Document:

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                                                                    EXHIBIT 10.1

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                           INTERACTIVE KNOWLEDGE, INC.

                             1998 STOCK OPTION PLAN

                            Effective August 17, 1998

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                           INTERACTIVE KNOWLEDGE, INC.

                             1998 STOCK OPTION PLAN

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                 Page
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<S>         <C>                                                                                                  <C>
ARTICLE I - INTRODUCTION........................................................................................  -1-
        1.1     Establishment...................................................................................  -1-
        1.2     Purposes........................................................................................  -1-
        1.3     Effective Date..................................................................................  -1-

ARTICLE II - DEFINITIONS........................................................................................  -1-

ARTICLE III - PLAN ADMINISTRATION...............................................................................  -3-

ARTICLE IV - STOCK SUBJECT TO THE PLAN..........................................................................  -3-
        4.1     Number of Shares................................................................................  -3-
        4.2     Adjustments for Stock Split, Stock Dividend, Etc................................................  -4-
        4.3     Adjustments for Certain Distributions of Property...............................................  -4-
        4.4     Distributions of Capital Stock and Indebtedness.................................................  -4-
        4.5     No Rights as Shareholder........................................................................  -4-
        4.6     Fractional Shares...............................................................................  -4-
        4.7     Determination by the Committee, Etc.............................................................  -4-

ARTICLE V - PARTICIPATION.......................................................................................  -5-

ARTICLE VI - STOCK OPTIONS......................................................................................  -5-
        6.1     Grant of Options to Eligible Employees and Eligible Consultants.................................  -5-
        6.2     Option Certificates.............................................................................  -5-
        6.3     Certain Option Terms............................................................................  -6-
                (a)      Number of Shares.......................................................................  -6-
                (b)      Price..................................................................................  -6-
                (c)      Duration and Exercise of Options.......................................................  -6-
                (d)      Termination of Employment or Service, Death, Disability, Etc...........................  -6-
                (e)      Exercise, Payments, Etc................................................................  -7-
                (f)      Withholding............................................................................  -8-
        6.4     Restrictions on Incentive Stock Options.........................................................  -9-
                (a)      Initial Exercise.......................................................................  -9-
                (b)      Ten Percent Shareholders...............................................................  -9-
</TABLE>

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<TABLE>
<S>         <C>                                                                                                  <C>
ARTICLE VII - CORPORATE REORGANIZATION; CHANGE OF CONTROL......................................................   -9-
        7.1     Reorganization.................................................................................   -9-
        7.2     Required Notice................................................................................   -9-
        7.3     Acceleration of Exercisability.................................................................  -10-

ARTICLE VIII - EMPLOYMENT; TRANSFERABILITY.....................................................................  -10-
        8.1     Employment.....................................................................................  -10-
        8.2     Other Employee Benefits........................................................................  -10-
        8.3     Transferability................................................................................  -10-

ARTICLE IX - SECURITIES LAW RESTRICTIONS.......................................................................  -10-

ARTICLE X - WITHHOLDING........................................................................................  -11-
        10.1    Withholding Requirement........................................................................  -11-
        10.2    Withholding With Stock.........................................................................  -11-

ARTICLE XI - MISCELLANEOUS.....................................................................................  -11-
        11.1    Expiration.....................................................................................  -11-
        11.2    Amendments, Etc................................................................................  -11-
        11.3    Treatment of Proceeds..........................................................................  -11-
        11.4    Section Headings...............................................................................  -12-
        11.5    Severability...................................................................................  -12-
        11.6    Gender and Number..............................................................................  -12-
</TABLE>

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                           INTERACTIVE KNOWLEDGE, INC.

                             1998 STOCK OPTION PLAN

                                    ARTICLE I
                                  INTRODUCTION

                1.1 Establishment. Interactive Knowledge, Inc., a Delaware
corporation (the "Company") hereby establishes the Interactive Knowledge, Inc.
1998 Stock Option Plan (the "Plan") for certain employees and consultants of the
Company.

                1.2 Purposes. The purposes of the Plan are to provide those who
are selected for participation in the Plan with added incentive to continue in
the long-term service of the Company and to create in such persons a more direct
interest in the future success of the operations of the Company by relating
incentive compensation to increases in shareholder value, so that the income of
those participating in the Plan is more closely aligned with the income of the
Company's shareholders. The Plan is also designed to provide a financial
incentive that will help the Company attract, retain and motivate the most
qualified employees and consultants.

                1.3 Effective Date. The effective date of the Plan shall be
August 12, 1998 (the "Effective Date"), subject to approval by the affirmative
votes of the holders of a majority of the shares of the Company present or
represented and entitled to vote at a meeting duly held in accordance with law
within one year following the Effective Date. If the shareholders of the Company
do not approve the Plan as specified above, Options granted under the Plan shall
be deemed to be rescinded without any further action by the Board or the
Company, and the Plan shall automatically terminate.

                                   ARTICLE II
                                  DEFINITIONS

                The following terms shall have the meanings set forth below:

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

                         (b) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

                         (c) "Committee" means the committee designated or
appointed pursuant to Article III.

                         (d) "Disabled" or "Disability" shall have the meaning
given to such terms in Section 22(e)(3) of the Code.

                                      -1-
<PAGE>   5

                         (e) "Eligible Consultants" means those consultants and
other individuals who provide services to the Company and whose judgment,
initiative and effort are important to the Company for the management and growth
of its business. For purposes of the Plan, Directors of the Company shall be
considered consultants, unless also employees. For purposes of the Plan,
Eligible Consultants include only those individuals who do not receive wages
subject to the withholding of federal income tax under Section 3401 of the Code.

                         (g) "Eligible Employees" means those employees
(including, without limitation, officers and directors who are also employees)
of the Company, whose judgment, initiative and efforts are important to the
Company for the growth of its business. For purposes of the Plan, an employee is
an individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Code. A determination by the Committee to grant
Options to an employee shall be controlling.

                         (h) "Fair Market Value" of a share of Stock shall be
the last reported sale price of the Stock on the NASDAQ National Market on the
day the determination is to be made, or if no sale took place on such day, the
average of the closing bid and asked prices of the Stock on the NASDAQ National
Market on such day, or if the market is closed on such day, the last day prior
to the date of determination on which the market was open for the transaction of
business, as reported by NASDAQ. If, however, the Stock should be listed or
admitted for trading on a national securities exchange, the Fair Market Value of
a share of the Stock shall be the last sales price, or if no sales took place,
the average of the closing bid and asked prices on the day the determination is
to be made, or if the market is closed on such day, the last day prior to the
date of determination on which the market was open for the transaction of
business, as reported in the principal consolidated transaction reporting system
for the principal national securities exchange on which the Stock is listed or
admitted for trading. If the Stock is not listed or traded on NASDAQ or on any
national securities exchange, the Fair Market Value of the Stock for purposes of
the grant of Options under the Plan shall be determined by the Committee in good
faith.

                         (i) "Incentive Stock Option" means any Option
designated as such and granted in accordance with the requirements of Section
422 of the Code.

                         (j) "Non-Qualified Option" means any Option other than
an Incentive Stock Option.

                         (k) "Option" means a right granted under the Plan to
purchase Stock at a stated price for a specified period of time.

                         (l) "Option Certificate" shall have the meaning given
to such term in Section 6.2.

                         (m) "Option Holder" means an Eligible Employee or
Eligible Consultant designated by the Committee from time to time during the
term of the Plan to receive one or more Options under the Plan.

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                         (n) "Option Price" means the price at which shares of
Stock subject to an Option may be purchased, determined in accordance with
subsection 6.3(b).

                         (o) "Share" means a share of Stock.

                         (p) "Stock" means the common stock of the Company.

                                   ARTICLE III
                               PLAN ADMINISTRATION

                Initially, the Committee shall consist of the entire Board. The
Board may at any time designate some of its members to constitute the Committee.
The Committee shall be responsible for administration of the Plan and is
empowered hereunder to take actions in administration of the Plan. If the
Committee does not consist of the entire Board, members of the Committee shall
be appointed from time to time by the Board, shall serve at the pleasure of the
Board and may resign at any time upon written notice to the Board. The Committee
shall determine the form or forms of the Option Certificates and other
agreements with Option Holders which shall evidence the particular provisions,
terms, conditions, rights and duties of the Company and the Option Holders with
respect to Options granted pursuant to the Plan, which provisions need not be
identical except as may be provided herein. The Committee may from time to time
adopt such rules and regulations for carrying out the purposes of the Plan as it
may deem proper and in the best interests of the Company. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any agreement entered into hereunder in the manner and to the extent
it shall deem expedient and it shall be the sole and final judge of such
expediency. No member of the Committee shall be liable for any action or
determination made in good faith. The determinations, interpretations and other
actions of the Committee pursuant to the provisions of the Plan shall be binding
and conclusive for all purposes and on all persons.

                                   ARTICLE IV
                            STOCK SUBJECT TO THE PLAN

                4.1 Number of Shares. The total number of Shares as to which
Options may be granted pursuant to the Plan shall be 1,846,666 in the aggregate.
Such number shall be adjusted in accordance with the provisions of Section 4.2.
Shares issued upon the exercise of Options shall be applied to reduce the
maximum number of Shares remaining available for use under the Plan. Shares
underlying Options that expire or terminate unexercised are available for grant
of Options under the Plan. Shares used to pay the Option Price, and shares
transferred to or withheld by the Company in satisfaction of withholding tax
obligations, are not available for the grant of Options under the Plan. The
Company shall at all times during the term of the Plan and while any Options are
outstanding retain as authorized and unissued Stock, or as treasury Stock, at
least the number of Shares from time to time required under the provisions of
the Plan, or otherwise assure itself of its ability to perform its obligations
hereunder.

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                4.2 Adjustments for Stock Split, Stock Dividend, Etc. If the
Company shall at any time increase or decrease the number of its outstanding
Shares by means of payment of a stock dividend or any other distribution upon
such Shares payable in Stock, or through a stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving the
Stock, or change in any way the rights and privileges of such Shares, then the
numbers, rights and privileges of both (a) the Shares as to which Options may be
granted under the Plan and (b) the Shares then subject to each outstanding
Option shall be increased, decreased or changed in like manner as if the
corresponding Shares had been issued and outstanding, fully paid and
nonassessable at the time of such occurrence. Upon any occurrence described in
this Section 4.2, the total Option Price under each then outstanding Option
(i.e., the Option Price per share multiplied by the number of shares subject to
the Option immediately before such occurrence) shall remain unchanged but shall
be apportioned ratably over the increased or decreased number of Shares subject
to the Option.

                4.3 Adjustments for Certain Distributions of Property. If the
Company shall at any time distribute with respect to its Stock assets or
securities of other persons (excluding cash dividends or distributions payable
out of capital surplus and dividends or other distributions referred to in
Sections 4.2 or 4.4), then either (a) the Option Price of outstanding Options
shall be adjusted to reflect the fair market value of the assets or securities
distributed, (b) the Company shall provide for the delivery upon exercise of
such Options of cash in an amount equal to the fair market value of the assets
or securities distributed or (c) a combination of such actions shall be taken,
all as determined by the Committee in its discretion, which determination need
not be the same for all holders of options granted by the Company. Fair market
value of the assets or securities distributed for this purpose shall be as
determined by the Committee.

                4.4 Distributions of Capital Stock and Indebtedness. If the
Company shall at any time distribute with respect to its Stock shares of its
capital stock (other than Stock) or evidences of indebtedness, then a
proportionate part of such capital stock and evidences of indebtedness shall be
set aside for each outstanding Option and, upon the exercise of such Option,
delivered to the Option Holder.

                4.5 No Rights as Shareholder. An Option Holder shall have none
of the rights of a shareholder with respect to the Shares subject to an Option
until such Shares are transferred to the Option Holder upon the exercise of such
Option. Except as provided in this Article IV, no adjustment shall be made for
dividends, rights or other property distributed to shareholders (whether
ordinary or extraordinary) for which the record date is prior to the date such
Shares are so transferred.

                4.6 Fractional Shares. No adjustment or substitution provided
for in this Article IV shall require the Company to issue a fractional share.
The total substitution or adjustment with respect to each Option shall be
limited by deleting any fractional share.

                4.7 Determination by the Committee, Etc. Adjustments under this
Article IV shall be made by the Committee, whose determinations with regard
thereto shall be final and binding.

                                       -4-

<PAGE>   8

                                    ARTICLE V
                                  PARTICIPATION

                In accordance with the provisions of the Plan, the Committee
shall, in its sole discretion, select Option Holders from among Eligible
Employees and Eligible Consultants to whom Options will be granted and shall
specify the number of Shares subject to each Option and such other terms and
conditions of each Option as the Committee may deem necessary or desirable and
consistent with the terms of the Plan. Eligible Employees shall be selected from
the employees of the Company who are performing services in the management,
operation and growth of the Company, and contribute, or are expected to
contribute, to the achievement of long-term corporate objectives. Eligible
Consultants shall be selected from the consultants and other individuals who
provide services to the Company with respect to the operation and growth of the
Company and who contribute, or are expected to contribute, to the achievement of
long-term corporate objectives. Generally, it is anticipated that the Company
will grant options only to Eligible Consultants who are Directors of the Company
who do not otherwise own stock in the Company. Eligible Employees and Eligible
Consultants may be granted one or more Options from time-to-time. The grant of
each such Option shall be separately approved by the Committee, and receipt of
one such Option shall not result in automatic receipt of any other Option. Upon
determination by the Committee that an Option is to be granted to an Eligible
Employee or Eligible Consultant, written notice shall be given to such person,
specifying the terms, conditions, rights and duties related thereto.

                                   ARTICLE VI
                                  STOCK OPTIONS

                6.1 Grant of Options to Eligible Employees and Eligible
Consultants. Coincident with or following designation for participation in the
Plan, Eligible Employees and Eligible Consultants may be granted one or more
Options. The Committee in its sole discretion shall designate whether an Option
is to be considered an Incentive Stock Option or a Non-Qualified Option.
Incentive Stock Options may be granted only to Eligible Employees. The Committee
may grant both an Incentive Stock Option and a Non-Qualified Option to an
Eligible Employee at the same time or at different times. Incentive Stock
Options and Non-Qualified Options, whether granted at the same or different
times, shall be deemed to have been awarded in separate grants and shall be
clearly identified, and in no event shall the exercise of one Option affect the
right to exercise any other Option or affect the number of Shares for which any
other Option may be exercised. An Option shall be considered as having been
granted on the date specified in the grant resolution of the Committee.

                6.2 Option Certificates. Each Option granted under the Plan
shall be evidenced by a written stock option certificate (an "Option
Certificate") issued in the name of the Option Holder and in such form as may be
approved by the Committee. The Option Certificate shall and shall be deemed to
incorporate and conform to the terms and conditions set forth herein, and may
also include such other terms and conditions, not inconsistent herewith, as the
Committee may consider appropriate in each case.

                                       -5-

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                6.3 Certain Option Terms. Options granted pursuant to the Plan
shall have terms and conditions consistent with the following in addition to the
terms and conditions set forth elsewhere herein:

                         (a) Number of Shares. Each Option shall relate to a
specified number of Shares determined by the Committee.

                         (b) Price. Each Option shall have an Option Price that
is determined by the Committee. Incentive Stock Options shall have an Option
Price that is equal to or greater than the Fair Market Value of the Stock on the
date the Option is granted.

                         (c) Duration and Exercise of Options. Each Option shall
relate to a specified period of time, as determined by the Committee, within
which the Option may be exercised by the Option Holder (the "Option Period").
The Option Period must end, in all cases, not more than ten years from the date
the Option is granted. In the absence of specific provisions in the Option
Certificate, each Option shall have an Option Period ending ten years from the
date the Option is granted. Each Option shall become exercisable (vest) over
such period of time, if any, as is determined by the Committee. In the absence
of specific provisions in the Option Certificate, (i) each Option shall vest as
to one-quarter of the underlying Shares one year from the grant date, then, as
to the remaining underlying Shares, 1/36th of those Shares monthly for the next
three years; and (ii) upon the events described in Section 7.1, if the notice
described in Section 7.2 is not given, the Option shall vest as to all
previously unvested shares.

                         (d) Termination of Employment or Service, Death,
Disability, Etc. The Committee may specify the period after which an Option may
be exercised following termination of the employment of an Eligible Employee or
termination of relationship with an Eligible Consultant. The effect of this
subsection 6.3(d) shall be limited to determining the consequences of a
termination and nothing in this subsection 6.3(d) shall restrict or otherwise
interfere with the Company's discretion with respect to the termination of any
person's employment or other relationship. If the Committee does not so specify,
the following shall apply:

                                  (i) If the employment or consulting
                relationship of an Option Holder by or with the Company
                terminates by action of the Option Holder for any reason other
                than death or Disability within six months after the date the
                Option is granted or if the employment or consulting
                relationship of the Option Holder by or with the Company is
                terminated within the Option Period for cause, as determined by
                the Company, the Option shall be void for all purposes. As used
                in this subsection 6.3(d), "cause" shall include without
                limitation a gross violation, as determined by the Company, of
                the Company's established policies and procedures, any event
                permitting termination for cause under any applicable employment
                agreement, any act of dishonesty, fraud or wilful misconduct
                toward the Company.

                                  (ii) If the employment or consulting
                relationship of the Option Holder terminates because the Option
                Holder becomes Disabled within the Option

                                       -6-

<PAGE>   10

                Period, the Option may be exercised by the Option Holder (or, in
                the case of his death after becoming disabled, by those entitled
                to do so under his will or by the laws of descent and
                distribution) within 30 days following such termination (if
                otherwise within the Option Period), but not thereafter. In any
                such case, the Option may be exercised only as to the Shares as
                to which the Option had become exercisable on or before the date
                of termination because of Disability.

                                  (iii) If the Option Holder dies within the
                Option Period, while employed by the Company, while a consultant
                to the Company or within the three-month period referred to in
                (iv) below, the Option may be exercised by those entitled to do
                so under his will or by the laws of descent and distribution
                within 30 days following his death (if otherwise within the
                Option Period), but not thereafter. In any such case the Option
                may be exercised only as to the Shares as to which the Option
                had become exercisable on or before the date of the Option
                Holder's death.

                                  (iv) If the employment or relationship of the
                Option Holder by or with the Company terminates within the
                Option Period for any reason other than for cause, Disability or
                death (and, in the case of a termination by action of the Option
                Holder, such termination occurs more than six months after the
                Option is granted), the Option may be exercised by the Option
                Holder within 30 days following the date of such termination (if
                otherwise within the Option Period), but not thereafter. In any
                such case, the Option may be exercised only as to the Shares as
                to which the Option had become exercisable on or before the date
                of termination.

                         (e) Exercise, Payments, Etc.

                                  (i) Manner of Exercise. The method for
                exercising each Option granted hereunder shall be by delivery to
                the Company of written notice specifying the number of Shares
                with respect to which such Option is exercised. The purchase of
                such Shares shall take place at the principal offices of the
                Company within thirty days following delivery of such notice, at
                which time the Option Price of the Shares shall be paid in full
                by any of the methods set forth below or a combination thereof.
                If the purchase price is paid by means of a broker's loan
                transaction described in clause (C) of Section 6.3(f)(ii), in
                whole or in part, the closing of the purchase of the Stock under
                the Option shall take place on the date on which, and only if,
                the sale of Stock upon which the broker's loan was based has
                been closed and settled, unless the Option Holder makes an
                irrevocable written election, at the time of exercise of the
                Option, to have the exercise treated as fully effective for all
                purposes upon receipt of the purchase price by the Company
                regardless of whether or not the sale of the Stock by the broker
                is closed and settled. The Company may require, as a condition
                to the exercise of the Option and delivery of the Shares, that
                the Option Holder execute a Shareholders' Agreement in the form
                then being used for the Company's Shareholders, which may or may
                not be substantially in the form of the Shareholders Agreement
                attached as Exhibit A to this Plan. A properly executed
                certificate or certificates representing the

                                       -7-

<PAGE>   11

                Shares shall be delivered to or at the direction of the Option
                Holder upon payment therefor. If Options on less than all shares
                evidenced by an Option Certificate are exercised, the Company
                shall deliver a new Option Certificate evidencing the Option on
                the remaining shares upon delivery of the Option Certificate for
                the Option being exercised.

                                  (ii) Manner of Payment. The Option Price shall
                be paid by any of the following methods or any combination of
                the following methods at the option of the Option Holder, or by
                any other method approved by the Committee upon the request of
                the Option Holder: (A) cash; (B) certified, cashier's or other
                check acceptable to the Company, payable to the order of the
                Company; (C) delivery to the Company of irrevocable instructions
                to a broker to deliver promptly to the Company the amount of
                sale or loan proceeds required to pay the Option Price; (D)
                delivery to the Company of certificates representing the number
                of Shares then owned by the Option Holder, the Fair Market Value
                of which (determined as of the date the notice of exercise is
                delivered to the Company) equals the Option Price of the Stock
                to be purchased pursuant to the Option, properly endorsed for
                transfer to the Company. No Option may be exercised by delivery
                to the Company of certificates representing Stock that has been
                held by the Option Holder for less than six months or such other
                period as is specified by the Committee.

                         (f) Withholding.

                                  (i) Non-Qualified Options. Upon exercise of an
                Option, the Option Holder shall make appropriate arrangements
                with the Company to provide for the amount of additional
                withholding required by Sections 3102 and 3402 of the Code and
                applicable state income tax laws, including payment of such
                taxes through delivery of shares of Stock or by withholding
                Stock to be issued under the Option, as provided in Section 10.

                                  (ii) Incentive Options. If an Option Holder
                makes a disposition (as defined in Section 424(c) of the Code)
                of any Stock acquired pursuant to the exercise of an Incentive
                Stock Option prior to the expiration of two years from the date
                on which the Incentive Stock Option was granted or prior to the
                expiration of one year from the date on which the Option was
                exercised, the Option Holder shall send written notice to the
                Company at its principal executive office (Attention: Corporate
                Secretary) of the date of such disposition, the number of shares
                disposed of, the amount of proceeds received from such
                disposition and any other information relating to such
                disposition as the Company may reasonably request. The Option
                Holder shall, in the event of such a disposition, make
                appropriate arrangements with the Company to provide for the
                amount of additional withholding, if any, required by Sections
                3102 and 3402 of the Code and applicable state income tax laws.

                                       -8-

<PAGE>   12

                6.4 Restrictions on Incentive Stock Options.

                         (a) Initial Exercise. The aggregate Fair Market Value
of the Shares with respect to which Incentive Stock Options are exercisable for
the first time by an Option Holder in any calendar year, under the Plan or
otherwise, shall not exceed $100,000. For this purpose, the Fair Market Value of
the Shares shall be determined as of the date of grant of the Option.

                         (b) Ten Percent Shareholders. Incentive Stock Options
granted to an Option Holder who is the holder of record of 10% or more of the
outstanding Stock of the Company shall have an Option Price equal to 110% of the
Fair Market Value of the Shares on the date of grant of the Option and the
Option Period for any such Option shall not exceed five years.

                                   ARTICLE VII
                   CORPORATE REORGANIZATION; CHANGE OF CONTROL

                7.1 Reorganization. Upon the occurrence of any of the following
events, if the notice required by Section 7.2 shall have first been given, the
Plan and (to the extent not exercised before the event occurs) all Options then
outstanding hereunder shall automatically terminate and be of no further force
and effect whatsoever, without the necessity for any additional notice or other
action by the Board or the Company: (a) the merger or consolidation of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the continuing corporation and which does not result in
any reclassification or change of outstanding shares of Common Stock); or (b)
the sale or conveyance of the property of the Company as an entirety or
substantially as an entirety (other than a sale or conveyance in which the
Company continues as holding company of an entity or entities that conduct the
business or businesses formerly conducted by the Company); or (c) the
dissolution or liquidation of the Company.

                7.2 Required Notice. The Company shall give each Option Holder
at least 30 days' prior written notice of any event described in Section 7.1,
except as otherwise provided in this Section 7.2. No notice shall be required in
the case of the events described in clauses (a) or (b) of Section 7.1 if the
Company, or the successor or purchaser, as the case may be, shall make adequate
provision for the assumption of the outstanding Options or the substitution of
new options for the outstanding Options on terms comparable to the outstanding
Options. Any such assumption or substitution shall give the Option Holder the
right thereafter to purchase the kind and amount of securities or property or
cash receivable upon such merger, consolidation, sale or conveyance by a holder
of the number of Shares that would have been receivable upon exercise of the
Option immediately prior to such merger, consolidation, sale or conveyance
(assuming such holder of Stock failed to exercise any rights of election and
received per share the kind and amount received per share by a majority of the
non-electing shares). The provisions of this Article VII shall similarly apply
to successive mergers, consolidations, sales or conveyances. Notice under this
Section 7.2 shall be deemed to have been given when delivered personally to an
Option Holder or when mailed to an Option Holder by registered or certified
mail, postage prepaid, at such Option Holder's address last known to the
Company.

                                       -9-

<PAGE>   13

                7.3 Acceleration of Exercisability. Each Option Holder notified
in accordance with Section 7.2 may exercise the portion of his or her Option
that is then exercisable at any time before the occurrence of the event
requiring the giving of notice (but subject to occurrence of such event). In
addition, as provided under Section 6.3(c), except as may be otherwise provided
in the Option Certificate, each Option Holder notified in accordance with
Section 7.2 may exercise the portion of the Option that is not then exercisable,
regardless of whether all conditions of exercise relating to length of service
have been satisfied.

                                  ARTICLE VIII
                           EMPLOYMENT; TRANSFERABILITY

                8.1 Employment. Nothing contained in the Plan or in any Option
granted under the Plan shall confer upon any Option Holder any right with
respect to the continuation of his or her employment by or service with the
Company, or interfere in any way with the right of the Company, subject to the
terms of any separate employment agreement or other contract to the contrary, at
any time to terminate the employment or service of such Option Holder or to
increase or decrease the compensation of the Option Holder from the rate in
existence at the time of the grant of an Option. The Committee shall determine
whether an authorized leave of absence, or absence in military or government
service, shall constitute a termination of employment.

                8.2 Other Employee Benefits. The amount of any compensation
deemed to be received by an Option Holder as a result of the exercise of an
Option shall not constitute "earnings" with respect to which any other employee
benefits of such person are determined, including without limitation benefits
under any pension, profit sharing, life insurance or salary continuation plan.

                8.3 Transferability. No right or interest of any Option Holder
in an Option granted pursuant to the Plan shall be assignable or transferable
during the lifetime of the Option Holder, either voluntarily or involuntarily,
or be subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of an Option Holder's death, an Option Holder's rights
and interests in Options shall be transferable by will or pursuant to the laws
of descent and distribution. Each Option granted under the Plan shall be
exercisable during the Holder's lifetime only by the Option Holder or, in the
event of Disability or incapacity, by the Option Holder's guardian or legal
representative.

                                   ARTICLE IX
                           SECURITIES LAW RESTRICTIONS

                Each Option shall be subject to the requirement that if at any
time counsel to the Company shall determine that the listing, registration or
qualification of the Shares subject to such Option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance or purchase of Shares thereunder, such Option may
not be exercised in whole or in part

                                      -10-

<PAGE>   14

unless such listing, registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the Committee. Nothing
herein shall be deemed to require the Company to apply for or obtain such
listing, registration or qualification.

                                    ARTICLE X
                                   WITHHOLDING

                10.1 Withholding Requirement. The Company's obligations to
deliver Shares upon the exercise of an Option shall be subject to the Option
Holder's satisfaction of all applicable federal, state and local income and
other tax withholding requirements.

                10.2 Withholding With Stock. The Committee may from time to
time, in its sole discretion, grant Option Holders the right to pay all such
amounts of tax withholding, or any part thereof, by electing to transfer to the
Company, or to have the Company withhold from Shares otherwise issuable to the
Option Holder, Shares having a value equal to the amount required to be withheld
or such lesser amount as may be specified by the Option Holder. The value of
Shares to be withheld shall be based on the Fair Market Value of the Stock on
the date that the amount of tax to be withheld is to be determined (the "Tax
Date"). Any such election by Option Holders to have Shares withheld for this
purpose will be subject to the following restrictions and any additional
restrictions imposed by the Committee: (a) all elections must be made prior to
the Tax Date; and (b) all elections shall be irrevocable.

                                   ARTICLE XI
                                  MISCELLANEOUS

                11.1 Expiration. The Plan shall terminate whenever the Board
adopts a resolution to that effect. If not sooner terminated by the Board, the
Plan shall terminate and expire on June 1, 2008. After termination, no
additional Options shall be granted under the Plan, but the Company shall
continue to recognize Options previously granted.

                11.2 Amendments, Etc. The Board may from time to time amend,
modify, suspend or terminate the Plan. Nevertheless, no such amendment,
modification, suspension or termination shall, without the consent of the Option
Holder, impair any Option previously granted under the Plan or deprive any
Option Holder of any Shares that he may have acquired through or as a result of
the Plan.

                11.3 Treatment of Proceeds. Proceeds from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Company.

                                      -11-

<PAGE>   15

                11.4 Section Headings. The section headings are included herein
only for convenience, and they shall have no effect on the interpretation of the
Plan.

                11.5 Severability. If any article, section, subsection or
specific provision is found to be illegal or invalid for any reason, such
illegality or invalidity shall not affect the remaining provisions of the Plan,
and the Plan shall be construed and enforced as if such illegal and invalid
provision had never been set forth in the Plan.

                11.6 Gender and Number. Except when otherwise indicated by the
context, the masculine gender shall include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.

                Adopted as of August 12, 1998.

                                          INTERACTIVE KNOWLEDGE, INC.,
                                          a Delaware corporation

                                          By: /s/ TIMOTHY R. SCHIEWE
                                             ----------------------------------
                                          Timothy R. Schiewe, President

                                      -12-<PAGE>   1
                                                                    EXHIBIT 10.2

                       AMENDMENT TO 1998 STOCK OPTION PLAN

     netLibrary, Inc., a Delaware corporation (formerly Interactive Knowledge,
Inc) does hereby amend the Interactive Knowledge, Inc. 1998 Stock Option Plan,
as amended (the "Option Plan") as follows:

     The first sentence of Article IV, Section 4.1 of the Option Plan is amended
in its entirety to read as follows:

          4.1 Number of Shares. The total number of Shares as to which the
          Options may be granted pursuant to the Plan shall be 5,021,666 in the
          aggregate.

     IN WITNESS WHEREOF, this Amendment to the Interactive Knowledge, Inc. 1998
Stock Option Plan has been signed and is effective the 18th day of February,
2000.

                                            NETLIBRARY, INC.

                                            By: /s/ TIMOTHY R. SCHIEWE
                                              ---------------------------------
                                            Name:  Timothy R. Schiewe
                                            Title: President

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