JENKON INTERNATIONAL INC
8-K, 1999-12-30
COMPUTER PROGRAMMING SERVICES
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                     SECURITIES AND EXCHANGE COMMISSION

                           Washington, D.C. 20549
                           -----------------------


                                  FORM 8-K


         Current Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)  December 16, 1999


                         JENKON INTERNATIONAL, INC.
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



          Delaware                     000-24637                  91-1890338
- ----------------------------     ------------------------    -------------------
(STATE OR OTHER JURISDICTION     (COMMISSION FILE NUMBER)       (IRS EMPLOYER
      OF INCORPORATION)                                      IDENTIFICATION NO.)



                      7600 N.E. 41st Street, Suite 350
                         Vancouver, Washington 98662
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (360) 256-4400

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ITEM 1.  CHANGES IN CONTROL OF REGISTRANT.

See Item 2 below for a summary of a transaction pursuant to which the Company
has issued shares of Common Stock and Preferred Stock to certain persons.
Upon the occurrence of certain events, the preferred shares are convertible
into shares having voting control of the Company. In addition, the Company
has completed a private placement of Convertible Promissory Notes that, in
certain circumstances described in Item 5 below, could result in the issuance
of an additional 4,500,000 shares of Common Stock.

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

           On December 16, 1999, Jenkon International, Inc. (the "Company")
entered into a Stock Exchange Agreement and Plan of Reorganization (the
"Agreement") with Multimedia KID - Intelligence in Education Ltd., ("MMKid") an
Israeli-based interactive educational company, and the stockholders of MMKid
pursuant to which the Company acquired 100% of the outstanding capital stock of
MMKid in exchange for the following consideration:

             840,000 shares of Company Common Stock,

             1,208,000 shares of Company Series B Preferred Stock, and

             1,208,000 shares of Company Series C Preferred Stock.

The Series B and Series C Preferred Stock will be convertible into an aggregate
of 24,160,000 shares of Company Common Stock and will have no voting or
conversion rights unless and until the stockholders of the Company have approved
the conversion rights of the Series B and Series C Preferred Stock. Upon such
stockholder approval, (i) the Series B Preferred Stock will automatically
convert into 12,080,000 shares of Common Stock, and (ii) the Series C Preferred
Stock will have voting rights on an as-converted basis and will be convertible
into an aggregate of 12,080,000 shares of Common Stock at such time as the
revenues of MMKid (as a stand alone entity) shall exceed $1,700,000 for any 12
month period (including months prior to December 16, 1999).

           Assuming all shares of Series B and Series C Preferred Stock are
converted into Common Stock, the former stockholders of MMKid would hold
approximately 83% of Jenkon's fully-diluted Common Stock.

           In the event that Jenkon stockholder approval of the grant of
conversion rights to the Series B and Series C Preferred Stock is not obtained
on or prior to March 31, 2000, the shares of Series B and Series C Preferred
Stock will be redeemable at the option of the holders thereof at a price of $10
per share for a total redemption price of $24,160,000.

           In connection with the closing of the acquisition of MMKid, the
Company agreed to promptly file a registration statement with respect to not
less than 6,750,000 shares

<PAGE>

of Common Stock (including shares underlying the Preferred Stock) issued to the
former MMKid stockholders. In addition, the Company will grant the former MMKid
stockholders piggyback and demand registration rights with respect to Common
Stock underlying the Preferred Stock that is not registered as described above.
The demand registration rights shall be exercisable at any time within 180 days
following the date of Closing. Piggyback rights will be exercisable commencing
one year after the Closing. Notwithstanding the registration of shares, MMKid
stockholders agreed to 12 month lock-up restrictions which apply to all shares
other than the 6,750,000 shares described above and shall terminate (i) at any
time after the closing sales price of Company Common Stock exceeds $6 per share
for 20 consecutive trading days, or (ii) at any time after the Company completes
a public offering of Common Stock for cash (other than upon exercise of
outstanding options or warrants).

           As a condition to the closing of the acquisition of MMKid, the
Company completed a private placement of $4.5 million of Convertible Promissory
Notes (See Item 5 below). Pursuant to the terms of the Agreement, the proceeds
of such financing were allocated equally among the Company's existing
operations and the operations of the newly-acquired MMKid.

           MMKid, designs manufacturers and sell numerous innovative software
and activity systems that together create virtual interactive learning centers
for children and adults. MMKid has software titles covering content as diverse
as science, nature, math, music, language, art, technology, transportation, as
well as everyday environments such as the home and workplace. The educational
systems are designed to promote creativity, imagination, listening, reading,
writing, cognitive and motor skills through a full range of media which touches
on different senses and emotions. In 1998, MMKid was awarded the Computer
Software Award from the Office of the Prime Minister of Israel for the category
of Special Innovation and Invention in Education.

ITEM 5.  OTHER EVENTS

           On December 16, 1999, the Company completed a private placement of an
aggregate of $4.5 million of Convertible Promissory Notes. Such Notes bear
interest at an annual rate of 12% from and after January 1, 2000 and are due and
payable in full on or before April 1, 2000. Accrued interest shall be payable on
February 1, 2000 and at maturity.

           The principal balance of the Notes shall be automatically converted
into Common Stock of the Company at a conversion rate of $1.00 per share
(4,500,000 shares total) at such time as the Company's stockholders have
approved the issuance of such conversion shares. The Company has agreed to use
its commercially reasonable efforts to file a registration statement with the
Securities and Exchange Commission at least 15 days prior to the date of any
stockholders meeting held to approve the conversion of the Notes. However, any
shares of stock registered will be subject to lock-up restrictions pursuant to
which the holder will not be able to sell, assign or transfer the shares until
the expiration of six months following the date of any stockholder approval.

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           Because of the difference between the reported market price of the
Company's Common Stock when the Convertible Promissory Notes were issued and
the conversion price of $1.00 per share, the Company will incur a significant
non-cash charge in connection with the private placement.

           As indicated in the Company's quarterly report on Form 10-QSB for
the quarter ended September 30, 1999, as a result of increased competitive
pressures, the Company has accelerated the development of its next generation
management information system. Because of this increased competitive pressure
as well as the development costs associated with the completion of the
Company's next generation product, the Company has and continues to experience
significant losses.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

           (a)   Financial Statements of Business Acquired.

                 It is currently impracticable to provide financial statements
                 of MMKid. The Company's independent auditor is currently
                 completing its audit of the financial statements of MMKid and
                 it is anticipated that the Company will file the requisite
                 audited financial statements no later than 60 days following
                 the date by which this Form 8-K must be filed.

           (b)   Pro Formal Financial Information.

                 It is currently impracticable to provide pro forma financial
                 statements of the Company including the operations of MMKid.
                 The Company's independent auditor is currently completing its
                 audit of the financial statements of MMKid and it is
                 anticipated that the Company will file any required pro forma
                 financial statements no later than 60 days following the date
                 by which this Form 8-K must be filed.

           (c)   Exhibits.

3.1        Certificate of Designation, Preferences and Rights of Series B
           Preferred Stock.

3.2        Certificate of Designation, Preferences and Rights of Series C
           Preferred Stock.

10.1       Stock Exchange Agreement and Plan of Reorganization, dated as of
           December 16, 1999, by and among the Company, MMKid and the former
           stockholders of MMKid.

10.2       Form of Convertible Promissory Note

99.1       Press release dated December 17, 1999 relating to the completion of
           the acquisition of MMKid by the Company

<PAGE>

                                 SIGNATURES

           Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.

                                       JENKON INTERNATIONAL, INC.
                                       (Registrant)


                                       By: /s/ DAVID EDWARDS
                                           -------------------------------------
                                           David Edwards
                                           Chief Executive Officer and
                                           Director


                                       By: /s/ ROBERT CAVITT
                                           -------------------------------------
                                           Robert Cavitt
                                           Executive Vice President and Director

<PAGE>

                     CERTIFICATE OF DESIGNATION, PREFERENCES
                                  AND RIGHTS OF
                            SERIES B PREFERRED STOCK
                                       OF
                           JENKON INTERNATIONAL, INC.,
                             A DELAWARE CORPORATION


         (Pursuant to Section 151 of the General Corporation Law of the
                               State of Delaware)


         Jenkon International, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that, pursuant to the authority contained in Article 4, Section 2 of
its Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolution creating a series of its
Preferred Stock designated as Series B Preferred Stock:

         RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be, and hereby is, created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof, are as follows:

                  BE IT RESOLVED, that pursuant to the authority vested in the
         Board of Directors of the Corporation by the Certificate of
         Incorporation, the Board of Directors does hereby provide for the issue
         of a series of Preferred Stock, $.001 par value per share, of the
         Corporation, to be designated "Series B Preferred Stock", consisting of
         1,208,000 shares, and to the extent that the voting powers,
         designations, preferences, limitations, restrictions and relative
         rights of the Series B Preferred Stock are not stated and expressed in
         the Certificate of Incorporation, does hereby fix and herein state and
         express such voting powers, designations, preferences, limitations,
         restrictions and relative rights as follows (all terms used herein
         which are defined in the Certificate of Incorporation shall be deemed
         to have the meanings provided therein):

                  1.  DESIGNATION AND AMOUNT. The shares of such series shall be
         designated as "Series B Preferred Stock" and the number of shares
         constituting such series shall be 1,208,000. Such number of shares may
         be decreased by resolution of the Board of Directors; provided, that no
         decrease shall reduce the number of shares of Series B Preferred Stock
         to a number less than the number of shares of Series B Preferred Stock
         then outstanding or reserved for issuance.

                  2.  RANKING. The Series B Preferred Stock shall rank (i)
         senior to the Common Stock, (ii) junior to the Series A Preferred
         Stock, and (ii) equal to the Series C Preferred Stock of the
         Corporation with respect to the payment of dividends, the
         distribution of assets and upon liquidation or winding up of the
         Corporation.

<PAGE>

                  3.  DIVIDENDS. So long as any shares of Series B Preferred
         Stock are outstanding, the Corporation shall not, without the written
         consent of the holders of a majority of the outstanding shares of
         Series B Preferred Stock, (i) declare or pay a dividend on, (ii) make
         any distribution to the holders of, or (iii) repurchase, redeem or make
         provisions for the purchase or redemption (whether directly or through
         a subsidiary) of any class or series of stock of the Corporation
         ranking junior or equal to the Series B Preferred Stock (other than the
         payment of dividends payable in securities of the Corporation which
         shall be governed by the provisions of Section 4(e)(i) of this
         Certificate of Designation).

                  4.  CONVERSION RIGHTS AND LIMITATIONS. The holders of the
         Series B Preferred Stock shall have the following conversion rights and
         limitations:

                      (a)  SUBJECT TO STOCKHOLDER APPROVAL. No shares of Series
         B Preferred Stock shall be convertible into Common Stock of the
         Corporation until the holders of a majority of the Common Stock
         represented and entitled to vote at a meeting of stockholders at which
         a quorum is present shall approve the right of the Series B Preferred
         Stock to so convert ("Stockholder Approval").

                      (b)  AUTOMATIC CONVERSION. Upon Stockholder Approval, the
         shares of Series B Preferred Stock shall automatically convert into
         fully-paid and nonassessable shares of Common Stock, with identical
         designations, preferences and rights thereof.

                      (c)  CONVERSION RATE. Each share of Series B Preferred
         Stock shall be converted into ten (10) shares of Common Stock.

                      (d)  MECHANICS OF CONVERSION. Upon Stockholder Approval,
         each holder of Series B Preferred Stock shall surrender the
         certificate or certificates therefor, duly endorsed, at the office of
         the Corporation or of any transfer agent for the Common Stock.
         Thereupon the Corporation shall promptly issue and deliver at such
         office to such holder a certificate or certificates for the number of
         shares of Common Stock to which such holder is entitled. Such
         conversion shall be deemed to have been made immediately prior to the
         close of business on the date of such surrender of the certificate
         representing the shares to be converted, and the person entitled to
         receive the shares of Common Stock issuable upon such conversion shall
         be treated for all purposes as the record holder of such shares of
         Common Stock on such date (the "Conversion Date").

                      (e)  ADJUSTMENTS IN CERTAIN CUSTOMARY EVENTS.

                           (i)   STOCK DIVIDENDS. In the event the Corporation
         shall make or issue, or fix a record date for the determination of
         holders of Common Stock entitled to receive, a dividend or other
         distribution payable in securities of the


                                       -2-

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         Corporation, then and in each such event provision shall be made so
         that the holders of the Series B Preferred Stock shall receive upon
         conversion thereof in addition to the number of shares of Common Stock
         receivable thereupon, the number of securities of the Corporation which
         they would have received had their Series B Preferred Stock been
         converted into Common Stock on the date of such event and had they
         thereafter, during the period from the date of such event to and
         including the Conversion Date, retained such securities receivable by
         them as aforesaid during such period, giving application to all
         adjustments called for during such period under this Section 4 with
         respect to the rights of the holders of the Series B Preferred Stock.

                           (ii)  RECAPITALIZATION OR RECLASSIFICATION.  If the
         Common Stock of the Corporation shall be changed into the same or
         different number of shares of any class or classes of stock of the
         Corporation, whether by recapitalization, reclassification or otherwise
         (other than a subdivision or combination of shares or stock dividend
         provided for elsewhere in the Certificate of Incorporation or these
         resolutions, or a reorganization, merger, consolidation or sale of
         assets provided for elsewhere in the Certificate of Incorporation or
         these resolutions), then and in each such event the holder of shares of
         Series B Preferred Stock shall have the right thereafter to convert
         such shares into the kind and amount of shares of stock and other
         securities and property receivable upon such reorganization,
         reclassification or other change by holders of the number of shares of
         Common Stock into which such shares of Series B Preferred Stock would
         have been converted (taking into account all accrued and unpaid
         dividends and interest with respect to such Series B Preferred Stock)
         immediately prior to such reorganization, reclassification or change,
         all subject to further adjustment as provided herein.

                           (iii) MERGER OR SALE OF ASSETS. If at any time or
         from time to time there shall be a merger or consolidation of the
         Corporation with or into another corporation (other than a merger which
         does not result in any reclassification, conversion, exchange or
         cancellation of outstanding shares or Common Stock of the Corporation),
         or the sale of all or substantially all of the Corporation's properties
         and assets to any other person followed by a liquidation of the
         Corporation, then, as a part of such transaction, provision shall be
         made so that each holder of a share of Series B Preferred Stock then
         outstanding shall have the right thereafter to convert such share only
         into the kind and amount of securities, cash and other property of the
         Corporation, or of the successor corporation resulting from such merger
         or consolidation, receivable upon such consolidation, merger, sale or
         transfer by a holder of the number of shares of Common Stock of the
         Corporation into which such share of Series B Preferred Stock might
         have been converted immediately prior to such consolidation, merger,
         sale or transfer, assuming such holder of Common Stock of the
         Corporation is not an entity with which the Corporation consolidated or
         into which the Corporation merged or which merged into the Corporation
         or to which such sale or transfer was made, as the case may be (a
         "constituent entity"), or an affiliate of a constituent entity. If
         necessary in any such case, appropriate adjustment shall be made in the
         application of the


                                       -3-

<PAGE>



         provisions of this Section 4 with respect to the rights of the holders
         of the Series B Preferred Stock after such transaction to the end that
         the provisions of this Section 4 (including adjustment of the
         Conversion Price then in effect and the number of shares issuable upon
         conversion of the Series B Preferred Stock) shall be applicable after
         that event in a manner corresponding as nearly as may be practicable in
         relation to any shares of stock or other securities or property
         thereafter deliverable on the conversion of the shares. The above
         provisions shall similarly apply to successive consolidations, mergers,
         sales or transfers.

                           (iv)  SUBDIVISION AND COMBINATION. In the event that
         the outstanding Common Stock shall be subdivided (by stock split or
         otherwise), or combined or consolidated, by reclassification or
         otherwise, into a different number of shares of Common Stock, the
         number of shares of Common Stock into which a share of Series B
         Preferred Stock may be converted shall be adjusted so that the holders
         of the Series B Preferred Stock shall have the right to convert each
         share of Series B Preferred Stock into the number of shares of Common
         Stock which such holders would have received upon such subdivision or
         combination if such holders had converted such shares into Common Stock
         immediately prior to such subdivision or combination. Any such
         adjustments shall become effective at the close of business on the
         effective date of the subdivision or combination.

                           (v)   CERTIFICATE AS TO ADJUSTMENTS. In each case of
         an adjustment or readjustment of the number of shares of Common Stock
         into which a share of Series B Preferred Stock may be converted, the
         Corporation will furnish each holder of Series B Preferred Stock with
         a certificate, executed by the President and Chief Financial Officer
         of the Corporation showing such adjustment or readjustment, and
         stating in detail the facts upon which such adjustment or readjustment
         is based. The Corporation in any such instance may, and in every
         instance upon the request of the holders of a majority of the Series B
         Preferred Stock the Corporation will, cause its independent public
         accountants to confirm the accuracy of such adjustment or readjustment.
         Any adjustment so confirmed shall be for all purposes hereof
         conclusively be deemed to be an appropriate adjustment.

                      (f)  TRANSFER TAXES. The Corporation will pay any and all
         documentary stamp or similar issue or transfer taxes payable in respect
         of the issue or delivery of shares of Common Stock on conversions of
         shares of Series B Preferred Stock pursuant hereto; provided, however,
         that the Corporation shall not be required to pay any tax which may be
         payable in respect of any transfer involved in the issue or delivery of
         shares of Common Stock in a name other than that of the holder of the
         shares of Series B Preferred Stock to be converted and no such issue or
         delivery shall be made unless and until the person requesting such
         issue or delivery has paid to the Corporation the amount of any such
         tax or has established, to the satisfaction of the Corporation, that
         such tax has been paid.


                                       -4-

<PAGE>



                      (g)  SHARES TO BE VALIDLY ISSUED, ETC.. The Corporation
         covenants that all shares of Common Stock which may be issued upon
         conversions of shares of Series B Preferred Stock will upon issue be
         duly and validly issued, fully paid and non-assessable, free of all
         liens and charges and not subject to any preemptive rights.

                      (h)  RESERVATION OF COMMON STOCK. The Corporation shall
         at all times reserve and keep available out of its authorized but
         unissued shares of Common Stock, solely for the purpose of effecting
         the conversion of the shares of the Series B Preferred Stock, such
         number of its shares of Common Stock as shall from time to time be
         sufficient to effect the conversion of all outstanding shares of the
         Series B Preferred Stock, and if at any time the number of authorized
         but unissued shares of Common Stock shall not be sufficient to effect
         the conversion of all then outstanding shares of the Series B Preferred
         Stock, the Corporation shall take such corporate action as may be
         necessary to increase its authorized but unissued shares of Common
         Stock to such number of shares as shall be sufficient for such purpose.

                  5.  REDEMPTION.

                      (a)  REDEMPTION RIGHTS. Upon the occurrence of a
         "Redemption Event" (as defined below), the shares of Series B Preferred
         Stock shall be redeemable at the option of the holders thereof. The
         redemption price of each share of Series B Preferred Stock shall be ten
         dollars ($10) per share (the "Redemption Price"). The Redemption Price
         shall increase at a rate of fifteen percent (15%) per year from and
         after April 1, 2000. A holder of Series B Preferred Stock desiring to
         redeem its shares shall provide written notice to the Corporation at
         its principal office of setting forth the number of shares it wishes to
         redeem. The Corporation shall pay the Redemption Price to a holder of
         Series B Preferred Stock within five (5) business days after it
         receives such written demand.

                      (b)  REDEMPTION EVENT. For purposes hereof, a "Redemption
         Event" shall be deemed to have occurred if:

                           (i)   Stockholder Approval has not been granted on or
         prior to March 31, 2000, or such later date as the holders of a
         majority of the Series B Preferred Stock shall agree;

                           (ii)  A receiver, liquidator or trustee of
         the Corporation or of a substantial part of its properties shall be
         appointed by court order and such order shall remain in effect for more
         than fifteen (15) days, the Corporation shall be adjudicated bankrupt
         or insolvent, a substantial party of the property of the Corporation
         shall be sequestered by court order and such order shall remain in
         effect for more than fifteen (15) days, or a petition to reorganize the
         Corporation under any bankruptcy, reorganization or insolvency law
         shall be filed against the Corporation and shall not be dismissed
         within forty-five (45) days after such filing;


                                       -5-

<PAGE>


                           (iii) The Corporation shall file a petition in
         voluntary bankruptcy or request reorganization under any provision of
         any bankruptcy, reorganization or insolvency law, or shall consent to
         the filing of any petition against it under any such law; or

                           (iv)  The Corporation shall make an assignment for
         the benefit of its creditors, or admit in writing its inability to pay
         its debts generally as they become due, or consent to the appointment
         of a receiver, trustee or liquidator of the Corporation, or of all or
         any substantial part of its properties.

                  6.  LIQUIDATION, DISSOLUTION OR WINDING UP.

                      (a)  LIQUIDATION PREFERENCE. In the event of any
         liquidation, dissolution or winding up of the Corporation, whether
         voluntary or involuntary ("Liquidation"), occurring before the date of
         Stockholder Approval, the holders of each share of Series B Preferred
         Stock shall be entitled to receive out of the "Available Funds" (as
         defined below), before any sums shall be paid or any assets distributed
         among the holders of shares of Common Stock and any other class of
         stock of the Corporation ranking junior to the Series B Preferred
         Stock, an amount or value (such amount or value as described
         immediately below is hereinafter called the "Series B Preference
         Price") equal to $10.00 per share of Series B Preferred Stock (subject
         to adjustment if the Series B Preferred Stock of the Corporation shall
         be changed into a different number of shares, whether by
         recapitalization, reclassification or otherwise, and then and in each
         such event the holder of shares of Series B Preferred Stock shall have
         the right thereafter to receive upon redemption such same amount
         aggregately receivable immediately prior to reorganization,
         reclassification or other change of the number of shares of Series B
         Preferred Stock apportioned among the number of shares into which such
         shares of Series B Preferred Stock are changed) plus in each case, any
         and all declared but unpaid dividends on such shares. As used herein,
         "Available Funds" shall mean the assets of the Corporation legally
         available for distribution to holders of the Corporation's capital
         stock, whether such assets are capital, surplus, or earnings. If the
         Available Funds shall be insufficient to permit the payment in full to
         all holders of the Series B Preferred Stock the full amounts (including
         all dividends accrued and unpaid) to which they shall be entitled by
         reason of such Liquidation of the Corporation, then there shall be paid
         to the holders of the Series B Preferred Stock in connection with such
         Liquidation of the Corporation, an amount equal to product derived by
         multiplying the amount of Available Funds times a fraction, the
         numerator of which shall be the full amount to which the holders of the
         Series B Preferred Stock shall be entitled by reason of such
         Liquidation of the Corporation and the denominator of which shall be
         the total amount which would have been distributed by reason of such
         Liquidation of the Corporation with respect to the Series B Preferred
         Stock then outstanding had the Corporation possessed sufficient assets
         to pay the maximum amount which the holders of all such stock would be
         entitled to receive in connection with such Liquidation of the
         Corporation.


                                       -6-

<PAGE>



                           The voluntary sale, conveyance, lease, exchange or
         transfer of all or substantially all the property or assets of the
         Corporation, or the merger or consolidation of the Corporation into or
         with any other corporation, or the merger of any other corporation into
         the Corporation, or any purchase of all or substantially all of the
         shares of any class or series of stock of the Corporation, shall not be
         deemed to be a Liquidation of the Corporation for the purposes of this
         Section 6, [so long as such transaction does not result in the issuance
         or creation of any shares of Preferred Stock of the Corporation, or of
         any successor, except any shares of Preferred Stock that rank junior
         (as defined elsewhere in these resolutions) to the shares of Series B
         Preferred Stock as to dividends and as to the distribution of assets
         upon dissolution, liquidation or winding up; provided, however, if more
         than 50% (by value as determined in good faith by the Board of
         Directors) of the consideration received in a transaction by holders of
         the Corporation's Common Stock in such transaction consists of cash,
         notes payable in cash or Marketable Stock (as defined below), the
         transaction will be deemed to be a Liquidation for purposes of this
         Section. The phrase "all or substantially all" as used in this
         definition in reference to a class of the Corporation's capital stock
         means 66% or more of the aggregate outstanding amount. The phrase "all
         or substantially all" as used in this definition in reference to the
         property, business or assets of the Corporation shall mean assets of a
         corporation as are quantitatively vital to the operations of the
         Corporation and substantially affects the existence and purpose of the
         Corporation. As used herein, the term "Marketable Stock" means the
         Corporation's Common Stock or common stock of any corporation that is
         the successor to all or substantially all of the business or assets of
         the Corporation or of the ultimate parent of such successor, which is
         (or will, upon distribution thereof, be) listed or quoted on the New
         York Stock Exchange, the American Stock Exchange, or the Nasdaq
         National Market or the Nasdaq Small Cap Market.]

                           The holder of any shares of Series B Preferred Stock
         shall not be entitled to receive any payment of the full balance owed
         for such shares under this Section 6 until such holder shall cause to
         be delivered to the Corporation (i) the certificate(s) representing
         such shares of Series B Preferred Stock (or an affidavit of lost
         certificate and such other documentation or assurances as are required
         by applicable law, in a form reasonably acceptable to the Corporation)
         and (ii) transfer instrument(s) satisfactory to the Corporation and
         sufficient to transfer such shares of Series B Preferred Stock to the
         Corporation free of any adverse interest. No interest shall accrue on
         any payment upon Liquidation after the due date thereof.

                           After the Series B Preference Price shall have been
         paid in full to the holders of the Series B Preferred Stock, or funds
         necessary for such payment shall have been set aside by the
         Corporation in trust for the account of holders of the Series B
         Preferred Stock and available for such payment, the remaining assets of
         the Corporation available for distribution to stockholders shall be
         distributed among the holders of Common Stock and any other class of
         stock of the Corporation ranking junior to the Series B Preferred
         Stock, and the holders of shares of the Series B


                                       -7-

<PAGE>

         Preferred Stock will not be entitled to any further participation in
         any distribution of assets by the Corporation.

                      (b)  PROPERTY. Whenever the distribution provided for
         herein shall be paid in property other than cash, the value of such
         distribution shall be the fair market value of such property as
         determined in good faith by the Board of Directors of the Corporation.

                  7.  VOTING RIGHTS. Except as otherwise required by applicable
         law, the Series B Preferred Stock shall have no voting rights.

                  8.  NOTICES OF RECORD DATES. In the event of any taking by
         the Corporation of a record of the holders of any class of
         securities for the purpose of determining the holders thereof who
         are entitled to receive any dividend or other distribution, or to
         receive any other right, or any capital reorganization of the
         Corporation, any reclassification or recapitalization of the
         capital stock of the Corporation, any merger or consolidation of the
         Corporation, or any transfer of all or substantially all of the
         assets of the Corporation to any other corporation, or any other
         entity or person, or any voluntary or involuntary dissolution,
         liquidation or winding up of the Corporation, then and in each such
         event the Corporation shall mail or cause to be mailed to each
         holder of Series B Preferred Stock a notice specifying (i) the date
         on which any such record is to be taken for the purpose of such
         dividend, distribution or right and a description of such dividend,
         distribution or right, (ii) the date on which any such
         reorganization, reclassification, recapitalization, transfer,
         consolidation, merger, dissolution, liquidation or winding up is
         expected to become effective, (iii) the time, if any, that is to be
         fixed, as to when the holders of record of Common Stock (or other
         securities) shall be entitled to exchange their shares of Common
         Stock (or other securities) for securities or other property
         deliverable upon such reorganization, reclassification,
         recapitalization, transfer, consolidation, merger, dissolution,
         liquidation or winding up. Such notice shall be mailed at least 30
         days prior to the date specified in such notice on which such action
         is to be taken.

                  9.  NO REISSUANCE OF THE SERIES B PREFERRED STOCK. No share or
         shares of the Series B Preferred Stock acquired by the Corporation by
         reason of redemption, purchase, conversion or otherwise shall be
         reissued. The Corporation may from time to time take such appropriate
         corporate action as may be necessary to reduce the authorized number of
         shares of the Series B Preferred Stock accordingly.

                 10.  NO SENIOR OR EQUAL SHARES. With the exception of the
         Series C Preferred Stock, the Board of Directors of the Corporation
         shall not, without the consent of the holders of a majority of the
         outstanding Series B Preferred Stock, create any class or series of
         equity security which is either senior or equal to the Series B
         Preferred Stock with respect to rights upon Liquidation.


                                       -8-

<PAGE>



                 11.  AMENDMENT. If any shares of Series C Preferred Stock have
         been issued and are outstanding, the rights, preferences and privileges
         of the Series C Preferred Stock may not be changed, altered or amended
         without the prior consent of the holders of (i) a majority of the
         outstanding Series C Preferred Stock, and (ii) at least eight-five
         percent (85%) of the outstanding Common Stock.

                 12.  COMMON STOCK. All rights accruing to the outstanding
         shares of the Corporation not expressly provided for to the contrary
         herein shalt be vested in the Common Stock.


                                       -9-

<PAGE>


         IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Designation, Preferences and Rights of Series B Preferred Stock to be duly
executed by its President and Chief Executive Officer and attested to by its
Secretary on this ____ day of ____________, 1999.


                                             JENKON INTERNATIONAL, INC.



                                             By:________________________________
                                                David Edwards, President and
                                                Chief Executive Officer


Attest:



- ---------------------------------
______________, Acting Secretary





                                      -10-


<PAGE>

                    CERTIFICATE OF DESIGNATION, PREFERENCES
                                 AND RIGHTS OF
                           SERIES C PREFERRED STOCK
                                      OF
                          JENKON INTERNATIONAL, INC.,
                            A DELAWARE CORPORATION


          (Pursuant to Section 151 of the General Corporation Law of
                            the State of Delaware)


         Jenkon International, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that, pursuant to the authority contained in Article 4,
Section 2 of its Certificate of Incorporation, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution creating
a series of its Preferred Stock designated as Series C Preferred Stock:

         "RESOLVED, that a series of the class of authorized Preferred Stock of
the Corporation be, and hereby is, created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof, are as follows:

               BE IT RESOLVED, that pursuant to the authority vested in the
         Board of Directors of the Corporation by the Certificate of
         Incorporation, the Board of Directors does hereby provide for the issue
         of a series of Preferred Stock, $.001 par value per share, of the
         Corporation, to be designated "Series C Preferred Stock", consisting of
         1,208,000 shares, and to the extent that the voting powers,
         designations, preferences, limitations, restrictions and relative
         rights of the Series C Preferred Stock are not stated and expressed in
         the Certificate of Incorporation, does hereby fix and herein state and
         express such voting powers, designations, preferences, limitations,
         restrictions and relative rights as follows (all terms used herein
         which are defined in the Certificate of Incorporation shall be deemed
         to have the meanings provided therein):

               1.    DESIGNATION AND AMOUNT. The shares of such series shall be
         designated as "Series C Preferred Stock" and the number of shares
         constituting such series shall be 1,208,000. Such number of shares may
         be decreased by resolution of the Board of Directors; provided, that no
         decrease shall reduce the number of shares of Series C Preferred Stock
         to a number less than the number of shares of Series C Preferred Stock
         then outstanding or reserved for issuance.

               2.    RANKING. The Series C Preferred Stock shall rank (i) senior
         to the Common Stock, and (ii) equal to the Series B Preferred Stock of
         the Corporation with respect to the payment of dividends, the
         distribution of assets and upon liquidation or winding up of the
         Corporation.

<PAGE>

               3.    DIVIDENDS. So long as any shares of Series C Preferred
         Stock are outstanding, the Corporation shall not, without the written
         consent of the holders of a majority of the outstanding shares of
         Series C Preferred Stock, (i) declare or pay a dividend on, (ii) make
         any distribution to the holders of, or (iii) repurchase, redeem or make
         provisions for the purchase or redemption (whether directly or through
         a subsidiary) of any class or series of stock of the Corporation
         ranking junior or equal to the Series C Preferred Stock (other than the
         payment of dividends payable in securities of the Corporation which
         shall be governed by the provisions of Section 4(f)(i) of this
         Certificate of Designation).

               4.    CONVERSION RIGHTS AND LIMITATIONS. The holders of the
         Series C Preferred Stock shall have the following conversion rights and
         limitations:

                     (a) SUBJECT TO STOCKHOLDER APPROVAL. No shares of Series C
         Preferred Stock shall be convertible into Common Stock of the
         Corporation unless and until the holders of a majority of the Common
         Stock represented and entitled to vote at a meeting of stockholders at
         which a quorum is present shall approve the right of the Series C
         Preferred Stock to so convert ("Stockholder Approval").

                     (b) SUBJECT TO POST-MERGER REVENUES OF THE CORPORATION.
         Additionally, no shares of Series C Preferred Stock shall be
         convertible into Common Stock of the Corporation unless and until the
         first calendar year (or part thereof) in which revenues of Multimedia
         K.I.D. - Intelligence in Education, Ltd., an Israeli corporation that
         will become a wholly-owned subsidiary of the Corporation simultaneously
         with the initial issuance of the shares of Series C Preferred Stock, as
         a stand-alone entity, shall exceed US$1,700,000.00, exclusive of
         revenues generated by the portion of the Corporation that constituted
         the Corporation prior to the contemplated merger (the "Annual Revenue
         Target").

                     (c) AUTOMATIC CONVERSION. Upon both Stockholder Approval
         and the achievement of the Annual Revenue Target, the shares of Series
         C Preferred Stock shall automatically convert into fully-paid and
         nonassessable shares of Common Stock, with identical designations,
         preferences and rights thereof.

                     (d) CONVERSION RATE. Each share of Series C Preferred Stock
         shall be converted into ten (10) shares of Common Stock, subject to
         adjustment in accordance with Section 4(f) below.

                     (e) MECHANICS OF CONVERSION. Upon Stockholder Approval and
         the achievement of the Annual Revenue Target, each holder of Series C
         Preferred Stock shall surrender the certificate or certificates
         therefor, duly endorsed, at the office of the Corporation or of any
         transfer agent for the Common Stock. Thereupon the Corporation shall
         promptly issue and deliver at such office to such holder a certificate
         or certificates for the number of shares of Common Stock to which such
         holder is


                                       -2-
<PAGE>

         entitled. Such conversion shall be deemed to have been made immediately
         prior to the close of business on the date of such surrender of the
         certificate representing the shares to be converted, and the person
         entitled to receive the shares of Common Stock issuable upon such
         conversion shall be treated for all purposes as the record holder of
         such shares of Common Stock on such date (the "Conversion Date").

                     (f)     ADJUSTMENTS IN CERTAIN CUSTOMARY EVENTS.

                             (i)   STOCK DIVIDENDS. In the event the Corporation
         shall make or issue, or fix a record date for the determination of
         holders of Common Stock entitled to receive, a dividend or other
         distribution payable in securities of the Corporation, then and in each
         such event provision shall be made so that the holders of the Series C
         Preferred Stock shall receive upon conversion thereof in addition to
         the number of shares of Common Stock receivable thereupon, the number
         of securities of the Corporation which they would have received had
         their Series C Preferred Stock been converted into Common Stock on the
         date of such event and had they thereafter, during the period from the
         date of such event to and including the Conversion Date, retained such
         securities receivable by them as aforesaid during such period, giving
         application to all adjustments called for during such period under this
         Section 4 with respect to the rights of the holders of the Series C
         Preferred Stock.

                             (ii)  RECAPITALIZATION OR RECLASSIFICATION.  If the
         Common Stock of the Corporation shall be changed into the same or
         different number of shares of any class or classes of stock of the
         Corporation, whether by recapitalization, reclassification or otherwise
         (other than a subdivision or combination of shares or stock dividend
         provided for elsewhere in the Certificate of Incorporation or these
         resolutions, or a reorganization, merger, consolidation or sale of
         assets provided for elsewhere in the Certificate of Incorporation or
         these resolutions), then and in each such event the holder of shares of
         Series C Preferred Stock shall have the right thereafter to convert
         such shares into the kind and amount of shares of stock and other
         securities and property receivable upon such reorganization,
         reclassification or other change by holders of the number of shares of
         Common Stock into which such shares of Series C Preferred Stock would
         have been converted (taking into account all accrued and unpaid
         dividends and interest with respect to such Series C Preferred Stock)
         immediately prior to such reorganization, reclassification or change,
         all subject to further adjustment as provided herein.

                             (iii) MERGER OR SALE OF ASSETS. If at any time or
         from time to time there shall be a merger or consolidation of the
         Corporation with or into another corporation (other than a merger which
         does not result in any reclassification, conversion, exchange or
         cancellation of outstanding shares or Common Stock of the Corporation),
         or the sale of all or substantially all of the Corporation's properties
         and assets to any other person followed by a liquidation of the
         Corporation, then, as a part of such transaction, provision shall be
         made so that each holder of a share of Series C


                                       -3-
<PAGE>

         Preferred Stock then outstanding shall have the right thereafter to
         convert such share only into the kind and amount of securities, cash
         and other property of the Corporation, or of the successor corporation
         resulting from such merger or consolidation, receivable upon such
         consolidation, merger, sale or transfer by a holder of the number of
         shares of Common Stock of the Corporation into which such share of
         Series C Preferred Stock might have been converted immediately prior to
         such consolidation, merger, sale or transfer, assuming such holder of
         Common Stock of the Corporation is not an entity with which the
         Corporation consolidated or into which the Corporation merged or which
         merged into the Corporation or to which such sale or transfer was made,
         as the case may be (a "constituent entity"), or an affiliate of a
         constituent entity. If necessary in any such case, appropriate
         adjustment shall be made in the application of the provisions of this
         Section 4 with respect to the rights of the holders of the Series C
         Preferred Stock after such transaction to the end that the provisions
         of this Section 4 (including adjustment of the Conversion Price then in
         effect and the number of shares issuable upon conversion of the Series
         C Preferred Stock) shall be applicable after that event in a manner
         corresponding as nearly as may be practicable in relation to any shares
         of stock or other securities or property thereafter deliverable on the
         conversion of the shares. The above provisions shall similarly apply to
         successive consolidations, mergers, sales or transfers.

                             (iv)  SUBDIVISION AND COMBINATION. In the event
         that the outstanding Common Stock shall be subdivided (by stock split
         or otherwise), or combined or consolidated, by reclassification or
         otherwise, into a different number of shares of Common Stock, the
         number of shares of Common Stock into which a share of Series C
         Preferred Stock may be converted shall be adjusted so that the holders
         of the Series C Preferred Stock shall have the right to convert each
         share of Series C Preferred Stock into the number of shares of Common
         Stock which such holders would have received upon such subdivision or
         combination if such holders had converted such shares into Common Stock
         immediately prior to such subdivision or combination. Any such
         adjustments shall become effective at the close of business on the
         effective date of the subdivision or combination.

                             (v)   CERTIFICATE AS TO ADJUSTMENTS. In each case
         of an adjustment or readjustment of the number of shares of Common
         Stock into which a share of Series C Preferred Stock may be converted,
         the Corporation will furnish each holder of Series C Preferred Stock
         with a certificate, executed by the President and Chief Financial
         Officer of the Corporation showing such adjustment or readjustment, and
         stating in detail the facts upon which such adjustment or readjustment
         is based. The Corporation in any such instance may, and in every
         instance upon the request of the holders of a majority of the Series C
         Preferred Stock the Corporation will, cause its independent public
         accountants to confirm the accuracy of such adjustment or readjustment.
         Any adjustment so confirmed shall be for all purposes hereof
         conclusively be deemed to be an appropriate adjustment.


                                       -4-
<PAGE>

                     (g)     TRANSFER TAXES. The Corporation will pay any and
         all documentary stamp or similar issue or transfer taxes payable in
         respect of the issue or delivery of shares of Common Stock on
         conversions of shares of Series C Preferred Stock pursuant hereto;
         provided, however, that the Corporation shall not be required to pay
         any tax which may be payable in respect of any transfer involved in the
         issue or delivery of shares of Common Stock in a name other than that
         of the holder of the shares of Series C Preferred Stock to be converted
         and no such issue or delivery shall be made unless and until the person
         requesting such issue or delivery has paid to the Corporation the
         amount of any such tax or has established, to the satisfaction of the
         Corporation, that such tax has been paid.

                     (h)     SHARES TO BE VALIDLY ISSUED, ETC.. The Corporation
         covenants that all shares of Common Stock which may be issued upon
         conversions of shares of Series C Preferred Stock will, upon issue,
         be duly and validly issued, fully paid and non-assessable, free of all
         liens and charges and not subject to any preemptive rights.

                     (i)     RESERVATION OF COMMON STOCK. The Corporation shall
         at all times from and after the date of Stockholder Approval reserve
         and keep available out of its authorized but unissued shares of Common
         Stock, solely for the purpose of effecting the conversion of the shares
         of the Series C Preferred Stock, such number of its shares of Common
         Stock as shall from time to time be sufficient to effect the conversion
         of all outstanding shares of the Series C Preferred Stock, and if at
         any time the number of authorized but unissued shares of Common Stock
         shall not be sufficient to effect the conversion of all then
         outstanding shares of the Series C Preferred Stock, the Corporation
         shall take such corporate action as may be necessary to increase its
         authorized but unissued shares of Common Stock to such number of shares
         as shall be sufficient for such purpose.

               5.    CANCELLATION. In the event that the Annual Revenue Target
         is not achieved by December 31, 2001, the shares of Series C Preferred
         Stock shall automatically be canceled without any further action on the
         part of the holders thereof or of the Corporation, and the holders of
         Series C Preferred Stock shall not be entitled to any rights of any
         sort, including, but not limited to, any rights of conversion,
         redemption or distribution.

               6.    REDEMPTION.

                     (a)     REDEMPTION RIGHTS. Upon the occurrence of a
         "Redemption Event" (as defined below), the shares of Series C Preferred
         Stock shall be redeemable at the option of the holders thereof. The
         redemption price of each share of Series C Preferred Stock shall be ten
         dollars ($10) per share (the "Redemption Price"). The Redemption Price
         shall increase at a rate of fifteen percent (15%) per year from and
         after April 1, 2000. A holder of Series C Preferred Stock desiring to
         redeem its shares shall provide written notice to the Corporation at
         its principal office of setting forth the


                                       -5-
<PAGE>

         number of shares it wishes to redeem. The Corporation shall pay the
         Redemption Price to a holder of Series C Preferred Stock within five
         (5) business days after it receives such written demand.

                     (b)     REDEMPTION EVENT. For purposes hereof, a
         "Redemption Event" shall be deemed to have occurred if:

                             (i)   Stockholder Approval has not been obtained
         on or prior to March 31, 2000, or such later date as the holders of a
         majority of the Series C Preferred Stock shall agree; provided,
         however, that if Stockholder Approval occurs after March 31, 2000, a
         Redemption Event shall be deemed to occur only with respect to shares
         of Series C Preferred Stock with respect to which written demand for
         redemption shall have been made and received by the Corporation prior
         to the date of Stockholder Approval;

                             (ii)  A receiver, liquidator or trustee of the
         Corporation or of a substantial part of its properties shall be
         appointed by court order and such order shall remain in effect for more
         than fifteen (15) days, the Corporation shall be adjudicated bankrupt
         or insolvent, a substantial party of the property of the Corporation
         shall be sequestered by court order and such order shall remain in
         effect for more than fifteen (15) days, or a petition to reorganize the
         Corporation under any bankruptcy, reorganization or insolvency law
         shall be filed against the Corporation and shall not be dismissed
         within forty-five (45) days after such filing;

                             (iii) The Corporation shall file a petition in
         voluntary bankruptcy or request reorganization under any provision of
         any bankruptcy, reorganization or insolvency law, or shall consent to
         the filing of any petition against it under any such law; or

                             (iv)  The Corporation shall make an assignment for
         the benefit of its creditors or consent to the appointment of a
         receiver, trustee or liquidator of the Corporation, or of all or any
         substantial part of its properties.

               7.    LIQUIDATION, DISSOLUTION OR WINDING UP.

                     (a)     LIQUIDATION PREFERENCE. In the event of any
         liquidation, dissolution or winding up of the Corporation, whether
         voluntary or involuntary ("Liquidation"), occurring before the date of
         Stockholder Approval, the holders of each share of Series C Preferred
         Stock shall be entitled to receive out of the "Available Funds" (as
         defined below), before any sums shall be paid or any assets distributed
         among the holders of shares of Common Stock and any other class of
         stock of the Corporation ranking junior to the Series C Preferred
         Stock, an amount or value (such amount or value as described
         immediately below is hereinafter called the "Series C Preference
         Price") equal to $10.00 per share of Series C Preferred Stock (subject
         to


                                       -6-
<PAGE>

         adjustment if the Series C Preferred Stock of the Corporation shall be
         changed into a different number of shares, whether by recapitalization,
         reclassification or otherwise, and then and in each such event the
         holder of shares of Series C Preferred Stock shall have the right
         thereafter to receive upon redemption such same amount aggregately
         receivable immediately prior to reorganization, reclassification or
         other change of the number of shares of Series C Preferred Stock
         apportioned among the number of shares into which such shares of Series
         C Preferred Stock are changed) plus in each case, any and all declared
         but unpaid dividends on such shares. In the event that a Liquidation
         occurs subsequent to the date of Stockholder Approval but prior to the
         date on which the Annual Revenue Target has been achieved, holders of
         Series C Preferred Stock will be entitled to a Series C Preference
         Price of $.01 per share of Series C Preferred Stock and, after payment
         thereof, shall participate ratably with the Common Stock in any
         distribution of Available Funds on an "as converted" bases. As used
         herein, "Available Funds" shall mean the assets of the Corporation
         legally available for distribution to holders of the Corporation's
         capital stock, whether such assets are capital, surplus, or earnings.
         If the Available Funds shall be insufficient to permit the payment in
         full to all holders of the Series C Preferred Stock the full amounts
         (including all dividends accrued and unpaid) to which they shall be
         entitled by reason of such Liquidation of the Corporation, then there
         shall be paid to the holders of the Series C Preferred Stock in
         connection with such Liquidation of the Corporation, an amount equal to
         product derived by multiplying the amount of Available Funds times a
         fraction, the numerator of which shall be the full amount to which the
         holders of the Series C Preferred Stock shall be entitled by reason of
         such Liquidation of the Corporation and the denominator of which shall
         be the total amount which would have been distributed by reason of such
         Liquidation of the Corporation with respect to the Series C Preferred
         Stock then outstanding had the Corporation possessed sufficient assets
         to pay the maximum amount which the holders of all such stock would be
         entitled to receive in connection with such Liquidation of the
         Corporation.

                                    The voluntary sale, conveyance, lease,
         exchange or transfer of all or substantially all the property or assets
         of the Corporation, or the merger or consolidation of the Corporation
         into or with any other corporation, or the merger of any other
         corporation into the Corporation, or any purchase of all or
         substantially all of the shares of any class or series of stock of the
         Corporation, shall not be deemed to be a Liquidation of the Corporation
         for the purposes of this Section 7; provided, however, if more than 50%
         (by value as determined in good faith by the Board of Directors) of the
         consideration received in a transaction by holders of the Corporation's
         Common Stock in such transaction consists of cash, notes payable in
         cash or Marketable Stock (as defined below), the transaction will be
         deemed to be a Liquidation for purposes of this Section. The phrase
         "all or substantially all" as used in this definition in reference to a
         class of the Corporation's capital stock means 66% or more of the
         aggregate outstanding amount. The phrase "all or substantially all" as
         used in this definition in reference to the property, business or
         assets of the Corporation shall mean assets of a corporation as are
         quantitatively vital to the operations of the Corporation and


                                       -7-
<PAGE>

         substantially affects the existence and purpose of the Corporation. As
         used herein, the term "Marketable Stock" means the Corporation's Common
         Stock or common stock of any corporation that is the successor to all
         or substantially all of the business or assets of the Corporation or of
         the ultimate parent of such successor, which is (or will, upon
         distribution thereof, be) listed or quoted on the New York Stock
         Exchange, the American Stock Exchange, or the Nasdaq National Market or
         the Nasdaq Small Cap Market.

                             The holder of any shares of Series C Preferred
         Stock shall not be entitled to receive any payment of the full balance
         owed for such shares under this Section 7 until such holder shall cause
         to be delivered to the Corporation (i) the certificate(s) representing
         such shares of Series C Preferred Stock (or an affidavit of lost
         certificate and such other documentation or assurances as are required
         by applicable law, in a form reasonably acceptable to the Corporation)
         and (ii) transfer instrument(s) satisfactory to the Corporation and
         sufficient to transfer such shares of Series C Preferred Stock to the
         Corporation free of any adverse interest. No interest shall accrue on
         any payment upon Liquidation after the due date thereof.

                             After the Series C Preference Price shall have been
         paid in full to the holders of the Series C Preferred Stock, or funds
         necessary for such payment shall have been set aside by the Corporation
         in trust for the account of holders of the Series C Preferred Stock and
         available for such payment, the remaining assets of the Corporation
         available for distribution to stockholders shall be distributed among
         the holders of Common Stock and any other class of stock of the
         Corporation ranking junior to the Series C Preferred  Stock, and the
         holders of shares of the Series C Preferred Stock will not be entitled
         to any further participation in any distribution of assets by the
         Corporation.

                     (b)     PROPERTY. Whenever the distribution provided for
         herein shall be paid in property other than cash, the value of such
         distribution shall be the fair market value of such property as
         determined in good faith by the Board of Directors of the Corporation.

               8.    VOTING RIGHTS. Except as otherwise required by applicable
         law, the Series C Preferred Stock shall have no voting rights prior to
         Stockholder Approval. If there has been Stockholder Approval but the
         Annual Revenue Target has not been satisfied, each share of the Series
         C Preferred Stock shall, except to the extent that requirements of law
         supersede the limitations on voting rights in the Certificate of
         Incorporation or these resolutions and as otherwise set forth herein,
         be entitled to vote, together with holders of the Common Stock of the
         Corporation as a single class, with respect to any questions upon which
         holders of Common Stock have the right to vote. Each holder of Series C
         Preferred Stock shall be entitled to that number of votes equal to the
         number of shares of Common Stock into which such holder's shares of
         Series C Preferred Stock could be converted pursuant to the provisions
         of Section 4 hereof, at


                                       -8-
<PAGE>

         the record date for the determination of stockholders entitled to vote
         on such matter or, if no such record date is established, at the date
         such vote is taken or any written consent of stockholders is solicited.
         Each holder of Series C Preferred Stock shall be entitled,
         notwithstanding any provision hereof, to notice of any stockholders'
         meeting in accordance with the bylaws of this Corporation.


               9.    NOTICES OF RECORD DATES. In the event of any taking by the
         Corporation of a record of the holders of any class of securities for
         the purpose of determining the holders thereof who are entitled to
         receive any dividend or other distribution, or to receive any other
         right, or any capital reorganization of the Corporation, any
         reclassification or recapitalization of the capital stock of the
         Corporation, any merger or consolidation of the Corporation, or any
         transfer of all or substantially all of the assets of the Corporation
         to any other corporation, or any other entity or person, or any
         voluntary or involuntary dissolution, liquidation or winding up of the
         Corporation, then and in each such event the Corporation shall mail or
         cause to be mailed to each holder of Series C Preferred Stock a notice
         specifying (i) the date on which any such record is to be taken for the
         purpose of such dividend, distribution or right and a description of
         such dividend, distribution or right, (ii) the date on which any such
         reorganization, reclassification, recapitalization, transfer,
         consolidation, merger, dissolution, liquidation or winding up is
         expected to become effective, (iii) the time, if any, that is to be
         fixed, as to when the holders of record of Common Stock (or other
         securities) shall be entitled to exchange their shares of Common Stock
         (or other securities) for securities or other property deliverable upon
         such reorganization, reclassification, recapitalization, transfer,
         consolidation, merger, dissolution, liquidation or winding up. Such
         notice shall be mailed at least 30 days prior to the date specified in
         such notice on which such action is to be taken.

               10.   NO REISSUANCE OF THE SERIES C PREFERRED STOCK. No share or
         shares of the Series C Preferred Stock acquired by the Corporation by
         reason of redemption, purchase, conversion or otherwise shall be
         reissued. The Corporation may from time to time take such appropriate
         corporate action as may be necessary to reduce the authorized number of
         shares of the Series C Preferred Stock accordingly.

               11.   NO SENIOR OR EQUAL SHARES. With the exception of the Series
         B Preferred Stock, the Board of Directors of the Corporation shall not,
         without the consent of the holders of a majority of the outstanding
         Series C Preferred Stock, create any class or series of equity security
         which is either senior or equal to the Series C Preferred Stock with
         respect to rights upon Liquidation.

               12.   AMENDMENT. If any shares of Series C Preferred Stock have
         been issued and are outstanding, the rights, preferences and privileges
         of the Series C Preferred Stock may not be changed, altered or amended
         without the prior consent of the holders


                                       -9-
<PAGE>

         of (i) a majority of the outstanding Series C Preferred Stock, and (ii)
         at least eight-five percent (85%) of the outstanding Common Stock.

               13.   COMMON STOCK. All rights accruing to the outstanding shares
         of the Corporation not expressly provided for to the contrary herein
         shalt be vested in the Common Stock."

         IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Designation, Preferences and Rights of Series C Preferred Stock to be duly
executed by its President and Chief Executive Officer and attested to by its
Secretary on this ____ day of December, 1999.


                                       JENKON INTERNATIONAL, INC.



                                       By:
                                          ---------------------------------
                                            Robert Cavitt, President


Attest:



- ----------------------------------
Cliff DeGroot, Assistant Secretary


                                      -10-

<PAGE>

               STOCK EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION

                  THIS STOCK EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION (this
"AGREEMENT") is made and entered into as of December 16, 1999, by and among
JENKON INTERNATIONAL, INC., a Delaware corporation ("JENKON"), MULTIMEDIA K.I.D.
- - INTELLIGENCE IN EDUCATION, LTD., an Israeli corporation (the "COMPANY"), and
the holders of all of the outstanding capital stock of the Company listed in
EXHIBIT A to this Agreement (the "STOCKHOLDERS").

                                    RECITALS

                  WHEREAS, each Stockholder is the record and beneficial owner
of that number of shares of the Common Stock of the Company set forth next to
such Stockholders's name on EXHIBIT A (the "STOCKHOLDER'S SHARES");

                  WHEREAS, Jenkon desires to acquire all of the outstanding
Common Stock of the Company ("COMPANY COMMON STOCK") in exchange for shares of
capital stock of Jenkon;

                  WHEREAS, Jenkon is willing to issue to each Stockholder, and
each Stockholder is willing to acquire from Jenkon, shares of capital stock of
Jenkon in exchange for such Stockholder's Shares so that: (i) the current
stockholders of the Company will be issued an aggregate of (a) 840,000 shares of
Jenkon Common Stock, $.001 par value ("JENKON COMMON STOCK"), of Jenkon, (b)
1,208,000 shares of Jenkon Series B Preferred Stock, $.001 par value ("SERIES B
PREFERRED"), and (c) 1,208,000 shares of Jenkon Series C Preferred Stock, $.001
par value ("SERIES C PREFERRED"); and (ii) Jenkon will acquire and own all of
the capital stock of the Company;

                  WHEREAS, the Board of Directors of Jenkon and the
Stockholders, deeming the above-described exchange in the manner contemplated
herein to be desirable and in the best interests of each of their corporations,
have authorized and approved such exchange subject to the terms and conditions
set forth herein and the execution and delivery of this Agreement by Jenkon and
each of the Stockholders; and

                  NOW, THEREFORE, in consideration of the promises and the
mutual covenants, representations, warranties and agreements set forth herein,
the parties hereto agree as follows:


                                   ARTICLE I.

                         TERMS OF THE EXCHANGE OF STOCK

                  1.1 THE EXCHANGE OF STOCK. At the Closing (as defined below),
Jenkon shall


                                        1
<PAGE>

convey, transfer, issue and deliver to each Stockholder the number of shares of
(i) Jenkon Common Stock, (ii) Series B Preferred, and (iii) Series C Preferred
set forth next to such Stockholder's name on EXHIBIT A in exchange for all of
the Stockholder's Shares set forth next to such Stockholder's name on EXHIBIT A,
and each Stockholder shall severally convey, transfer, assign and deliver to the
Company all of such Stockholder's Shares in exchange therefor (the "STOCK
EXCHANGE"). The Stockholder's Shares set forth on EXHIBIT A constitute all of
the issued and outstanding capital stock of the Company. Following such
exchange, no Stockholder or any other person or entity other than Jenkon shall
own any equity interest in the Company. At the Closing each of the Stockholders
shall deliver to Jenkon a photocopy of Deed of Transfer and the Notice of Share
Allotment evidencing the assignment of the shares of Company Common Stock owned
by such Stockholder; provided, however, that if no such document is delivered
despite such requirement, execution by the Stockholder of this Agreement shall
be deemed to be sufficient evidence of the assignment and transfer of such
Stockholders's shares of the Company to Jenkon. Promptly following the Closing,
Jenkon, the Company and the Stockholders shall cause a filing to be made with
the Registrar of Companies in Israel evidencing transfer of ownership of all
Company Shares to Jenkon. Within three (3) business days of receipt written
confirmation to Jenkon from the Company's Israeli counsel that all requisite
filings have been made with the Registrar of Companies to reflect that Jenkon is
the record owner of 5,375 ordinary shares of the Company, Jenkon shall deliver
to The Law Offices of Oscar Folger, as agent for the Stockholders ("STOCKHOLDERS
AGENT"), the certificates evidencing the shares of Jenkon Common Stock, Series B
Preferred and Series C Preferred to be issued to the Stockholders under this
Agreement. The Stockholders Agent shall promptly distribute such certificates to
the Stockholders; provided, however, that Jenkon's obligation to deliver such
stock to the Stockholders shall be deemed satisfied in full by delivery thereof
to the Stockholders Agent and each Stockholder agrees that Jenkon shall have no
liability to any Stockholder for the failure or delay of Stockholder Agent to
deliver the certificates to the Stockholders.

                  1.2      AMOUNT OF CONSIDERATION.

                           (a) In consideration for all of the outstanding
capital stock of the Company, Jenkon shall issue to the Stockholders an
aggregate of: (i) 840,000 shares of Jenkon Common Stock, (ii) 1,208,000 shares
of Series B Preferred, and (iii) 1,208,000 shares of Series C Preferred Stock
(the "CONSIDERATION"), which Consideration shall be distributed to the
Stockholders in accordance with EXHIBIT A. In no event shall Jenkon be required
to issue to securityholders of the Company (including the Stockholders) a number
of shares in excess of the Consideration. In the event that, for any reason, the
Stockholders are not owners of all of the capital stock and options or warrants
to acquire capital stock of the Company (1) the Consideration shall not be
increased but shall be allocated among the Stockholders and such additional
holders in accordance with their relative ownership percentages (calculated on
an as-converted basis) and (2) Jenkon shall have the right, without obtaining
the consent of any Stockholder, to issue stop-transfer instructions and/or
cancel certificates issued as Consideration and reissue new certificates
representing the correct ownership of shares.


                                        2
<PAGE>

                           (b) The sum of the 840,000 shares of Jenkon Common
Stock issued to the Stockholders and the maximum number of shares of Jenkon
Common Stock issuable upon conversion of the Series B Preferred and the Series C
Preferred issued to the Stockholders shall be 25,000,000 shares of Jenkon Common
Stock, which shall represent no less than seventy-nine percent (79%) of the
total number of shares of Jenkon Common Stock issued and outstanding on a
fully-diluted basis immediately following the Closing. However, for purposes of
calculating such ownership percentage, the total number of shares of Jenkon
Common Stock issued and outstanding on a fully-diluted basis immediately
following the Closing shall not include the shares of Jenkon Common Stock issued
or to be issued upon conversion of the convertible debt described in Section 7.1
below.

                  1.3 PREFERRED STOCK. Attached hereto as Exhibits B and C
respectively are the Certificate of Designation, Preferences and Rights for the
Series B Preferred and the Series C Preferred, each as filed with the Delaware
Secretary of State and currently in effect. Such Certificates of Designation are
sometimes referred to herein a "CERTIFICATE OF DESIGNATION" and collectively as
the "CERTIFICATES OF DESIGNATION."

                  1.4 POST-CLOSING STRUCTURE OF ENTITIES. Immediately following
the Closing, the Company shall be a wholly-owned subsidiary of Jenkon and from
and after the Closing shall be maintained as a separate operating unit of
Jenkon. From and after the Closing, Jenkon's existing business shall be
maintained as a separate operating unit through Jenkon's existing operating
subsidiary, Jenkon International, Inc., a Washington corporation.

                  1.5 CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place (a) at the offices of Jeffer, Mangels, Butler &
Marmaro LLP, 2121 Avenue of the Stars, 10th Floor, Los Angeles, California at
8:00 a.m., local time, on December 16, 1999 or on such later date as the last
condition to Closing specified in this Agreement shall have been satisfied or
waived, or (b) at such later place, time, date or method as Jenkon and the
Company shall mutually agree. The date on which the Closing occurs is
hereinafter referred to as the "CLOSING DATE".

                  1.6 APPOINTMENT OF STOCKHOLDERS AGENT. By executing this
Agreement, each Stockholder hereby designates and appoints the Stockholders
Agent as such Stockholder's representative and attorney-in-fact for and on
behalf of such Stockholder with full power of substitution to: (i) receive and
accept service of any and all notices under this Agreement on such Stockholder's
behalf, (ii) waive on behalf of such Stockholder any of the conditions to
Closing set forth in Article VIII hereof and (iii) to receive and accept stock
certificates representing the Consideration or any shares of Common Stock into
which any portion of such Consideration may be converted.


                                        3
<PAGE>

                                   ARTICLE II.

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  The Company hereby makes the following representations and
warranties to and for the benefit of Jenkon, subject to the exceptions set forth
in the Company's Disclosure Schedules (which exceptions shall specifically
identify a Section, Subsection or clause of a single Section or Subsection
hereof and which specific exceptions shall only apply to such identified
Section, Subsection or clause) that:

                  2.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and is current in all filings
relating to its corporate existence under the laws of Israel. The Company has
the corporate power to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have, or would reasonably be expected to have,
a material adverse effect on the business, financial condition, results of
operations, assets (including intangible assets), liabilities or prospects of
the Company (hereinafter referred to as a "MATERIAL ADVERSE EFFECT").

                  2.2 ARTICLES OF INCORPORATION; BYLAWS. The Company has
furnished or made available to Jenkon complete and correct copies (with English
translations) of the Articles of Incorporation and the Bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of the Company. The Company is not in violation of any of the provisions
of its Articles of Incorporation or Bylaws or equivalent organizational
documents.

                  2.3 CAPITALIZATION.

                           (a) The authorized capital stock of the Company
consists entirely of (i) 23,000 registered ordinary shares of the Company, 1 NIS
par value ("COMPANY SHARES"), of which 5,375 shares are to be issued and
outstanding immediately following the Closing Date. The Stockholder's Shares
constitute all of the issued and outstanding Company Shares. The outstanding
Company Shares are held of record by the Stockholders, with the addresses of
record and in the amounts set forth in EXHIBIT A. The Stockholders are the only
stockholders of record of the Company and all transfers or issuances of Company
Shares occurring prior to the Closing Date have been reported to and recorded by
the Israeli Registrar of Companies. All outstanding Company Shares are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws,
or equivalent organizational documents, of the Company, or any agreement to
which the Company is a party or by which it is bound.

                           (b) No Company Shares or other securities of the
Company are


                                        4
<PAGE>

reserved for issuance, and there are no contracts, agreements, commitments or
arrangements obligating the Company to offer, sell, issue or grant any shares
of, or any options, warrants or rights of any kind to acquire any shares of, or
any securities that are convertible into or exchangeable for any shares of,
capital stock of the Company, to redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding shares of, or any outstanding options,
warrants or rights of any kind to acquire any shares of, or any outstanding
securities that are convertible into or exchangeable for any shares of, capital
stock of the Company or to grant any mortgage, pledge, security interest,
attachment, encumbrance, lien, claim or charge of any kind (collectively,
"LIENS") on any shares of capital stock of the Company.

                           (c) Immediately following the Closing, Jenkon shall
be the beneficial and record owner of 5,375 ordinary shares of the Company, free
and clear of any and all Liens.

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

                  2.5 AUTHORITY.

                           (a) The Stockholders have unanimously approved the
Stock Exchange and this Agreement, and the Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company. The
Company's Board of Directors has unanimously approved the Stock Exchange and
this Agreement and has executed all necessary Protocols or other consents
required in order to evidence such approval. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

                           (b) Except as set forth on SCHEDULE 2.5(b), the
execution and delivery of this Agreement by the Company does not, and, as of the
Closing Date, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "CONFLICT") (i) any provision of the Articles of Incorporation or
Bylaws, or equivalent organizational documents, of the Company, or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise,


                                        5
<PAGE>

license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, except with respect to
the preceding clause (ii) for any Conflict which could not reasonably be
expected to have a Material Adverse Effect. No consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other domestic or foreign governmental
authority, instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any
third party (so as not to trigger any Conflict) is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i) such
consents, waivers, authorizations, filings, approvals and registrations which
are set forth on SCHEDULE 2.5(b), and (ii) where the failure to obtain or make
any such consent, waiver, approval, order, authorization, registration,
declaration or filing could not reasonably be expected to have a Material
Adverse Effect.

                  2.6 COMPANY FINANCIAL STATEMENTS.

                           (a) SCHEDULE 2.6 sets forth the Company's audited
balance sheets as of December 31, 1997 and December 31, 1998 (the "BALANCE
SHEETS") and the related audited statements of operations, shareholders' equity
and cash flows for the twelve-month periods then ended and the footnotes thereto
as well as the Company's unaudited balance sheet as of June 30, 1999 (the
"INTERIM BALANCE SHEET") and the related unaudited statements of operations for
the six-month period then ended (collectively, the "COMPANY FINANCIALS"). The
Company Financials are correct in all material respects and have been prepared
in accordance with Israel generally accepted accounting principles ("ISRAEL
GAAP") applied on a basis consistent throughout the periods indicated and
consistent with each other. The Company Financials present fairly the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject to normal year-end adjustments in the case of
unaudited financial statements, which such adjustments will not be material in
amount or significance.

                           (b) The Company maintains a system of internal
accounting control sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with United States generally accepted
accounting principles ("US GAAP") and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences; and (v) the Company's financial
statements can be audited, without unreasonable effort or expense, by an
independent public accountant in accordance with US GAAP and the requirements of
the Securities and Exchange Commission with respect to reporting companies under
the Securities Exchange Act of 1934, as amended.

                  2.7 NO UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 2.7, as of


                                        6
<PAGE>

the Closing Date the Company does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (which would
be required to be reflected in financial statements in accordance with US GAAP),
which individually or in the aggregate, has not been reflected in the Interim
Balance Sheet.

                  2.8 NO CHANGES. Except as set forth in SCHEDULE 2.8, since the
date of the Interim Balance Sheet, there has not been, occurred or arisen any:

                           (a) transaction by the Company except in the ordinary
course of business as conducted on the date of the Interim Balance Sheet and
consistent with past practices;

                           (b) amendments or changes to the Articles of
Incorporation or Bylaws, or equivalent organizational documents, of the Company;

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

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

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

                           (f) change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by the
Company;

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

                           (h) declaration, setting aside or payment of a
dividend or other distribution with respect to the capital stock of the Company,
or any direct or indirect redemption, purchase or other acquisition by the
Company of any capital stock, or any split, combination or reclassification in
respect of any shares of capital stock, or any issuance or authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock;

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


                                       7
<PAGE>


                           (j) sale, lease, license or other disposition of any
of the assets or properties of the Company, except in the ordinary course of
business as conducted on that date and consistent with past practices;

                           (k) amendment or termination of any material
contract, agreement or license to which the Company is a party or by which it is
bound;

                           (l) loan by the Company to any person or entity,
incurrence by the Company of any indebtedness, guaranteeing by the Company of
any indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, or creation of any security
interest in any of the Company's assets or properties, except for advances to
employees for travel and business expenses in the ordinary course of business,
consistent with past practices;

                           (m) waiver or release of any right or claim of the
Company, including any write-off or other compromise of any account receivable
of the Company;

                           (n) commencement or notice or threat of commencement
of any lawsuit or proceeding against or investigation of the Company or its
affairs, or any reasonable basis for any of the foregoing;

                           (o) notice of any claim or potential claim of
ownership by a third party of Company Intellectual Property Rights (as defined
in Section 2.12 below) or of infringement by the Company of any third party's
intellectual property rights;

                           (p) change in pricing or royalties set or charged by
the Company to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Company Intellectual Property Rights to the
Company;

                           (q) event or condition of any character that has or
could be reasonably expected to have a Material Adverse Effect on the Company;
or

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

                  2.9 TAX AND OTHER RETURNS AND REPORTS.

                           (a) DEFINITION OF TAXES. For the purposes of this
Agreement, "TAX" or, collectively, "TAXES", means any and all Israeli or United
States (federal, state, and/or local) and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes based
upon or measured by gross receipts, income, profits, sales,


                                        8
<PAGE>

use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts and including any liability for taxes of a
predecessor entity.

                           (b) TAX RETURNS AND AUDITS.

                                    (i) The Company, as of the Closing Date,
will have prepared and filed all required domestic and foreign returns,
estimates, information statements and reports (collectively, "RETURNS") relating
to any and all Taxes concerning or attributable to the Company or its operations
and such Returns are true and correct and have been completed in accordance with
applicable law.

                                    (ii) The Company, as of the Closing Date:
(A) will have paid or accrued all Taxes it is required to pay or accrue and (B)
will have withheld with respect to its employees all Taxes required to be
withheld.

                                    (iii) The Company has not been delinquent in
the payment of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.

                                    (iv) To the best of the Company's knowledge,
no audit or other examination of any Return of the Company is currently in
progress, nor has the Company been notified of any request for such an audit or
other examination.

                                    (v) To the best of the Company's knowledge
the Company does not have any liabilities for unpaid Taxes which have not been
accrued or reserved against on the Balance Sheet, whether asserted or
unasserted, contingent or otherwise, and the Company does not have any knowledge
of any basis for the assertion of any such liability attributable to the
Company, or its assets or operations.

                                    (vi) There are (and as of immediately
following the Closing Date will be) no Liens on the assets of the Company
relating to or attributable to Taxes.

                                    (vii) The Company does not have any
knowledge of any basis for the assertion of any claim relating or attributable
to Taxes which, if adversely determined, would result in any Lien on the assets
of the Company.

                  2.10 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
agreement (non-compete or otherwise), commitment, judgment, injunction, order or
decree to which the Company is a party or otherwise binding upon the Company
which has or reasonably could be


                                        9
<PAGE>

expected to have the effect of prohibiting or impairing any business practice
of the Company, any acquisition of property (tangible or intangible) by the
Company or the conduct of business by the Company. Without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.

                  2.11 TITLE TO PROPERTIES; ABSENCE OF LIENS.


                           (a) The Company does not own real property, nor has
the Company ever owned any real property. Except as described in the notes to
the Company Financials, the Company does not lease any real property. The
description of the terms of any Company leases contained in the notes to the
Company Financials are complete and accurate in all material respects. All such
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default).

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

                  2.12 INTELLECTUAL PROPERTY.

                           (a) For the purposes of this Agreement, the following
terms have the following definitions:

                  "INTELLECTUAL PROPERTY" means any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States,
Israeli, international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether or not patentable or
patented), invention disclosures, improvements, trade secrets, proprietary
information, know-how, technology, technical data and customer lists; (iii) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks; (vi) all trademark
and service mark registrations and applications therefor and all goodwill
associated therewith throughout the world; (vii) all domain names, uniform
resource locators and other Internet or similar addresses or identifiers
("DOMAIN NAMES"); (viii) all databases and data


                                       10
<PAGE>

collections and all rights therein throughout the world; and (ix) all computer
software including all source code, object code, firmware, development tools,
files, records and data, all media on which any of the foregoing is recorded;
(x) any similar, corresponding or equivalent rights to any of the foregoing and
(xi) all documentation related to any of the foregoing.

                  "COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that (i) is owned by (ii) is exclusively licensed to or (iii) was
developed or created by the Company.

                  "REGISTERED INTELLECTUAL PROPERTY" shall mean all United
States, Israeli, international and foreign: (i) patents and patent applications
(including provisional applications); (ii) registered trademarks or service
marks, applications to register trademarks or service marks, intent-to-use
applications, or other registrations or applications related to trademarks or
service marks; (iii) registered copyrights and applications for copyright
registration; (iv) Domain Name registrations and other registrations,
subscriptions and memberships related to the Internet; and (v) any other Company
Intellectual Property that is subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any
domestic or foreign regulatory, standards, government or other public or private
legal authority.

                           (b) SCHEDULE 2.12(b) lists all Registered
Intellectual Property owned by, or filed in the name of, the Company (the
"COMPANY REGISTERED INTELLECTUAL PROPERTY") and lists (i) any proceedings or
actions before any domestic or foreign court, tribunal (including the United
States Patent and Trademark Office (the "PTO"), Internet registration authority
or equivalent authority anywhere in the world related to any of the Company
Registered Intellectual Property and (ii) the date on which such registrations
will expire or by which time the rights in the Intellectual Property related to
such registrations will have to be renewed or extended to prevent expiration,
lapse or other loss.

                           (c) Each item of Company Intellectual Property,
including all Company Registered Intellectual Property, is free and clear of any
Liens. To the best of Company's knowledge, the Company (i) is the exclusive
owner of, and has the right to use exclusively, all Trademarks and Domain Names,
used in connection with the operation or conduct of the business of the Company,
including the sale of any products or technology or the provision of any
services by the Company and (ii) owns exclusively, and has good title to, (x)
all copyrighted works that are Company products (including all copyrights
related to any World Wide Web other similar Internet sites operated by or on
behalf of the Company) or (y) other works of authorship that the Company
otherwise purports to own.

                           (d) To the extent that any Intellectual Property
(including any software, Internet sites or other products or materials of the
Company) has been developed or created by any person other than the Company for
which the Company has, directly or indirectly, paid, the Company has a written
agreement with such person with respect thereto


                                       11
<PAGE>

and the Company thereby has obtained ownership of, and is the exclusive owner
of, all such Intellectual Property. To the extent that the Company has acquired
any Intellectual Property from a third party, to the maximum extent provided for
by, and in accordance with, applicable laws and regulations, the Company has
recorded each such assignment with the relevant authorities.

                           (e) The Company has not transferred ownership of or
granted any license of or right to use or authorized the retention of any rights
to use any Intellectual Property that is or was Company Intellectual Property,
to any other person.

                           (f) Other than "shrink-wrap" and similar widely
available commercial end-user licenses, the contracts, licenses and agreements
listed in SCHEDULE 2.12(f) include all contracts, licenses and agreements, to
which the Company is a party and which are reasonably necessary for the conduct
of the Company's business, with respect to any Intellectual Property of any
person other than the Company. No person other than the Company has ownership
rights to improvements made by the Company in Intellectual Property which has
been licensed to the Company.

                           (g) SCHEDULE 2.12(g) lists all contracts, licenses
and agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any material obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
material obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property of any person other than the Company.

                           (h) To the best of the Company's knowledge, the
operation of the business of the Company as such business is currently conducted
or is reasonably contemplated to be conducted (including, without limitation,
products, technology or services currently under development and the design,
development, manufacture, use, import and sale of the products, technology and
services of the Company) does not, and the Company has not received notice that
the operation of the business of the Company as such is currently conducted
(including, without limitation, products, technology or services currently under
development and the design, development, manufacture, use, import and sale of
the products, technology and services of the Company), infringes or
misappropriates the Intellectual Property of any person, violate the rights of
any person or entity (including rights to privacy or publicity), constitute
unfair competition or trade practices under the laws of any jurisdiction, or
violate the laws or regulations of any jurisdiction. To the best of the
Company's knowledge, none of the advertising or other similar activities of the
Company violates any public or private codes or regulations governing such
activities.

                           (i) There are neither contracts, licenses nor
agreements between the Company on one hand and any other person on the other
with respect to Company Intellectual Property under which there is any dispute
known to the Company regarding the scope of such


                                       12
<PAGE>

agreement or performance under such agreement including with respect to any
payments to be made or received by the Company thereunder.

                           (j) To the Company's knowledge, no person is
infringing or misappropriating any Company Intellectual Property.

                           (k) The Company has taken reasonable steps in
accordance with normal industry practice to protect the Company's rights in
confidential information and trade secrets of the Company or provided by any
other person to the Company.

                           (l) No Company Intellectual Property or product,
technology or service of the Company is subject to any proceeding or outstanding
decree, order, judgment, agreement or stipulation that restricts in any manner
the use, transfer or licensing thereof by the Company or may affect the
validity, use or enforceability of such Company Intellectual Property.

                           (m) To the knowledge of the Company, no (i) product,
technology, service or publication of the Company, (ii) material published or
distributed by the Company or (iii) conduct or statement of the Company,
constitutes obscenity, defames any person, constitutes false advertising or
otherwise violates any law or regulation.

                           (n) The Company has not used or accessed (including
by hyperlinks or framing) the content or materials of any third party, including
a third party's Internet site, in manner that violates any laws or regulations
or misappropriates or infringes the Intellectual Property of such third party.

                           (o) The Company has taken reasonable steps to ensure
that its products (including existing products and technology and products and
technology currently under development) will accurately record, store, process,
calculate and present calendar dates falling on and after (and if applicable,
spans of time including) January 1, 2000, and will calculate any information
dependent on or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record, store,
process, calculate and present calendar dates on or before December 31, 1999, or
calculate any information dependent on or relating to such dates (collectively,
"YEAR 2000 COMPLIANT"). The Company has taken reasonable steps to ensure that
its products (i) will lose no functionality with respect to the introduction of
records containing dates falling on or after January 1, 2000 and (ii) will be
interoperable with other products used and distributed by Jenkon that may
reasonably deliver records to the Company's products or receive records from the
Company's products, or interact with the Company's products, including but not
limited to back-up and archived data. All of the Company's internal computer and
technology products and systems are Year 2000 Compliant.

                  2.13 AGREEMENTS, CONTRACTS AND COMMITMENTS.


                                       13
<PAGE>

                           (a) Except as set forth on SCHEDULE 2.13(a) or as
specifically set forth in the Company Financials (including the notes thereto),
the Company does not have, is not a party to and is not bound by:

                                    (i) any collective bargaining agreements,

                                    (ii) any agreements or arrangements that
contain any severance pay or post-employment liabilities or obligations,

                                    (iii) any bonus, deferred compensation,
pension, profit sharing or retirement plans, or any other employee benefit plans
or arrangements,

                                    (iv) any employment or consulting agreement,
contract or commitment (excluding "at will" employee relationships) with an
employee or individual consultant or salesperson or any consulting or sales
agreement, contract or commitment under which any firm or other organization
provides services to the Company,

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

                                    (vi) any lease of personal property having a
value individually in excess of $25,000,

                                    (vii) any agreement of indemnification or
guaranty,

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

                                    (ix) any agreement, contract or commitment
relating to capital expenditures and involving future payments in excess of
$25,000,

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

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


                                       14
<PAGE>


                       (xii) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.

                 (b)   The Company has not breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted under,
any of the terms or conditions of any agreement, contract or commitment
required to be set forth on SCHEDULE 2.13(a) or SCHEDULE 2.12(b) (any such
agreement, contract or commitment, a "CONTRACT"). Each Contract is in full
force and effect and is not subject to any material default thereunder, of
which the Company has knowledge, by any party obligated to the Company pursuant
thereto. Following the Closing Date, the Company will be permitted to exercise
all of the Company's rights under the Contracts without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay had the
transactions contemplated by this Agreement not occurred.

         2.14    INTERESTED PARTY TRANSACTIONS. Except as specifically
disclosed in the notes to the Company Financials, no officer, director or
Stockholder of the Company (nor any ancestor, sibling, descendant or spouse of
any of such persons, or any trust, partnership or corporation in which any of
such persons has or has had an interest), has or has had, directly or
indirectly, (i) an economic interest in any entity which furnished or sold, or
furnishes or sells, services or products that the Company furnishes or sells,
or proposes to furnish or sell, (ii) an economic interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any Contract.

         2.15    COMPLIANCE WITH LAWS. The Company has not received any notices
of violation with respect to any foreign or domestic statute, law or regulation
and, to the Company's knowledge, has complied in all material respects with
such statutes, laws and regulations.

         2.16    LITIGATION. There is no action, suit or proceeding of any
nature pending, or to the Company's knowledge, threatened against the Company,
its properties or any of its officers or directors, in their respective
capacities as such. To the Company's knowledge, there is no investigation
pending or threatened against the Company, its properties or any of its
officers or directors by or before any Governmental Entity. No Governmental
Entity has at any time challenged or questioned the legal right of the Company
to manufacture, offer or sell any of its products in the present manner or
style thereof.

         2.17    INSURANCE. The Company maintains valid and enforceable
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company, and
such insurance policies and fidelity bonds contain provisions which are
reasonable and customary in the Company's industry, and there is no claim by
the Company pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and


                                       15

<PAGE>


the Company is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.

         2.18    BROKERS' AND FINDERS' FEES. The Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.

         2.19    EMPLOYMENT MATTERS. The Company (i) to Company's knowledge, is
in compliance in all material respects with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each
case, with respect to its employees; (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent
with past practice). To the Company's knowledge, no employee of the Company (i)
is in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or presently proposed
to be conducted by the Company or to the use of trade secrets or proprietary
information of others and (ii) has given notice to the Company, nor is the
Company otherwise aware, that any employee intends to terminate his or her
employment with the Company. No employee has any claim or right to any
ownership interest in or royalties from any Company Intellectual Property.

         2.20    GOVERNMENTAL AUTHORIZATIONS AND LICENSES. The Company
possesses all material consents, licenses, permits, grants or other
authorizations issued to the Company by a Governmental Entity (i) pursuant to
which the Company currently operates or holds any interest in any of its
properties or (ii) which is required for the operation of its business or the
holding of any such interest therein (collectively, "COMPANY AUTHORIZATIONS"),
which Company Authorizations are in full force and effect and constitute all
Company Authorizations required to permit the Company to operate or conduct its
business or hold any interest in its properties or assets.

         2.21    REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company in this Agreement (as modified by the Company's
Disclosure Schedules), nor any statement made in any schedule or certificate
furnished by the Company pursuant to this Agreement, or furnished in or in
connection with documents mailed or


                                       16

<PAGE>


delivered to the Stockholders in connection with soliciting their consent to
this Agreement and the Stock Exchange, contains or will at the Closing Date
contain, any untrue statement of a material fact, or omits or will omit at the
Closing Date to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.


                                  ARTICLE III.

                        REPRESENTATIONS AND WARRANTIES OF
                                THE STOCKHOLDERS

         Each Stockholder, severally but not jointly, represents and warrants
to, and agrees with, Jenkon that:

         3.1    TITLE TO THE SHARES. Each Stockholder is the owner of,
beneficially and of record, and has good and marketable title to the number of
Stockholder's Shares set forth after such Stockholder's name in EXHIBIT A; such
shares will be transferred and conveyed to Jenkon pursuant hereto, free and
clear of any and all covenants, conditions, restrictions, security agreements,
equities, voting trust arrangements, Liens, options and adverse claims or
rights whatsoever, and the Stockholder owns no other stock or other equity
interest, or right to any equity interest, in the Company.

         3.2    AUTHORITY. Stockholder has the full right, power and authority
to enter into this Agreement to transfer the Stockholder's Shares to Jenkon
hereunder, and upon consummation of the exchange contemplated hereby, Jenkon
will acquire from the Stockholder good and marketable title to the
Stockholder's Shares, free and clear of any and all covenants, conditions,
restrictions, security agreements, equities, voting trust arrangements, Liens,
options and adverse claims or rights whatsoever. This Agreement constitutes a
valid and legally binding obligation of Stockholder, enforceable in accordance
with its terms.

         3.3    NO LEGAL BAR. Stockholder is not a party to, subject to or
bound by any agreement or judgment, order, writ, prohibition, injunction or
decree of any court or other governmental body which would prevent, prohibit,
condition or limit the execution, delivery or consummation of this Agreement by
the Stockholder to Jenkon or the transfer of the Stockholder's Shares to be
conveyed by the Stockholder to Jenkon pursuant hereto.

         3.4    BROKERS' FEES AND FINDERS' FEES. Stockholder has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.

         3.5    NO CLAIMS AGAINST THE COMPANY. Stockholder has no claims for


                                       17

<PAGE>


payment or reimbursement or any other claim against the Company other than those
claims specifically set forth in the Company Financials.

         3.6     INVESTOR REPRESENTATIONS.

                 (a)   Stockholder is acquiring the Jenkon Common Stock, Series
B Preferred and Series C Preferred (collectively, the "JENKON SECURITIES") for
Stockholder's own account as principal, not as a nominee or agent, for
investment purposes only, and not with a view to, or for, resale, distribution
thereof in whole or in part (except as such resale may be permitted under
applicable securities laws), and no other person has a direct or indirect
beneficial interest in such shares. Further, Stockholder does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant an interest in all or any portion of the Jenkon Securities to
any third person.

                 (b)   Stockholder understands that the issuance of the Jenkon
Securities pursuant to this Agreement is intended to be exempt from
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT") by virtue of Section 4(2) of the Securities Act and the provisions of
Regulation D promulgated thereunder ("REGULATION D"). In furtherance thereof,
Stockholder represents and warrants to and agrees with the Jenkon and its
affiliates as follows:

                       (i)    Stockholder realizes that the basis for the
exemption may not be present if, notwithstanding such representations,
Stockholder has in mind merely acquiring the Jenkon Securities for a fixed or
determinable period in the future, or with a view towards sale of such shares
or a portion thereof;

                       (ii)   Stockholder has the financial ability to bear the
economic risk of his investment, has adequate means for providing for his
current needs and personal contingencies and has no need for liquidity with
respect to Stockholder's investment in the Jenkon;

                       (iii)  Stockholder has such knowledge and experience in
financial and business matters, including experience in, familiarity with, and
knowledge of (i) the software industry, (ii) the business and affairs of Jenkon
and its affiliates, and (iii) investment and other securities matters, as to be
capable of evaluating the merits and risks of the prospective investment; and

                       (iv)   Stockholder represents that he is an "accredited
investor" as that term is defined in Rule 501(a) promulgated under Regulation D.

                 (c)   Stockholder has been given the opportunity for a
reasonable time prior to the date hereof to ask questions of, and receive
answers from Jenkon concerning Jenkon and the Stockholder's investment in
Jenkon, and has been given the opportunity for a


                                       18

<PAGE>


reasonable time prior to the date hereof to obtain such additional information
necessary in order for him to evaluate the merits and risk of purchase of the
Jenkon Securities to be issued to such Stockholder hereunder. In this regard,
the Stockholder has been provided the opportunity to review a copy of that
certain Confidential Private Placement Memorandum of Jenkon, dated September 10,
1999, relating to the private placement described in Section 7.1 below (the
"PPM"), a copy of which has been provided to the Stockholders Agent. Stockholder
has reviewed the section of the PPM entitled "Risk Factors."

                 (d)   Stockholder understands that investment in Jenkon is an
illiquid investment. In particular, Stockholder recognizes that he may not and
represents, warrants and agrees that he will not sell or otherwise transfer any
Jenkon Securities or shares of Jenkon Common Stock issuable upon conversion of
any shares of Series C Preferred or Series B Preferred without registration
under the Securities Act or an exemption therefrom and a favorable opinion of
counsel for Jenkon to that effect is obtained (if requested by Jenkon). The
Stockholder fully understands and agrees that he must bear the economic risk of
his purchase because, among other reasons, neither the Jenkon Securities nor
the shares of Jenkon Common Stock underlying such securities, have not been
registered under the Securities Act or under the securities laws of any state
and, therefore, cannot be resold, pledged, assigned or otherwise disposed of
unless such shares is subsequently registered under the Securities Act and
under the applicable securities laws of such states or an exemption from such
registration is available. Stockholder agrees that the certificates
representing the Jenkon Securities and any shares of Jenkon Common Stock
issuable upon conversion thereof shall bear such restrictive legend(s) as
Jenkon deems necessary or desirable to reflect the restrictions on transfer
under applicable law or this Agreement.

         3.7     LIMITATION ON STOCKHOLDER LIABILITY. Notwithstanding anything
to the contrary contained herein, each Stockholder shall be liable for a breach
of the representations, warranties and covenants of such Stockholder contained
in this Agreement only for an amount not exceeding the value of the Jenkon
Securities received by such Stockholder (valued at the fair market value of
such shares on the Closing Date which determination shall be made on an
as-converted basis based upon the last sale price of Jenkon Common Stock on The
Nasdaq Small Cap Market on the Closing Date).

                                   ARTICLE IV.

                    REPRESENTATIONS AND WARRANTIES OF JENKON

         Jenkon represents and warrants to and for the benefit of each of the
Stockholders as follows:

         4.1     ORGANIZATION AND QUALIFICATION. Jenkon is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Jenkon has the corporate power to own, lease and operate its
properties and to carry on its business as now


                                       19

<PAGE>


being conducted. Jenkon is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which the failure to be so
qualified would have a material adverse effect on Jenkon as a whole.

         4.2     AUTHORITY. Jenkon has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Jenkon. This Agreement has
been duly executed and delivered by Jenkon and constitutes the valid and
binding obligations of Jenkon, enforceable in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors'
rights generally and (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies. The
execution and delivery of this Agreement by Jenkon does not, and, as of the
Closing Date, the consummation of the transactions contemplated hereby will
not, constitute a Conflict with (i) any provision of the Certificate of
Incorporation or Bylaws of Jenkon, or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Jenkon or its properties or assets, except, with respect to the
preceding clause (ii), for any Conflict which could not reasonably be expected
to have a material adverse effect on the business, financial condition, results
of operations, assets (including intangible assets), liabilities or prospects
of Jenkon (hereinafter referred to as a "JENKON MATERIAL ADVERSE EFFECT"). No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any third party (so as
not to trigger any Conflict) is required by or with respect to Jenkon in
connection with Jenkon's execution and delivery of this Agreement or its
consummation of the transactions contemplated hereby, except such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws,
and (iii) where the failure to obtain or make any such consent, waiver,
approval, order, authorization, registration, declaration or filing could not
reasonably be expected to have a Jenkon Material Adverse Effect.

         4.3     CAPITALIZATION.

                 (a)   As of the date of this Agreement, the authorized capital
stock of Jenkon consists of (i) 20,000,000 shares of Common Stock, par value
$.001 per share, of which 4,537,836 shares were issued and outstanding as of
December 13, 1999, (ii) 1,500,000 shares of Series A Preferred Stock, par value
$.001 per share, none of which are issued and outstanding. In addition (i)
150,000 shares of Jenkon Common Stock are subject to issuance upon the exercise
of warrants issued the underwriters of Jenkon's initial public offering in
1998, (ii) 117,321 shares of Jenkon Common Stock are subject to issuance upon
the exercise of warrants issued in connection with a 1998 private placement,
(iii) 161,760 shares of Jenkon Common Stock are subject to issuance upon the
exercise of warrants issued in connection with


                                       20

<PAGE>


a 1996 private placement, and (iv) 1,000,000 shares are reserved for issuance
upon the exercise of options granted under Jenkon's Stock Option Plan of which
options to purchase approximately 700,000 shares of Jenkon Common Stock are
currently outstanding. All of the outstanding shares of Jenkon Common Stock are
validly issued, fully paid, nonassessable and free of preemptive rights.

                 (b)   The shares of Jenkon Common Stock, Series B Preferred
and Series C Preferred to be issued pursuant to the Stock Exchange, when
issued, will be duly authorized, validly issued, fully paid and non-assessable,
and free of preemptive rights.

         4.4     SEC DOCUMENTS; JENKON FINANCIAL STATEMENTS. Jenkon has
furnished or made available to the Company true and complete copies of all
reports or registration statements filed by it with the United States
Securities and Exchange Commission (the "SEC") under the Securities Exchange
Act of 1934 (the "EXCHANGE ACT") for all periods since the date of its initial
public offering, all in the form so filed (all of the foregoing being
collectively referred to as the "SEC DOCUMENTS"). As of their respective filing
dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a document
subsequently filed with the SEC. Jenkon has filed all SEC Documents required to
be filed under the Securities Act or Exchange Act, as the case may be. The
financial statements of Jenkon, including the notes thereto, included in the
SEC Documents (the "JENKON FINANCIAL STATEMENTS") comply as to form in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with US GAAP consistently applied (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-QSB of the SEC) and present fairly the consolidated
financial position of Jenkon at the dates thereof and the consolidated results
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal audit adjustments). There has been no
change in Jenkon accounting policies except as described in the notes to the
Jenkon Financial Statements.

         4.5     NO MATERIAL ADVERSE CHANGE. Since the date of the balance sheet
included in Jenkon's most recently filed report on Form 10-QSB or Form 10-KSB,
Jenkon has conducted its business in the ordinary course and there has not
occurred: (a) any amendment or change in the Certificate of Incorporation or
Bylaws of Jenkon (other than any amendment to the Certificate of Incorporation
necessary to give effect to the Certificates of Designation, Preferences and
Rights for the Series B Preferred and the Series C Preferred), or (b) any
damage to, destruction or loss of any assets of the Jenkon (whether or not
covered by insurance) that materially and adversely affects the financial
condition or business of Jenkon. Jenkon has incurred significant losses in
fiscal the fiscal year ended June 30, 1999 and the first quarter of fiscal 2000
and expects to report significant losses in at least the second and third


                                       21

<PAGE>


quarters of fiscal 2000. In addition, absent the proceeds of the private
placement contemplated by Section 7.1 of this Agreement, Jenkon lacks the
financial resources to continue its operations significantly beyond December 15,
1999. Accordingly, Jenkon makes no representation or warranty to the
Stockholders as to its current financial condition. The Stockholders acknowledge
and agree that, notwithstanding anything to the contrary contained in this
Agreement, any deterioration of Jenkon's financial condition or prospects, or
any claims resulting from such financial deterioration (including the initiation
of any delisting proceedings by the Nasdaq Stock Market), shall not be deemed a
breach of any representation and warranty under this Agreement.

         4.6     LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Jenkon has received any
notice of assertion against Jenkon, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.

         4.7     DISCLOSURE. No statement by Jenkon contained in this Agreement
and the exhibits attached hereto and any written statement or certificate
furnished or to be furnished to the Company pursuant hereto or in connection
with the transactions contemplated hereby (when read together) contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.


                                   ARTICLE V.

                        CONDUCT PRIOR TO THE CLOSING DATE

         5.1     CONDUCT OF BUSINESS OF THE COMPANY. During the period, if any,
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Closing Date, the Company agrees (except
to the extent that Jenkon shall otherwise consent in writing or to the extent
set forth in SCHEDULE 5.1) to carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to
pay its debts and Taxes when due, to pay or perform other obligations when due,
and, to the extent consistent with such business, to use all reasonable efforts
consistent with past practice and policies to preserve intact its present
business organization, keep available the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it, all with the goal of preserving unimpaired its goodwill and ongoing
businesses at the Closing Date. The Company shall promptly notify Jenkon of any
event or occurrence or emergency not in the ordinary course of its business,
and any material event involving or adversely affecting the Company or its
business. Except as expressly contemplated by this Agreement, the Company shall
not, without the prior written consent of Jenkon:


                                       22

<PAGE>


                           (a) Enter into any commitment, activity or
transaction not in the ordinary course of business.

                           (b) Transfer to any person or entity any rights to
any Company Intellectual Property other than in the ordinary course of
business;

                           (c) Amend or otherwise modify (or agree to do so),
except in the ordinary course of business, or violate the terms of, any
Contract;

                           (d) Commence or settle any litigation or any
dispute resolution process;

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

                           (f) Except for the issuance of shares of capital
stock upon exercise or conversion of presently outstanding options or
warrants, issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, any shares of capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire,
or other agreements or commitments of any character obligating it to issue
any such shares or other convertible securities;

                           (g) Cause or permit any amendments to its Articles
of Incorporation or Bylaws, or equivalent organizational documents;

                           (h) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company;

                           (i) Sell, lease, license or otherwise dispose of
any of its properties or assets, except in the ordinary course of business
and consistent with past practice;

                           (j) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or purchase or guarantee any debt securities of others or amend the
terms of any outstanding loan agreement;

                           (k) Grant any severance or termination pay to any
director, officer,

                                       23
<PAGE>


employee or consultant, except payments made pursuant to written agreements
outstanding on the date hereof (which such agreements are disclosed on
SCHEDULE 5.1(k)) or otherwise hire employees other than hirings in the
ordinary course of business;

                           (l) Adopt or amend any employee benefit plan,
program, policy or arrangement (including without limitation any amendment
which accelerates vesting under any such employee benefit plan, program,
policy or arrangement), or enter into any employment contract, extend any
employment offer, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the
salaries or wage rates of its employees;

                           (m) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business and
consistent with past practice;

                           (n) Pay, discharge or satisfy, in an amount in
excess of $25,000, in any one case, or $50,000, in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business of liabilities reflected or reserved
against in the Company Financials;

                           (o) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;

                           (p) Cancel, materially amend or renew any
insurance policy other than in the ordinary course of business; or

                           (q) Take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.1(a) through (p) above, or
any other action that would prevent the Company from performing or cause the
Company not to perform its covenants hereunder.

                  5.2      NO SOLICITATION.

                           (a) Until the earlier of the Closing Date and the
date of termination of this Agreement pursuant to the provisions of Section
10.1 hereof, the Company will not (nor will the Company permit any of the
Company's officers, directors, shareholders, agents, representatives or
affiliates to) directly or indirectly, take any of the following actions with
any party other than Jenkon and its designees: (i) solicit, initiate,
entertain, or encourage any proposals or offers from, or conduct discussions
with or engage in negotiations with, any person relating to any possible
acquisition of the Company (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise), any material portion of its capital
stock or assets or any equity interest in the Company, (ii) provide
information with respect to it to any person, other than Jenkon and its
affiliates, relating to, or otherwise cooperate with,

                                       24
<PAGE>


facilitate or encourage any effort or attempt by any such person with regard
to, any possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise), any material
portion of its capital stock or assets or any equity interest in the Company,
(iii) enter into an agreement with any person, other than Jenkon and its
affiliates, providing for the acquisition of the Company (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its capital stock or assets or any equity interest in the
Company, or (iv) make or authorize any statement, recommendation or
solicitation in support of any possible acquisition of the Company (whether
by way of merger, purchase of capital stock, purchase of assets or
otherwise), any material portion of its capital stock or assets or any equity
interest in the Company by any person, other than by Jenkon and its
affiliates. The Company shall immediately cease and cause to be terminated
any such contacts or negotiations with third parties relating to any such
transaction or proposed transaction.

                           (b) In addition to the foregoing, if the Company
receives prior to the Closing Date or the termination of this Agreement any
offer or proposal or request, directly or indirectly, relating to any of the
above, the Company shall immediately notify Jenkon thereof, including
information as to the identity of the offeror or the party making any such
offer or proposal and the specific terms of such offer or proposal, as the
case may be, and such other information related thereto as Jenkon may
reasonably request. Except as contemplated by this Agreement, disclosure by
the Company of the terms of this Agreement (other than the prohibition of
this section) shall be deemed to be a violation of this Section 5.2.

                           (c) Until the earlier of the Closing Date and the
date of termination of this Agreement pursuant to the provisions of Section
10.1 hereof, Jenkon will not (nor will Jenkon permit any of its officers,
directors, shareholders, agents, representatives or affiliates to) directly
or indirectly, take any of the following actions with any party other than
the Company: (i) solicit, initiate, entertain, or encourage any proposals or
offers from, or conduct discussions with or engage in negotiations with, any
person relating to any possible acquisition of Jenkon (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise), any
material portion of its capital stock or assets or any equity interest in the
Jenkon, (ii) provide information with respect to it to any person, other than
the Company, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any
possible acquisition of Jenkon (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise), any material portion of its capital
stock or assets or any equity interest in Jenkon, (iii) enter into an
agreement with any person, other than the Company, providing for the
acquisition of the Jenkon (whether by way of merger, purchase of capital
stock, purchase of assets or otherwise), any material portion of its capital
stock or assets or any equity interest in Jenkon, or (iv) make or authorize
any statement, recommendation or solicitation in support of any possible
acquisition of Jenkon (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any material portion of its capital stock
or assets or any equity interest in Jenkon by any person, other than by the
Company. Notwithstanding the foregoing, the provisions of this Section 5.2

                                       25
<PAGE>


shall not prohibit or restrict any shareholder of Jenkon from voting such
shareholder's shares in favor of a business combination of Jenkon with any
party.

                  5.3 CONDUCT OF BUSINESS OF JENKON. During the period, if
any, from the date of this Agreement and continuing until the earlier of the
termination of this Agreement and the Closing Date, Jenkon agrees (except to
the extent that the Company shall otherwise consent in writing) to carry on
its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted, to pay its debts and Taxes when due, to
pay or perform other obligations when due, and, to the extent consistent with
such business, to use all reasonable efforts consistent with past practice
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Closing
Date. Jenkon shall promptly notify the Company of any event or occurrence or
emergency not in the ordinary course of its business, and any material event
involving or adversely affecting Jenkon or its business. Except as expressly
contemplated by this Agreement, Jenkon shall not, without the prior written
consent of the Company:

                           (a) Enter into any commitment, activity or
transaction not in the ordinary course of business.

                           (b) Transfer to any person or entity any rights to
any Intellectual Property of Jenkon other than in the ordinary course of
business;

                           (c) Amend or otherwise modify (or agree to do so),
except in the ordinary course of business, or violate the terms of, any
Contract of Jenkon;

                           (d) Commence or settle any litigation or any
dispute resolution process;

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

                           (f) Except for the issuance of shares of capital
stock upon exercise or conversion of presently outstanding options or
warrants (other than issuance of options under Jenkon's existing stock option
plan, securities issued in connection with the private placement described in
Section 7.1 hereof, and the issuance of 50,000 shares to David Edwards in
connection with a separation agreement to be executed at or after the
Closing),

                                       26
<PAGE>


issue, grant, deliver or sell or authorize or propose the issuance, grant,
delivery or sale of, any shares of capital stock or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any such
shares or other convertible securities;

                           (g) Cause or permit any amendments to its Articles
of Incorporation or Bylaws, or equivalent organizational documents except as
contemplated by this Agreement;

                           (h) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of Jenkon;

                           (i) Sell, lease, license or otherwise dispose of
any of its properties or assets, except in the ordinary course of business
and consistent with past practice;

                           (j) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of
Jenkon or purchase or guarantee any debt securities of others or amend the
terms of any outstanding loan agreement other than debt incurred in
connection with the private placement described in Section 7.1;

                           (k) Grant any severance or termination pay to any
director, officer, employee or consultant, except payments made pursuant to
written agreements outstanding on the date hereof or pursuant to a separation
agreement with David Edwards the terms of which have been previously reviewed
by the Company (and which may be documented following the Closing) and
includes the issuance of 50,000 shares of Common Stock of Jenkon, the payment
of $50,000 (such $50,000 to be paid only fro the proceeds of the Financing
(as defined below) allocated to Jenkon Washington pursuant to Section 7.1
below) as well as the forgiveness of certain indebtedness of David Edwards to
the Company incurred in the first quarter of fiscal 1999, or otherwise hire
employees other than hirings in the ordinary course of business;

                           (l) Adopt or amend any employee benefit plan,
program, policy or arrangement (including without limitation any amendment
which accelerates vesting under any such employee benefit plan, program,
policy or arrangement), or enter into any employment contract, extend any
employment offer, pay or agree to pay any special bonus or special
remuneration to any director, employee or consultant, or increase the
salaries or wage rates of its employees;

                           (m) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business and
consistent with past practice;

                                       27
<PAGE>


                           (n) Pay, discharge or satisfy, in an amount in
excess of $25,000, in any one case, or $50,000, in the aggregate, any claim,
liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business of liabilities reflected or reserved
against in Jenkon's financial statements or incurred in the ordinary course;

                           (o) Fail to pay or otherwise satisfy its monetary
obligations as they become due, except such as are being contested in good
faith;

                           (p) Cancel, materially amend or renew any
insurance policy other than in the ordinary course of business; or

                           (q) Take, or agree in writing or otherwise to
take, any of the actions described in Sections 5.1(a) through (p) above, or
any other action that would prevent the Company from performing or cause
Jenkon not to perform its covenants hereunder.

                                   ARTICLE VI.

                              ADDITIONAL AGREEMENTS

                  6.1  ADDITIONAL ASSURANCES. At the request of Jenkon, the
Company and the Stockholders shall execute and deliver to Jenkon such
instruments and do and perform such acts and things as Jenkon may deem
reasonably necessary or desirable for complying with all applicable
securities laws and state corporate law in connection with the Exchange
Transaction or any registrations contemplated by Section 6.2 to this
Agreement.

                  6.2  REGISTRATION RIGHTS.

                           (a) REGISTRATION STATEMENT ON FORM SB-2/S-3.
Jenkon shall use its commercially reasonable efforts to file, at least
fifteen (15) days prior to the date of the meeting of Jenkon stockholders at
which Stockholder Approval is proposed to be obtained, a Registration
Statement on Form SB-2 or S-3 with the SEC covering the resale of not less
than 6,750,000 shares of Jenkon Common Stock issued to the Stockholders at
the Closing or issuable upon conversion of Preferred Stock. Such registration
may also include shares of Jenkon Common Stock issuable upon conversion of
debt issued in private placement described in Section 7.1 of this Agreement.
The allocation of such registration rights among the Stockholders shall be as
set forth in SCHEDULE 6.2(a) to this Agreement. As a condition to
registration of any Jenkon Common Stock on behalf of a Stockholder, the
Stockholder shall provide such information and complete such questionnaires
as the Jenkon may reasonably require in order to comply with applicable state
and federal securities laws. In addition, each Stockholder shall agree to
customary indemnification of Jenkon and its officers, directors, agents and
affiliates with respect to any information provided by such Stockholder.

                                       28
<PAGE>


                           (b) DEMAND REGISTRATION RIGHTS. At any time
commencing one hundred eighty (180) days following the Closing Date and
ending two years following the Closing Date, upon the written request of
holders ("HOLDERS") of more than 50% of the "Registerable Securities" (as
defined below) (the "INITIATING HOLDERS") that Jenkon file a registration
statement or similar document under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), then Jenkon shall promptly notify all other Holders
of such request and shall use its best efforts to cause all Registerable
Securities that such Holders have requested to be included in such
registration statement within 15 days after receipt of such written notice,
to be registered under the Securities Act. Jenkon shall be obligated to
effect not more than one registration pursuant to these demand registration
rights. "REGISTERABLE SECURITIES" as used herein means (i) shares of Jenkon
Common Stock issued pursuant to this Agreement, (ii) shares of Jenkon Common
Stock issued or issuable upon conversion of shares of Series B Preferred or
Series C Preferred, which constitute "restricted securities" as defined in
Regulation D of the Securities Act and which have not already been registered
pursuant to Section 6.2(a) above or otherwise registered and sold to the
public.

                           (c) PIGGY-BACK REGISTRATION RIGHTS. If, at any
time or from time to time, Jenkon shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their respective demand registration rights, other than a
registration (i) relating solely to employee benefit plans on Form S-8 or
similar forms which may be promulgated in the future, (ii) a registration
pursuant to Section 6.2(a) above, (iii) registration of no more than 125,000
shares of Jenkon Common Stock issuable upon exercise of warrants issued in
connection with a private placement of notes and warrants by Jenkon in June
1998, or (iv) a registration on Form S-4 or similar forms which may be
promulgated in the future relating solely to a Securities and Exchange
Commission Rule 145 or similar transaction, Jenkon will (1) promptly give to
each Holder written notice thereof and (2) include in such registration (and
any related qualification under Blue-Sky laws or other compliance), and in
any underwriting involved therein, all Registerable Securities of such
Holders as specified in a written request or requests made within 15 days
after receipt of such written notice from Jenkon.

                           (d) CUT-BACKS. Notwithstanding anything to the
contrary contained in this Section 6.2, in the event of an underwritten
offering of securities by Jenkon, if the underwriter shall advise Jenkon in
writing that marketing factors (including, without limitation, an adverse
effect on the per share offering price) require a limitation of the number of
shares to be underwritten, then Jenkon shall so advise all Holders of
Registerable Securities that have requested and are entitled to registration
in accordance with the provisions of Section 6.2(c). In such event, the
number of shares of Registerable Securities that may be included in the
registration and underwriting shall be allocated pro rata among the Holders
of Registerable Securities whose shares would have been registered in
proportion, as nearly as practicable, to the respective amounts of
Registerable Securities held by such Holders at the time of filing of the
registration statement. No Registerable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.

                                       29
<PAGE>

                           (e) EXPENSES OF REGISTRATION. All registration
expenses incurred in connection with any registration, qualification or
compliance pursuant to Paragraphs 6.2 (a), (b) and (c), exclusive of the fees
and expenses of any special counsel to the selling Holders as well as any
underwriter discounts or non-accountable expense allowances payable with respect
to any Registerable Securities sold, shall be borne by Jenkon.

                           (f) REGISTRATION PROCEDURES. In the case of each
registration, qualification or compliance effected by Jenkon pursuant to this
Section 6.2, Jenkon will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense Jenkon will, among other things, (i) keep
such registration, qualification or compliance effective for a period of
three years with respect to or until the Holder or Holders have completed the
distribution described in the registration relating thereto, whichever first
occurs, and (ii) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.

                           (g) TERMINATION OF REGISTRATION RIGHTS. The
registration rights granted pursuant to this Section 6.2 shall be
non-transferrable and shall automatically terminate with respect to any
Registerable Securities upon the sale, transfer or assignment of such
Registerable Securities other than sales, transfers or assignments made by
the Holder (i) to wholly-owned affiliates of the Holder or shareholders,
partners or other equity owners of such Holder, (ii) to members of the
Holder's immediate family, (iii) to trusts created for estate planning
purposes for which the beneficiaries are the Holder and/or members of the
Holder's immediate family, or (iv) in accordance with applicable state and
federal securities laws as evidenced by an opinion of counsel to such effect
in a form and from counsel reasonably acceptable to Jenkon. In addition,
notwithstanding anything to the contrary set forth in this Section 6.2, the
registration rights granted in this Section 6.2 shall terminate with respect
to any Registerable Securities at such time as such Registerable Securities
(which may be less than all Registerable Securities then outstanding) may be
legally sold by the Holder in the public market without Rule 144 volume
limitations.

                           (h) INDEMNIFICATION. Jenkon shall indemnify and
hold harmless each Holder of Registerable Securities from and against any and
all losses, claims, damages and liabilities caused by any untrue statement of
a material fact contained in any registration statement filed by Jenkon under
the Securities Act by reason of this Section 6.2, any post-effective
amendment to such registration statement, or any prospectus included therein,
or caused by any omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by
any such untrue statement or omission based upon information furnished or
required to be furnished in writing to Jenkon by a Holder (or the authorized
representatives or agents of the Holder) expressly for use therein, which
indemnification shall include each person, if any, who controls the Holder
within the meaning

                                       30

<PAGE>

of the Securities Act and each officer, director, employee and agent of the
Holder; provided, however, that Jenkon shall not be obligated to so indemnify
the Holder or any other person referred to above unless the Holder or other
person, as the case may be, shall at the same time indemnify Jenkon, its
directors, each officer signing the registration statement and each person,
if any, who controls Jenkon within the meaning of the Securities Act, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement of a material fact contained in any registration statement
or any prospectus required to be filed or furnished in connection with such
public offering or caused any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or omission based upon information furnished in
writing to Jenkon by the Holder expressly for use therein.

                           If for any reason the indemnification provided for
in the preceding paragraph is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and
the indemnifying party, as well as any other relevant equitable
considerations.

                  6.3 LOCK-UP. Notwithstanding anything to the contrary
herein, the Stockholders agree to a lock-up of their Jenkon Common Stock
(including Common Stock into which Series B Preferred and Series C Preferred
is convertible), but not including the 6,750,000 shares referred to in
Section 6.2(a), for 12 months except (i) for sales permitted by a majority of
the disinterested members of Board of Directors of Jenkon, (ii) at any time
after the closing sales price of the common stock of Jenkon has been at least
$6 for 20 consecutive trading days, or (iii) at any time after Jenkon has
completed any public offering of its Common Stock for cash other than upon
the exercise of presently existing option or warrants or the financing
transaction contemplated by Section 7.1 of this Agreement. Any release from
the lock-up provisions described in this Agreement must be made pro rata
among all locked-up Stockholders.

                  6.4 CHAIRMAN OF THE BOARD. After Stockholder Approval has
been obtained or such earlier date as David Rubner indicates a willingness in
writing to accept appointment, it is contemplated that David Rubner shall be
appointed as the Chairman of the Board of Directors of Jenkon; provided that
Mr. Rubner will not be obligated to accept appointment as Chairman at any
time than Jenkon's Common Stock is not listed on the Nasdaq Stock Market or
are subject to any notification or proceeding relating to such delisting.

                  6.5 CANCELLATION OF INDEBTEDNESS. After the Closing Date,
Jenkon agrees to


                                       31

<PAGE>

use its best reasonable efforts to cause the cancellation of the personal
guaranties of officers, directors or Stockholders of the Company which have
been issued to bank lenders with respect to indebtedness of the Company.

                  6.6 ACCESS TO INFORMATION. Each party shall afford the
other and their accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Closing
Date to (a) all of its properties, books, contracts, commitments and records,
and (b) all other information concerning its business, properties and
personnel (subject to restrictions imposed by applicable law) as the others
may reasonably request, subject, in the case of Jenkon, to reasonable limits
on access to its technical and other nonpublic information. No information or
knowledge obtained in any investigation pursuant to this Section 6.6 shall
affect or be deemed to modify any representation or warranty contained herein
or the conditions of the parties to consummate the Stock Exchange. The
parties will enter into a confidentiality agreement for the confidential
treatment of the information exchanged during the due diligence process.

                  6.7 CONFIDENTIALITY. Each of the parties hereto hereby
agrees to keep such information or knowledge obtained in any investigation
pursuant to Section 6.6, or pursuant to the negotiation and execution of this
Agreement or the effectuation of the transactions contemplated hereby,
confidential, and also agrees not to use such knowledge or information;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession on a non-confidential basis prior to the disclosure thereof by the
other party, (b) is generally known to the public and did not become so known
through any violation of law, (c) became known to the public through no fault
of such party, (d) is later lawfully acquired by such party from other
sources, (e) is required to be disclosed by order of court or government
agency with subpoena powers or (f) which is disclosed in the course of any
litigation between any of the parties hereto.

                  6.8 FAIRNESS OPINION. At its option, the Company shall, at
its expense, obtain a fairness opinion relating to the Stock Exchange.

                  6.9 EXPENSES. If the Stock Exchange is not consummated, all
fees and expenses incurred in connection with the Stock Exchange including,
without limitation, all legal, accounting, financial advisory, consulting and
all other fees and expenses of third parties ("THIRD PARTY EXPENSES")
incurred by a party in connection with the negotiation and effectuation of
the terms and conditions of this Agreement and the transactions contemplated
hereby shall be the obligation of the respective party incurring such fees
and expenses.

                  6.10 PUBLIC DISCLOSURE. Unless otherwise required by law
(including, without limitation, federal and state securities laws) or, as to
Jenkon, by the rules and regulations of The Nasdaq Stock Market Inc. prior to
the Closing Date, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement shall be made by any party hereto unless
approved by Jenkon and the Company prior to release, provided that such

                                       32

<PAGE>

approval shall not be unreasonably withheld or delayed.

                  6.11 CONSENTS. The Company shall use its commercially
reasonable efforts to obtain the consents, waivers and approvals of parties
to any Contract as may be required in connection with the Stock Exchange, or
for any such Contract to remain in full force and effect without limitation,
modification or alteration after the Closing Date so as to preserve all
rights of and benefits to the Company and Jenkon thereunder.

                  6.12 COMMERCIALLY REASONABLE EFFORTS. Subject to the terms
and conditions provided in this Agreement, each of the parties hereto shall
use its commercially reasonable efforts to ensure that its representations
and warranties remain true and correct in all material respects, and to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals, to effect
all necessary registrations and filings, and to remove any injunctions or
other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the
purpose of securing to the parties hereto the benefits contemplated by this
Agreement; provided that Jenkon shall not be required to agree to any
divestiture by Jenkon or the Company or any of Jenkon's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property
of Jenkon or its subsidiaries or affiliates or the Company or its affiliates,
or the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.

                  6.13 NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to Jenkon, and Jenkon shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event, the occurrence
or non-occurrence of which is likely to cause any representation or warranty
of the Company and Jenkon, respectively, contained in this Agreement to be
untrue or inaccurate at or prior to the Closing Date and (ii) any failure of
the Company or Jenkon, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.13 shall not limit or otherwise affect any remedies available
to the party receiving such notice.

                  6.14 NASDAQ SMALL CAP LISTING. Jenkon shall authorize for
listing on The Nasdaq Small Cap Market the shares of Jenkon Common Stock
issuable, and those required to be reserved for issuance, in connection with
the Stock Exchange, promptly following the Closing and in accordance with the
rules of The Nasdaq Small Cap Market.

                  6.15 COMPANY'S AUDITORS. The Company will use its
commercially reasonable efforts to cause its management and its independent
auditors to facilitate on a timely basis (i) the preparation of financial
statements (including pro forma financial statements if

                                       33

<PAGE>

required) as required by Jenkon to comply with applicable SEC regulations,
(ii) the review ofthe Company's audit work papers for up to the past three
years, including interim periods and access for review or examination of
selected interim financial statements and data, and (iii) the delivery of
such representations from the Company's independent accountants as may be
reasonably requested by Jenkon or its accountants.

                  6.16 NO ADVICE AS TO TAX EFFECTS ON STOCKHOLDERS.
Notwithstanding anything to the contrary contained in this Agreement or any
document, certificate, transaction or correspondance contemplated hereby,
neither Jenkon, its officer, directors, stockholders, attorneys or accounts
has advised the Company or any Stockholder or has made any representations or
warranties to the Company or the Stockholders with respect to the tax effects
of the Stock Exchange on the Stockholders. The Company and the Stockholders
have been advised by Jenkon and its counsel as to the possibility that the
Stock Exchange would a taxable transaction which could result in significant
tax liabilities to the Stockholders. The Company and the Stockholders
acknowledge that they have had the opportunity to consult with their own tax
counsel with respect to the tax effects of the transaction under applicable
United States and Israel tax laws.

                  6.17 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each
party hereto, at the request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
as may be reasonably necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.

                  6.18 MEETING OF JENKON STOCKHOLDERS. Promptly following the
Closing Date, Jenkon agrees to prepare and file with the SEC all requisite
proxy materials and hold a special or annual meeting of stockholders to
consider (i) conversion of the Series B and Series C Preferred Stock into
Common Stock, (ii) conversion of any convertible securities issued in
connection with the private placement described in Section 7.1 into Common
Stock, (iii) an amendment of Jenkon's Certificate of Incorporation to
increase the number of authorized shares of Common Stock, and (iv) such other
matters as the Board of Directors of Jenkon shall determine in its sole
discretion. The Board of Directors of Jenkon shall recommend approval of all
such shareholder action items.

                                  ARTICLE VII.

                     CONDITIONS TO OBLIGATIONS OF EACH PARTY

                  The respective obligations of each party to this Agreement
to effect the transactions contemplated herein shall be subject to the
fulfillment, at or prior to the Closing Date, of all the conditions set forth
in this Article VII.

                  7.1 FINANCING.

                                       34

<PAGE>

                           (a) Jenkon shall have raised gross proceeds (after
deduction of commissions and non-accountable expense allowances payable) of at
least $4,500,000 through the offering of unsecured convertible debt described in
the PPM (the "FINANCING").

                           (b) The parties hereto agree that the first
$500,000 of net proceeds of the Financing have been released from escrow
prior to the Closing Date and were allocated to the current business
operations of Jenkon. The first $500,000 of additional net proceeds from the
Financing will be allocated to the Company (as a separate operating division
of Jenkon). Thereafter, any additional proceeds of the Financing will be
divided equally between Jenkon International, Inc., a Washington corporation
(as a separate operating division of Jenkon) ("JENKON WASHINGTON") and the
Company (as a separate operating division of Jenkon). The parties agree that
(i) funds allocated to Jenkon Washington will not be utilized for the
repayment of indebtedness or other obligations of the Company or for any
purposes other than the operation of Jenkon Washington's business, and (ii)
funds allocated to the Company's operations will not be utilized for the
repayment of indebtedness or other obligations of Jenkon and that such
proceeds will be applied substantially as described in SCHEDULE 7.1 attached
hereto. All legal fees of Jenkon's counsel relating to this Agreement and the
transactions and registrations contemplated thereby shall be paid out of the
funds designated for Jenkon Washington. The parties hereto agree that the
proceeds of the Financing allocable to the Company shall be sent by wire
transfer to a trust account of the Stockholder Agent, as representative of
the Company.

                  7.2 GOVERNMENTAL APPROVALS. All approvals of governments
and governmental agencies necessary to consummate the transactions hereunder
shall have been received.

                  7.3 CONSENTS. All consents, waivers and approvals of
parties to any Contract as may be required in connection with the Stock
Exchange, or for any such Contract to remain in full force and effect without
limitation, modification or alteration after the Closing Date so as to
preserve all rights of and benefits to the Company and Jenkon thereunder
shall have been received.

                  7.4 NO LITIGATION. Neither the Company nor Jenkon shall be
a party to any litigation that would reasonably be expected to have a
Material Adverse Effect on either the Company or Jenkon, other than pending
or threatened litigation currently disclosed in Jenkon's filings with the SEC.

                  7.5 NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition preventing the consummation of the Stock Exchange shall be in
effect.

                  7.6 PESSIE GOLDENBERG. Pessie Goldenberg shall have entered
into an

                                       35

<PAGE>

employment agreement with Jenkon on terms acceptable to both Mr. Goldenberg
and Jenkon.

                                  ARTICLE VIII.

                  CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDERS

                  The obligation of each Stockholder to exchange the
Stockholder's Shares for Jenkon Common Stock under this Agreement and to
otherwise effect the transactions contemplated herein are, at the option of
each Stockholder, subject to the satisfaction, at or prior to the Closing
Date, of all the conditions set forth in this Article VIII. Any Stockholder
may, as to such Stockholder, waive any or all of these conditions as a whole
or in part without prior notice, provided, however, that such a waiver of any
condition shall not constitute a waiver by such Stockholder of any of its
other rights or remedies, at law or in equity, if Jenkon should be in default
of any of its representations, warranties or covenants under this Agreement.

                  8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Jenkon contained in this Agreement shall be true and correct in
all material respects (except for those representations and warranties which
are by their terms qualified by a statement of materiality, which
representations and warranties shall be true and correct in all respects) on
and as of the Closing Date, except for changes contemplated by this Agreement
and except for those representations and warranties which address matters
only as of a particular date (which shall remain true and correct as of such
date), with the same force and effect as if made on and as of the Closing
Date, except, in all such cases, for such breaches, inaccuracies or omissions
of such representations and warranties which have neither had nor reasonably
would be expected to have a material adverse effect on Jenkon; and the
Company shall have received a certificate to such effect signed on behalf of
Jenkon by a duly authorized officer of Jenkon.

                  8.2 AGREEMENTS AND COVENANTS. Jenkon shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date, and the Company shall have received a certificate
to such effect signed by a duly authorized officer of Jenkon.

                  8.3 EMPLOYMENT AGREEMENTS. Jenkon Washington or any
operating subsidiary thereof shall have assumed the obligations of Jenkon
under the existing employment agreements between each of David Edwards and
Robert Cavitt, on the one hand, and Jenkon on the other hand.

                  8.4 NASDAQ LISTING. The Common Stock of Jenkon shall, at
the Closing, continue to be listed on the Nasdaq Small Cap Market and no
inquiry or proceeding by The Nasdaq Stock Market, Inc. shall then be in
progress for the possible delisting of such shares; provided, however, that
absent a final and unappealable delisting decision, notice from The

                                       36

<PAGE>

Nasdaq Stock Market, Inc. regarding Jenkon's possible delisting due to (i)
failure to have two independent directors, (ii) failure to maintain
sufficient net tangible assets, or (iii) the going concern qualification
contained in any financial statements of Jenkon shall not, in itself, be
deemed to be a violation of this condition of Closing. Jenkon has provided
the Stockholders Agent with a complete copy of all written correspondence
received from the Nasdaq Stock Market, Inc. regarding any possible delisting.

                  8.5 BOARD AUTHORIZATION. Jenkon shall have delivered to the
Company, reasonable evidence of approval by Jenkon's Board of Directors of
this Agreement and the transactions contemplated hereby.

                                   ARTICLE IX.

                       CONDITIONS TO OBLIGATIONS OF JENKON

                  The obligation of Jenkon to exchange Jenkon Common Stock
for each Stockholder's Shares under this Agreement and to otherwise effect
the transactions contemplated herein are subject to the satisfaction, at or
prior to the Closing Date, of all the conditions set forth below in this
Article IX. Jenkon may waive any or all of these conditions as a whole or in
part without prior notice, provided, however, that such waiver of any
condition shall not constitute a waiver by Jenkon of any of its other rights
or remedies, at law or in equity, if any of the Stockholders should be in
default of any of its representations, warranties or covenants under this
Agreement.

                  9.1 REPRESENTATIONS AND WARRANTIES AT SIGNING. The
representations and warranties of (i) the Company contained in this
Agreement, and (ii) by the Stockholders only as set forth in Article 3 or
EXHIBIT A hereto, shall have been true and correct in all material respects
(except for those representations and warranties which are by their terms
qualified by a standard of materiality, which representations and warranties
shall have been true and correct in all respects) as of the date of this
Agreement.

                  9.2 REPRESENTATIONS AND WARRANTIES AT CLOSING. The
representations and warranties of (i) the Company contained in this
Agreement, and (ii) the Stockholders only as set forth in Article 3 or
EXHIBIT A hereto, shall be true and correct in all material respects (except
for those representations and warranties which are by their terms qualified
by a standard of materiality, which representations and warranties shall be
true and correct in all respects) on and as of the Closing Date (without
regard to any updates to the Company's Disclosure Schedules, unless otherwise
agreed by Jenkon), except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as
of a particular date (which shall remain true and correct as of such date),
with the same force and effect as if made on and as of the Closing Date,
except, in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a materal adverse effect on the business,

                                       37

<PAGE>

financial condition, results of operations, assets (including intangible
assets), liabilities or prospects of the Company or Jenkon (hereinafter
referred to as a "MATERIAL ADVERSE EFFECT"); and Jenkon shall have received a
certificate to such effect signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company.

                  9.3 AGREEMENTS AND COVENANTS. The Company and Stockholders
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by
it or them on or prior to the Closing Date, except for non-performance of
such agreements and covenants which neither has, nor reasonably could be
expected to have, a Substantial Adverse Effect, and Jenkon shall have
received a certificate to such effect signed by a duly authorized officer of
the Company.

                  9.4 LEGAL OPINION. Jenkon shall each have received
customary written opinions from Israeli counsel to the Company, in a form and
substance reasonably satisfactory to Jenkon, as to, among other things, the
due authorization, execution and delivery of the Agreement by the
Stockholders and the Company and the enforceability of such Agreement and the
Stock Exchange.

                  9.5 REVIEW OF FINANCIAL STATEMENTS. Jenkon and its
accountants shall have completed their review of the Company Financials. The
historical audited financial statements must, in the opinion of the
accountants for Jenkon, be suitable or readily adaptable for incorporation in
the registration statements, prospectuses and annual reports to be filed by
Jenkon with the SEC under the Securities Act and the Exchange Act.

                  9.6 MATERIAL ADVERSE CHANGE. There shall not have occurred
any adverse change in the business, assets (including intangible assets),
liabilities, financial condition, results of operations or prospects of the
Company since the date of this Agreement having a Material Adverse Effect.

                  9.7 RESIGNATION OF DIRECTORS. The directors of the Company
in office immediately prior to the Closing Date other than Pessie Goldenberg
shall have resigned as directors of the Company effective immediately
following the Closing Date. Pessie Goldenberg shall continue as a director
and chief executive officer of the Company. To the extent permitted by
applicable law, promptly following the Closing, Pessie Goldenberg, the
Company and Jenkon shall cause a majority of the Board of Directors (or
equivalent governing body) of the Company to be current members of the Board
of Directors of Jenkon.

                                   ARTICLE X.

                                 INDEMNIFICATION

                  10.1 INDEMNIFICATION BY JENKON. Jenkon shall indemnify,
save and hold harmless each of the Company Parties and their respective
officers, directors, employees,

                                       38

<PAGE>

affiliates, accountants and attorneys, from and against any and all costs,
losses, liabilities, damages, lawsuits, deficiencies, claims and expenses
(whether or not arising out of third-party claims), including, without
limitation, interest, penalties, reasonable attorneys' fees and all amounts
paid in investigation, defense or settlement of any of the foregoing (herein,
"DAMAGES"), incurred in connection with or arising out of or resulting from
(i) any breach of any covenant of Jenkon pursuant to this Agreement; or (ii)
the inaccuracy of any representation, made by Jenkon in or pursuant to this
Agreement or any instrument delivered by Jenkon at the Closing.

                  10.2     INDEMNIFICATION BY COMPANY PARTIES.

                           (a) The Company shall indemnify and save and hold
harmless Jenkon and its employees, directors, officers, affiliates, agents,
accountants, and attorneys from and against any and all Damages incurred in
connection with or arising out of or resulting from any breach of any
covenant or warranty, or the inaccuracy of any representation, made by any
Company Party in or pursuant to this Agreement or any instrument delivered by
such Company Party at the Closing.

                           (b) The Stockholders shall, severally but not
jointly, indemnify and save and hold harmless Jenkon and its employees,
directors, officers, affiliates, agents, accountants, and attorneys from and
against any and all Damages incurred in connection with or arising out of or
resulting from any breach of any covenant or warranty, or the inaccuracy of
any representation, made by such Stockholder in Article 3 or EXHIBIT A of
this Agreement.

                  10.3 DEFENSE OF CLAIMS. If a claim for Damages is to be
made by a party entitled to indemnification hereunder against the
indemnifying party, the party entitled to such indemnification shall give
written notice (the "CLAIM NOTICE") to the indemnifying party as soon as
practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Article X. The Claim Notice shall
set forth, with reasonable specificity, the facts, conditions, or events
which may give rise to Damages for which indemnification may be sought under
this Article X. If any lawsuit or enforcement action is filed against any
party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as practicable (and in
any event within thirty (30) days after the service of the citation or
summons); provided, that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except to the
extent that the indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall acknowledge in
writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, the indemnifying party shall be entitled, if it so elects,
to take control of the defense and investigation of such lawsuit or action
and to employ and engage attorneys of its own choice to handle and defend the
same, at the indemnifying party's cost, risk and expense provided that the
indemnifying party and its counsel shall proceed with

                                       39

<PAGE>

diligence and in good faith with respect thereto. The indemnified party shall
cooperate in all reasonable aspects with the indemnifying party and such
attorneys in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom; provided, however, that the indemnified
party may, at its own cost, participate in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom.

                  10.4 LIMITATIONS ON INDEMNIFICATIONS. All representations
and warranties made by the parties herein or in any instrument or document
furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto and
shall expire on the first anniversary of the Closing Date, and shall no
longer be of any force or effect and no claim may be made thereafter or with
respect thereto, forever, except (i) as to any matter as to which a claim is
submitted in writing to the indemnifying party prior to such second
anniversary and identified as a claim for indemnification pursuant to this
Agreement, (ii) as to any matter which is based upon willful fraud by the
indemnifying party, with respect to which the representations and warranties
set forth in this Agreement shall expire only upon expiration of the
applicable statute of limitations, and (iii) with respect to any breach of
the representations and warranties Sections 2.3, 2.9, 3.1, 3.2 hereof, with
respect to which the representations and warranties set forth in this
Agreement shall expire upon expiration of the applicable statute of
limitations for claims against the indemnified party. The term "Damages" as
used in Article X does not include consequential damages to the party
requesting indemnification.

                  10.5 EXCLUSIVE REMEDIES. After the Closing, except in
respect of any common law fraud or willful misconduct of any party hereto and
any equitable remedies available to enforce the terms of this Agreement, the
indemnities set forth in this Article XI shall be the exclusive remedies of
the parties hereto for any misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of any covenant or agreement
contained in this Agreement, and the parties shall not be entitled to a
rescission of this Agreement or to any further rights or claims of any nature
whatsoever in respect thereof, all of which the parties hereto hereby waive.

                                   ARTICLE XI.

                        TERMINATION, AMENDMENT AND WAIVER

                  11.1 TERMINATION. Subject to the provisions of Sections
11.2 and 11.3 below, this Agreement may be terminated and the Stock Exchange
abandoned at any time prior to the Closing Date:

                           (a) by mutual written consent of the Stockholders
and Jenkon;

                           (b) by Jenkon or the Company if: (i) the Closing
Time has not occurred before 11:59 p.m. (Israel time) on December 31, 1999
(provided that the right to

                                       40

<PAGE>

terminate this Agreement under this clause 11.1(b)(i) shall not be available
to any party whose willful failure to fulfill any obligation hereunder has
been the primary cause of, or resulted in, the failure of the Closing to
occur on or before such date); (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Stock Exchange; or (iii) there shall be any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Stock
Exchange by any governmental entity that would make consummation of the Stock
Exchange illegal;

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

                           (d) by Jenkon if it is not in material breach of
its obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of the Company and (i) such breach has not been cured within ten
(10) business days after written notice to the Company (provided that, no
cure period shall be required for a breach which by its nature cannot be
cured), and (ii) as a result of such breach the conditions set forth in
Section 9.1, 9.2 or 9.3, as the case may be, would not then be satisfied;

                           (e) by the Company if it is not in material breach
of its obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of Jenkon and (i) such breach has not been cured within ten (10)
business days after written notice to Jenkon (provided that, no cure period
shall be required for a breach which by its nature cannot be cured), and (ii)
as a result of such breach the conditions set forth in Section 8.1 or 8.2, as
the case may be, would not then be satisfied.

                  Where action is taken to terminate this Agreement pursuant
to this Section 10.1, it shall be sufficient for such action to be authorized
by the Board of Directors, with respect to Jenkon, or the Stockholders
holding a majority of the voting capital stock of the Company, with respect
to the Company.

                  11.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 11.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Jenkon, the Company, or their respective officers, directors or stockholders,
provided that each party shall remain liable for any breaches of this
Agreement prior to its termination; and provided further that, the provisions
of Articles X, XI and XII of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.

                                       41

<PAGE>


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

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

                                  ARTICLE XII.

                                 MISCELLANEOUS

                  12.1     SURVIVAL OR REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. All representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Closing.

                  12.2     NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or by commercial delivery service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):

                  (a)      If to Jenkon, addressed to:

                           Jenkon International, Inc.
                           7600 NE 41st Street, Suite 300
                           Vancouver, WA 98662
                           Attention: President
                           Fax: (360) 816-2823

                           With copies to:

                           Jeffer, Mangels, Butler & Marmaro LLP
                           2121 Avenue of the Stars, 10th Floor
                           Los Angeles, California 90067
                           Attn.: Robert M. Steinberg
                           Facsimile No.: (310) 203-0567


                                       42
<PAGE>


                  (b)      If to the Company, addressed to:

                           Multimedia K.I.D. -- Intelligence in Education Ltd.
                           23 Haluzathapardesanut Street
                           Petah Tikva, Israel

                           Attention: Pessie Goldenberg

                           With copies to:

                           The Law Offices of Oscar Folger
                           521 Fifth Avenue
                           New York, New York 10175
                           Attention: Oscar Folger
                           Fax: (212) 697-7833

                  (c)      If to any Stockholder:

                           To the address set forth under the Stockholder's
                           name on EXHIBIT A attached hereto or to such other
                           address or person as any party shall have last
                           designated by such notice to the other party
                           hereto with a copy to the Stockholders Agent set
                           forth in (b) above.

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

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

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

                                       43
<PAGE>


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

                  12.7     OTHER REMEDIES. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of
any one remedy will not preclude the exercise of any other remedy.

                  12.8     GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each of the parties hereto agrees
that process may be served upon them in any manner authorized by the laws of
the State of New York for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction
and such process.

                  12.9     ARBITRATION. As to any disputes or controversies
arising out of, relating to, or in connection with the Agreement:

                           (a) The parties shall attempt in good faith to agree
upon the rights of the respective parties with respect to any dispute or
controversy arising out of, relating to, or in connection with this Agreement or
the interpretation, validity, construction, performance, breach or complete
termination thereof. In the event that no such agreement can be reached, any
such dispute or controversy shall be submitted to arbitration in accordance with
the rules of the American Arbitration Association, as then in effect.

                           (b) Judgment upon any award rendered by the
arbitrator may be entered in any court having jurisdiction. Any such
arbitration shall be held in Vancouver, Washington. Each of the parties to
this Agreement hereby irrevocably submits to the jurisdiction of the
arbitrator in Vancouver, Washington and waives any defense in an arbitration
based upon any claim that such party is not subject personally to the
jurisdiction of such arbitrator, that such arbitration is brought in an
inconvenient forum or that such venue is improper. The arbitral award shall
be in writing and shall be final and binding on each of the parties hereto.
Judgment upon the award may be entered by any court having jurisdiction
thereof or having jurisdiction over the parties or their assets. For purposes
of this Section 11.9, in any arbitration hereunder, the non-prevailing party
to an arbitration shall pay its own expenses, the fees of the arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the

                                       44
<PAGE>


other party to the arbitration.

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

                  12.11     SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.

                                       45
<PAGE>


                  IN WITNESS WHEREOF, each of the parties hereto has caused this
Stock Exchange Agreement and Plan of Reorganization to be signed and delivered
effective as of the date first set forth above.


                                 JENKON INTERNATIONAL, INC., a Delaware
                                 corporation


                                 By:
                                    --------------------------------------------
                                      David Edwards, Chief Executive Officer


                                 By:
                                    --------------------------------------------
                                      Robert Cavitt, President


                                 MULTIMEDIA K.I.D. - INTELLIGENCE IN
                                 EDUCATION, LTD., an Israeli corporation


                                 By:
                                    --------------------------------------------
                                      Pessie Goldenberg, Director


                                 By:
                                    --------------------------------------------
<PAGE>

THE STOCKHOLDERS:


- ------------------------------------
ZEHAVA RUBNER


- ------------------------------------        ------------------------------------
LAURA HUBERFELD                             YEHUDA LAZKRON


- ------------------------------------        ------------------------------------
NAOMI BODNER                                PESSIE GOLDENBERG


- ------------------------------------        ------------------------------------
RITA FOLGER                                 DROR WATENSTEIN

ALLIED INTERNATIONAL FUND, INC.             LAWJESS PARTNERS, LTD.


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

Name:                                       Name:
Title:                                      Title:

TRAUTMAN WASSERMAN & COMPANY                BNR FAMILY PARTNERS LTD.


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

VAC WORLDWIDE, INC.                         OLD OAK FUND, INC.


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

<PAGE>

BURLIN PORTFOLIO INC.                       CONGREGATION AHAVAS
                                            TZEDOKAH V'CHESED


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


- ------------------------------------        ------------------------------------
LORI SEMPERVIVE                             GABRIEL CERRONE


- ------------------------------------        ------------------------------------
BEVERLY OPPENHEIMER                         BRENADETTE MALONEY


- ------------------------------------        ------------------------------------
HANNAH GELTZER                              EVAN BERGER


- ------------------------------------        ------------------------------------
GARY SCHONWALD                              ELIZABETH CRESPO


- ------------------------------------        ------------------------------------
ROBIN SACHS                                 IRWIN KATSOFF


<PAGE>

                                    EXHIBIT A

                            COMPANY SHAREHOLDER LIST


<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
                                                         JENKON             JENKON SERIES          JENKON SERIES
                                       COMPANY           COMMON             B PREFERRED            C PREFERRED
                                       SHARES            STOCK TO BE        STOCK TO BE            STOCK TO BE
NAME AND ADDRESS                       OWNED             RECEIVED           RECEIVED               RECEIVED
- ----------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------
<S>                                    <C>               <C>                <C>                    <C>
ZEHAVA RUBNER                          1,466             286,381            326,616                326,616
Adv. Bachar
17 Marmorek
Tel-Aviv, Israel
- ----------------------------------------------------------------------------------------------------------------
NAOMI BODNER                           733               143,190            163,303                163,302
16 Grosser Lane
Monsey, NY 10952
- ----------------------------------------------------------------------------------------------------------------
LAURA HUBERFELD                        733               143,190            163,302                163,303
250 Longwood Crossing
Lawrence, NY 11559
- ----------------------------------------------------------------------------------------------------------------
PESSIE GOLDENBERG                      1,200             234,418            267,349                267,349
23 Halutzat Hapardesanut
Petach Tikva, Israel
- ----------------------------------------------------------------------------------------------------------------
DROR WATENSTEIN                        50                9,767              11,140                 11,140
23 Halutzat Hapardesanut
Petach Tikva, Israel
- ----------------------------------------------------------------------------------------------------------------
YEHUDA LAZKRON                         50                9,767              11,140                 11,140
c/o Adv. Bachar
17 Marmorek
Tel-Aviv, Israel
- ----------------------------------------------------------------------------------------------------------------
RITA FOLGER                            68                13,287             15,150                 15,150
c/o The Law Offices of
Oscar Folger
521 Fifth Avenue
New York, NY 10175
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
- --------------------------------------------------------------------------------------------------
<S>                            <C>               <C>                <C>                    <C>
ALLIED INTERNATIONAL FUND,      244.76            0                  56,916                 56,916
INC.
208-16 38th Avenue
Bayside, NY 11361
- --------------------------------------------------------------------------------------------------
LAWJESS PARNTERS, LTD           114.31            0                  26,584                 26,584
29 John Street, PMB 222
New York, NY 10038
- --------------------------------------------------------------------------------------------------
LORI SEMPERVIVE                 8.6               0                  2,000                  2,000
9 Delware Avenue
Gillette, NJ 07933
- --------------------------------------------------------------------------------------------------
BNR FAMILY PARTNERS LTD         112.16            0                  26,084                 26,084
P.O. Box 243
Florham Park, NJ 07932
- --------------------------------------------------------------------------------------------------
GABRIEL CERRONE                 37.62             0                  8,750                  8,750
150 East 52nd Street
29th Floor
New York, NY 10022
- --------------------------------------------------------------------------------------------------
BEVERLY OPPENHEIMER             37.62             0                  8,750                  8,750
438 East Beach Street
Long Beach, NY 11561
- --------------------------------------------------------------------------------------------------
TRAUTMAN WASSERMAN &            75.25             0                  17,500                 17,500
COMPANY
500 Fifth Avenue
New York, NY 10110
- --------------------------------------------------------------------------------------------------
VAC WORLDWIDE, INC.             21.5              0                  5,000                  5,000
P.O. Box 302
Tallman, NY 10982
- --------------------------------------------------------------------------------------------------
BRENADETTE MALONEY              7.52              0                  1,750                  1,750
830 Chestnut Street
Roselle Park, NJ 07204
- --------------------------------------------------------------------------------------------------
HANNAH GELTZER                  8.6               0                  2,000                  2,000
2820 West 8th Street
Brooklyn, NY 11221
- --------------------------------------------------------------------------------------------------
EVAN BERGER                     37.62             0                  8,750                  8,750
215 East 68th Street
New York, NY 10021
- --------------------------------------------------------------------------------------------------

<PAGE>

- ------------------------------------------------------------------------------------------------------
GARY SCHONWALD                  16.12             0                  3,750                  3,750
70 East 77th Street
New York, NY 10021
- ------------------------------------------------------------------------------------------------------
ELIZABETH CRESPO                5.37              0                  1,250                  1,250
3021 Beach 40th Street
Brooklyn, NY 11224
- ------------------------------------------------------------------------------------------------------
OLD OAK FUND, INC.              195.3             0                  45,416                 45,416
488 Madison Avenue
8th Floor
New York, NY 10022
- ------------------------------------------------------------------------------------------------------
ROBIN SACHS                     12.9              0                  3,000                  3,000
39 Clayton Drive
Dix Hills, NY 11746
- ------------------------------------------------------------------------------------------------------
BURLIN PORTFOLIO, INC.          64.5              0                  15,000                 15,000
c/o Dr. D. Rothchild
Mannesse Street 10
8003 Zurich
- ------------------------------------------------------------------------------------------------------
IRWIN KATSOFF                   43                0                  10,000                 10,000
156 West 56th Street
New York, NY 10019
- ------------------------------------------------------------------------------------------------------
EZER M'ZION                     10.75             0                  2,500                  2,500
250 Longwood Crossing
Lawrence, NY 11559
- ------------------------------------------------------------------------------------------------------
CONGREGATION AHAVAS             21.5              0                  5,000                  5,000
TZEDOKAH V'CHESED
16 Grosser Lane
Monsey, NY 10952
- ------------------------------------------------------------------------------------------------------
TOTALS                          5,375             840,000            1,208,000              1,208,000
- ------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                 SCHEDULE 6.2(a)

                        ALLOCATION OF REGISTRATION RIGHTS
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S>                                           <C>
                                               SHARES OF JENKON COMMON STOCK TO BE
                                               REGISTERED ON BEHALF OF STOCKHOLDER
                                               (INCLUDING SHARES ISSUABLE UPON
NAME                                           CONVERSION OF SERIES B AND SERIES C
                                               PREFERRED STOCK)
- ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------
ZEHAVA RUBNER                                  2,200,000
- ------------------------------------------------------------------------------------------------------
NAOMI BODNER                                   1,050,000
- ------------------------------------------------------------------------------------------------------
LAURA HUBEFELD                                 1,050,000
- ------------------------------------------------------------------------------------------------------
PESSIE GOLDENBERG                              0
- ------------------------------------------------------------------------------------------------------
DROR WATENSTEIN                                0
- ------------------------------------------------------------------------------------------------------
YEHUDA LAZKRON                                 0
- ------------------------------------------------------------------------------------------------------
RITA FOLGER                                    100,000
- ------------------------------------------------------------------------------------------------------
ALLIED INTERNATIONAL FUND, INC.                384,848
- ------------------------------------------------------------------------------------------------------
LAWJESS PARNTERS, LTD                          237,533
- ------------------------------------------------------------------------------------------------------
LORI SEMPERVIVE                                20,000
- ------------------------------------------------------------------------------------------------------
BNR FAMILY PARTNERS LTD                        237,533
- ------------------------------------------------------------------------------------------------------
GABRIEL CERRONE                                175,000
- ------------------------------------------------------------------------------------------------------

<PAGE>

- ------------------------------------------------------------------------------------------------------
BEVERLY OPPENHEIMER                            175,000
- ------------------------------------------------------------------------------------------------------
TRAUTMAN WASSERMAN &                           0
COMPANY
- ------------------------------------------------------------------------------------------------------
VAC WORLDWIDE, INC.                            100,000
- ------------------------------------------------------------------------------------------------------
BRENADETTE MALONEY                             35,000
- ------------------------------------------------------------------------------------------------------
HANNAH GELTZER                                 20,000
- ------------------------------------------------------------------------------------------------------
EVAN BERGER                                    125,000
- ------------------------------------------------------------------------------------------------------
GARY SCHONWALD                                 75,000
- ------------------------------------------------------------------------------------------------------
ELIZABETH CRESPO                               25,000
- ------------------------------------------------------------------------------------------------------
OLD OAK FUND, INC.                             360,086
- ------------------------------------------------------------------------------------------------------
ROBIN SACHS                                    30,000
- ------------------------------------------------------------------------------------------------------
BURLIN PORTFOLIO, INC.                         150,000
- ------------------------------------------------------------------------------------------------------
IRWIN KATSOFF                                  100,000
- ------------------------------------------------------------------------------------------------------
EZER M'ZION                                    0
- ------------------------------------------------------------------------------------------------------
CONGREGATION AHAVAS TZEDOKAH                   100,000
V'CHESED
- ------------------------------------------------------------------------------------------------------
TOTALS                                         6,750,000
- ------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED, DISPOSED OF OR OFFERED FOR SALE, IN
WHOLE OR IN PART, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THAT ACT COVERING THIS NOTE AND/OR THE COMMON STOCK ISSUABLE UPON CONVERSION
THEREOF, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO JENKON
INTERNATIONAL, INC. THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

                           CONVERTIBLE PROMISSORY NOTE
                                  (the "Note")

                           JENKON INTERNATIONAL, INC.


Principal Sum: $________________________

Holder: ________________________________


JENKON INTERNATIONAL, INC., a Delaware corporation (hereinafter called the
"Corporation"), hereby promises to pay the Principal Sum set forth above (the
"Principal Sum") to the order of the above-referenced holder (the "Holder") on
or before April 1, 2000. This Note shall accrue interest at the rate of twelve
percent (12%) per annum from and after January 1, 2000. Accrued interest shall
be payable on February 1, 2000 and at maturity or on conversion (each, an
"interest payment date"). Interest shall be computed on the basis of a 360-day
year.

1.       ISSUANCE. This Note is being issued pursuant to the terms of a Note
Purchase Agreement between the Corporation and the Holder (the "Subscription
Agreement") which contains, among other things, certain representations by the
Holder as to Holder's sophistication as an investor. In addition, the
Subscription Agreement contains certain covenants of the Corporation relating
to the registration of the Common Stock into which this Note may be converted
under the Securities Act of 1933, as amended (the "Act").

2.       CONVERSION.

         (a) On the Shareholder Approval Date (as hereinafter defined), the
outstanding principal balance of this Note shall automatically be converted
into shares of common stock, $0.001 par value, of the Corporation ("Common
Stock") at a conversion price of $1.00 per share.

         (b) Simultaneously with the issuance of this Note, the Corporation
shall reserve for issuance on conversion of this Note the total number shares
of Common Stock issuable upon conversion of this Note (as such number may be
adjusted from time to time in accordance with

<PAGE>

(c) below, the "Conversion Shares"). The Corporation shall use
its best reasonable efforts promptly to list on the Nasdaq SmallCap Market, all
of the Conversion Shares.

         (c) If any capital reorganization or reclassification of the Common
Stock, stock split, reverse stock split, stock combination, or consolidation or
merger of the Corporation with or into another corporation, or distribution of
the proceeds of any sale or conveyance of all or substantially all of its
assets to another corporation (a "Capital Event") shall be effected, then, as a
condition precedent of such Capital Event, the following provision shall be
made: The Holder of the Note shall, from and after the date of such Capital
Event sale have the right to receive upon conversion (in lieu of the shares of
Common Stock of the Corporation immediately theretofore issuable upon the
exercise of conversion rights), such shares of stock, securities or assets as
would have been issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore issuable upon conversion of
the Note (regardless of whether the Note was actually convertible at such
time). In any such case, appropriate provision shall be made with respect to
the rights and interests of the Holders to the end that such conversion rights
(including, without limitation, provisions for appropriate adjustments) shall
thereafter be applicable, as nearly as may be practicable in relation to any
shares of stock, securities or assets thereafter deliverable upon the
conversion of the Note.

         (d) The Corporation covenants to call a meeting of stockholders to be
held on or before March 31, 2000 to, among other things, approve the
issuance of the Conversion Shares and such other shares of Common Stock as may
be issuable upon conversion of certain other notes of the same tenor
(collectively, the "JNKN Notes"). The Board of Directors of the Corporation
will recommend that the stockholders of the Corporation vote in favor of such
approval. The date on which such approval is obtained is referred to herein as
the "Stockholder Approval Date."

3.       ISSUANCE OF CONVERSION SHARES. The Corporation covenants and agrees
that all Conversion Shares will, upon conversion of the JNKN Notes and issuance
in accordance with the terms hereof, be duly and validly issued, fully paid and
non-assessable.

4.       EVENTS OF DEFAULT AND ACCELERATION OF THE NOTE.

         (a)   An "event of default" with respect to this Note shall exist if
any of the following shall occur:

               (i)   The Corporation shall breach or fail to comply with any
provision of this Note and such breach or failure shall continue for fifteen
(15) days after written notice thereof to the Corporation by any Holder of JNKN
Notes.

               (ii)  A receiver, liquidator or trustee of the Corporation or of
a substantial part of its properties shall be appointed by court order and such
order shall remain in effect for more than fifteen (15) days; or the Corporation
shall be adjudicated bankrupt or insolvent; or a substantial part of the
property of the Corporation shall be sequestered by court order and such

<PAGE>

order shall remain in effect for more than fifteen (15) days; or a petition to
reorganize the Corporation under any bankruptcy, reorganization or insolvency
law shall be filed against the Corporation and shall not be dismissed within
forty-five (45) days after such filing.

               (iii) The Corporation shall file a petition in voluntary
bankruptcy or request reorganization under any provision of any bankruptcy,
reorganization or insolvency law, or shall consent to the filing of any petition
against it under any such law.

               (iv)  The Corporation shall make an assignment for the benefit of
its creditors, or consent to the appointment of a receiver, trustee or
liquidator of the Corporation, or of all or any substantial part of its
properties.

         (b) If an event of default referred to in clause (i) shall occur, the
Holder may, in addition to such Holder's other remedies, by written notice to
the Corporation, declare the principal amount of this Note, together with all
interest accrued thereon, to be due and payable immediately. Upon any such
declaration, such amount shall become immediately due and payable and the
Holder shall have all such rights and remedies provided for under the terms of
this Note and the Subscription Agreement. If an event of default referred to in
clauses (ii), (iii) or (iv) shall occur, the principal amount of this Note,
together with all interest accrued thereon, shall become immediately due and
payable and the Holder shall have all such rights and remedies, if any,
provided for under the terms of this Note and the Subscription Agreement.

5.       INTEREST RATE LIMITATION. It is the intent of Holder and the
Corporation in this execution of this Note, that the loan evidenced hereby be
exempt from the restrictions of applicable state usury laws. In the event that
for any reason, it should be determined that any such usury law is applicable
to this Note, Holder and the Corporation stipulate and agree that none of the
terms and provisions contained herein shall ever be construed to create a
contract for the use, forbearance or detention of money requiring payment of
interest at a rate in excess of the maximum interest rate permitted to be
charged by the laws of such state. In such event, if the Corporation shall
collect monies which are deemed to constitute interest which would otherwise
increase the effective interest rate on this Note to a rate in excess of the
maximum rate permitted to be charged by applicable state law, all such sums
shall, at the option of Holder, be credited to the payment of the sums due
hereunder or returned to the Corporation.

6.       MISCELLANEOUS.

         (a) All notices and other communications required or permitted to be
given hereunder shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by telegram, by
facsimile, recognized overnight mail carrier, telex or other standard form of
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows: (a) if to the Holder, to such address
as such Holder shall furnish to the Corporation in accordance with this Section,
or (b) if to the Corporation, to it at its headquarters office, or to such other
address as the Corporation shall furnish to the Holder in

<PAGE>

accordance with this Section.

         (b) This Note shall be governed and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
entirely within such state.

         (c) The Corporation waives protest, notice of protest, presentment,
dishonor, notice of dishonor and demand.

         (d) If any provision of this Note shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Note shall be construed as if such invalid
or unenforceable provision had never been contained herein.

         (e) The waiver of any event of default or the failure of the Holder to
exercise any right or remedy to which it may be entitled shall not be deemed a
waiver of any subsequent event of default or of the Holder's right to exercise
that or any other right or remedy to which the Holder is entitled.

         (f) Upon the occurrence of an uncured event of default, the Holder of
this Note shall be entitled to recover its legal and other costs of collecting
on this Note, and such costs shall be deemed added to the principal amount of
this Note.

         (g) In addition to all other remedies to which the Holder may be
entitled hereunder, Holder shall also be entitled to decrees of specific
performance without posting bond or other security.

         IN WITNESS WHEREOF, the Corporation has caused this Note to be duly
executed on the date set forth below


Dated: ____________________________________


JENKON INTERNATIONAL, INC.



By: _______________________________________
    David Edwards, Chief Executive Officer

<PAGE>

COMPANY PRESS RELEASE

SOURCE: JENKON INTERNATIONAL, INC.

JENKON INTERNATIONAL, INC. COMPLETES ACQUISITION OF
MULTIMEDIA KID AND $4.5 MILLION FINANCING

VANCOUVER, Wash., Dec. 20 /PRNewswire/ -- David Edwards, Chief Executive Officer
of Jenkon International, Inc. (Nasdaq: JNKN - news) and Equilink, LLC, today
jointly announced that Jenkon has completed its acquisition of Multimedia K.I.D.
- -- Intelligence in Education, Ltd., (MMKid), an award-winning designer of
virtual interactive learning centers for children and adults. In addition,
Jenkon announced the completion of a $4.5 million private placement of
Convertible Promissory Notes that was a condition to closing of the acquisition
of MMKid.

Jenkon's existing business and the business of MMKid will be maintained as
separate operating subsidiaries of Jenkon. The net proceeds of the financing
transaction will be distributed between the two subsidiaries with each of the
two operating entities receiving net proceeds of approximately $2,050,000,
inclusive of funds received by Jenkon in previous closings.

In connection with the acquisition of a 100% percent interest in MMKid, Jenkon
issued to the stockholders of MMKid an aggregate of i) 840,000 shares of Jenkon
common stock, and ii) 2,416,000 shares of Preferred Stock which will be
convertible into an aggregate of 24,160,000 shares of Jenkon common stock.
Assuming all shares of Preferred Stock convert, former MMKid shareholders would
hold approximately 83% of Jenkon's common stock. The Preferred Stock will have
no voting or conversion rights unless and until the stockholders of Jenkon have
approved the grant of voting rights to such shares. Upon Jenkon stockholder
approval, one-half of the Preferred Stock will automatically convert into Common
Stock with the remaining Preferred Stock converting into Common Stock upon the
satisfaction of certain revenue targets for MMKid. In the event stockholder
approval of the grant of voting rights is not obtained prior to March 31, 2000,
the Preferred Stockholders will have the right to force Jenkon to redeem the
Preferred Stock for an aggregate conversion price of approximately $24,000,000.

The Convertible Promissory Notes issued by the Company in connection with the
$4.5 million financing are due April 1, 2000 but will automatically convert into
an aggregate of 4,500,000 shares of Jenkon Common Stock upon Jenkon stockholder
approval of such conversion.

About Jenkon and Its Subsidiaries

Jenkon is a developer of specialized software solutions for network marketing
and other companies involved in the direct sales industry. The Company's
management information systems, including its proprietary SUMMIT V-Registered
Trademark- software, have been installed with over 150 direct sales companies in
over 25 countries throughout the world.

<PAGE>

Jenkon's product line includes NOW!-Registered Trademark- and
JOL.NOW!-Registered Trademark-, Jenkon's scaleable Internet-based product,
allows home-based direct sales personnel to communicate with the company they
represent as well as the ability to quickly obtain, view and analyze information
over the Internet, including order status, personal and group sales, and
commissions. JOL (Jenkon-On-Line) provides an outsourcing solution for existing
and start-up companies who want to reduce operational overhead by giving them
access to Jenkon's premier compensation software system. This service allows
companies to manage their direct sales network without significant staffing and
hardware expenses. Integrated with Jenkon's NOW!-Registered Trademark- product,
JOL provides 24-hour e-commerce, order entry and sales information to the
corporate client's sales organization.

MMKid, designs manufacturers and sell numerous innovative software and activity
systems that together create virtual interactive learning centers for children
and adults. MMKid has software titles covering content as diverse as science,
nature, math, music, language, art, technology, transportation, as well as
everyday environments such as the home and workplace. The educational systems
are designed to promote creativity, imagination, listening, reading, writing,
cognitive and motor skills through a full range of media which touches on
different senses and emotions.

In 1998, MMKid was awarded the prestigious Computer Software Award from the
Office of the Prime Minister of Israel for the category of "Special Innovation
and Invention in Education."

Safe Harbor Statement

In addition to historical information, this release contains forward-looking
statements made in good faith, including, but not limited to, those statements
regarding the business plans of Jenkon International, Inc and Multimedia K.I.D.
Although the expectations reflected in such forward-looking statements are
believed to be reasonable, no assurance can be given that such expectations
will prove to be correct. Readers are cautioned not to place undue reliance on
these forward-looking statements as they are based on current expectations and
are subject to a number of risks, uncertainties and assumptions relating to the
business and results of operations of Jenkon International, Inc and Multimedia
K.I.D. -- Intelligence in Education, Ltd., competitive factors, shifts in
market demand and other risks and uncertainties, including uncertainties with
respect to changes or developments in social, business, economic, industry,
market, legal and regulatory circumstances and conditions and actions taken or
omitted to be taken by third parties, including customers, suppliers,
competitors and stockholders and legislative, regulatory, judicial and other
governmental authorities.

For more information, visit Jenkon's website at www.jenkon.com or contact: Pat
O'Hara at Jenkon International, Inc., 7600 NE 41st Street, Suite 300,
Vancouver, WA 98662. Tel: 360-256- 4400, Fax: 360-256-9623.



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