Document:

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                                                                    EXHIBIT 10.6

                              EMPLOYMENT AGREEMENT
                              --------------------

          THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective
as of December 20, 1999 (the "Effective Date"), by and between GREGORY K. JONES
("Executive"), an individual, and uBID, INC. (the "Company"), a Delaware
corporation with principal offices located at 8550 Bryn Mawr Avenue, Suite 200,
Chicago, Illinois, 60631 (Executive and Company are collectively referred to
herein as the "Parties").

          WHEREAS, Executive and Company entered into an employment agreement
dated October 22, 1997 (the "1997 Employment Agreement"), pursuant to which
Executive became employed as President and Chief Executive Officer of the
Company, on the terms and conditions set forth therein;

          WHEREAS, Executive and the Company wish to supersede the 1997
Employment Agreement with this Agreement;

          WHEREAS, Executive was granted certain options to purchase 366,494
shares of Common Stock of the Company pursuant to the Informal Stock Option Plan
(the "Original Stock Options");

          WHEREAS, Company desires to continue to employ Executive, and
Executive desires to continue employment with the Company, on the terms
contained herein;

          ACCORDINGLY, this Agreement is hereby entered into to provide for such
continued employment.

          NOW THEREFORE, in consideration of the mutual covenants herein
contained, the Parties consent and agree as follows:

          1.  Employment.  Company hereby employs Executive as its President,
              ----------
Chief Executive Officer and Chairman of the Board of Directors (the "Board").
During the Term of Employment (as hereinafter defined), Executive will have the
title, status and duties of President, Chief Executive Officer, and Chairman of
the Board, and will report directly to the Board.

          2.  Duties.  During the Term of Employment:
              ------
          (a) Executive shall be responsible for all business development and
     corporate functions of the Company, as well as such other duties as may be
     assigned to him from time to time by the Board and as are not inconsistent
     with

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     the duties typically vested in a President, Chief Executive Officer, and
     Chairman of the Board of a corporation.

          (b) Executive will devote his full time and best efforts, talents,
     knowledge and experience to serving as the Company's President, Chief
     Executive Officer, and Chairman of the Board.  Executive shall perform the
     foregoing duties in the Company's Chicago, Illinois location.  Executive
     acknowledges that the duties to be performed by him under this Agreement
     are such that he may be required to travel in connection with the Company's
     business.  Executive agrees to engage in any travel which the Board of
     Directors may deem necessary to the performance of his duties.

          (c) Except upon the prior written consent of the Board of Directors,
     during his employment with the Company, Executive shall not engage (in any
     capacity) in any other business, commercial, or professional activity
     (whether or not pursued for pecuniary advantage) that is competitive with
     the Company, that creates a conflict of interest between Executive and the
     Company or any partner, joint venturer, or affiliated entity of the
     Company, or that impairs or otherwise interferes with the Executive's
     performance of his duties under this Agreement. Executive may serve on the
     board of directors of no more than four other companies (or such greater
     number as the Company's board of directors shall approve in advance),
     subject to the foregoing limitations and again only with written approval
     of the Company's board of directors. Executive may participate in other
     activities such as the supervision of personal investments, speaking
     engagements, activities involving charitable, educational, and similar
     types of activities; provided that such activities do not, in the judgment
     of the board of directors, compete with the Company or conflict or
     otherwise interfere with the Company's business or the Executive's
     performance of his duties under this Agreement. The time involved in such
     activities shall not be treated as vacation time. Executive shall be
     entitled to keep any amounts paid to him in connection with such activities
     (e.g., director fees and honoraria).

          3.  Term of Employment.  The "Term of Employment," will commence on
              ------------------
the Effective Date, and will continue thereafter until three years from the
Effective Date and will be automatically extended for subsequent one (1) day
periods for each day of the Term of Employment that passes after the Effective
Date, unless sooner terminated by either Party in accordance with the provisions
of this Agreement. The intent of the foregoing provision is that this Agreement
becomes "evergreen" on the Effective Date so that on each passing day after the
Effective Date the Term of Employment automatically extends to a full three-year
period.

          4.  Compensation and Benefits. During the Term of Employment, Company
              -------------------------
shall provide to Executive, and Executive shall accept from Company, as full
compensation for Executive's services hereunder, compensation and benefits as
follows:

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          (a) Base Salary. Commencing on February 1, 2000, and throughout the
              -----------
     Term of Employment, Executive shall be paid an annual base salary ("Base
     Salary") of Two Hundred Fifty Thousand Dollars ($250,000). The Board, or
     such committee of the Board as is responsible for setting the compensation
     of senior executive officers, shall review Executive's performance and Base
     Salary annually in January of each year, and determine whether to adjust
     Executive's Base Salary on a prospective basis. The Company will provide
     the first review in or around January 2001. Such adjusted annual salary
     then shall become Executive's "Base Salary" for purposes of this Agreement.
     Executive's annual Base Salary shall not be reduced after any increase,
     without Executive's consent. The Company shall pay Executive's Base Salary
     according to payroll practices in effect for the Company's other senior
     executive officers.

          (b) Bonus and Incentive Compensation; Perquisites. Executive shall be
              ---------------------------------------------
     eligible to participate in any annual performance bonus plans, long-term
     incentive plans, and/or equity-based compensation plans established or
     maintained by the Company for its senior executive officers, including, but
     not limited to, the uBid, Inc. 1998 Stock Incentive Plan (the "1998 Stock
     Plan"). Each year, Executive shall be eligible to receive a preestablished
     annual bonus, at a target amount equal to fifty percent (50%) of
     Executive's then current Base Salary, based on the attainment of objectives
     mutually agreeable to Executive and the Board. The Company will provide
     Executive with the same type and level of perquisites as it provides to
     other senior executive officers of the Company.

          (c) Employee Benefits. Executive will be eligible to participate on
              -----------------
     substantially the same basis as the Company's other senior executive
     officers in any employee or executive benefit plans offered by the Company
     including, without limitation, medical, dental, short-term and long-term
     disability, life insurance, pension, profit sharing and nonqualified
     deferred compensation arrangements. The Company reserves the right to
     modify, suspend or discontinue any and all of the plans, practices,
     policies and programs at any time without recourse by Executive, so long as
     Company takes such action generally with respect to other similarly
     situated senior executive officers.

          (d) Business Expenses. Company shall reimburse Executive for
              -----------------
     reasonable, ordinary, and necessary business or entertainment expenses,
     incurred in the performance of his duties hereunder, in accordance with
     Company's policies for senior executive officers and upon presentation of
     appropriate documentation, as the Company may from time to time require.

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          (e) Vacation. Executive shall be entitled to paid vacation in
     accordance with the Company's vacation policy for senior executive
     officers, but in no event less than three (3) weeks vacation during each
     calendar year of the Term of Employment, and shall be entitled to holidays,
     sick days and personal days in accordance with the Company's policy for its
     employees generally. Unused vacation time shall be either paid upon request
     or, alternatively, carried over for a period not in excess of twelve (12)
     months.

          5.  Payments on Termination of Employment.
              -------------------------------------

          (a) Termination of Employment for any Reason.  The following payments
              ----------------------------------------
     will be made upon the termination of Executive's employment for any reason:

               (i) Earned but unpaid Base Salary through the date of
          termination;

               (ii) Any annual incentive plan bonus, or other form of incentive
          compensation, for which the performance measurement period has ended,
          but which is unpaid at the time of termination;

               (iii) Any accrued but unpaid vacation;

               (iv) Any amounts payable under any of the Company's executive
          benefit plans in accordance with the terms of those plans, except as
          may be required under Code Section 401(a)(13); and

               (v) Subject to the conditions and limitations imposed by Section
          4(d) hereof, unreimbursed business expenses reasonably incurred by
          Executive in connection with his duties on behalf of the Company.

          (b) Voluntary Termination of Employment for Other Than Good Reason.
              --------------------------------------------------------------
     In addition to the amounts determined under (a) above, if Executive
     voluntarily terminates employment for other than Good Reason, then in
     addition to the amounts determined under (a) above, Executive shall be
     entitled to a pro rata portion of the target bonus under the Company's
     annual incentive plan for the year in which such termination occurs.

          (c) Termination of Employment for Death or Disability.  In addition to
              -------------------------------------------------
     the amounts determined under (a) above, if Executive's termination of
     employment occurs by reason of death or Disability, Executive (or his
     estate) will receive a pro rata portion of any bonus payable under the
     Company's annual incentive plan for the year in which such termination
     occurs determined based on the highest of (i) the actual annual bonus paid
     for the fiscal year immediately preceding such termination, (ii) the target
     bonus for the fiscal year in which such termination occurs, or (iii) the
     actual bonus attained for the fiscal year in which

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     such termination occurs. For purposes of this Agreement, "Disability" means
     Executive's long-term disability as defined under the Company's long-term
     disability plan, or if Executive is not covered by a long-term disability
     plan sponsored by the Company, Executive's inability to engage in any
     substantial gainful activity by reason of any medically-determined physical
     or mental impairment that can be expected to result in death or to be of
     long-continued and indefinite duration.

          (d) Termination by the Company Without Cause, or Voluntary Termination
              ------------------------------------------------------------------
     by Executive for Good Reason.  If the Company terminates Executive's
     ----------------------------
     employment other than for Cause, or Executive voluntarily terminates his
     employment for Good Reason, in addition to the benefits payable under (a),
     the Company will pay the following amounts and provide the following
     benefits, subject to and conditioned upon Executive's execution of a
     general release of claims in a form to be provided and approved by the
     Company:

               (i) The Base Salary that the Company would have paid under the
          Agreement had Executive's employment continued to until the six month
          anniversary of his employment termination.

               (ii) The annual bonus that the Company would have paid under the
          Agreement had Executive's employment continued until the later of the
          six month anniversary of his employment termination, or the end of the
          Company's fiscal year in which Executive's employment terminated.  For
          this purpose, annual bonus will be determined as the highest of (A)
          the actual bonus paid for the fiscal year immediately preceding such
          termination, (B) the target bonus for the fiscal year in which such
          termination occurs, or (C) the actual bonus attained for the fiscal
          year in which such termination occurs.

               (iii)  Continued coverage under the Company's medical, dental,
          life, disability, pension, profit sharing and other executive benefit
          plans through the end of month containing the six month anniversary of
          Executive's employment termination, at the same cost to Executive as
          in effect on the date of Executive's termination.  If the Company
          determines that Executive cannot participate in any benefit plan
          because he is not actively performing services for the Company, the
          Company may provide such benefits under an alternate arrangement, such
          as through the purchase of an individual insurance policy that
          provides similar benefits or, if applicable, through a nonqualified
          pension or profit sharing plan.  To the extent that Executive's
          compensation is necessary for determining the amount of any such
          continued coverage or benefits, such compensation (Base Salary and
          annual bonus) through the end of the covered period shall be at the
          highest rate in effect during the 12-month period immediately
          preceding Executive's termination of employment.

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               (iv) The period through the end of the six month anniversary of
          Executive's employment termination shall continue to count for
          purposes of determining Executive's age and service with the Company
          with respect to (A) eligibility, vesting, and the amount of benefits
          under the Company's executive benefit plans, and (B) the vesting of
          any outstanding stock options, restricted stock or other equity-based
          compensation awards.

               (v) Outplacement services, as elected by Executive (and with a
          firm elected by Executive), not to exceed $10,000 in total.

          (e) Good Reason.  For purposes of this Agreement, "Good Reason" shall
              -----------
     mean the occurrence of any of the following without Executive's written
     consent: (i) assigning duties to Executive that are inconsistent with those
     of the position of President, Chief Executive Officer, and Chairman of the
     Board, as those duties apply in similar companies in similar industries;
     (ii) requiring Executive to report to other than the Board; (iii) the
     failure of the Company to pay any portion of Executive's compensation
     within 10 days of the date such compensation is due; (iv) the Company
     requires Executive to relocate his principal business office to a location
     not within 25 miles of the Company's principal business office located in
     the Chicago, Illinois metropolitan area; or (v) the Company's failure to
     continue in effect any cash or stock-based incentive or bonus plan, pension
     plan, welfare benefit plan, or other benefit plan, program or arrangement,
     unless the aggregate value of all such arrangements provided to Executive
     after such discontinuance is not materially less than the aggregate value
     as of the Effective Date.  For purposes of this paragraph, "Company" shall
     mean the Company and, following any successor or surviving corporation
     following a Change in Control or Corporate Transaction (as those terms are
     defined in the 1998 Stock Plan).  Notwithstanding the foregoing definition,
     "Good Reason" shall not exist unless Executive provides the Company's Board
     of Directors with written notice of the alleged cause of the "Good Reason"
     and the Company fails to cure the cause of the Good Reason within thirty
     (30) days from the date of such notice.

          (f) Cause.  For purposes of this Agreement, "Cause" means Executive's:
              -----
     (i) continued and willful or grossly negligent failure to substantially
     perform his duties hereunder (other than any such failure in connection
     with death or disability); (ii) conviction of a felony or conduct involving
     moral turpitude or other criminal conduct materially adversely affecting
     the Company; or (iii) fraud, misappropriation, or embezzlement involving
     Company property; or (iv) commission of other intentional wrongful acts
     that materially impair the goodwill or business of the Company or that
     cause material damage to its property, goodwill or business.  If the
     termination for Cause is pursuant to clause (i) of this paragraph (f), then
     prior to any such termination for Cause, the Board will give Executive
     thirty days (30) written notice and an opportunity to cure such conduct.
     For purposes of this paragraph, no act or failure to act on Executive's
     part will be considered "willful" unless it is done, or omitted to be done,
     by him in bad faith or without a reasonable belief that his action or
     omission was in the Company's

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     best interests. Any act, or failure to act, based upon authority given
     pursuant to a resolution duly adopted by the Board or based upon the advice
     of the Company's counsel will be conclusively presumed to be done, or
     omitted to be done, in good faith and in the Company's best interests, in
     the absence of evidence indicating that such authority was provided by
     persons with a personal interest in the act, omission, or transaction.

          7.  Restrictive Covenants.
              ---------------------

         (a) Definitions. For purposes of this Agreement, the following terms
             -----------
     will be defined as follows:

               (i) The "Company's Business" will mean the business of business-
          to-consumer auctions conducted by the Company or any of its Related
          Entities as of the Effective Date.

               (ii) The term "Related Entities" will mean (i) any entity that
          the Company directly or indirectly controls, and (ii) any entity in
          which the Company has a significant equity interest.

          (b) Confidential Information.  Executive acknowledges that he has had
              ------------------------
     and will have access to confidential information (including, but not
     limited to, current and prospective confidential know-how, technology,
     trade secrets, customer lists, mailing lists, marketing plans, business
     plans and product information) concerning the business, customers,
     products, plans, finances, suppliers, and assets of the Company and its
     Related Entities that is not generally known outside the Company
     ("Confidential Information").  "Confidential Information" shall not include
     information that would otherwise constitute Confidential Information but
     that has become public other than through a breach of this Agreement or
     other improper means.  Executive agrees that he shall not, at any time,
     directly or indirectly use, divulge, furnish or make accessible to any
     person any Confidential Information, but instead shall keep all
     Confidential Information strictly and absolutely confidential except as
     required by law.  Executive agrees that the obligations under this Section
     shall survive termination of his employment with the Company, for any
     reason and by either party.  The preceding obligations of confidence and
     nondisclosure shall not apply to:

               (i) information in the possession of Executive prior to the
          disclosure thereof by the Company;

               (ii) information in the public domain, except information that
          becomes public through violation of the covenants set forth in this
          Section 7;

               (iii) information obtained from a third person not under an
          obligation of nondisclosure to the Company;

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               (iv) information required by law or legal process to be
          disclosed, provided advance notice thereof is given to the Company;
          and

               (v) information disclosed with the Company's written approval.

          (c) Non-Competition.  Executive agrees that commencing on the
              ---------------
     Effective Date of this Agreement and continuing for a period of twelve (12)
     months following termination of his employment by either party for any
     reason (the "Non-Compete Period"), he shall not, without the prior written
     consent of the Board, participate or engage in, directly or indirectly (as
     an owner (except as a passive owner of not more than 5% of any class of
     publicly-traded securities, so long as Executive has no active
     participation in the business of such entity), partner, employee, officer,
     director, independent contractor, consultant, advisor, or in any other
     capacity calling for the rendition of services, advice, or acts of
     management, operation, or control), any business that competes or intends
     to compete with the Company's Business.

          (d) Non-Solicitation of Employees.  Executive agrees that, during the
              -----------------------------
     Non-Compete Period, he shall not directly or indirectly solicit any
     employee of the Company to leave such employment.

          (e) Non-Solicitation of Customers.  Executive agrees that during the
              -----------------------------
     Non-Compete Period, he shall not directly or indirectly solicit, in
     connection with any business or activity that is competitive with the
     Company's Business, any entity that is or becomes a customer of the Company
     or any of the Related Entities at or before the time of the termination of
     Executive's employment.

          (f) No Diversion of Business Opportunities and Prospects.  During the
              ----------------------------------------------------
     Non-Compete Period, Executive shall not directly or indirectly seek to
     divert or dissuade from continuing to do business with or entering into
     business with the Company or any of the Related Entities, any supplier,
     customer, or other person or entity that had a business relationship with
     the Company or with which Company was actively planning or pursuing a
     business relationship (and of which Executive had knowledge) at or before
     the time of termination of Executive's employment.

          (g) Irreparable Harm.  Executive acknowledges that (i) Executive's
              ----------------
     compliance with this Section is necessary to preserve and protect the
     proprietary rights, Confidential Information and the goodwill of the
     Company and the Related Entities, as going concerns; (ii) any failure by
     Executive to comply with the provisions of this Section will result in
     irreparable and continuing injury for which there will be no adequate
     remedy at law; and (iii) in the event that Executive should fail to comply
     with the terms and conditions of this Section, the Company shall be
     entitled, in addition to such other relief as may be proper, to equitable
     relief (including, but not limited to, the issuance of an injunction and/or
     temporary restraining order) as may be necessary to cause Executive to
     comply

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     with this Agreement, to restore to the Company its property, and to make
     the Company whole.

          8.  Intellectual Property.  During the Term of Employment, Executive
              ---------------------
will disclose to the Company all ideas, inventions and business plans developed
by him during such period which relate directly to the Company's Business,
including without limitation, any design, logo, slogan or campaign or any
process, operation, product or improvement that may be patentable or
copyrightable.  Executive agrees that all patents, licenses, copyrights,
tradenames, trademarks, service marks, advertising campaigns, promotional
campaigns, designs, logos, slogans and business plans developed or created by
Executive in connection with the Company's Business, either individually or in
collaboration with others, will be deemed works for hire and the sole and
absolute property of the Company.  Executive agrees, that at the Company's
request, he will take all steps necessary to secure the rights thereto to the
Company by patent, copyright or otherwise.

          From time to time during and after the Term of Employment, Executive
will be involved in other businesses.  The Company agrees that Executive will
not disclose to the Company any ideas, inventions and business plans developed
---
by him during such period which relate to such other businesses, including
without limitation, any design, logo, slogan or campaign or any process,
operation, product or improvement that may be patentable or copyrightable.  The
Company agrees that all patents, licenses, copyrights, tradenames, trademarks,
service marks, advertising campaigns, promotional campaigns, designs, logos,
slogans and business plans developed or created by Executive in connection with
the other businesses will be the sole and absolute property of Executive.

          9.  Modification.  No modification, amendment or waiver of this
              ------------
Agreement, nor consent to any departure from any of the terms or conditions
hereof, shall be effective unless in writing and signed by the Parties hereto.
Any such waiver or consent shall be effective only in the specific instance and
for the purpose for which given.  The failure of any Party hereto to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part hereof or the right of any Party thereafter to enforce each and every
such provision.

          10.  Other Agreements.  This Agreement sets forth and constitutes the
               ----------------
entire agreement and understanding between the Parties with respect to the
subject matter of this Agreement.  This Agreement supersedes and cancels all
prior agreements and understandings, whether written or oral, relating to the
subject matter of this Agreement, including Executive's 1997 Employment
Agreement.  This instrument shall have no effect on Executive's Original Stock
Options or on any stock options granted to Executive under the Company's 1998
Stock Incentive Plan, nor shall this instrument affect any rights and benefits
afforded to Executive in his capacity as a stockholder under the Company's
certificate of incorporation or by-laws.

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          11.  Insurance and Indemnity.  For the period from the date hereof
               -----------------------
through at least the tenth anniversary of Executive's termination of employment
from the Company, the Company agrees to maintain Executive as an insured party
on all directors' and officers' insurance maintained by the Company for the
benefit of its directors and officers on at least the same basis as all other
covered individuals, and provide Executive with at least the same corporate
indemnification as its officers.

          12.  Assignment; Successors.  Executive may not assign this Agreement
               ----------------------
at any time without the express written consent of the Company.  This Agreement
shall inure to the benefit of and be binding upon the Company and its
successors.  The Company may not assign this Agreement without Executive's
written consent, except that the Company's obligations under this Agreement
shall be the binding legal obligations of any successor to the Company by sale,
and in the event of any transaction that results in the transfer of
substantially all of the assets or business of the Company, the Company will use
its best efforts to cause the transferee to assume the Company's obligations
under this Agreement.  If the transferee does not assume the Company's
obligations under this Agreement, Executive shall have Good Reason to terminate
employment.  Upon Executive's death, this Agreement will inure to the benefit of
Executive's heirs, legatees, and legal representatives of the Executive's
estate.

          13.  Arbitration.
               -----------

          (a) Arbitrable Claims:   To the fullest extent permitted by law, all
              -----------------
disputes between Executive (and his successors and assigns) and the Company (and
its parents, subsidiaries, affiliated entities, shareholders, directors,
officers, agents, employees, successors, and assigns) relating in any manner
whatsoever to the relationship between Executive and the Company, including,
without limitation, all disputes arising under or relating to this Agreement
("Arbitrable Claims") shall be resolved by arbitration.  Arbitrable Claims shall
include, but are not limited to, contract (express or implied) and tort claims
of all kinds, as well as all claims based on any federal, state, or local law,
statute, or regulation.

          (b) Procedure:   Arbitration of Arbitrable Claims shall be in
              ---------
accordance with the then-existing and applicable rules of the American
Arbitration Association ("AAA"), as augmented in this Agreement.  Arbitration
shall be final and binding upon the parties and shall be the exclusive remedy
for all Arbitrable Claims.  Notwithstanding the foregoing, either party may, at
their option, seek provisional injunctive relief as may be necessary to preserve
the efficacy of a pending or contemplated arbitration proceeding.  All
arbitration hearings under this Agreement shall be conducted in Chicago,
Illinois.  The parties hereby waive any rights they may have to trial by jury in
regard to Arbitrable Claims, including, without limitation, any right to trial
by jury as to the making, existence, validity, or enforceability of the
agreement to arbitrate contained within this Section.

          (c) Law Governing Arbitration Provision:   The foregoing arbitration
              -----------------------------------
provision shall be governed by, and shall be considered fully enforceable under,
the

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provisions of the Federal Arbitration Act, which the parties hereby acknowledge
and agree applies to arbitration provisions contained within employment
agreements.

          14.  Notices.  All notices required to be given under the terms of the
               -------
Agreement, or that either of the Parties desires to give hereunder, shall be in
writing and delivered personally, by overnight courier or by confirmed
facsimile, or be sent by registered mail or certified mail, postage prepaid,
return receipt requested, addressed as follows:

          If to Company:
          Attn:  Compensation Committee
          uBid Online Auction
          8550 West Bryn Mawr Avenue
          Suite 200
          Chicago, Illinois 60631-3203

          with a copy to:
          Robert Mattson, Esq.
          Morrison & Foerster LLP
          19900 MacArthur Boulevard
          Suite 1200
          Irvine, California 92612-2445

          If to Executive:
          Mr. Gregory K. Jones
          366 Bluff's Edge Drive
          Lake Forest, IL 60045

          with a copy to:
          Mark Heatwole, Esq.
          Winston & Strawn
          35 West Wacker Drive
          Chicago, IL  60601

Any Party may change the address to which notice is to be sent to it or to him
by notice in writing to the other Party as provided above.

          15.  Governing Law.  This Agreement shall be subject to and governed
               -------------
by the laws of the State of Illinois, without regard to the conflicts of laws
principles thereof.

          16.  Severability.  If any provision(s) of this Agreement shall be
               ------------
found invalid or unenforceable, in whole or in part, then such provision(s)
shall be deemed to be modified or restricted to the extent and in the manner
necessary to render the same valid

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and enforceable, or shall be deemed excised from this Agreement, as the case may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision(s) had been originally
incorporated herein as so modified or restricted, or as if such provision(s) had
not been originally incorporated herein, as the case may be.

          17.  Counterpart Execution.  This Agreement may be executed in
               ---------------------
multiple counterparts, each of which shall be deemed an original.

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

GREGORY K. JONES                          uBID, INC.

   /s/ Gregory K. Jones                   By: /s/ Thomas E. Werner
---------------------------                  ___________________________________

                                          Its: Chief Financial Officer
                                              __________________________________

                                       12<PAGE>

                                                                    EXHIBIT 10.7

                                   uBID, INC.

                           1998 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

                                       1
<PAGE>

(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:

                 (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 uBid, Inc., a Delaware corporation.
                 -------

            (m) "Consultant" means any person (other than an Employee or, 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, advisory
or other 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

                                       2
<PAGE>

case of (i) any approved leave of absence, (ii) transfers between locations of
the Company or 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;

                (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) 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 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 is permanently unable to carry
                 ----------
out the responsibilities and functions of the position held by the Grantee by
reason of any medically determinable physical or mental impairment. A Grantee
will not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.

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

                                       3
<PAGE>

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

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

            (aa) "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.

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

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

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

                                       4
<PAGE>

            (ee) "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.

            (ff) "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.

            (gg) "Plan" means this 1998 Stock Incentive Plan.
                  ----

            (hh) "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. For this purpose of the Non-Qualified Stock Options to
be granted under this Plan pursuant to Section 3.6 of the Separation and
Distribution Agreement to be entered into between the Company and its parent,
Creative Computers, Inc. ("Creative"), "Related Entity" shall include Creative
and its Subsidiaries, notwithstanding that, at the time of the granting of such
Options, the Company may no longer be a Subsidiary of Creative.

            (ii) "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.

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

            (kk) "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.

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

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

            (nn) "Related Entity Disposition" means the sale, distribution or
                  --------------------------
other disposition by the Company of all or substantially all of the Company's
interests in any Related 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.

     3.  Stock Subject to the Plan.
         -------------------------

            (a) The maximum aggregate number of Shares which may be issued
pursuant to Awards initially shall be 2,500,000 Shares, and commencing with the
first business day of each calendar year thereafter beginning with January 1,
2000, such

                                       5
<PAGE>

maximum aggregate number of Shares shall be increased by a number equal to three
percent (3%) of the number of Shares outstanding as of December 31 of the
immediately preceding calendar year. Notwithstanding the foregoing, subject to
the provisions of Section 10, below, the maximum aggregate number of Shares
available for grant of Incentive Stock Options shall be 650,000 Shares, and such
number shall not be subject to annual adjustment as described above. 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.
                ------------------

                (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

                                       6
<PAGE>

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, including a reduction in the exercise price (or base amount on which
appreciation is measured) of any Award to reflect a reduction in the Fair Market
Value of the Common Stock since the grant date of the Award, 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;

                (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.

                                       7
<PAGE>

            (c) Effect of Administrator's Decision. All decisions,
                ----------------------------------
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.

     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 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

                                       8
<PAGE>

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 five hundred thousand (500,000) 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

                                       9
<PAGE>

right in favor of the Company or a Related Entity or to any other restriction
the Administrator determines to be appropriate.

            (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 shall be transferable to the
extent provided in the Award Agreement.

            (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 unless otherwise determined by the
Administrator.

                                       10
<PAGE>

                (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.

                (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:

                (i) cash;

                (ii) check;

                (iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;

                (iv) 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);

                (v) 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

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

                                       11
<PAGE>

            (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.

            (d) Reload Options. In the event the exercise price or tax
                --------------
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with terms identical to the Award
Agreement under which the Option was exercised, but at an exercise price as
determined by the Administrator in accordance with the Plan.

     8.  Exercise of Award.
         -----------------

            (a) Procedure for Exercise; Rights as a Stockholder.
                -----------------------------------------------

                (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. 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.

                                       12
<PAGE>

                (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.

            (c) Buyout Provisions. The Administrator may at any time offer to
                -----------------
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Grantee at the time that such offer is made.

     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
          ------------------------------------------
action by the shareholders 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, 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, (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; 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/Changes in Control/Related Entity Dispositions.
          ---------------------------------------------------------------------

            (a) The Administrator, in its sole discretion, may provide in any
Award Agreement that, in the event of a Corporate Transaction, all or a portion
of the unvested

                                       13
<PAGE>

Award covered by such Award Agreement shall automatically become 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. 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) The Administrator, in its sole discretion, may provide in any
Award Agreement that, in the event of a Change in Control (other than a Change
in Control which also is a Corporate Transaction), all or a portion of the
unvested Award covered by such Award Agreement shall automatically become 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.

            (c) The Administrator, in its sole discretion, may provide in any
Award Agreement that, effective upon the consummation of a Related Entity
Disposition, all or a portion of the unvested Award covered by such Award
Agreement shall automatically become 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 effective date of the Related Entity Disposition. 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 terminate. 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.

            (d) The Administrator, in its sole discretion, may provide in any
Award Agreement for other acceleration of vesting and exercisability, and
release from restrictions on transfer (other than transfer restrictions
applicable to Incentive Stock Options) and repurchase or forfeiture rights
("Other Acceleration") of an Award covered by such Award Agreement in addition
to those set forth in subsections (a), (b) and (c) above. The terms and
conditions of such acceleration and release shall be determined in the sole
discretion of the Administrator and shall be fully set forth in the Award
Agreement.

            (e) Notwithstanding the above, the Administrator may, in its
discretion, prevent the acceleration and vesting and release of restrictions on
transfer and repurchase or forfeiture rights of any outstanding Award with
respect to any Corporate Transaction, Change of Control, Related Entity
Disposition or Other Acceleration provisions.

     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

                                       14
<PAGE>

terminated. Subject to Section 16, 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

                                       15
<PAGE>

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 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.

                                       16

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