COFFEE HOLDING CO., INC.

                             1998 STOCK OPTION PLAN

      The purpose of the 1998 Stock Option Plan (the "Plan") is to assist COFFEE
HOLDING CO., INC.  (the  "Company")  to attract and retain  qualified  officers,
employees,  directors and consultants of the Company, a Subsidiary,  or a Parent
of the Company, by enabling them to acquire common stock of the Company and thus
providing  incentive  for them to expend  maximum  effort for the success of the
Company's  business.  The Plan  provides  for the  issuance of  incentive  stock
options   ("Incentive   Stock   Options')   pursuant  to  Section  5(a)  and  of
non-qualified  options  ("Non-Qualified  Options") pursuant to Section 5(b). The
Incentive  Stock  Options  granted under Section 5(a) are intended to qualify as
incentive stock options under Section 422 of the Internal  Revenue Code of 1986,
as amended (the "Code").  Non-Qualified Options granted pursuant to Section 5(b)
are intended to be options which do not satisfy the  requirements of Section 422
of the Code.  All  references to "options" in the Plan shall  include  Incentive
Stock Options and Non-Qualified Options.

      The  options  offered  pursuant  to the  Plan  are a  matter  of  separate
inducement  to the persons who receive them and are not in lieu of any salary or
other compensation for the services of such persons.

      The  Company by means of the Plan seeks to retain the  services of persons
now serving the Company or any Subsidiary or Parent of the Company and to secure
the services of additional  persons capable of providing  services  important to
the welfare of the Company or any Subsidiary or Parent of the Company.

      To assist in meeting the objectives  described  above,  the Company hereby
adopts the Plan.

      1. Amount and Source of Stock.  The  aggregate  number and class of shares
which may be the subject of options  granted  pursuant to the Plan is  2,000,000
shares of common  stock of the Company,  par value $.0001 per share,  subject to
adjustment  as provided in Section 9 of the Plan.  Such shares may be authorized
but  unissued  shares of common stock of the Company or may be shares held in or
acquired for the treasury of the  Company.  Any shares of common stock  reserved
for  issuance  or  transfer  under an option  which for any  reason  terminates,
expires or is  canceled  unexercised  as to such  shares,  may be  reserved  for
issuance or transfer  under another option granted under the Plan. The aggregate
fair market value  (determined  at the time the option is granted) of the shares
as to  which  Incentive  Stock  Options  may be  granted  to any  option  holder
("Optionee")  under this Plan or any other plan of the Company or any Subsidiary
or  Parent  of the  Company  which are  exercisable  for the first  time by such
Optionee during any calendar year shall not exceed $100,000.

      2. Administration of the Plan.

            (a) The Plan shall be  administered by the Board of Directors of the
Company,  which, to the extent it shall determine,  may delegate its powers with
respect  to  administration  of  the  Plan  to  a  committee  (the  "Committee")
consisting  of not  less  than  three  members.  The  Board


<PAGE>

of Directors shall determine, within the limits of the express provisions of the
Plan, those directors,  employees, and officers who are to receive options under
the Plan and the number of shares of common stock to be subject to such options.
Options granted under the Plan shall, subject to the provisions of Section 5 and
11 hereof and the following sentence, be in such form as determined and approved
by the Board of  Directors.  The Board of Directors  shall  interpret  the Plan,
prescribe,  amend  and  rescind  rules  and  regulations,   forms,  notices  and
agreements relating to it and make all determinations necessary or advisable for
its administration, all such actions as approved by the Board of Directors to be
final and conclusive.

            (b) The Board of Directors may from time to time appoint  members of
the Committee in addition to or in substitution for members previously appointed
and may fill any vacancies in the  Committee.  The Committee  shall elect one of
its members as Chairman,  and may appoint a secretary,  who need not be a member
of the Committee or a director of the Company,  to keep minutes of its meetings.
Meetings  of the  Committee  shall be held at such  times and places as it shall
deem advisable.  A majority of the members of the Committee  shall  constitute a
quorum.  All action of the Committee shall be by a majority of its members.  Any
action may be taken by unanimous written consent setting forth the action taken,
signed by all of the  members of the  Committee,  and action so taken shall have
the same effect as if it had been taken by unanimous vote at a meeting duly held
and called.  The  Committee  shall report its action at meetings or by unanimous
written consent to the Board of Directors.

            (c) At any time prior to the appointment of the Committee and at any
time thereafter when the Committee shall not be duly  constituted and subject to
all eligibility  limitations  which would otherwise apply to the Plan, the Board
of Directors shall exercise all the functions of the Committee under the Plan.

      3. Effective  Date and Term of Plan. The Plan as originally  adopted shall
become  effective when adopted by the Board of Directors of the Company,  except
that unless the Plan is authorized by the  affirmative  vote of the holders of a
majority of the  outstanding  shares of common  stock of the  Company  within 12
months  after its adoption by the Board of  Directors,  the Plan and all options
outstanding  under the Plan shall  terminate at the  expiration of such 12 month
period.  The  solicitation of such approval shall be in accordance with the laws
of the State of Nevada and, if applicable,  in accordance  with Section 14(a) of
the  Securities  Exchange  Act of 1934.  Options  may be granted  under the Plan
within 10 years from the date of its adoption by the Board of Directors, but not
thereafter.

      4.  Eligible  Participants.   Only  officers,  directors,   employees  and
consultants  of the Company or a Subsidiary  or a Parent of the Company  shall b
eligible to receive  options  under the Plan. An employee who is also a director
of the Company or a Subsidiary  or a Parent of the Company  shall be eligible to
participate  under the Plan.  Except as provided in Section  5(a)(v)  below,  no
Incentive Stock Option shall be granted to a non-employee director,  consultant,
or an individual who, immediately before the granting of the option, owns (or is
deemed to own) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or a Parent or Subsidiary of the Company.


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<PAGE>

      5. Grant and Terms of Options. The Board of Directors may grant options at
any time for from time to time prior to the  termination of the Plan, and except
as hereinafter  provided,  such options shall be subject to the following  terms
and conditions:

            (a) Incentive Stock Options.

                  (i) Purchase  Price.  The purchase  price provided for in each
Incentive  Stock Option granted  pursuant to this Section 5(a) of the Plan shall
be determined by the Board of Directors, provided that in no instance shall such
price be less than the fair market value of the shares subject to such option on
the date on which the Incentive Stock Option is granted.

                  (ii) Duration of Option.  Each Incentive  Stock Option granted
pursuant  to the Plan will  terminate  no later  than 10 years  from the date on
which it is granted, unless it is terminated earlier under Section 7 or 8.

                  (iii)  Transferability  of Option.  No Incentive  Stock Option
shall be  transferable by the employee in whole or in part other than by will or
the laws of descent and distribution, and each such option shall be exercisable,
during the lifetime of the employee, only by him or her.

                  (iv)  Exercise of Option.  Subject to the  provisions  of this
Section  5(a),  the  Board  of  Directors  shall  have  absolute  discretion  in
determining  whether any  Incentive  Stock  Option  granted  hereunder  shall be
exercisable  in whole at one time or in part from  time to time and,  if in part
from time to time,  the rate at which  such  option  shall be  exercisable  on a
cumulative or  non-cumulative  basis.  Except as provided in Section 7 and 8, no
Incentive  Stock  Option may be  exercised at a time when the Optionee is not an
employee of the Company or a Subsidiary or a Parent of the Company.

                  (v) Special Ten Percent  Shareholder Rule. Sections 4, 5(a)(i)
and 5(a)(ii)  notwithstanding,  an  Incentive  Stock Option may be granted to an
individual who immediately before the granting of such option owns (or is deemed
to own) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a Subsidiary  or a Parent of the Company,  if
at the time such  option is granted,  (i) such option  price is at least 110% of
the fair market value of the stock subject to such option,  and (ii) such option
by its terms may not be exercised  after the expiration of 5 years from the date
on which it was granted.

            (b) Non-Qualified Stock Options.

                  (i)  Purchase   Price.   The  purchase   price   provided  for
Non-Qualified  Option granted pursuant to this Section 5(b) of the Plan shall be
determined by the Board of Directors.

                  (ii) Duration of Option.  Each  Non-Qualified  Option  granted
pursuant  to the Plan will  terminate  no later  than 10 years  from the date on
which it is  granted,  unless  it is  terminated  earlier  under  Section 7 or 8
hereof.


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<PAGE>

                  (iii) Transferability of Option. No Non-Qualified Option shall
be  transferable  by the  employee,  director or  consultant in whole or in part
other than by will or the laws of descent or distribution,  and each such option
shall  be  exercisable,  during  the  lifetime  of  the  employee,  director  or
consultant, only by him or her.

                  (iv)  Exercise of Option.  Subject to the  provisions  of this
Section  5(b),  the  Board  of  Directors  shall  have  absolute  discretion  in
determining  whether  any  Non-Qualified   Option  granted  hereunder  shall  be
exercisable  in whole at one time or in part from  time to time and,  if in part
from time to time,  the rate at which  such  option  shall be  exercisable  on a
cumulative or  non-cumulative  basis.  Except as provided in Section 7 and 8, no
Non-Qualified  Option may be  exercised  at a time when the  Optionee  is not an
employee  or a  director  of the  Company  or a  Subsidiary  or a Parent  of the
Company. A Non-Qualified  Option granted to a consultant may be exercised as the
Board of Directors determines in its sole discretion.

      6. Manner of Exercise of Options.

            (a) Unless the Board of  Directors  shall  otherwise  determine,  an
option,  to the extent  exercisable under the Plan, may be exercised by delivery
to the Secretary of the Company,  at its principal  office, of a written notice,
signed by the person  entitled to exercise the option,  specifying the number of
shares  purchasable under the option which the Optionee then wishes to purchase,
together  with a certified or bank  cashier's  check payable to the order of the
Company,  in the amount of the aggregate  option price for such number of shares
and  any  withholding  tax due or  such  other  consideration  as the  Board  of
Directors agrees to accept.

            (b) Unless the shares to be acquired upon exercise of an option may,
at the time of such  acquisition,  be lawfully  resold in accordance with a then
currently effective registration statement or post-effective amendment under the
Securities  Act of 1933, as amended,  the Board of Directors  may provide,  as a
condition  to the delivery of any shares to be  purchased  upon  exercise of the
option,  that the Company  receive  appropriate  evidence  that the  Optionee is
acquiring the shares for investment and not with a view to the  distribution  or
public  offering  of  the  shares,  or  any  interest  in  the  shares,   and  a
representation  to the  effect  that the  Optionee  shall  make no sale or other
disposition  of the shares unless (a) the Company shall have received an opinion
of  counsel  satisfactory  to it in form  and  substance  that the sale or other
disposition  may  be  made  without   registration  under  the  then  applicable
provisions of the Securities Act of 1933, as amended,  and the related rules and
regulations of the Securities and Exchange Commissions,  or (b) the shares shall
be included in a currently  effective  registration  statement or post-effective
amendment under the Securities Act of 1933, as amended.  In no event shall stock
be issued or  certificates  be  delivered  until full payment as required by the
Plan shall have been  received by the Company,  nor shall the Optionee  have any
right or status as a  shareholder  prior to such  payment.  In no event  shall a
fraction of a share be purchased or issued under the Plan.

            (c) If at any time the Board of  Directors  shall  determine  in its
discretion that the listing, registration or qualification of the shares covered
by the Plan upon any national  securities exchange or under any state or federal
law, or the consent or approval of any


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<PAGE>

governmental regulatory body, is necessary or desirable as a condition of, or in
connection  with,  the sale or purchase of shares  subject to the Plan,  no such
shares  shall  be  delivered  unless  and  until  such  listing,   registration,
qualification,  consent or approval  shall have been  effected or  obtained,  or
otherwise  provided for, free of any  conditions  not acceptable to the Board of
Directors.

      7.  Termination  of  Employment.  In the event that the  employment of any
employee  or  tenure  as a  director  of  an  Optionee  shall  be  involuntarily
terminated  other  than  for  cause  or by  reason  of the  death  or  permanent
disability of the  Optionee,  the option may be exercised by the Optionee to the
extent  that he or she was  entitled to do so at the  termination  of his or her
employment  or tenure,  at any time within three months after such  termination,
but in no event  may an  option  be  exercised  after the date on which it would
otherwise  terminate.  In the event that the  employment  of any employee or the
tenure of a director  shall be  voluntarily  terminated or terminated for cause,
any option held by the employee or a director  under the Plan, to the extent not
previously  exercised,  shall forthwith  terminate.  Normal  retirement or early
retirement  with the consent of the Company or a  Subsidiary  or a Parent of the
Company  pursuant  to any  retirement  plan  shall not  constitute  a  voluntary
termination of employment or a termination of employment for cause, but shall be
considered  for this  purpose to be an  involuntary  termination  other than for
cause. The Board of Directors shall determine, in its sole discretion, the terms
of the  exercise  of an option  granted  to a  consultant  with  respect  to the
termination  of the  consultant.  Nothing in the Plan or in any  option  granted
pursuant to the Plan shall confer on any individual any right to continue in the
employ or as a  director,  or as a  consultant  of the  Company or a Parent or a
Subsidiary of the Company, or interfere in any way with the right of the Company
or a Parent or a Subsidiary of the Company to terminate  his or her  employment,
tenure as a director or engagement as a consultant.

      8. Death or Disability of an Optionee.

            (a) If an  Optionee  shall die while  employed  by or  serving  as a
director of the Company or a Subsidiary  or a Parent of the Company,  the option
may be exercised (i) to the extent that the employee or director was entitled to
do so at the date of his or her death,  and (ii) to the  additional  extent that
the employee or director  would have been  entitled to do so had the option been
exercisable   with  respect  to  the  number  of  shares  covered  by  the  next
installment,  if any,  of the option,  by a legatee or legatees of the  Optionee
under  his or her  last  will  or by his  or  her  personal  representatives  or
distributees  at any time  within  one year  after the date of death,  but in no
event may the  option be  exercised  after the date on which it would  otherwise
terminate.

            (b)  If  an  Optionee  shall  die  within  three  months  after  the
involuntary termination, other than for cause, of his or her employment by or of
his or her service as a director of the Company or a  Subsidiary  or a Parent of
the  Company,  the option may be  exercised,  to the extent that the employee or
director was entitled to do so at the date of his or her death,  by a legatee or
legatees of the  Optionee  under his or her last will or by his or her  personal
representative  or  distributees  at any time  within one year after the date of
death,  but in no event may the option be  exercised  after the date on which it
would otherwise expire.


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<PAGE>

            (c) If an  Optionee  is a  consultant  and he or she shall die,  the
option may be exercised (i) to the extent that the consultant was entitled to do
so at the date of his or her death,  and (ii) to the additional  extent that the
consultant  would have been  entitled to do so had the option  been  exercisable
with respect to the number of shares covered by the next installment, if any, of
the option,  by a legatee or legatees of the Optionee under his or her last will
or by his or her personal representatives or distributees at any time within one
year after the date of death,  but in no event may the option be exercised after
the date on which it would otherwise terminate.

            (d) If an Optionee  shall become  permanently  disabled  (within the
meaning of  Section  22(e)(3)  of the Code)  while  employed  by or serving as a
director of the Company or a Subsidiary  or a Parent of the Company,  the option
may be exercised by the Optionee to the extent that he or she was entitled to do
so at the  termination of his or her employment or tenure as a director,  at any
time  within one year after such  termination,  but in no event may an option be
exercised after the date on which it would otherwise expire.

            (e) If an  Optionee  is a  consultant  and he or  she  shall  become
permanently  disabled  (within the meaning of 22(e)(3) of the Code),  the option
may be exercised by the Optionee to the extent that he or she was entitled to do
so upon the  termination of his or her  engagement,  at any time within one year
after such  termination,  but in no event may an option be  exercised  after the
date on which it would otherwise expire.

      9. Adjustment of Number and Price of Shares Subject to Options.

            (a) If the outstanding shares of the common stock of the Company are
subdivided, consolidated,  increased, decreased, changed into or exchanged for a
different  number  or  kind of  shares  or  securities  of the  Company  through
reorganization, merger, recapitalization,  reclassification,  capital adjustment
or otherwise, or if the Company shall issue common stock as a dividend or upon a
stock split,  then the number and kind of shares  available  for purposes of the
Plan and all shares subject to the unexercised portion of any options previously
granted and the exercise price of those options shall be appropriately adjusted.
However,  no such adjustment shall change the total exercise price applicable to
the unexercised portion of any outstanding option.

            (b)  Adjustments  under this Section 9 shall be made by the Board of
Directors,  whose  determination as to what  adjustments  shall be made shall be
final and  binding.  In  computing  any  adjustment  under  this  Section 9, any
fractional  share which might  otherwise  become  subject to an option  shall be
eliminated.

      10. Change of Control.

            (a) In no event of a Change of Control (as herein  defined),  unless
otherwise  determined  by the Board of Directors or the Committee at the time of
grant or by amendment (with the holder's consent) of such grant, all outstanding
options awarded under the Plan shall become fully exercisable and vested.


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<PAGE>

            (b) A "Change of Control"  shall be deemed to occur on the date that
any of the following events occur:

                  (i)  any  person  or  persons  acting   together  which  would
constitute a "group" for purposes of Section  13(d) of the  Securities  Exchange
Act of 1934,  as  amended  ("Exchange  Act"),  other  than the  Company  and any
subsidiary,  shall  beneficially  own (as defined in Rule 13d-3 of the  Exchange
Act),  directly or  indirectly,  at least 20% of the total  voting  power of all
classes  of capital  stock of the  Company  entitled  to vote  generally  in the
election of the Board;

                  (ii) either (A) Current  Directors (as herein  defined)  shall
cease for any reason to  constitute  at least a majority  of the  members of the
Board (for these  purposes,  a "Current  Director"  shall mean any member of the
Board as of the  effective  date of the  Plan,  and any  successor  of a Current
Director   whose   election,   or  nomination  for  election  by  the  Company's
shareholders,  was approved by at least two-thirds of the Current Directors then
on the Board) or (B) at any meeting of the  shareholders  of the company  called
for the purpose of electing  directors,  a majority of the persons  nominated by
the Board for election as directors shall fail to be elected;

                  (iii) the  shareholders  of the Company  approve (A) a plan of
complete  liquidation  of the  Company,  or (B) an agreement  providing  for the
merger or  consolidation  of the  Company  (i) in which the  Company  is not the
continuing or surviving corporation (other than a consolidation or merger with a
wholly  owned  subsidiary  of the Company in which all shares of common stock of
the  Company  outstanding  immediately  prior to the  effectiveness  thereof are
changed into or exchanged for the same  consideration) or (ii) pursuant to which
the shares of common stock of the Company are converted into cash, securities or
other property,  except as  consolidation  or merger of the Company in which the
holders  of  the  common  stock  of  the  Company   immediately   prior  to  the
consolidation or merger have, directly or indirectly, at least a majority of the
common stock of the continuing or surviving  corporation  immediately after such
consolidation or merger or in which the Board immediately prior to the merger or
consolidation would, immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving  corporations;
or

                  (iv) the  shareholders of the Company approve an agreement (or
agreements) providing for the sale or other disposition (in one transaction or a
series  of  transactions)  of all or  substantially  all  of the  assets  of the
Company.

      11. Liquidation,  Merger or Consolidation. In the event of the dissolution
or liquidation of the Company,  or in the event of a merger or  consolidation in
which (i) the Company is a party and (ii) the  agreements  governing such merger
or  consolidation  do not provide for the issuance of substitute  options or the
assumption of the options issued  hereunder (as issuing and assuming are defined
in Code Section 424(a)),  with  substantially  equivalent terms as determined by
the Board of Directors in lieu of the options  granted under the Plan or for the
express assumption of such outstanding options by the surviving corporation, the
Board of Directors  shall declare that each option  granted under the Plan shall
terminate as of a date to be fixed by the Board of Directors  (the  "Termination
Date"), provided that the Board of Directors


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shall cause to be mailed  thirty (30) days before the  Termination  Date written
notice of the  Termination  Date to each Optionee,  and each Optionee shall have
the right,  during the period  between the receipt of the written notice and the
Termination Date to exercise his option, in whole or in part, whether or not all
or any part of such option  would not  otherwise be  exercisable.  The notice of
exercise  must be received by the Company on or prior to the  Termination  Date.
Any then  outstanding  option not  exercised  in its entirety on or prior to the
Termination  Date  specified  by the Board of  Directors  and any and all rights
thereunder shall terminate as of said date.

      12. Amendment or Discontinuance of Plan. The Board of Directors may alter,
suspend or discontinue the Plan at any time,  except that no action of the Board
may, without appropriate  shareholder  action,  materially increase the benefits
accruing to the  participants  under the Plan,  materially  increase the maximum
number  of shares  subject  to the Plan  (except  as  provided  in  Section  9),
materially modify the requirements for eligibility under the Plan, implement any
change requiring shareholder approval under the Code or any other applicable law
and,  without the consent of the Optionee,  no such action shall alter the terms
of, or impair the rights of the  Optionee  under any option  previously  granted
pursuant to the Plan.  Unless  sooner  terminated,  the Plan shall  terminate as
provided in Section 3. An option may not be granted  while the Plan is suspended
or after it is terminated.  The rights and obligations  under any option granted
while the Plan is in effect may not be  altered or  impaired  by  suspension  or
termination  of the Plan,  except  upon the  consent  of the  person to whom the
option  was  granted.  The  power of the  Board of  Directors  to  construe  and
administer  any options  granted prior to the  termination  or suspension of the
Plan shall nevertheless continue after and survive such termination and continue
during such suspension.

      13. Miscellaneous Provisions.

            (a)  Subsidiary.  As used herein,  the term  "subsidiary"  means any
"subsidiary corporation" within the meaning of Section 424(f) of the Code.

            (b) Parent.  As used  herein,  the term  "parent"  means any "parent
corporation" within the meaning of Section 424(e) of the Code.

            (c)  Permanently  Disabled.  As used herein,  the term  "permanently
disabled" means "permanently disabled" within the meaning of Section 22(e)(3) of
the Code.

            (d)  Governing  Law.  The Plan shall be  governed by the laws of the
State of Nevada.

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