HA2003 Inc – ‘PREM14A’ on 1/28/00

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger    168    832K 
                          or Acquisition                                         

Document Table of Contents

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.    ) 

                                                                [Download Table]
                                                                     
Filed by the Registrant /X/                                          
Filed by a Party other than the Registrant / /                       
Check the appropriate box:                                           
/X/        Preliminary Proxy Statement                               
/ /        Confidential, for Use of the Commission Only (as permitted
           by Rule 14a-6(e)(2))                                      
/ /        Definitive Proxy Statement                                
/ /        Definitive Additional Materials                           
/ /        Soliciting Material Pursuant to Section240.14a-11(c) or   
           Section240.14a-12                                         

                                                                [Download Table]
                                                                 
                 HA-LO INDUSTRIES, INC.                          
------------------------------------------------------------     
      (Name of Registrant as Specified In Its Charter)           
------------------------------------------------------------     
(Name of Person(s) Filing Proxy Statement, if other than the     
                         Registrant)                             

Payment of Filing Fee (Check the appropriate box):                              

                                                                [Download Table]
                                                                          
/ /        No fee required.                                               
/X/        Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 
           and 0-11.                                                      
           (1)  Title of each class of securities to which transaction    
                applies:                                                  
                Common Stock, without par value.                          
                Series A Convertible Preferred Stock, without par value   
           (2)  Aggregate number of securities to which transaction       
                applies:                                                  
                17,000,000 shares of Common Stock                         
                5,100,000 shares of Preferred Stock                       
           (3)  Per unit price or other underlying value of transaction   
                computed pursuant to Exchange Act Rule 0-11 (set forth the
                amount on which the filing fee is calculated and state how
                it was determined):                                       
                $10.0625 per share, which is equal to the average of the  
                high and low prices of the Common Stock as reported on the
                New York Stock Exchange on January 27, 2000. There is no  
                market for the Preferred Stock; however, because each such
                share of Preferred Stock is initially convertible into one
                share of Common Stock, the value of the Preferred Stock is
                for purposes of this calculation equal to the market value
                of the Common Stock.                                      
           (4)  Proposed maximum aggregate value of transaction:          
                $241,381,250, which equals the sum of (i) $19 million in  
                cash payable in the merger, (ii) $171,062,500 in Common   
                Stock issuable in the merger (calculated as indicated in  
                (3) above), and (iii) $51,318,750 in Preferred Stock      
                issuable in the merger (calculated as indicated in (3)    
                above).                                                   
           (5)  Total fee paid:                                           
                $48,277                                                   
                ----------------------------------------------------------
/ /        Fee paid previously with preliminary materials.                
/ /        Check box if any part of the fee is offset as provided by      
           Exchange Act Rule 0-11(a)(2) and identify the filing for which 
           the offsetting fee was paid previously. Identify the previous  
           filing by registration statement number, or the Form or        
           Schedule and the date of its filing.                           
           (1)  Amount Previously Paid:                                   
                ----------------------------------------------------------
           (2)  Form, Schedule or Registration Statement No.:             
                ----------------------------------------------------------
           (3)  Filing Party:                                             
                ----------------------------------------------------------
           (4)  Date Filed:                                               
                ----------------------------------------------------------

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[LOGO]

PROPOSED MERGER--YOUR VOTE IS VERY IMPORTANT

   The board of directors of HA-LO Industries, Inc. has unanimously approved a
merger agreement that would result in HA-LO acquiring all of                    
Starbelly.com, Inc. If we complete the merger, Starbelly.com stockholders will  
receive approximately $240 million, which amount we will pay as follows:        

(1) paying $19 million in cash (less Starbelly.com's merger expenses in excess  
of $500,000);                                                           

(2) paying the balance by issuing shares of:                                    

(a) HA-LO common stock valued at $170 million; and                      

(b) HA-LO convertible preferred stock valued at $51 million.            

This includes HA-LO's assumption of Starbelly.com's outstanding stock options,  
which will be exercisable for HA-LO common stock and HA-LO convertible preferred
stock.                                                                          

 We will issue in the merger and reserve for issuance upon exercise of the
assumed stock options 17 million shares of our common stock and 5.1 million     
shares of our preferred stock. You will continue to own your shares after the   
merger. Immediately after the merger, pre-merger shareholders of HA-LO will own 
approximately 69% of the outstanding common stock, and the former stockholders  
of Starbelly.com will own approximately 31% of the outstanding common stock     
(assuming all of the preferred shares are converted into common stock and all   
assumed options are exercised and all preferred shares issued upon exercise are 
converted into common stock).                                                   

  The board of directors and stockholders of Starbelly.com have approved the
merger. We cannot complete the merger unless it is approved by HA-LO's          
shareholders. A vote in favor of the merger also constitutes a vote in favor of:

- the issuance of common stock pursuant to the merger agreement;        

- the amendment of the Company's articles of incorporation to permit the
    issuance of convertible preferred stock in the merger and, upon exercise
      of options assumed in the merger, the reservation of 5.1 million shares of
  common stock for issuance upon conversion of the convertible preferred
stock; and                                                          

- the adoption of a new stock option plan under which HA-LO will assume 
    Starbelly.com's stock option plan and the options outstanding under that
plan.                                                               

We have scheduled a special meeting for you to vote on the merger. In   
addition, at the special meeting that will be asked to:                         

- approve an amendment to our articles of incorporation to increase the 
   number of shares of common stock that HA-LO is authorized to issue from
100 million to 250 million and to increase the number of shares of  
convertible preferred stock that HA-LO is authorized to issue from  
10 million to 20 million; and                                       

- approve an amendment to our articles of incorporation to authorize the
board of directors to provide for the future issuance of convertible
    preferred stock without the approval of the holders of our common stock.

    YOUR VOTE IS VERY IMPORTANT.  Please take the time to vote by completing the
enclosed proxy card and returning it in the return envelope provided, even if   
you plan to attend the special shareholders' meeting. You should note that if   
you sign, date and mail your proxy card without indicating how you              

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wish to vote, your proxy will be counted as a vote in favor of the proposals    
submitted at the special meeting. If you hold your shares in the name of a bank 
or broker, you should follow the instructions on the form you receive from your 
bank or broker.                                                                 

The date, time and place of our meeting are:                            

March       , 2000, 10:00 a.m., Chicago time
Harris Bank, Room       
111 West Monroe Street
Chicago, Illinois 60603 

   This document provides you with detailed information about the meeting, the
proposed merger and the other matters to be considered at the special meeting.  
We encourage you to read this entire document carefully. IN PARTICULAR, YOU     
SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 15 WHICH DESCRIBES     
CERTAIN RISKS THAT YOU SHOULD CONSIDER IN EVALUATING THE MERGER. You may also   
obtain information about our company from publicly available documents that we  
have filed with the Securities and Exchange Commission.                         

                                          ______________________________________
                       John R. Kelley, Jr.
                                         President and Chief Executive Officer
                          HA-LO Industries, Inc.

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[LOGO]

HA-LO INDUSTRIES, INC.
5980 WEST TOUHY AVENUE
NILES, ILLINOIS 60714 

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 
MARCH   , 2000

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

Notice is hereby given that a Special Meeting of Shareholders of HA-LO  
Industries, Inc., an Illinois corporation ("HA-LO" or the "Company"), will be   
held at HARRIS BANK, ROOM       , 111 WEST MONROE STREET, CHICAGO, ILLINOIS     
60603 on       , March   , 2000 at 10:00 a.m., Chicago time, for the following  
purposes:                                                                       

(1) To consider and vote upon a proposal to approve the merger of       
       Starbelly.com with a wholly owned subsidiary of HA-LO. A vote in favor of
the merger also constitutes a vote in favor of (a) the issuance of
 17 million shares of common stock pursuant to the merger agreement,
    (b) the amendment of the Company's articles of incorporation to permit
      the issuance of 5.1 million shares of convertible preferred stock in the
     merger and upon exercise of the assumed options, (c) the reservation of
    5.1 million shares of common stock for issuance upon conversion of the
    convertible preferred stock and (d) the adoption of a new stock option
      plan under which HA-LO will assume Starbelly.com's stock option plan and
the options outstanding under that plan.                          

(2) To consider and vote upon a proposal to amend Article Four of the   
     Company's articles of incorporation to increase the number of shares of
common stock HA-LO is authorized to issue from 100 million to     
       250 million and to increase the number of shares of convertible preferred
    stock that HA-LO is authorized to issue from 10 million to 20 million.

(3) To consider and vote upon a proposal to amend Article Four of the   
      Company's articles of incorporation to authorize your board of directors
       to provide for the future issuance of convertible preferred stock without
the further approval of the holders of our common stock.          

   (4) To transact such other business as may properly come before the special
meeting.                                                          

You are entitled to exercise dissenters' rights in connection with the  
merger in accordance with the Illinois Business Corporation Act of 1983, as     
amended (the "IBCA"). In order to exercise dissenters' rights, you must:        

- deliver to HA-LO, before the vote is taken at the special meeting, a  
  written demand for payment of your shares of HA-LO common stock if the
merger is completed;                                                

- NOT vote in favor of the proposal to merge Starbelly.com and HA-LO's  
wholly owned subsidiary; and                                        

  - comply with the other requirements contained in Sections 11.65 and 11.70
of the IBCA.                                                        

  For additional details regarding dissenters' rights, please read carefully
the section of the accompanying proxy statement captioned "The Special          
Meeting--Dissenters' Rights."                                                   

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   If you were a shareholder of record at the close of business on January 28,
2000, you are entitled to notice of and to vote at the meeting and at any       
postponements or adjournments thereof. A complete list of the shareholders      
entitled to vote at the meeting will be subject to inspection by any shareholder
at the Company's principal executive office, 5980 West Touhy Avenue, Niles,     
Illinois 60714, during usual business hours, for a period of ten days prior to  
the meeting.                                                                    

                                       By Order of the Board of Directors,

                       JOHN R. KELLEY, JR.
                                         PRESIDENT AND CHIEF EXECUTIVE OFFICER

Niles, Illinois                                                                 
February   , 2000                                                               

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

  THE BOARD OF DIRECTORS EXTENDS A CORDIAL INVITATION TO ALL SHAREHOLDERS TO
ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE       
COMPLETE, DATE, SIGN AND RETURN AS PROMPTLY AS POSSIBLE THE ENCLOSED PROXY IN   
THE ACCOMPANYING REPLY ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE 
THEIR PROXIES AND VOTE IN PERSON.                                               

REFERENCES TO ADDITIONAL INFORMATION

The accompanying proxy statement incorporates important business and    
financial information about HA-LO from documents we have filed with the         
Securities and Exchange Commission but have not included in or delivered with   
this document. If you write or call us, we will send you these documents without
charge. Please contact:                                                         

HA-LO Industries, Inc.                
5980 West Touhy Avenue                
Niles, Illinois 60714                 
               Attention: Gregory J. Kilrea, Chief Financial Officer
(847) 647-2300                        

 PLEASE REQUEST DOCUMENTS FROM US BY FEBRUARY   , 2000. If you request any
incorporated documents, we will mail the requested documents by first class     
mail, or another equally prompt means, as soon as possible after we receive your
request.                                                                        

  See "Where To Find More Information" on page 82 for more information about
the documents referred to in the proxy statement.                               

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

HA-LO INDUSTRIES, INC.
PROXY STATEMENT 
RELATING TO A 
PROPOSED MERGER WITH STARBELLY.COM, INC.
--------------------------------------------------------------------------------

- We are proposing a merger with Starbelly.com, Inc., a company that intends to 
create a leading business to business e-commerce marketplace for the        
custom-decorated merchandise industry. If the merger is completed,          
Starbelly.com will become our wholly-owned subsidiary. See "The Merger" on  
page 35.                                                                    

- The total merger consideration will be approximately $240 million, which we   
will pay by:                                                                

Q paying $19 million in cash (less certain expenses),                   

Q paying the balance by issuing:                                        

- shares of our common stock valued in the merger agreement at    
$170 million, and                                             

- shares of our convertible preferred stock valued in the merger  
agreement at $51 million.                                     

This includes shares issuable upon exercise of Starbelly.com's outstanding stock
options.                                                                        
See "Description of the Convertible Preferred Stock" on page 48.                

- Following the merger, our shareholders will own approximately 69% of our      
common stock, and the former stockholders of Starbelly.com and holders of   
  Starbelly.com stock options will own approximately 31% of our common stock, if
all of their stock options are exercised and all shares of our convertible  
preferred stock are converted into common stock.                            

- We will hold a special meeting of HA-LO shareholders on       , March   , 2000
to consider matters necessary to complete the merger.                       

- At the special meeting, we are asking you to approve:                         

  Q the merger, including the issuance of our common stock and our preferred
stock in the merger,                                                

Q the assumption of Starbelly.com's stock options, and                  

   Q amendments to our articles of incorporation to increase our capital stock
  and to provide for the future issuance of preferred stock without your
  further approval. See "Proposed Amendment to the Company's Articles of
Incorporation to Increase Authorized Capital Stock" on page 79 and  
      "Proposed Amendment to the Company's Articles of Incorporation Relating to
the Issuance of Convertible Preferred Stock" on page 81.            

- Our board of directors unanimously recommends that you vote in favor of the   
merger and the other proposals described in this proxy statement. See "The  
Merger--Recommendation of the HA-LO Board and Reasons for the Merger" on    
page 37.                                                                    

- Your vote is important. Approval of the merger and each of the other proposals
  to be considered at the meeting requires the affirmative vote of a majority of
the outstanding shares of our common stock. Broker non-votes and abstentions
will count as votes cast AGAINST each of the proposals. See "The Special    
Meeting, Voting and Proxies--Required Vote" on page 31.                     

- You may vote either in person or by properly executed proxy. Please take the  
time to vote by completing the enclosed proxy card and returning it in the  
return envelope provided.                                                   

- You can change your vote any time before your shares are voted at the special 
 meeting by (1) sending a written notice stating that you would like to revoke
your proxy, (2) completing and submitting a new, later-dated proxy card or  
(3) attending the meeting and voting in person. See "The Special Meeting,   
Voting and Proxies--Proxies" on page 31.                                    

- If the merger is completed, and you have properly exercised your dissenters'  
rights, you may require HA-LO to purchase your shares for cash at their fair
value. The procedures that you must follow are described under "The Special 
Meeting, Voting and Proxies--Dissenters' Rights" on page 32.                

See "Risk Factors" beginning on page 15 for certain matters you should consider.

This document contains important information about the proposed merger. Please
read it carefully.

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TABLE OF CONTENTS 

                                                                [Download Table]
                                                                      
QUESTIONS AND ANSWERS ABOUT THE MERGER......................         1

SUMMARY OF PROXY STATEMENT..................................         2
  The Companies.............................................         2
  About the Special Meeting.................................         3
  The HA-LO Board of Directors Recommends Voting For the              
    Merger and the Other Proposals..........................         4
  Votes Necessary to Approve the Merger and the Other                 
    Proposals...............................................         4
  The Merger................................................         4
  Assumption of Stock Options...............................         8
  Amendment to Our Articles of Incorporation to Increase              
    Authorized Shares.......................................         8
  Amendment to Our Articles of Incorporation to Authorize             
    the Board to Issue Convertible preferred stock Without            
    Stockholder Approval....................................         9
  Your board of Directors After the Merger..................         9
  Limits on Forward-Looking Statements......................        10
  Risk Factors..............................................        10
  Summary Unaudited Pro Forma Financial Information.........        11
  HA-LO Summary Selected Historical Financial Data..........        12
  Starbelly.com Summary Selected Historical Financial                 
    Data....................................................        13
  Unaudited Comparative Per Share Data......................        13

RISK FACTORS................................................        15
  Risks Related to the Merger...............................        15
  Risks Related to Starbelly.com's Business.................        16
  Risk Factors Generally Affecting All E-commerce Businesses          
    and Internet Businesses.................................        23
  Risks Related to HA-LO Capital Stock......................        26

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING                       
  STATEMENTS................................................        28

THE SPECIAL MEETING, VOTING AND PROXIES.....................        30
  Purpose; Time and Place...................................        30
  Record Date; Voting Rights................................        30
  Quorum....................................................        30
  Required Vote.............................................        31
  Proxies...................................................        31
  Cost of Solicitation......................................        31
  Adjournment...............................................        32
  Dissenters' Rights........................................        32

THE MERGER..................................................        35
  General...................................................        35
  Background of the Merger..................................        35
  Recommendation of the HA-LO Board and Reasons for the               
    Merger..................................................        37
  Opinion of Financial Advisor to HA-LO.....................        39
  Starbelly.com's Reasons for the Merger....................        44
  Merger Consideration......................................        45
  Effective Time of the Merger..............................        45
  Management and Operations After the Merger................        45
  Interests of Certain Persons in the Merger................        45
  Resale of HA-LO Shares....................................        45
  Accounting Treatment......................................        46
  New York Stock Exchange Listing...........................        46
  Material Federal Income Tax Consequences..................        46

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                                                                [Download Table]
                                                                      
  Regulatory Approvals......................................        47

DESCRIPTION OF THE CONVERTIBLE PREFERRED STOCK..............        48

ASSUMPTION OF OUTSTANDING STARBELLY.COM OPTIONS.............        51
  Introduction..............................................        51
  Plan Summary..............................................        51
  Certain Tax Matters.......................................        54

COMPARATIVE MARKET PRICE DATA...............................        55

THE MERGER AGREEMENT........................................        56
  Closing Of The Merger.....................................        56
  Consideration to be Received in the Merger................        56
  Terms Of The Merger.......................................        57
  Other Covenants and Agreements............................        59
  Termination of the Merger Agreement.......................        60
  Termination Fees..........................................        61
  Indemnification...........................................        61
  Amendment and Waiver......................................        62
  Other Agreements Related to the Merger Agreement..........        62

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL                      
  INFORMATION...............................................        65
  HA-LO and Starbelly.com Pro Forma Combined Condensed                
    Financial Statements....................................        65

STARBELLY.COM SELECTED HISTORICAL FINANCIAL DATA............        69

STARBELLY.COM MANAGEMENT'S DISCUSSION AND ANALYSIS OF                 
  FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............        70
  Overview..................................................        70
  Results of Operations.....................................        70
  Liquidity and Capital Resources...........................        71
  Recently Issued Accounting Pronouncements.................        71

THE BUSINESS OF STARBELLY...................................        72
  General...................................................        72
  Distribution Channels.....................................        72
  Order Fulfillment.........................................        73
  Advantages to Starbelly.com's Marketplace Solutions.......        74
  Product Categories and Brands.............................        75
  Technology................................................        76
  Sales and Marketing.......................................        76
  Customers.................................................        77
  Competition...............................................        77
  Other Information.........................................        77

YOUR BOARD OF DIRECTORS AFTER THE MERGER....................        77
  Biographical Information on Brad and Eric.................        78

STOCK OWNERSHIP.............................................        78

PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF                       
  INCORPORATION TO INCREASE AUTHORIZED CAPITAL STOCK........        79

PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF                       
  INCORPORATION RELATING TO THE ISSUANCE OF CONVERTIBLE               
  PREFERRED STOCK...........................................        81

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                                                                [Download Table]
                                                                      
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS..................        82

WHERE TO FIND MORE INFORMATION..............................        82

EXHIBIT A...................................................       A-1
EXHIBIT B...................................................       B-1
EXHIBIT C...................................................       C-1
EXHIBIT D...................................................       D-1
EXHIBIT E...................................................       E-1

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QUESTIONS AND ANSWERS ABOUT THE MERGER

1.  AS A HA-LO SHAREHOLDER, WHAT DO I NEED TO DO NOW?                           

 After carefully reading and considering the information contained in this
document, please complete and sign your proxy card. Then mail your signed proxy 
card in the enclosed return envelope as soon as possible so that your shares may
be represented at the special meeting and voted as you wish.                    

2.  IF MY HA-LO SHARES ARE HELD IN "STREET NAME" BY MY BROKER OR BANK, WILL IT  
VOTE MY SHARES FOR ME?                                                  

  Your broker or bank will vote your shares only if you provide instructions
on how to vote. You should contact your broker and ask what directions your     
broker will need from you. Your broker will not be able to vote your shares     
without instructions from you.                                                  

3.  CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?              

 Yes. You can change your vote at any time before your shares are voted at
the special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new, later dated proxy card. If you choose either of these
two methods, you must submit your notice of revocation or your new proxy card to
HA-LO at the address given below. Third, you can attend the HA-LO special       
meeting and vote in person. Simply attending the meeting, however, will not     
revoke your proxy. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change your vote.                

4.  AS A HA-LO SHAREHOLDER, SHOULD I SEND IN MY SHARE CERTIFICATES?             

No. HA-LO shareholders will keep their existing share certificates.     

5.  WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?                              

   We are working to complete the merger as quickly as possible and expect the
merger to be completed promptly following the special meeting.                  

6.  WHERE CAN I FIND MORE INFORMATION ABOUT HA-LO?                              

  You may obtain additional information about HA-LO by calling or writing to
us or you may obtain documents through the Internet. See "Where To Find More    
Information" on page 82.                                                        

7.  WHAT DO I DO IF I DECIDE TO EXERCISE DISSENTERS' RIGHTS?                    

Each HA-LO shareholder is permitted to exercise dissenters' rights with 
respect to the merger. For information regarding how to exercise dissenters'    
rights, see the section "The Special Meeting, Voting and Proxies--Dissenters'   
Rights" on page 32.                                                             

8.  WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT THE MEETING OR THE MERGER?      

If you would like additional information, you should contact:           

HA-LO Industries, Inc.                                                  
5980 Touhy Avenue                                                       
Niles, Illinois 60714                                                   
Attention: Gregory J. Kilrea, Chief Financial Officer                   
(847) 647-2300                                                          

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SUMMARY OF PROXY STATEMENT

   THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE      
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE      
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS        
REFERRED TO IN "WHERE YOU CAN FIND MORE INFORMATION" (PAGE 82). WE HAVE ATTACHED
THE MERGER AGREEMENT AS EXHIBIT A TO THIS DOCUMENT. WE ENCOURAGE YOU TO READ THE
MERGER AGREEMENT. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER. THE PAGE    
REFERENCES BELOW WILL DIRECT YOU TO FURTHER INFORMATION IN THIS DOCUMENT        
REGARDING THE TOPIC COVERED UNDER THAT CAPTION.                                 

THE COMPANIES                                                                   

HA-LO                                                                           

HA-LO is a full service, innovative brand marketing organization whose  
diverse marketing disciplines, or competency groups, are centered around its    
client's brands. Brand marketing builds the value of the brand by connecting it 
with target audiences to achieve strategic marketing objectives.                

Our competency groups are organized into three operating segments:      
promotional products, marketing services and telemarketing. The marketing       
services segment is further divided into promotion marketing, brand strategy and
identity, presence marketing and consumer event marketing segments or divisions.
Each one of the segments has similar products and services, production          
processes, types of customers, distribution methods and regulatory environments.

Our competency groups include:                                          

PROMOTIONAL PRODUCTS, offered by HA-LO, physically connect brands with  
identified target markets and individuals through repeated exposure to          
merchandise that builds brand awareness, enhances brand recognition and creates 
brand loyalty.                                                                  

PROMOTION MARKETING, offered by UPSHOT, a subsidiary of HA-LO, connects 
brands with consumers at strategic points of contact through consumer and retail
promotion, merchandising and sponsorship activation.                            

BRAND STRATEGY AND IDENTITY, offered by LAGA, a subsidiary of HA-LO,    
connects a company product, service or image with a target audience by creating,
revitalizing, or leveraging a brand through brand identity, design, and         
integrated communication programs.                                              

  PRESENCE MARKETING, offered by our HA-LO Sports & Entertainment and Events
By HA-LO divisions, connects brands with target audiences through sports and    
corporate sponsorships, licensing, corporate meetings, events and sales         
incentive programs.                                                             

 RELATIONSHIP MARKETING, offered by UPSHOT and Market USA, subsidiaries of
HA-LO, connects brands with target audiences through consumer events--including 
new product sampling and brand awareness programs--and through a range of       
telemarketing services.                                                         

  HA-LO's principal executive offices are located at 5980 West Touhy Avenue,
Niles, Illinois 60714, and its telephone number at that address is              
(847) 647-2300.                                                                 

STARBELLY.COM (PAGE 72)                                                         

 Starbelly.com intends to create a leading business to business e-commerce
marketplace for the custom-decorated merchandise industry. Starbelly.com is     
attempting to redefine the traditional market for customized soft and hard goods
with an interactive marketplace that allows its customers to customize          
decorations on any product in real-time from any Internet web browser.          

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    Starbelly.com unifies key aspects of the custom-decorated merchandise supply
chain through integrated and automatic fulfillment systems. These systems are   
being developed to act together as a single efficient interface between the     
end-user and the other elements of the supply chain, such as suppliers of       
undecorated merchandise (which are referred to in the industry as "blanks"),    
decorators, customer service representatives, offsite production and shippers.  
Starbelly.com eliminates several links in the traditional supply chain,         
providing its customers with substantially improved convenience, a simplified   
customizing and ordering process, faster delivery, status tracking, lower costs 
and enhanced customer experience.                                               

   Once fully-operational, Starbelly.com's centralized marketplace is expected
to provide a wide range of business and consumer channels using a single        
electronic point of contact to access a large database of soft and hard goods   
offered by branded manufacturers. Starbelly.com's four target market channels   
are:                                                                            

- the "BUSINESS-TO-BUSINESS" market, where Starbelly.com's business     
      customers can set up customizable virtual storefronts carrying merchandise
they select and purchase through Starbelly.com;                     

    - the "INTERNET PROPERTIES" market, where Starbelly.com provides third-party
Internet websites such as Internet portals with virtual storefronts 
offering merchandise with the third parties' own logos and brands;  

- the "PROMOTIONAL PRODUCT DISTRIBUTION" market, comprised of 17,000    
businesses which sell and distribute promotional products, to whom  
Starbelly.com will offer an Internet presence and Starbelly.com's   
fulfillment system; and                                             

   - the "BUSINESS-TO-CONSUMER" market, where consumers will be able to access
  the Starbelly.com website to interactively design, customize and order
products.                                                           

ABOUT THE SPECIAL MEETING (PAGE 30)                                             

   The special meeting is scheduled to be held at 10:00 a.m., Chicago time, on
  , March   , 2000, at Harris Bank, Room       , 111 W. Monroe Street,
Chicago, Illinois. January 28, 2000 is the record date for determining the      
holders of HA-LO common stock entitled to vote at the special meeting. On the   
record date, [48,724,790] shares of HA-LO common stock were outstanding and     
entitled to vote.                                                               

   At the special meeting, you will consider and vote on proposals to approve:

   (1) the merger, including (a) issuance of 17 million shares of HA-LO common
     stock in the merger and upon exercise of options assumed in the merger;
(b) an amendment to Article Four of the Company's articles of     
       incorporation to permit the issuance of 5.1 million shares of convertible
       preferred stock in the merger and upon the exercise of options assumed in
       the merger; (c) the reservation of 5.1 million shares of common stock for
      issuance upon conversion of the convertible preferred stock; and (d) the
adoption of a new stock option plan under which HA-LO will assume 
      Starbelly.com's stock option plan and the options outstanding under that
plan;                                                             

   (2) an amendment to the Company's articles of incorporation to increase the
number of shares of common stock HA-LO is authorized to issue from
100 million to 250 million and to increase the number of shares of
      convertible preferred stock HA-LO is authorized to issue from 10 million
to 20 million;                                                    

(3) an amendment to the Company's articles of incorporation to authorize
       your board of directors to provide for the future issuance of convertible
       preferred stock without the further approval of the holders of our common
stock; and                                                        

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   (4) such other business as may properly come before the special meeting and
any postponements and adjournments thereof.                       

THE HA-LO BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE MERGER AND THE    
OTHER PROPOSALS (PAGE 37)                                                   

  YOUR BOARD OF DIRECTORS, BY A UNANIMOUS VOTE, HAS APPROVED AND ADOPTED THE
MERGER AGREEMENT AND THE OTHER PROPOSALS TO BE CONSIDERED AT THE MEETING. THE   
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AND THE  
OTHER PROPOSALS. WE CANNOT COMPLETE THE MERGER UNLESS IT IS APPROVED BY HA-LO'S 
SHAREHOLDERS.                                                                   

  THE BOARD OF DIRECTORS AND THE STOCKHOLDERS OF STARBELLY.COM HAVE APPROVED
THE MERGER.                                                                     

VOTES NECESSARY TO APPROVE THE MERGER AND THE OTHER PROPOSALS (PAGE 31)         

   Approval of the merger of Starbelly.com and HA-LO's wholly owned subsidiary
and each of the other proposals to be considered at the meeting requires the    
affirmative vote of a majority of the outstanding shares of HA-LO common stock. 
Broker non-votes and abstentions will count as votes cast AGAINST each of the   
proposals.                                                                      

Each HA-LO shareholder has one vote per share on each proposal.         

THE MERGER (PAGE 35)                                                            

   The merger agreement provides for the merger of Starbelly.com with and into
our merger subsidiary, as a result of which our merger subsidiary will survive  
the merger under the new name "Starbelly.com, Inc." and Starbelly.com will cease
its separate existence. However, the parties are permitted under the merger     
agreement to restructure the merger so that Starbelly.com survives the merger   
and our merger subsidiary ceases its separate existence.                        

CONSIDERATION TO BE RECEIVED IN THE MERGER                                      

If we complete the merger, Starbelly.com stockholders will receive      
approximately $240 million, which amount we will pay as follows:                

(1) paying $19 million in cash (less Starbelly.com's merger expenses in excess  
of $500,000);                                                           

(2) paying the balance by issuing shares of:                                    

(a) HA-LO common stock valued at $170 million; and                      

(b) HA-LO preferred convertible stock valued at $51 million.            

This includes shares issuable upon exercise of Starbelly.com's outstanding stock
options, which will be assumed by HA-LO and will be exercisable for HA-LO       
convertible preferred stock and HA-LO common stock.                             

SHARE ISSUANCE AND OWNERSHIP                                                    

 We will issue in the merger and reserve for issuance upon exercise of the
assumed stock options 17 million shares of our common stock and 5.1 million     
shares of our preferred stock.                                                  

You will continue to own your shares after the merger.                  

Immediately after the merger, pre-merger shareholders of HA-LO will own 
approximately 69% of the outstanding common stock, and the former stockholders  
of Starbelly.com will own approximately 31% of the outstanding common stock     
(assuming all of the preferred shares are converted into                        

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common stock and all assumed options are exercised and all preferred shares     
issued upon exercise are converted into common stock).                          

  We will account for the merger as a purchase of Starbelly.com as described
under "The Merger--Accounting Treatment" (page 46).                             

REASONS FOR THE MERGER (PAGE 37)                                                

    Your board of directors has identified numerous benefits HA-LO may expect to
result from the merger, including the following:                                

  - position HA-LO to capitalize on expanding e-commerce markets, especially
Internet- or intranet-based business-to-business markets;           

- enhance HA-LO's customer service;                                     

- rapidly expand, through electronic linkage, HA-LO's offering of       
customizable blank products and pre-designed decorations;           

- increase HA-LO's productivity;                                        

   - build HA-LO's brand recognition in e-commerce markets while enhancing our
reputation as an agent of change and a business leader;             

   - build HA-LO's promotional products customer base while encouraging repeat
business from existing customers;                                   

- reduce HA-LO's costs to market and fulfill orders for custom-decorated
promotional products;                                               

- infuse HA-LO's organization with new talent and cultural change; and  

 - increase HA-LO's pricing and marketing flexibility for custom-decorated
promotional products.                                               

In addition to the factors described above, your board of directors also
considered the following negative factors relating to the merger:               

- the challenges inherent in combining our operations with those of     
     Starbelly.com, including the radical departure from our existing business
  model and managing potential conflicts in the business cultures of our
companies;                                                          

 - the status of Starbelly.com's technology, some of which is still in the
developmental stage and therefore may not function as expected;     

- the potential departure of sales force personnel;                     

 - the potential of our competitors aggressively recruiting our employees;

  - our need to borrow funds to pay the cash portion of merger consideration
and merger expenses, provide working capital to fund Starbelly.com's
future operations and pay the redemption price of the convertible   
preferred stock if holders exercise their redemption rights; and    

- the dilution of our shareholders' voting interest.                    

GRANT OF REGISTRATION RIGHTS TO THE STARBELLY.COM STOCKHOLDERS (PAGE 63)        

  We will register for resale, in four steps, the shares of our common stock
received by the Starbelly.com stockholders in the merger and the shares of our  
common stock issuable to the Starbelly.com stockholders upon their conversion of
convertible preferred stock. We will register 25% of these shares within ten    
days after completion of the merger, an additional 15% within three months after
completion of the merger, an additional 33 1/3% of these shares within nine     
months after                                                                    

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completion of the merger and the remaining shares within two years after        
completion of the merger. In addition to registration on this schedule, we are  
required to register any shares of our common stock issuable upon conversion of 
our convertible preferred stock by Chase Venture Capital Associates, L.P., or   
any of its affiliates, within 30 days after notice of its conversion, to the    
extent not already registered.                                                  

We will also register for issuance the shares of common and convertible 
preferred stock issuable upon exercise of the Starbelly.com stock options that  
we are assuming in the merger and the shares of common stock issuable upon      
conversion of the convertible preferred stock.                                  

AVAILABILITY OF DISSENTERS' RIGHTS (PAGE 32)                                    

  You will be entitled to exercise dissenters' rights in accordance with the
Illinois Business Corporation Act of 1983, as amended (the "IBCA"). In order to 
exercise dissenters' rights, you must:                                          

- deliver to HA-LO, before the vote is taken at the special meeting, a  
 written demand for payment of you shares of HA-LO common stock if the
merger is completed;                                                

- NOT vote in favor of the proposal to merge Starbelly.com and HA-LO's  
wholly owned subsidiary; and                                        

  - comply with the other requirements contained in Sections 11.65 and 11.70
of the IBCA. See "The Special Meeting--Dissenters' Rights."         

  Under the Delaware General Corporation Law, Starbelly.com stockholders are
entitled to exercise appraisal rights, and receive the "fair value" of their    
Starbelly.com shares. Under Delaware law, the Delaware Court of Chancery would  
make any determinations of "fair value" for Starbelly.com stockholders          
exercising appraisal rights. However, Starbelly.com stockholders having         
approximately 94% of the stockholder voting power have already approved the     
merger and have granted irrevocable proxies to two of our executive officers so 
that these stockholders cannot revoke their approval before the merger closes   
(unless the merger agreement is earlier terminated and except as Delaware law   
may otherwise require revocation of proxies). Accordingly, appraisal rights will
not be available to these persons.                                              

OPINION OF FINANCIAL ADVISOR TO HA-LO (PAGE 39)                                 

HA-LO's financial advisor, Credit Suisse First Boston, has delivered a  
written opinion to the HA-LO board of directors as to the fairness, from a      
financial point of view, of the aggregate merger consideration of $240,000,000. 
The full text of Credit Suisse First Boston's written opinion is attached to    
this document as Exhibit B. We encourage you to read this opinion carefully in  
its entirety for a description of the procedures followed, assumptions made,    
matters considered and limitations on the review undertaken. Credit Suisse First
Boston's opinion is directed to the HA-LO board of directors and does not       
constitute a recommendation to any shareholder as to any matter relating to the 
merger.                                                                         

LOANS TO STARBELLY.COM                                                          

 On January 6, 2000, while negotiating the merger agreement but before the
merger agreement was signed, we loaned Starbelly.com $5 million on an unsecured 
basis, and, upon signing the merger agreement, we extended Starbelly.com an     
additional unsecured $5 million loan. Under the merger agreement, we have agreed
to loan Starbelly.com up to an additional $10 million, depending upon when the  
merger is completed. If we do not complete the merger by March 1, 2000, we will 
extend Starbelly.com an unsecured $5 million loan, and if we do not complete the
merger by April 1, 2000, we will extend Starbelly.com another unsecured         
$5 million loan. These loan amounts are not part of the merger consideration,   
although under certain circumstances (1) Starbelly.com may not be required to   
pay back all or a portion of these loans if we become obligated to pay          
Starbelly.com termination fees,                                                 

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and (2) the maturity dates of the loans may be accelerated if we properly       
terminate the merger agreement. See "HA-LO Loans to Starbelly.com" (page 64).   

CONDITIONS THAT MUST BE MET TO COMPLETE MERGER (PAGE 52)                        

HA-LO and Starbelly.com will not complete the merger unless a number of 
conditions are satisfied or, if permitted, waived by them. These include:       

 1.  HA-LO shareholders must approve the merger, including the issuance of
HA-LO shares to the Starbelly.com stockholders;                   

2.  There must be no law, regulation or order preventing the merger;    

3.  The New York Stock Exchange must approve the shares of HA-LO common 
      stock issuable in the merger for listing on the New York Stock Exchange;
and                                                               

 4.  Consents and approvals from all third parties, including governmental
entities, have been received.                                     

EVENTS THAT ALLOW TERMINATION OF THE MERGER AGREEMENT (PAGE 60)                 

    HA-LO and Starbelly.com mutually can agree to terminate the merger agreement
at any time without completing the merger. In addition, the merger agreement may
be terminated if:                                                               

  - Starbelly.com has breached the merger agreement and the damages we would
  suffer as a result would reasonably be expected to exceed $14 million;

   - we have breached the merger agreement and the damages Starbelly.com would
  suffer as a result would reasonably be expected to exceed $40 million;

 - any final decision of a governmental authority prohibits concluding the
merger;                                                             

  - our shareholders fail to approve the merger at the special meeting or if
the merger is not completed by April 15, 2000 (or April 29, 2000, if
either we or Starbelly.com requests an extension);                  

- we have not, by February 28, 2000, provided evidence reasonably       
satisfactory to Starbelly.com that we have a working capital credit 
  facility with substantially the same terms as our current facility; or

   - because of your board of directors' fiduciary duties to our shareholders,
your board acts upon a proposal to enter into certain business      
combinations with someone other than Starbelly.com.                 

TERMINATION FEES (PAGE 61)                                                      

We have agreed to pay Starbelly.com for up to $500,000 of merger-related
expenses incurred by Starbelly.com and its stockholders, plus their actual      
damages up to a maximum of $10 million, if (1) our shareholders do not approve  
the merger, (2) we cannot provide evidence by February 28, 2000 that we have a  
credit facility substantially similar to our current facility, or (3) if your   
board of directors acts on a third-party proposal to enter into a business      
combination with someone other than Starbelly.com. We have also agreed that we  
will reimburse Starbelly.com for up to $500,000 of its expenses related to the  
merger agreement if Starbelly.com terminates the agreement because we materially
breach it. If, however, our breach were to be in bad faith, we would also be    
liable to Starbelly.com for its actual damages, up to a maximum of $10 million. 

   Starbelly.com has agreed to reimburse us for up to $500,000 of our expenses
related to the merger agreement if we terminate the merger agreement because    
Starbelly.com materially breaches it. In addition, Starbelly.com would be       
required to pay us, within six months, all amounts outstanding under            

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the loans we have extended to Starbelly.com. If, however, Starbelly.com's breach
were to be in bad faith, Starbelly.com would also be liable to us for our actual
damages, up to a maximum of $10 million, and Starbelly.com would be immediately 
required to pay us all amounts outstanding under the loans we have extended.    

REGULATORY APPROVALS (PAGE 47)                                                  

    [UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED,
THE MERGER CANNOT BE COMPLETED UNTIL BOTH COMPANIES, AS WELL AS STARBELLY.COM'S 
[THREE] LARGEST STOCKHOLDERS, HAVE GIVEN CERTAIN INFORMATION AND MATERIALS TO   
THE FEDERAL TRADE COMMISSION AND DEPARTMENT OF JUSTICE AND A REQUIRED WAITING   
PERIOD HAS EXPIRED OR BEEN TERMINATED. THE COMPANIES SUBMITTED PRE-MERGER       
NOTIFICATION AND REPORT FORMS DURING THE WEEK OF FEBRUARY       , 2000 AND      
RECEIVED NOTIFICATION OF EARLY TERMINATION OF THE WAITING PERIOD ON FEBRUARY    
, 2000.]                                                            

DESCRIPTION OF THE CONVERTIBLE PREFERRED STOCK (PAGE 48)                        

If the merger is completed, as part of the merger consideration, we will
issue 5.1 million shares of convertible preferred stock in the merger and upon  
exercise of the assumed Starbelly.com stock options. The convertible preferred  
stock ranks senior to the Company's common stock, and in parity with or senior  
to all other existing and future classes of our capital stock and series of     
convertible preferred stock. Preferred shareholders can vote on all matters on  
which the holders of the Company's common stock are entitled to vote. Each share
of convertible preferred stock will have the number of votes equal to the number
of shares of common stock then issuable upon conversion of such shares. Each    
share of convertible preferred stock will be convertible initially into one     
share of our common stock at any time before redemption. However, if the average
closing price of the Company's common stock equals or exceeds $24 for ten       
consecutive trading days, the convertible preferred stock will automatically    
convert into common stock at the then effective conversion ratio. The holders of
convertible preferred stock can require us to redeem all or any number of their 
shares at a cash price of $10 per share, plus any accrued and unpaid dividends. 

ASSUMPTION OF STOCK OPTIONS (PAGE 51)                                           

As of January 24, 2000, options to purchase 2,530,084 shares of         
Starbelly.com common stock were outstanding, and options to purchase an         
additional 574,916 shares may still be granted. Under its stock option plan, and
before we complete the merger, Starbelly.com may grant options to purchase up to
an aggregate of 3,500,000 shares of its common stock, of which 395,000 shares   
have already been issued upon option exercises. The merger agreement provides   
that as of the effective date of the merger HA-LO will assume Starbelly.com's   
outstanding stock options. Therefore, a vote in favor of the merger also        
constitutes a vote in favor of the adoption by HA-LO of a new stock option plan 
under which HA-LO will assume Starbelly.com's outstanding options.              

AMENDMENT TO OUR ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED SHARES (PAGE  
79)                                                                         

The board of directors unanimously recommends that Article Four of our  
articles of incorporation be amended to increase the number of shares of our    
common stock HA-LO is authorized to issue from 100 million to 250 million and to
increase the number of shares of convertible preferred stock that HA-LO is      
authorized to issue from 10 million to 20 million. If approved, the increased   
number of authorized shares of common stock will be available for us to issue   
from time to time without further vote of our shareholders, except as required  
under Illinois law or the rules of the stock exchange where our common stock is 
traded. (Similarly, if the matters relating to convertible preferred stock      
issuance described in the next paragraph are approved, the increased number of  
authorized shares of convertible preferred stock will be available for us to    
issue from time to time without further vote of our shareholders, except as     
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common stock is traded.) As of January 28, 2000, [48,724,790] shares of our     
common stock were issued and outstanding. If the merger is approved, this number
will increase to [68,226,651] shares when we issue our common stock in the      
merger and upon exercise of stock options assumed in the merger and to          
[70,824,790] shares if all of the preferred shares issued in the merger and upon
exercise of assumed options were each to be converted into common stock. If the 
merger is approved, an aggregate 5.1 million shares of convertible preferred    
stock will be issued in the merger or reserved for issuance upon exercise of    
stock options assumed in the merger. The board of directors believes that the   
proposed authorized share increase will ensure that the Company has a sufficient
number of preferred shares authorized to allow it to act upon transactions that 
may be proposed in the future. If the merger is approved, the merger will be    
completed even if this proposal to amend our articles of incorporation is not   
approved.                                                                       

AMENDMENT TO OUR ARTICLES OF INCORPORATION TO AUTHORIZE THE BOARD TO ISSUE      
CONVERTIBLE PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL (PAGE 81)          

While the board of directors is authorized to establish the terms of any
convertible preferred stock the Company proposes to issue, the articles of      
incorporation require that the board determine the liquidation and dividend     
rights of convertible preferred stock to be issued as a class by filing articles
of amendment to the articles of incorporation. However, the adoption of an      
amendment to the articles of incorporation requires the approval of the         
Company's shareholders. In order to provide the board of directors with greater 
flexibility in establishing the terms of any convertible preferred stock the    
Company proposes to issue in the future and avoid delays which would result from
obtaining shareholder approval prior to issuing any convertible preferred stock,
the board of directors recommends that our articles of incorporation be amended 
to authorize the board of directors to provide for the issuance of convertible  
preferred stock without the approval of the Company's shareholders. If the      
merger is approved, the merger will be completed even if this proposal to amend 
our articles of incorporation is not approved.                                  

YOUR BOARD OF DIRECTORS AFTER THE MERGER (PAGE 77)                              

 At the time of the merger, your board of directors will be increased from
eight to eleven directors. All eight persons who are members of your board of   
directors immediately before the merger will continue to serve as directors     
immediately after the merger. Immediately following the merger and continuing   
until the next shareholder's meeting convened to elect directors, certain       
representatives of pre-merger stockholders of Starbelly.com will each have a    
right to designate persons whom your board will place in the three vacancies    
created by the board expansion. Under this arrangement, Bradley Keywell,        
Starbelly.com's chief executive officer, is entitled to designate one person to 
fill a vacancy on the HA-LO board of directors until the next meeting of        
shareholders convened to elect directors. Under a three-year employment         
agreement we have agreed to enter into with Mr. Keywell at the merger closing,  
for so long as Mr. Keywell's employment agreement is in effect, he will have a  
right to request the board of directors to nominate his designee, and if he does
so, our management (within legal limits) is required to present such designee to
our shareholders as a nominee for election. We have agreed to a similar         
arrangement with Mr. Lefkofsky, except Mr. Lefkofsky is entitled to designate   
two persons to fill vacancies on the HA-LO board of directors until the next    
meeting of shareholders convened to elect directors. Also under a three-year    
employment agreement we have agreed to enter into with Mr. Lefkofsky when we    
complete the merger, for so long as Mr. Lefkofsky's employment agreement is in  
effect, he will have the right to request the board of directors to nominate and
present two designees for election by our shareholders.                         

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LIMITS ON FORWARD-LOOKING STATEMENTS (PAGE 28)                                  

   This document contains forward-looking statements that are subject to risks
and uncertainties. Forward-looking statements include the information concerning
possible or assumed future results of operations of HA-LO, Starbelly.com and the
combined company as well as statements preceded by, followed by or that include 
the words "believes," "expects," "anticipates," "intends," or similar           
expressions. You should understand that important factors, in addition to those 
discussed elsewhere in this document and in the documents that are incorporated 
herein by reference, could affect the future results of the combined companies  
and could cause those results to differ materially from those expressed in our  
forward-looking statements.                                                     

RISK FACTORS                                                                    

Before deciding how to vote at the special meeting, you should carefully
review "Risk Factors" on page 15.                                               

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SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION                               

The following table presents summary unaudited pro forma financial      
information derived from the Unaudited Pro Forma Combined Condensed Financial   
Statements included elsewhere in this proxy statement and has been presented    
assuming the merger will be accounted for as a purchase business combination.   
The Unaudited Pro Forma Condensed Combined Financial Statements do not purport  
to present the financial position or results of operations of HA-LO had the     
transaction and events assumed therein occurred on the date specified, nor are  
they necessarily indicative of the results of operations that may be achieved in
the future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in HA-LO's Annual Report on Form 10-K, which is
incorporated by reference, "Starbelly.com's Management's Discussion and Analysis
of Financial Condition and Results of Operations" (page 70) and "HA-LO and      
Starbelly.com Pro Forma Combined Condensed Financial Statements" (page 65)      
included in this proxy statement.                                               

HA-LO AND STARBELLY.COM SUMMARY PRO FORMA FINANCIAL INFORMATION 
(in thousands, except per share amounts)

                                                                [Download Table]

                                                                    NINE MONTHS    
                                                YEAR ENDED             ENDED       
                                           DECEMBER 31, 1998(1)  SEPTEMBER 30, 1999
                                           --------------------  ------------------
                                                                    (UNAUDITED)    
                                                                                   
PRO FORMA STATEMENT OF OPERATIONS                                                  
  (UNAUDITED):(2)                                                                  
  Net sales...............................       $589,669             $464,767     
  Net income (loss).......................         24,750              (44,012)    
  Pro forma net income (loss)(3)..........         24,520                  N/A     
  Pro forma earnings (loss) per share                                              
    (diluted).............................           0.53                (0.67)    

                                                                [Download Table]

                                                              SEPTEMBER 30, 1999
                                                              ------------------
                                                                 (UNAUDITED)    
                                                                                
PRO FORMA BALANCE SHEET DATA:(2)                                                
  Total assets..............................................       $577,087     
  Working Capital...........................................        148,121     
  Long-term debt, net of current portion....................         28,900     
  Redeemable Convertible preferred stock....................         51,000     
  Shareholders' equity......................................        380,285     

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

(1) Starbelly.com commenced operations on March 22, 1999. Therefore, financial  
   information for periods prior to this date does not exist for Starbelly.com
(and the pro forma data only includes Starbelly.com results for this    
   less-than-9-month period), and the financial information for the year ended
December 31, 1998 reflects HA-LO data only.                             

(2) The unaudited pro forma combined financial data presented (a) may not       
  indicate the results that would have been obtained had the merger actually
  occurred on the date assumed, (b) is based on preliminary estimates of the
fair value of the net assets to be acquired and certain assumptions     
management deems appropriate and (c) should be read in conjunction with 
 other historical and pro forma financial statements and the related notes
included elsewhere or incorporated by reference in this document.       

(3) Certain companies acquired and accounted for using the pooling-of-interests 
    accounting method had elected to be treated as subchapter S corporations and
were therefore not subject to federal income taxes prior to their       
acquisition by HA-LO. Pro forma net income and pro forma net            

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income per share amounts include an unaudited provision for federal and 
state taxes at an effective rate of 40%.                                

HA-LO SUMMARY SELECTED HISTORICAL FINANCIAL DATA                                

   The following tables set forth selected historical financial data and other
operating information for HA-LO for each of the fiscal years 1994 to 1998 and   
for the nine month periods ended September 30, 1998 and 1999. The selected      
financial information for each of the fiscal years has been derived from the    
Consolidated Financial Statements of HA-LO, which have been audited by Arthur   
Andersen LLP, independent auditors to HA-LO, and from the underlying accounting 
records of HA-LO. The selected financial information for the nine-month periods 
has been derived from unaudited consolidated financial statements of HA-LO and  
reflects all adjustments (consisting of normal recurring adjustments) that, in  
the opinion of the management of HA-LO, are necessary for a fair presentation of
such information. Operating results for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for fiscal   
1999.                                                                           

All information contained in the following tables should be read in     
conjunction with "Management's Discussion and Analysis of Financial Condition   
and Results of Operations," "Unaudited Pro Forma Combined Condensed Financial   
Information" and the Consolidated Financial Statements and related notes of     
HA-LO incorporated by reference herein.                                         

HA-LO INDUSTRIES, INC.
(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]

                                                                                       NINE MONTHS ENDED  
                                              YEARS ENDED DECEMBER 31,                   SEPTEMBER 30     
                                ----------------------------------------------------  ------------------- 
                                  1994       1995       1996       1997       1998      1998       1999   
                                --------   --------   --------   --------   --------  --------   -------- 
                                                                                                          
HISTORICAL:                                                                                               

INCOME STATEMENT DATA:                                                                                    
  Net sales.................... $218,834   $310,116   $375,736   $465,721   $589,669  $413,722   $464,584 
  Net income(loss).............    9,195      7,309     10,092     15,458     24,750    14,976    (15,531)
  Pro forma net income(1)......    6,346      5,902      9,879     14,846     24,520    14,747        N/A 
  Pro forma net income (loss)                                                                             
    per share, diluted.........     0.19       0.17       0.25       0.36       0.53      0.32      (0.32)
  Weighted average shares                                                                                 
    outstanding, diluted.......   32,588     34,586     40,266     41,112     46,447    45,595     49,032 

BALANCE SHEET DATA (AT END OF                                                                             
  PERIOD):                                                                                                
  Total assets................. $ 92,141   $124,331   $147,063   $238,053   $347,017  $317,850   $354,616 
  Working capital..............   21,742     42,286     60,706     78,741    162,751   158,217    142,602 
  Long-term debt, net of                                                                                  
    current portion............   14,917     13,263     29,863     44,930         --     1,660      5,900 
  Shareholders' equity(2)......   24,414     52,091     62,032     85,473    235,491   224,540    233,714 

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

(1) Certain companies acquired and accounted for using the pooling-of-interests 
    accounting method had elected to be treated as subchapter S corporations and
were therefore not subject to Federal income taxes prior to their       
 acquisition by the Company. Pro forma net income and pro forma net income
    per share amounts include an unaudited provision for Federal and state taxes
at an effective rate of 40%.                                            

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(2) Includes cash dividends of $5,088,000, $7,761,000, $6,887,000, $5,296,000   
 and $11,518,000, declared by acquired companies in 1994, 1995, 1996, 1997
and 1998, respectively, prior to HA-LO's acquisition of such companies. 

STARBELLY.COM SUMMARY SELECTED HISTORICAL FINANCIAL DATA                        

  For Starbelly.com's selected historical financial data and other operating
information for period from inception, March 22, 1999, through September 30,    
1999, see "Starbelly.com Selected Historical Financial Data" (page 69).         

UNAUDITED COMPARATIVE PER SHARE DATA                                            

 The following table sets forth certain historical per share data of HA-LO
and Starbelly.com and combined per share data on an unaudited pro forma basis,  
based on the assumption that the merger occurred on March 22, 1999 (date of     
inception of Starbelly.com) and was accounted for using the purchase method of  
accounting. The pro forma comparative per share data has been adjusted to give  
effect to the issuance in the merger of 17 million shares of common stock and   
5.1 million shares of convertible preferred stock, assuming exercise of all the 
assumed Starbelly.com stock options. The pro forma comparative share data does  
not purport to represent what HA-LO's financial position or results of operation
would actually have been had the merger occurred at the beginning of the        
earliest period presented or to project HA-LO's financial position or results of
operation for any future date or period. This data should be read in conjunction
with the "Unaudited Pro Forma Combined Condensed Financial Information" and the 
Consolidated Financial Statements and related notes of HA-LO included or        
incorporated by reference herein and the Financial Statements and related notes 
of Starbelly.com included elsewhere herein.                                     

                                                        [Enlarge/Download Table]

                                                                       AS OF AND FOR THE           
                                                             --------------------------------------
                                                                                    NINE MONTHS    
                                                                YEAR ENDED             ENDED       
                                                             DECEMBER 31, 1998   SEPTEMBER 30, 1999
                                                             -----------------   ------------------
                                                                                                   
EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS--                                             
BASIC(3)                                                                                           
  Historical HA-LO..........................................       $0.55               $(0.32)     
  Historical Starbelly.com..................................         N/A               $(0.15)     
  Pro forma combined(5).....................................       $0.55               $(0.67)     

DILUTED                                                                                            
  Historical HA-LO..........................................       $0.53               $(0.32)     
  Historical Starbelly.com..................................         N/A               $(0.15)     
  Pro forma combined(5).....................................       $0.53               $(0.67)     

BOOK VALUE PER SHARE                                                                               
  Historical HA-LO(2).......................................       $4.93               $ 4.80      
  Historical Starbelly.com(2)...............................          --               $ 0.40      
  Pro forma combined(5).....................................       $4.93               $ 5.79      

DIVIDENDS PER SHARE                                                                                
  Historical HA-LO(1).......................................          --                   --      
  Historical Starbelly.com..................................          --                   --      
  Pro forma combined(4) (5).................................          --                   --      

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

(1) Excludes dividends of $11,518,000 paid by an acquired company (accounted for
   a pooling-of-interest) to its shareholders in 1998 prior to its acquisition
by HA-LO                                                                

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(2) The historical book value per common share is computed by dividing          
   shareholders' equity by the number of shares of common stock outstanding at
the end of each period.                                                 

(3) The unaudited pro forma earnings (loss) per common share is based upon the  
  weighted average number of common and common equivalent shares outstanding
for each period plus common shares to be issued in the acquisition.     

(4) There are no pro forma cash dividends per share as HA-LO does not intend to 
pay cash dividends in the foreseeable future.                           

(5) The equivalent pro forma amounts are determined by multiplying the pro forma
combined earnings (loss) per share from continuing operations, pro forma
   combined book value per share and pro forma combined dividends per share by
the merger exchange ratio.                                              

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RISK FACTORS

  When deciding how to vote on the merger, you should consider carefully all
of the information contained in this document, including the following factors  
which relate to the merger and to the combined businesses of HA-LO and          
Starbelly.com. All of the identified risks can be substantial and many of such  
risks could materially and adversely affect HA-LO's results of operations,      
financial condition, business and prospects, as well as the market price of our 
common stock.                                                                   

RISKS RELATED TO THE MERGER                                                     

UNCERTAINTIES IN ACHIEVING BENEFITS OF MERGER AND INTEGRATING THE BUSINESSES    

    We cannot assure you that we will realize any of the anticipated benefits of
the merger. Whether we achieve these benefits will depend in part upon our      
ability to integrate our businesses in an efficient manner. We cannot be certain
that this will occur. To achieve the merger benefits, we will incur significant 
costs, expend significant capital and fund substantial anticipated Starbelly.com
operating losses. Our costs could be higher than anticipated and we may have to 
expend additional capital and fund higher-than-expected operating losses to     
achieve the anticipated benefits of the merger.                                 

COMBINING THE COMPANIES COULD HAVE ADVERSE IMPACT                               

 The integration of our business and Starbelly.com's business will require
substantial attention from management. The diversion of management's attention  
and any difficulties encountered in the transition and integration process could
have a material adverse effect on the revenues, levels of expenses and operating
results of the combined company. For a discussion of other factors and          
assumptions related to estimated merger benefits. See "The                      
Merger--Recommendation of the HA-LO Board and Reasons for the Merger"           
(Page 37).                                                                      

MERGER COSTS MAY BE MORE THAN EXPECTED                                          

    We estimate that the direct costs of the merger will be from $4.0 million to
$4.5 million. These direct costs include $500,000 of direct merger costs for    
which we have agreed to reimburse Starbelly.com and Starbelly.com's stockholders
for their direct merger costs. These costs are not included in the unaudited pro
forma data appearing elsewhere in this proxy statement. We also estimate that we
will have to expend capital equal to approximately $13.0 million and fund       
estimated Starbelly.com operating losses of approximately $16.0 million during  
the twelve months following the merger to achieve the expected merger benefits  
referred to above. If these costs, capital expenditures or operating losses are 
higher than estimated, the merger benefits may be reduced or delayed.           

THE PRICE PER SHARE OF OUR COMMON STOCK AT THE EFFECTIVE TIME OF THE MERGER MAY 
BE GREATER THAN THE PRICE USED TO ESTABLISH THE EXCHANGE RATIO              

 Under the merger agreement, the exchange ratio establishing the number of
shares of HA-LO common stock and convertible preferred stock into which the     
Starbelly.com common stock will be converted is based on the lower of $10.00 or 
the average closing price of HA-LO common stock on the New York Stock Exchange  
for each trading day over a twenty-five day period consisting of the trading    
days during the fifteen calendar days prior to the execution of the merger      
agreement and the trading days during the ten calendar days following the       
execution of the merger agreement. Since this average closing price was $10.05, 
the number of shares of our common stock and our convertible preferred stock    
issuable in the merger was based on a $10.00 share price. Accordingly, it is    
possible that the market price of our common stock at the effective time of the 
merger will be higher than $10.00 per share. If this is the case, the value of  
the consideration to be received by Starbelly.com stockholders will be more than
the price on which the exchange ratio was based. The historical market prices of
our                                                                             

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common stock are included under "Comparative Market Price Data--HA-LO Common    
Stock" (page 55).                                                               

REDUCTION OF HA-LO SHAREHOLDERS' VOTING POWER; NEW MAJOR SHAREHOLDERS           

    The issuance of shares of HA-LO common stock and convertible preferred stock
in the merger and upon exercise of assumed options will substantially dilute the
voting interest of the current HA-LO shareholders. The convertible preferred    
stock will entitle the holders to one vote per share on all matters submitted to
holders of our common stock. These convertible preferred stock voting rights    
will dilute the voting power of our common stock shareholders. As a result of   
the merger, Starbelly.com stockholders will own approximately 31% of the voting 
power of HA-LO after the merger (including shares that may be issued upon       
conversion of our convertible preferred stock and exercise of all assumed       
options). Following the merger, (1) Coventry Partners Family Limited            
Partnership, of which Bradley Keywell is a beneficial owner, will have          
approximately       % of the voting power of HA-LO common stock and             
(2) Bloomfield Partners Family Limited Partnership, of which Eric Lefkofsky is a
beneficial owner, will have approximately       % of the voting power of HA-LO  
common stock. The voting power presented above assumes conversion of our        
convertible preferred stock and exercise of all the assumed Starbelly.com stock 
options.                                                                        

THE MERGER WILL HAVE AN IMPACT ON VOTING AND MANAGEMENT OF OUR COMPANY.         

    The parties have agreed that, at the closing of the merger, our by-laws will
be amended to increase the size of your board of directors from eight to eleven 
directors. Under the merger agreement, at the closing of the merger, Bradley    
Keywell, Starbelly.com's chief executive officer, and Eric Lefkofsky,           
Starbelly.com's president, are entitled to request for nomination that number of
directors to your board which is proportionate to the Starbelly.com             
stockholders' ownership of our common stock (assuming the conversion of our     
convertible preferred stock issued in the merger). Mr. Keywell is entitled to   
designate one person to fill a vacancy on the HA-LO board of directors until the
next meeting of shareholders convened to elect directors and Mr. Lefkofsky is   
entitled to designate two persons to fill vacancies on the HA-LO board of       
directors until the next meeting of shareholders convened to elect directors.   
Furthermore, under a three-year employment agreement we have agreed to enter    
into with Mr. Keywell at the merger closing, for so long as Mr. Keywell's       
employment agreement is in effect, he will have the right to request the board  
of directors to nominate his designee, and if he does so, our management (within
legal limits) is required to present such designee to our shareholders as a     
nominee for election. Also, under a three-year employment agreement we have     
agreed to enter into with Mr. Lefkofsky at the merger closing, for so long as   
Mr. Lefkofsky's employment agreement is in effect, he will have the right to    
request the board of directors to nominate and present two designees for        
election by our shareholders.                                                   

IF THE MERGER IS NOT APPROVED BY OUR SHAREHOLDERS, WE ARE OBLIGATED TO PAY A    
SUBSTANTIAL TERMINATION FEE.                                                

   We have agreed to pay Starbelly.com up to $500,000 of its expenses plus its
actual damages up to a maximum of $10 million if our shareholders do not approve
the merger. While we cannot predict with any certainty the approximate amount of
expenses and actual damages Starbelly.com could incur or suffer if the merger is
not concluded, it is possible that these amounts could be material to HA-LO.    

RISKS RELATED TO STARBELLY.COM'S BUSINESS                                       

STARBELLY.COM'S EXTREMELY LIMITED OPERATING HISTORY MAKES FUTURE FORECASTING    
DIFFICULT                                                                   

Starbelly.com was incorporated in March 1999. From March until June 1999
Starbelly.com focused on developing its business model, technology and          
operations, hiring personnel and raising capital. Since                         

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June 1999 Starbelly.com has been selling products and offering services in the  
business-to-business channel and through the Internet, both on a limited basis. 
As a result of Starbelly.com's extremely limited operating history, it is       
difficult to accurately forecast Starbelly.com's revenues or to predict         
Starbelly.com's operating expenses. Starbelly.com's prospects must be considered
in light of the risks, expenses and difficulties frequently encountered by      
companies in an early stage of development, particularly companies engaged in   
new and rapidly evolving markets such as electronic commerce.                   

STARBELLY.COM'S BUSINESS SYSTEM IS NEW AND UNPROVEN                             

   Starbelly.com has designed a new business system that redefines the process
of ordering custom-decorated merchandise and the fulfillment process with       
respect to those orders. Starbelly.com has only been delivering products under  
this system since June 1999 on a limited basis. Starbelly.com's success depends 
upon its ability to implement Starbelly.com's system on the Internet. Moreover, 
the volume of orders Starbelly.com has filled is substantially below designed   
capacity and the levels that are necessary for Starbelly.com to achieve         
profitability. As a result, the success of Starbelly.com's system on the        
Internet and in a high volume order environment has yet to be proven.           
Refinements or modifications to Starbelly.com's business systems and            
technologies may be necessary or advisable as Starbelly.com evaluates its       
continuing operations, particularly its ongoing ability to receive undecorated  
products, or "blanks," on a timely basis and in the necessary quantities, and   
its ability to scale Starbelly.com's business through partnerships with         
additional distributors and "pre-press" and contract decoration providers.      

STARBELLY.COM'S POTENTIAL CUSTOMERS MAY NOT ACCEPT STARBELLY.COM'S SOLUTIONS OR 
SYSTEMS                                                                     

    Many of the new customers Starbelly.com intends to pursue have long-standing
business relationships and personal ties to their existing distributors or other
suppliers of decorated products. Those customers may be reluctant to disrupt    
these relationships. Customers are also often reluctant to change their existing
ordering habits, or to adopt new technologies, such as Internet ordering, to    
replace existing relationships. To successfully market Starbelly.com's products 
through the Internet, Starbelly.com will generally be required to educate       
potential customers on the use and benefits of the Starbelly.com system, which  
may require Starbelly.com to incur substantial expense. Although Starbelly.com  
believes its new method for providing customized decorated products will provide
significant cost and time savings for Starbelly.com's existing and potential    
customers, there can be no assurance that such customers will accept it. If they
do not, our future operating results would be materially and adversely affected.
Starbelly.com's success depends substantially on its ability to initiate, manage
and expand its relationships with customers, and Starbelly.com's failure to do  
this could limit its anticipated growth in revenues and seriously harm its      
business.                                                                       

STARBELLY.COM HAS INCURRED SIGNIFICANT LOSSES SINCE INCEPTION, AND STARBELLY.COM
ANTICIPATES THAT IT WILL CONTINUE TO INCUR LARGE FUTURE LOSSES              

    Starbelly.com has incurred significant losses since inception and expects to
continue to incur significantly larger losses in the future. Starbelly.com's net
loss was approximately $2.5 million during the period from its inception on     
March 22, 1999 to September 30, 1999. Starbelly.com expects to continue to incur
significant marketplace development, technology, sales and marketing and        
administrative expenses for Starbelly.com's business. In fact, Starbelly.com    
currently expects to increase its operating expenses significantly in connection
with expanding Starbelly.com's sales and marketing channels, developing its Web 
site, services and technologies and hiring additional personnel. Starbelly.com  
will need to generate significant revenue to achieve and maintain profitability,
and we cannot be certain that it will achieve this. Even if Starbelly.com does  
reach profitability, Starbelly.com may not be able to sustain or increase its   
profitability.                                                                  

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STARBELLY.COM'S OPERATING RESULTS ARE EXPECTED TO BE VOLATILE AND DIFFICULT TO  
PREDICT                                                                     

   Starbelly.com's operating results may fluctuate significantly in the future
particularly in the early stages of its business due to a variety of factors,   
many of which are outside of Starbelly.com's control. Factors that may harm     
Starbelly.com's business or cause its operating results to fluctuate include the
size, timing, and variance of customer orders, particularly large orders from a 
limited number of customers; Starbelly.com's ability to retain existing         
customers, attract new customers and maintain customer satisfaction; the ability
to successfully launch the Starbelly.com Web site and customer virtual          
storefront websites, and the level of traffic to such sites; changes in         
inventory availability from third-party suppliers; general economic conditions  
and economic conditions specific to the Internet, electronic commerce or the    
custom-decorated merchandise industry, the level of use of the Internet and     
acceptance of the Internet and commercial online services for the purchase of   
custom-decorated products; Starbelly.com's ability to upgrade and develop       
systems and infrastructure and to attract new personnel in a timely and         
effective manner, technical difficulties, system downtime or Internet brownouts;
the amount and timing of operating costs and capital expenditures relating to   
expansion of Starbelly.com's business, operations and infrastructure; potential 
governmental regulation; unforeseen events affecting the custom-decorated       
merchandise industry; decreases in the prices at which Starbelly.com can sell   
its products; the timing of the introduction or enhancement of products by      
Starbelly.com, Starbelly.com's customers and Starbelly.com's competitors; and   
defects and other quality problems with Starbelly.com's products. Any change in 
one or more of these factors, as well as others, could cause Starbelly.com's    
operating results to fluctuate.                                                 

 We believe Starbelly.com's customers will tend to order sporadically, and
their purchases may vary significantly from quarter to quarter. Starbelly.com's 
customers are unlikely to forecast expected purchases in advance, frequently may
not order as expected (E.G., with regard to timing, quantities or product mix), 
and may place purchase orders only shortly before the scheduled delivery date.  
These order habits are likely to cause Starbelly.com's revenue to fluctuate     
significantly, particularly in the early stages of its business.                

A number of factors will also cause gross margins for Starbelly.com's   
products to fluctuate in future periods. As the markets for Starbelly.com's     
products mature, and as Starbelly.com faces additional competition, it is likely
that the average unit prices of such products will decrease in response to      
competitive pricing pressures, increased sales discounts, new product           
introductions by Starbelly.com's competitors or other factors. In response, we  
believe Starbelly.com will likely need to reduce the cost of its products       
through increased efficiencies and reductions in the amount Starbelly.com pays  
for materials or labor. At the same time, Starbelly.com will likely also seek to
increase sales of higher margin products. If these efforts are not successful,  
Starbelly.com's revenue and gross margins will decline, significantly harming   
its operating results and financial condition.                                  

STARBELLY.COM FACES A NUMBER OF CHALLENGES IN FULFILLING ORDERS, AND MAY NOT BE 
ABLE TO PRODUCE ITS PRODUCTS IN REQUESTED VOLUMES OR MEET CUSTOMERS' ORDERS 

A cornerstone of Starbelly.com's strategy is the ability to deliver to  
Starbelly.com's customers customized goods in certain key product categories    
within seven business days of their confirmed online order. Starbelly.com does  
not maintain an inventory of custom-decorated merchandise nor does it control a 
distribution system for these products. Instead, Starbelly.com depends on       
distributors to carry a wide variety of blanks and to ship these products to a  
decorator who then decorates the products. Fulfilling these orders in this      
timeframe presents significant challenges.                                      

In order to provide timely service for Starbelly.com's customers, while 
eliminating Starbelly.com's need to hold inventory, Starbelly.com relies on     
contract carriers (such as UPS and Federal Express) to ship blanks from         
distributors to on-site or off-site contract decorators and to ship finished    
products from those decorators to Starbelly.com's customers. Starbelly.com is   
therefore subject to the risks,                                                 

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including employee strikes and inclement weather associated with such carriers' 
ability to provide delivery services to meet Starbelly.com's needs.             
Starbelly.com also relies on its distributors to carry sufficient quantities of 
goods and to accurately apprise Starbelly.com as to the current inventories for 
the products Starbelly.com sells. The failure of distributors to provide blanks 
to decorators on time and without abnormal amounts of defects, and the failure  
of contract carriers to timely ship products to or from decorators, would       
tarnish Starbelly.com's reputation and brands, and could adversely affect       
Starbelly.com's sales and prospects.                                            

As Starbelly.com expands, Starbelly.com expects it will enter into      
agreements and form alliances with other contract decoration facilities         
throughout the United States and, eventually, the world. Accordingly, the       
success of Starbelly.com's expansion will depend on a number of factors,        
including Starbelly.com's ability to integrate the operations of new decorators 
into its existing operations; to coordinate and manage those decorators in      
multiple and perhaps geographically distant locations; and to establish and     
maintain adequate quality control, management and information systems and       
financial controls over those decorators. If Starbelly.com is not successful in 
these efforts, Starbelly.com's ability to expand and grow could be materially   
and adversely affected. Furthermore, Starbelly.com's ability to expand its      
fulfillment capacity and its business will depend in part upon Starbelly.com's  
ability to obtain the agreement of additional contractors to permit             
Starbelly.com to embed its business processes into their such contractors'      
operations and equipment. If Starbelly.com is unable to convince other          
decorators to agree to such terms, Starbelly.com may need to directly invest in 
employees and equipment to increase its decorating capacity, which may adversely
affect Starbelly.com's ability to expand or its financial results.              

IF WE FAIL TO SUCCESSFULLY DEVELOP THE STARBELLY.COM BRAND, STARBELLY.COM'S     
REVENUE MAY BE ADVERSELY AFFECTED                                           

 We believe that establishing and maintaining the Starbelly.com brand is a
critical aspect of developing and maintaining strategic customer relationships, 
and that the importance of brand recognition will increase as the number of     
customers ordering products grows. Starbelly.com's failure to successfully      
develop Starbelly.com's brand may adversely affect its ability to generate      
revenue. Starbelly.com intends to increase its sales and marketing staff and to 
increase spending on programs, including advertising campaigns and marketing    
events, to create and maintain brand loyalty among its customers. If            
Starbelly.com does not generate a corresponding increase in Starbelly.com's     
revenue as a result of its branding efforts or otherwise fails to promote the   
Starbelly.com brand successfully, or if Starbelly.com incurs excessive expenses 
in its efforts, its business, results of operations and financial condition may 
be significantly harmed. In addition, if Starbelly.com's customers do not       
perceive Starbelly.com products to be of high quality, or if Starbelly.com      
introduces new products that are not accepted by the market, the value of the   
Starbelly.com brand will decline and its business will suffer.                  

STARBELLY.COM MAY HAVE DIFFICULTY MANAGING ITS GROWTH                           

Starbelly.com's business has grown rapidly since its inception in       
March 1999. Starbelly.com incorporated in March 1999 with no employees, and by  
January 24, 2000 Starbelly.com had 118 full time employees and 16 independent   
contractors engaged on a full-time basis. To help manage future growth          
effectively, Starbelly.com must maintain and enhance its financial and          
accounting system and controls, hire and integrate new personnel and manage     
expanded operations. Starbelly.com's failure to manage recent or future         
expansion successfully could have a material adverse effect on the quality of   
Starbelly.com's products and technology, its ability to retain customers and key
personnel and its operating results and financial condition.                    

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STARBELLY.COM'S MANAGEMENT TEAM IS NEW AND MAY NOT BE ABLE TO WORK TOGETHER     
SUCCESSFULLY                                                                

  Starbelly.com's success depends to a significant degree upon the continued
joint contributions of Starbelly.com's key management, none of whom were hired  
before March 1999 and many of whom have been hired much more recently. Because  
of the limited time during which Starbelly.com's management team has been       
working together, there can be no assurance that its management will be able to 
work effectively as a team to meet the many challenges Starbelly.com faces.     

MANAGEMENT MAY HAVE DIFFICULTY INTEGRATING THE BUSINESS AND CORPORATE CULTURES  
OF HA-LO AND STARBELLY.COM                                                  

   The merger and related transactions involve the integration of two business
organizations that have previously operated independently. HA-LO and            
Starbelly.com may encounter difficulties in integrating the operations of the   
two businesses. The companies may not be able to successfully blend their       
products, services and technology to create the advantages which the merger is  
intended to create. Also, HA-LO's client base may not be willing to shift       
significant portions of their promotional product purchasing to the Internet.   
Furthermore, any delays or unexpected obstacles or costs in connection with such
integration could have a material adverse effect on the combined company's      
business, operating results or financial condition and the expected value of the
merger.                                                                         

   There is also the risk that the operations, management and personnel of the
two companies may not be compatible, and either HA-LO or Starbelly.com may      
experience the loss of key personnel for that reason. HA-LO or Starbelly.com may
also experience a disruption in their employee base as a result of uncertainty  
following the merger and during the integration process. As a result, key       
employees may seek employment elsewhere, including with competitors.            

IF STARBELLY.COM LOSES KEY PERSONNEL OR IS UNABLE TO HIRE ADDITIONAL QUALIFIED  
PERSONNEL, STARBELLY.COM MAY NOT BE SUCCESSFUL                              

The loss of the services of one or more of key personnel could seriously
harm Starbelly.com's business. Starbelly.com depends on the continued services  
and performance of its senior management and other key personnel, particularly  
Bradley Keywell, Starbelly.com's founder and chief executive officer, and Eric  
Lefkofsky, Starbelly.com's founder and president. Although we will enter into   
three-year employment agreements with Mr. Keywell and Mr. Lefkofsky if we       
complete the merger, the contractual relationships can be terminated under      
certain circumstances, and some of these circumstances may not be within our    
control.                                                                        

 Starbelly.com's future success also depends upon the continued service of
its other executive officers and its key software development, merchandising,   
technical, marketing, finance and support personnel and its ability to attract  
additional personnel in each of these areas. Competition for qualified personnel
in these areas is intense, particularly at the senior level, and Starbelly.com  
might not be able to hire the kind and number of employees Starbelly.com is     
targeting. Starbelly.com's failure to attract and retain these key employees    
could have a material adverse effect on Starbelly.com's business, results of    
operations and financial condition. In addition, employees may leave            
Starbelly.com and subsequently seek to compete against Starbelly.com, even      
though they have signed agreements not to do so.                                

STARBELLY.COM DEPENDS ON THIRD PARTIES TO PROVIDE RELIABLE SOFTWARE, SYSTEMS,   
AND RELATED SERVICES                                                        

    Starbelly.com depends on certain third-party service and software providers,
including Oracle and Level 3. Starbelly.com depends on these third-party        
providers to continue to offer, maintain and update Starbelly.com's software    
infrastructure. Any discontinuation of such services, or any reduction in       
performance that requires Starbelly.com to replace such services, would be      
disruptive to Starbelly.com's business. Starbelly.com depends on its software   
providers for the development and maintenance of                                

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electronic commerce processing systems. The failure of such systems could have a
material adverse effect on Starbelly.com's business and operations.             

  In the past, certain of Starbelly.com's third-party service providers have
experienced interruptions or failures in their system or services. If such      
failures were to occur in the future, Starbelly.com's customers could be        
prevented from accessing or purchasing products through the Starbelly.com Web   
site. Any reduction in performance, disruption in Internet or online access or  
discontinuation of services provided by any of Starbelly.com's Internet service 
providers could have a material adverse effect on Starbelly.com's business,     
operating results and financial condition.                                      

Some of Starbelly.com's agreements with third-party service and software
providers have terms of, or expire within, one year or less and in some cases   
are subject to cancellation for any reason or no reason upon short notice. Any  
cancellation of services by any those third-party providers, or failure to renew
services upon expiration, without notice sufficient to allow Starbelly.com to   
transition to a new service provider in a timely and cost-effective manner would
have a material adverse effect on Starbelly.com's business, operating results   
and financial condition.                                                        

IF DEMAND EXCEEDS THE CAPACITY CONSTRAINTS OF STARBELLY.COM'S INTERNET  
TECHNOLOGY SYSTEMS OR FULFILLMENT SYSTEMS OR IF STARBELLY.COM DOES NOT CONTINUE 
TO DEVELOP THESE SYSTEMS PROPERLY, STARBELLY.COM'S BUSINESS COULD BE ADVERSELY  
AFFECTED                                                                        

 Starbelly.com's revenues depend on the number of businesses and consumers
who use its Web site or Web sites it has designed for purchase of               
custom-decorated merchandise. Accordingly, the satisfactory performance,        
reliability and availability of these Web sites, transaction-processing systems 
and network infrastructure are critical to Starbelly.com's operating results, as
well as its ability to attract and retain customers and maintain adequate       
customer service levels. Any system interruptions that result in the            
unavailability of Starbelly.com's Web sites or reduced performance of the       
transaction system would reduce the volume of sales, which could have a material
adverse effect on Starbelly.com's business, operating results and financial     
condition.                                                                      

    Starbelly.com uses an internally developed system for its Web site and those
Web sites which Starbelly.com develops for its customers.                       
Starbelly.com-developed customer Web sites handle substantially all aspects of  
transaction processing, including product customization, customer profiling and 
confirmations. Starbelly.com may experience periodic system interruptions from  
time to time. A substantial increase in the volume of traffic on Starbelly.com's
Web sites, or the number of orders placed by customers in excess of projected   
amounts will require Starbelly.com to expand and upgrade further its technology,
transaction-processing systems and network infrastructure. Starbelly.com may    
also experience temporary capacity constraints due to sharply increased traffic 
during sales or other promotions, which could cause unanticipated system        
disruptions, slower response times, degradation in levels of customer service,  
impaired quality and delays in reporting accurate financial information. There  
can be no assurance that Starbelly.com's transaction-processing system and      
network infrastructure will be able to accommodate its system traffic in the    
future, or that Starbelly.com will, in general, be able to accurately project   
the rate or timing of such increases or upgrade Starbelly.com's system and      
infrastructure to accommodate future traffic levels on its Web sites and those  
Starbelly.com develops for its customers.                                       

    In the future, Starbelly.com intends to upgrade and expand its system and to
integrate newly developed or purchased modules with Starbelly.com's existing    
systems in order to improve its accounting, control and reporting methods and   
support increased transaction volume. Starbelly.com's inability to add          
additional software and hardware or to develop and upgrade further its existing 
technology, transaction processing systems or network infrastructure to         
accommodate increased traffic on its Web site or those Web sites Starbelly.com  
develops for its customers or its inability to handle increased sales volume    
through Starbelly.com's transaction-processing systems may cause unanticipated  
system disruptions, slower response times, degradation in levels of customer    
service, impaired quality                                                       

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and speed of order fulfillment, and delays in reporting accurate financial      
information. There can be no assurance that Starbelly.com will be able, in a    
timely manner, to effectively upgrade and expand its transaction-processing     
systems or to integrate smoothly any newly developed or purchased modules with  
its existing systems. Any inability to do so could have a material effect on    
Starbelly.com's business, operating results and financial condition.            

A SYSTEM FAILURE WOULD ADVERSELY AFFECT STARBELLY.COM'S BUSINESS                

  Starbelly.com's ability to successfully receive and transmit orders online
and provide high-quality customer service largely depends on the efficient and  
uninterrupted operation of its computer and communications hardware systems.    
Some of the Starbelly.com systems or their components are untested in           
high-volume operations. Some Starbelly.com intranet and database systems are    
located in Chicago, Illinois. These systems and operations are vulnerable to    
damage or interruption from fire, flood, power loss, telecommunications failure,
break-ins and similar events. The failure of Starbelly.com's intranet and       
database systems could have a material adverse effect on Starbelly.com's        
business, operating results and financial condition.                            

   Starbelly.com's servers and related technology are currently housed on-site
with redundant systems located off-site. Despite the implementation of network  
security measures, Starbelly.com's servers are vulnerable to computer viruses,  
physical or electronic break-ins and similar disruptions, which could lead to   
interruptions, delays, loss of data or the inability to accept and confirm      
customer orders or to provide orders to distributors or decorators. The         
occurrence of any of the foregoing risks could have a material adverse effect on
Starbelly.com's business, operating results and financial condition. Any virus  
infecting Starbelly.com's system or other damage to Starbelly.com's system could
adversely affect the computer systems of a third party. Such an event could     
expose Starbelly.com to a risk of loss or litigation or possible liability.     

STARBELLY.COM MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE INCREASINGLY       
COMPETITIVE CUSTOM-DECORATED MERCHANDISE MARKET                             

   The custom-decorated merchandise market is a rapidly evolving and intensely
competitive industry, and electronic commerce generally is a new and rapidly    
evolving medium. Starbelly.com competes primarily with various producers of     
custom-decorated merchandise. As the market for custom decorated products       
continues to grow, Starbelly.com expects other competitors, including           
established retail and mail order suppliers or other electronic commerce        
companies, to develop online services that compete with Starbelly.com's         
services. The level of competition is likely to increase as current competitors 
increase the sophistication of their offerings and as new participants enter the
market. Many of Starbelly.com's potential competitors have longer operating     
histories, larger customer bases, greater brand recognition and significantly   
greater financial, marketing and other resources than Starbelly.com does and may
enter into strategic or commercial relationships with larger, more established  
and well-financed companies. Certain of Starbelly.com's competitors may be able 
to secure services and products from suppliers on more favorable terms, devote  
greater resources to marketing and promotional campaigns and devote             
substantially more resources to Web site and systems development than           
Starbelly.com can. In addition, new technologies and the expansion of existing  
technologies may increase competitive pressures. Increased competition may      
result in reduced operating margins, as well as loss of market share and brand  
recognition. There can be no assurance that Starbelly.com will be able to       
compete successfully against current and future competitors, and competitive    
pressures could have a material adverse effect on Starbelly.com's business,     
operating results and financial condition.                                      

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FEDERAL, STATE AND LOCAL ENVIRONMENTAL LAWS AND REGULATIONS, AND FAILURE TO     
COMPLY WITH THEM COULD HARM STARBELLY.COM'S BUSINESS                        

 Starbelly.com's vendors, who perform decorating services, including those
residing in Starbelly.com's Chicago headquarters, are subject to a variety of   
federal, state, and local environmental laws and regulations related to the use,
storage, discharge and disposal of wastewater and other chemicals used in their 
processes. They may incur significant costs to comply with current or future    
environmental laws and regulations, or be adversely affected by the cost of     
compliance with these laws and regulations, which would effectively increase    
Starbelly.com's costs. In addition, Starbelly.com may be directly responsible   
for the remediation of any environmental contamination caused by decorators     
residing on its properties. Any such liability could have a material adverse    
effect on Starbelly.com's operations.                                           

RISK FACTORS GENERALLY AFFECTING ALL E-COMMERCE BUSINESSES AND INTERNET         
BUSINESSES                                                                  

STARBELLY.COM DEPENDS ON THE CONTINUED GROWTH OF ELECTRONIC COMMERCE            

Starbelly.com's viability is substantially dependent upon the widespread
acceptance and use of the Internet as an effective medium for commerce. The use 
of the Internet as a means of effecting transactions, particularly in the market
for custom-decorated products, is at an early stage of development. For         
Starbelly.com to be successful, businesses and consumers must accept and utilize
new ways of conducting business and exchanging information. Convincing          
businesses and consumers to evaluate and purchase custom-decorated products     
online may be particularly difficult, as such these parties have traditionally  
relied on ad specialty distributors and specialty catalogs to purchase such     
products. Rapid growth in the use of and interest in the Web, the Internet and  
commercial online services is a recent phenomenon, and there can be no assurance
that acceptance and use will continue to develop or that a sufficiently broad   
base of customers will adopt, and continue to use, the Internet and commercial  
online services as a medium of commerce, particularly for evaluating and        
purchasing custom-decorated products.                                           

  Demand for recently introduced services and products over the Internet and
commercial online services is subject to a high level of uncertainty. A minority
of these services and products have proved to be profitable. The development of 
the Internet and commercial online services into a viable commercial marketplace
is subject to a number of factors, including continued growth in the number of  
users of such services, concerns about transaction security, continued          
development of the necessary technological infrastructure, development of       
enabling technologies, uncertain and increasing government regulation and the   
development of complementary services and products.                             

To the extent that the Internet and other online services continue to   
experience growth in the number of users, their frequency of use or increase in 
their bandwidth requirements, there can be no assurance that the infrastructure 
for the Internet and other online services will be able to support the demands  
placed upon them. In addition, the Internet or other online services could lose 
their viability due to delays in the development or adoption of new standards   
and protocols required to handle increased levels of Internet or other online   
service activity, or due to increased governmental regulation. Changes in or    
insufficient availability of telecommunications services to support the Internet
or other online services also could result in slower response times and         
adversely affect usage of the Internet and other online services generally and  
Starbelly.com in particular. If the use of the Internet and other online        
services does not continue to grow or grows more slowly than expected, if the   
infrastructure for the Internet and other online services do not effectively    
support growth that may occur or if the Internet and other online services do   
not become a viable commercial marketplace, Starbelly.com's business operating  
results and financial condition would be materially and adversely affected.     

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RAPID TECHNOLOGICAL CHANGE COULD MATERIALLY AFFECT STARBELLY.COM                

    The Internet and the electronic commerce industry are characterized by rapid
technological change, changes in user and customer requirements and preferences,
frequent new product and service introductions embodying new technologies and   
the emergence of new industry standards and practices that could render         
Starbelly.com's existing technology and systems obsolete. The emerging nature of
these products and services and their rapid evolution will require Starbelly.com
to continually improve the performance, features and reliability of its         
e-commerce services, particularly in response to competitive offerings.         
Starbelly.com's success will depend, in part on its ability to enhance existing 
services and to develop and license new services and technologies that address  
the increasingly sophisticated and varied needs of Starbelly.com's prospective  
customers. Starbelly.com will also need to respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis. 
The development or licensing of online sites and other proprietary technology   
entails significant technical and business risks and requires substantial       
expenditures and lead time. There can be no assurance that Starbelly.com will   
use new technologies effectively or adapt its Web site, proprietary technology  
and transaction processing systems to customer requirements or emerging industry
standards. If Starbelly.com is unable, for technical, legal, financial or other 
reasons, to adapt in a timely manner in response to changing market conditions  
or customer requirements, Starbelly.com's business, operating results and       
financial condition could be materially and adversely affected.                 

STARBELLY.COM'S MARKETPLACE OR DATABASE MAY BE SUSCEPTIBLE TO SECURITY BREACHES 

   A fundamental requirement for electronic commerce and communications is the
secure transmission of confidential information over public networks.           
Starbelly.com will rely on encryption and authentication technology licensed    
from third parties to provide the security and authentication necessary to      
effect secure transmission of confidential information, such as customer credit 
card numbers. In addition, Starbelly.com intends to maintain an extensive,      
confidential database of customer profiles and transaction information. There   
can be no assurance that advances in computer capabilities, new discoveries in  
the field of cryptography, or other events or developments will not result in a 
compromise or breach of the algorithms Starbelly.com uses to protect customer   
transaction data contained in its customer database. Further, Starbelly.com's   
servers may be vulnerable to computer viruses, physical or electronic break-ins 
and similar disruptions. If any such compromise of Starbelly.com's security were
to occur, it could have a material adverse effect on its reputation, business,  
operating results and financial condition. A party who is able to circumvent    
Starbelly.com's security measures could misappropriate proprietary information  
or cause interruptions in its operations. Starbelly.com may be required to      
expend significant capital and other resources to protect against such security 
breaches or to alleviate problems caused by such breaches. Concerns over the    
security of transactions conducted on the Internet and commercial online        
services and the privacy of users may also inhibit the growth of the Internet   
and commercial online services, especially as a means of conducting commercial  
transactions. To the extent that Starbelly.com's activities or third-party      
contractors involve the storage and transmission of proprietary information,    
such as credit card numbers or other personal information, security breaches    
could expose Starbelly.com to a risk of loss or litigation and possible         
liability. There can be no assurance that Starbelly.com's security measures will
prevent security breaches or that failure to prevent such security breaches will
not have a material adverse effect on Starbelly.com's business, operating       
results and financial condition.                                                

STARBELLY.COM MAY HAVE LIABILITY FOR INTERNET CONTENT IN ITS MARKETPLACE        

As a publisher and distributor of online content, Starbelly.com faces   
potential liability for defamation, negligence, copyright, patent or trademark  
infringement and other claims based on the nature and content of the materials  
that it receives, stores, publishes or distributes. For example, Starbelly.com  
has not in all cases obtained formal written consent for use of photo images and
related                                                                         

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market materials and may be exposed to liability for such unauthorized usage.   
Such claims have been brought and sometimes successfully pressed, against online
services. In addition, Starbelly.com does not and cannot practically screen all 
of the content generated by its users, and Starbelly.com could be exposed to    
liability with respect to such content. Although Starbelly.com carries general  
liability insurance, its insurance may not cover claims of these types or may   
not be adequate to indemnify Starbelly.com for all liability that may be        
imposed. Any imposition of liability, particularly liability that is not covered
by insurance or is in excess of insurance coverage, could have a material       
adverse effect on its reputation, business, operating results and financial     
condition.                                                                      

FUTURE GOVERNMENTAL REGULATION OF THE INTERNET MAY RESTRICT STARBELLY.COM'S     
BUSINESS                                                                    

There are currently few laws or regulations that specifically regulate  
communications or commerce on the Internet. Laws and regulations may be adopted 
in the future, however, that address issues including user privacy, pricing and 
the characteristics and quality of products and services. An increase in        
regulation or the application of existing laws to the Internet could            
significantly increase Starbelly.com's costs of operations and harm its         
business. For example, the Communications Decency Act of 1996 sought to prohibit
the transmission of certain types of information and content over the Web.      
Additionally, several telecommunications companies have petitioned the Federal  
Communications Commission to regulate Internet service providers and online     
service providers in a manner similar to long distance telephone carriers and to
impose access fees on these companies. Imposition of access fees could increase 
the cost of transmitting data over the Internet.                                

STARBELLY.COM RELIES ON INTELLECTUAL PROPERTY RIGHTS THAT MAY NOT ADEQUATELY    
PROTECT STARBELLY.COM UNDER CURRENT LAWS                                    

To establish and protect Starbelly.com's trademarks, services marks and 
other proprietary rights in its products and services, Starbelly.com relies on a
combination of copyright, unfair competition, trademark, service mark and trade 
secret laws; confidentiality agreements with licensees and other third parties; 
and confidentiality agreements and policies covering employees. Starbelly.com   
cannot assure us or you that these measures will be adequate, that Starbelly.com
will be able to secure registrations for all of its marks in the U.S. or        
internationally or that third parties will not infringe upon or misappropriate  
its proprietary rights. Any infringement, misappropriation or litigation        
relating to intellectual property rights may divert Starbelly.com's management's
attention and its funds to litigate such claims. Provisions in Starbelly.com's  
license agreements with its customers protecting against unauthorized use,      
copying, transfer and disclosure of its licensed products may be unenforceable  
under the laws of specific jurisdictions and foreign countries. In addition, the
laws of some foreign countries do not protect proprietary rights to the same    
extent, as do the laws of the United States. Starbelly.com cannot assure us or  
you that its methods of protecting its proprietary rights in the United States  
or abroad will be adequate. Starbelly.com also cannot assure us or you that     
competing companies will not independently develop technology similar to its    
proprietary technology.                                                         

Legal standards relating to the validity, enforceability and scope of   
protection of certain property rights in Internet-related businesses are        
uncertain and evolving. In particular, new domain name registration and         
ownership property procedures may be adopted that may make it more difficult for
Starbelly.com and other Internet-related businesses to retain or obtain         
desirable domain names.                                                         

 Companies in Starbelly.com's industry and other electronic commerce-based
industries have been the subject of claims that their Web site content, method  
of doing business and processes for conducting on-line transactions violate the 
patent, trademark, copyright and other intellectual property rights of their    
competitors or other third parties. Although Starbelly.com believes that its    
proprietary rights do not infringe on the intellectual property rights of       
others, other parties may assert infringement claims against Starbelly.com or   
claims that Starbelly.com has violated a patent or infringed a copyright,       
trademark or other intellectual property right belonging to such other parties. 
Starbelly.com may be                                                            

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subject to claims of this type in the future as it develops and introduces new  
products and methods of doing business in the future. Any infringement claims,  
even if not meritorious, could result in Starbelly.com's expenditure of         
significant financial and managerial resources, which could harm its business.  

Starbelly.com also intends to continue to strategically license certain 
content for its Web site from third parties, including content which is         
integrated with internally developed content and used on its Web site to provide
key services. There can be no assurance that these third party content licenses 
will be available to Starbelly.com on commercially reasonable terms or that     
Starbelly.com will be able to successfully integrate such third-party content.  
Such content licenses may expose Starbelly.com to increased risks, including    
risks associated with the assimilation of new content, the diversion of         
resources from the development of on-line content and functionality, the        
inability to generate revenues from new content sufficient to offset associated 
acquisition costs and the maintenance of uniform, appealing content. The        
inability to obtain any of these licenses could result in delays in Web site    
development or services until equivalent content can be identified, licensed and
integrated. Any such delays in development or services could have a material    
adverse effect on Starbelly.com's business, operating results and financial     
condition.                                                                      

   Companies in Starbelly.com's industry whose employees accept positions with
competitors frequently claim that their competitors have engaged in unfair      
hiring practices or have assisted the employee in breaching noncompetition or   
nondisclosure agreements. Starbelly.com may be subject to claim of this type in 
the future as it seeks to hire qualified employees. Starbelly.com could incur   
substantial costs in defending itself against these claim or litigation         
associated with these claims, regardless of their merit. On the other hand,     
courts have taken a restrictive view with regard to the enforcement of          
noncompetition and nonsolicitation covenants and nondisclosure and secrecy      
agreements, particularly with respect to Internet-related businesses. Therefore,
Starbelly.com may not be able to enforce the agreements it has with its         
employees regarding restrictions on their ability to compete against            
Starbelly.com.                                                                  

RISKS RELATED TO HA-LO CAPITAL STOCK                                            

INCREASED NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND CONVERTIBLE PREFERRED 
STOCK COULD HAVE AN ANTI-TAKEOVER EFFECT                                    

 If the proposed amendments to our articles of incorporation are approved,
the resulting increase in the authorized number of shares of our common stock   
and our convertible preferred stock, and the ability of the board of directors  
to issue convertible preferred stock without further shareholder action, could  
delay or prevent a change in control of HA-LO. Within legal limits imposed by   
the Illinois Business Corporation Act and the rules of the New York Stock       
Exchange, your board of directors could issue shares of authorized (but yet     
unissued) common stock or convertible preferred stock in one or more            
transactions that would make a change in control of HA-LO more difficult, and   
therefore less likely. By potentially discouraging initiation of any such       
unsolicited takeover attempt, the proposed amendments may limit the opportunity 
for our shareholders to dispose of their shares at the higher price generally   
available in takeover attempts or that may be available under a merger proposal.
The proposed amendments may permit HA-LO's management, the current board of     
directors and the new directors filling vacancies created at the time of the    
merger to retain their positions, and place them in a better position to resist 
changes that shareholders may wish to make if they are dissatisfied with the    
conduct of HA-LO's business. In addition, the issuance of these additional      
shares of our common stock or convertible preferred stock could also dilute the 
earnings per share and book value per share of outstanding shares of our common 
stock or convertible preferred stock. These additional shares could be used to  
dilute the stock ownership or voting rights of a person seeking to obtain       
control of HA-LO. However, your board of directors is not aware of any attempt  
to take control of HA-LO and the board has not presented these proposals with   
the intent that they be used as a type of anti-takeover device.                 

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RISKS RELATING TO THE HA-LO CONVERTIBLE PREFERRED STOCK                         

   At any time during the 30-day period commencing on the first anniversary of
the effective date of the merger, the holders of the convertible preferred stock
issued in the merger and upon exercise of the assumed options will have the     
right to require the Company to redeem all or any part of their shares at a     
price per share in cash equal to the liquidation preference of $10.00 per share,
plus any accrued and unpaid dividends. If holders of a significant number of    
shares of convertible preferred stock elect to have their shares redeemed, HA-LO
will be required to borrow the funds necessary to pay the redemption price or to
raise such funds through the public or private sale of debt or equity           
securities. There can be no assurance that adequate financing will be available 
to pay the redemption price or that the terms of any such financing will be     
satisfactory to HA-LO.                                                          

If the Company defaults on its obligation to redeem any shares of       
convertible preferred stock, for so long as the Company is in default, the      
shares of convertible preferred stock that the Company failed to redeem will    
accrue dividends, at a rate of 8% of the liquidation price per annum on the     
$10.00 per share issuance price of such shares, beginning on the first date on  
which the Company failed to redeem such shares of convertible preferred stock   
until the redemption price has been paid in full. The rate at which dividends   
accrue will increase by 4% of the liquidation price per annum on each six month 
anniversary of the date of default until the redemption price (including accrued
dividends) has been paid in full.                                               

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

    Certain matters discussed in this proxy statement constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The forward-looking statements relate to anticipated financial            
performance, management's plans and objectives for future operations, business  
prospects, outcome of regulatory proceedings, market conditions and other       
matters. The Private Securities Litigation Reform Act of 1995 provides a safe   
harbor for forward-looking statements in certain circumstances. The following   
discussion is intended to identify the forward-looking statements and certain   
factors that could cause future outcomes to differ materially from those set    
forth in the forward-looking statements.                                        

 Forward-looking statements include the information concerning possible or
assumed future results of operations of HA-LO, as well as other future events   
set forth under "Questions and Answers About the Merger," "Risk Factors--Risks  
Related to the Merger--Uncertainties in Achieving Benefits of the Merger and    
Integrating the Businesses," "--Risks Related to Starbelly.com's Business," "The
Merger--Recommendation of the HA-LO Board and Reasons for the Merger,"          
"--Opinion of Financial Adviser to HA-LO," "--Management and Operations After   
the Merger," "Unaudited Pro Forma Combined Condensed Financial Information," and
other statements in this proxy statement identified by words such as            
"anticipate," "estimate," "expect," "intend," "believe," and "objective," and   
include, in particular, the statements as to:                                   

1. the ability of the combined company to compete effectively in its
markets;                                                      

   2. the anticipated levels and sources of merger benefits resulting from
the merger and estimated timing of achieving those benefits;  

    3. the ability to convince customers to use Starbelly.com's services and
systems;                                                      

 4. the anticipated manner in which identified merger benefits will be
achieved;                                                     

  5. the estimated amount of costs and capital expenditures necessary to
achieve the merger benefits;                                  

    6. the estimated future costs, operating losses and capital expenditures
associated with Starbelly.com's business;                     

7. the ability of the combined entity to further diversify through  
   acquisitions or development of new business and the marketing and
delivery of new products and services;                        

8. the ability to attract and retain qualified employees; and       

9. the ability of sales people who quit to take customers with them.

  Readers are cautioned not to place undue reliance on these forward-looking
statements, which involve known and unknown risks, uncertainties and other      
factors that may cause the actual results, performance or achievements of the   
combined company to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. These   
factors may affect HA-LO's operations, markets, products, services and prices.  
In addition to any assumptions and other factors referred to specifically in    
connection with forward-looking statements, factors that could cause HA-LO's    
actual results to differ materially from those contemplated in any              
forward-looking statement include, among others, the following:                 

1. general economic and business conditions;                        

2. industry capacity;                                               

3. changes in technology;                                           

4. changes in political, social and economic conditions;            

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5. regulatory matters, including the possibility of new regulations 
affecting e-commerce;                                         

    6. challenges associated with the integration of the operations of HA-LO
and Starbelly.com;                                            

7. regulatory delays or conditions imposed by regulatory bodies in  
approving the merger;                                         

8. adverse regulatory treatment;                                    

9. the ability of HA-LO and Starbelly.com to implement and realize  
    anticipated cost savings and revenue enhancements from the merger;

10. the actual costs required to effect the merger and to realize     
anticipated cost savings and revenue enhancements;            

 11. the actual duration of Starbelly.com's continuing operating losses;

12. the loss of any significant customers;                            

13. changes in business strategy or development plans;                

14. actual future costs of operating expenses;                        

15. actual costs of continuing investments in technology;             

 16. the availability of capital to finance possible acquisitions and to
refinance debt;                                               

     17. the ability of management to implement the strategy of acquisitions and
process improvements;                                         

     18. changes in the capital markets affecting the ability to finance capital
requirements; and                                             

    19. the other factors listed in our annual report on Form 10-K or in other
        reports previously or hereafter filed by HA-LO with the Securities and
  Exchange Commission, which are incorporated by reference herein.

    Other factors and assumptions not identified above were also involved in the
derivation of these forward-looking statements, and the failure of these other  
assumptions to be realized, as well as other factors, may also cause actual     
results to differ materially from those projected. HA-LO does not assume any    
obligation to update any forward-looking statements to reflect actual results,  
changes in assumptions or changes in other factors affecting those              
forward-looking statements.                                                     

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THE SPECIAL MEETING, VOTING AND PROXIES 

   This document is being furnished to HA-LO's shareholders in connection with
the solicitation of proxies by the board of directors for use at the HA-LO      
special meeting.                                                                

PURPOSE; TIME AND PLACE                                                         

The HA-LO special meeting is scheduled to be held at 10:00 a.m., Chicago
time, on       , March   , 2000, at Harris Bank, Room       , 111 W. Monroe     
Street, Chicago, Illinois. The purpose of the special meeting is:               

(1) To consider and vote upon a proposal to approve the merger of       
       Starbelly.com with a wholly owned subsidiary of HA-LO. A vote in favor of
 the merger also constitutes a vote in favor of: (a) the issuance of
 17 million shares of common stock pursuant to the merger agreement;
    (b) the amendment of the Company's articles of incorporation to permit
      the issuance of 5.1 million shares of convertible preferred stock in the
     merger and upon exercise of the assumed options; (c) the reservation of
    5.1 million shares of common stock for issuance upon conversion of the
     convertible preferred stock; and (d) the adoption of a new stock option
      plan under which HA-LO will assume Starbelly.com's stock option plan and
the options outstanding under that plan.                          

(2) To consider and vote upon a proposal to amend Article Four of the   
     Company's articles of incorporation to increase the number of shares of
common stock that HA-LO is authorized to issue from 100 million to
       250 million and to increase the number of shares of convertible preferred
    stock that HA-LO is authorized to issue from 10 million to 20 million;

(3) To consider and vote upon a proposal to amend Article Four of the   
     Company's articles of incorporation to authorize the board of directors
    to provide for the issuance of convertible preferred stock without the
further approval of the holders of our common stock; and          

   (4) To transact such other business as may properly come before the special
meeting.                                                          

YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND DETERMINED THAT 
THE TRANSACTIONS CONTEMPLATED BY IT ARE FAIR TO AND IN THE BEST INTERESTS OF    
HA-LO AND THE HA-LO SHAREHOLDERS. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE MERGER AND FOR THE OTHER PROPOSALS.                       

RECORD DATE; VOTING RIGHTS                                                      

  Holders of record of shares of HA-LO common stock at the close of business
on January 28, 2000, the record date, will be entitled to notice of and to vote 
at the special meeting. As of the record date, [48,724,790] shares of HA-LO     
common stock were issued and outstanding and entitled to vote. Each outstanding 
share of HA-LO common stock is entitled to one vote upon each matter presented  
at the special meeting.                                                         

QUORUM                                                                          

The holders of a majority of the issued and outstanding shares of HA-LO 
common stock must be present in person or represented by proxy at the HA-LO     
special meeting for a quorum to be present. Abstentions and broker non-votes    
(I.E., proxies from brokers or nominees indicating that those persons have not  
received instructions from the beneficial owners or other persons entitled to   
vote shares as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be considered present for the purpose of      
establishing a quorum.                                                          

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REQUIRED VOTE                                                                   

   Approval of the proposed merger requires the affirmative vote of a majority
of the outstanding shares of common stock. Broker non-votes and abstentions will
count as votes cast AGAINST this proposal.                                      

    Approval of the proposals to amend our articles of incorporation to increase
the number of shares of our common stock that HA-LO is authorized to issue from 
100 million to 250 million and to increase the number of shares of our          
convertible preferred stock that HA-LO is authorized to issue from 10 million to
20 million, and to permit the board of directors to authorize the future        
issuance of convertible preferred stock without the further approval of the     
holders of our common stock requires the affirmative vote of a majority of the  
outstanding shares of common stock. Broker non-votes and abstentions will count 
as votes cast AGAINST these proposals.                                          

PROXIES                                                                         

  You may vote either in person or by properly executed proxy. By completing
and returning the form of proxy, you authorize the persons named therein to vote
all your HA-LO shares on your behalf. Each properly completed and returned proxy
will be voted in accordance with the instructions indicated on that proxy. If no
instructions are given, properly executed proxies will be voted:                

    - FOR approval of the merger (and the related transactions described in this
proxy statement);                                                   

    - FOR approval of the amendment to our articles of incorporation to increase
   the number of authorized shares of our common stock and our convertible
preferred stock; and                                                

- FOR approval of the amendment to our articles of incorporation to     
  authorize the board of directors to provide for the future issuance of
      convertible preferred stock without the further approval of the holders of
our common stock.                                                   

   Your board of directors does not know of any matters to be presented at the
special meeting other than those described in this proxy statement. If other    
matters are properly brought before the meeting, the persons named as proxies   
intend to use their judgment in voting on those matters.                        

   You may revoke a previously granted proxy at any time before it is voted at
the special meeting. If you wish to revoke your proxy, you must do one of the   
following:                                                                      

- deliver to the Secretary of HA-LO written instructions to revoke your 
proxy; or                                                           

  - deliver to the Secretary of HA-LO another duly executed and subsequently
dated proxy; or                                                     

- attend the meeting and vote in person.                                

Attending the special meeting will not, by itself, revoke a previously  
granted proxy. Harris Bank, HA-LO's stock transfer agent, will receive and      
tabulate proxies and ballots.                                                   

PLEASE DO NOT SEND ANY SHARE CERTIFICATES WITH YOUR PROXY CARDS.                

COST OF SOLICITATION                                                            

   HA-LO will pay all expenses for soliciting proxies for the special meeting.
Our officers and employees, who will receive no compensation above their regular
salaries for their services, may solicit proxies from our shareholders in person
or by mail, telephone, telecopy or telegram. We have asked banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries to forward      
solicitation materials to the beneficial owners of our common stock held of     
record by those holders, and, upon request, we will reimburse them for their    
reasonable forwarding expenses.                                                 

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ADJOURNMENT                                                                     

 The special meeting may be adjourned to another date and/or place for any
proper purpose (including, without limitation, for the purpose of soliciting    
additional proxies).                                                            

DISSENTERS' RIGHTS                                                              

  The rights of HA-LO shareholders who dissent in connection with the merger
are governed by specific legal provisions contained in sections 11.65 and 11.70 
of the IBCA. Although we describe in the paragraphs below the dissenters' rights
available under Illinois law, we encourage you to read sections 11.65 and 11.70 
of the IBCA, a copy of which we have attached to this proxy statement as        
Exhibit C.                                                                      

   If the merger is completed, HA-LO shareholders who have fully complied with
the relevant provisions of the IBCA may have the right to require us to purchase
their shares of HA-LO common stock for cash at the fair value of such shares,   
plus any accrued interest, as of the merger closing. Beneficial owners of shares
of HA-LO common stock whose shares are held by another person, such as a        
trustee, broker or nominee, should instruct the record holder to follow the     
procedures outlined below if such persons wish to dissent with respect to any or
all of their shares. Under the IBCA, no shareholder who is entitled to exercise 
dissenters' rights has any right to challenge the validity of the merger or to  
have the merger set aside or rescinded, except in an action to determine whether
the merger is fraudulent against the shareholder or HA-LO or constitutes a      
breach of a fiduciary duty owed to the shareholder.                             

   We must purchase shares of HA-LO common stock upon demand from a dissenting
shareholder if such shareholder has complied with the relevant IBCA             
requirements. The procedures to be followed include the following requirements: 

  - The shareholder of record MUST NOT vote all of his shares to approve the
merger. The shareholder MAY vote part of his shares in favor of the 
    merger. In such a case, the shareholder will retain the right to have us
purchase those shares that were not voted in favor of the merger.   

- A beneficial owner of shares who is not the record owner may assert   
    dissenters' rights as to shares held on such person's behalf only if the
    beneficial owner submits to us the record owner's written consent to the
dissent before or at the same time the beneficial owner asserts     
dissenters' rights.                                                 

- The notice of meeting to the shareholders of HA-LO relating to the    
      proposal to approve the merger must inform the shareholders of their right
    to dissent and the procedure to dissent. If, before the special meeting,
    we give our shareholders material information about the merger that will
      objectively enable our shareholders to vote on the merger and to determine
   whether or not to exercise dissenters' rights, a shareholder may assert
    dissenters' rights only if the shareholder does not vote in favor of the
      approval of the merger and the shareholder delivers to us, before the vote
 is taken at the special meeting, a written demand for purchase of his
shares if the merger is completed.                                  

Within ten days after the merger is completed or 30 days after the      
shareholder delivers to us written demand for payment, whichever is later, we   
will send each shareholder who has delivered a written demand for payment the   
following items:                                                                

 - a statement setting forth our opinion as to the estimated fair value of
the shares;                                                         

    - our latest balance sheet as of the end of a fiscal year ending not earlier
  than 16 months before the delivery of the statement, together with the
statement of income for that year and the latest available interim  
financial statements; and                                           

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- either (1) a commitment to pay for the shares of the dissenting       
    shareholder at their estimated fair value upon the delivery to us of the
  share certificate or certificates (or other evidence of ownership with
     respect to the shares), or (2) instructions to the dissenting shareholder
     to sell his or her shares within ten days after delivery of our statement
to the shareholder.                                                 

   Under the IBCA, we are permitted to instruct the shareholder to sell his or
her shares (rather than pay for them directly) because our shares trade on the  
New York Stock Exchange, a public market where the shares may be readily sold.  
If the shareholder does not sell within that ten-day period after we give the   
instruction to sell, the shareholder is considered to have sold his or her      
shares at the average New York Stock Exchange closing price of our shares of    
common stock during that ten-day period.                                        

A HA-LO shareholder who properly demands for payment retains his or her 
rights as a HA-LO shareholder until the merger closes. If we have not properly  
instructed the dissenting shareholder to sell his or her shares, when the merger
closes we must pay to each dissenter who delivers his or her share certificates 
(or other evidence of share ownership) the amount we estimate to be the fair    
value of the shares, plus accrued interest, and a written explanation of how we 
calculated the interest. The term "fair value" means the value of the shares    
immediately before the merger closing excluding any appreciation or depreciation
in anticipation of the merger, unless such exclusion would be inequitable. The  
term "interest" means interest from the date of the merger closing until the    
date of payment, at the average rate we pay on our principal bank loans or, if  
we have no loans, at a rate that is fair and equitable under all the            
circumstances.                                                                  

  If the dissenting shareholder does not agree with our estimated fair value
of the shares or the amount of interest due, the shareholder, within 30 days    
from the delivery of our statement of fair value, must notify us in writing of  
the shareholder's estimated fair value and amount of interest due and demand    
payment for the difference between the shareholder's estimate of fair value and 
interest due and the amount we paid for the shares (if we elected to pay for the
shares) or the sale proceeds from the shareholder's sale of the shares (if we   
instructed the shareholder to sell the shares).                                 

  If, within 60 days after our delivery of our estimate of fair value of the
shares and interest due, we and the dissenting shareholder have not agreed in   
writing upon the fair value of the shares and interest due, we must either pay  
the difference in value demanded by the shareholder, with interest, or file a   
petition in the circuit court of the county where either our registered office  
or our principal office is located, requesting the court to determine the fair  
value of the shares and interest due. This court has full and exclusive         
jurisdiction to determine the fair value of the shares. We will make all        
dissenters, whether or not residents of Illinois, whose demands remain          
unsettled, parties to the proceeding as an action against their shares and all  
parties will be served with a copy of the petition. We may serve non-residents  
with notice of the proceeding by registered or certified mail or by publication 
as provided by law. Our failure to commence an action will not, by itself, limit
or affect the right of the dissenting shareholders to commence an action.       

   The court may appoint one or more persons as appraisers to receive evidence
and recommend a fair value amount. The appraisers have the power described in   
the order appointing them, or in any amendment to it. Each dissenter who is a   
party to the proceeding is entitled to judgment for the amount, if any, by which
the court finds that the fair value of his shares, plus interest, exceeds the   
amount we paid or the proceeds of sale by the shareholder, whichever amount     
applies.                                                                        

 The court will calculate the proceeding's costs, including the reasonable
compensation and expenses of any appraisers the court has appointed. Generally, 
the court will not include the fees and expenses of attorneys and experts for   
the parties in this calculation. If the court determines the fair value of the  
shares to be significantly greater than the value we estimated to be the fair   
value, then we may be required to pay some or all of these calculated costs.    
Similarly, if the court determines the fair value of the shares to be           
significantly greater than the value a dissenter estimated to be the fair value,

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then that dissenter may be required to pay some or all of these costs. However, 
the court may also charge the fees and expenses of attorneys and experts for the
parties to the proceeding in amounts the court finds equitable:                 

    - against us (and in favor of any or all dissenters) if the court finds that
 we did not substantially comply with the requirements of the IBCA, or

   - against either us or a dissenter (and in favor of any other party) if the
     court finds that the charged party acted arbitrarily, vexatiously, or not
in good faith with respect to the rights the IBCA provides.         

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THE MERGER

GENERAL                                                                         

The Agreement and Plan of Merger and Plan of Reorganization, dated as of
January 17, 2000, by and among HA-LO, Starbelly.com and HA-LO Industries, Inc., 
a Delaware corporation (our "merger subsidiary"), is the legal document that    
governs the merger transactions described in this proxy statement. The merger   
agreement provides for the merger of Starbelly.com with and into our merger     
subsidiary, as a result of which our merger subsidiary will survive the merger  
under the new name "Starbelly.com, Inc.," and Starbelly.com will cease its      
separate existence. However, the parties are permitted under the merger         
agreement to restructure the merger so that Starbelly.com survives the merger   
and our merger subsidiary ceases its separate existence. For a description of   
the merger agreement, see "The Merger Agreement" (page 56).                     

If we complete the merger, Starbelly.com stockholders will receive      
approximately $240 million, which amount we will pay as follows:                

(1) paying $19 million in cash (less Starbelly.com's merger expenses in 
excess of $500,000);                                              

(2) paying the balance by issuing shares of:                            

(a) HA-LO common stock valued at $170 million; and                

(b) HA-LO preferred convertible stock valued at $51 million.      

The amount we will pay to complete the merger includes the value of HA-LO shares
we will issue upon exercise of Starbelly.com's outstanding stock options, which 
will be exercisable for HA-LO convertible preferred stock and HA-LO common      
stock.                                                                          

 We will issue in the merger and reserve for issuance upon exercise of the
assumed stock options 17 million shares of our common stock and 5.1 million     
shares of our preferred stock. You will continue to own your shares after the   
merger. Immediately after the merger, pre-merger shareholders of HA-LO will own 
approximately 69% of the outstanding common stock, and the former stockholders  
of Starbelly.com will own approximately 31% of the outstanding common stock     
(assuming all of the preferred shares are converted into common stock and all   
assumed options are exercised and all preferred shares issued upon exercise are 
converted into common stock).                                                   

BACKGROUND OF THE MERGER                                                        

During HA-LO's first 25 years of business, from 1972 until 1997, HA-LO's
sole line of business was the traditional sale and distribution of promotional  
and related products. In 1997, HA-LO acquired Market USA, a leading             
telemarketing company; in 1998, HA-LO acquired a branding identity company      
(LAGA) and two well-known companies in the brand marketing and promotion        
business (UPSHOT and Siebel Marketing Group). These acquisitions were made as   
part of HA-LO's mission to transform itself into a brand marketing organization 
and to become more competitive in the new economy.                              

As HA-LO's product and services mix was changing, and technological and 
on-line innovations began to change all businesses, HA-LO management realized   
the need to develop an Internet strategy to reflect changing economic times. In 
1999, the Company formed Upshot Direct, a company formed to satisfy increasing  
client demand for complete direct marketing and database solutions in both      
online and offline environments. Company management also began an analysis of   
ways in which the Company's traditional promotional products business could be  
made more efficient and effective by employing the Internet and other           
technological advances, whether through acquisition or internal development.    

In August 1999, Linden Nelson, vice chairman of the board of HA-LO,     
contacted Bradley Keywell, the co-founder and chief executive officer of        
Starbelly.com, to schedule a meeting to discuss the online                      

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and offline promotional products business. Mr. Nelson and Mr. Keywell had been  
acquainted professionally and personally for several years.                     

    Shortly thereafter, Mr. Nelson, as well as Jon Sloan, HA-LO's Vice President
of National Accounts, and Tom Hunt, HA-LO's Vice President of Operations, met   
with Mr. Keywell, Eric Lefkofsky, the co-founder and president of Starbelly.com,
and other Starbelly.com representatives to begin initial exploration of possible
business relationships.                                                         

During the next several weeks, HA-LO and Starbelly.com exchanged certain
information and ideas concerning the others' operations and business strategies.

On October 14, 1999, Mr. Nelson and John Kelley, then the president of  
HA-LO's subsidiary, UPSHOT, and other representatives of HA-LO met with         
Mr. Keywell and Mr. Lefkofsky, Richard Heise, a director and a representative of
certain principal stockholders of Starbelly.com, and other representatives of   
Starbelly.com, to identify potential strategic advantages of combining the      
companies. During the meeting, the parties discussed the potential business     
synergies and efficiencies that could be realized from the combination.         

 Following this meeting, a series of additional meetings were held between
mid-October and early December, 1999 at which representatives of HA-LO and      
Starbelly.com further explored the potential benefits of a business combination.
During this period, senior management of HA-LO and members of HA-LO's board of  
directors visited Starbelly.com's headquarters to familiarize themselves with   
the company's operations and resources.                                         

  On December 1, 1999, Mr. Kelley and Lou Weisbach, chairman of the board of
HA-LO, interviewed several investment banking firms after which they selected   
Credit Suisse First Boston Corporation to serve as HA-LO's financial advisor in 
connection with the merger.                                                     

    On December 6, 1999, the parties executed a Confidentiality Agreement, dated
as of November 24, 1999, in which each party agreed to maintain the             
confidentiality of non-public information furnished by the other.               

 Throughout this period and through the execution of the merger agreement,
Starbelly.com was not precluded from and continued to pursue additional         
financing opportunities, which, if funded, would have made the consummation of  
the merger less likely. Starbelly.com also commenced financial analyses relating
to a possible initial public offering. HA-LO also continued its analysis of     
pursuing an Internet strategy through internal development or alternative       
acquisitions. Starbelly.com and HA-LO did not enter into any exclusivity or     
other similar agreements during the pendency of their discussions.              

 During the week of December 5, 1999, representatives of the companies met
and began the process of the preparation of a term sheet regarding a possible   
acquisition of Starbelly.com by HA-LO. Between December 6 and December 18, the  
principals of the parties held extensive discussions and merger negotiations    
continued. A non-binding term sheet was executed on December 18, 1999. The      
initial draft of the merger agreement was circulated on December 29, 1999; from 
December 6, 1999 to January 15, 2000, representatives of HA-LO and of           
Starbelly.com performed detailed management due diligence of the other. In      
connection with its review, HA-LO retained Ernst & Young to conduct a due       
diligence investigation of Starbelly.com's technology capacity and capabilities.

   On December 15, 1999, Mr. Kelley, now president and chief executive officer
of HA-LO, and Lou Weisbach, chairman of the board of HA-LO, interviewed several 
investment banking firms after which they selected Credit Suisse First Boston to
serve as HA-LO's financial advisor in connection with the merger.               

During the last week of December 1999, Michael Linderman, president of  
HA-LO's promotional products division, met with Mr. Lefkofsky to discuss sales  
and operational matters, and representatives of both parties continued to focus 
on issues relating to the integration of HA-LO and Starbelly.com.               

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  On January 6, 2000, a working group meeting attended by representatives of
HA-LO and Starbelly.com was held to discuss various aspects of the proposed     
merger, including the terms of the merger agreement and related documents and   
strategic and operational issues. HA-LO's legal counsel, Neal, Gerber &         
Eisenberg, and its financial advisor, as well as Starbelly.com's legal counsel, 
Altheimer & Gray, and its financial advisor, Hambrecht & Quist, LLC, also       
attended the meeting.                                                           

  Negotiations between HA-LO and Starbelly.com continued throughout the next
week. On January 16, 2000 the HA-LO board held a special meeting to evaluate the
merger. At the meeting, members of senior management of HA-LO presented a       
comprehensive analysis of the proposed transaction, including an overview of    
Starbelly.com and its operations, financial condition and competitive position, 
the reasons for and disadvantages of the merger and strategic alternatives to   
the proposed combination. Neal, Gerber & Eisenberg reviewed the terms of the    
merger agreement. Credit Suisse First Boston made a financial presentation,     
which is more fully described below under "The Merger--Opinion of Financial     
Advisor of HA-LO" (page 39). After the meeting concluded, representatives of    
HA-LO and Starbelly.com and their respective legal counsel negotiated final     
terms and completed the merger agreement and the related documents.             

On January 17, 2000, the HA-LO board held a special telephonic meeting, 
reviewed the merger agreement and approved the merger. At the meeting, Neal,    
Gerber & Eisenberg summarized material changes to the agreements which had been 
agreed to since the previous day's board meeting, and Credit Suisse First Boston
rendered its oral opinion which opinion was confirmed by delivery of a written  
opinion dated January 17, 2000, to the effect that, as of the date of the       
opinion and based upon and subject to the matters described in the opinion, the 
aggregate merger consideration of $240,000,000 was fair, from a financial point 
of view, to HA-LO. Officers of HA-LO and Starbelly.com executed the merger      
agreement later that day, and, prior to the commencement of trading on          
January 18, 2000, HA-LO issued a press release announcing the execution of the  
merger agreement.                                                               

RECOMMENDATION OF THE HA-LO BOARD AND REASONS FOR THE MERGER                    

    THE HA-LO BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTEREST OF, HA-LO AND THE HA-LO SHAREHOLDERS. ACCORDINGLY, THE HA-LO BOARD
HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT   
YOU VOTE FOR THE MERGER.                                                        

 The HA-LO board of directors has identified benefits it expects to result
from the merger. The board of directors believes that the merger will include   
the following benefits for HA-LO:                                               

  - position HA-LO to capitalize on expanding e-commerce markets, especially
Internet- or intranet-based business-to-business markets;           

- enhance HA-LO's customer service;                                     

- rapidly expand, through electronic linkage, HA-LO's offering of       
customizable blank products and pre-designed decorations;           

- increase HA-LO's productivity;                                        

   - build HA-LO's brand recognition in e-commerce markets while enhancing our
reputation as an agent of change and a business leader;             

   - build HA-LO's promotional products customer base while encouraging repeat
business from existing customers;                                   

- reduce HA-LO's costs to market and fulfill orders for custom-decorated
promotional products;                                               

- infuse HA-LO's organization with new talent and cultural change; and  

 - increase HA-LO's pricing and marketing flexibility for custom-decorated
promotional products.                                               

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We expect to incur non-recurring merger-related costs estimated at      
$4.0 million to $4.5 million. The estimate includes direct transaction costs    
consisting of legal, financial advisory, accounting, consulting, printing,      
mailing, proxy and shareholder meeting fees and expenses. We anticipate         
unquantified operational and administrative cost savings following the merger   
closing; however, your board of directors views potential revenue growth to be  
of far greater importance than anticipated cost savings in its determination to 
recommend the merger proposal.                                                  

When making its determination, the HA-LO board considered, among other  
things, the following factors:                                                  

- the business, operations, prospects and strategic alliances of each of
HA-LO and Starbelly.com;                                            

 - the judgment, advice and analyses of our management with respect to the
  strategic, financial and potential operational benefits of the merger,
based in part on the business, financial and legal due diligence    
investigations performed on Starbelly.com;                          

- management's belief that the medium- and long-term trend in the       
      promotional products distribution industry involves increasing reliance on
Internet- and intranet-based solutions like those in development or 
already developed by Starbelly.com;                                 

  - unquantified cross-selling opportunities and operating efficiencies that
may result from the merger;                                         

    - the advice of counsel that the merger should be tax-free to HA-LO for U.S.
federal income tax purposes;                                        

    - the number of shares of our common stock to be issued to the Starbelly.com
stockholders in the merger and upon conversion of the convertible   
preferred stock and exercise of the assumed Starbelly.com options;  

 - the number of shares of convertible preferred stock to be issued in the
  merger and upon exercise of the assumed options and the terms of those
shares;                                                             

- the terms of the merger agreement; and                                

 - the opinion of Credit Suisse First Boston to the effect that, as of the
      date of the opinion and based upon and subject to the matters described in
     the opinion, the aggregate merger consideration of $240,000,000 was fair,
 from a financial point of view, to HA-LO. A copy of the Credit Suisse
     First Boston opinion is attached as Exhibit B to this proxy statement and
 is described below under "The Merger--Opinion of Financial Advisor to
HA-LO" (page 39).                                                   

   In addition to the factors described above, the board of directors of HA-LO
also considered the following negative factors relating to the merger:          

- the challenges inherent in combining our operations with those of     
     Starbelly.com, including the radical departure from our existing business
model and managing potential clashes in the business cultures of our
companies;                                                          

 - the status of Starbelly.com's technology, some of which is still in the
developmental stage, and therefore may not function as expected;    

- the potential departure of sales force personnel;                     

 - the potential of our competitors aggressively recruiting our employees;

- our need to borrow funds to pay the merger consideration and merger   
expenses, provide working capital to fund Starbelly.com's future    
      operations and pay the redemption price of the convertible preferred stock
if holders exercise their redemption rights; and                    

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- the dilution of our shareholders' voting interest.                    

  The foregoing discussion of the information and factors considered by your
board of directors is not intended to be exhaustive but includes all important  
factors considered by the board. In reaching its determination to approve and   
recommend the merger, your board did not assign any relative or specific weights
to the foregoing factors, and individual directors may have given differing     
weights to different factors. Your board of directors is unanimous in its       
recommendation that HA-LO shareholders vote for the merger.                     

OPINION OF FINANCIAL ADVISOR TO HA-LO                                           

GENERAL                                                                         

Credit Suisse First Boston has acted as HA-LO's financial advisor in    
connection with the merger. HA-LO selected Credit Suisse First Boston based on  
Credit Suisse First Boston's experience, expertise and reputation, and          
familiarity with HA-LO's business. Credit Suisse First Boston is an             
internationally recognized investment banking firm and is regularly engaged in  
the valuation of businesses and securities in connection with mergers and       
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements   
and valuations for corporate and other purposes.                                

   In connection with Credit Suisse First Boston's engagement, HA-LO requested
that Credit Suisse First Boston evaluate the fairness, from a financial point of
view, to HA-LO of the aggregate merger consideration of $240,000,000. On        
January 17, 2000, at a meeting of the HA-LO board of directors held to evaluate 
the merger, Credit Suisse First Boston rendered to the HA-LO board of directors 
an oral opinion, which opinion was confirmed by delivery of a written opinion   
dated January 17, 2000, to the effect that, as of the date of the opinion and   
based upon and subject to the matters described in the opinion, the aggregate   
merger consideration of $240,000,000 was fair, from a financial point of view,  
to HA-LO.                                                                       

The full text of Credit Suisse First Boston's written opinion dated     
January 17, 2000 to the HA-LO board of directors, which sets forth the          
procedures followed, assumptions made, matters considered and limitations on the
review undertaken, is attached as Exhibit B and is incorporated into this       
document by reference. Holders of HA-LO common stock are urged to, and should,  
read this opinion carefully and in its entirety. Credit Suisse First Boston's   
opinion is addressed to the HA-LO board of directors and relates only to the    
fairness of the merger consideration from a financial point of view, does not   
address any other aspect of the proposed merger or any related transaction and  
does not constitute a recommendation to any shareholder as to any matter        
relating to the merger. The summary of Credit Suisse First Boston's opinion in  
this document is qualified in its entirety by reference to the full text of the 
opinion.                                                                        

  In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement and related documents, including shareholder agreements entered into  
between HA-LO and certain stockholders of Starbelly.com, as well as publicly    
available business and financial information relating to HA-LO and available    
business and financial information relating to Starbelly.com. Credit Suisse     
First Boston also reviewed other information relating to HA-LO and              
Starbelly.com, including financial forecasts, provided to or discussed with     
Credit Suisse First Boston by HA-LO and Starbelly.com, and met with the         
managements of HA-LO and Starbelly.com to discuss the businesses and prospects  
of HA-LO and Starbelly.com.                                                     

  Credit Suisse First Boston also considered financial and stock market data
of HA-LO and financial information of Starbelly.com and compared those data with
similar data for other publicly held companies in businesses it deemed similar  
to those of HA-LO and Starbelly.com and considered, to the extent publicly      
available, the financial terms of other business combinations and other         
transactions                                                                    

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which have recently been effected. Credit Suisse First Boston also considered   
other information, financial studies, analyses and investigations and financial,
economic and market criteria that it deemed relevant.                           

    In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information that was  
provided to or otherwise reviewed by it and relied on that information being    
complete and accurate in all material respects. With respect to financial       
forecasts, Credit Suisse First Boston was advised, and assumed, that the        
forecasts were reasonably prepared on bases reflecting the best currently       
available estimates and judgments of the managements of HA-LO and Starbelly.com 
as to the future financial performance of HA-LO and Starbelly.com. In addition, 
Credit Suisse First Boston relied upon the assessments of the management of     
HA-LO and its advisors as to:                                                   

- the potential synergies and other strategic benefits (including the   
    amount, timing and achievability thereof) anticipated to result from the
merger;                                                             

   - Starbelly.com's existing technology and products and the validity of, and
  risks associated with, Starbelly.com's future products and technology;

- the ability of HA-LO to retain key employees of Starbelly.com; and    

   - the ability of HA-LO to fund the cash portion of the merger consideration
 and the cash needs of HA-LO on an ongoing basis following the merger.

Credit Suisse First Boston assumed, with the consent of the board of    
directors of HA-LO, that the merger will be treated as a tax-free reorganization
for federal income tax purposes and that all outstanding Starbelly.com warrants 
would be exercised for and converted into shares of Starbelly.com common stock  
prior to the effective time of the proposed merger or that Starbelly.com would  
receive from holders of Starbelly.com warrants consents to the conversion of    
Starbelly.com warrants into their allocated portion of the merger consideration 
as more fully described in the merger agreement. In addition, Credit Suisse     
First Boston assumed that the stockholders' agreements entered into between     
HA-LO and certain stockholders of Starbelly.com in connection with the merger   
agreement will be in full force and effect at the time of the consummation of   
the merger.                                                                     

  Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or 
otherwise, of HA-LO or Starbelly.com, and was not furnished with any evaluations
or appraisals. Credit Suisse First Boston's opinion was necessarily based on    
information available to, and financial, economic, market and other conditions  
as they existed and could be evaluated by, Credit Suisse First Boston on the    
date of its opinion. Credit Suisse First Boston did not express any opinion as  
to the actual value of the HA-LO common stock when issued in the merger or the  
prices at which the HA-LO common stock will trade after the merger. No other    
limitations were imposed on Credit Suisse First Boston with respect to the      
investigations made or procedures followed in rendering its opinion.            

In preparing its opinion to the HA-LO board of directors, Credit Suisse 
First Boston performed a variety of financial and comparative analyses,         
including those described below. The summary of Credit Suisse First Boston's    
analyses described below is not a complete description of the analyses          
underlying Credit Suisse First Boston's opinion. The preparation of a fairness  
opinion is a complex analytical process involving various determinations as to  
the most appropriate and relevant methods of financial analyses and the         
application of those methods to the particular circumstances and, therefore, a  
fairness opinion is not readily susceptible to partial analysis or summary      
description. In arriving at its opinion, Credit Suisse First Boston made        
qualitative judgments as to the significance and relevance of each analysis and 
factor that it considered. Accordingly, Credit Suisse First Boston believes that
its analyses must be considered as a whole and that selecting portions of its   
analyses and factors or focusing on information presented in tabular format,    
without considering all analyses and factors or the narrative                   

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description of the analyses, could create a misleading or incomplete view of the
processes underlying its analyses and opinion.                                  

    In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and     
other matters, many of which are beyond the control of HA-LO and Starbelly.com. 
No company, transaction or business used in Credit Suisse First Boston's        
analyses as a comparison is identical to HA-LO or Starbelly.com or the proposed 
merger, and an evaluation of the results of those analyses is not entirely      
mathematical. Rather, the analyses involve complex considerations and judgments 
concerning financial and operating characteristics and other factors that could 
affect the acquisition, public trading or other values of the companies,        
business segments or transactions being analyzed. The estimates contained in    
Credit Suisse First Boston's analyses and the ranges of valuations resulting    
from any particular analysis are not necessarily indicative of actual values or 
predictive of future results or values, which may be significantly more or less 
favorable than those suggested by the analyses. In addition, analyses relating  
to the value of businesses or securities do not purport to be appraisals or to  
reflect the prices at which businesses or securities actually may be sold.      
Accordingly, Credit Suisse First Boston's analyses and estimates are inherently 
subject to substantial uncertainty.                                             

    Credit Suisse First Boston's opinion and financial analyses were only one of
many factors considered by the HA-LO board of directors in its evaluation of the
proposed merger and should not be viewed as determinative of the views of the   
HA-LO board of directors or management with respect to the merger or the merger 
consideration.                                                                  

  The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with the preparation of its opinion and
reviewed with the HA-LO board of directors at a meeting of the board of         
directors held on January 16, 2000. The financial analyses summarized below     
include information presented in tabular format. In order to fully understand   
Credit Suisse First Boston's financial analyses, the tables must be read        
together with the text of each summary. The tables alone do not constitute a    
complete description of the financial analyses. Considering the data set forth  
in the tables below without considering the full narrative description of the   
financial analyses, including the methodologies and assumptions underlying the  
analyses, could create a misleading or incomplete view of Credit Suisse First   
Boston's financial analyses.                                                    

STARBELLY.COM                                                                   

IPO ANALYSIS.  Credit Suisse First Boston estimated the present value of
Starbelly.com's fully-distributed equity value assuming an initial public       
offering of Starbelly.com on September 30, 2000. Starbelly.com's                
fully-distributed equity value was estimated by applying a range of revenue     
multiples derived from selected publicly traded companies in the                
business-to-business e-commerce enabler industry and the business-to consumer   
e-commerce retailer industry, which Credit Suisse First Boston deemed to be     
relevant, to projected 2001 revenues for Starbelly.com. Estimated financial data
for the selected companies was based on publicly available research analysts'   
estimates. Estimated financial data for Starbelly.com was based upon            
Starbelly.com management estimates, adjusted to reflect the discount customarily
applied to management estimates by research analysts evaluating initial public  
offerings. This analysis assumed further dilution of Starbelly.com's current    
stockholders from a round of venture capital financing prior to the initial     
public offering. Credit Suisse First Boston then discounted the                 
fully-distributed equity value using discount rates ranging from 30% to 50%.    
This analysis indicated an implied equity reference range for Starbelly.com of  
approximately $238.0 million to $378.0 million.                                 

HA-LO                                                                           

DISCOUNTED CASH FLOW ANALYSIS.  Credit Suisse First Boston estimated the
present value of the stand-alone, unlevered, after-tax free cash flows that     
HA-LO could produce over calendar years 2000                                    

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through 2004, based on two scenarios. The management case was based on estimates
of the management of HA-LO. The alternative case was based on adjustments to the
management case developed by, or discussed with and reviewed by, HA-LO          
management to reflect lower margins and revenue growth than the management case.

 Ranges of terminal values were estimated using multiples of terminal year
2004 earnings before interest, taxes, depreciation and amortization, commonly   
referred to as EBITDA, of 9.0x to 11.0x. The free cash flows were then          
discounted to present value using discount rates of 13.0% to 14.0%.             

    SELECTED COMPANIES ANALYSIS.  Credit Suisse First Boston compared financial,
operating and stock market data of HA-LO to corresponding data of the following 
publicly traded companies in the marketing services industry:                   

- Caribiner International, Inc.                                         

- Catalina Marketing Corporation                                        

- Cyrk, Inc.                                                            

- Equity Marketing, Inc.                                                

- Snyder Communications, Inc.                                           

 In addition, Credit Suisse First Boston compared financial, operating and
stock market data of HA-LO to corresponding data of the following publicly      
traded companies in the telemarketing industry:                                 

- APAC Customer Services, Inc.                                          

- SITEL Corporation                                                     

- TeleSpectrum Worldwide Inc.                                           

- TeleTech Holdings, Inc.                                               

- West TeleServices Corporation                                         

   Credit Suisse First Boston reviewed, among other things, estimated calendar
year 2000 enterprise values, calculated as equity value, plus net debt, as a    
multiple of estimated calendar year 2000 sales, EBITDA and earnings before      
interest and taxes, commonly known as EBIT. All multiples were based on closing 
stock prices on January 13, 2000. Estimated financial data for the selected     
companies was based on publicly available research analysts' estimates, and     
estimated financial data for HA-LO was based upon HA-LO management estimates.   

None of the selected companies is identical to HA-LO. Accordingly, an   
analysis of the results of the Selected Companies Analysis involves complex     
considerations of the selected companies and other factors that could affect the
public trading value of HA-LO and the selected companies.                       

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SELECTED TRANSACTIONS ANALYSIS.  Credit Suisse First Boston analyzed the
purchase prices and implied transaction multiples paid in the following recent  
selected transactions in the promotional products, marketing services and       
telemarketing industries:                                                       

                                                        [Enlarge/Download Table]

                   ACQUIROR                                       TARGET                  
   -----------------------------------------     -----------------------------------------
                                                                                            
-  NCO Group, Inc.                            -  Compass International Services           
                                                 Corporation                              
-  HA-LO                                      -  Parsons International S.A.               
-  CustomerONE Holding Corporation            -  LCS Industries, Inc.                     
-  HA-LO                                      -  Premier Promotions & Marketing, Inc.     
-  HA-LO                                      -  Lipson Associates, Inc.                  
-  HA-LO                                      -  Promotional Marketing LLC                
-  AHL Services, Inc.                         -  Gage Marketing Support Service Group and 
                                                 Adistra, LLC                             
-  APAC TeleServices, Inc.                    -  ITI Marketing Services, Inc.             
-  The Great Universal Stores, P.L.C.         -  Metromail Corporation                    
-  Electronic Data Systems Corporation        -  Neodata Corporation                      
-  Cyrk, Inc.                                 -  Simon Marketing, Inc.                    
-  Cyrk, Inc.                                 -  Tonkin, Inc.                             
-  HA-LO                                      -  Market USA, Inc.                         
-  Heritage Media Corporation                 -  DIMAC Corporation                        

Credit Suisse First Boston compared enterprise values in the selected   
transactions as multiples of, among other things, latest twelve months sales,   
EBITDA and EBIT and equity values in the selected transactions as a multiple of 
latest twelve months net income. All multiples were based on financial          
information publicly available at the time of the relevant transaction. Credit  
Suisse First Boston then applied a range of selected multiples for the selected 
transactions of estimated calendar year 2000 sales, EBITDA and EBIT to          
corresponding financial data of HA-LO, based on HA-LO management estimates.     

No company or transaction used in the Selected Transactions Analysis is 
identical to HA-LO or the proposed merger. Accordingly, an analysis of the      
results of this analysis involves complex considerations of the companies       
involved and the transactions and other factors that could affect the           
acquisition value of the companies and HA-LO.                                   

    AGGREGATE REFERENCE RANGE.  Based on the valuation methodologies employed in
the analyses described above, Credit Suisse First Boston derived an implied     
equity reference range for HA-LO of approximately $6.38 to $8.93 per share.     
Credit Suisse First Boston then estimated the implied aggregate value of the    
consideration to be paid in the merger, assuming conversion of the HA-LO        
convertible preferred stock and, alternatively, redemption of the HA-LO         
convertible preferred stock. Based on the average of the stock price for the    
HA-LO common stock for the 15 calendar days prior to January 13, 2000 of $8.68  
per share, this analysis indicated the following implied aggregate reference    
ranges for the merger consideration, as compared to the implied                 
fully-distributed equity reference range for Starbelly.com on a stand-alone     
basis of approximately $238.0 million to $378.0 million:                        

                                                        [Enlarge/Download Table]

                              CONVERSION OF CONVERTIBLE PREFERRED  REDEMPTION OF CONVERTIBLE PREFERRED
                                 STOCK INTO HA-LO COMMON STOCK               STOCK FOR CASH           
                              -----------------------------------  -----------------------------------
                                                                                                      
Implied Aggregate Reference                                                                           
  Range for Merger                                                                                    
  Consideration.............. $182.0 million to $246.0 million     $195.0 million to $245.0 million   

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PRO FORMA MERGER ANALYSIS.  Credit Suisse First Boston analyzed the     
potential pro forma effect of the merger on HA-LO's estimated revenue per share 
and EBITDA per share for calendar years 2000 to 2002 based on the Starbelly.com 
alternative case, the HA-LO management case and the HA-LO alternative case,     
after giving effect to synergies anticipated by HA-LO management to result from 
the merger. Credit Suisse First Boston assumed that the HA-LO convertible       
preferred stock issued as part of the merger consideration was redeemed for cash
or, alternatively, converted into HA-LO common stock. This analysis indicated   
that the proposed merger would (1) be dilutive to HA-LO's estimated revenue per 
share under all scenarios, (2) be dilutive to HA-LO's estimated EBITDA per share
under all scenarios in calendar years 2000 and 2001, and (3) accretive to       
HA-LO's estimated EBITDA in calendar year 2002. The actual results achieved by  
the combined company may vary from projected results and the variations may be  
material.                                                                       

   OTHER FACTORS.  In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:      

- the recent trading history of the HA-LO common stock; and             

  - HA-LO's stock price performance relative to the Standard & Poor's MidCap
400 Index.                                                          

  MISCELLANEOUS.  HA-LO has agreed to pay Credit Suisse First Boston for its
financial advisory services a customary fee. HA-LO also has agreed to reimburse 
Credit Suisse First Boston for its reasonable out-of-pocket expenses, including 
fees and expenses of legal counsel and any other advisor retained by Credit     
Suisse First Boston, and to indemnify Credit Suisse First Boston and related    
parties against liabilities, including liabilities under the federal securities 
laws, arising out of its engagement. Credit Suisse First Boston and its         
affiliates have in the past provided, and are currently providing, financial    
services to HA-LO and certain of its affiliates unrelated to the proposed       
merger, for which services Credit Suisse First Boston has received, and may     
receive, compensation. In the ordinary course of business, Credit Suisse First  
Boston and its affiliates may actively trade equity securities of HA-LO for     
their own accounts and for the accounts of customers and, accordingly, may at   
any time hold long or short positions in such securities.                       

STARBELLY.COM'S REASONS FOR THE MERGER                                          

    - Starbelly.com expects that the merger will provide it with the opportunity
    to penetrate in a short period of time a broad base of corporate clients
     using its Internet solution. Starbelly.com expects the Internet to become
a significant distribution channel for custom-decorated products.   
    Starbelly.com believes that the synergy created by its Internet solution
    and HA-LO's existing customer base will enable it to capture significant
    share of the custom-decorated products market. Starbelly.com believes it
is a critical competitive advantage to be the first in the market.  

    - Starbelly.com also believes that the merger will give Starbelly.com access
    to its custom-decorated products market through the largest, in terms of
   sales, company in the industry. Starbelly.com strategically chose HA-LO
    because of its dominant position in the promotional products market, its
high quality sales force and its high quality relationship with its 
customers.                                                          

    Q Starbelly.com patterns believes that HA-LO's sales force has the ability
     to influence its customers' purchasing patterns and will greatly assist
Starbelly.com in its efforts to cause those customers to purchase 
   promotional and other custom-decorated products through the Internet.

    Q Starbelly.com believes that it would require substantial time and talent
  to develop the customer base that HA-LO already possesses. Moreover,
    Starbelly.com believes that the time required to independently develop
such a customer base could be an impediment to the early market   
 penetration that Starbelly.com believes is important to obtaining a
significant market share.                                         

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MERGER CONSIDERATION                                                            

If we complete the merger, Starbelly.com stockholders will receive      
approximately $240 million, which amount we will pay as follows:                

(1) paying $19 million in cash (less Starbelly.com's merger expenses in 
excess of $500,000);                                              

(2) paying the balance by issuing shares of:                            

(a) HA-LO common stock valued at $170 million; and                

(b) HA-LO preferred convertible stock valued at $51 million.      

This includes shares issuable upon conversion of Starbelly.com's outstanding    
stock options, which will be assumed by HA-LO and will be exercisable for       
HA-LO's common stock and HA-LO convertible preferred stock.                     

 We will issue in the merger and reserve for issuance upon exercise of the
assumed stock options 17 million shares of our common stock and 5.1 million     
shares of our preferred stock. You will continue to own your shares after the   
merger. Immediately after the merger, pre-merger shareholders of HA-LO will own 
approximately 69% of the outstanding common stock, and the former stockholders  
of Starbelly.com will own approximately 31% of the outstanding common stock     
(assuming all of the preferred shares are converted into common stock and all   
assumed options are exercised and all preferred shares issued upon exercise are 
converted into common stock).                                                   

 The description of HA-LO's convertible preferred stock is described below
under "Description of the Convertible Preferred Stock" (page 43).               

Options to purchase Starbelly.com common stock granted to Starbelly.com 
employees, directors and consultants will be assumed by HA-LO in the merger. See
"Assumption of Outstanding Starbelly.com Options" (page 45).                    

EFFECTIVE TIME OF THE MERGER                                                    

The merger will be effective at the time a certificate of merger is duly
filed with each of the Secretary of State of Delaware or any later date or time 
specified in the certificate of merger. The closing will occur as soon as       
possible after all conditions to the merger are satisfied.                      

MANAGEMENT AND OPERATIONS AFTER THE MERGER                                      

Following the merger closing, John R. Kelley, Jr. will remain chief     
executive officer of HA-LO, and Bradley Keywell will assume the role of         
president. Eric Lefkofsky, Starbelly.com's president, will become HA-LO's chief 
integration officer, focusing on the e-transformation of the HA-LO Promotional  
Products group, as well as HA-LO's marketing services divisions. In addition, it
is probable that Mr. Keywell and Mr. Lefkofsky will become members of your board
of directors.                                                                   

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

    If the merger is completed, Marshall J. Katz, who is currently a director of
HA-LO, will receive a consulting fee in return for certain consulting services  
he has performed for us with respect to the merger. The consulting fee we will  
pay is comprised of $200,000 in cash and options to purchase 50,000 shares of   
HA-LO common stock at an exercise price of $12.188 per share.                   

RESALE OF HA-LO SHARES                                                          

    The shares of our common and convertible preferred stock to be issued in the
merger are being offered in reliance on an exemption from the registration      
requirements of the Securities Act of 1933                                      

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("Securities Act") and various state securities laws. The shares to be issued to
the Starbelly.com stockholders in the merger will be "restricted securities"    
under Rule 144 of the Securities Act, and may be resold only if registered or in
transactions permitted by Rule 144 or other exemptions from registration. Under 
the merger agreement, we must file a shelf registration statement with the      
Securities and Exchange Commission within ten days after the merger closes to   
register for public resale a portion of the common stock received the           
Starbelly.com stockholders, and we are required to file additional registration 
statements at agreed upon times in the future to register additional shares of  
common stock for resale by all of the Starbelly.com stockholders, including     
common stock issued upon conversion of the convertible preferred stock issued in
the merger. Various Starbelly.com stockholders who will receive 66% of the      
common stock we will issue in the merger (assuming all of the preferred shares  
are converted into common stock and all assumed options are exercised and all   
preferred shares issued upon exercise are converted into common stock) have     
agreed to additional restrictions on HA-LO common stock and convertible         
preferred stock resales under separate agreements with us. See "The Merger      
Agreement--Other Covenants and Agreements" (page 59) and "The Merger            
Agreement--Other Agreements Related to the Merger Agreement" (page 62).         

We have agreed to register for issuance the shares of common stock and  
convertible preferred stock issuable upon exercise of the outstanding           
Starbelly.com options being assumed by HA-LO in the merger. See "The Merger     
Agreement--Other Covenants and Agreements" (page 59).                           

This document does not cover resales of our common stock received by the
Starbelly.com stockholders in the merger, and no person is authorized to make   
any use of this document for any resale.                                        

ACCOUNTING TREATMENT                                                            

   We intend to account for the merger as HA-LO's "purchase" of Starbelly.com.
Accordingly, Starbelly.com's results of operations will be included in our      
consolidated results of operations after the completion date of the merger. In  
preparing our consolidated financial statements, we will establish a new        
accounting basis for the Starbelly.com assets and liabilities. After the merger,
Starbelly.com's assets will take a new aggregate book value equal to the merger 
consideration PLUS Starbelly.com's liabilities PLUS the merger costs. This new  
aggregate book value is then allocated first to Starbelly.com's current assets  
at fair market value, second to Starbelly.com's specific intangibles at fair    
market value, and the remainder to Starbelly.com's goodwill. We are then        
required to amortize this goodwill. In particular, we will record goodwill in an
amount equal to substantially all of the merger consideration and merger        
expenses, and amortize this amount over five years. After the merger, the       
goodwill amortization charge will reduce our earnings for financial reporting   
purposes over the five-year amortization period.                                

NEW YORK STOCK EXCHANGE LISTING                                                 

  We expect to list for trading on the New York Stock Exchange the shares of
HA-LO common stock to be issued in connection with the merger and the shares of 
common stock issuable upon conversion of the convertible preferred stock and the
exercise of the assumed options. It is a condition to the closing of the merger 
that these shares be authorized for listing upon issuance.                      

MATERIAL FEDERAL INCOME TAX CONSEQUENCES                                        

GENERAL                                                                         

The following discussion is a summary description of the material United
States federal income tax consequences of the merger. The discussion is based   
upon the provisions of the Internal Revenue Code of 1986, as amended (the       
"Code"), applicable Treasury Regulations, judicial decisions and administrative 
rulings and practices, all as in effect on the date of this proxy statement, and
all of which are subject to change at any time, possibly with retroactive       
effect. Any such change could alter the tax                                     

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consequences to us, Starbelly.com or a Starbelly.com stockholder. The discussion
does not address the effects of any state, local or foreign tax laws or any     
federal tax laws other than federal income tax laws.                            

TREATMENT OF US, OUR SHAREHOLDERS, OUR MERGER SUBSIDIARY AND STARBELLY.COM      

We have been advised by our counsel, Neal, Gerber & Eisenberg, that the 
merger will be treated for federal income tax purposes as a reorganization under
Section 368(a) of the Code. Accordingly, our existing shareholders will not     
recognize any gain or loss as a result of the merger for federal income tax     
purposes. Similarly, neither we, nor our merger subsidiary nor Starbelly.com,   
each of which is a party to the reorganization, within the meaning of           
Section 368(b) of the Code, will recognize any gain or loss as a result of the  
merger for federal income tax purposes. In rendering this advice, Neal,         
Gerber & Eisenberg relied upon factual representations made by officers of      
HA-LO.                                                                          

TREATMENT OF HOLDERS OF STARBELLY.COM COMMON STOCK                              

   It is a condition to the obligation of Starbelly.com to complete the merger
that it receive an opinion dated the closing date from a law firm retained as   
counsel to Starbelly.com, which opinion may be based on such certificates and   
letters as are acceptable to that law firm, to the effect that, for federal     
income tax purposes, the Starbelly.com stockholders will not recognize income,  
gain or loss upon the merger, except to the extent of any cash consideration    
actually received or deemed received.                                           

 We will not seek a ruling from the Internal Revenue Service regarding the
merger and the advice and opinion of counsel referred to above will not be      
binding on the Internal Revenue Service which may disagree with counsel's       
conclusions.                                                                    

REGULATORY APPROVALS                                                            

    [UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED,
THE ANTITRUST DIVISION OF THE U.S. DEPARTMENT OF JUSTICE AND THE U.S. FEDERAL   
TRADE COMMISSION MUST REVIEW TRANSACTIONS SUCH AS THE MERGER. THE FEDERAL       
AGENCIES CONDUCTING THESE REVIEWS DETERMINE WHETHER THE MERGER COMPLIES WITH    
ANTITRUST LAWS. THE HART-SCOTT-RODINO ACT REQUIRES BOTH COMPANIES, AS WELL AS   
STARBELLY.COM'S [THREE] LARGEST STOCKHOLDERS, TO NOTIFY THESE FEDERAL AGENCIES  
OF THE MERGER. THE REQUIRED WAITING PERIOD MUST EXPIRE OR TERMINATE BEFORE THE  
MERGER CAN BE COMPLETED. BOTH COMPANIES FILED THE NOTIFICATION REPORTS WITH THE 
ANTITRUST DIVISION AND THE FEDERAL TRADE COMMISSION DURING THE WEEK OF FEBRUARY 
, 2000 AND THE WAITING PERIOD WITH RESPECT TO SUCH FILINGS WAS TERMINATED BY
THE FEDERAL TRADE COMMISSION EFFECTIVE FEBRUARY   , 2000.                       

  AT ANY TIME BEFORE OR AFTER THE MERGER CLOSES, THE ANTITRUST DIVISION, THE
FEDERAL TRADE COMMISSION, STATE ANTITRUST AUTHORITIES OR A PRIVATE PERSON COULD 
SEEK TO ENJOIN THE MERGER OR CAUSE EITHER OF THE COMPANIES TO DIVEST CERTAIN    
ASSETS. THE MERGER AGREEMENT CONDITIONS THE MERGER ON THE RECEIPT OF ALL        
REQUIRED GOVERNMENTAL CONSENTS AND APPROVALS, INCLUDING EXPIRATION OR           
TERMINATION OF THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ACT.]             

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DESCRIPTION OF THE CONVERTIBLE PREFERRED STOCK

As a portion of the merger consideration, HA-LO will issue 5.1 million  
shares of convertible participating preferred stock, assuming the exercise of   
all the assumed stock options.                                                  

RANKING                                                                         

With respect to rights on liquidation, winding-up and dissolution, the  
convertible preferred stock ranks senior to the Company's common stock, and in  
parity with or senior to all other existing and future classes of capital stock 
and series of shares of convertible preferred stock of the Company.             

DIVIDENDS AND PARTICIPATION RIGHTS                                              

   Except as described below under "--Redemption," no dividends will accrue on
the convertible preferred stock. However, if the Company declares or pays any   
dividends on its common stock (whether payable in cash, securities, or other    
property), other than dividends payable solely in shares of common stock, the   
holders of convertible preferred stock will be entitled to participate in such  
dividends, on an as-converted basis, at the same time that the Company declares 
and pays such dividends to the holders of its common stock.                     

LIQUIDATION PREFERENCE                                                          

  Upon any liquidation, winding-up or dissolution of the Company, before any
distribution or payment is made to any holder of equity securities of the       
Company ranking junior to the shares of convertible preferred stock, each holder
of convertible preferred stock will be paid (1) a liquidation preference of     
$10.00 per share of convertible preferred stock then owned by such holder, and  
(2) such holder's proportionate share (based upon the aggregate number of shares
of common stock then outstanding, assuming conversion of all outstanding shares 
of convertible preferred stock) of the amount available for payment to the      
holders of our outstanding common stock.                                        

If, upon any liquidation, winding-up or dissolution of the Company, the 
assets of the Company are insufficient to pay in full the amount due on the     
convertible preferred stock and the amount due on any parity securities, then   
such assets will be distributed among the holders of the convertible preferred  
stock and the holders of such other parity securities on a ratable basis.       

VOTING RIGHTS                                                                   

 The holders of convertible preferred stock will have the right to vote on
all matters on which the holders of the Company's common stock are entitled to  
vote. For purposes of such voting, each share of convertible preferred stock    
will have the number of votes equal to the number of shares of common stock then
issuable upon conversion of such shares of convertible preferred stock.         

PROTECTIVE PROVISIONS                                                           

   The Company will not, without consent of the holders of at least a majority
of the outstanding shares of convertible preferred stock, voting as a class:    

   (1) increase the number of authorized shares of convertible preferred stock
      or issue any additional shares of convertible preferred stock, except as
contemplated by the terms of the convertible preferred stock;     

(2) amend or modify the powers, preferences or rights of the convertible
    preferred stock or amend, alter or repeal any of the provisions of the
    Company's articles of incorporation or by-laws (including by merger or
similar transaction or otherwise) so as to exchange, reclassify or
    eliminate the shares of convertible preferred stock or any part of the
convertible preferred                                             

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      stock or otherwise affect adversely the powers, preferences or rights of
  the holders of convertible preferred stock; change the designations,
   preferences, qualifications, limitations, restrictions, or special or
       relative rights of the common stock; divide the shares of such class into
      series and fix or authorize the board of directors to fix the variations
       in the relative rights and preferences between the shares of such series;
    change the shares of such class into the same or a different number of
     shares of the same class or another class or classes; create a right of
  exchange, of all or any part of the shares of another class into the
      shares of such class; cancel or otherwise affect dividends on the shares
     of such class which had accumulated but had not been declared; limit or
deny the voting rights of the shares of such class; or            

   (3) other than the convertible preferred stock, create, authorize, issue or
      permit to exist any class of capital stock or series of preferred shares
that ranks senior to or in parity with the shares of convertible  
       preferred stock with respect to dividend rights or rights on liquidation,
 winding-up or dissolution, or reclassify any class or series of any
junior stock into, or authorize any securities exchangeable for,  
     convertible into or evidencing the right to purchase, any such class or
series.                                                           

CONVERSION RIGHTS                                                               

Each holder of convertible preferred stock will be entitled, at such    
holder's option and at any time prior to redemption, to convert all or any      
portion of such holder's shares into shares of the Company's common stock. Each 
share of convertible preferred stock will be convertible initially into one     
share of the Company's common stock. The conversion price is subject to         
adjustment from time to time in order to prevent dilution of the conversion     
rights granted in the articles of amendment.                                    

   In the event the average closing price of the Company's common stock equals
or exceeds $24.00 for ten consecutive trading days, each share of convertible   
preferred stock will automatically convert into common stock at the then        
effective conversion ratio.                                                     

REDEMPTION                                                                      

 The Company may not redeem the convertible preferred stock at its option.

    The holders of the convertible preferred stock at any time during the 30-day
period commencing on the first anniversary of the effective date of the merger, 
will have the right to require the Company to redeem all or any part of their   
shares at a price per share in cash equal to the liquidation preference of      
$10.00 per share, plus any accrued and unpaid dividends. The Company will be    
required to effect any redemption for which notice has been timely delivered no 
later than 60 days after the Company's receipt of such notice. This redemption  
right will terminate and become unexercisable after the last day of the         
redemption period (except with respect to any shares of convertible preferred   
stock for which the redemption rights have been timely exercised but which have 
not yet been redeemed).                                                         

If the Company defaults on its obligation to redeem any shares of       
convertible preferred stock, for so long as the Company is in default, the      
shares of convertible preferred stock that the Company failed to redeem will    
accrue dividends, at a rate of 8% of the liquidation price per annum on the     
$10.00 per share issuance price of such shares, beginning on the first date on  
which the Company failed to redeem such shares of convertible preferred stock   
until the redemption price has been paid in full. The rate at which dividends   
accrue will increase by 4% of the liquidation price per annum on each six month 
anniversary of the date of default until the redemption price (including accrued
dividends) has been paid in full.                                               

In the event of a "change of control," as defined in the articles of    
amendment, each holder of convertible preferred stock will be entitled, at such 
holder's option, to require the Company to redeem all or any part of their      
shares at a price per share in cash equal to a redemption price equal to the    

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greater of (1) the liquidation preference of $10.00 per share, plus any accrued 
and unpaid dividends, and (2) the amount that would have been payable if the    
holder had exercised his or her conversion immediately prior to such change of  
control.                                                                        

  If the Company sells all of the capital stock, or all or substantially all
of the assets of any subsidiary or significant business division of the Company 
for consideration consisting, in whole or in part, of cash while any shares of  
convertible preferred stock remain outstanding, then the Company is required to 
use all of the cash proceeds of such sale to fund the working capital and       
general corporate needs of the Company (including repayment of outstanding      
indebtedness under the Company's line of credit or other commercial bank loan)  
and/or to redeem the maximum possible number of shares of convertible preferred 
stock that can be redeemed with such cash proceeds. To the extent that the      
Company does not use all of the cash proceeds of any significant sale for       
working capital and general corporate purposes within 90 days of a significant  
sale, within 15 days after the expiration of such 90-day period, it must deliver
a written purchase offer to all holders of convertible preferred stock then     
outstanding and promptly purchase shares from all holders who accept this offer,
pro rata based on the number of shares then held by each at a purchase price per
share equal to the liquidation preference of $10.00 per share, plus any accrued 
and unpaid dividends.                                                           

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ASSUMPTION OF OUTSTANDING STARBELLY.COM OPTIONS 

INTRODUCTION                                                                    

Starbelly.com currently maintains the 1999 Stock Option Plan for        
Starbelly.com employees, directors and consultants. Under this plan, and before 
we complete the merger, Starbelly.com may grant options to purchase up to an    
aggregate of 3,500,000 shares of its common stock, of which 395,000 shares have 
already been issued upon option exercises. As of January 24, 2000, options to   
purchase 2.530,084 shares of Starbelly.com common stock at a weighted average   
exercise price of $1.00 per share were outstanding and held by 140 Starbelly.com
employees, directors and consultants, and options to purchase an additional     
574,916 shares may still be granted. Under the merger agreement, HA-LO is       
required, at the effective time of the merger, to assume Starbelly.com's        
obligations under the plan and each option outstanding under the plan. As a     
result, each Starbelly.com option will, as of the effective date of the merger, 
entitle the holder to receive upon exercise the same number of shares of HA-LO  
common stock and of HA-LO convertible preferred stock as such holder would have 
received pursuant to the merger agreement if the option had been exercised      
immediately prior to the merger. The other terms of each Starbelly.com option   
will continue to apply after the merger, except that prior to the effective     
time, Starbelly.com may cause (1) fifty percent (50%) of all Starbelly.com's    
options held by each key employee (as defined in the merger agreement) to become
fully vested at the effective time, and (2) thirty-three and one-third percent  
(33 1/3%) of all Starbelly.com options held by each employee identified by      
Starbelly.com to become fully vested at the effective time. In order to assume  
Starbelly.com's options and its obligations under the plan, your board of       
directors has adopted the HA-LO Industries, Inc. Stock Option Plan for          
Starbelly.com Employees, Directors and Consultants. After the merger closes, no 
new options will be granted under Starbelly.com's plan or the new HA-LO plan. A 
vote by the HA-LO shareholders in favor of the merger will constitute a vote in 
favor of the adoption of the HA-LO stock option plan and the reservation of     
shares of common stock and shares of convertible preferred stock for issuance   
upon exercise of the assumed options.                                           

PLAN SUMMARY                                                                    

In the paragraphs that follow, we summarize the material features of the
Starbelly.com plan. As you read this summary, you should bear in mind that, at  
the time the merger closes, the Starbelly.com plan will be incorporated into the
new HA-LO plan, and HA-LO will assume Starbelly.com's obligations under the     
Starbelly.com plan. The new HA-LO plan will be substantially identical to the   
Starbelly.com plan, except that, after the merger closes:                       

- the options to purchase Starbelly.com shares outstanding immediately  
      before the merger will treated as options to purchase our common stock and
    our convertible preferred stock (in amounts calculated consistently with
the conversion of shares under the merger agreement);               

  - the exercise price of each option under the new HA-LO plan will be equal
 to the exercise price of the assumed option to purchase Starbelly.com
class A common stock in effect immediately before the merger; and   

   - the compensation committee of your board of directors will administer the
new HA-LO plan.                                                     

   The summary below is neither exhaustive nor definitive, and you should read
the full text of the HA-LO plan which is attached to this proxy statement as    
Exhibit D for a complete description.                                           

PURPOSE                                                                         

    The purpose of the plan is to advance the interests of Starbelly.com and its
stockholders by providing an incentive to attract, retain and reward persons    
performing services for Starbelly.com and by motivating such persons to         
contribute to the growth and profitability of Starbelly.com.                    

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ADMINISTRATION                                                                  

The plan is administered by Starbelly.com's board of directors. All     
questions of interpretation of the plan or of any option granted under the plan 
will be determined by the board, and such determinations will be final and      
binding upon all persons having an interest in the plan or such option.         

With respect to participation by executive officers or directors of     
Starbelly.com or any other person whose transactions in Starbelly.com securities
are subject to Section 16 of the Securities Exchange Act of 1934, at any time   
that any class of equity security of Starbelly.com is registered pursuant to    
Section 12 of that Act, the plan will be administered in compliance with the    
requirements of Rule 16b-3 under that Act.                                      

SHARE RESERVE                                                                   

The maximum number of shares of Starbelly.com common stock that may be  
issued under the plan is 3,500,000, of which 395,000 shares Starbelly.com has   
already been issued. If an outstanding option for any reason expires or is      
terminated or canceled or if shares of common stock are repurchased by          
Starbelly.com under the terms of the plan, the shares allocable to the          
unexercised portion of that option or the repurchased shares will again be      
available for issuance under the plan.                                          

ELIGIBILITY                                                                     

Options may be granted to Starbelly.com employees, directors and        
consultants.                                                                    

TERMS OF OPTIONS                                                                

Each option is evidenced by an option agreement specifying the number of
shares of common stock covered by the option. Unless otherwise specified by the 
board of directors, each option has a term of ten years. The period during which
an option is exercisable may be reduced in the event the optionee's service with
Starbelly.com is terminated as described below.                                 

EXERCISE OF OPTIONS                                                             

  Options are exercisable at the time or times, or upon the event or events,
and subject to those terms, conditions, performance criteria and restrictions   
which are determined by the board of directors and set forth in the option      
agreement evidencing such option. With the exception of an option granted to an 
officer, director or consultant, no option may become exercisable at a rate less
than 20% per year over a period of five years from the effective date of grant  
of such option, subject to the optionee's continued service.                    

  Except as otherwise provided, payment of the exercise price for the number
of shares of common stock being purchased pursuant to any option must be made:  

- in cash, by check or cash equivalent;                                 

    - by tender to Starbelly.com of shares of common stock owned by the optionee
     having a fair market value (as determined by Starbelly.com) not less than
the exercise price;                                                 

  - by the assignment of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the option;

- by the optionee's promissory note in a form approved by Starbelly.com;

  - by such other consideration as may be approved by the board of directors
from time to time to the extent permitted by applicable law; or     

- by any combination of these methods.                                  

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Starbelly.com reserves the right to establish, decline to approve or    
terminate any program or procedures for the exercise of options by means of a   
cashless exercise.                                                              

OPTION PRICE                                                                    

  The exercise price for each option is established in the discretion of the
board of directors; provided, however, that (1) the exercise price for an       
incentive stock option may not be less than the fair market value of a share of 
common stock on the effective date of grant of the option, (2) the exercise     
price for a nonstatutory stock option may not be less than 85% of the fair      
market value of a share of common stock on the effective date of grant of the   
option, and (3) no option granted to a ten percent owner optionee will have an  
exercise price less than 110% of the fair market value of a share of common     
stock on the effective date of grant of the option.                             

TRANSFERABILITY                                                                 

   During the lifetime of the optionee, an option may be exercised only by the
optionee or the optionee's guardian or legal representative. No option will be  
assignable or transferable by the optionee, except by will or by the laws of    
descent and distribution.                                                       

CHANGE IN CAPITALIZATION                                                        

In the event of any stock dividend, stock split, reverse stock split,   
recapitalization, combination, reclassification or similar change in the capital
structure of Starbelly.com, appropriate adjustments will be made in the number  
and class of shares subject to the plan and to any outstanding options and in   
the exercise price of any outstanding options. If a majority of the shares which
are of the same class as the shares that are subject to outstanding options are 
exchanged for, converted into, or otherwise become shares of another            
corporation, the board of directors may unilaterally amend the outstanding      
options to provide that such options are exercisable for shares of such other   
corporation.                                                                    

TERMINATION OF SERVICE                                                          

 If the optionee's service with Starbelly.com is terminated because of the
disability of the optionee, the option may be exercised by the optionee (or the 
optionee's guardian or legal representative) at any time prior to the expiration
of six months following such cessation of service. If the optionee's service    
with Starbelly.com is terminated because of the death of the optionee, the      
option may be exercised by the optionee's legal representative at any time prior
to the expiration of six months following such cessation of service. If the     
optionee's service with Starbelly.com terminates for any reason, except         
disability or death, following such cessation of service, the option may be     
exercised by the optionee within thirty days following such cessation of        
service. Certain employees have agreements whereby upon termination, there will 
be an acceleration of vesting on unvested options. Such acceleration ranges from
30 days to twelve months of additional vesting, in no case extending past the   
option expiration date.                                                         

OCCURRENCE OF CERTAIN CORPORATE TRANSACTIONS                                    

In the event of a "Change in Control" (as defined in the plan), the     
surviving, continuing, successor, or purchasing corporation or parent           
corporation thereof, as the case may be, may either assume Starbelly.com's      
rights and obligations under outstanding options or substitute for outstanding  
options substantially equivalent options for the acquiring corporation's stock. 
An option will be deemed assumed if, following the Change in Control, the option
confers the right to purchase in accordance with its terms and conditions for   
each share of common stock subject to the option immediately prior to the Change
in Control, the consideration (whether stock, cash or other securities or       
property) to which a holder of a share of common stock on the effective date of 
the Change in Control was entitled. Any option which is neither assumed or      
substituted for by the acquiring corporation in connection with                 

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the Change in Control nor exercised as of the date of the Change in Control     
terminates and cease to be outstanding effective as of the date of the Change in
Control.                                                                        

LIMITATION ON INCENTIVE STOCK OPTIONS                                           

    To the extent that an option designated as an incentive stock option becomes
exercisable by an optionee for the first time during any calendar year for stock
having a fair market value greater than $100,000, the portion of such option    
which exceeds such amount will be treated as a nonstatutory stock option.       

TERMINATION; AMENDMENT                                                          

The board of directors may terminate or, subject to certain limitations,
amend the plan at any time. Generally, no amendment of the plan may adversely   
affect any then outstanding option without the consent of the optionee.         

CERTAIN TAX MATTERS                                                             

Starbelly.com has the right to deduct from the shares of common stock   
issuable upon exercise of an option a number of shares having a fair market     
value equal to any federal, state, local and foreign taxes required to be       
withheld by Starbelly.com upon the exercise of the option. Alternatively,       
Starbelly.com may require the optionee to make adequate provision for any such  
tax withholding obligations of Starbelly.com arising in connection with the     
exercise of the option.                                                         

 The following is only a summary of the possible effects of federal income
taxation upon the optionee and Starbelly.com with respect to the exercise of    
options under the plan. The summary does not purport to be complete and does not
discuss the income tax laws of any state or foreign country in which an optionee
may reside.                                                                     

NON-STATUTORY OPTIONS                                                           

  In the case of non-statutory options, no taxable income is recognized upon
grant of such an option. Taxation is deferred until the option is exercised at  
which time the excess of (1) the fair market value of the common stock purchased
under the option over (2) the exercise price paid for such shares will be taxed 
to the optionee at ordinary income rates, and Starbelly.com will be entitled to 
a corresponding income tax deduction at that time. Upon subsequent sale of the  
purchased shares, any gain or loss would be treated as a sale or exchange of a  
capital asset.                                                                  

INCENTIVE STOCK OPTIONS                                                         

  In the case of incentive stock options, no taxable income is recognized by
the optionee at the time an incentive stock option is granted, and no taxable   
income is generally recognized at the time the option is exercised. The optionee
will, however, recognize taxable income in the year in which the shares         
purchased under an incentive stock option are sold in an amount equal to the    
difference, if any, between the exercise price of the incentive option stock and
the fair market value of those shares on the date of sale. To the extent any    
option designated as an incentive stock option fails the statutory requirements 
of such characterization, such option will be treated as a non-statutory stock  
option.                                                                         

For federal income tax purposes, dispositions are divided into two      
categories: qualifying and disqualifying. The optionee will make a qualifying   
disposition if the sale or other disposition of the option shares is made after 
the optionee has held the shares for more than two years after the grant date of
the option and more than one year after the exercise date. If the optionee fails
to satisfy either of these two holding periods, then a disqualifying disposition
will result. If the optionee makes a disqualifying disposition of the purchased 
shares, the optionee recognizes ordinary income to the extent                   

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of the lesser of (1) the difference between the disposition price and the       
exercise price or (2) the difference between the exercise price and the fair    
market value of the stock on the date of exercise. Starbelly.com will be        
entitled to an income tax deduction for the taxable year in which such          
disposition occurs, equal to the amount by which the fair market value of such  
shares on the date the option was exercised exceeded the option price.          

COMPARATIVE MARKET PRICE DATA 

HA-LO COMMON STOCK                                                              

HA-LO's common stock is traded on the New York Stock Exchange under the 
symbol "HMK." The following table sets forth, for the periods indicated, the    
high and low sales prices of the HA-LO common stock as reported on New York     
Stock Exchange.                                                                 

                                                        [Enlarge/Download Table]

                                                                       HIGH                      LOW           
                                                             ------------------------  ------------------------
                                                                                                               
1998 (1)                                                                                                       
  First Quarter............................................. $25 9/16                  $16 5/16                
  Second Quarter............................................ 23 13/16                  19 1/16                 
  Third Quarter............................................. 23 9/16                   14 7/8                  
  Fourth Quarter............................................ 25 3/16                   14 15/16                
1999                                                                                                           
  First Quarter............................................. 25 7/16                   8 9/16                  
  Second Quarter............................................ 14 3/4                    9 1/2                   
  Third Quarter............................................. 9 7/8                     5 5/16                  
  Fourth Quarter............................................ 9                         4 7/16                  
2000                                                                                                           
  First Quarter (through [FEBRUARY]     )................... [      ]                  [      ]                

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

(1) All share prices have been adjusted to take into account a 3-for-2 stock    
split which was effected on February 19, 1999.                          

   HA-LO has not paid any dividends since its initial public offering in 1992.

On January 14, 2000, the last full trading day prior to the public      
announcement of the execution of the merger agreement, the last sale price of   
the HA-LO common stock as reported on the New York Stock Exchange was $12 3/16. 
On February       , 2000, the most recent practicable date prior to the printing
of this proxy statement for which sales price information was obtainable, the   
last sale price of the HA-LO common stock as reported on the New York Stock     
Exchange was $      .                                                           

    On January 28, 2000, there were approximately [48,724,790] holders of record
of HA-LO common stock.                                                          

STARBELLY.COM COMMON STOCK                                                      

Starbelly.com is privately-held and there is, therefore, no established 
public trading market for the Starbelly.com common stock. For information       
regarding the Starbelly.com common stock, see "Unaudited Comparative Per Share  
Data" (page 13) and "Starbelly.com Selected Historical Financial Data" (page    
69).                                                                            

POST-MERGER DIVIDEND POLICY                                                     

  After the merger, we intend to retain earnings to finance the expansion of
our businesses. Any future dividends will be at the discretion of your board of 
directors and will be determined after consideration of factors such as our     
earnings, financial condition, cash flows from operations, current and          
anticipated cash needs, expansion plans and any restrictions that may be imposed
under our current and future credit facilities.                                 

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THE MERGER AGREEMENT

   THIS DISCUSSION SUMMARIZES THE MATERIAL PROVISIONS OF THE MERGER AGREEMENT.
A COPY OF THE MERGER AGREEMENT IS INCLUDED IN THIS DOCUMENT AS EXHIBIT A. THIS  
SUMMARY IS QUALIFIED BY REFERENCE TO THE FULL AGREEMENT, WHICH YOU ARE          
ENCOURAGED TO READ.                                                             

CLOSING OF THE MERGER                                                           

The merger agreement provides that the merger will be completed when the
certificate of merger is filed with the Secretary of State of the State of      
Delaware Secretary of State. If our shareholders approve the merger and all     
other conditions to the merger are satisfied or waived, the merger is expected  
to be completed promptly after our special meeting.                             

CONSIDERATION TO BE RECEIVED IN THE MERGER                                      

If we complete the merger, Starbelly.com stockholders will receive      
approximately $240 million, which amount we will pay by paying $19 million in   
cash (less Starbelly.com's merger expenses in excess of $500,000) and paying the
balance by issuing shares of HA-LO common stock valued at $170 million and      
shares of HA-LO convertible preferred stock valued at $51 million. This includes
HA-LO's assumption of Starbelly.com's outstanding stock options, which will be  
exercisable for HA-LO common stock and HA-LO convertible preferred stock. We    
will issue in the merger and reserve for issuance upon exercise of the assumed  
stock options 17 million shares of our common stock and 5.1 million shares of   
our convertible preferred stock.                                                

  Ownership of HA-LO common stock and voting rights after the merger will be
substantially different than ownership and voting before the merger. When       
comparing HA-LO's ownership and control after the merger to its ownership and   
control before the merger, you should bear in mind that the Starbelly.com       
stockholders receiving convertible preferred stock may convert some or all of   
these shares into our common stock, and that the holders of Starbelly.com       
options may exercise some or all of these options for shares of the Company's   
common stock and convertible preferred stock. Moreover, the holders of the      
convertible preferred stock are entitled to one vote for each of their preferred
shares when matters are submitted to a vote to the holders of our common stock. 
Therefore, the holders of convertible preferred stock exercise to that extent   
control over matters submitted to our shareholders even if these holders of     
convertible preferred stock do not convert their shares into common stock. The  
following table summarizes the effects of the voting and conversion rights of   
all convertible preferred stock issued in the merger and the exercise of all    
options substituted in the merger:                                              

                                                        [Enlarge/Download Table]

                               AFTER THE MERGER, PRE-MERGER   AFTER THE MERGER, FORMER STARBELLY.COM
ASSUMING THAT:                 HA-LO SHAREHOLDERS WILL OWN:           STOCKHOLDERS WILL OWN:        
--------------                 -----------------------------  --------------------------------------
                                                                                                    
Former Starbelly.com                                                                                
stockholders do convert their                                                                       
HA-LO convertible preferred                                                                         
stock but former                                                                                    
Starbelly.com optionholders                                                                         
do not exercise their HA-LO     % of our outstanding common                                         
options.                                  stock.              % of our outstanding common stock.    

Former Starbelly.com                                                                                
stockholders do convert their                                                                       
HA-LO convertible preferred                                                                         
stock and former Starelly.com                                                                       
optionholders do exercise                                                                           
their HA-LO options and                                                                             
convert the underlying          % of our outstanding common                                         
convertible preferred stock.               stock              % of our outstanding common stock     

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NO CONVERSION OF OUR COMMON STOCK                                               

Nothing will happen to your HA-LO shares as a result of the merger. They
will not be converted, and you will not need to surrender them for any exchange.
After the merger, your certificates will represent the same number of shares as 
they represented before the merger.                                             

TERMS OF THE MERGER                                                             

STARBELLY.COM'S REPRESENTATIONS AND WARRANTIES                                  

In the merger agreement, the parties have made various customary        
representations and warranties as to, among other things:                       

- their corporate organization and compliance with law                  

- their capitalization                                                  

- the enforceability of the merger agreement and the authority of the   
parties to enter into the merger agreement                          

- absence of conflicts                                                  

- litigation                                                            

- absence of changes in their businesses                                

- employee benefit matters                                              

- tax matters                                                           

- intellectual property rights                                          

- significant contracts                                                 

- environmental matters                                                 

- related party transactions                                            

Starbelly.com has also made representations and warranties as to, among 
other things:                                                                   

- its business and financial condition                                  

- required approvals or consents to complete the merger                 

- financial statements and business records                             

- real property                                                         

- title to its assets                                                   

- inventory and warranty matters                                        

- Starbelly.com's ownership of our common stock                         

- Starbelly.com's website                                               

- year 2000 matters                                                     

- Starbelly.com's technology systems                                    

   We have also made representations and warranties as to, among other things:

- our proper filing of periodic reports with the Securities and Exchange
Commission                                                          

 - the non-applicability of the takeover statute contained in the Illinois
Business Corporation Act                                            

- absence of a HA-LO shareholder rights plan                            

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  All of these representations and warranties will expire one year after the
merger closes.                                                                  

CONDITIONS TO THE MERGER                                                        

The obligations of the parties to complete the merger are subject to    
satisfaction or waiver of certain conditions on or before the closing. These    
include:                                                                        

- our required shareholder approval;                                    

   - the absence of a governmental order, law or private action preventing the
transaction or seeking to prevent it;                               

- receipt of all necessary third party and governmental consents;       

  - listing on the New York Stock Exchange of our shares to be issued in the
merger;                                                             

- the continuing truthfulness of the representations made in the merger 
agreement;                                                          

- all parties' compliance with the merger agreement's terms;            

- receipt of signed employment agreements and non-competition agreements
from certain key employees and stockholders of Starbelly.com; and   

  - receipt of the escrow agreements (see "--Other Agreements Related to the
Merger Agreement "--Escrow Agreements (page 62)).                   

   Our obligation to close the merger is subject to the satisfaction or waiver
of certain additional conditions on or before the closing. These include:       

- payment by Starbelly.com stockholders, board members and employees of 
their debts to Starbelly.com;                                       

    - Silicon Valley Bank's exercise of its warrant to purchase 28,369 shares of
      Starbelly.com Series B Convertible Preferred Stock and conversion of these
      preferred shares into shares of Starbelly.com common stock (or, instead of
   this warrant exercise and conversion transaction, Silicon Valley Bank's
granting its consent to be treated in the merger as if this warrant 
exercise and conversion had taken place); and                       

 - our receipt of indemnification agreements from each of Bradley Keywell,
Starbelly.com's current chief executive officer, and Eric Lefkofsky,
Starbelly.com's current president.                                  

Starbelly.com's obligation to close the merger is subject to the        
satisfaction or waiver of certain additional conditions on or before the        
closing. These include:                                                         

    - receipt of an opinion from its attorneys as to the tax consequences of the
merger to the Starbelly.com stockholders;                           

- receipt of our agreement to release claims against the officers and   
directors of Starbelly.com relating to their actions as officers,   
   directors and stockholders occurring before the merger closing (but not
including obligations related to the merger agreement and related   
agreements);                                                        

   - filing with the Secretary of State of the State of Illinois our statement
    establishing the convertible preferred stock to be issued in the merger;
and                                                                 

 - receipt by the Starbelly.com stockholders of signed registration rights
agreements (see "--Other Agreements Related to the Merger           
Agreement--Registration Rights Agreements (page 63)).               

OBLIGATIONS PENDING CLOSING                                                     

The merger agreement imposes obligations and restrictions on its parties
pending the transaction. The affirmative obligations for both parties include:  

- providing access to each other's business records and management      
personnel;                                                          

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- operating their businesses in the usual manner;                       

- preserving their business relations;                                  

- maintaining existing insurance policies;                              

  - consulting with each other on operational matters (to the extent legally
permitted); and                                                     

- filing tax returns before their due dates.                            

The merger agreement also restricts the parties to agreed levels of the 
following (or prohibits them entirely):                                         

- bonuses and salary increases;                                         

- new employee benefit plans;                                           

- changing Starbelly.com's overall business (prohibited);               

- incurrence of new debt;                                               

- capital expenditures;                                                 

- dividends and distributions (prohibited);                             

- changes in capitalization (prohibited);                               

- acquisitions and mergers (prohibited);                                

- dispositions of material assets (prohibited);                         

- amendments to material organizational documents (prohibited); and     

- soliciting the sale of Starbelly.com or HA-LO to a third party        
(prohibited).                                                       

OTHER COVENANTS AND AGREEMENTS                                                  

The merger agreement requires the parties to fulfill certain other      
obligations that relate to the merger and the issuance of our shares of common  
stock and convertible preferred stock, including the following:                 

    - All parties to the merger agreement must make efforts to permit the merger
to be a tax-free reorganization under the Internal Revenue Code.    

    - We will register for resale, in four steps, the shares of our common stock
      received by the Starbelly.com stockholders in the merger and the shares of
  our common stock issuable to the Starbelly.com stockholders upon their
   conversion of our convertible preferred stock. These registrations will
   occur beginning ten days after the merger closing and will be completed
within two years. See "--Other Agreements Related to the Merger     
Agreement--Registration Rights Agreements" (page 63).               

 - We will also take certain other actions relating to the issuance of our
      common stock, as needed, including filing notices for state securities law
 compliance and for listing shares of our common stock on the New York
Stock Exchange.                                                     

- Each of the Starbelly.com stockholders will enter into a shareholders 
agreement with us. See "--Other Agreements Related to the Merger    
Agreement--Stockholders' Agreements" (page 63).                     

- We, Starbelly.com, and Starbelly.com's stockholders will take actions 
    necessary to complete the merger, including obtaining all required third
    party and governmental consents. We will keep each other informed of any
events or conditions that may prevent the merger or any of the other
transactions relating to the merger.                                

- We and Starbelly.com will cooperate in order to obtain the tax opinion
   from Starbelly.com's counsel. See "--Terms of the Merger--Conditions to
the Merger" (page 58)).                                             

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- In connection with the merger, we have agreed to give Starbelly.com   
 pre-merger stockholders the number of directors on the board which is
  proportionate to the Starbelly.com stockholder ownership of our common
 stock (assuming the conversion of our convertible preferred stock and
exercise of options) in the merger. We have agreed to place three   
   designees on your board and to amend our bylaws to increase the size of
your board from eight to eleven directors. Immediately following the
    merger, Bradley Keywell will designate one person to serve on your board
 and Eric Lefkofsky will designate two persons to serve on your board.

 - We will assume the outstanding options to purchase Starbelly.com common
stock. At the time the merger closes, we will register the shares of
common stock and convertible preferred stock which are issuable upon
   exercise of these options. See "Assumption of Outstanding Starbelly.com
Options."                                                           

- We have agreed to loan Starbelly.com up to an additional $10 million, 
  depending upon when the merger is completed. If we do not complete the
merger by March 1, 2000, we will extend Starbelly.com an unsecured  
   $5 million loan, and if we do not close the merger by April 1, 2000, we
   will extend Starbelly.com another unsecured $5 million loan. These loan
      amounts are not a part of the merger consideration, although under certain
    circumstances (1) Starbelly.com may not be required to pay back all or a
portion of these loans if we become obligated to pay Starbelly.com  
termination fees, and (2) the maturity dates of the loans may be    
accelerated if we properly terminate the merger agreement.          

- We have agreed to exculpate from liability and indemnify, after the   
   merger, those persons who are currently Starbelly.com officers, agents,
    employees and directors to the same extent that these protections are in
place before the merger closes.                                     

- If Starbelly.com requests, we will be required to amend the merger    
agreement to provide that Starbelly.com, rather than our merger     
subsidiary, will be the surviving entity after the merger.          

For a description of other agreements among Starbelly.com, certain      
Starbelly.com stockholders and us, see "--Other Agreements Related to the       
Merger--Registration Rights Agreements" (page 63), "--Other Agreements Related  
to the Merger--Stockholders' Agreements" (page 63) and "--Other Agreements      
Related to the Merger--Escrow Agreements" (page 62).                            

TERMINATION OF THE MERGER AGREEMENT                                             

    The merger agreement may be terminated at any time before the transaction is
completed:                                                                      

  - by mutual consent of the Starbelly.com board of directors and your board
of directors;                                                       

- by your board of directors if Starbelly.com has breached the merger   
      agreement and the damages we would suffer as a result of this breach would
reasonably be expected to exceed $14 million;                       

  - by their board of directors if we have breached the merger agreement and
   the damages Starbelly.com would suffer as a result of this breach would
reasonably be expected to exceed $40 million;                       

    - by either your board of directors or Starbelly.com's board of directors if
   any final decision of a governmental authority prohibits concluding the
merger;                                                             

    - by either party if our shareholders fail to approve at our special meeting
    the issuance of our shares in the merger or if the merger transaction is
not completed by April 15, 2000 (or April 29, 2000, if either we or 
Starbelly.com requests an extension) (the "Outside Date");          

  - by Starbelly.com if we have not, by February 28, 2000, provided evidence
   reasonably satisfactory to Starbelly.com that we have a working capital
      credit facility with substantially the same terms as our current facility;
or                                                                  

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   - by Starbelly.com if, because of your board of directors' fiduciary duties
to HA-LO shareholders, your board acts upon a proposal to enter into
certain business combinations with someone other than Starbelly.com.

The maturity dates for loans we have advanced to Starbelly.com will be  
extended for one year if, either:                                               

- we are unable to close the merger by the Outside Date because certain 
regulatory approvals or processes have not been completed; or       

    - we or Starbelly.com have properly terminated the merger agreement (not due
      to any breach by Starbelly.com) and Starbelly.com cannot repay these loans
in the ordinary course of their business.                           

TERMINATION FEES                                                                

We have agreed to pay Starbelly.com for up to $500,000 of merger-related
expenses incurred by Starbelly.com and its stockholders plus their actual       
damages up to a maximum of $10 million if:                                      

- our shareholders do not approve the merger, or                        

- we are unable, by February 28, 2000, to provide evidence reasonably   
satisfactory to Starbelly.com that we have a working capital credit 
  facility with substantially the same terms as our current facility, or

- if, because of your board of directors' fiduciary duties to HA-LO     
shareholders, your board acts upon a proposal to enter into certain 
business combinations with someone other than Starbelly.com, and    
Starbelly.com terminates the merger agreement.                      

   We have also agreed that we will reimburse Starbelly.com for merger-related
expenses incurred by Starbelly.com and its stockholders, up to $500,000, if     
Starbelly.com terminates the agreement because we materially breach it. Under   
this circumstance Starbelly.com's obligations to pay amounts under the loans we 
have extended to Starbelly.com would be extended one additional year. If,       
however, our breach were to be willful and in bad faith, we would be liable to  
Starbelly.com, not only for its expenses up to $500,000, but also for           
Starbelly.com's actual damages, up to a maximum of $10 million.                 

Starbelly.com has agreed to reimburse us for our expenses related to the
merger agreement, up to $500,000, if we terminate the merger agreement because  
Starbelly.com materially breaches it. Under this circumstance, Starbelly.com    
would be required to pay us, within six months, all amounts outstanding under   
the loans we have extended Starbelly.com. If, however, Starbelly.com's breach   
were to be willful and in bad faith, Starbelly.com would be liable to us, not   
only for expenses up to $500,000, but also for our actual damages, up to a      
maximum of $10 million, and Starbelly.com would be immediately required to pay  
us all amounts outstanding under the loans we have extended to them.            

INDEMNIFICATION                                                                 

FOR OUR BENEFIT                                                                 

    The merger agreement requires the Starbelly.com stockholders to indemnify us
for claims brought within one year against all losses, expenses (including      
reasonable attorneys' fees and expenses) or liabilities arising out of any      
breach by Starbelly.com of the merger agreement, up to a maximum of             
$25 million. However, we are not entitled to indemnification payments unless our
damages are greater than $5 million, and, if our damages reach this threshold,  
we may recover only the portion of our damages which exceeds $5 million. Our    
recovery of damages through indemnification is subject to an important          
limitation. We can recover our losses only from the escrow accounts holding     
$25 million of the merger consideration in the form of shares of our common     
stock and convertible preferred stock.                                          

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These shares will be treated as having the same value they did at the time of   
the merger. See "--Other Agreements Related to the Merger Agreement--Escrow     
Agreements," below.                                                             

FOR THE BENEFIT OF STARBELLY.COM'S STOCKHOLDERS                                 

   The merger agreement also provides that we will indemnify the Starbelly.com
stockholders for claims brought within one year against all losses, expenses    
(including reasonable attorneys' fees and expenses) or liabilities, arising out 
of our breach of the merger agreement, up to a maximum of $29 million. However, 
the Starbelly.com stockholders are not entitled to indemnification payments     
unless their damages are greater than $15 million, and, if their damages reach  
this threshold, Starbelly.com stockholders may recover only the portion of their
damages which exceeds $15 million.                                              

AMENDMENT AND WAIVER                                                            

The merger agreement may be amended only by mutual written agreement.   
Waivers under the agreement must be in writing.                                 

OTHER AGREEMENTS RELATED TO THE MERGER AGREEMENT                                

ESCROW AGREEMENTS                                                               

We have entered into separate escrow agreements with (1) five principal 
Starbelly.com stockholders and an escrow agent to provide us limited protections
in the event we are entitled to indemnification under the merger agreement and  
(2) two principal Starbelly.com stockholders, who will enter into employment    
agreements in connection with the merger. Under the first set of escrow         
agreements, when we complete the merger, these five principal Starbelly.com     
stockholders will deposit $25 million of the merger consideration, consisting of
shares of our common stock and shares of our convertible preferred stock issued 
in the merger, with American National Bank and Trust Company of Chicago (the    
"Escrow Agent"). The Escrow Agent will hold the escrowed shares as security for 
Starbelly.com's indemnification obligations under the merger agreement: if we   
have a proper claim for indemnification, we are entitled to recover escrowed    
shares with a value equal to our claim. If our claim is disputed, the Escrow    
Agent will retain escrowed shares with a value equal to the disputed amount (but
any undisputed portion would be released to us). For purposes of the escrow     
agreements, the value of our shares will be equal to their values in the merger.
Unless we have a claim pending one year after the merger closes, all remaining  
shares in the escrow will be released to the former principal Starbelly.com     
stockholders who originally deposited the shares into escrow.                   

Under the second set of escrow agreements, Bloomfield Partners Family   
Limited Partnership (of which Bradley Keywell is a beneficial owner) and        
Coventry Partners Family Limited Partnership (of which Eric Lefkofsky is a      
beneficial owner) will each deposit a portion of each of their merger           
consideration with the Escrow Agent. Bloomfield Partners Family Limited         
Partnership will deposit approximately        on behalf of Bradley Keywell.     
Coventry Partners Family Limited Partnership will deposit approximately         
on behalf of Eric Lefkofsky. This portion of the merger consideration is        
intended to secure each of Bradley Keywell's and Eric Lefkofsky's performance of
their respective three-year employment agreements after the merger. See         
"--Employment Agreements With Key Executives." If either Mr. Keywell or         
Mr. Lefkofsky defaults under his respective employment agreement, Bloomfield    
Partners (in the case of a default by Mr. Keywell) or Coventry Partners (in the 
case of a default by Mr. Lefkofsky) will forfeit the escrowed shares escrowed   
under these agreements. However, we have agreed that a portion of the escrowed  
shares will be released to each of Bloomfield Partners and Coventry Partners    
each year provided that no employee default has occurred for Mr. Keywell or     
Mr. Lefkofsky, respectively. The Escrow Agent will release 100% of the escrowed 
shares on the third anniversary of the merger closing, if no employee default   
has occurred before that time.                                                  

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STOCKHOLDERS' AGREEMENTS                                                        

    Starbelly.com stockholders with an approximate 94% of the stockholder voting
power have already approved the merger and have entered into separate agreements
with us ("Stockholders' Agreements") restricting these stockholders from        
revoking their approval (or agreeing to a competing business combination)       
between the date of the merger agreement and the completion of the merger       
(unless the merger agreement is earlier terminated and except as Delaware law   
may otherwise require). These Stockholders' Agreements also contain customary   
investment representations regarding the stockholders' acquisition of our common
stock and convertible preferred stock in the merger.                            

Of the Starbelly.com stockholders who have executed these agreements,   
holders of shares representing 69% of our common stock to be issued in the      
merger (assuming conversion of shares of convertible preferred stock but        
excluding exercise of assumed options) have agreed, for a period of three years 
after the merger closing and subject to certain limitations contained in the    
Stockholders' Agreements; to refrain from certain transactions involving our    
capital stock and management of our company, including:                         

- future acquisitions of more than 1% of our common stock (assuming the 
     conversion of convertible preferred stock and the exercise of outstanding
options);                                                           

- acting or seeking to control our management, board of directors or    
policies; and                                                       

   - transferring shares of our capital stock to another person who, after the
transfer, would own more than 10% of the voting power of HA-LO.     

In addition, the two Starbelly.com stockholders who are also key        
Starbelly.com employees, Bradley Keywell and Eric Lefkofsky, have also agreed to
certain restrictive covenants which apply after the merger. Upon the merger     
closing, each of Mr. Keywell and Mr. Lefkofsky will enter into five-year        
agreements restricting them from competing against us, using or disclosing our  
proprietary information or soliciting our employees or customers.               

REGISTRATION RIGHTS AGREEMENTS                                                  

 These agreements between HA-LO and each of the Starbelly.com stockholders
specify in greater detail our obligations to register our common stock and      
convertible preferred stock for the Starbelly.com stockholders (see "--Other    
Covenants and Agreements"). We are required to register for resale, in four     
steps, the shares of our common stock received by the Starbelly.com stockholders
in the merger and the shares of our common stock issuable to the Starbelly.com  
stockholders upon their conversion of convertible preferred stock. We will      
register 25% of these shares within ten days after completion of the merger, an 
additional 15% within three months after completion of the merger, an additional
33 1/3% of these shares within nine months after completion of the merger and   
the remaining shares within two years after completion of the merger. We are    
required to register any shares of our common stock issuable upon conversion of 
preferred stock by one of the Starbelly.com stockholders, Chase Venture Capital 
Associates, L.P., and for any of its affiliates, within 30 days after its notice
of conversion, to the extent not already registered. We are responsible for     
paying expenses relating to the registration, but the Starbelly.com stockholders
are responsible for paying any selling commissions and attorneys' fees.         

Under these agreements, we have also agreed to indemnify a seller or    
underwriter of our common stock against all losses, expenses (including         
reasonable attorneys' fees and expenses) or liabilities resulting from an untrue
statement (or omission of an important fact) in the resale prospectus for the   
registered shares, unless such damages relate to an untrue statement (or        
omission of an important fact) that someone else furnished (or neglected to     
furnish) us. However, principal Starbelly.com stockholders have agreed to       
indemnify us against losses, expenses (including reasonable attorneys' fees and 
expenses) or liabilities under the securities laws as a result of an untrue     
statement (or omission of an                                                    

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important fact) that they furnished (or neglected to furnish) to us for the     
resale prospectus or this proxy statement.                                      

   The registration agreements also contain customary investor representations
from the Starbelly.com stockholders.                                            

HA-LO LOANS TO STARBELLY.COM                                                    

 On January 6, 2000, while negotiating the merger agreement but before the
merger agreement was signed, we loaned Starbelly.com $5 million on an unsecured 
basis, and, upon signing the merger agreement, we extended Starbelly.com an     
additional unsecured $5 million loan. Under the merger agreement, we have agreed
to loan Starbelly.com up to an additional $10 million, depending upon when the  
merger is completed. If we do not complete the merger by March 1, 2000, we will 
extend Starbelly.com an unsecured $5 million loan, and if we do not close the   
merger by April 1, 2000, we will extend Starbelly.com another unsecured         
$5 million loan. These loan amounts are not a part of the merger consideration, 
although under certain circumstances (1) Starbelly.com may not be required to   
pay back all or a portion of these loans if we become obligated to pay          
Starbelly.com termination fees, and (2) the maturity dates of the loans may be  
accelerated if we properly terminate the merger agreement.                      

EMPLOYMENT AGREEMENTS WITH KEY EXECUTIVES                                       

At the time the merger closes, we will enter into three-year employment 
agreements with each of Bradley Keywell, who will become president of HA-LO, and
Eric Lefkofsky, who will become chief integration officer. Under his agreement, 
Mr. Keywell for so long as Mr. Keywell's employment agreement is in effect, will
have a right to request the board of directors to nominate his designee, and if 
he does so, our management (within legal limits) is required to present such    
designee to our shareholders as nominee for election. Under Mr. Lefkofsky's     
agreement, for so long as Mr. Lefkofsky's employment agreement is in effect, he 
will have the right to request the board of directors to nominate and the board 
of directors will present two designees for election by our shareholders. Under 
each of these agreements, the key executive agrees to the following:            

- maintain confidentiality;                                             

- assign works made for hire to HA-LO; and                              

- refrain, during the term of the employment agreement and for two years
  afterward, from competing against HA-LO or soliciting its employees or
customers.                                                          

If either Messrs. Keywell or Lefkofsky defaults under their respective  
agreements, certain shares of HA-LO common stock received as Merger             
Consideration in which Mr. Keywell or Mr. Lefkofsky, respectively, hold a       
beneficial interest will be forfeited. See "--Escrow Agreements."               

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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

HA-LO AND STARBELLY.COM PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS       

   The following unaudited Pro Forma Combined Condensed Balance Sheet reflects
adjustments computed assuming that the merger had closed as of September 30,    
1999. The unaudited Pro Forma Combined Statements of Operations reflect         
adjustments computed assuming that the merger had closed on March 22, 1999 (the 
date of inception of Starbelly.com), and carried forward through September 30,  
1999. Accordingly, the effects of pro forma adjustments on income are not       
reflected in retained earnings on the Pro Forma Balance Sheet. The pro forma    
information gives effect to the merger under the purchase method of accounting  
and to the assumptions and adjustments described in the accompanying notes to   
the pro forma combined condensed financial statements.                          

The pro forma combined condensed financial statements are based on the  
historical financial statements of HA-LO and the related notes thereto          
incorporated herein by reference and the historical financial statements of     
Starbelly.com and the related notes thereto included elsewhere herein. These pro
forma statements are presented for informational purposes only and may not      
necessarily be indicative of the results that actually would have occurred had  
the merger been consummated at the dates indicated, nor are they necessarily    
indicative of future operating results or financial position.                   

HA-LO AND STARBELLY.COM PRO FORMA COMBINED CONDENSED INCOME STATEMENT 

                                                        [Enlarge/Download Table]

                                                     FOR THE YEAR ENDED DECEMBER 31, 1998              
                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            
                                                  ------------------------------------------           
                                                                                 PRO FORMA    PRO FORMA
                                                     HA-LO      STARBELLY.COM   ADJUSTMENTS   COMBINED 
                                                  -----------   -------------   ------------  ---------
                                                                                                       
Net sales........................................   $589,669      $      --       $      --   $589,669 
Cost of sales....................................    382,503             --              --    382,503 
                                                    --------      ---------       ---------   -------- 
  Gross Profit...................................    207,166             --              --    207,166 
Selling expenses.................................     76,639             --              --     76,639 
General and administrative expenses..............     80,950             --              --     80,950 
Non-Recurring Charges............................     10,337             --              --     10,337 
                                                    --------      ---------       ---------   -------- 
  Income from operations.........................     39,240             --              --     39,240 
Other income (expense), net......................      1,633             --              --      1,633 
                                                    --------      ---------       ---------   -------- 
  Income before taxes............................     40,873             --              --     40,873 
Provision for income taxes.......................     16,123             --              --     16,123 
                                                    --------      ---------       ---------   -------- 
Net income for the period........................   $ 24,750      $      --       $      --   $ 24,750 
                                                    --------      ---------       ---------   -------- 
Pro forma net income for the period..............   $ 24,520      $      --       $      --   $ 24,520 
                                                    --------      ---------       ---------   -------- 
Net Income per Share (unaudited pro forma)                                                             
  Basic..........................................   $   0.55      $      --       $      --   $   0.55 
  Diluted........................................   $   0.53      $      --       $      --   $   0.53 
Weighted Average Shares Outstanding                                                                    
  Basic..........................................     44,734             --              --     44,734 
  Diluted........................................     46,447             --              --     46,447 

See Notes to Pro Forma Combined Condensed Financial Statements                  

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HA-LO AND STARBELLY.COM PRO FORMA COMBINED CONDENSED INCOME STATEMENT 

                                                        [Enlarge/Download Table]

                                             FOR THE NINE MONTHS ENDED SEPTEMBER 30,                    
                                                              1999                                      
                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                    
                                            -----------------------------------------                   
                                                                           PRO FORMA          PRO FORMA 
                                               HA-LO      STARBELLY.COM   ADJUSTMENTS         COMBINED  
                                            (UNAUDITED)     (AUDITED)     (UNAUDITED)        (UNAUDITED)
                                            -----------   -------------   -----------        -----------
                                                                                                        
Net sales..................................   $464,584        $   183       $     --           $464,767 
Cost of sales..............................    306,171            161             --            306,332 
Restructuring charges......................      2,653             --             --              2,653 
                                              --------        -------       --------           -------- 
  Gross Profit.............................    155,760             22             --            155,782 

Selling expenses...........................     66,676            450             --             67,126 
General and administrative expenses........     88,118          2,137         26,268 (G)(D)     116,523 
Non-Recurring Charges......................     27,347             --             --             27,347 
                                              --------        -------       --------           -------- 
  Loss from operations.....................    (26,381)        (2,565)       (26,268)           (55,214)

Other income (expense), net................        496             66           (897)(C)           (335)
                                              --------        -------       --------           -------- 
  Loss before taxes........................    (25,885)        (2,499)       (27,165)           (55,549)
                                              --------        -------       --------           -------- 
Benefit for income taxes...................    (10,354)            --         (1,183)(F)        (11,537)
                                              --------        -------       --------           -------- 
Net loss for the period....................   $(15,531)       $(2,499)      $(25,982)          $(44,012)
                                              ========        =======       ========           ======== 
Net loss per share (unaudited pro forma):                                                               
  Basic/Diluted............................   $  (0.32)       $ (0.15)                         $  (0.67)
Weighted Average Shares Outstanding:                                                                    
  Basic/Diluted............................     48,559         17,098            (98)(E)         65,559 

See Notes to Pro Forma Combined Condensed Financial Statements                  

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HA-LO AND STARBELLY.COM PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
(UNAUDITED) 
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                            PRO FORMA      PRO FORMA
                                                  HA-LO     STARBELLY.COM  ADJUSTMENTS     COMBINED 
                                                 --------   -------------  -----------     ---------
                                                                                                    
                                                ASSETS                                              
CURRENT ASSETS:                                                                                     
  Cash and cash equivalents....................  $ 14,028      $ 7,115             --      $ 21,143 
  Short-term investments.......................       845           --             --           845 
  Receivables..................................   176,359          156             --       176,515 
  Inventories..................................    37,650           --             --        37,650 
  Prepaid expenses and deposits................    12,984          148             --        13,132 
                                                 --------      -------       --------      -------- 
    Total current assets.......................   241,866        7,419             --       249,285 
                                                 --------      -------       --------      -------- 
PROPERTY AND EQUIPMENT, NET....................    37,218        1,242             --        38,460 
                                                 --------      -------       --------      -------- 
OTHER ASSETS:                                                                                       
  Intangible assets, net.......................    69,091           --        213,528 (A)   282,619 
  Due from related party.......................        --          282             --           282 
  Other........................................     6,441           --             --         6,441 
                                                 --------      -------       --------      -------- 
    Total other assets.........................    75,532          282        213,528       289,342 
                                                 --------      -------       --------      -------- 
                                                 $354,616      $ 8,943       $213,528      $577,087 
                                                 ========      =======       ========      ======== 

                                 LIABILITIES AND SHAREHOLDERS' EQUITY                               
CURRENT LIABILITIES:                                                                                
  Current maturities of long-term debt.........  $  1,681      $    --       $     --      $  1,681 
  Book overdraft...............................       801           --             --           801 
  Accounts payable.............................    52,521        1,732             --        54,253 
  Accrued expenses.............................                                                     
    Other......................................    34,802          168             --        34,970 
    Restructuring..............................     9,459           --             --         9,459 
                                                 --------      -------       --------      -------- 
    Total current liabilities..................    99,264        1,900             --       101,164 
                                                 --------      -------       --------      -------- 
LONG-TERM DEBT,                                                                                     
  less maturities shown above..................     5,900           --         23,000 (C)    28,900 
ACCRUED RESTRUCTURING EXPENSE..................    12,530           --             --        12,530 
DEFERRED LIABILITIES...........................     3,208           --             --         3,208 
COMMITMENTS AND CONTINGENCIES                                                                       
REDEEMABLE CONVERTIBLE.........................        --           --         51,000 (A)    51,000 
PREFERRED STOCK                                                                                     
SHAREHOLDERS' EQUITY:                                                                               
  Convertible preferred stock..................        --            7             (7)(B)        -- 
  Common stock.................................   213,936           18        169,982 (A)   383,936 
  Note receivable from stockholder.............        --         (250)           250 (B)        -- 
  Additional paid-in capital...................        --        9,767         (9,767)(B)        -- 
  Other........................................    (4,462)          --        (23,429)(A)   (27,891)
  Retained earnings (deficit)..................    24,240       (2,499)         2,499 (B)    24,240 
                                                 --------      -------       --------      -------- 
    Total shareholders' equity.................   233,714        7,043        139,528       380,285 
                                                 --------      -------       --------      -------- 
                                                 $354,616      $ 8,943       $213,528      $577,087 
                                                 ========      =======       ========      ======== 

See notes to Pro Forma Combined Condensed Financial Statements                  

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NOTES TO HA-LO AND STARBELLY.COM PRO FORMA COMBINED CONDENSED BALANCE SHEET 

                                                                [Download Table]
                                                                       
(A) The following is a summary of the purchase price and its           
  components assumed for the pro forma financial statements.           

Purchase Price:                                                        
  Common Stock..............................................  $170,000 
  Convertible preferred stock...............................    51,000 
  Cash......................................................    19,000 
Cost and fees of acquisition................................     4,000 
Less: Net tangible assets and liabilities acquired..........    (7,043)
Less: Contingent purchase consideration.....................   (23,429)
                                                              -------- 
Identifiable intangible assets..............................  $213,528 
                                                              ======== 

(B) To eliminate the adjusted historical equity accounts of            
  Starbelly.com.                                                       

(C) To record the effects of additional financing incurred             
  to fund the acquisition and the related interest charges             
  for the period based on current interest rate of 7.5%.               

                                                                [Download Table]

                                                              9/30/99 
                                                              --------
                                                                      
Assumed additional debt borrowings (cash plus cost and fees           
  of acquisition)...........................................  $23,000 
Assumed interest rate.......................................      7.5%
                                                              ------- 
Annual interest expense.....................................    1,725 
                                                              ------- 
Percentage of period included...............................       52%
                                                              ------- 
Amortization expense 3/22/99--9/30/99.......................  $   897 
                                                              ======= 

(D) To record amortization of goodwill over 10 years on a             
  straight-line basis.                                                

                                                                [Download Table]

                                                              9/30/99  
                                                              -------- 
                                                                       
Goodwill....................................................  $213,528 
Amortization period.........................................         5 
                                                              -------- 
Annual Amortization expense.................................    42,706 
                                                              -------- 
Percentage of period included...............................        52%
                                                              -------- 
Amortization expense 3/22/99--9/30/99.......................  $ 22,207 
                                                              ======== 

(E) To adjust the weighted average shares for the shares               
  issued in the acquisition.                                           

                                                                [Download Table]

                                                              9/30/99  
                                                              -------- 
                                                                       
Exchange ratio..............................................   99.4268%
Target weighted average shares outstanding from                        
  3/22/99--9/30/99..........................................    17,098 
                                                              -------- 
Target adjusted weighted average shares outstanding.........    17,000 
                                                              -------- 
Pro forma share adjustment..................................       (98)
                                                              ======== 

(F) To record income tax benefit on proforma adjustments               
  affecting income.                                                    

                                                                [Download Table]

                                                              9/30/99  
                                                              -------- 
                                                                       
Pro-forma income before taxes...............................  $(55,549)
Less: Non-deductible goodwill and deferred compensation                
  amortization..............................................    26,268 
                                                              -------- 
Taxable loss................................................   (29,281)
Tax rate....................................................      39.4%
                                                              -------- 
Benefit.....................................................   (11,537)
Less: Benefit recorded in HA-LO.............................   (10,354)
                                                              -------- 
Pro Forma Adjustment........................................  $ (1,183)
                                                              ======== 

(G) To record compensation expense related to contingent               
  purchase consideration.                                              

                                                                [Download Table]

                                                              9/30/99  
                                                              -------- 
                                                                       
Contingent Consideration....................................  $ 23,429 
Amortization period.........................................         3 
                                                              -------- 
Annual Amortization expense.................................     7,810 
                                                              -------- 
Percentage of period included...............................        52%
                                                              -------- 
Amortization expense 3/22/99--9/30/99.......................  $  4,061 
                                                              ======== 

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STARBELLY.COM SELECTED HISTORICAL FINANCIAL DATA

  The following tables set forth selected historical combined financial data
and other operating information for Starbelly.com for the period March 22, 1999 
(its date of inception) to September 30, 1999. The selected financial           
information for the period has been derived from the Financial Statements of    
Starbelly.com, which have been audited by Arthur Andersen LLP, independent      
auditors to Starbelly.com, and from the underlying accounting records of        
Starbelly.com. Operating results from the date of inception to September 30,    
1999 are not necessarily indicative of the results that may be expected for     
fiscal 1999.                                                                    

All information contained in the following tables should be read in     
conjunction with "Starbelly.com's Management's Discussion and Analysis of       
Financial Condition and Results of Operations" (page 70), "Unaudited Pro Forma  
Combined Condensed Financial Information" (page 65) and with the Financial      
Statements and related notes of Starbelly.com included herein. Certain amounts  
from the statements of operation of Starbelly.com have been reclassified to     
conform with the presentation below.                                            

                                                        [Enlarge/Download Table]

                                                                   PERIOD ENDED       
                                                                SEPTEMBER 30, 1999    
                                                             (IN THOUSANDS, EXCEPT PER
                                                                  SHARE AMOUNTS)      
                                                             -------------------------
                                                                                      
INCOME STATEMENT DATA:                                                                
  Net sales.................................................          $   183         
  Net loss..................................................          $(2,499)        
  Diluted loss per share....................................          $ (0.15)        

BALANCE SHEET DATA (AT END OF PERIOD):                                                
  Total assets..............................................          $ 8,943         
  Working capital...........................................          $ 5,519         
  Long-term debt, net of current portion....................          $    --         
  Stockholders' equity......................................          $ 7,043         

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STARBELLY.COM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS 

OVERVIEW                                                                        

 Starbelly.com intends to create a leading business-to-business e-commerce
marketplace for the custom-decorated merchandise industry. Starbelly.com        
believes that its business model can redefine the traditional market for        
customized soft and hard goods with an interactive marketplace that allows its  
customers to customize decorations on any product in real-time from any Internet
web browser. Starbelly.com also believes its offerings will extend the reach of 
current sales and marketing channels to not only large corporations, but also   
small- to mid- size businesses, associations, smaller promotional product       
distributors, and consumers.                                                    

Starbelly.com intends to unify key aspects of the custom-decorated      
merchandise supply chain through integrated fulfillment systems. These systems  
will ultimately act together as a single efficient interface between the        
end-user and the other elements of the supply chain, such as blank merchandise  
suppliers, decorators, customer service representatives and shippers.           
Starbelly.com intends to remove several links in the traditional supply chain,  
providing its customers with exceptional convenience, a simplified customizing  
and ordering process, faster delivery, lower costs and enhanced customer        
experience. In addition, by accessing the national distributor network directly,
Starbelly.com is establishing a virtual distribution network with key           
distributors that provides it with just-in-time inventory of a large selection  
of hard and soft goods thereby minimizing the inventory requirements for both   
Starbelly.com and its customers.                                                

 Starbelly.com was incorporated in Delaware on March 22, 1999. Its primary
activities since inception have been raising equity capital to fund operations, 
developing and refining its business model and recruiting and hiring employees  
in technology, sales and marketing, operations, and administration. To date,    
Starbelly.com has not realized significant revenues and only a small portion of 
such revenues have been generated through the Internet.                         

RESULTS OF OPERATIONS                                                           

Due to Starbelly.com's limited operating history, it believes that its  
results of operations are not overly meaningful and should not be relied upon as
an indication of future performance. The results of operations are for the      
period from inception, March 22, 1999, through September 30, 1999.              

NET SALES                                                                       

    Since inception, the Starbelly.com has been in the development stage and has
recognized approximately $183,000 of sales. Such sales has been generated       
through traditional off-line means and through the Internet. Net sales relate to
the sale of custom-decorated merchandise to business customers. Three customers 
accounted for approximately 68.5% of net sales for the period.                  

COST OF SALES                                                                   

Starbelly.com's cost of sales for the period was approximately $161,000,
resulting in a gross profit margin of approximately 12%. Cost of sales includes 
the cost of blank product, decoration, and freight and handling. Starbelly.com's
gross profit margin was negatively impacted during the period by certain rework 
and certain COD charges incurred due to Starbelly.com's limited operating       
history.                                                                        

SALES, MARKETING AND OPERATIONS EXPENSES                                        

Starbelly.com incurred approximately $450,000 of sales, marketing and   
operations expenses during the period. These expenses are comprised mainly of   
compensation and benefits for personnel engaged in sales, marketing,            
merchandising, business development, and operations; certain consulting costs;  
advertising and promotion activities and other miscellaneous sales and marketing
activities.                                                                     

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Starbelly.com expects to incur substantial expenses in this area in the future  
as it expands its sales and business development efforts, builds out its        
operating infrastructure, and continues to build brand name recognition through 
advertising and promotional activities.                                         

TECHNOLOGY AND DEVELOPMENT EXPENSES                                             

Starbelly.com incurred approximately $1,140,000 of technology and       
development expenses during the period. These expenses are comprised primarily  
of compensation and benefits for personnel engaged in the design and development
of Starbelly.com's website and the maintenance and support of Starbelly.com's   
internal systems and infrastructure, and consulting expenses related to         
development of Starbelly.com's technology strategy and website. Starbelly.com   
believes that it will be necessary to continue to invest heavily in technology  
and development to remain competitive.                                          

GENERAL AND ADMINISTRATIVE EXPENSES                                             

   Starbelly.com incurred approximately $997,000 of general and administrative
expenses during the period. These expenses are comprised primarily of           
compensation and benefits for executive and administrative personnel,           
facilities, professional services and other general corporate activities.       
Starbelly.com believes that its general and administrative expenses will grow   
substantially as it expands its infrastructure.                                 

LIQUIDITY AND CAPITAL RESOURCES                                                 

Since its inception, Starbelly.com has financed its operations primarily
through the private placement of equity securities, raising approximately       
$9.5 million through September 30, 1999. At September 30, 1999, Starbelly.com   
had approximately $7.1 million in cash and cash equivalents. Starbelly.com has  
had significant negative cash flows from operating activities since inception.  

  Net cash used in operating activities for the period totaled approximately
$1.1 million. Cash used in operating activities consisted primarily of net      
operating losses, increases in accounts receivable, due from related party, and 
prepaid expenses, which were partially offset by increases in accounts payable  
and accrued expenses.                                                           

  Net cash used in investing activities for the period totaled approximately
$1.3 million and consisted primarily of capital expenditures for computer and   
technology equipment, purchased software, and other equipment.                  

Net cash provided by financing activities for the period totaled        
approximately $9.5 million, comprised almost entirely from the proceeds from the
private sale of convertible preferred stock. At September 30, 1999,             
Starbelly.com also had an available equipment line from a bank. Subsequent to   
September 30, 1999, Starbelly.com borrowed approximately $850,000 pursuant to   
this line.                                                                      

Starbelly.com believes it will require substantial additional working   
capital to continue to fund the growth of its business. Starbelly.com believes  
its sale to HA-LO announced in January 2000, will allow Starbelly.com to have   
the available working capital to fund the growth of its business.               

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS                                       

In March 1998, the American Institute of Certified Public Accountants   
("AICPA") issued Statement of Position ("SOP") No. 98-1, Accounting for the     
Costs of Computer Software Developed for Internal Use. SOP 98-1 requires        
entities to capitalize some of the costs related to internal-use software once  
the applicable criteria have been met. Starbelly.com has adopted SOP 98-1.      

In April 1998, the AICPA issued SOP 98-5, Reporting for the Costs of    
Start-Up Activities. SOP 98-5 requires that all start-up costs related to new   
operations be expensed as incurred. Starbelly.com has adopted SOP 98-5, which   
did not have a material impact on the financial statements.                     

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THE BUSINESS OF STARBELLY.COM 

GENERAL                                                                         

 Starbelly.com intends to create a leading business to business e-commerce
marketplace for the custom-decorated merchandise industry. Starbelly.com intends
to redefine the traditional market for customized soft and hard goods with an   
interactive marketplace that allows its customers to customize decorations on   
any product in real-time from any Internet web browser.                         

    Starbelly.com unifies key aspects of the custom-decorated merchandise supply
chain through integrated and automatic fulfillment systems. These systems act   
together as a single efficient interface between the end-user and the other     
elements of the supply chain, such as blank suppliers, decorators, customer     
service representatives, offsite production and shippers. Starbelly.com         
eliminates several links in the traditional supply chain, providing its         
customers with exceptional convenience, a simplified customizing and ordering   
process, faster delivery, status tracking, lower costs and enhanced customer    
experience. In addition, by accessing the national distribution network         
directly, Starbelly.com is establishing a virtual distribution network with key 
distributors that provides it with just-in-time inventory of a large selection  
of soft and hard goods removing any inventory requirements for Starbelly.com or 
Starbelly.com's customers. Moreover, Starbelly.com's marketplace provides a     
payment advantage: Starbelly.com receives immediate payment from many of its    
customers but does not have to pay its suppliers of blank products for 30 to    
60 days.                                                                        

DISTRIBUTION CHANNELS                                                           

Starbelly.com intends to leverage its custom-decorated merchandise      
marketplace to provide multiple customized interfaces for four different market 
channels. Each of these customized interfaces is developed or will be developed 
from Starbelly.com's outsourced StarStores (Starbelly.com's virtual storefront  
for its customers) or its Web site. StarStores are customizable, outsourced     
marketplaces linked to a customer's Web site that present a compelling affiliate
model for Starbelly.com. Using Starbelly.com's StoreBuilder technology, it      
intends to build StarStores for its customers on demand with limited user       
maintenance. Starbelly.com currently has agreements with over approximately 100 
businesses to create customized StarStores. Starbelly.com's Web site,           
Starbelly.com will be launched in the Spring of 2000 and will be customizable   
for private or outsourced access. Starbelly.com's four target market channels   
are:                                                                            

BUSINESS-TO-BUSINESS.  In the business-to-business market Starbelly.com 
intends to offer multiple solutions to meet the diverse needs of this customer  
base. First, Starbelly.com intends to provide businesses with a password        
protected private version of Starbelly.com for their promotional product        
sourcing needs including storing and policing the use of their logos. Second,   
customers will be able to access Starbelly.com's marketplace through a private, 
customized Starbelly.com interface for the procurement of uniforms.             
Starbelly.com's customers could operate holding no inventory and customizing for
a specific region or other criteria. Third, Starbelly.com intends to provide    
hosted StarStores for its business customers that reside on an intranet or      
extranet and provide a customized "company store" that carries selected         
merchandise chosen by Starbelly.com's customer. Finally, Starbelly.com intends  
to provide promotions whereby Starbelly.com allows its customers to market      
interactively created promotional/incentive products to their customer base     
using selections from Starbelly.com's marketplace.                              

INTERNET PROPERTIES.  Starbelly.com will be able to provide content,    
community and commerce Web sites with virtual StarStores offering merchandise   
featuring these sites' own brand or logo with virtually no inventory            
commitments. In addition, Starbelly.com can offer high traffic Web sites, such  
as portals and community sites, the ability to offer the full Starbelly.com site
on their Web site with Starbelly.com providing the hosting and fulfillment.     

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PROMOTIONAL PRODUCT DISTRIBUTORS.  Starbelly.com intends to provide the 
fragmented network of over 17,000 small- to medium-sized promotional product    
distributors with their own private label version of Starbelly.com. This will   
provide these distributors with an Internet presence and a back-end integrated  
fulfillment engine, thus driving Starbelly.com's business through its potential 
competitors. In this way Starbelly.com intends to empower its competitors with  
its fulfillment system and allow promotional product salespeople to focus all of
their efforts on selling.                                                       

    BUSINESS-TO-CONSUMER.  Starbelly.com plans to offer consumers the ability to
access Starbelly.com's Web site in the Spring of 2000 to interactively customize
and design products. Starbelly.com's Web site will offer consumers access to a  
very extensive library of blank products, as well as a database of images that  
can be used to decorate the products. Alternatively, consumers will be able to  
store their own images to be used for decoration. In addition, Starbelly.com    
intends to offer templates that give consumers pre-configured products and      
pre-merchandised selections of products for holidays, events and affinities.    

ORDER FULFILLMENT                                                               

 Starbelly.com believes that its fulfillment engine provides a significant
competitive advantage for its marketplace solution. By focusing its integrated  
fulfillment system on owning or unifying every manufacture point on the supply  
chain except the blank product supply, Starbelly.com intends to provide its     
customers with a one-stop source for their custom-decorated merchandise.        
Starbelly.com generally does not (and plans not to) own the decoration machines 
or employ or manage the people operating them. Rather Starbelly.com intends to  
embed its information systems, management infrastructure and quality control    
procedures into the supply chain in order to integrate decorators in a          
captive-style production system.                                                

To further support this strategy, in October 1999 Starbelly.com signed a
letter of intent with one of the largest soft goods distributors in the United  
States. This letter of intent provides Starbelly.com with, among other things,  
exclusive on-site decorating facilities at their distribution warehouse to      
provide decoration services for products that Starbelly.com sells and to be the 
exclusive supplier of decorated goods for their customers. Starbelly.com is     
actively fostering similar relationships with other soft goods distributors as  
well as hard goods suppliers. When fully operational, Starbelly.com's           
proprietary technology is planned to provide real-time tracking of orders at any
stage within the production process. In addition, as Starbelly.com deepens its  
relationships with distributors to further create Starbelly.com's virtual       
network, Starbelly.com intends to wrap its technology into these relationships  
to enable real-time tracking across the network. Starbelly.com believes that its
fulfillment system provides it with a flexible and scalable model that allows it
to control the supply chain while minimizing capital expenditures.              

In all soft goods categories and certain hard goods categories,         
Starbelly.com intends to leverage this "vertical" alignment to unify the entire 
production and fulfillment process except for the manufacture of the product. In
doing so, Starbelly.com expects to realize significant economies of scale and   
cost savings which it will be able to pass on to its customers. In all other    
hard goods categories, however, Starbelly.com's suppliers traditionally stock   
the inventory, control the pre-press steps and decorate the product. For this   
reason, Starbelly.com has access to over 2,500 hard goods distributors who      
provide it with a one-stop supply of fully-decorated goods and ensure it a      
large, virtual inventory of hard goods.                                         

Starbelly.com further streamlines the production process by giving its  
customers greater control over the design of their products. In the traditional 
offline process, advertising specialty companies work with decorators before the
outsourced decoration process can begin. This expensive and inefficient model   
results in numerous meetings and cost mark-ups, in addition to a three to six   
week delivery time. In Starbelly.com's model, however, customers will use the   
multiple interfaces to its                                                      

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StarStores and Starbelly.com Web site to select their blanks, create their      
design and approve an online sample all with mouse clicks. Enabling the customer
to complete the pre-press and approval process before the initial order is      
placed reduces, and in some cases eliminates, the pre-press errors that can     
occur in the offline process. Finally, Starbelly.com intends to leverage its    
operational information system to provide real-time tracking of all orders      
through every stage of the production process.                                  

ADVANTAGES TO STARBELLY.COM'S MARKETPLACE SOLUTIONS                             

    Starbelly.com's interactive electronic marketplace solutions are intended to
or are designed to provide the following key benefits:                          

 "CLICKS AND MORTAR" INFRASTRUCTURE.  Starbelly.com intends to combine the
interactive advantages of the Internet, its integrated fulfillment engine and   
significant decorating capacities to infuse the custom-decorated merchandise    
industry with a buyer-focused solution that redefines the market.               

   VIRTUAL INVENTORY.  Starbelly.com's access to distributors provides it with
just-in-time inventory capabilities. For this reason, neither Starbelly.com nor 
its customers need to hold any measurable amount of inventory of decorated      
products.                                                                       

BRAND VARIETY.  The blank product market includes some of the most      
recognizable brands in the world. Through the broad selection of blank products 
accessible to Starbelly.com, it provides its customers with access to the brands
that enable its customers to make these brands their own through customization. 
In addition, Starbelly.com plans to enhance its own brand through association   
with these recognizable brands.                                                 

INTERACTIVE AND CUSTOMIZED DECORATION.  Customers will be able to design
their own products in real-time with the results of their customization         
presented immediately online. This process not only pushes the design power and 
accountability to Starbelly.com's customers but also eliminates the             
time-consuming pre-press aspects of the traditional supply chain.               

NO MINIMUM ORDER SIZE.  Starbelly.com's fulfillment infrastructure,     
including its integrated sourcing and decorating operations should permit       
customers to generally order in any quantity, including a single piece, which   
sharply contrasts from the traditional sourcing system that requires large      
orders.                                                                         

SIGNIFICANTLY LOWER PRICES RELATIVE TO TRADITIONAL PROVIDERS.  Because  
Starbelly.com leverages its network of distributors to ensure low cost          
purchasing of blank products and eliminate standard commissions (mark-ups) along
the supply chain, Starbelly.com expects to be able to profitably sell its       
products for up to 5% to 30% less than most offline providers.                  

CUSTOMERIZATION.-TM-  Rather than a salesperson-driven business model,  
Starbelly.com's target marketplaces that are almost completely buyer-focused.   
Starbelly.com's buyers "pull" the entire manufacturing process, meaning that    
once an order is placed, the manufacturing process is triggered. Starbelly.com  
believes that by providing an interactive, dynamic user experience that includes
"cutting-edge" customization technology, it will drive adoption and loyalty     
among its customer groups.                                                      

   DIGITAL ASSET MANAGEMENT CAPABILITIES.  Starbelly.com stores its customers'
digital artwork and maintains a database such that it is easily accessible at   
any time. In addition, Starbelly.com allows its customers to determine the      
business constraints around which their valuable brands may be used for         
decorated products, thereby providing the proper "policing" of its customers'   
digital assets.                                                                 

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PRODUCT CATEGORIES AND BRANDS                                                   

Starbelly.com offers a large selection of soft and hard goods in its    
custom-decorated merchandise marketplace. These include:                        

                                                        [Enlarge/Download Table]

SELECTED LIST OF SOFT GOODS OFFERED           SELECTED LIST OF HARD GOODS OFFERED         
--------------------------------------------  --------------------------------------------
                                                                                          
T-shirts               Windwear               Leather Items          Pottery              
Polo shirts            Uniforms               Paperweights           Pins/Pendants        
Sweatshirts            Robes                  Awards                 Magnets              
Hats                   Towels                 Food Products          Sunglasses           
Polar Fleece           Sheeting               Candy/Gum              Coolers              
Jackets/Movers         Outerwear              Children's Furniture   Calendars            
Button-down shirts     Corporate Uniforms     Mugs                   Computer Items       
Denim Jackets          Aprons                 Plates                 Golf Balls           
Windbreakers           Cooking Mits           Crystal                Beverage Holders     
Baby Clothes           Bags/Luggage           Frames                 Handy Knives         
Hunting Clothes        Umbrellas              Clocks                 Toys                 
Sweaters               Briefcase/Folios       Pens/Pencils           Luggage Tags         
Scarves                Mouse Pads                                                         

  Through the broad-based distribution market for blanks, Starbelly.com also
offers its customers unparalleled access to a wide range of well-known brands   
for soft and hard goods for worldwide distribution.                             

SELECTED LIST OF BRANDS OFFERED 

                                                                [Download Table]
                                                          
Champion                               Jerzees            
Hanes                                  Gildan             
Lee                                    Munsingwear        
Columbia Sportswear                    Jonathan Corey     
Fruit of the Loom                      Outer Banks        
Cross Creek                            Spaulding          
Russell Athletic                       Arrow              
Country Cottons                        Timberline Colorado
Gerber Childrenswear                   Fieldcrest Cannon  
Weatherproof                           Bic pens           
Bill Blass                             Cross pens         
Eastpak                                Waterford          
Patagonia                              Swiss Army         
Rawlings                               Golden Bear        
Antigua                                Bike               
Port Authority                         Bickies            
London Fog                             Anvil              
Van Heusen                             New Era            

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TECHNOLOGY                                                                      

Starbelly.com is developing its front-end interactive customization, its
digital asset management and its back-end fulfillment technology to handle a    
high volume, complex supply chain. The key components of its technology include:

ARCHITECTURE                                                                    

    Starbelly.com's underlying architecture is not only concerned with structure
and behavior but with usage, functionality, performance, resilience, reuse,     
comprehensibility, economic and technology constraints and trade-offs, and      
aesthetic concerns. Starbelly.com has followed proven design methodologies to   
create a reliable and nimble architecture. Some of the key patterns (common     
solution to a common problem in a given context), technologies (models,         
frameworks, languages) and methodologies that have been employed for            
Starbelly.com's architecture include both proven and emerging technologies.     

TECHNOLOGY                                                                      

 The Starbelly.com network provides online sales and procurement solutions
for the customized apparel industry. This system is based on a thin client      
architecture which allows participants to access the network with an            
infrastructure to support an Internet browser and is highly scalable to support 
the expected growth in transactions and offerings. The production data center is
currently located at Level (3), Starbelly.com's Tier I Provider, located in     
Chicago, Illinois. This data center provides 24 hours-a-day, 7-days-a week      
system support and connectivity to all major Internet backbones and provides    
bandwidth via redundant high-speed connections.                                 

SALES AND MARKETING                                                             

   Starbelly.com's sales and marketing approach is designed to establish broad
business, affinity group and consumer recognition of Starbelly.com and its      
custom-decorated merchandise marketplace. Starbelly.com's sales strategy is     
different from the traditional custom-decorated merchandise industry.           
Starbelly.com is intends to foster customer relationships whereby its customers 
rely on its marketplace and integrated fulfillment system for their             
custom-decorated merchandise needs. Starbelly.com sells its business-to-business
marketplace solutions through its direct sales force and its lead generation    
campaigns. Starbelly.com believes it gains significant leverage with its sales  
force as its customers are able to rely on its interfaces and its fulfillment   
system for their needs. Starbelly.com's direct sales force segments the         
business-to-business market into four vertical segments to provide increased    
focus and customer service capabilities. These segments are corporate sales,    
entertainment sales, Internet content sales and retail sales.                   

   Starbelly.com intends to continue to aggressively promote its brand name to
access business-to-business opportunities as well as drive traffic to           
Starbelly.com by combining traditional offline strategies, including public     
relations, print and radio advertising, with online marketing vehicles such as  
banner advertising and strategic partnerships with relevant Web sites and       
portals. Starbelly.com is investing in a marketing campaign. Starbelly.com      
believes that by establishing partnerships with many of the leading portals, it 
will succeed in building a large and diverse customer base that utilizes the its
fulfillment engine on a private label basis to purchase products. To this end,  
Starbelly.com has established, or is in the process of establishing, long-term  
strategic relationships with several of the major portals, including Yahoo!.    

    As of January 24, 2000, Starbelly.com had a sales organization of 32 people,
comprising sales, marketing, and merchandising personnel, many of whom have     
experience in the custom-decorated merchandise industry. Companies at which     
Starbelly.com's sales team has gained experience include HA-LO, Cyrk and Group  
II Communications.                                                              

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CUSTOMERS                                                                       

A selected list of some of Starbelly.com's customers includes:          

                                                                [Download Table]
                                                                        
Art.com                                Lettuce Entertain You Enterprises
Arthur Andersen                        National Football League         
Chase Manhattan Bank                   Peapod.com                       
Chevron                                Starbucks                        
Foote, Cone & Belding                  Whitman-Hart                     
Gatorade (Quaker Oats)                 Young Presidents Organization    
Harris Bank                                                             

COMPETITION                                                                     

  Electronic commerce generally, and the online custom-decorated merchandise
market specifically, are new, rapidly evolving and intensely competitive, and   
Starbelly.com expects such competition to intensify in the future. Currently,   
Starbelly.com competes with a broad range of companies including traditional    
custom-decorated merchandise retailers, direct retailers (E.G., L.L. Bean and   
Land's End), promotional product firms (E.G., HA-LO and Cyrk), advertising      
agencies, and apparel or hard goods manufacturers who sell direct to the        
customer. These competitors sell most of their products through a direct sales  
force or mail-order catalogs.                                                   

While Starbelly.com does not believe that it has any direct online      
competition in the custom-decorated merchandise market that combines an         
interactive marketplace and integrated fulfillment system, there are several    
existing and emerging Web sites focused on electronic commerce opportunities in 
this area. These include companies like iPrint.com, imagex.com and              
MadeToOrder.com that could expand their offerings to compete with Starbelly.com.
As the market for online custom-decorated merchandise grows, other companies,   
including established retailers and distributors, are expected to develop online
services that compete with Starbelly.com's services.                            

OTHER INFORMATION                                                               

FACILITIES AND EMPLOYEES                                                        

    Starbelly.com's headquarters are located in Chicago, Illinois. Starbelly.com
leases approximately 25,000 square feet of space. As of January 24, 2000,       
Starbelly.com had 118 employees, including 8 in general management, 46 in       
technology, 32 in sales and marketing and 32 in finance and operations.         
Starbelly.com also employs an additional 16 full-time contract employees.       

INTELLECTUAL PROPERTY                                                           

   Starbelly.com relies on a combination of copyright, trade secret trademark,
confidentiality procedures and contractual provisions to protect its proprietary
rights in its products and technology. Starbelly.com generally enters into      
confidentiality agreements with its employees and consultants and limits access 
to, and distribution of, its proprietary information. Starbelly.com maintains   
trademarks, to identify the source of its products, development tools and       
service offerings and rely upon trademark laws to protect its proprietary rights
in these marks.                                                                 

YOUR BOARD OF DIRECTORS AFTER THE MERGER

 At the time of the merger, your board of directors will be increased from
eight to eleven directors. All eight persons who are members of your board of   
directors immediately before the merger will continue to serve as directors     
immediately after the merger. Your board will then fill the three vacancies     
created by the board expansion with persons requested to be nominated by Bradley
Keywell,                                                                        

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Starbelly.com's chief executive officer, and Eric Lefkofsky, Starbelly.com's    
president. We anticipate that Mr. Keywell and Mr. Lefkofsky will request        
nomination of themselves to fill two of the three vacant positions on your      
board, but they have not yet advised HA-LO whom they intend to request be       
nominated to fill the third vacancy.                                            

    Bradley A. Keywell, age 30, co-founder of Starbelly.com, has been a director
and the chief executive officer of Starbelly.com since its inception on         
March 22, 1999. Upon completing the merger, Mr. Keywell will serve as president 
of HA-LO and, under an employment agreement, will have the right to nominate a  
director to serve on the HA-LO board for a period of time. In addition, since   
August 1994, Mr. Keywell has served as director and president of Brandon Apparel
Group, Inc., Chicago, Illinois, which is a leading manufacturer and marketer of 
licensed apparel selling to major retailers.                                    

    Eric Lefkofsky, age 30, co-founder of Starbelly.com, has been a director and
the chairman of the board, secretary and treasurer of Starbelly.com since its   
inception on March 22, 1999. Upon completion of the merger, Mr. Lefkofsky will  
serve as chief integration officer of HA-LO and, under an employment agreement, 
will have the right to nominate two directors to serve on the board for a period
of time. In addition, since August 1994, Mr. Lefkofsky has served as director   
and chief executive officer of Brandon Apparel Group, Inc., Chicago, Illinois.  

STOCK OWNERSHIP 

   The following table sets forth, as of January 28, 2000, certain information
concerning the beneficial ownership of our common stock by (1) our directors,   
and (2) all directors and executive officers as a group. Unless otherwise       
indicated, each person has sole investment and voting power (or shares such     
powers with his or her spouse) with respect to the shares shown as beneficially 
owned by that person. No other person or entity beneficially owns 5% or more of 
our common stock.                                                               

                                                        [Enlarge/Download Table]

                                                 NUMBER OF SHARES                        APPROXIMATE   
                                                BENEFICIALLY OWNED     APPROXIMATE     PERCENT OF CLASS
NAME AND ADDRESS(1)                             ON JANUARY 28, 2000  PERCENT OF CLASS   AS ADJUSTED(2) 
-------------------                             -------------------  ----------------  ----------------
                                                                                                       
Lou Weisbach...................................       3,365,058(3)          6.8%              4.7%     
Linden D. Nelson...............................       3,084,931(4)          6.3%              4.3%     
John R. Kelley, Jr.............................         762,825(5)          1.6%              1.1%     
Seymour N. Okner...............................         668,454(6)          1.4%                *      
Marshall J. Katz...............................         416,387(7)            *                 *      
Thomas Herskovits..............................         121,346(8)            *                 *      
Brian Hermelin.................................          10,012               *                 *      
All Directors and Executive Officers, as a                                                             
  group (15 persons)...........................       8,894,384(9)         17.5%             12.2%     

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

(1) The address of each executive officer and director of the Company is in care
of the Company, 5980 West Touhy Avenue, Niles, Illinois 60714.          

(2) Adjusted to give effect to the issuance in the merger and upon exercise of  
the assumed options of 17 million shares of our common stock and        
5.1 million shares of our convertible preferred stock.                  

(3) Includes 794,256 shares subject to immediately exercisable options held by  
Mr. Weisbach, and 2,205,102 shares owned by the Lou Weisbach Revocable  
Trust. Excludes 127,500 shares held in trust for the benefit of         
Mr. Weisbach's wife and 76,780 shares held in trusts for the benefit of 
Mr. Weisbach's children, over which Mr. Weisbach has no sole or shared  
powers to vote or dispose.                                              

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(4) Includes 43,372 shares owned by Maple Lane Acquisition Limited Liability    
   Company ("Maple Lane"), of which Mr. Nelson is the managing member; 131,250
shares owned by Mr. Nelson's wife; 78,300 shares held by a charitable   
  foundation of which Mr. Nelson is President; and 448,744 shares subject to
   immediately exercisable options. Excludes 262,500 shares held in trusts for
    the benefit of Mr. Nelson's children, over which Mr. Nelson has no voting or
dispositive powers.                                                     

(5) Includes 4,167 shares subject to immediately exercisable options.           

(6) Includes 42,500 shares subject to immediately exercisable options held by   
Mr. Okner, 526,241 shares owned by the Seymour N. Okner Revocable Trust,
99,667 shares held by a charitable foundation of which Mr. Okner is the 
    President, and 46 shares held by Mr. Okner's spouse. Excludes shares held in
   trusts for the benefit of two of Mr. Okner's children, over which Mr. Okner
has no sole or shared powers to vote or dispose and in which Mr. Okner's
spouse is a trustee.                                                    

(7) Includes 412,787 shares subject to immediately exercisable options held by  
Mr. Katz.                                                               

(8) Includes 32,718 shares held jointly with Mr. Herskovits' wife; 11,250 shares
owned by Mr. Herskovits' minor son; and 68,753 shares subject to options
  held by Mr. Herskovits that are exercisable during the Measurement Period.

(9) Includes 2,113,517 shares subject to immediately exercisable options.       

PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE 
AUTHORIZED CAPITAL STOCK

  Your board of directors believes that it is in the best interests of HA-LO
to amend Article Four of HA-LO's articles of incorporation to increase the      
number of shares of its common stock that the Company is authorized to issue    
from 100 million shares to 250 million shares and the number of shares of       
convertible preferred stock that the Company is authorized to issue from        
10 million shares to 20 million shares. The text of the proposed amendment is   
attached as Exhibit E to this proxy statement.                                  

 As of January 28, 2000, 48,724,790 shares of our common stock were issued
and outstanding, 9,000,000 shares of our common stock were reserved for issuance
upon the exercise of options granted and to be granted under the 1997 Stock     
Plan, 5,834,822 shares of our common stock were reserved for issuance upon the  
exercise of options granted and to be granted under HA-LO's 1992 stock option   
plan, and 755,473 shares of common stock were reserved for issuance upon the    
exercise of other options and warrants we have granted. If the merger is        
completed, 17 million shares of our common stock will be issued in the merger or
reserved for issuance upon exercise of the Starbelly.com stock options being    
assumed by HA-LO and an additional 5.1 million shares will be reserved for      
issuance upon the conversion of the convertible preferred stock to be issued in 
the merger.                                                                     

 As of January 28, 2000, no shares of our convertible preferred stock were
outstanding. If the merger is completed, an aggregate 5.1 million shares of     
convertible preferred stock will be issued in the merger or reserved for        
issuance upon exercise of the assumed Starbelly.com stock options.              

  If approved, the increased number of authorized shares of common stock and
convertible preferred stock will be available for your board to issue for       
purposes and consideration as your board of directors may approve. Subject to   
the approval of an amendment to the Company's articles of incorporation to      
permit the board to provide for the issuance of convertible preferred stock     
without shareholder approval as described below, no further vote of holders of  
our common stock will be required for such issuance, except as provided under   
Illinois law, the rules of the New York Stock Exchange (or the securities       
exchange where our capital stock may in the future be listed) or as may         
otherwise be agreed to by the Company. See "Description of the Convertible      
Preferred Stock--                                                               

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Protective Provisions" (page 48). The availability of additional shares of      
common stock and convertible preferred stock for issue, without the delay and   
expense of obtaining the approval of shareholders at a special meeting, will    
afford us greater flexibility in acting upon proposed transactions. Other than  
the shares of common stock and convertible preferred stock to be issued in the  
merger and shares reserved for issuance as described above, we currently have no
specific plans or arrangements to issue additional common or convertible        
preferred stock; however, from time to time we have explored various acquisition
opportunities. Nevertheless, your board of directors may consider the           
advisability of issuing convertible preferred stock after the completion of the 
merger in order to provide funds to repay a portion of the indebtedness incurred
in connection with the merger, for working capital or for other corporate       
purposes. Your board of directors believes that the availability of additional  
common stock and convertible preferred stock will afford HA-LO increased        
flexibility should appropriate opportunities arise.                             

The additional shares of common stock for which we are seeking your     
authorization would be identical to the shares of common stock now authorized.  
Holders of our common stock do not have preemptive rights to subscribe for      
additional securities which may we may issued in the future. The additional     
shares of convertible preferred stock for which we are seeking your             
authorization would be issued in such series with such dividend rates,          
liquidation preferences, terms of redemption, sinking fund provisions,          
conversion rights and voting rights as may be established by your board of      
directors without further approval of holders of common stock if the proposed   
amendment described below under "Proposed Amendment to the Company's Articles of
Incorporation Relating to the Issuance of Convertible Preferred Stock" is       
approved.                                                                       

You should be aware that the additional shares of common stock and      
convertible preferred stock for which we are seeking your authorization would be
available for your board of directors to issue and could be used for purposes   
that some might consider to be in defense of a potential takeover threat. We    
would be able to sell these shares to purchasers who might side with your board 
of directors in opposing a takeover bid which your board determines not to be in
the best interests of HA-LO and its shareholders. Issuing new shares could      
discourage persons seeking to gain control of HA-LO in other ways as well. In   
the event someone tries to take over HA-LO by purchasing a substantial amount of
our common stock or convertible preferred stock, and if this person acquired    
this stock intending to effect a merger, a sale of all or any part of our       
assets, or a similar transaction, our issuance of new shares could be used to   
dilute the stock ownership of such person.                                      

Neither this amendment nor the proposed amendment described below under 
"Proposed Amendment to the Company's Articles of Incorporation Relating to the  
Issuance of Convertible Preferred Stock" is directed at any specific effort to  
obtain control of HA-LO that we know of. Your board of directors does not       
currently intend to solicit a shareholder vote on any other proposal relating to
a possible takeover of HA-LO. However, your board of directors intends to study 
developments in this area, and, if additional anti-takeover measures are deemed 
desirable, your board will adopt, or propose to our shareholders to adopt, such 
additional measures.                                                            

   Approval of this proposal requires the affirmative vote of persons who hold
a majority of the outstanding shares of our common stock. Broker non-votes and  
abstentions will count as votes cast AGAINST this proposal. Your board believes 
that the proposed increase in the number of authorized shares is in the best    
interests of HA-LO and its shareholders and unanimously recommends that         
shareholders vote FOR the proposed amendment. If the merger is approved, the    
merger will be completed even if this proposal to amend our articles of         
incorporation is not approved.                                                  

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PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION RELATING TO THE 
ISSUANCE OF CONVERTIBLE PREFERRED STOCK 

  Your board of directors is authorized to provide from time to time for the
issuance of up to 10 million shares (20 million shares if the preceding proposal
is approved) of convertible preferred stock in one or more series and to fix the
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations, restrictions and privileges of each series 
of convertible preferred stock, including the serial designation and authorized 
number of shares, the dividend rates, liquidation preferences, terms of         
redemption, sinking fund provisions, conversion rights and voting rights.       
Although the company's articles of incorporation purport to enable your board to
take these actions without shareholder approval, the articles of incorporation  
also provide that if convertible preferred stock is issued as a class, then your
board of directors is to determine liquidation and dividend rights by filing    
articles of amendment to the articles of incorporation prior to the issuance of 
any shares of the "preferred class." Because under Illinois law the adoption of 
an amendment to the articles of incorporation requires shareholder approval, the
inclusion of this provision in our articles of incorporation effectively negates
the power which would otherwise be vested in your board to provide for the      
issuance of convertible preferred stock without shareholder action.             

    In order to increase the flexibility of the board of directors and enable it
to provide for the issuance of convertible preferred stock without the          
significant delay and expense which would result from having to obtain prior    
shareholder approval, your board has adopted, subject to shareholder approval,  
an amendment to Article Four of HA-LO's articles of incorporation to delete the 
requirement that liquidation and dividend rights be determined through an       
amendment to the articles of incorporation. The text of the proposed amendment  
is attached as Exhibit E to this proxy statement. If this proposal is approved, 
no further vote of HA-LO shareholders will be required to fix the terms of and  
issue shares of convertible preferred stock, except as required under Illinois  
law, the rules of the New York Stock Exchange (or the securities exchange where 
our capital stock may in the future be listed) or as may otherwise be agreed to 
by the Company. See, however, "Description of the Convertible Preferred         
Stock--Protective Provisions" (page 48).                                        

 The issuance of convertible preferred stock, while providing the board of
directors with flexibility in connection with possible acquisitions, financings 
or other corporate purposes, may have the effect, as described above, of        
delaying, deferring or preventing a change of control of the Company. Except for
the issuance of the convertible preferred stock pursuant to the merger          
agreement, the Company has no present plans to issue any shares of convertible  
preferred stock. See, however, "Proposed Amendment to the Company's Articles of 
Incorporation to Increase Authorized Capital Stock."                            

   Approval of this proposal requires the affirmative vote of persons who hold
a majority of the outstanding shares of our common stock. Broker non-votes and  
abstentions will count as votes AGAINST this proposal. Your board believes that 
the proposed amendment is in the best interests of HA-LO and its shareholders   
and unanimously recommends that shareholders vote FOR the proposed amendment. If
the merger is approved, the merger will be completed even if this proposal to   
amend our articles of incorporation is not approved.                            

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SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS

    The 2000 Annual Meeting of Shareholders is presently scheduled to be held on
Tuesday, May 9, 2000. Any proposals of shareholders intended to be personally   
presented at such meeting were to have been received by the Secretary of HA-LO  
for inclusion in HA-LO's proxy statement for the annual meeting and form of     
proxy by November 30, 1999. Any proposals of shareholders intended to be        
personally presented at such meeting (but not to be included in the HA-LO's     
proxy statement or form of proxy) must be received by the Secretary of HA-LO no 
later than February 13, 2000.                                                   

WHERE TO FIND MORE INFORMATION

 We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy our filed reports, statements or
other information at the SEC's public reference rooms in Washington, D.C., New  
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for 
further information on the public reference rooms. Our public filings are also  
available from commercial document retrieval services and at the Internet World 
Wide Web site maintained by the SEC at "http://www.sec.gov." Reports, proxy     
statements and other information about us also may be inspected at the NASD's   
offices at 1735 K Street, Washington, D.C. 20006.                               

As allowed by SEC rules, this proxy statement does not contain all the  
information you can find in the Registration Statement or its exhibits.         

   The SEC allows us to "incorporate by reference" information into this proxy
statement, which means that we can disclose important business and financial    
information by referring you to another document separately filed with the SEC. 
The information incorporated by reference is deemed to be part of this proxy    
statement, except for any information superseded by information contained       
directly in the proxy statement. This proxy statement incorporates by reference 
the following documents previously filed by us with the SEC. These documents    
contain important information about our company and its business and finances.  

                                                        [Enlarge/Download Table]

SEC FILINGS                                   PERIOD                                       
-----------                                   ------                                       
                                                                                           
Annual Report on Form 10-K................... Year ended December 31, 1998                 
Current Report on Form 8-K................... Dated January 21, 2000                       
Current Report on Form 8-K................... Dated March 23, 1999                         
Quarterly reports on Form 10-Q............... Three months ended March 31, 1999, six months
                                              ended June 30, 1999, and nine months ended   
                                              September 30, 1999                           
Description of common stock contained in                                                   
Registration Statement, and amendments and                                                 
reports updating this description............ Dated October 20, 1992                       

    We are also incorporating by reference additional documents we may file with
the SEC between the date of this proxy statement and the date of our special    
meeting.                                                                        

If you are one of our shareholders, we may have sent you some of the    
documents incorporated by reference, but you can still obtain those documents   
through us, or the SEC, or the SEC's Internet World Wide Web site described     
above. Documents incorporated by reference are available from us without charge,
excluding their exhibits unless specifically incorporated by reference as an    
exhibit to                                                                      

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this proxy statement. Documents incorporated by reference in this proxy         
statement may be obtained from us upon request in writing or by telephone at the
following address and phone number:                                             

HA-LO Industries, Inc.
5980 West Touhy Avenue
Niles, Illinois 60714 
      Attention: Gregory J. Kilrea
   Telephone: (847) 647-2300

    IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE DO SO BY FEBRUARY   ,
2000 TO RECEIVE THEM BEFORE THE SPECIAL MEETING. Requested documents will be    
mailed to you by first-class mail, or other equally prompt means, within one    
business day after we receive your request.                                     

You should rely only on the information contained or incorporated by    
reference in this proxy statement to vote your shares at the special meeting. We
have not authorized anyone to provide you with information that is different    
from that contained in this proxy statement. This proxy statement is dated      
February   , 2000. You should not assume that the information contained in the  
proxy statement is accurate as of any other date, and neither the mailing of    
this proxy statement to our shareholders nor the issuance of our common stock in
the merger shall create any contrary implication.                               

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INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]

                                                                PAGE  
                                                              --------
                                                                      
Starbelly.com, Inc.                                                   

  Report of Independent Accounts............................    F-2   

  Balance Sheet as of September 30, 1999....................    F-3   

  Statement of Operation for the Period from March 22, 1999           
    (Date of Inception), to September 30, 1999..............    F-4   

  Statement of Stockholders' Equity for the Period from               
    March 22, 1999 (Date of Inception), to September 30,              
    1999....................................................    F-5   

  Statement of Cash Flows for the Period from March 22, 1999          
    (Date of Inception), to September 30, 1999..............    F-6   

  Notes to Financial Statements.............................    F-7   

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of                                                    
Starbelly.com, Inc.:                                                            

We have audited the accompanying balance sheet of STARBELLY.COM, INC. (a
Delaware corporation in the development stage) as of September 30, 1999, and the
related statements of operations, stockholders' equity and cash flows for the   
period from March 22, 1999 (date of inception), to September 30, 1999. These    
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these financial statements based on  
our audit.                                                                      

We conducted our audit in accordance with generally accepted auditing   
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audit provides a reasonable basis for our opinion.          

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Starbelly.com, Inc. as of   
September 30, 1999, and the results of its operations and its cash flows for the
period from March 22, 1999 (date of inception), to September 30, 1999, in       
conformity with generally accepted accounting principles.                       

ARTHUR ANDERSEN LLP                                                             

Chicago, Illinois                                                               
January 26, 2000                                                                

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STARBELLY.COM, INC. 

(A DEVELOPMENT STAGE COMPANY) 

BALANCE SHEET 

AS OF SEPTEMBER 30, 1999

                                                                [Download Table]
                                                                         
                                 ASSETS                                  
CURRENT ASSETS:                                                          
  Cash and cash equivalents.................................  $7,115,223 
  Accounts receivable, less allowance for doubtful accounts              
    of $20,000..............................................     155,522 
  Prepaid expenses and other current assets.................     147,899 
                                                              ---------- 
        Total current assets................................   7,418,644 
                                                              ---------- 
PROPERTY AND EQUIPMENT, at cost.............................   1,310,140 
  Less- Accumulated depreciation............................     (68,007)
                                                              ---------- 
        Property and equipment, net.........................   1,242,133 
                                                              ---------- 
DUE FROM RELATED PARTY......................................     282,029 
                                                              ---------- 
        Total assets........................................  $8,942,806 
                                                              ========== 
                  LIABILITIES AND STOCKHOLDERS' EQUITY                   

CURRENT LIABILITIES:                                                     
  Accounts payable..........................................  $1,732,410 
  Accrued expenses..........................................     167,474 
                                                              ---------- 
        Total current liabilities...........................   1,899,884 
                                                              ---------- 
COMMITMENTS AND CONTINGENCIES                                            

STOCKHOLDERS' EQUITY:                                                    
  Convertible Preferred stock, Series A; $.001 par value;                
    1,500,000 shares authorized; 1,500,000 shares issued and             
    outstanding.............................................       1,500 
  Convertible Preferred stock, Series B; $.001 par value;                
    5,653,711 shares authorized; 5,653,711 shares issued and             
    outstanding.............................................       5,654 
  Common stock, Class A; $.001 par value; 3,105,000 shares               
    authorized; 1,050,000 shares issued and outstanding.....       1,050 
  Common stock, Class B; $.001 par value; 36,895,000 shares              
    authorized; 16,500,000 shares issued and outstanding....      16,500 
  Note receivable from stockholder..........................    (250,000)
  Additional paid-in capital................................   9,766,761 
  Accumulated deficit.......................................  (2,498,543)
                                                              ---------- 
        Total stockholders' equity..........................   7,042,922 
                                                              ---------- 
        Total liabilities and stockholders' equity..........  $8,942,806 
                                                              ========== 

The accompanying notes are an integral part of this balance sheet.

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STARBELLY.COM, INC. 

(A DEVELOPMENT STAGE COMPANY) 

STATEMENT OF OPERATIONS 

FOR THE PERIOD FROM MARCH 22, 1999 (DATE OF INCEPTION), TO SEPTEMBER 30, 1999 

                                                                [Download Table]
                                                                          
NET SALES...................................................  $   183,154 
COST OF SALES...............................................      160,945 
                                                              ----------- 
        Gross profit........................................       22,209 
                                                              ----------- 
OPERATING EXPENSES:                                                       
  Sales, marketing and operations...........................      449,538 
  Technology and development................................    1,140,111 
  General and administrative................................      996,791 
                                                              ----------- 
        Total operating expenses............................    2,586,440 
                                                              ----------- 
INTEREST INCOME.............................................       65,688 
                                                              ----------- 
        Loss before taxes...................................   (2,498,543)
INCOME TAXES................................................           -- 
                                                              ----------- 
        Net loss............................................  $(2,498,543)
                                                              =========== 

The accompanying notes are an integral part of this statement.

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 
STATEMENT OF STOCKHOLDERS' EQUITY 
FOR THE PERIOD FROM MARCH 22, 1999 (DATE OF INCEPTION), TO SEPTEMBER 30, 1999 

                                                        [Enlarge/Download Table]

                                                                                 CONVERTIBLE PREFERRED STOCK                    
                                         COMMON STOCK, PAR VALUE         -------------------------------------------            
                                         $.001, 40,000,000 SHARES          PAR VALUE $.001,       PAR VALUE $.001,              
                                                AUTHORIZED                    1,500,000              5,653,711                  
                                    ----------------------------------          SHARES                 SHARES                   
                                     CLASS A,     CLASS B,                    AUTHORIZED             AUTHORIZED                 
                                    3,105,000    36,895,000              --------------------   --------------------  ADDITIONAL
                                      SHARES       SHARES       PAR                    PAR                    PAR      PAID-IN  
                                    AUTHORIZED   AUTHORIZED    VALUE      SHARES      VALUE      SHARES      VALUE     CAPITAL  
                                    ----------   ----------   --------   ---------   --------   ---------   --------  ----------
                                                                                                                                
BALANCE, March 22, 1999                                                                                                         
  Issuance of Class B Common                                                                                                    
    Stock..........................              16,500,000    16,500                                                    (8,250)
  Issuance of Series A Preferred                                                                                                
    stock..........................                                      1,500,000     1,500                          1,498,500 
  Issuance of Series B Preferred                                                                                                
    stock..........................                                                             5,653,711     5,654   7,994,346 
  Issuance of warrants.............                                                                                      10,682 
  Exercise of Class A common stock                                                                                              
    options........................ 1,050,000                   1,050                                                   249,450 
  Compensation and other non-cash                                                                                               
    expense related to stock                                                                                                    
    transactions...................                                                                                      22,033 
  Net loss for period..............                                                                                             
                                    ---------    ----------   -------    ---------    ------    ---------    ------   ----------
BALANCE, September 30, 1999........ 1,050,000    16,500,000   $17,550    1,500,000    $1,500    5,653,711    $5,654   $9,766,761
                                    =========    ==========   =======    =========    ======    =========    ======   ==========



                                       NOTE                                                                                     
                                    RECEIVABLE                                                                                  
                                       FROM       ACCUMULATED                                                                   
                                    STOCKHOLDER     DEFICIT         TOTAL                                                       
                                    -----------   ------------   -----------                                                    
                                                                                                                                
BALANCE, March 22, 1999                                                                                                         
  Issuance of Class B Common                                                                                                    
    Stock..........................                                    8,250                                                    
  Issuance of Series A Preferred                                                                                                
    stock..........................                                1,500,000                                                    
  Issuance of Series B Preferred                                                                                                
    stock..........................                                8,000,000                                                    
  Issuance of warrants.............                                   10,682                                                    
  Exercise of Class A common stock                                                                                              
    options........................   (250,000)                          500                                                    
  Compensation and other non-cash                                                                                               
    expense related to stock                                                                                                    
    transactions...................                                   22,033                                                    
  Net loss for period..............                (2,498,543)    (2,498,543)                                                   
                                     ---------    -----------    -----------                                                    
BALANCE, September 30, 1999........  $(250,000)   $(2,498,543)   $ 7,042,922                                                    
                                     =========    ===========    ===========                                                    

The accompanying notes are an integral part of this statement.

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

STATEMENT OF CASH FLOWS 

FOR THE PERIOD FROM MARCH 22, 1999 (DATE OF INCEPTION), TO SEPTEMBER 30, 1999 

                                                                [Download Table]
                                                                          
CASH FLOWS FROM OPERATING ACTIVITIES:                                     
  Net loss..................................................  $(2,498,543)
  Adjustments to reconcile net loss to net cash used in                   
    operating activities--                                                
    Depreciation............................................       68,007 
    Compensation and other non-cash expense related to stock              
      transactions..........................................       22,033 
    Changes in assets and liabilities--                                   
      Accounts receivable...................................     (155,522)
      Prepaid expenses and other current assets.............     (137,217)
      Due from related party................................     (282,029)
      Accounts payable......................................    1,732,410 
      Accrued expenses......................................      167,474 
                                                              ----------- 
        Net cash used in operating activities...............   (1,083,387)
                                                              ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                     
  Purchase of property and equipment........................   (1,310,140)
                                                              ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                     
  Proceeds from issuance of common stock....................        8,250 
  Proceeds from issuance of preferred stock.................    9,500,000 
  Exercise of common stock options..........................          500 
                                                              ----------- 
        Net cash provided by financing activities...........    9,508,750 
                                                              ----------- 
NET INCREASE IN CASH........................................    7,115,223 

CASH AND CASH EQUIVALENTS, beginning of period..............           -- 
                                                              ----------- 

CASH AND CASH EQUIVALENTS, end of period....................  $ 7,115,223 
                                                              =========== 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING               
  ACTIVITIES:                                                             
    Issuance of note receivable in connection with exercise               
      of options............................................  $   250,000 
    Issuance of warrants in connection with financing.......  $    10,987 
                                                              =========== 

The accompanying notes are an integral part of this statement.

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 

SEPTEMBER 30, 1999

DESCRIPTION OF BUSINESS                                                 

Starbelly.com, Inc. (the "Company"), f/k/a The Zebra.com, is a Delaware 
corporation which was incorporated on March 22, 1999, and is a development stage
company. Its primary activities since inception have been to raise equity       
capital to finance operations and to develop an Internet-based business solution
for the custom-decorated merchandise industry, which includes promotional and ad
specialty products and casual uniforms.                                         

  The Company has incurred significant losses since inception and expects to
continue to incur substantial losses. The net loss was $2,498,543 for the period
ended September 30, 1999. The Company expects to continue to incur significant  
expenses related to marketplace development, technology, sales and marketing and
administration. Significant revenue will need to be generated to achieve and    
maintain profitability. There can be no assurance that the Company will be able 
to generate sufficient revenues to achieve or sustain profitability in the      
future. If profitability is reached, the Company may not be able to sustain or  
increase profitability. As further discussed in Note 9, on January 17, 2000, the
Company signed a definitive stock purchase agreement agreeing to be acquired by 
HA-LO Industries, Inc. The Company anticipates that the transaction will close  
in March and the acquiring company intends to fund the Company's operations     
through 2000.                                                                   

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES                    

USE OF ESTIMATES

The preparation of financial statements in conformity with generally    
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

CASH AND CASH EQUIVALENTS 

 Cash and cash equivalents include all highly liquid investments purchased
with original maturities of three months or less. Cash and cash equivalents are 
recorded at cost, which approximates fair value due to the short maturity of    
these instruments.                                                              

TRADE ACCOUNTS RECEIVABLE 

   For the period ending September 30, 1999, the Company charged approximately
$20,000 to trade allowance for doubtful accounts.                               

PROPERTY AND EQUIPMENT

 Property and equipment are stated at cost. Depreciation is computed using
the straight-line method at rates adequate to depreciate the cost of applicable 
assets over their expected useful lives. Repairs and maintenance are charged to 
expense as incurred. Gains or losses resulting from sales or                    

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

retirements are recorded as incurred, at which time related costs and           
accumulated depreciation are removed from the accounts. The estimated useful    
lives are as follows:                                                           

                                                                [Download Table]

                                                               USEFUL  
ASSET DESCRIPTION                                               LIFE   
-----------------                                             ---------
                                                                       
Computer equipment and software.............................  2-3 years
Furniture and office equipment..............................   5 years 
Leasehold improvements......................................   3 years 
                                                              =========

FINANCIAL INSTRUMENTS 

The carrying value for current assets and current liabilities reasonably
approximates fair value due to the short maturity of these items.               

The financial instruments that potentially subject the Company to       
concentration of credit risk consist principally of cash investments and trade  
receivables. The Company has cash investment policies that limit cash           
investments to short-term, low-risk investments. With respect to trade          
receivables, the Company grants unsecured credit to its customers. Management   
believes that its accounts receivable credit risk is limited as these customers 
are geographically dispersed and are in numerous different industries.          
Additionally, the Company establishes accounts receivable allowances based upon 
factors relating to the credit risk of specific customers and other information.
Three customers accounted for approximately 68.5% of the Company's sales for the
period ended September 30, 1999.                                                

REVENUE RECOGNITION 

The Company recognizes revenue from product sales, net of any discounts,
when the products are shipped to the customers.                                 

COST OF SALES 

   Cost of sales consists primarily of merchandise sold to customers including
product cost, decoration cost and freight and handling charges.                 

SALES, MARKETING AND OPERATIONS COSTS 

  Sales, marketing and operations costs consist primarily of advertising and
promotional expenditures, operations facility expenses and payroll and related  
expenses for personnel engaged in marketing, operations, sales and customer     
service. Advertising expenditures are expensed as incurred. The Company's       
advertising to date has related primarily to building brand awareness, including
primarily print advertising and promotions. Total advertising and promotion     
costs for the period ended September 30, 1999, was $44,494.                     

TECHNOLOGY AND DEVELOPMENT COSTS

   The Company has adopted Statement of Position ("SOP") No. 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use,"     
which provides guidance on the accounting for the cost of computer software     
developed or obtained for internal use. Costs incurred in the development of the
Company's main web site and related applications to be used in connection       

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

with the Company's services have been expensed to operations as incurred as the 
rapid pace of technological change results in an estimated useful life of one   
year or less. These costs consist primarily of payroll and related expenses and 
consultant costs. The Company incurred technology and development costs of      
approximately $1,140,000 for the period ended September 30, 1999. Costs incurred
in the development of certain products to be used in connection with the        
Company's services have been capitalized and are being amortized on a           
straight-line basis over the estimated useful life of the products of two years.
These costs consist primarily of payroll and related expenses and consultant    
costs. As of September 30, 1999, the amount capitalized is approximately        
$112,000. For the period ended September 30, 1999, the Company amortized        
approximately $4,700.                                                           

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of   
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." 
Under the asset and liability method of SFAS No. 109, deferred tax assets and   
liabilities are recognized for the future tax consequences attributable to      
differences between the financial statement carrying amounts of existing assets 
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted   
tax rates expected to apply to taxable income in the years in which those       
temporary differences are expected to be recovered or settled. A valuation      
allowance has been provided to offset deferred tax assets, which consists       
primarily of net operating losses. At September 30, 1999, the deferred tax asset
and offsetting valuation allowance amount to approximately $934,000. The Company
has net operating losses for both federal and state tax purposes of             
approximately $2,311,000 expiring during 2015. The net operating losses can be  
carried forward to offset future taxable income. Utilization of the above       
carryforwards may be subject to the utilization limits, which may inhibit the   
Company's ability to use carryforwards in the future.                           

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation arrangements with     
employees in accordance with the provisions of Accounting Principles Board      
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and complies
with the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based     
Compensation." Under APB No. 25, compensation expense is based on the           
difference, if any, on the measurement date, between the estimated fair value of
the Company's stock and the exercise price of options to purchase that stock.   
The compensation expense is amortized on a straight-line basis over the vesting 
period of the options.                                                          

The Company accounts for stock-based compensation arrangements with     
nonemployees in accordance with SFAS No. 123. SFAS No. 123 establishes a fair   
value based method of accounting for stock-based compensation plans. Under the  
fair value based method, compensation cost is measured at the grant date based  
on the value of the award, which is calculated using an option pricing model,   
and is recognized over the service period, which is usually the vesting period. 

SEGMENT INFORMATION 

  The Company identifies its operating segments based on business activities
and management responsibility. The Company operates in a single business segment
and has no significant international sales.                                     

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

START-UP COSTS

In accordance with SOP No. 98-5, "Reporting on the Costs of Start-up    
Activities," the Company has expensed all start-up costs, including organization
costs, as incurred.                                                             

2.  PROPERTY AND EQUIPMENT                                                      

 Property and equipment at September 30, 1999, consisted of the following:

                                                                [Download Table]
                                                                         
Computer equipment and software.............................  $  995,946 
Furniture and office equipment..............................      92,668 
Leasehold improvements......................................     221,526 
                                                              ---------- 
                                                               1,310,140 
Less--Accumulated depreciation..............................     (68,007)
                                                              ---------- 
    Property and equipment, net.............................  $1,242,133 
                                                              ========== 

3.  DEBT                                                                        

On September 16, 1999, the Company entered into a Loan and Security     
Agreement ("Agreement") with a bank for a committed equipment line up to a      
maximum of $1,250,000 that terminates on May 31, 2000. Each equipment advance on
the line is limited to $500,000 until the Company reports monthly revenue of at 
least $100,000. The advance limit will be increased to $1,000,000 when the      
Company reports monthly revenue of $200,000. The maximum number of equipment    
advances is five. Eligible equipment under the equipment line includes computer 
equipment, office equipment and furnishings. Each equipment advance will be     
considered a separate borrowing and will have a separate payment schedule and   
interest rate as determined by the bank at the time of the equipment advance.   
Principal and interest payments are due monthly on the first day of the month   
following the funding date and the interest rate will be equal to the bank's    
basic rate. The repayment period on each equipment advance is 36 months. The    
Company is required to grant the bank a first priority continuing security      
interest in all presently existing and later acquired equipment financed under  
an equipment advance. The Agreement contains various nonfinancial covenants. The
Company had not taken any equipment advances as of September 30, 1999. In       
conjunction with the Agreement, the Company issued the bank a warrant to        
purchase 28,369 shares of Series B preferred stock with an exercise price of    
$1.41 per share. The warrant expires in September, 2006. The warrants were      
valued using the Black-Scholes option pricing model (see Note 8). Subsequent to 
September 30, 1999, the Company borrowed approximately $848,000 against the     
committed equipment line.                                                       

4.  401(K) SAVINGS PLAN                                                         

   The Company has a savings plan ("401(k) Plan") which qualifies as a defined
contribution arrangement under Section 401 (a), 401(k) and 501(a) of the        
Internal Revenue Code. Under the 401(k) Plan, participating employees may defer 
a percentage (not to exceed 15%) of their eligible pretax earnings up to the    
Internal Revenue Service's annual contribution limit. All employees on the      
payroll of the Company are eligible to participate in the 401(k) Plan.          

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

5.  COMMITMENTS AND CONTINGENCIES                                               

    The Company is, at times, subject to pending and threatened legal action and
proceedings. Management believes that the outcome of such actions or proceedings
is not expected to have a material adverse effect on the financial position or  
results of operations of the Company.                                           

Subsequent to September 30, 1999, the Company entered into a sublease   
agreement related to its main operating facility. It is a three year agreement  
which can be terminated by the Company with six month's notice. The amount of   
rent is determined based on the percentage of space used by the Company. The    
Company does not anticipate that its monthly rent will exceed $20,000 per month 
pursuant to the agreement.                                                      

6.  RELATED-PARTY TRANSACTIONS                                                  

 On May 10, 1999, the Company entered into a Supply and Services Agreement
(the "Agreement") with a company that is owned by the founding stockholders of  
the Company. The Agreement calls for the provision of decoration services by the
Company to the related party, among other shared services and facilities.       
Pursuant to the Agreement, the Company has billed for these decoration services.
Amounts billed have been reflected net of payroll and facilities provided to the
Company by the related party, as well as a software license granted to the      
Company by the related party. At September 30, 1999, the net amount due from the
related party is $282,029.                                                      

    No amounts billed by the Company to the related party have been reflected as
revenue since the relationship pursuant to the Agreement has been determined to 
be an agency relationship rather than a principal relationship. Reflected in the
Company's statement of operations within general and administrative operating   
expense is approximately $232,000 of payroll and facility expense provided to   
the Company by the related party. The payroll expenses are allocated to the     
Company based on estimates of the percentage of time these employees provided   
services to the Company. The facility expenses are allocated to the Company     
based on the percentage of space used by the Company. Management believes that  
this amount approximates the fair market value of such services and facilities. 

 Subsequent to September 30, 1999, on November 15, 1999, the Agreement was
terminated.                                                                     

The Company also has supply and service agreements with two contract    
decorators which operate their businesses in the same facility as the Company.  
Certain of the owners of these two companies have been granted Company stock    
options with exercise prices equivalent to those granted to Company employees.  
As further discussed in Note 8, expense is recognized for these nonemployees, as
determined by a Black-Scholes option pricing model, over the respective vesting 
periods.                                                                        

7.  STOCKHOLDERS' EQUITY                                                        

COMMON STOCK

The Company was incorporated on March 22, 1999. A total of 8,250,000    
founders shares of Class B common stock were issued for consideration of $8,250.
During June 1999, a one-for-one stock dividend was declared and distributed to  
the common stockholders. The effect of this stock dividend is reflected in the  
accompanying financial statements.                                              

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

The Class A common stock is non-voting while the Class B common stock is
voting.                                                                         

PREFERRED STOCK 

  On May 10, 1999, the Company issued 1,500,000 shares of Series A preferred
stock at a price of $1.00 per share. The holders of Series A preferred stock are
entitled to receive dividends of 6% per share per annum, payable quarterly, if  
declared. The dividend is only payable after all Series B preferred stock       
dividends are paid. Upon liquidation, after Series B preferred stock holders are
paid their liquidation preference, Series A preferred stock holders are entitled
to a liquidation preference of the per share price plus declared and unpaid     
dividends prior to any distribution. If the amount payable to common stock      
holders on liquidation would exceed the amounts paid to holders of Series A     
preferred stock on account of their liquidation preferences, the Series A       
preferred stock automatically converts to Class B common stock at its conversion
rate. Shares of Series A preferred stock may be converted into Class B common   
stock at any time upon a holder's request. All shares of Series A preferred     
stock will be converted into Class B common stock upon the first to occur of the
consent of a majority of holders of Series A preferred stock and Series B       
preferred stock voting together in a single class, or upon the consummation of  
an initial public offering at a price per share equal to $1.50 per share of     
Series A preferred stock resulting in aggregate cash proceeds to the Company of 
at least $10 million. The aggregate conversion price of the shares is determined
by dividing the purchase price of the Series A preferred stock by the conversion
price ($.50 per share as of September 30, 1999). The conversion price is subject
to adjustment on any subdivision or stock dividend paid on account of the common
stock and was adjusted based on the stock dividend previously described. In     
addition, the conversion price is subject to a proportional adjustment to the   
extent the consideration actually received for future issuances of stock are    
less than the conversion price of the Series A preferred stock, other than      
certain issuances, as defined. Holders of Series A preferred stock have no      
preemptive rights. Holders of Series A preferred stock have limited piggy-back  
registration rights. Holders of Series A preferred stock are entitled to voting 
rights as if their conversion rights had been exercised.                        

   On July 29, 1999, the Company issued 5,653,711 shares of Series B preferred
stock at a price of $1.41 per share. The holders of Series B preferred stock are
entitled to receive dividends of 6% per share per annum, if declared. Upon      
liquidation, Series B preferred stock holders are entitled to a liquidation     
preference of the per share price plus declared and unpaid dividends prior to   
any distribution, including the liquidation preference on account of the        
Series A preferred stock. Shares of Series B preferred stock may be converted   
into Class B common stock at any time upon a holder's request. All shares of    
Series A preferred stock will be converted into Class B common stock upon the   
first to occur of the consent of a majority of holders of Series A preferred    
stock and Series B preferred stock voting together in a single class, or upon   
the consummation of an initial public offering at a price per share equal to    
three times the issue price of the Series B preferred stock resulting in        
aggregate cash proceeds to the Company of at least $20 million. The aggregate   
conversion price of the shares is determined by dividing the purchase price of  
the Series B preferred stock by the conversion price ($1.41 per share as of     
September 30, 1999). The conversion price is subject to adjustment on any       
subdivision or stock dividend paid on account of the common stock. In addition, 
the conversion price is subject to a proportional adjustment to the extent the  
consideration actually received for future issuances of stock are less than the 
lower of the conversion price of the Series B preferred stock or the then-market
value of the Series B preferred stock, other than certain issuances, as defined.
Holders of Series B preferred stock have preemptive rights to the extent        
necessary to maintain fully diluted                                             

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

ownership of the Company on issuances of stock by the Company, other than       
certain specified issuances. Holders of Series A preferred stock have been      
granted certain registration rights. Holders of Series B preferred stock are    
entitled to voting rights as if their conversion rights had been exercised.     

8.  STOCK OPTION PLANS                                                          

In June, 1999, the Board of Directors adopted the 1999 Stock Plan (the  
"Plan"). The Plan provides for 3,105,000 shares of Class A common stock to be   
granted. Under the terms of the Plan, options may be granted to employees,      
consultants and directors. Options granted to consultants are valued by the     
Company using a Black-Scholes option pricing model, with such value recorded as 
expense over the term of the service provided. Typically, options granted to    
employees vest over four years, 25% after the first year, ratably each quarter  
over the remaining three years, and generally expire ten years from the date of 
grant. Shares issued under the Plan may be subject to a right of refusal,       
repurchase options or other conditions and restrictions as determined by the    
Board of Directors. By way of example, certain options granted by the Company   
are immediately exercisable. In such cases, the Company has a right to          
repurchase any unvested shares from the employee upon termination at the price  
paid by the employee upon exercise. Unvested shares are typically held in       
escrow. At September 30, 1999, of the 1,050,000 shares of Class A common stock  
outstanding, issued pursuant to exercise of stock options, 868,750 of such      
shares are unvested shares which can be subject to repurchase.                  

Subsequent to September 30, 1999, an executive owning 1,000,000 of the  
aforementioned shares left the Company. The consideration for these shares had  
been in the form of a $250,000 note receivable, which is depicted within the    
statement of stockholders' equity separately. In connection with this departure,
the Company repurchased 675,000 shares at the original exercise price.          
Additionally, the Company accelerated a portion of a deferred signing bonus and 
agreed to remit certain tax withholdings. The impact of this will be a charge to
operations in October of approximately $100,000. All amounts to be remitted by  
the Company to the employee were applied to the note receivable.                

The following table summarizes the Company's stock option activity:     

                                                        [Enlarge/Download Table]

                                                                                       WEIGHTED-
                                                                           EXERCISE     AVERAGE 
                                                               NUMBER      PRICE PER   EXERCISE 
                                                             OF SHARES       SHARE       PRICE  
                                                             ----------   -----------  ---------
                                                                                                
Outstanding at inception, March 22, 1999....................     --       $   --         $--    
  Granted...................................................  2,459,834   .01 to 1.00      .67  
  Exercised................................................. (1,050,000)  .01 to .25       .24  
  Canceled..................................................    (80,500)     1.00         1.00  
                                                             ----------   -----------    -----  
Outstanding at September 30, 1999...........................  1,329,334      1.00         1.00  
                                                             ==========   ===========    =====  

   At September 30, 1999, 64,584 options are exercisable, all of which have an
exercise price of $1.00. Subsequent to September 30, 1999, the Company granted  
approximately 1,140,000 additional stock options, all of which have an exercise 
price of $1.00 per share. To the extent that the exercise price of these options
is less than the fair market value of the underlying common stock, as determined
by the Company, compensation expense will result and will be recorded over the  
vesting period of the related stock options.                                    

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STARBELLY.COM, INC. 
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

SEPTEMBER 30, 1999

 Pro forma information regarding net loss is required by SFAS No. 123, and
has been determined as if the Company had accounted for its employee stock      
options under the fair-value method of that statement. The fair value for these 
options was estimated at the date of grant using the minimum-value method, which
utilizes a near-zero volatility factor. The remaining assumptions were an       
expected life of 5 years, a risk-free interest rate of 5.0%, and no dividend    
yield.                                                                          

    The option-valuation method requires input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly 
different from those of traded options, and because the change in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing method does not necessarily provide a reliable single     
measure of the employee stock options. The effects of applying SFAS No. 123 in  
the pro forma disclosure are not indicative of future amounts and additional    
awards in future years are anticipated.                                         

If the Company recognized employee stock related compensation expense in
accordance with SFAS No. 123 under the minimum value method, its net loss for   
the period ended September 30, 1999 would have been approximately $12,000       
higher.                                                                         

From time to time, the Company grants stock options to non-employees,   
principally consultants, independent contractors, and advisors. The Company     
accounts for these option grants pursuant to the provisions of SFAS No. 123     
incorporating the same assumptions discussed above. Approximately $22,000 of    
compensation expense was recorded during the period ended September 30, 1999    
related to these options.                                                       

In conjunction with its loan agreement, the Company issued the bank a   
warrant to purchase 28,369 shares of Series B preferred stock at $1.41 per share
(see Note 3). The warrant expires in September, 2006. The Company accounted for 
this warrant in accordance with SFAS No. 123. The fair value of the warrant was 
calculated at the date of grant using the Black-Scholes option pricing model    
with the following assumptions: weighted-average risk-free interest rate of 5%, 
a dividend yield of 0% and a weighted-average expected life of the warrant of   
seven years. The fair value of the warrants was approximately $11,000 and was   
included in prepaid expenses on the accompanying balance sheet. The expense will
be amortized over the term of the equipment advances. For the period ended      
September 30, 1999, the Company amortized approximately $300.                   

    In connection with the closing of the transaction discussed in Note 9, there
will be an acceleration of stock option vesting of 50% of unvested options for  
certain employees and 33% of unvested options for all other employees.          

9.  SUBSEQUENT EVENTS                                                           

On January 17, 2000, the Company signed a definitive stock purchase     
agreement agreeing to be acquired by Ha-Lo Industries, Inc., a leading provider 
of promotional and ad specialty products and marketing services. The purchase   
price is $240 million, comprised of cash, preferred stock and common stock. The 
Company's Board of Directors and Shareholders have approved the transaction. The
Shareholders of Ha-Lo Industries are expected to vote on the transaction in     
March, 2000. It is anticipated that the transaction will close in March, 2000.  

In conjunction with this transaction, Ha-Lo Industries will make certain
specified loans to the Company whether or not the transaction closes. In        
addition, the agreement stipulates certain break-up fees and other matters if   
the transaction does not close.                                                 

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                                                                       EXHIBIT A

AGREEMENT AND PLAN OF MERGER

AND PLAN OF REORGANIZATION

BY AND AMONG

 HA-LO INDUSTRIES, INC.,

STARBELLY.COM, INC.,

 AND

HA-LO INDUSTRIES, INC.

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

W I T N E S S E T H:

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

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

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

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

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

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

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

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

 ARTICLE I

THE MERGER TRANSACTION

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

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

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

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

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

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

SECTION 1.07      THE CLOSING. The closing of the transactions
contemplated by this Agreement will take place at the offices of Neal, Gerber   
& Eisenberg, Chicago, Illinois, and will be effective at the Effective Time.    
On the terms and subject to the conditions of this Agreement and provided       
that this Agreement has not been terminated pursuant to Article VIII, the       
closing of the Merger (the "CLOSING") will take place at 10:00 a.m., local      
time in Chicago, Illinois, on the date which is the third business day to       
occur on or after the satisfaction of the conditions set forth in Section       
7.1, provided that if all conditions set forth in Article VII are not           
fulfilled or waived on such third business day, then the Closing shall be       
automatically extended from time to time until the first subsequent business    
day on which all such conditions are so satisfied or waived, subject to         
Section 8.01(e), unless another date or place is agreed to in writing by the    
parties. The date on which the Closing occurs is referred to herein as the      
"CLOSING DATE." At the Closing, (a) Acquiror shall deliver, and each            
Stockholder will be entitled to receive, upon surrender to Acquiror of          
certificates representing shares of Company Common Stock or shares of Company   
Preferred Stock, as the case may be, for cancellation, certificates             
representing the number of shares of Acquiror Common Stock and/or Acquiror      
Series A Preferred Stock that such Stockholder is entitled to receive           
pursuant to Section 2.01 hereof, and (b) the parties shall execute and          
deliver or make the deliveries set forth in Sections 7.01 and 7.02 hereof. In   
the event any certificate representing shares of Company Common Stock or        
shares of Company Preferred Stock shall have been lost, stolen or destroyed,    
upon the making of an affidavit of that fact by the Person claiming such        
certificate to be lost, stolen or destroyed and, if reasonably required by      
Acquiror, the posting by such Person of a bond in such amount as Acquiror may   
determine is reasonably necessary as indemnity against any claim that may be    
made against it with respect to such certificate, Acquiror will issue in        
exchange for such lost, stolen or destroyed certificate the shares of           
Acquiror Common Stock and/or Acquiror Series A Preferred Stock and any cash     
in lieu of fractional shares deliverable in respect thereof pursuant to this    
Agreement.                                                                      
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ARTICLE II  

EXCHANGE OF CERTIFICATES  

SECTION 2.01      MERGER CONSIDERATION.                       

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE III 

 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

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

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

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

SECTION 3.01      ORGANIZATION AND QUALIFICATION; EQUITY      
INVESTMENTS. The Company is a corporation, duly organized, validly existing     
and in good standing under the laws of the State of Delaware. Except as set     
forth on Section 3.01 of the Company Disclosure Schedules, the Company does     
not own, directly or indirectly, five percent (5%) or more of the voting        
stock or other equity interests in another Person. The Company possesses all    
requisite corporate power and corporate authority to own, lease and operate     
its properties and/or to carry on its business as it is now being conducted,    
and is duly qualified and in good standing to do business in each               
jurisdiction in which the nature of the business conducted by the Company or    
the ownership or leasing of its properties makes such qualification             
necessary, other than where the failure to do so would not have a Company       
Adverse Effect. The Company was duly incorporated on March 22, 1999; no         
predecessor Person conducted the business of the Company.                       

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

SECTION 3.03      CAPITALIZATION OF THE COMPANY.              

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

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

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

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

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

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

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

                                (B)      5,653,711 shares are designated
                   as Company Series B Preferred Stock, of which
                     5,653,711 are issued and outstanding, and which
                  are held of record by the Persons and in the
                 amounts set forth on Section 3.03(a) of the
   Company Disclosure Schedules.
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       (b)      No Other Company Securities are issued and
  outstanding. Section 3.03(b) of the Company Disclosure Schedules
   contains a list of all outstanding warrants, options, agreements,
    convertible securities (other than Company Preferred Stock and the
      Silicon Warrant) and other commitments pursuant to which the Company
     is or may become obligated to issue, sell or otherwise transfer any
   Company Common Stock or Company Preferred Stock, which list names
      all Persons entitled to receive such Company Common Stock or Company
      Preferred Stock and sets forth the shares of Company Common Stock or
     Company Preferred Stock required to be issued thereunder. Except as
      described in Section 3.03(b) of the Company Disclosure Schedules, no
    shares of Company Common Stock or Company Preferred Stock are held
in treasury or are reserved for any other purpose.            

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

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

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

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

  SECTION 3.04      AUTHORITY. The Company possesses the requisite
corporate power and corporate authority to execute and deliver this             
Agreement, including the Exhibits attached hereto, to perform its obligations   
under this Agreement and to consummate the transactions contemplated by this    
Agreement. The execution and delivery of this Agreement by the Company and      
the consummation by the Company of the transactions contemplated by this        
Agreement have been duly authorized by all necessary corporate action,          
including the approval by the Company's Stockholders and directors, and no      
other proceedings on the part of the Company are necessary to authorize this    
Agreement or to consummate the transactions contemplated by this Agreement.     
This Agreement has been duly executed and delivered by the Company, and         
assuming the due authorization, execution and delivery by Acquiror and          
Acquiror Sub, constitutes the legal, valid and binding obligation of the        
Company, enforceable in accordance with its terms and conditions.               
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SECTION 3.05 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS.     

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

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

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

SECTION 3.07      FINANCIAL STATEMENTS.                       

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

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  accepted accounting principles and standards ("GAAP") and do not
contain footnotes and other presentation items that would be  
required by GAAP.                                             

                  (b)      The Company has no liabilities or indebtedness of any
    nature whatsoever, except for (i) liabilities and indebtedness set
forth in the Balance Sheets included in the Company Financial 
         Statements dated November 30, 1999 (the "MOST RECENT STATEMENTS"), (ii)
      liabilities and indebtedness which have arisen after the date of the
  Most Recent Statements in the ordinary course of business of the
  Company, (iii) liabilities and indebtedness set forth in Section
   3.07(b) of the Company Disclosure Schedules, (iv) liabilities and
       indebtedness incurred in connection with the transaction contemplated
        herein, and (v) except as otherwise set forth in this Section 3.07(b),
         any such liability or indebtedness in each case less than $100,000, and
less than $1,000,000 in aggregate liabilities or indebtedness.

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

SECTION 3.09      ABSENCE OF LITIGATION.                      

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

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

SECTION 3.10      CONTRACTS; NO DEFAULT.                      

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 3.11      EMPLOYEE BENEFIT PLANS; LABOR MATTERS.      

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

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

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                (c)      As used in this Agreement, "PENSION PLAN" means any
    Employee Benefit Plan which is an employee pension benefit plan as
         defined in ERISA, or is otherwise a pension, savings or retirement plan
       or a plan of deferred compensation, and the term "WELFARE PLAN" means
any Employee Benefit Plan which is not a Pension Plan.        

        (d)      With respect to the Employee Benefit Plans:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      (h)      Section 3.11(h) of the Company Disclosure
   Schedules lists, as of the date of this Agreement, all collective
     bargaining or other labor union contracts to which the Company is a
   party and which is applicable to persons employed by the Company.
      There is no pending or, to the knowledge of the Company, threatened,
      labor dispute, strike or work stoppage against the Company which may
   materially interfere with the business activities of the Company,
    its revenues, profits, cash flows, or other results of operations.
    The Company has no knowledge of the commission of any unfair labor
     practices in connection with the operation of the Company business,
   and there is not now pending or, to the knowledge of the Company,
   threatened, any charge, complaint or other proceeding against the
Company by the National Labor Relations Board, or comparable  
Governmental Entities.                                        

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

SECTION 3.12      TAXES.                                      

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     SECTION 3.13      INTELLECTUAL PROPERTY RIGHTS. Except as set forth
in Section 3.13 of the Company Disclosure Schedules or in the last sentence     
of this Section 3.13, the Company owns or possesses the right or license        

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to use all patents, trademarks, service marks, trade names, domain names,       
slogans, trade secrets and other tangible or intangible proprietary             
confidential information (including scientific and technical information,       
design processes, operating processes, schematics, procedures, formulae, data   
processing techniques, software, the specialized information and technology     
embodied in communications program materials, software documentation and        
other program and system designs), which it has used or currently uses (the     
"INTELLECTUAL PROPERTY") without any known conflict or alleged conflict with,   
or infringement of, the rights of others, and the Company's public use of any   
of such Intellectual Property which the Company is currently using internally   
and which it currently intends to commence using publicly shall not conflict    
with, or infringe upon, the rights of others. All Intellectual Property owned   
by the Company is referred to herein as the "OWNED INTELLECTUAL PROPERTY."      
All Intellectual Property currently licensed to the Company is referred to      
herein as the "LICENSED INTELLECTUAL PROPERTY." Section 3.13 of the Company     
Disclosure Schedules identifies (i) all Owned Intellectual Property             
consisting of issued domestic and foreign patents and patent applications       
pending, patent applications in process, domain name registrations, common      
law trademarks which are material to the Company's business as currently        
operated or as planned to be operated with such trademarks which the Company    
is currently using internally and currently intends to commence using           
publicly, domestic and foreign trademark registrations and trademark            
registration applications, copyright registrations, copyright registration      
applications, common law service marks which are material to the Company's      
business as currently operated or as planned to be operated with such           
trademarks which the Company is currently using internally and currently        
intends to commence using publicly, service mark registrations, service mark    
registration applications and written know-how agreements, and rights           
acquired through litigation, and (ii) all of the material Licensed              
Intellectual Property (other than computer software which is generally          
commercially available). Except as set forth in Section 3.13 of the Company     
Disclosure Schedules, the agreements for Licensed Intellectual Property         
(including computer software) are in full force and effect; the rights of the   
Company thereunder are free and clear of all adverse claims, options, liens,    
charges, security interests and encumbrances; and no defaults exist             
thereunder. The Company has not been served with any notice or summons          
regarding any interference, opposition or cancellation proceedings or           
infringement suits, nor to the knowledge of the Company or any of Nancy         
Dugan, Paul Ivsin, Nick Antista and Hugo Toledo (the "Additional IT             
Personnel") has the Company received any threat of such action, with respect    
to any Intellectual Property. To the knowledge of the Company and the           
Additional IT Personnel, the Company has not been charged with infringing any   
patent, copyright, trademark right or other intellectual property right of      
any person, and neither the Company nor any of the Additional IT Personnel      
has any knowledge of any third party's use of any Intellectual Property in a    
manner that infringes upon the rights of the Company or any third party. The    
Intellectual Property comprises all of the intellectual property rights and     
licenses pertaining thereto necessary for the Company to conduct its business   
as formerly operated, and as currently planned to be operated, except for       
such licenses and intellectual property rights set forth in Section 3.13 of     
the Company Disclosure Schedules. The Company has not taken or allowed there    
to be taken any action to cause any of the material Intellectual Property to    
be abandoned, or failed to take such action necessary to prevent such           
material Intellectual Property from being abandoned. Section 3.13 of the        
Company Disclosure Schedules identifies all parties (other than the Company's   
employees) who have created any portion of the Owned Intellectual Property,     
and the Company has obtained from each of such persons a valid and              
enforceable written assignment of any and all rights which they would           
otherwise have in the Owned Intellectual Property. The Company has obtained     
written agreements or other adequate assurances from all of its current and     
former employees and from each third party with whom it has shared any of its   
confidential proprietary information, pursuant to which such employees and      
other third parties have acknowledged that such information is confidential     
proprietary information of the Company and have undertaken to maintain such     
information as confidential in accordance with the terms thereof.               
Notwithstanding any other provision of this Section 3.13 to the contrary, the   
Company shall not be deemed to be in breach of any of its representations or    
warranties set forth in this Section 3.13 as a result of any use which may be   
made of the trademark STARBELLY at any time following the Effective Time, and   
the terms of this Section 3.13 shall be applicable to the trademark STARBELLY   
solely with respect to the use thereof prior to the Effective Time.             

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

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

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

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

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

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

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

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

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

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

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

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

    SECTION 3.18      TITLE TO ASSETS. Except for matters disclosed in
Section 3.18 of the Company Disclosure Schedules, the Company is the owner of   
and has good and valid title to, or in the case of leased property has a        
valid leasehold interest in, all of its properties and assets, including        
those assets and properties reflected in the Company Financial Statements,      
free and clear of all liens, claims or encumbrances.                            

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

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

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

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

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

 SECTION 3.24      THE COMPANY'S WEBSITE. The Company's Internet
website (the "WEBSITE") is a reasonably stable, secure and redundant website    
with regard to both bandwidth and server needs, taking into account all facts   
and circumstances. The current capacity of the Website is sufficient to         
permit reasonable access by at least 500 simultaneous users, and the Website    
has been designed and developed such that its capacity may readily be           
expanded to address currently projected increases in the Website's average      
daily number of users. At all times following the date on which the Website     
is complete, operational and accessible from the Internet (the "Website         
Launch Date") the Website will be capable of being operational and accessible   
from the Internet as described above no less than ninety-eight percent (98%)    
of the time, measured with respect to semiannual periods commencing at the      
Effective Time, and determined without regard to periods when the Website is    
not operational and accessible from the Internet due to (i) the Company's       
development efforts and upgrades, or (ii) viruses transmitted over the          
Internet, failures of systems controlled by third parties such as Ameritech     
Corp. or Level 3, Inc., or other causes beyond the reasonable control of the    
Company (it being understood and agreed that the Website is intended to be      
operational and accessible from the Internet 24 hours per day, and not merely   
during business hours). The Company has prepared and implemented a reasonable   
disaster recovery contingency plan pursuant to which the Company or its         
designee will be able to restore the Website and recover the database of        
information collected by the Company with respect to users of the Website       
within a reasonably prompt period following any fire or other disaster which    
may occur at the Company's facilities.                                          

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

                  (a)      None of the computer systems owned or operated by the
Company or by any third party on behalf of the Company, and no
    machinery, equipment, fixtures, inventory or other system which is
   owned, leased or operated by the Company or by any third party on
         behalf of the Company and controlled by one or more computer processors
  (collectively, the "COMPUTER SYSTEMS") will result in a material
     failure or disruption of any of the Company's business, operations,
    financial reporting, tax reporting, inventory management, accounts
    receivable systems, accounts payable systems, invoicing, delivery,
personnel                                                     

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   management or records, benefits records or administration, or any
other records or systems as a result of being incapable of    
    recognizing and correctly calculating dates on or after January 1,
      2000, or unable to perform any of its intended functions in a proper
      and efficient manner as a result of its use with data containing any
date on or after January 1, 2000 (the "YEAR 2000 PROBLEM")    

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

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

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

             (b)      providing feedback to customer on order receipt;

                (c)      providing order status information to the customer;

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

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

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

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

                  (h)      establishing and maintaining a master image database;

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

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

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

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

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

          (n)      preserving and protecting the security of the
  Technology Systems, including without limitation the Website and
   affiliate websites which are hosted on the Company's servers, and
   preserving and protecting the confidentiality of all transactions
processed using the Technology Systems, using                 

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    passwords, firewalls and other methods which are reasonable taking
into account all facts and circumstances.                     

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

ARTICLE IV

 REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB

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

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

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

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

SECTION 4.03      CAPITALIZATION OF ACQUIROR AND ACQUIROR SUB.

                 (a)      The authorized capital stock of Acquiror consists of
       100,000,000 shares of Acquiror Common Stock, of which 48,724,790 were
         issued and outstanding as of January 14, 2000, and 10,000,000 shares of
     Preferred Stock, no par value ("ACQUIROR PREFERRED STOCK"), none of
   which are issued and outstanding. The authorized capital stock of
         Acquiror Sub consists of 1,000 shares of Common Stock, no par value per
       share ("ACQUIROR SUB COMMON STOCK"), of which, as of the date of this
         Agreement, 1,000 shares are issued and outstanding. On the date of this
Agreement, all issued and outstanding shares of               

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     Acquiror Common Stock and Acquiror Sub Common Stock are, and at the
     Effective Time all issued and outstanding shares of Acquiror Common
  Stock, Acquiror Series A Preferred Stock and Acquiror Sub Common
Stock will be, duly authorized, validly issued, fully paid and
 non-assessable. Acquiror is the record holder of all issued and
      outstanding shares of Acquiror Sub Common Stock, and such shares are
     owned by Acquiror free and clear of any and all security interests,
      liens, claims, pledges, agreements, limitations on Acquiror's voting
 rights, charges or other encumbrances of any nature whatsoever.

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

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

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

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

SECTION 4.04      AUTHORITY.                                  

      (a)      Each of Acquiror and Acquiror Sub has the
      requisite corporate power and corporate authority to enter into this
 Agreement and, subject to the approval of the Share Issuance by
affirmative vote of the holders of a majority of the shares of
Acquiror Common Stock present and entitled to vote at the     

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      Shareholders Meeting, to consummate the transactions contemplated by
 this Agreement. The execution and delivery of this Agreement by
 Acquiror and Acquiror Sub, and the consummation by Acquiror and
  Acquiror Sub of the transactions contemplated by this Agreement,
    have been duly authorized by all necessary corporate action (other
     than the Shareholder Approval) and no other proceedings on the part
   of Acquiror or Acquiror Sub (other than the Shareholders Meeting)
are necessary to authorize this Agreement or to consummate the
      transactions contemplated by this Agreement. This Agreement has been
duly executed and delivered by Acquiror and Acquiror Sub and, 
assuming the due authorization, execution and delivery by the 
  Company, constitutes the legal, valid and binding obligations of
    Acquiror and Acquiror Sub enforceable in accordance with its terms
and conditions.                                               

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

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

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

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

SECTION 4.06      SECURITIES REPORTS; FINANCIAL STATEMENTS.   

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

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

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

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

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

SECTION 4.08      ABSENCE OF LITIGATION.                      

            (a)      Except as set forth in an Acquiror Report filed
  with the Commission prior to the date hereof, there is no claim,
action, suit, litigation, proceeding, arbitration, or, to the 
     knowledge of Acquiror, investigation of any kind affecting Acquiror
    or any of its subsidiaries, at law or in equity (including actions
or proceedings seeking injunctive relief), pending or, to the 
knowledge of Acquiror, threatened, except for claims, actions,
 suits, litigations, proceedings, arbitrations or investigations
 which cannot reasonably be expected to have an Acquiror Adverse
     Effect. There is no action pending or, to the best knowledge of the
    Acquiror or Acquiror Sub, threatened seeking to enjoin or restrain
the Merger or any transaction contemplated by the Merger.     

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

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

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

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

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

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

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

SECTION 4.15      ERISA COMPLIANCE.                           

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

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

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

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

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

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

SECTION 4.16      TAXES.                                      

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

            (b)      Except as disclosed in the Acquiror Reports, no
     deficiencies for any taxes have been proposed, asserted or assessed
     against Acquiror or any of its subsidiaries that are not adequately
reserved                                                      

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    for, except for deficiencies that individually or in the aggregate
would not have an Acquiror Adverse Effect.                    

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

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

SECTION 4.18      INTELLECTUAL PROPERTY.                      

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

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

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

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

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property owned or leased by Acquiror or its subsidiaries has not been used by   
any other person in violation of, any Environmental Laws.                       

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

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

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

ARTICLE V 

 COVENANTS RELATING TO THE CONDUCT OF THE COMPANY BUSINESS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          (j) Incur any liability or any obligation for borrowed
     money or purchase money indebtedness, whether or not evidenced by a
contract, note, bond, debenture or similar instrument, other  

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than liabilities and obligations up to One Million Dollars    
    ($1,000,000) which relate to the conduct of the Company's business
    consistent with the Offering Memo and the Company's past practice;

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

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

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

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

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

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

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

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

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

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

           (a)      Except as consistent with the past practice of
 Acquiror or as contemplated by the Budget or that is reasonably
     appropriate to consummate the Merger, (i) increase the compensation
or any                                                        

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

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

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

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

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

        (f)      Except pursuant to the Acquiror Plans or as
      permitted by Section 5.04(g) hereof, issue, deliver, award, grant or
    sell, or authorize the issuance, delivery, award, grant or sale of
(including the grant of any security interests, liens, claims,
pledges, limitations in voting rights, charges or other       
encumbrances), any shares of any class of its capital stock   
      (including shares held in treasury), any securities convertible into
    or exercisable or exchangeable for any such shares, or any rights,
warrants or options to acquire any such shares, or amend or   
     otherwise modify the terms of any such rights, warrants or options,
   the effect of which shall be to make such terms more favorable to
the holders thereof;                                          

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

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

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

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

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

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

     (m)      Initiate, solicit, continue or encourage
  (including by way of furnishing any information or assistance in
connection with) any inquiries or the making of any offer that
      constitutes, or may reasonably be expected to lead to, any "Acquiror
  Competing Transaction" (as such term is defined below), or enter
into discussions or negotiations with any person or entity in 
  furtherance of such inquiries or to obtain an Acquiror Competing
     Transaction or enter into any agreement with respect to an Acquiror
      Competing Transaction. Acquiror shall promptly notify the Company if
  any such inquiries or proposals are received by Acquiror, by any
     material subsidiary of Acquiror or by any of its or their officers,
directors, financial advisors, attorneys, accountants or other
     representatives. For purposes of this Agreement, the term "ACQUIROR
   COMPETING TRANSACTION") shall mean any of the following involving
 Acquiror or any material subsidiary of Acquiror (other than the
   Merger): (i) except as required by Acquiror's Board of Directors'
     fiduciary duties, as advised in writing by counsel to Acquiror, any
    merger, consolidation, exchange, material business combination, or
other similar material transaction (except with respect to    
     transactions permitted pursuant to Section 5.04(g)); (ii) except as
 required by Acquiror's Board of Directors' fiduciary duties, as
advised in writing by counsel to Acquiror, any sale, lease,   
     exchange, mortgage, pledge, transfer or other disposition of all or
     substantially all of the assets of Acquiror in a single transaction
or series of related transactions; (iii) except as required by
Acquiror's Board of Directors' fiduciary duties, as advised in
writing by counsel to Acquiror, any sale of or exchange for   
   (including, without limitation, by merger or tender offer) all of
  the outstanding capital stock or equity of Acquiror; or (iv) any
  agreement to, or announcement by Acquiror of a proposal, plan or
   intention, to do any of the foregoing. If Acquiror shall exercise
     its rights with respect to fiduciary duties, a copy of such opinion
    shall be furnished to the Company three (3) business days prior to
taking any action required by such fiduciary duties.          

SECTION 5.05      ACCESS AND INFORMATION.                     

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

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

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ARTICLE VI

 ADDITIONAL AGREEMENTS

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

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

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

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

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

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

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

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

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

SECTION 6.06      APPROPRIATE ACTION; CONSENTS; FILINGS.      

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

      (c)      From the date of this Agreement until the
Effective Time, the Company shall promptly notify Acquiror in 
writing of any pending or, to the knowledge of the Company,   
    threatened action, proceeding or investigation by any Governmental
  Entity or any other person (i) challenging or seeking damages in
 connection with the Merger and conversion of the Company Common
 Stock and/or Company Preferred Stock into Acquiror Common Stock
     and/or Acquiror Series A Preferred Stock pursuant to the Merger, or
      (ii) seeking to restrain or prohibit the consummation of the Merger,
the other transactions contemplated under this Agreement, or  
     otherwise limit the right of Acquiror or its subsidiaries to own or
operate all or any portion of the businesses or assets of the 
Company or the Surviving Corporation, which in either case is 
      reasonably likely to have a Company Adverse Effect prior to or after
the Effective Time, or an Acquiror Adverse Effect after the   
Effective Time.                                               

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

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

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

    SECTION 6.08      PUBLIC ANNOUNCEMENTS. Subject to applicable Law,
each of Acquiror and the Company shall obtain the other party's prior           
approval (which shall not be unreasonably withheld) of the contents of all      
public announcements (including press releases) with respect to the Merger or   
this Agreement. The Company and Acquiror acknowledge and agrees that any such   
press release or other public announcement respecting the Merger or this        
Agreement shall be disseminated only in coordination between the Company and    
Acquiror.                                                                       
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    SECTION 6.09      OBLIGATIONS OF ACQUIROR SUB. Acquiror shall, for
the benefit of the Company and its Stockholders, take all reasonable action     
necessary to cause Acquiror Sub to perform its obligations under this           
Agreement and to consummate the Merger on the terms and conditions set forth    
in this Agreement.                                                              

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

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

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

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

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

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

   SECTION 6.11      ACQUIROR BOARD REPRESENTATION. At the Effective
Time, the Board of Directors of Acquiror shall be reconstituted so that it is   
no more than eleven (11) members and so that it contains as members such        
number of directors as designated by the Principal Executives (the "BOARD       
DESIGNEES"), rounded up to the next whole number, as shall cause such Board     
Designees to represent that portion of the Board of Directors of Acquiror       
equal to the product of the total number of directors on such Board (giving     
effect to the directors elected pursuant to this sentence) multiplied by the    
percentage that the aggregate number of shares of Acquiror Common Stock to be   
issued pursuant to this Agreement (or issuable upon conversion of Acquiror      
Series A Preferred Stock to be issued pursuant to this Agreement) and to be     
beneficially owned by the Stockholders bears to the total number of shares of   
Acquiror Common Stock to be outstanding at the Effective Time or then           
issuable upon conversion of Acquiror Series A Preferred Stock to be then        
outstanding. In order to satisfy its obligations hereunder, Acquiror further    
agrees prior to the Effective Time to amend its Bylaws and to take such other   
action as reasonably requested by the Company.                                  

      SECTION 6.12      STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS.
During the period from the date hereof through the Effective Time, the          
Company may not terminate, amend, modify or waive any provision of any          
confidentiality or standstill agreement to which it is a party (other than      
the Letter of Confidentiality pursuant to its terms or by written agreement     
of the parties thereto). During such period, the Company shall enforce, to      
the fullest extent permitted under applicable Law, the provisions of any such   
agreement, including by reasonable efforts to obtain injunctions to prevent     
any breaches of such agreements and to enforce specifically the terms and       
provisions thereof in any court of the United States of America or of any       
state having jurisdiction.                                                      
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SECTION 6.13      COMPANY OPTIONS UNDER THE PLAN.             

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

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

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

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

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

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      become fully vested at the Effective Time (and the remainder of such
   employee's Company Options shall vest on the date they would have
otherwise vested absent such accelerated vesting).            

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

SECTION 6.14      CONDITIONAL FUNDING.                        

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

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

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

SECTION 6.15      EMPLOYEE AND RELATED MATTERS.               

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

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

SECTION 6.16      INDEMNIFICATION.                            

             (a)      From and after the Effective Time, the Surviving
       Corporation shall, and Acquiror shall cause the Surviving Corporation
        to, provide exculpation and indemnification for each Person who is now
       or has been at any time prior to the date hereof or who becomes prior
       to the Effective Time, an officer, agent, employee or director of the
      Company (the "COMPANY INDEMNIFIED PARTIES") which is the same as the
     exculpation and indemnification provided to the Company Indemnified
       Parties by the Company immediately prior to the Effective Time in its
Certificate of Incorporation and Bylaws, as in effect on the  
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  date hereof; provided, that such exculpation and indemnification
      covers actions on or prior to the Effective Time, including, without
      limitation, all transactions contemplated by this Agreement (or that
limitation of the indemnification obligations of the Escrowed 
   Stockholders under Article IX hereof and excluding actions (other
than with respect to appraisal rights pursuant to applicable  
Delaware Law) brought by Stockholders who did not vote for, or
submit their written consent to approve, the Merger).         

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

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

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

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

SECTION 6.17      COMMITMENT LOANS; FACILITY.                 

             (a)      Simultaneously herewith or on the next busineess
     day hereafter, Acquiror shall make an unsecured loan to the Company
      in immediately available funds in the amount of $5,000,000, with the
   Company's repayment obligation solely evidenced by a subordinated
   note substantially in the form of EXHIBIT D attached hereto (such
  note, together with that certain unsecured loan in the amount of
     $5,000,000 made by Acquiror to the Company pursuant to that certain
    Promissory Note, dated January 6, 2000, are referenced hereinafter
 as the "COMMITMENT NOTES"). Acquiror and Acquiror Sub agree and
     acknowledge that such loan shall in no way reduce, modify or offset
 all or any portion of the Merger Consideration or the rights or
     remedies of the Company or the Stockholders whether under or at law
or in equity.                                                 

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

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

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

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

ARTICLE VII 

CLOSING CONDITIONS

      SECTION 7.01      CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and    
the other transactions contemplated by this Agreement shall be subject to the   
satisfaction at or prior to the Effective Time of the following conditions,     
any or all of which may be waived, in whole or in part, to the extent           
permitted by applicable Law:                                                    

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

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

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

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

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

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

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

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

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

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

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

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

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

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

           (k)      SIDE LETTER. Acquiror shall have received from
 each Principal Executive a side letter in the form of EXHIBIT I
attached hereto, whereby such Principal Executive agrees to   
  indemnify Acquiror and the Surviving Corporation for liabilities
incurred as a result of the conduct of Persons (other than the
Company, Acquiror, Acquiror Sub and interest therein) owned,  
directly or indirectly, by such Principal Executive.          
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 SECTION 7.03      CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions      
contemplated in this Agreement are also subject to the following conditions:    

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

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

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

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

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

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

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

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

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

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

               (k)      The Shareholder Approval shall have been received.
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ARTICLE VIII

 TERMINATION, AMENDMENT AND WAIVER

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

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

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

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

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

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

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

SECTION 8.02      EFFECT OF TERMINATION. Except as provided in
Section 8.03, upon the proper termination of this Agreement in accordance       
with the provisions of Section 8.01 hereof, this Agreement shall be null and    
void, and all other rights and obligations of Acquiror, Acquiror Sub, the       
Company, and the Stockholders under this Agreement shall forthwith cease and    
have no further force or effect; provided that the provisions of Sections       
6.14 and 6.17 shall remain in full force and effect and the payments made       
pursuant thereto shall continue to be governed by the terms thereof and, to     
the extent applicable, any notes delivered pursuant thereto. In the event of    
the termination of this Agreement as provided in Section 8.01, each party, if   
so requested by the other party, will return                                    

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promptly every document furnished to it by or on behalf of the other party in   
connection with the transaction contemplated hereby, whether so obtained        
before or after the execution of this Agreement, and any copies thereof         
(except for copies of documents publicly available) which may have been made,   
and will cause its representatives and any representatives of financial         
institutions and investors and others to whom such documents were furnished     
promptly to return such documents and any copies thereof any of them may have   
made. The obligation of that certain Letter of Confidentiality, dated           
November 24, 1999 (the "LETTER OF CONFIDENTIALITY"), by and between the         
Company and Acquiror, shall terminate upon any termination of this Agreement.   
This Section 8.02 shall survive any termination of this Agreement.              

SECTION 8.03      FEES AND EXPENSES; OTHER MATTERS.           

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

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

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

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

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

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

         (e)      Any demand for the payment of Expenses shall
itemize in reasonable detail all qualifying disbursements and 
      accruals, and notwithstanding one party's payment of another party's
Expenses, the party incurring such items may update and/or    
    supplement its demand at any time and from time to time, until the
    expiration of sixty (60) days from the date of the initial demand.
All Expenses owing in                                         

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     accordance with this Section 8.03 shall be made by wire transfer of
      immediately available funds to an account designated by the party so
  entitled to receive payment therefor and shall be made not later
     than two (2) business days after delivery by one party to the other
of demand and proper itemization thereof ("PAYMENT DATE").    

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

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

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

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

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

ARTICLE IX

 INDEMNIFICATION MATTERS

      SECTION 9.01      SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS. Notwithstanding the closing of the Merger, the                  
representations and warranties of the Company, Acquiror and Acquiror Sub        
contained in this Agreement and in any certificate delivered hereunder shall    
survive the Effective                                                           

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Time (the "SURVIVAL PERIOD") until the expiration of one (1) year following     
the Effective Time. The covenants and agreements contained herein to be         
performed or complied with on or prior to the Effective Time shall expire at    
the Effective Time. The covenants and agreements contained herein to be         
performed or complied with after the Effective Time and the parties'            
liabilities in respect of a breach thereof (other than the covenant to          
indemnify against breaches of the representations and warranties of the         
parties), shall survive the Effective Time until such covenants and             
agreements have been performed or complied with, or until they shall have       
expired in accordance with their respective terms.                              

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

            (a)      in valuing the Acquiror Common Stock (including
      shares of Acquiror Common Stock issuable upon conversion of Acquiror
Series A Preferred Stock), for purposes of payment of any     
    indemnification obligation under this Section 9.02(a), such shares
     of Acquiror Common Stock shall in all events be valued at the Share
     Value; in valuing the Acquiror Series A Preferred Stock for payment
    of any indemnification obligation under this Section 9.02(a), such
    Shares of Acquiror Series A Preferred Stock shall in all events be
valued at Liquidation Value (as such terms defined is the     
     Certificate of Designation set forth on Exhibit K hereto). Any such
set-off against the Acquiror Common Stock or Acquiror Series A
Preferred Stock shall be treated as a reduction of the Merger 
   Consideration received by the Stockholders in the Merger, and any
and all Returns filed in connection with the Merger after such
set-off shall so reflect; and                                 

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

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

       (d)      Acquiror shall not be entitled to recover:

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

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

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

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

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deemed to secure Acquiror and Acquiror Sub's rights to indemnification          
hereunder and shall be Acquiror's and Acquiror Sub's sole recourse for any      
claims for indemnification under Section 9.02 hereof.                           

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

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

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

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

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

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

SECTION 9.05      INDEMNIFICATION PROCEDURES.                 

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

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

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      proceeding defended only by the Indemnitee shall be binding upon the
  Indemnitor. The Indemnitor with respect to such Damages shall be
 subrogated to the right of action, if at all, of the Indemnitee
 against any other person arising from the matter from which the
claim for Damages has arisen.                                 

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

ARTICLE X 

GENERAL PROVISIONS

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

If to Acquiror or Acquiror Sub:                               

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

with a copy to:                                               

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

If to the Company:                                            

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

with a copy to:                                               

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

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

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

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

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

    SECTION 10.06      ENTIRE AGREEMENT. This Agreement (together with
the Exhibits, and the Company Disclosure Schedules and Acquiror Disclosure      
Schedules and the other documents delivered pursuant hereto), constitutes the   
entire agreement of the parties and supersede all prior agreements and          
undertakings, both written and oral, between the parties, or any of them,       
with respect to the subject matter hereof, except for the Letter of             
Confidentiality (which shall remain in full force and effect in accordance      
with the terms and conditions contained therein, notwithstanding anything       
contained in this Agreement which can be construed to the contrary; such        
Letter of Confidentiality shall be deemed void at the Effective Time) and,      
except as otherwise expressly provided herein, is not intended to confer upon   
any other Person any rights or remedies hereunder. The inclusion of any item    
in the Company Disclosure Schedules or the Acquiror Disclosure Schedules        
shall not be deemed evidence of the materiality of such item for purposes of    
this Agreement. The parties make no representations or warranties to each       
other, except as contained in this Agreement, and any and all prior             
representations and warranties made by any party or its representatives,        
whether orally or in writing, shall be deemed to have been merged into this     
Agreement, it being intended that no such prior representations or warranties   
shall survive the execution and delivery of this Agreement. Acquiror and        
Acquiror Sub acknowledge that they have conducted an independent                
investigation of the financial condition, assets (including, without            
limitation, the Company's Intellectual Property and the Company's website),     
liabilities, properties, results of operations and prospects of the Company     
in making its determination as to the propriety of the transactions             
contemplated by this Agreement and the agreements ancillary hereto, and in      
entering into this Agreement, have relied solely on the results of said         
investigation and on the representations and warranties of the Company          
expressly contained in this Agreement. The Company acknowledges that it has     
conducted an independent investigation of the financial condition, assets,      
liabilities, properties, results of operations and prospects of Acquiror in     
making its determination as to the propriety of the transactions contemplated   
by this Agreement and the agreements ancillary hereto, and in entering into     
this Agreement, have relied solely on the results of said investigation and     
on the representations and warranties of Acquiror expressly contained in this   
Agreement.                                                                      

     SECTION 10.07 SPECIFIC PERFORMANCE. Notwithstanding any termination
right granted in Article VIII, in the event of the nonfulfillment of any        
condition to a party's closing obligations, in the alternative, such party      
may elect to do one of the following: (i) proceed to close despite the          
nonfulfillment of any closing condition, it being understood that               
consummation of the Closing shall not be deemed a waiver of a breach of any     
representation, warranty or covenant and of such party's rights and remedies    
with respect thereto to the extent that such party shall have knowledge of      
such breach and the Closing shall nonetheless occur; (ii) decline to close,     
terminate this Agreement as provided in Article VIII, and thereafter seek       
damages to the extent, but only to the extent, permitted in Article VIII; or    
(iii) seek specific performance of the obligations of the other party. Each     
party hereby agrees that in the event of any breach by such party of this       
Agreement, the remedies available to the other party at law would be            

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inadequate and that such party's obligations under this Agreement may be        
specifically enforced. The parties hereto recognize and agree that in the       
event that, in breach of this Agreement, a party refuses to consummate the      
Merger, money damages would be inadequate and the other party would have no     
adequate remedy at law. Accordingly, the parties hereto agree that such a       
party shall have the right, in addition to any other rights and remedies        
existing in its favor, to enforce its rights and the other parties'             
obligations under this Agreement by an action or actions for specific           
performance, injunctive and/or equitable relief, without proof of actual        
damages and without posting a bond or other security, in order to enforce or    
prevent any violations (whether anticipatory, continuing or future) of this     
Agreement. The rights granted under this Section 10.07 shall be in addition     
to any other remedies available pursuant to this Agreement.                     

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

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

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

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

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

            HA-LO INDUSTRIES, INC.,  an Illinois
corporation             

    By:       /S/ JOHN R. KELLEY
                          --------------------------------
                     John R. Kelley, President

                      HA-LO INDUSTRIES, INC., a Delaware corporation

 By:       /S/ GREG KILREA
                          --------------------------------
                  Greg Kilrea, President

                   STARBELLY.COM, INC., a Delaware corporation

     By:       /S/ BRADLEY KEYWELL
                          --------------------------------
            Bradley Keywell,

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[LOGO]                                                                          

                                                                       EXHIBIT B

January 17, 2000

Board of Directors                                                              
HA-LO Industries, Inc.                                                          
5980 Touhy Avenue                                                               
Niles, Illinois 60714                                                           

Members of the Board:                                                           

You have asked us to advise you with respect to the fairness to HA-LO   
Industries, Inc., an Illinois corporation ("HA-LO"), from a financial point of  
view of the Merger Consideration (as defined below) set forth in an Agreement   
and Plan of Merger and Plan of Reorganization, dated as of January 17, 2000 (the
"Merger Agreement"), by and among HA-LO, HA-LO Industries, Inc., a Delaware     
corporation and a wholly owned subsidiary of HA-LO ("Merger Sub"), and          
Starbelly.com, Inc., a Delaware corporation f/k/a TheZebra.com, Inc.,           
("Starbelly"). As more fully described in the Merger Agreement, Starbelly will  
be merged with and into Merger Sub (the "Merger") pursuant to which HA-LO will  
(i) acquire all outstanding shares of the common stock, par value $0.001 per    
share, of Starbelly (the "Starbelly Common Stock") and preferred stock, par     
value $0.001 per share, of Starbelly (the "Starbelly Preferred Stock"),         
(ii) acquire all outstanding warrants to purchase shares of Starbelly Common    
Stock (the "Starbelly Warrants") and (iii) assume all obligations relating to   
outstanding options to purchase shares of Starbelly Common Stock, in exchange   
for aggregate consideration of $240,000,000 (the "Merger Consideration"),       
consisting of cash, shares of common stock, without par value, of HA-LO ("HA-LO 
Common Stock"), shares of Series A Convertible Preferred Stock, without par     
value, of HA-LO and options to purchase HA-LO Common Stock. The Merger Agreement
also contemplates the exercise and conversion of all outstanding Starbelly      
Warrants into shares of Starbelly Common Stock prior to the effective time of   
the Merger or the receipt from holders of Starbelly Warrants of consents to the 
conversion of Starbelly Warrants into their allocated portion of the Merger     
Consideration as more fully described in the Merger Agreement (the              
"Conversion").                                                                  

In arriving at our opinion, we have reviewed the Merger Agreement and   
certain related documents, including stockholder agreements entered into between
HA-LO and certain stockholders of Starbelly (the "Stockholder Agreements"),     
certain publicly available business and financial information relating to HA-LO 
and certain available business and financial information relating to Starbelly. 
We have also reviewed certain other information relating to HA-LO and Starbelly,
including financial forecasts, provided to or discussed with us by HA-LO and    
Starbelly, and have met with the managements of HA-LO and Starbelly to discuss  
the businesses and prospects of HA-LO and Starbelly. We have also considered    
certain financial and stock market data of HA-LO and certain financial          
information of Starbelly, and we have compared those data with similar data for 
publicly held companies in businesses similar to HA-LO and Starbelly, and we    
have considered, to the extent publicly available, the financial terms of       
certain other business combinations and other transactions which have recently  
been effected. We also considered such other information, financial studies,    
analyses and investigations and financial, economic and market criteria which we
deemed relevant.                                                                

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 In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on 
such information being complete and accurate in all material respects. With     
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best       
currently available estimates and judgments of the managements of HA-LO and     
Starbelly as to the future financial performance of HA-LO and Starbelly. In     
addition, we have relied upon the assessments of the management of HA-LO and its
advisors as to (i) the potential synergies and other strategic benefits         
(including the amount, timing and achievability thereof) anticipated to result  
from the Merger, (ii) Starbelly's existing technology and products and the      
validity of, and risks associated with, Starbelly's future products and         
technology, (iii) the ability of HA-LO to retain key employees of Starbelly and 
(iv) the ability of HA-LO to fund the cash portion of the Merger Consideration  
and the cash needs of HA-LO on an ongoing basis following the Merger. We have   
assumed, with your consent, that the Merger will be treated as a tax-free       
reorganization for federal income tax purposes and that the Conversion will     
occur in all material respects as contemplated by the Merger Agreement. In      
addition, we have assumed that the Stockholder Agreements will be in full force 
and effect at the time of the consummation of the Merger. We have not been      
requested to make, and have not made, an independent evaluation or appraisal of 
the assets or liabilities (contingent or otherwise) of HA-LO or Starbelly, nor  
have we been furnished with any such evaluations or appraisals. Our opinion is  
necessarily based upon information available to us, and financial, economic,    
market and other conditions as they exist and can be evaluated, on the date     
hereof. We are not expressing any opinion as to the actual value of the HA-LO   
Common Stock when issued pursuant to the Merger or the prices at which the HA-LO
Common Stock will trade subsequent to the Merger.                               

 We have acted as financial advisor to HA-LO in connection with the Merger
and will receive a fee for such services, a significant portion of which is     
contingent upon the consummation of the Merger. Credit Suisse First Boston and  
its affiliates have in the past provided financial services to HA-LO and certain
of its affiliates unrelated to the proposed Merger, for which services we have  
received compensation. In the ordinary course of business, Credit Suisse First  
Boston and its affiliates may actively trade the debt and equity securities of  
HA-LO for their own accounts and for the accounts of customers and, accordingly,
may at any time hold long or short positions in such securities.                

It is understood that this letter is for the information of the Board of
Directors of HA-LO in connection with its evaluation of the Merger, does not    
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to any matter relating to the Merger, and is not to be quoted 
or referred to, in whole or in part, in any registration statement, prospectus  
or proxy statement, or in any other document used in connection with the        
offering or sale of securities, nor shall this letter be used for any other     
purposes, without our prior written consent.                                    

  Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair to HA-LO from a financial point of
view.                                                                           

                                                                [Download Table]
                                                 
Very truly yours,                                

CREDIT SUISSE FIRST BOSTON CORPORATION           

By:                                              
     --------------------------------------------
                 Charles B. Edelstein            
                   MANAGING DIRECTOR             

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                                                           EXHIBIT C

Section 805 ILCS 5/11.65. Right to dissent                                      

Sec. 11.65. Right to dissent. (a) A shareholder of a corporation is   
entitled to dissent from, and obtain payment for his or her shares in the       
event of any of the following corporate actions:                                

(1)  consummation of a plan of merger or consolidation or a plan of share       
exchange to which the corporation is a party if (i) shareholder authorization   
is required for the merger or consolidation or the share exchange by Section    
11.20 [805 ILCS 5/11.20] or the articles of incorporation or (ii) the           
corporation is a subsidiary that is merged with its parent or another           
subsidiary under Section 11.30 [805 ILCS 5/11.30];                              

(2)  consummation of a sale, lease or exchange of all, or substantially all,    
of the property and assets of the corporation other than in the usual and       
regular course of business;                                                     

(3)  an amendment of the articles of incorporation that materially and          
adversely affects rights in respect of a dissenter's shares because it:         

(i)   alters or abolishes a preferential right of such shares;        

 (ii)  alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of such   
shares;                                                                         

(iii) in the case of a corporation incorporated prior to January 1,   
1982, limits or eliminates cumulative voting rights with respect to such        
shares; or                                                                      

(4)  any other corporate action taken pursuant to a shareholder vote if the     
articles of incorporation, by-laws, or a resolution of the board of directors   
provide that shareholders are entitled to dissent and obtain payment for        
their shares in accordance with the procedures set forth in Section 11.70       
[805 ILCS 5/11.70] or as may be otherwise provided in the articles, by-laws     
or resolution.                                                                  

(b)  A shareholder entitled to dissent and obtain payment for his or her        
shares under this Section may not challenge the corporate action creating his   
or her entitlement unless the action is fraudulent with respect to the          
shareholder or the corporation or constitutes a breach of a fiduciary duty      
owed to the shareholder.                                                        

(c)  A record owner of shares may assert dissenters' rights as to fewer than    
all the shares recorded in such person's name only if such person dissents      
with respect to all shares beneficially owned by any one person and notifies    
the corporation in writing of the name and address of each person on whose      
behalf the record owner asserts dissenters' rights. The rights of a partial     
dissenter are determined as if the shares as to which dissent is made and the   
other shares were recorded in the names of different shareholders. A            
beneficial owner of shares who is not the record owner may assert dissenters'   
rights as to shares held on such person's behalf only if the beneficial owner   

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submits to the corporation the record owner's written consent to the dissent    
before or at the same time the beneficial owner asserts dissenters' rights.     

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Section 805 ILCS 5/11.70. Procedure to Dissent                                  

Sec. 11.70. Procedure to Dissent. (a) If the corporate action giving  
rise to the right to dissent is to be approved at a meeting of shareholders,    
the notice of meeting shall inform the shareholders of their right to dissent   
and the procedure to dissent. If, prior to the meeting, the corporation         
furnishes to the shareholders material information with respect to the          
transaction that will objectively enable a shareholder to vote on the           
transaction and to determine whether or not to exercise dissenters' rights, a   
shareholder may assert dissenters' rights only if the shareholder delivers to   
the corporation before the vote is taken a written demand for payment for his   
or her shares if the proposed action is consummated, and the shareholder does   
not vote in favor of the proposed action.                                       

(b)  If the corporate action giving rise to the right to dissent is not to be   
approved at a meeting of shareholders, the notice to shareholders describing    
the action taken under Section 11.30 or Section 7.10                            
[805 ILCS 5/11.30 or 805 ILCS 5/7.10] shall inform the shareholders of their    
right to dissent and the procedure to dissent. If, prior to or concurrently     
with the notice, the corporation furnishes to the shareholders material         
information with respect to the transaction that will objectively enable a      
shareholder to determine whether or not to exercise dissenters' rights, a       
shareholder may assert dissenter's rights only if he or she delivers to the     
corporation within 30 days from the date of mailing the notice a written        
demand for payment for his or her shares.                                       

(c)  Within 10 days after the date on which the corporate action giving rise    
to the right to dissent is effective or 30 days after the shareholder           
delivers to the corporation the written demand for payment, whichever is        
later, the corporation shall send each shareholder who has delivered a          
written demand for payment a statement setting forth the opinion of the         
corporation as to the estimated fair value of the shares, the corporation's     
latest balance sheet as of the end of a fiscal year ending not earlier than     
16 months before the delivery of the statement, together with the statement     
of income for that year and the latest available interim financial              
statements, and either a commitment to pay for the shares of the dissenting     
shareholder at the estimated fair value thereof upon transmittal to the         
corporation of the certificate or certificates, or other evidence of            
ownership, with respect to the shares, or instructions to the dissenting        
shareholder to sell his or her shares within 10 days after delivery of the      
corporation's statement to the shareholder. The corporation may instruct the    
shareholder to sell only if there is a public market for the shares at which    
the shares may be readily sold. If the shareholder does not sell within that    
10 day period after being so instructed by the corporation, for purposes of     
this Section the shareholder shall be deemed to have sold his or her shares     
at the average closing price of the shares, if listed on a national exchange,   
or the average of the bid and asked price with respect to the shares quoted     
by a principal market maker, if not listed on a national exchange, during       
that 10 day period.                                                             

(d)  A shareholder who makes written demand for payment under this Section      
retains all other rights of a shareholder until those rights are cancelled or   
modified by the consummation of the proposed corporate action. Upon             
consummation of that action, the corporation shall pay to each dissenter who    
transmits to the corporation the certificate or other evidence of ownership     
of the shares the amount the corporation estimates to be the fair value of      
the shares, plus accrued interest, accompanied by a written explanation of      
how the interest was calculated.                                                

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(e)  If the shareholder does not agree with the opinion of the corporation as   
to the estimated fair value of the shares or the amount of interest due, the    
shareholder, within 30 days from the delivery of the corporation's statement    
of value, shall notify the corporation in writing of the shareholder's          
estimated fair value and amount of interest due and demand payment for the      
difference between the shareholder's estimate of fair value and interest due    
and the amount of the payment by the corporation or the proceeds of sale by     
the shareholder, whichever is applicable because of the procedure for which     
the corporation opted pursuant to subsection (c).                               

(f)  If, within 60 days from delivery to the corporation of the shareholder     
notification of estimate of fair value of the shares and interest due, the      
corporation and the dissenting shareholder have not agreed in writing upon      
the fair value of the shares and interest due, the corporation shall either     
pay the difference in value demanded by the shareholder, with interest, or      
file a petition in the circuit court of the county in which either the          
registered office or the principal office of the corporation is located,        
requesting the court to determine the fair value of the shares and interest     
due. The corporation shall make all dissenters, whether or not residents of     
this State, whose demands remain unsettled parties to the proceeding as an      
action against their shares and all parties shall be served with a copy of      
the petition. Nonresidents may be served by registered or certified mail or     
by publication as provided by law. Failure of the corporation to commence an    
action pursuant to this Section shall not limit or affect the right of the      
dissenting shareholders to otherwise commence an action as permitted by law.    

(g)  The jurisdiction of the court in which the proceeding is commenced under   
subsection (f) by a corporation is plenary and exclusive. The court may         
appoint one or more persons as appraisers to receive evidence and recommend     
decision on the question of fair value. The appraisers have the power           
described in the order appointing them, or in any amendment to it.              

(h)  Each dissenter made a party to the proceeding is entitled to judgment      
for the amount, if any, by which the court finds that the fair value of his     
or her shares, plus interest, exceeds the amount paid by the corporation or     
the proceeds of sale by the shareholder, whichever amount is applicable.        

(i)  The court, in a proceeding commenced under subsection (f), shall           
determine all costs of the proceeding, including the reasonable compensation    
and expenses of the appraisers, if any, appointed by the court under            
subsection (g), but shall exclude the fees and expenses of counsel and          
experts for the respective parties. If the fair value of the shares as          
determined by the court materially exceeds the amount which the corporation     
estimated to be the fair value of the shares or if no estimate was made in      
accordance with subsection (c), then all or any part of the costs may be        
assessed against the corporation. If the amount which any dissenter estimated   
to be the fair value of the shares materially exceeds the fair value of the     
shares as determined by the court, then all or any part of the costs may be     
assessed against that dissenter. The court may also assess the fees and         
expenses of counsel and experts for the respective parties, in amounts the      
court finds equitable, as follows:                                              

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(1)  Against the corporation and in favor of any or all dissenters if the       
court finds that the corporation did not substantially comply with the          
requirements of subsections (a), (b), (c), (d), or (f).                         

(2)  Against either the corporation or a dissenter and in favor of any other    
party if the court finds that the party against whom the fees and expenses      
are assessed acted arbitrarily, vexatiously, or not in good faith with          
respect to the rights provided by this Section.                                 

If the court finds that the services of counsel for any dissenter were of       
substantial benefit to other dissenters similarly situated and that the fees    
for those services should not be assessed against the corporation, the court    
may award to that counsel reasonable fees to be paid out of the amounts         
awarded to the dissenters who are benefited. Except as otherwise provided in    
this Section, the practice, procedure, judgment and costs shall be governed     
by the Code of Civil Procedure [735 ILCS 5/1-101 et seq.].                      

(j)  As used in this Section:                                                   

(1)  "Fair value", with respect to a dissenter's shares, means the value of     
the shares immediately before the consummation of the corporate action to       
which the dissenter objects excluding any appreciation or depreciation in       
anticipation of the corporate action, unless exclusion would be inequitable.    

(2)  "Interest" means interest from the effective date of the corporate         
action until the date of payment, at the average rate currently paid by the     
corporation on its principal bank loans or, if none, at a rate that is fair     
and equitable under all the circumstances.                                      

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                                                                       EXHIBIT E

Amendments to the Articles of Incorporation (Amended and Restated) of 
HA-LO Industries, Inc.

 I. Paragraph (a) of Article Four will be amended in its entirety to read:

(a) The number of shares which the Corporation shall be authorized to issue,    
itemized by class, series and par value, if any, is:                            

                                                                [Download Table]


                                                                                   
  CLASS            SERIES          PAR VALUE PER SHARE  NUMBER OF SHARES AUTHORIZED
  Common             --                No par value             250,000,000        
Preferred   To be designated by        No par value              20,000,000        
           the Board of Directors                                                  

 II. The last paragraph of Article Four, which currently reads as follows:

If the Preferred Stock is issued as a class, then the Board of    
Directors of the Corporation will determine liquidation rights and
dividend rights by filing Articles of Amendment to the Articles of
Incorporation of the Corporation prior to the issuance of any     
shares of the Preferred Stock.                                    

will be deleted in its entirety.                                  

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  PROXY              HA-LO INDUSTRIES, INC.              PROXY

   SPECIAL MEETING OF SHAREHOLDERS - MARCH ___, 2000

  THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned shareholder of HA-LO INDUSTRIES, INC., an Illinois corporation  
("HA-LO" or the "Company")), hereby appoints John R. Kelley, Jr. and Gregory J. 
Kilrea, and each of them, proxies and attorneys-in-fact of the undersigned,     
each with full power of substitution, to attend and act for the undersigned at  
the special meeting of shareholders to be held on Tuesday, March ___, 2000 at   
Harris Bank, Room _____, 111 West Monroe Street, Chicago, Illinois  60603 and   
at any adjournments or postponements thereof, and in connection therewith to    
vote and represent all of the shares of common stock of HA-LO which the         
undersigned would be entitled to vote.                                          

Said proxies and attorneys, and each of them, shall have the powers which the   
undersigned would have if acting in person.  Said proxies, without hereby       
limiting their general authority, are authorized to vote in accordance with     
their best judgment with respect to all matters incident to the conduct of the  
special meeting and all matters presented at the meeting but which are not      
known to the board of directors at the time of solicitation of this proxy.  The 
undersigned hereby revokes any other proxy to vote at such meeting and hereby   
ratifies and confirms all that said proxies and attorneys, and  each of them,   
may lawfully do by virtue hereof.                                               

Each of the above named proxies at said meeting, either in person or by         
substitute, shall have and exercise all the powers of said proxies hereunder.   
This proxy will be voted in accordance with the choices specified by the        
undersigned on this proxy.  In their discretion, each of the above-named        
proxies is authorized to vote upon such other business incident to the conduct  
of the special meeting as may properly come before the meeting or any           
postponements or adjournments thereof.                                          

IF NO INSTRUCTIONS ARE INDICATED HEREIN, THIS PROXY WILL BE TREATED AS A GRANT  
OF AUTHORITY TO VOTE FOR THE PROPOSALS AND ANY OTHER MATTERS TO BE VOTED UPON   
AT THE SPECIAL MEETING OR AT ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.         

 PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD

(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)

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      PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY   / /

                                                        [Enlarge/Download Table]

                                                                                  FOR  AGAINST  ABSTAIN
                                                                                                       
1. Approval of the merger, including the issuance in the merger and upon          / /    / /      / /  
   exercise of options assumed by the Company under Starbelly.com's stock option                       
   plan of 17 million shares of HA-LO common stock to the Starbelly.com                                
   stockholders, an amendment to the Company's articles of incorporation to permit                     
   the issuance in the merger and upon exercise of the assumed options of 5.1                          
   million shares of convertible preferred stock, the reservation of 5.1 million                       
   shares of common stock for issuance upon conversion of the convertible                              
   preferred stock and, the adoption of a new stock option plan under which the                        
   Company will assume Starbelly.com's stock option plan and the options                               
   outstanding under the plan.                                                                         

                                                                                  FOR  AGAINST  ABSTAIN
2. Approval of amendment to the Company's articles of incorporation to increase   / /    / /      / /  
   the number of shares of common stock and the number of shares of convertible                        
   preferred stock the Company is authorized to issue from 100 million to 250                          
   million and from 10 million to 20 million, respectively.                                            

3. Approval of amendment to the Company's articles of incorporation to authorize  / /    / /      / /  
   the board of directors to provide for the future issuance of convertible                            
   preferred stock without the approval of the holders of our common stock.                            

4. The persons named in this proxy also may vote, in their discretion, upon such                       
   other matters as may properly come before the meeting or any adjournment                            
   thereof.                                                                                            


Please complete, sign and mail this proxy promptly in the enclosed envelope.    
No postage is required for mailing in the United States.                        

                                               Dated _____________________, 2000

                                  Signature(s) _________________________________
                                               _________________________________

IMPORTANT:  Please date this proxy and sign exactly as your name appears on     
this proxy.  If shares are held by joint tenants, both should sign.  When       
signing as attorney, executor, administrator, trustee or guardian, please give  
title as such.  If a corporation, please sign in full corporate name by         
president, or authorized officer.  If a partnership, please sign in partnership 
name by authorized person.                                                      

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PREM14A’ Filing		Date		First		Last			Other Filings
		9/30/00		50					10-Q
		5/31/00		102
		5/9/00		91
		4/29/00		16		150
		4/15/00		16		150
		4/1/00		15		145
		3/1/00		15		145
		2/28/00		16		150
		2/13/00		91
Filed on:		1/28/00		5		88
		1/27/00		1					424B3
		1/26/00		94
		1/24/00		17		86
		1/21/00		91					8-K
		1/18/00		46
		1/17/00		44		159			8-K
		1/16/00		46		114
		1/15/00		45
		1/14/00		64		128
		1/13/00		51		52
		1/6/00		15		146
		1/1/00		127		131
		12/31/99		129					10-K,  10-K/A
		12/29/99		45
		12/18/99		45
		12/15/99		45
		12/6/99		45
		12/5/99		45
		12/1/99		45					S-3
		11/30/99		91		117
		11/24/99		45		151
		11/15/99		103					10-Q
		10/14/99		45
		9/30/99		20		131			10-Q
		9/16/99		102		148
		7/29/99		104
		6/30/99		91					10-Q
		5/10/99		103		104
		3/31/99		91					10-Q
		3/23/99		91					8-K
		3/22/99		20		114
		2/19/99		64					8-K,  S-3
		12/31/98		20		91			10-K
		9/30/98		21					10-Q
		12/31/97		130					10-K,  S-3
		10/20/92		91
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