Tired of Hillary's influence, Teri decides to quit Models Inc. and negotiate her own contracts. During an agency party, a drunken Teri plunges off a high-rise building to her death. It is initially believed to be a suicide, but soon ruled a murder. The suspects include Hillary, because of her anger about the financial losses she will suffer due to Teri's departure; Brian, whose advances she spurned; and Carrie, whom Teri taunted about her spiraling career and the child she gave up for adoption. Sarah moves out of Jo Reynolds' apartment and into the agency's beach house with the other models. She teases her friends Jake and Jo about their confused relationship before heading on her way. David immediately takes a special interest in Sarah, sparking jealousy in Julie. Sarah tries to win over Julie by helping her expose a photographer who promised career advances in exchange for sex. Julie goes on a drinking binge during a New York audition and loses the gig to Sarah. She accuses Sarah of

A scuffle erupts at Teri's funeral. Hillary angers David by ordering him away from Sarah; she considers their relationship unprofessional. Hillary tries to put the moves on Lt. Soto, who is heading up the investigation of Teri's murder. She insists that her attraction to him has nothing to do with the fact that she is the prime suspect. Carrie learns her son's whereabouts and makes a ""business proposition"" to his adopted father. Julie acquires a bad reputation following the incident in New York. Eric blackmails Linda with a porn video she once appeared in.

Sarah, still haunted by memories of an abusive relationship, pushes David away. He gets drunk and sleeps with Julie, who is stung when he calls their night together a mistake. Hillary and Lt. Soto consummate their relationship, complicating the murder investigation. Carrie meets her son, Kyle. Eric uses Linda to help him make connections in the music business. He continues to hold the illicit tape over her head.

Brian becomes attracted to Sarah and objects to her relationship with David. Sarah again backs away from David, who tries to prove himself with a sudden proposal. Julie breaks up their quickie wedding and reveals that David slept with her. Carrie and Paul grow closer during a photo shoot in Cabo San Lucas. Eric receives an offer from a record company, but expects Linda to finance him.

Cynthia Nichols, a confident African-American model, joins the agency. When Eric demands more money from Linda, she turns him down and finally dumps him. She moves into the beach house. Julie succeeds in keeping Sarah and David apart. Paul's wife orders Carrie to keep away from her family, but Carrie continues to move in on Paul and Kyle. Suspicion in the murder case falls on Brian because of his obsession with Teri. Stephanie, the agency's receptionist, provides him with an alibi. She is crushed when Brian ignores her to pursue Sarah. Hillary is jailed for the crime, while the real killer executes a violent attack on David.

With Hillary and David out of commission, Julie seizes control of the agency. She reassigns one of Sarah's jobs to Linda. Linda is concerned after Marcia Carson launches into a tirade about Carrie. Kyle objects to Carrie's interference with his parents' marriage. Linda tries to move on with her life; she begins seeing Chris White, the handsome heir to a soap company. Brian seeks a relationship with Sarah, but cannot get over his feelings for Teri. Stephanie offers to finance Eric's demo tape. He later pays a visit to a loan shark.

Hillary is released from jail. She and Julie try to nurse David back to health. David resolves to separate Brian and Sarah. Sarah experiences doubts about Brian following startling revelations about his past. Brian is arrested for suspicion of murder. Linda's relationship with Chris deepens, despite Eric's hold over her. Carrie tells Hillary the truth about her connection to Kyle.

Brian is released, but a spooked Sarah decides to keep her distance. Hillary gets her hands on the tapes of Linda. She threatens to destroy Eric's music career unless he stays out of Linda's life forever. Carrie finally tells Paul that she is Kyle's biological mother. Paul explodes with anger and ends their relationship. Sarah is trapped in a house with the murderer during a power outage. Stephanie killed Teri in a jealous rage because of her fixation on Brian, and plans to do the same to Sarah. Brian and David help save Sarah and subdue Stephanie, who is taken into custody. Although David had expressed frustration at Julie's attempts to play nursemaid, he seems surprisingly conciliatory as she sees him home from the hospital. A woman who is a dead ringer for Teri appears in Hillary's office and expresses an interest in joining the agency.

Hillary is thrilled by the arrival of Monique Duran, a woman with Teri's looks but not her nasty attitude. The already-fragile Carrie cannot handle living and working with a constant reminder of her sister. Hillary dumps the smitten Lt. Soto. Sarah hits the bottle after Brian tells her that things cannot work between them. Linda moves into Chris's mansion. Eric seeks her help when he has difficulty paying off a debt to some dangerous individuals.