phrase "intellectual property, confidential or proprietary
information concerning the Business" means all information concerning the
business, affairs, products, suppliers, customers or employees of, or relating
to, the Business, including, without limitation, that which relates to marketing
or brand recognition matters, such as logos, typestyles, copyrights, trade
names, brand names, user names, service names, service marks and trademarks, or
to technical matters, such as patents, designs, drawings, specification sheets,
schematics, test data, technical literature, manufacturing and process
information, know-how, trade secrets, in process research efforts and technical
data of Buyer, the Company or any of their Affiliates, or to business matters
such as the identity of suppliers, customers or business partners or terms of
business relationships with suppliers, customers or business partners.  The
phrase "intellectual property, confidential or proprietary information
concerning the Business" shall not, however, include any information to the
extent that (i) Stockholder is required to disclose any of the foregoing
pursuant to the provisions of applicable law; (ii) any such information becomes
generally known and available to the public otherwise than by reason of a
disclosure or communication of such information by Stockholder; or (iii) any
such information is disclosed after the written approval of Buyer, the Company
or any of their Affiliates.  Stockholder agrees that the restrictions contained
in this Section 3 shall continue to apply without time restrictions, so long as
any information remains intellectual property, confidential or proprietary
information concerning the Business.

     5.   CONSIDERATION.  Stockholder acknowledges that the consideration for
the covenants in Sections 2, 3 and 4 consists of substantial economic value to
be provided to Stockholder pursuant to the Merger Agreement, and that no
separate consideration shall be payable pursuant to this Agreement.  Stockholder
also acknowledges that Buyer would not consummate the Merger unless Stockholder
entered into this Agreement.

     6.   MISCELLANEOUS.

          6.1  ENTIRE AGREEMENT; AMENDMENTS.  This Agreement and any document
referred to herein or executed contemporaneously herewith set forth the entire
understanding of the parties relating to the subject matter hereof and supersede
all agreements, representations, warranties, statements, promises and
understandings, with respect to the subject matter hereof.  None of the terms or
provisions hereof shall be modified or waived, and this Agreement may not be
amended or terminated, except by a  written instrument signed by the party
against which modifications or waiver or amendment or termination is to be
enforced.  No waiver of any one provision shall be considered a waiver of any
other provision, and the fact that an obligation is waived for a period of time
or in one instance shall not be considered to be a continuing waiver.


                                      -4-



          6.2  REMEDIES NOT EXCLUSIVE.  No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy will be cumulative and will be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.  The election of any one or more remedies
will not constitute a waiver of the right to pursue other available remedies.

          6.3  NOTICES.  All notices under this Agreement will be in writing and
will be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
to such address as may be designated from time to time by the relevant party,
and which will initially be as set forth below.  Any notice sent by certified
mail will be deemed to have been given three (3) days after the date on which it
is mailed.  All other notices will be deemed given when received.  No objection
may be made to the manner of delivery of any notice actually received in writing
by an authorized agent of a party.  Notices will be addressed as follows or to
such other address as the party to whom the same is directed will have specified
in conformity with the foregoing:

          (i)  If to Buyer:

               eToys Inc.
               2850 Ocean Park Boulevard, Suite 220
               Santa Monica, CA  90405
               Attention:  
               Telephone No.:  
               Telecopy No.:  

               with a copy to:

               Irell & Manella LLP
               333 South Hope Street, Suite 3300
               Los Angeles, California 90071
               Attention:  Anthony T. Iler
               Telephone No.:  (213) 620-1555
               Telecopy No.:  (213) 229-0515


                                      -5-



          (ii) If to Stockholder:

               Matthew Glickman
     
               _________________________
               _________________________
     

               with a copy to:

               _________________________
               _________________________
               _________________________
               Attention:  
               Telephone:  
               Telecopy No.:  

          6.4  EQUITABLE RELIEF; ACCOUNTING.  Stockholder acknowledges that the
covenants contained in Sections 2, 3 and 4 hereof are reasonable and necessary
to protect the legitimate interests of Buyer, that any breach or threatened
breach of such covenants will result in irreparable injury to Buyer and that the
remedy at law for such breach or threatened breach would be inadequate. 
Accordingly, in the event of the breach by Stockholder of any of the provisions
of this Agreement, Buyer, in addition and as a supplement to such other rights
and remedies as may exist in its favor, may apply to any court of law or equity
having jurisdiction to enforce this Agreement, and/or may apply for injunctive
relief against any act that would violate any of the provisions of this
Agreement (without being required to post a bond).  Stockholder further
understands that monetary damages will not be sufficient to avoid or compensate
for a breach of the covenants contained in Sections 2, 3 and 4 hereof and that
injunctive relief would be appropriate to prevent any such breach or threatened
breach.  Such right to obtain injunctive relief may be exercised, at the option
of Buyer, concurrently with, prior to, after, or in lieu of, the exercise of any
other rights or remedies that Buyer may have as a result of any such breach or
threatened breach.  In addition, Stockholder shall account for and pay over to
Buyer all compensation, profits and other benefits inuring to Stockholder's
benefit that are derived or received by Stockholder thereof resulting from any
action or transaction constituting a breach of the covenants contained in
Sections 2, 3 and 4 hereof.

          6.5  THIRD-PARTY BENEFITS.  None of the provisions of this Agreement
will be for the benefit of, or enforceable by, any third-party beneficiary.

          6.6  SUCCESSORS AND ASSIGNS.  This Agreement will be binding upon and
inure to the benefit of the parties, their respective successors and permitted
assigns.  None of the parties hereto may assign any of their rights or
obligations under this Agreement without the prior written consent of all other
parties hereto, except that this Agreement may be assigned by Buyer to any
corporation or other business entity that succeeds to all or substantially all
of the business of Buyer through merger, consolidation, corporate 


                                      -6-



reorganization or by acquisition of all or substantially all of the assets or 
capital stock of Buyer.

          6.7  GOVERNING LAW.  All questions with respect to this Agreement and
the rights and liabilities of the parties shall be governed by the laws of the
state of California, regardless of the choice of law provisions of that state or
any other jurisdiction.  

          6.8  RULES OF CONSTRUCTION.

               6.8.1     HEADINGS.  The Section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, extend or
interpret the scope of this Agreement or any particular Section.

               6.8.2     TENSE AND CASE.  Throughout this Agreement, as the
context may require, references to any word used in one tense or case shall
include all other appropriate tenses or cases.  

               6.8.3     SEVERABILITY.  The validity, legality or enforceability
of the remainder of this Agreement will not be affected even if one or more of
the provisions of this Agreement are held to be invalid, illegal or
unenforceable in any respect.  Further, if the period of time, the extent of the
geographic area or the scope of the prescribed activities covered by this
Agreement should be deemed unenforceable, then this Agreement shall be construed
to cover the maximum period of time, geographic area and scope of prescribed
activities (not to exceed the maximum time, geographic area or scope set forth
herein) as may be valid under applicable law.  The parties specifically intend
that any court determining the extent of the enforceability of this Agreement
shall, if it determines that the Agreement is not fully enforceable in
accordance with its terms, modify the period of time, geographic area or scope
of prescribed activities provided for herein to the minimum extent necessary
such that the provisions hereof as so modified are enforceable.

          6.9  ATTORNEYS' FEES.  If any action or proceeding is brought to
enforce or interpret any provision of this Agreement, the prevailing party shall
be entitled to recover as an element of its costs, and not its damages,
reasonable attorneys' fees and costs incurred in connection with such action or
proceeding.

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


                                      -7-



     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the first date set forth above.


                              eToys Inc.


                              By:________________________
                                 Name:
                                 Title:

                              STOCKHOLDER


                              ___________________________
                              Name: Matthew Glickman 


                                      -8-