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                                                                    Exhibit 4(b)

                             1997 STOCK OPTION PLAN

                                       OF

                            VIRTUAL COMMUNITIES, INC.


  1.   PURPOSES OF THE PLAN. This stock option plan (the "Plan") is designed to
provide an incentive to employees (including directors and officers who are
employees) and to consultants and directors who are not employees of Virtual
Communities, Inc., a Delaware corporation (the "Company"), or any of its
Subsidiaries (as defined in Paragraph 19), and to offer an additional inducement
in obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.

  2.   STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12, the
aggregate number of shares of common stock, $.0001 par value per share, of the
Company ("Common Stock") for which options may be granted under the Plan shall
not exceed 726,000. Such shares of Common Stock may, in the discretion of the
Board of Directors of the Company (the "Board of Directors"), consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock held in the treasury of the Company. Subject to the provisions of
Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercisable shall again become available for the granting of
options under the Plan. The Company shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.

  3.   ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or a committee of the Board of Directors consisting of not
less than two directors (collectively, the "Committee"). A majority of the
members of the Committee shall constitute a quorum, and the acts of a majority
of the members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.

  Subject to the express provisions of the Plan, the Committee shall have the
authority, in its sole discretion, to determine the employees who shall be
granted Employee Options and the consultants who shall be granted Consultant
Options and the Non-Employee Directors who shall be granted Non-Employee
Director Options (all as defined in Paragraph 19); the times when  options shall
be granted; whether an Employee Option shall be an ISO or a NQSO; the number of
shares of Common Stock to be subject to each option; the term of each option;
the date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the
number of shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any option or installment; whether shares of Common Stock may be
issued upon the exercise of an option as partly paid and, if so, the dates when
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future installments of the exercise price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the
exercise price, whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and, if so, whether to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
contract  referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company, any of its Subsidiaries or a Parent (as defined in Paragraph
19), to financial objectives for the Company, any of its Subsidiaries or a
Parent, a division of any of the foregoing, a product line or other category,
and/or the period of continued employment of the optionee with the Company, any
of its Subsidiaries or a Parent, and to determine whether such contingencies
have been met; whether an optionee is Disabled (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes
or other amounts; the fair market value of a share of Common Stock; to construe
the respective Contracts and the Plan; with the consent of the optionee, to
cancel or modify an option, provided, that the modified provision is to be
included in an option granted under the Plan on the date of the modification,
and further, provided, that in the case of a modification (within the meaning of
Section 424(h) of the Code) of an ISO, such option as modified would be
permitted to be granted on the date of such modification under the terms of the
Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; and to make all other determinations necessary or advisable for
administering the Plan. Any controversy or claim arising out of or relating to
the Plan, any option granted under the Plan or any Contract shall be determined
unilaterally by the Committee in its sole discretion.

The determinations of the Committee on the matters referred to in this Paragraph
3 shall be conclusive and binding on the parties.

  No member or former member of the Committee shall be liable for any action,
failure to act or determination made in good faith with respect to the Plan or
any option hereunder. In addition, the Company shall indemnify and hold harmless
each member and former member of the Committee and their respective successors,
assigns, heirs and personal representatives from and against any liability,
loss, claim, damage and expense (including without limitation attorneys' fees
and expenses) incurred in connection therewith by reason of any action, failure
to act or determination made in good faith under or in connection with the Plan
or any option hereunder to the fullest extent permitted with respect to
directors under the Company's certificate of incorporation, by-laws or
applicable law.

  4.   ELIGIBILITY. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant (a) Employee Options
to employees (including officers and directors who are employees)of the Company
or any of its Subsidiaries, (b) Consultant Options to consultants to the Company
or any of its Subsidiaries, and (c) Non-Employee Director Options to Non-
Employee Directors. Such options granted shall cover such number of shares of
Common Stock as the Committee may determine, in its sole discretion; provided,
however, that the maximum number of shares subject to Employee Options that may
be granted to any individual during any calendar year under the Plan (the
"162(m) Maximum") shall not exceed 250,000 shares; and further, provided, that
the aggregate market value (determined at the time the option is granted in
accordance with Paragraph 5) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are exercisable
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for the first time by such optionee during any calendar year shall not exceed
$100,000. Such limitation shall be applied by taking ISOs into account in the
order in which they were granted. Any option (or the portion thereof) granted in
excess of such amount shall be treated as a NQSO.

  5.   EXERCISE PRICE. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee in its sole discretion;
provided, however, that the exercise price of an ISO shall not be less than the
market value of the Common Stock subject to such option on the date of grant;
and further, provided, that if, at the time an ISO is granted, the optionee owns
(or is deemed to own under Section 424(d) of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the exercise price of such
ISO shall not be less than 110% of the market value of the Common Stock subject
to such ISO on the date of grant.

  The holder hereof may effect a cashless exercise of the Common Stock
underlying the holder's options by delivering the contract to the Company
together with a Subscription in the form indicated for that purpose, duly
executed by such holder, in which case no payment of cash will be required.
Upon such cashless exercise, the number of shares of Common Stock to be
purchased by each holder hereof shall be determined by dividing:  (i) the number
obtained by multiplying the number of shares that are the subject of each
holder's contracts by the amount, if any, by which the then market value (as
hereinafter defined) exceeds the exercise price; by (ii) the per share exercise
price.  In no event shall the Company be obligated to issue any fractional
securities and, at the time it causes a certificate or certificates to be
issued, it shall pay the holder in lieu of any fractional securities or shares
to which such holder would otherwise be entitled, by the Company check, in an
amount equal to such fraction multiplied by the market value.  The market value
shall be determined on a per share basis as of the close of the business day
preceding the exercise, which determination shall be made as follows:  (a) if
the Common Stock is listed for trading on a national or regional stock exchange
or is included on the NASDAQ National Market or Small-Cap Market, the average
closing sale price quoted on such exchange or the NASDAQ National Market or for
the ten (10) trading days immediately preceding the date of exercise, or if no
trade of the Common Stock shall have been reported during such period, the last
sale price so quoted for the next day prior thereto on which a trade in the
Common Stock was so reported; or (b) if the Common Stock is not so listed,
admitted to trading or included, the average of the closing highest reported bid
and lowest reported ask price as quoted on the National Association of
Securities Dealer's OTC Bulletin Board or in the "pink sheets" published by the
National Daily Quotation Bureau for the first day immediately preceding the date
of exercise on which the Common Stock is traded.

  6.   TERM. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion; provided,
however, that the term of each ISO granted pursuant to the Plan shall be for a
period not exceeding 10 years from the date of grant thereof, and further,
provided, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five years from the date of grant. Options shall be subject
to earlier termination as hereinafter provided.

  7.   EXERCISE. An option (or any part or installment thereof), to the
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extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract permits installment
payments) (a) in cash or by certified check or (b) if the applicable Contract
permits, with previously acquired shares of Common Stock, or options to purchase
shares of Common Stock having an aggregate fair market value on the date of
exercise (determined in accordance with Paragraph 5) equal to the aggregate
exercise price of all options being exercised, or with any combination of cash,
certified check or shares of Common Stock.

  The Committee may, in its sole discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed notice,
together with a copy of his irrevocable instructions to a broker acceptable to
the Committee to deliver promptly to the Company the amount of sale or loan
proceeds sufficient to pay such exercise price. In connection therewith, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.

  A person entitled to receive Common Stock upon the exercise of an option
shall not have the rights of a stockholder with respect to such shares of Common
Stock until the date of issuance of a stock certificate to him for such shares;
provided, however, that until such stock certificate is issued, any optionee
using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired shares.

  8.   TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason (other
than the death or Disability of the Optionee) may exercise such option, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination if the Optionee resigns from the Company,
or one year in the event an Optionee's employment is terminated by the Company,
or Optionee is a Consultant or Director of the Company, but not thereafter and
in no event after the date the option would otherwise have expired; provided,
however, that if such relationship is terminated either (a) for cause, or (b)
without the consent of the Company, such option shall terminate immediately.

  For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
eemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.

  Except as may otherwise be expressly provided in the applicable Contract,
Employee Options and Consultant Options granted under the Plan shall not be
affected by any change in the status of the optionee so long as the optionee
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continues to be an employee of, or a consultant to, the Company, or any of the
Subsidiaries or a Parent (regardless of having changed from one to the other or
having been transferred from one corporation to another).

  Except as may otherwise be expressly provided in the applicable Contract, the
holder of a Non-Employee Director Option whose directorship with the Company has
terminated for any reason other than his death or Disability may exercise such
option, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired; provided, however,
that if his directorship shall be terminated for cause, such option shall
terminate immediately.

  Nothing in the Plan or in any option granted under the Plan shall confer on
any optionee any right to continue in the employ of, or as a consultant to, the
Company, any of its Subsidiaries or a Parent, or as a director of the Company,
or interfere in any way with any right of the Company, any of its Subsidiaries
or a Parent to terminate the optionee's relationship at any time for any reason
whatsoever without liability to the Company, any of its Subsidiaries or a
Parent.

  9.   DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised, to
the extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.

  Except as may otherwise be expressly provided in the applicable Contract, any
optionee whose relationship as an employee of, or consultant to, the Company,
its Parent and Subsidiaries has terminated by reason of such optionee's
Disability may exercise his Employee Option or Consultant Option, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.

  Except as may otherwise be expressly provided in the applicable Contract, if
an optionee dies (a) while he is a director of the Company, (b) within three
months after the termination of his directorship with the Company (unless such
termination was for cause) or (c) within one year after the termination
following the termination of his directorship by reason of Disability, his Non-
Employee Director Options may be exercised, to the extent exercisable on the
date of his death, by his Legal Representative at any time within one year after
death, but not thereafter and in no event after the date the option would
otherwise have expired. Except as may otherwise be expressly provided in the
applicable Contract, an optionee whose directorship with the Company has
terminated by reason of Disability, may exercise his Non-Employee Director
Options, to the extent exercisable on the effective date of such termination, at
any time within one year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.

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  10.  COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its
sole discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.

  The Committee may require, in its sole discretion, as a condition to the
exercise of any option that the optionee execute and deliver to the Company his
representations and warranties, in form, substance and scope satisfactory to the
Committee, which the Committee determines are necessary or convenient to
facilitate the perfection of an exemption from the registration requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including without limitation that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.

  In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.

  11.  STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.

  12.  ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, split-up, combination
or exchange of shares or the like which results in a change in the number or
kind of shares of Common Stock which is outstanding immediately prior to such
event, the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each outstanding option and the
exercise price thereof, and the 162(m) Maximum shall be appropriately adjusted
in the same manner as the number and kind of shares of a stockholder of the
Company who owned the same number and kind of shares immediately prior to such
event, and the exercise price of the options shall be adjusted so that the
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aggregate exercise price of each outstanding unexercised option remains the
same. Notwithstanding the foregoing, such adjustment may provide for the
elimination of fractional shares which might otherwise be subject to options
without payment therefor. Such adjustments shall be made by the Board of
Directors, whose determination shall be conclusive and binding on all parties.

  In the event of a Corporate Transaction or Change of Control of the Company as
defined in section 19 herein, or upon the liquidation or dissolution of the
Company, an optionee's rights with respect to exercisability of outstanding
options under the Plan shall automatically be accelerated and fully vested, and
an optionee shall thereafter have the absolute right to exercise his option in
whole or in part for and during the remainder of the term for which his option
is outstanding. The portion of any Incentive Stock Option accelerated under this
Section 12 in connection with a Corporate Transaction, Change in Control or upon
dissolution or liquidation of the Company, shall remain exercisable as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar
limitation of Section 422(d) of the Code is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated excess portion of such Option
shall be exercisable as a Non-Qualified Stock Option.

  13.  AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on May 20, 1997. No option may be granted under the Plan
after May 31, 2007. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3 of the Securities Exchange Act of 1934,
Section 162(m) of the Code, or any change in applicable law, regulations,
rulings or interpretations of administrative agencies; provided, however, that
no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or the 162(m) Maximum, (b) to the extent required by Rule
16b-3, materially increase the benefits accruing to participants under the Plan
or (c) change the eligibility requirements to receive options hereunder. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing and outstanding option affected thereby, adversely
affect his rights under such option. The power of the Committee to construe and
administer any options granted under the Plan prior to the termination or
suspension of the Plan nevertheless shall continue after such termination or
during such suspension.

  14.  NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void ab initio
and of no force or effect.

  15.  WITHHOLDING TAXES. The Company may withhold (a) cash, (b) subject to any
limitations under Rule 16b-3, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value on the exercise date
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(determined in accordance with Paragraph 5), or (c) any combination thereof, in
an amount equal to the amount which the Committee determines is necessary to
satisfy the Company's obligation to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required
payments have been made.

  16.  LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon exercise of
an option under the Plan and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as it determines, in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act and any
applicable state securities laws, (b) implement the provisions of the Plan or
any agreement between the Company and the optionee with respect to such shares
of Common Stock, or (c) permit the Company to determine the occurrence of a
"disqualifying disposition", as described in Section 421(b) of the Code, of the
shares of Common Stock issued or transferred upon the exercise of an ISO granted
under the Plan.

  The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock upon the exercise of an option granted under the Plan, as
well as all fees and expenses incurred by the Company in connection with such
issuance.

  17.  USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for such corporate purposes as the Board
of Directors may determine.

  18.  SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT

CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.

  19.  DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:

  (a)  "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:

  (i)  the direct or indirect acquisition by any person or related group of
persons (other than an acquisition from or by the Company or by a Company-
sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than eighty percent (80%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which a majority of
the Continuing Directors who are not Affiliates or Associates of the offeror do
not recommend such stockholders accept, or
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  (ii) a change in the composition of the Board over a period of thirty-six (36)
months or less such that a majority of the Board members (rounded up to the next
whole number) ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who are Continuing Directors.

  (b)  "Constituent Corporation" shall mean any corporation which engages
with the Company, any of its Subsidiaries or a Parent in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.

  (c)  "Consultant Option" shall mean a NQSO granted pursuant to the Plan to a
person who, at the time of grant, is a consultant to the Company or a
Subsidiary of the Company, and at such time is neither a common law employee of
the Company or any of its Subsidiaries nor a director of the Company.

  (d)  "Corporate Transaction" means any of the following transactions:

  (i)  a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
state in which the Company is incorporated;

  (ii) the sale, transfer or other disposition of all or substantially all of
the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;

  (iii)  any reverse merger in which the Company is the surviving entity but in
which securities possessing more than eighty percent (80%) of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from those who held such securities immediately prior to
such merger; or

  (iv)   an acquisition by any person or related group of persons (other than
the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than eighty percent (80%) of the total combined voting power of
the Company's outstanding securities (whether or not in a transaction also
constituting a Change in Control), but excluding any such transaction that the
Administrator determines shall not be a Corporate Transaction.

    (e)  "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.

    (f)  "Employee Option" shall mean an option granted pursuant to the
Plan to an individual who, at the time of grant, is an employee of the Company
or any of its Subsidiaries.

    (g)  "Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased
or incapacitated optionee with respect to an option granted under the Plan.

    (h)  "Non-Employee Director" shall mean a person who is a director of the
Company, but is not a common law employee of the Company, any of its
Subsidiaries or a Parent.
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    (i)  "Non-Employee Director Option" shall mean a NQSO granted pursuant to
the Plan to a person who, at the time of the grant, is a Non-Employee Director.

    (j)  "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.

    (k)  "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.

  20.  GOVERNING LAW; CONSTRUCTION.  The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.

  Neither the Plan nor any Contracts shall be construed or interpreted with any
presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.

  21.  PARTIAL INVALIDITY.  The invalidity, illegality or unenforceability of
any provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.

  22.  STOCKHOLDER APPROVAL.  The Plan shall be subject to approval by the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote thereon at the next duly held meeting of the Company's

stockholders at which a quorum is present.  No options granted hereunder may be
exercised prior to such approval; provided, however, that the date of grant of
any option shall be determined as if the Plan had not been subject to such
approval.  Notwithstanding the foregoing, if the Plan is not approved by a vote
of the stockholders of the Company on or before December 31, 1999, the Plan and
any options granted hereunder shall terminate.
<PAGE>

                       FORM OF CASHLESS EXERCISE AGREEMENT



TO:  Avi Moskowitz, President
     Virtual Communities, Inc.
     151 West 25th Street
     New York, New York 10001


  The undersigned, the holder of an option contract representing the right to
acquire _______ shares of Virtual Communities, Inc. (the "Company"), which
contract is being delivered herewith, hereby irrevocably elects the cashless
exercise of the purchase right provided by the Company's option plan and the
option contract for and to purchase thereunder, Shares of the Company in
accordance with the formula provided at Section five (5) of the option plan. The
undersigned requests that the certificates for such Shares be issued in the name
of, and delivered to _____________________________________________, whose
address is __________________________________________________ , all in
accordance with the Company's stock option plan and the option contract.


Dated: ________________________


                                             ______________________________
                                             (Signature must conform in all
                                             respects to name of Holder as
                                             specified on the fact of the
                                             Warrant Certificate)


                                             ______________________________

                                             ______________________________
                                             (Address)

                                             ______________________________
                                             (Social Security Number of
                                             Tax Identification Number)
<PAGE>

                             1998 STOCK OPTION PLAN

                                       OF

                            VIRTUAL COMMUNITIES, INC.


  1.   PURPOSES OF THE PLAN. This stock option plan (the "Plan") is designed to
provide an incentive to employees (including directors and officers who are
employees) and to consultants and directors who are not employees of Virtual
Communities, Inc., a Delaware corporation (the "Company"), or any of its
Subsidiaries (as defined in Paragraph 19), and to offer an additional inducement
in obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.

  2.   STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12, the
aggregate number of shares of common stock, $.0001 par value per share, of the
Company ("Common Stock") for which options may be granted under the Plan shall
not exceed 524,000. Such shares of Common Stock may, in the discretion of the
Board of Directors of the Company (the "Board of Directors"), consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock held in the treasury of the Company. Subject to the provisions of
Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercisable shall again become available for the granting of
options under the Plan. The Company shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.

  3.   ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or a committee of the Board of Directors consisting of not
less than two directors (collectively, the "Committee"). A majority of the
members of the Committee shall constitute a quorum, and the acts of a majority
of the members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.


  Subject to the express provisions of the Plan, the Committee shall have the
authority, in its sole discretion, to determine the employees who shall be
granted Employee Options and the consultants who shall be granted Consultant
Options and the Non-Employee Directors who shall be granted Non-Employee
Director Options (all as defined in Paragraph 19); the times when options shall
be granted; whether an Employee Option shall be an ISO or a NQSO; the number of
shares of Common Stock to be subject to each option; the term of each option;
the date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the
number of shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any option or installment; whether shares of Common Stock may be
<PAGE>

issued upon the exercise of an option as partly paid and, if so, the dates when
future installments of the exercise price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the
exercise price, whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and, if so, whether to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
contract referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company, any of its Subsidiaries or a Parent (as defined in Paragraph
19), to financial objectives for the Company, any of its Subsidiaries or a
Parent, a division of any of the foregoing, a product line or other category,
and/or the period of continued employment of the optionee with the Company, any
of its Subsidiaries or a Parent, and to determine whether such contingencies
have been met; whether an optionee is Disabled (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes
or other amounts; the fair market value of a share of Common Stock; to construe
the respective Contracts and the Plan; with the consent of the optionee, to
cancel or modify an option, provided, that the modified provision is permitted
to be included in an option granted under the Plan on the date of the
modification, and further, provided, that in the case of a modification (within
the meaning of Section 424(h) of the Code) of an ISO, such option as modified
would be permitted to be granted on the date of such modification under the
terms of the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; and to make all other determinations necessary or
advisable for administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any option granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive and binding on the parties.

  No member or former member of the Committee shall be liable for any action,
failure to act or determination made in good faith with respect to the Plan or
any option hereunder. In addition, the Company shall indemnify and hold harmless
each member and former member of the Committee and their respective successors,
assigns, heirs and personal representatives from and against any liability,
loss, claim, damage and expense (including without limitation attorneys' fees
and expenses) incurred in connection therewith by reason of any action, failure
to act or determination made in good faith under or in connection with the Plan
or any option hereunder to the fullest extent permitted with respect to
directors under the Company's certificate of
incorporation, by-laws or applicable law.

  4.   ELIGIBILITY. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant (a) Employee Options
to employees (including officers and directors who are employees) of the Company
or any of its Subsidiaries, (b) Consultant Options to consultants to the Company
or any of its Subsidiaries, and (c) Non-Employee Director Options to Non-
Employee Directors. Such options granted shall cover such number of shares of
Common Stock as the Committee may determine, in its sole discretion; provided,
however, that the maximum number of shares subject to Employee Options that may
be granted to any individual during any calendar year under the Plan (the
"162(m) Maximum") shall not exceed 250,000 shares; and further, provided, that
the aggregate market value (determined at the time the option is granted in
accordance with Paragraph 5) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are exercisable
<PAGE>

for the first time by such optionee during any calendar year shall not exceed
$100,000. Such limitation shall be applied by taking ISOs into account in the
order in which they were granted. Any option (or the portion thereof) granted in
excess of such amount shall be treated as a NQSO.

  5.   EXERCISE PRICE. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee in its sole discretion;
provided, however, that the exercise price of an ISO shall not be less than the
market value of the Common Stock subject to such option on the date of grant;
and further, provided, that if, at the time an ISO is granted, the optionee owns
(or is deemed to own under Section 424(d) of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the exercise price of such
ISO shall not be less than 110% of the market value of the Common Stock subject
to such ISO on the date of grant.

  The holder hereof may effect a cashless exercise of the Common Stock
underlying the holder's options by delivering the contract to the Company
together with a Subscription in the form indicated for that purpose, duly
executed by such holder, in which case no payment of cash will be required.
Upon such cashless exercise, the number of shares of Common Stock to be
purchased by each holder hereof shall be determined by dividing:  (i) the number
obtained by multiplying the number of shares that are the subject of each
holder's contracts by the amount, if any, by which the then market value (as
hereinafter defined) exceeds the exercise price; by (ii) the per share exercise
price.  In no event shall the Company be obligated to issue any fractional
securities and, at the time it causes a certificate or certificates to be
issued, it shall pay the holder in lieu of any fractional securities or shares
to which such holder would otherwise be entitled, by the Company check, in an
amount equal to such fraction multiplied by the market value.  The market value
shall be determined on a per share basis as of the close of the business day
preceding the exercise, which determination shall be made as follows:  (a) if
the Common Stock is listed for trading on a national or regional stock exchange
or is included on the NASDAQ National Market or Small-Cap Market, the average
closing sale price quoted on such exchange or the NASDAQ National Market or for
the ten (10) trading days immediately preceding the date of exercise, or if no
trade of the Common Stock shall have been reported during such period, the  last
sale price so quoted for the next day prior thereto on which a trade in the
Common Stock was so reported; or (b) if the Common Stock is not so listed,
admitted to trading or included, the average of the closing highest reported bid
and lowest reported ask price as quoted on the National Association of
Securities Dealer's OTC Bulletin Board or in the "pink sheets" published by the
National Daily Quotation Bureau for the first day immediately preceding the date
of exercise on which the Common Stock is traded.

  6.   TERM. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion;
provided,however, that the term of each ISO granted pursuant to the Plan shall
be for a period not exceeding 10 years from the date of grant thereof, and
further, provided, that if, at the time an ISO is granted, the optionee owns (or
is deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
of any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five years from the date of grant. Options shall be subject
to earlier termination as hereinafter provided.

  7.   EXERCISE. An option (or any part or installment thereof), to the
<PAGE>

extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract permits installment
payments) (a) in cash or by certified check or (b) if the applicable Contract
permits, with previously acquired shares of Common Stock, or options to purchase
shares of Common Stock having an aggregate fair market value on the date of
exercise (determined in accordance with Paragraph 5) equal to the aggregate
exercise price of all options being exercised, or with any combination of cash,
certified check or shares of Common Stock.
The Committee may, in its sole discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed notice,
together with a copy of his irrevocable instructions to a broker acceptable to
the Committee to deliver promptly to the Company the amount of sale or loan
proceeds sufficient to pay such exercise price. In connection therewith, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.

  A person entitled to receive Common Stock upon the exercise of an option
shall not have the rights of a stockholder with respect to such shares of Common
Stock until the date of issuance of a stock certificate to him for such shares;
provided, however, that until such stock certificate is issued, any optionee
using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired shares.

  8.   TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason (other
than the death or Disability of the Optionee) may exercise such option, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination if the Optionee resigns from the Company,
or one year in the event an Optionee's employment is terminated by the Company,
or Optionee is a Consultant or Director of the Company, but not thereafter and
in no event after the date the option would otherwise have expired; provided,
however, that if such relationship is terminated either (a) for cause, or (b)
without the consent of the Company, such option shall terminate immediately.

  For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.

  Except as may otherwise be expressly provided in the applicable Contract,
Employee Options and Consultant Options granted under the Plan shall not be
affected by any change in the status of the optionee so long as the optionee
continues to be an employee of, or a consultant to, the Company, or any of the
<PAGE>

Subsidiaries or a Parent (regardless of having changed from one to the other or
having been transferred from one corporation to another).

  Except as may otherwise be expressly provided in the applicable Contract, the
holder of a Non-Employee Director Option whose directorship with the Company has
terminated for any reason other than his death or Disability may exercise such
option, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired; provided, however,
that if his directorship shall be terminated for cause, such option shall
terminate immediately.

  Nothing in the Plan or in any option granted under the Plan shall confer on
any optionee any right to continue in the employ of, or as a consultant to, the
Company, any of its Subsidiaries or a Parent, or as a director of the Company,
or interfere in any way with any right of the Company, any of its Subsidiaries
or a Parent to terminate the optionee's relationship at any time for any reason
whatsoever without liability to the Company, any of its Subsidiaries or a
Parent.

  9.   DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised, to
the extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.

  Except as may otherwise be expressly provided in the applicable Contract, any
optionee whose relationship as an employee of, or consultant to, the Company,
its Parent and Subsidiaries has terminated by reason of such optionee's
Disability may exercise his Employee Option or Consultant Option, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.

  Except as may otherwise be expressly provided in the applicable Contract, if
an optionee dies (a) while he is a director of the Company, (b) within three
months after the termination of his directorship with the Company (unless such
termination was for cause) or (c) within one year after the termination
following the termination of his directorship by reason of Disability, his Non-
Employee Director Options may be exercised, to the extent exercisable on the
date of his death, by his Legal Representative at any time within one year after
death, but not thereafter and in no event after the date the option would
otherwise have expired. Except as may otherwise be expressly provided in the
applicable Contract, an optionee whose directorship with the Company has
terminated by reason of Disability, may exercise his Non-Employee Director
Options, to the extent exercisable on the effective date of such termination, at
any time within one year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.

10.  COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its
<PAGE>

sole discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.

  The Committee may require, in its sole discretion, as a condition to the
exercise of any option that the optionee execute and deliver to the Company his
representations and warranties, in form, substance and scope satisfactory to the
Committee, which the Committee determines are necessary or convenient to
facilitate the perfection of an exemption from the registration requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including without limitation that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.

  In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.

  11.  STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.

  12.  ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, split-up, combination
or exchange of shares or the like which results in a change in the number or
kind of shares of Common Stock which is outstanding immediately prior to such
event, the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each outstanding option and the
exercise price thereof, and the 162(m) Maximum shall be appropriately adjusted
in the same manner as the number and kind of shares of a stockholder of the
Company who owned the same number and kind of shares immediately prior to such
event, and the exercise price of the options shall be adjusted so that the
aggregate exercise price of each outstanding unexercised option remains the
<PAGE>

same. Notwithstanding the foregoing, such adjustment may provide for the
elimination of fractional shares which might otherwise be subject to options
without payment therefor. Such adjustments shall be made by the Board of
Directors, whose determination shall be conclusive and binding on all parties.

  In the event of a Corporate Transaction or Change of Control of the Company as
defined in section 19 herein, or upon the dissolution or liquidation of the
Company, an optionee's rights with respect to exercisability of outstanding
options under the Plan shall automatically be accelerated and fully vested, and
an optionee shall thereafter have the absolute right to exercise his option in
whole or in part for and during the remainder of the term for which his option
is outstanding. The portion of any Incentive Stock Option accelerated under this
Section 12 in connection with a Corporate Transaction, Change in Control,
liquidation or dissolution of the Company, shall remain exercisable as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar
limitation of Section 422(d) of the Code is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated excess portion of such Option
shall be exercisable as a Non-Qualified Stock Option.

  13.  AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on December 13, 1998. No option may be granted under the Plan
after December 31, 2001. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3 of the Securities Exchange Act of 1934,
Section 162(m) of the Code, or any change in applicable law, regulations,
rulings or interpretations of administrative agencies; provided, however, that
no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or the 162(m) Maximum, (b) to the extent required by Rule
16b-3, materially increase the benefits accruing to participants under the Plan
or (c) change the eligibility requirements to receive options hereunder. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing and outstanding option affected thereby, adversely
affect his rights under such option. The power of the Committee to construe and
administer any options granted under the Plan prior to the termination or
suspension of the Plan nevertheless shall continue after such termination or
during such suspension.

  14.  NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void ab initio
and of no force or effect.

  15.  WITHHOLDING TAXES. The Company may withhold (a) cash, (b) subject to any
limitations under Rule 16b-3, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value on the exercise date
(determined in accordance with Paragraph 5), or (c) any combination thereof, in
an amount equal to the amount which the Committee determines is necessary to
<PAGE>

satisfy the Company's obligation to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required
payments have been made.

  16.  LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon exercise of
an option under the Plan and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as it determines, in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act and any
applicable state securities laws, (b) implement the provisions of the Plan or
any agreement between the Company and the optionee with respect to such shares
of Common Stock, or (c) permit the Company to determine the occurrence of a
"disqualifying disposition", as described in Section 421(b) of the Code, of the
shares of Common Stock issued or transferred upon the exercise of an ISO granted
under the Plan.

  The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock upon the exercise of an option granted under the Plan, as
well as all fees and expenses incurred by the Company in connection with such
issuance.

  17.  USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for such corporate purposes as the Board
of Directors may determine.

  18.  SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.

  19.  DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:

  (a)  "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:

  (i)    the direct or indirect acquisition by any person or related group of
persons (other than an acquisition from or by the Company or by a Company-
sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than eighty percent (80%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which a majority of
the Continuing Directors who are not Affiliates or Associates of the offeror do
not recommend such stockholders accept, or

  (ii)   a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members (rounded up to the
<PAGE>

next whole number) ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who are Continuing Directors.

  (b)  "Constituent Corporation" shall mean any corporation which engages
with the Company, any of its Subsidiaries or a Parent in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.

  (c)  "Consultant Option" shall mean a NQSO granted pursuant to the Plan to a
person who, at the time of grant, is a consultant to the Company or a
Subsidiary of the Company, and at such time is neither a common law employee of
the Company or any of its Subsidiaries nor a director of the Company.

  (d)  "Corporate Transaction" means any of the following transactions:

  (i)    a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
state in which the Company is incorporated;

  (ii)   the sale, transfer or other disposition of all or substantially all of
the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;

  (iii)  any reverse merger in which the Company is the surviving entity but in
which securities possessing more than eighty percent (80%) of the total combined
voting power of the Company's outstanding securities are transferred to a person
or persons different from those who held such securities immediately prior to
such merger; or

  (iv)   an acquisition by any person or related group of persons (other than
the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than eighty percent (80%) of the total combined voting power of
the Company's outstanding securities (whether or not in a transaction also
constituting a Change in Control), but excluding any such transaction that the
Administrator determines shall not be a Corporate Transaction.

     (e)  "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.

     (f)  "Employee Option" shall mean an option granted pursuant to the Plan to
an individual who, at the time of grant, is an employee of the Company or any of
its Subsidiaries.

     (g)  "Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased
or incapacitated optionee with respect to an option granted under the Plan.

     (h)  "Non-Employee Director" shall mean a person who is a director of the
Company, but is not a common law employee of the Company, any of its
Subsidiaries or a Parent.

     (i)  "Non-Employee Director Option" shall mean a NQSO granted
pursuant to the Plan to a person who, at the time of the grant, is a Non-
Employee Director.
<PAGE>

     (j)  "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.

     (k)  "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.

  20.    GOVERNING LAW; CONSTRUCTION.  The Plan, such options as may be
granted hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.

  Neither the Plan nor any Contracts shall be construed or interpreted with any
presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.

  21.    PARTIAL INVALIDITY.  The invalidity, illegality or unenforceability of
any provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.

  22.  STOCKHOLDER APPROVAL.  The Plan shall be subject to approval by the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote thereon at the next duly held meeting of the Company's
stockholders at which a quorum is present.  No options granted hereunder may be
exercised prior to such approval; provided, however, that the date of grant of
any option shall be determined as if the Plan had not been subject to such
approval.  Notwithstanding the foregoing, if the Plan is not approved by a vote
of the stockholders of the Company on or before June 30, 1999, the Plan and any
options granted hereunder shall terminate.
<PAGE>

                       FORM OF CASHLESS EXERCISE AGREEMENT
                       -----------------------------------


TO:  Avi Moskowitz, President
     Virtual Communities, Inc.
     151 West 25th Street
     New York, New York 10001


  The undersigned, the holder of an option contract representing the right to
acquire _____ shares of Virtual Communities, Inc. (the "Company"), which
contract is being delivered herewith, hereby irrevocably elects the cashless
exercise of the purchase right provided by the Company's option plan and the
option contract for and to purchase thereunder, Shares of the Company in
accordance with the formula provided at Section five (5) of the option contract.
The undersigned requests that the certificates for such Shares be issued in the
name of, and delivered to ______________________, whose address is
__________________________________________________ , all in accordance with the
Company's stock option plan and the option contract.


Dated: ________________________


                                               ______________________________
                                               (Signature must conform in all
                                               respects to name of Holder as
                                               specified on the fact of the
                                               Warrant Certificate)


                                               ______________________________
                                               ______________________________
                                                  (Address)

                                               ______________________________
                                                  (Social Security Number of
                                                  Tax Identification Number)
<PAGE>

                             1999 STOCK OPTION PLAN

                                       OF

                            VIRTUAL COMMUNITIES, INC.


  1.   PURPOSES OF THE PLAN. This stock option plan (the "Plan") is designed to
provide an incentive to employees (including directors and officers who are
employees) and to consultants and directors who are not employees of Virtual
Communities, Inc., a Delaware corporation (the "Company"), or any of its
Subsidiaries (as defined in Paragraph 19), and to offer an additional inducement
in obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.

  2.   STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12, the
aggregate number of shares of common stock, $.0001 par value per share, of the
Company ("Common Stock") for which options may be granted under the Plan shall
not exceed 1,000,000. Such shares of Common Stock may, in the discretion of the
Board of Directors of the Company (the "Board of Directors"), consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock held in the treasury of the Company. Subject to the provisions of
Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercisable shall again become available for the granting of
options under the Plan. The Company shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.

  3.   ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or a committee of the Board of Directors consisting of not
less than two directors (collectively, the "Committee"). A majority of the
members of the Committee shall constitute a quorum, and the acts of a majority
of the members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.

  Subject to the express provisions of the Plan, the Committee shall have the
authority, in its sole discretion, to determine the employees who shall be
granted Employee Options and the consultants who shall be granted Consultant
Options and the Non-Employee Directors who shall be granted Non-Employee
Director Options (all as defined in Paragraph 19); the times when options shall
be granted; whether an Employee Option shall be an ISO or a NQSO; the number of
shares of Common Stock to be subject to each option; the term of each option;
the date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the
number of shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any option or installment; whether shares of Common Stock may be
issued upon the exercise of an option as partly paid and, if so, the dates when
future installments of the exercise price shall become due and the amounts of
<PAGE>

such installments; the exercise price of each option; the form of payment of the
exercise price, whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and, if so, whether to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
contract referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company, any of its Subsidiaries or a Parent (as defined in Paragraph
19), to financial objectives for the Company, any of its Subsidiaries or a
Parent, a division of any of the foregoing, a product line or other category,
and/or the period of continued employment of the optionee with the Company, any
of its Subsidiaries or a Parent, and to determine whether such contingencies
have been met; whether an optionee is Disabled (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes
or other amounts; the fair market value of a share of Common Stock; to construe
the respective Contracts and the Plan; with the consent of the optionee, to
cancel or modify an option, provided, that the modified provision is permitted
to be included in an option granted under the Plan on the date of the
modification, and further, provided, that in the case of a modification (within
the meaning of Section 424(h) of the Code) of an ISO, such option as modified
would be permitted to be granted on the date of such modification under the
terms of the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; and to make all other determinations necessary or
advisable for administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any option granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive and binding on the parties.

  No member or former member of the Committee shall be liable for any action,
failure to act or determination made in good faith with respect to the Plan or
any option hereunder. In addition, the Company shall indemnify and hold harmless
each member and former member of the Committee and their respective successors,
assigns, heirs and personal representatives from and against any liability,
loss, claim, damage and expense (including without limitation attorneys' fees
and expenses) incurred in connection therewith by reason of any action, failure
to act or determination made in good faith under or in connection with the Plan
or any option hereunder to the fullest extent permitted with respect to
directors under the Company's certificate of
incorporation, by-laws or applicable law.

  4.   ELIGIBILITY. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant (a) Employee Options
to employees (including officers and directors who are employees) of the Company
or any of its Subsidiaries, (b) Consultant Options to consultants to the Company
or any of its Subsidiaries, and (c) Non-Employee Director Options to Non-
Employee Directors. Such options granted shall cover such number of shares of
Common Stock as the Committee may determine, in its sole discretion; provided,
however, that the maximum number of shares subject to Employee Options that may
be granted to any individual during any calendar year under the Plan (the
"162(m) Maximum") shall not exceed 300,000 shares; and further, provided, that
the aggregate market value (determined at the time the option is granted in
accordance with Paragraph 5) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are exercisable
for the first time by such optionee during any calendar year shall not exceed
$100,000. Such limitation shall be applied by taking ISOs into account in the
<PAGE>

order in which they were granted. Any option (or the portion thereof) granted in
excess of such amount shall be treated as a NQSO.

  5.   EXERCISE PRICE. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee in its sole discretion;
provided, however, that the exercise price of an ISO shall not be less than the
market value of the Common Stock subject to such option on the date of grant;
and further, provided, that if, at the time an ISO is granted, the optionee owns
(or is deemed to own under Section 424(d) of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the exercise price of such
ISO shall not be less than 110% of the market value of the Common Stock subject
to such ISO on the date of grant.

  The holder hereof may effect a cashless exercise of the Common Stock
underlying the holder's options by delivering the contract to the Company
together with a Subscription in the form indicated for that purpose, duly
executed by such holder, in which case no payment of cash will be required. Upon
such cashless exercise, the number of shares of Common Stock to be purchased by
each holder hereof shall be determined by dividing: (i) the number obtained by
multiplying the number of shares that are the subject of each holder's contracts
by the amount, if any, by which the then market value (as hereinafter defined)
exceeds the exercise price; by (ii) the per share exercise price. In no event
shall the Company be obligated to issue any fractional securities and, at the
time it causes a certificate or certificates to be issued, it shall pay the
holder in lieu of any fractional securities or shares to which such holder would
otherwise be entitled, by the Company check, in an amount equal to such fraction
multiplied by the market value. The market value shall be determined on a per
share basis as of the close of the business day preceding the exercise, which
determination shall be made as follows: (a) if the Common Stock is listed for
trading on a national or regional stock exchange or is included on the NASDAQ
National Market or Small-Cap Market, the average closing sale price quoted on
such exchange or the NASDAQ National Market or for the ten (10) trading days
immediately preceding the date of exercise, or if no trade of the Common Stock
shall have been reported during such period, the last sale price so quoted for
the next day prior thereto on which a trade in the Common Stock was so reported;
or (b) if the Common Stock is not so listed, admitted to trading or included,
the average of the closing highest reported bid and lowest reported ask price as
quoted on the National Association of Securities Dealer's OTC Bulletin Board or
in the "pink sheets" published by the National Daily Quotation Bureau for the
first day immediately preceding the date of exercise on which the Common Stock
is traded.

  6.   TERM. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion;
provided,however, that the term of each ISO granted pursuant to the Plan shall
be for a period not exceeding 10 years from the date of grant thereof, and
further, provided, that if, at the time an ISO is granted, the optionee owns (or
is deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
of any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five years from the date of grant. Options shall be subject
to earlier termination as hereinafter provided.

  7.   EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
<PAGE>

specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract permits installment
payments) (a) in cash or by certified check or (b) if the applicable Contract
permits, with previously acquired shares of Common Stock, or options to purchase
shares of Common Stock having an aggregate fair market value on the date of
exercise (determined in accordance with Paragraph 5) equal to the aggregate
exercise price of all options being exercised, or with any combination of cash,
certified check or shares of Common Stock.  The Committee may, in its sole
discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed notice,
together with a copy of his irrevocable instructions to a broker acceptable to
the Committee to deliver promptly to the Company the amount of sale or loan
proceeds sufficient to pay such exercise price. In connection therewith, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.

    A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.

  8.   TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason (other
than the death or Disability of the Optionee) may exercise such option, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination if the Optionee resigns from the Company,
or one year in the event an Optionee's employment is terminated by the Company,
or Optionee is a Consultant or Director of the Company, but not thereafter and
in no event after the date the option would otherwise have expired; provided,
however, that if such relationship is terminated either (a) for cause, or
(b)without the consent of the Company, such option shall terminate immediately.

  For the purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.

  Except as may otherwise be expressly provided in the applicable Contract,
Employee Options and Consultant Options granted under the Plan shall not be
affected by any change in the status of the optionee so long as the optionee
continues to be an employee of, or a consultant to, the Company, or any of the
Subsidiaries or a Parent (regardless of having changed from one to the other or
having been transferred from one corporation to another).
<PAGE>

  Except as may otherwise be expressly provided in the applicable Contract, the
holder of a Non-Employee Director Option whose directorship with the Company has
terminated for any reason other than his death or Disability may exercise such
option, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired; provided, however,
that if his directorship shall be terminated for cause, such option shall
terminate immediately.

  Nothing in the Plan or in any option granted under the Plan shall confer on
any optionee any right to continue in the employ of, or as a consultant to, the
Company, any of its Subsidiaries or a Parent, or as a director of the Company,
or interfere in any way with any right of the Company, any of its Subsidiaries
or a Parent to terminate the optionee's relationship at any time for any reason
whatsoever without liability to the Company, any of its Subsidiaries or a
Parent.

  9.   DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be

expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised, to
the extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.

  Except as may otherwise be expressly provided in the applicable Contract, any
optionee whose relationship as an employee of, or consultant to, the Company,
its Parent and Subsidiaries has terminated by reason of such optionee's
Disability may exercise his Employee Option or Consultant Option, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.

  Except as may otherwise be expressly provided in the applicable Contract, if
an optionee dies (a) while he is a director of the Company, (b) within three
months after the termination of his directorship with the Company (unless such
termination was for cause) or (c) within one year after the termination
following the termination of his directorship by reason of Disability, his Non-
Employee Director Options may be exercised, to the extent exercisable on the
date of his death, by his Legal Representative at any time within one year after
death, but not thereafter and in no event after the date the option would
otherwise have expired. Except as may otherwise be expressly provided in the
applicable Contract, an optionee whose directorship with the Company has
terminated by reason of Disability, may exercise his Non-Employee Director
Options, to the extent exercisable on the effective date of such termination, at
any time within one year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.

     10.  COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its
sole discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
<PAGE>

"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.

  The Committee may require, in its sole discretion, as a condition to the
exercise of any option that the optionee execute and deliver to the Company his
representations and warranties, in form, substance and scope satisfactory to the
Committee, which the Committee determines are necessary or convenient to
facilitate the perfection of an exemption from the registration requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including without limitation that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.

  In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.

  11.  STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.

  12.  ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, split-up, combination
or exchange of shares or the like which results in a change in the number or
kind of shares of Common Stock which is outstanding immediately prior to such
event, the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each outstanding option and the
exercise price thereof, and the 162(m) Maximum shall be appropriately adjusted
in the same manner as the number and kind of shares of a stockholder of the
Company who owned the same number and kind of shares immediately prior to such
event, and the exercise price of the options shall be adjusted so that the
aggregate exercise price of each outstanding unexercised option remains the
same. Notwithstanding the foregoing, such adjustment may provide for the
elimination of fractional shares which might otherwise be subject to options
<PAGE>

without payment therefor. Such adjustments shall be made by the Board of
Directors, whose determination shall be conclusive and binding on all parties.

  In the event of a Corporate Transaction or Change of Control of the Company as
defined in section 19 herein, or upon the dissolution or liquidation of the
Company, an optionee's rights with respect to exercisability of outstanding
options under the Plan shall automatically be accelerated and fully vested, and
an optionee shall thereafter have the absolute right to exercise his option in
whole or in part for and during the remainder of the term for which his option
is outstanding. The portion of any Incentive Stock Option accelerated under this
Section 12 in connection with a Corporate Transaction, Change in Control,
liquidation or dissolution of the Company, shall remain exercisable as an
Incentive Stock Option under the Code only to the extent the $100,000 dollar
limitation of Section 422(d) of the Code is not exceeded. To the extent such
dollar limitation is exceeded, the accelerated excess portion of such Option
shall be exercisable as a Non-Qualified Stock Option.

  13.  AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on April , 1999. No option may be granted under the Plan
after December 31, 2001. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3 of the Securities Exchange Act of 1934,
Section 162(m) of the Code, or any change in applicable law, regulations,
rulings or interpretations of administrative agencies; provided, however, that
no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or the 162(m) Maximum, (b) to the extent required by Rule
16b-3, materially increase the benefits accruing to participants under the Plan
or (c) change the eligibility requirements to receive options hereunder. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing and outstanding option affected thereby, adversely
affect his rights under such option. The power of the Committee to construe and
administer any options granted under the Plan prior to the termination or
suspension of the Plan nevertheless shall continue after such termination or
during such suspension.

  14.  NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives.  Except to the extent provided above,
options may not be assigned, transferred,
pledged, hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void ab initio and of no force or effect.

  15.  WITHHOLDING TAXES. The Company may withhold (a) cash, (b) subject to any
limitations under Rule 16b-3, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value on the exercise date
(determined in accordance with Paragraph 5), or (c) any combination thereof, in
an amount equal to the amount which the Committee determines is necessary to
satisfy the Company's obligation to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
<PAGE>

its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required
payments have been made.

  16.  LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon exercise of
an option under the Plan and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as it determines, in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act and any
applicable state securities laws, (b) implement the provisions of the Plan or
any agreement between the Company and the optionee with respect to such shares
of Common Stock, or (c) permit the Company to determine the occurrence of a
"disqualifying disposition", as described in Section 421(b) of the Code, of the
shares of Common Stock issued or transferred upon the exercise of an ISO granted
under the Plan.

  The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock upon the exercise of an option granted under the Plan, as
well as all fees and expenses incurred by the Company in connection with such
issuance.

  17.  USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for such corporate purposes as the Board
of Directors may determine.

  18.  SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.

  19.  DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:

  (a)  "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:

   (i)   the direct or indirect acquisition by any person or related group of
persons (other than an acquisition from or by the Company or by a Company-
sponsored employee benefit plan or by a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than eighty percent (80%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders which a majority of
the Continuing Directors who are not Affiliates or Associates of the offeror do
not recommend such stockholders accept, or

   (ii)  a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members (rounded up to the
next whole number) ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who are Continuing Directors.
<PAGE>

  (b)  "Constituent Corporation" shall mean any corporation which engages
with the Company, any of its Subsidiaries or a Parent in a transaction to which
Section 424(a) of the Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.

  (c)  "Consultant Option" shall mean a NQSO granted pursuant to the Plan to a
person who, at the time of grant, is a consultant to the Company or a
Subsidiary of the Company, and at such time is neither a common law employee of
the Company or any of its Subsidiaries nor a director of the Company.

  (d)  "Corporate Transaction" means any of the following transactions:

   (i)   a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;

   (ii)  the sale, transfer or other disposition of all or substantially
all of the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;

   (iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than eighty percent (80%) of the total
combined voting power of the Company's outstanding securities are transferred to
a person or persons different from those who held such securities immediately
prior to such merger; or

   (iv)  an acquisition by any person or related group of persons (other
than the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities
possessing more than eighty percent (80%) of the total combined voting power of
the Company's outstanding securities (whether or not in a transaction also
constituting a Change in Control), but excluding any such transaction that the
Administrator determines shall not be a Corporate Transaction.

    (e)  "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Code.

    (f)  "Employee Option" shall mean an option granted pursuant to the
Plan to an individual who, at the time of grant, is an employee of the Company
or any of its Subsidiaries.

    (g)  "Legal Representative" shall mean the executor, administrator or other
person who at the time is entitled by law to exercise the rights of a deceased
or incapacitated optionee with respect to an option granted under the Plan.

    (h)  "Non-Employee Director" shall mean a person who is a director of the
Company, but is not a common law employee of the Company, any of its
Subsidiaries or a Parent.

    (i)  "Non-Employee Director Option" shall mean a NQSO granted pursuant to
the Plan to a person who, at the time of the grant, is a Non-Employee Director.

    (j)  "Parent" shall have the same definition as "parent corporation" in
Section 424(e) of the Code.
<PAGE>

    (k)  "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.

  20.  GOVERNING LAW; CONSTRUCTION. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.

  Neither the Plan nor any Contracts shall be construed or interpreted with any
presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.

  21.  PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of any
provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.

  22.  STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote thereon at the next duly held meeting of the Company's
stockholders at which a quorum is present. No options granted hereunder may be
exercised prior to such approval; provided, however, that the date of grant of
any option shall be determined as if the Plan had not been subject to such
approval. Notwithstanding the foregoing, if the Plan is not approved by a vote
of the stockholders of the Company on or before December 31, 1999, the Plan and
any options granted hereunder shall terminate.
<PAGE>

                      FORM OF CASHLESS EXERCISE AGREEMENT
                      -----------------------------------


TO:  Avi Moskowitz, President
     Virtual Communities, Inc.
     151 West 25th Street
     New York, New York 10001


  The undersigned, the holder of an option contract representing the right to
acquire _____ shares of Virtual Communities, Inc. (the "Company"), which
contract is being delivered herewith, hereby irrevocably elects the cashless
exercise of the purchase right provided by the Company's option plan and the
option contract for and to purchase thereunder, Shares of the Company in
accordance with the formula provided at Section five (5) of the option contract.
The undersigned requests that the certificates for such Shares be issued in the
name of, and delivered to __________________________, whose address is
_______________________________________ , all in accordance with the Company's
stock option plan and the option contract.


                                        Dated: ________________________


                                        ______________________________
                                        (Signature must conform in all
                                        respects to name of Holder as
                                        specified on the fact of the
                                        Warrant Certificate)


                                        ______________________________

                                        ______________________________
                                        (Address)

                                        ______________________________
                                        (Social Security Number of
                                        Tax Identification Number)
<PAGE>

                           VIRTUAL COMMUNITIES, INC.

                           1999 STOCK INCENTIVE PLAN

 1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional
incentive to Employees, Directors and Consultants and to promote the success of
the Company's business.

 2. Definitions. As used herein, the following definitions shall apply:

 (a) "Administrator" means the Board or any of the Committees appointed to
administer the Plan.

 (b) "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.

 (c) "Applicable Laws" means the legal requirements relating to the

administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.

 (d) "Award" means the grant of an Option, SAR, Dividend Equivalent Right,
Restricted Stock, Performance Unit, Performance Share, or other right or
benefit under the Plan.

 (e) "Award Agreement" means the written agreement evidencing the grant of an
Award executed by the Company and the Grantee, including any amendments
thereto.

 (f) "Board" means the Board of Directors of the Company.

 (g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such termination is
for "Cause" as such term is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in the
absence of such then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's: (i) refusal or
failure to act in accordance with any specific, lawful direction or order of
the Company or a Related Entity; (ii) unfitness or unavailability for service
or unsatisfactory performance (other than as a result of Disability); (iii)
performance of any act or failure to perform any act in bad faith and to the
detriment of the Company or a Related Entity; (iv) dishonesty, intentional
misconduct or material breach of any agreement with the Company or a Related
Entity; or (v) commission of a crime involving dishonesty, breach of trust, or
physical or emotional harm to any person. At least 30 days prior to the
termination of the Grantee's Continuous Service pursuant to (i) or (ii) above,
the Administrator shall provide the Grantee with notice of the Company's or such
Related Entity's intent to terminate, the reason therefor, and an opportunity
for the Grantee to cure such defects in his or her service to the Company's or
such Related Entity's satisfaction. During this 30 day (or longer) period, no
Award issued to the Grantee under the Plan may be exercised or purchased.

 (h) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
<PAGE>

          (i) the direct or indirect acquisition by any person or related group
     of persons (other than an acquisition from or by the Company or by a
     Company- sponsored employee benefit plan or by a person that directly or
     indirectly controls, is controlled by, or is under common control with, the
     Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
     Exchange Act) of securities possessing more than fifty percent (50%) of the
     total combined voting power of the Company's outstanding securities
     pursuant to a tender or exchange offer made directly to the Company's
     stockholders which a majority of the Continuing Directors who are not
     Affiliates or Associates of the offeror do not recommend such stockholders
     accept, or

          (ii) a change in the composition of the Board over a period of thirty-
     six (36) months or less such that a majority of the Board members (rounded
     up to the next whole number) ceases, by reason of one or more contested
     elections for Board membership, to be comprised of individuals who are
     Continuing Directors.

 (i) "Code" means the Internal Revenue Code of 1986, as amended.

 (j) "Committee" means any committee appointed by the Board to administer the
Plan.

 (k) "Common Stock" means the common stock of the Company.

 (l) "Company" means Virtual Communities, Inc., a Delaware corporation.

 (m) "Consultant" means any person (other than an Employee or a Director,
solely with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

 (n) "Continuing Directors" means members of the Board who either (i) have
been Board members continuously for a period of at least thirty-six (36) months
or (ii) have been Board members for less than thirty-six (36) months and were
elected or nominated for election as Board members by at least a majority of the
Board members described in clause (i) who were still in office at the time such
election or nomination was approved by the Board.

 (o) "Continuous Service" means that the provision of services to the Company
or a Related Entity in any capacity of Employee, Director or Consultant, is not
interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave. For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.

 (p) "Corporate Transaction" means any of the following transactions:

  (i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
<PAGE>

  (ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company (including the capital stock of the Company's
subsidiary corporations) in connection with the complete liquidation or
dissolution of the Company;

  (iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger; or

  (iv) acquisition by any person or related group of persons (other than
the Company or by a Company-sponsored employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities (whether or not in a
transaction also constituting a Change in Control), but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction.

 (q) "Covered Employee" means an Employee who is a "covered employee" under
Section 162(m)(3) of the Code.

 (r) "Director" means a member of the Board or the board of directors of any
Related Entity.

 (s) "Disability" means that a Grantee would qualify for benefit payments
under the long-term disability policy of the Company or the Related Entity to
which the Grantee provides services regardless of whether the Grantee is
covered by such policy.

 (t) "Dividend Equivalent Right" means a right entitling the Grantee to
compensation measured by dividends paid with respect to Common Stock.

 (u) "Employee" means any person, including an Officer or Director, who is
an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related Entity shall not be sufficient to constitute
"employment" by the Company.

 (v) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 (w) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:

  (i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price
was reported on that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the Administrator
to be the primary market for the Common Stock or the Nasdaq National
Market, whichever is applicable or (B) if the Common Stock is not traded on
any such exchange or national market system, the average of the closing bid
and asked prices of a Share on the Nasdaq Small Cap Market for the day
prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
<PAGE>

Administrator deems reliable; or

  (ii) In the absence of an established market for the Common Stock of the
type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.

 (x) "Grantee" means an Employee, Director or Consultant who receives an
Award pursuant to an Award Agreement under the Plan.

 (y) "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent (50%) of the beneficial interest, a
foundation in which these persons (or the Grantee) control the management of
assets, and any other entity in which these persons (or the Grantee) own more
than fifty percent (50%) of the voting interests.

 (z) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

 (aa) "Non-Qualified Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.

  (bb) "Officer" means a person who is an officer of the Company or a Related
Entity within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 (cc) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.

 (dd) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

 (ee) "Performance--Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.

 (ff) "Performance Shares" means Shares or an Award denominated in Shares
which may be earned in whole or in part upon attainment of performance criteria
established by the Administrator.

 (gg) "Performance Units" means an Award which may be earned in whole or in
part upon attainment of performance criteria established by the Administrator
and which may be settled for cash, Shares or other securities or a combination
of cash, Shares or other securities as established by the Administrator.

 (hh) "Plan" means this 1999 Stock Incentive Plan.

 (ii) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in which
the Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.

 (jj) "Related Entity Disposition" means the sale, distribution or other
disposition by the Company, a Parent or a Subsidiary of all or substantially
all of the interests of the Company, a Parent or a Subsidiary in any Related
<PAGE>

Entity effected by a sale, merger or consolidation or other transaction
involving that Related Entity or the sale of all or substantially all of the
assets of that Related Entity, other than any Related Entity Disposition to the
Company, a Parent or a Subsidiary.

  (kk) "Restricted Stock" means Shares issued under the Plan to the Grantee
for such consideration, if any, and subject to such restrictions on transfer,
rights of first refusal, repurchase provisions, forfeiture provisions, and
other terms and conditions as established by the Administrator.

  (ll) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor thereto.

  (mm) "SAR" means a stock appreciation right entitling the Grantee to Shares or
cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.

  (nn) "Share" means a share of the Common Stock.

  (oo) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.

 3. Stock Subject to the Plan.

 (a) Subject to the provisions of Section 10, below, the maximum aggregate
number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) is 1,000,000 Shares, plus an annual increase to be
added on the first day of the Company's fiscal year beginning in 2001 equal to
two percent (2%) of the number of Shares outstanding as of such date or a
lesser number of Shares determined by the Administrator. Notwithstanding the
foregoing, subject to the provisions of Section 10, below, of the number of
Shares specified above, the maximum aggregate number of Shares available for
grant of Incentive Stock Options shall be 900,000 Shares, plus an annual
increase to be added on the first day of the Company's fiscal year beginning in
2001 equal to the lesser of (x) 1,000,000 Shares, (y) two percent (2%) of the
number of Shares outstanding as of such date, or (z) a lesser number of Shares
determined by the Administrator. The Shares to be issued pursuant to Awards may
be authorized, but unissued, or reacquired Common Stock.

 (b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future issuance
under the Plan (unless the Plan has terminated). Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.

 4. Administration of the Plan.

 (a) Plan Administrator.
<PAGE>

  (i) Administration with Respect to Directors and Officers. With respect
to grants of Awards to Directors or Employees who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board
or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to
permit such grants and related transactions under the Plan to be exempt
from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board.

  (ii) Administration With Respect to Consultants and Other Employees.
With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. The Board
may authorize one or more Officers to grant such Awards and may limit such
authority as the Board determines from time to time.

  (iii) Administration With Respect to Covered Employees. Notwithstanding
the foregoing, grants of Awards to any Covered Employee intended to qualify
as Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to
Covered Employees, references to the "Administrator" or to a "Committee"
shall be deemed to be references to such Committee or subcommittee.

  (iv) Administration Errors. In the event an Award is granted in a manner
inconsistent with the provisions of this subsection (a), such Award shall
be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

 (b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:

  (i) to select the Employees, Directors and Consultants to whom Awards
may be granted from time to time hereunder;

  (ii) to determine whether and to what extent Awards are granted
hereunder;

  (iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

  (iv) to approve forms of Award Agreements for use under the Plan;

  (v) to determine the terms and conditions of any Award granted
hereunder;

  (vi) to amend the terms of any outstanding Award granted under the Plan,
provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;
<PAGE>

  (vii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan, including without limitation, any notice of Award or
Award Agreement, granted pursuant to the Plan;

  (viii) to establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable foreign jurisdictions and to
afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with
the provisions of the Plan; and

  (ix) to take such other action, not inconsistent with the terms of the
Plan, as the Administrator deems appropriate.


  5. Eligibility. Awards other than Incentive Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.

 6. Terms and Conditions of Awards.

  (a) Type of Awards. The Administrator is authorized under the Plan to award
any type of arrangement to an Employee, Director or Consultant that is not
inconsistent with the provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iii) any other security with the value derived from the
value of the Shares. Such awards include, without limitation, Options, SARs,
sales or bonuses of Restricted Stock, Dividend Equivalent Rights, Performance
Units or Performance Shares, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.

 (b) Designation of Award. Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as either
an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.

  (c) Conditions of Award. Subject to the terms of the Plan, the Administrator
shall determine the provisions, terms, and conditions of each Award including,
but not limited to, the Award vesting schedule, repurchase provisions, rights of
first refusal, forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment contingencies, and
satisfaction of any performance criteria. The performance criteria established
<PAGE>

by the Administrator may be based on any one of, or combination of, increase in
share price, earnings per share, total stockholder return, return on equity,
return on assets, return on investment, net operating income, cash flow,
revenue, economic value added, personal management objectives, or other measure
of performance selected by the Administrator. Partial achievement of the
specified criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement.

  (d) Acquisitions and Other Transactions. The Administrator may issue Awards
under the Plan in settlement, assumption or substitution for, outstanding awards
or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

 (e) Deferral of Award Payment. The Administrator may establish one or more
programs under the Plan to permit selected Grantees the opportunity to elect to
defer receipt of consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would entitle the
Grantee to payment or receipt of Shares or other consideration under an Award.
The Administrator may establish the election procedures, the timing of such
elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.

 (f) Award Exchange Programs. The Administrator may establish one or more
programs under the Plan to permit selected Grantees to exchange an Award under
the Plan for one or more other types of Awards under the Plan on such terms and
conditions as determined by the Administrator from time to time.

  (g) Separate Programs. The Administrator may establish one or more separate
programs under the Plan for the purpose of issuing particular forms of Awards to
one or more classes of Grantees on such terms and conditions as determined by
the Administrator from time to time.

 (h) Individual Option and SAR Limit. The maximum number of Shares with
respect to which Options and SARs may be granted to any Employee in any fiscal
year of the Company shall be 200,000 Shares. The foregoing limitation shall be
adjusted proportionately in connection with any change in the Company's
capitalization pursuant to Section 10, below. To the extent required by Section
162(m) of the Code or the regulations thereunder, in applying the foregoing
limitation with respect to an Employee, if any Option or SAR is canceled, the
canceled Option or SAR shall continue to count against the maximum number of
Shares with respect to which Options and SARs may be granted to the Employee.
For this purpose, the repricing of an Option (or in the case of a SAR, the base
amount on which the stock appreciation is calculated is reduced to reflect a
reduction in the Fair Market Value of the Common Stock) shall be treated as the
cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 (i) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee,
Director or Consultant to exercise any part or all of the Award prior to full
vesting of the Award. Any unvested Shares received pursuant to such exercise
may be subject to a repurchase right in favor of the Company or a Related
Entity or to any other restriction the Administrator determines to be
appropriate.
<PAGE>

 (j) Term of Award. The term of each Award shall be the term stated in the
Award Agreement, provided, however, that the term of an Incentive Stock Option
shall be no more than ten (10) years from the date of grant thereof. However, in
the case of an Incentive Stock Option granted to a Grantee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Award Agreement.

 (k) Transferability of Awards. Incentive Stock Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's
Incentive Stock Option in the event of the Grantee's death on a beneficiary
designation form provided by the Administrator. Other Awards may be
transferred by gift or through a domestic relations order to members of the
Grantee's Immediate Family to the extent provided in the Award Agreement or in
the manner and to the extent determined by the Administrator.

 (l) Time of Granting Awards. The date of grant of an Award shall for all
purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.

 7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.

  (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an
Award shall be as follows:

  (i) In the case of an Incentive Stock Option:

   (A) granted to an Employee who, at the time of the grant of such
 Incentive Stock Option owns stock representing more than ten percent
 (10%) of the voting power of all classes of stock of the Company or any
 Parent or Subsidiary, the per Share exercise price shall be not less
 than one hundred ten percent (110%) of the Fair Market Value per Share
 on the date of grant; or

   (B) granted to any Employee other than an Employee described in the
 preceding paragraph, the per Share exercise price shall be not less than
 one hundred percent (100%) of the Fair Market Value per Share on the
 date of grant.

  (ii) In the case of a Non-Qualified Stock Option, the per Share exercise
price shall be not less than eighty-five percent (85%) of the Fair Market
Value per Share on the date of grant.

  (iii) In the case of Awards intended to qualify as Performance-Based
Compensation, the exercise or purchase price, if any, shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
<PAGE>

  (iv) In the case of other Awards, such price as is determined by the
Administrator.

  (v) Notwithstanding the foregoing provisions of this Section 7(a), in
the case of an Award issued pursuant to Section 6(d), above, the exercise
or purchase price for the Award shall be determined in accordance with the
principles of Section 424(a) of the Code.

  (b) Consideration. Subject to Applicable Laws, the consideration to be paid
for the Shares to be issued upon exercise or purchase of an Award including the
method of payment, shall be determined by the Administrator (and, in the case of
an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following, provided that the portion of the consideration
equal to the par value of the Shares must be paid in cash or other legal
consideration permitted by the Delaware General Corporation Law:

  (i) cash;

  (ii) check;

  (iii) surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or
attestation equal to the aggregate exercise price of the Shares as to which
said Award shall be exercised (but only to the extent that such exercise of
the Award would not result in an accounting compensation charge with
respect to the Shares used to pay the exercise price unless otherwise
determined by the Administrator);

  (iv) with respect to Options, payment through a broker-dealer sale and
remittance procedure pursuant to which the Grantee (A) shall provide
written instructions to a Company designated brokerage firm to effect the
immediate sale of some or all of the purchased Shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased Shares and (B) shall provide written directives to the Company to
deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction; or

  (v) any combination of the foregoing methods of payment.

 (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or
other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.

 8. Exercise of Award.

 (a) Procedure for Exercise; Rights as a Stockholder.
<PAGE>

  (i) Any Award granted hereunder shall be exercisable at such times and
under such conditions as determined by the Administrator under the terms of
the Plan and specified in the Award Agreement.

  (ii) An Award shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Award by the person entitled to exercise the Award and full payment for
the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to
pay the purchase price as provided in Section 7(b)(v). Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to Shares subject to an
Award, notwithstanding the exercise of an Option or other Award. The
Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Award. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in the Award Agreement or Section
10, below.

 (b) Exercise of Award Following Termination of Continuous Service.

  (i) An Award may not be exercised after the termination date of such
Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided
in the Award Agreement.

  (ii) Where the Award Agreement permits a Grantee to exercise an Award
following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term
of the Award, whichever occurs first.

  (iii) Any Award designated as an Incentive Stock Option to the extent
not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its
terms for the period specified in the Award Agreement.

 9. Conditions Upon Issuance of Shares.

 (a) Shares shall not be issued pursuant to the exercise of an Award unless
the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

  (b) As a condition to the exercise of an Award, the Company may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any Applicable
Laws.

 10. Adjustments Upon Changes in Capitalization. Subject to any required
<PAGE>

action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
and SARs may be granted to any Employee in any fiscal year of the Company, as
well as any other terms that the Administrator determines require adjustment
shall be proportionately adjusted for (i) any increase or decrease in the number
of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Shares, or similar event
affecting the Shares, (ii) any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other transaction with respect to Common Stock to which Section 424(a) of the
Code applies or any similar transaction; provided, however that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator and its determination shall be final, binding and conclusive.
Except as the Administrator determines, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to,
the number or price of Shares subject to an Award.

 11. Corporate Transactions/Change in Control/Related Entity
Dispositions. Except as may be provided in an Award Agreement:

  (a) In the event of a Corporate Transaction, each Award which is at the time
outstanding under the Plan automatically shall become fully vested and
exercisable and be released from any restrictions on transfer (other than
transfer restrictions applicable to Incentive Stock Options) and repurchase or
forfeiture rights, immediately prior to the specified effective date of such
Corporate Transaction, for all of the Shares at the time represented by such
Award. Effective upon the consummation of the Corporate Transaction, all
outstanding Awards under the Plan shall terminate. However, all such Awards
shall not terminate if the Awards are, in connection with the Corporate
Transaction, assumed by the successor corporation or Parent thereof.

 (b) In the event of a Change in Control (other than a Change in Control
which also is a Corporate Transaction), each Award which is at the time
outstanding under the Plan automatically shall become fully vested and
exercisable and be released from any restrictions on transfer (other than
transfer restrictions applicable to Incentive Stock Options) and repurchase or
forfeiture rights, immediately prior to the specified effective date of such
Change in Control, for all of the Shares at the time represented by such Award.

 (c) Effective upon the consummation of a Related Entity Disposition, for
purposes of the Plan and all Awards, the Continuous Service of each Grantee who
is at the time engaged primarily in service to the Related Entity involved in
such Related Entity Disposition shall be deemed to terminate and each Award of
such Grantee which is at the time outstanding under the Plan automatically shall
become fully vested and exercisable and be released from any restrictions on
transfer (other than transfer restrictions applicable to Incentive Stock
Options) and repurchase or forfeiture rights for all of the Shares at the time
represented by such Award and be exercisable in accordance with the terms of the
Award Agreement evidencing such Award. However, such Continuous Service shall
not be deemed to terminate if such Award is, in connection with the Related
Entity Disposition, assumed by the successor entity or its Parent.
<PAGE>

 12. Effective Date and Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

 13. Amendment, Suspension or Termination of the Plan.

 (a) The Board may at any time amend, suspend or terminate the Plan. To the
extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required.

 (b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.

 (c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards
already granted, and such Awards shall remain in full force and effect as if
the Plan had not been amended, suspended or terminated, unless mutually agreed
otherwise between the Grantee and the Administrator, which agreement must be in
writing and signed by the Grantee and the Company.

 14. Reservation of Shares.

  (a) The Company, during the term of the Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

 (b) The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

  15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall
not confer upon any Grantee any right with respect to the Grantee's Continuous
Service, nor shall it interfere in any way with his or her right or the
Company's right to terminate the Grantee's Continuous Service at any time, with
or without cause.

  16. No Effect on Retirement and Other Benefit Plans. Except as specifically
provided in a retirement or other benefit plan of the Company or a Related
Entity, Awards shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or a Related
Entity, and shall not affect any benefits under any other benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount of benefits is related to level of compensation. The Plan is not a
"Retirement Plan" or "Welfare Plan" under the Employee Retirement Income
Security Act of 1974, as amended.

 17. Stockholder Approval. The grant of Incentive Stock Options under the
Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
<PAGE>

be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.