Document:

<PAGE>   1
                                                                EXHIBIT 10.7
                              AGREEMENT OF SUBLEASE

                  THIS AGREEMENT OF SUBLEASE, dated as of October 1, 1999
(this "Agreement"), by and between InterWorld Corporation ("InterWorld" or
"Sublandlord"), duly organized and existing under the laws of the State of
Delaware, having its principal office at 395 Hudson Street, 6th Floor, New York,
NY 10014, and UGO Networks, Inc. ("UGO" or "Subtenant"), duly organized and
existing under the laws of the State of Delaware, having an existing principal
office at 251 Park Avenue South, New York, NY 10010.

Capitalized terms used in the recitals to and within this Agreement and not
otherwise defined herein shall have the respective meanings assigned to such
terms in the Original Lease Agreement between InterWorld and the New York City
District Council of Carpenters Pension Fund dated January 12, 1997, as amended
by the First Amendment to Lease dated July 1, 1999 (collectively the Overlease),
and incorporated by reference herein:

                              W I T N E S S E T H:

                  WHEREAS, Sublandlord is the Tenant of certain square footage
(the "Premises") at 395 Hudson Street in the Burrough of Manhattan, City, County
and State of New York, (the "Building") Sublandlord wishes to sublease a portion
of the Premises to Subtenant upon the terms and conditions herein after set
forth.

                  NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:

                  1. Sublease.

                           (a) Sublandlord hereby subleases to Subtenant and
Subtenant hereby subleases from Sublandlord that portion of the 8th floor of the
Premises shown on Schedule A hereof (the "Sublet Premises"), upon the terms
hereinafter contained.

                           (b) Subtenant is hereby entitled to the rights of the
Sublandlord with respect to the Sublet Premises, as Tenant under the Overlease.

                           (c) Except as otherwise expressly provided herein or
to the extent inconsistent with the provisions hereof, all of the terms,
covenants, conditions and provisions of the Overlease are hereby incorporated
in, and made a part of, this Sublease with the same force and effect as if set
forth herein in full; and such rights and obligations as are contained in the
Overlease are hereby imposed upon the respective parties hereto, Sublandlord
herein being substituted for the "Landlord" under the Overlease and Subtenant
herein being substituted for the "Tenant" under the Overlease.

                           (d) For the purposes of this Sublease, the following
provisions of the Overlease are not incorporated as part of this Sublease:
Paragraphs 1.04, 1.08, 3.03 (specific

                                      -1-
<PAGE>   2
time periods, Structure-Tone as general contractor, etc.), 3.07, 3.08, 4.01(b),
references to 1997 in 4.02, 4.07(c), 9.02(a) and (b), hook-up charge reference
in second sentence of 15.01, 31, 40.01 , and 42.

                  2. Duration of Term. The Term of this Agreement (the "Sublease
Term") shall commence on July 1, 1999, (the "Sublease Commencement Date") and
shall expire on December 15, 2015 (the "Sublease Expiration Date"), or such
earlier date as this Agreement may hereinafter provide.

                  3. Rental Provisions.

                           (a) Base Rent. Subtenant shall pay Base Rent to
Sublandlord, without demand or notice, as follows: Beginning on April 1, 2000
and on or before each month beginning thereafter, Subtenant shall pay to
Sublandlord the Subtenant' proportionate share (as defined in Section 3.(b)
below) of the annual basic lease payment as set forth on the attached Exhibit A
in equal monthly installments. Subtenant covenants to pay to Sublandlord in
equal monthly installments plus additional rent as provided herein. All basic
lease payments and additional rent shall be paid to Sublandlord at its office
shown above. The aforementioned date of commencement of rent is reflective of a
Partial Rent Abatement period, as defined in First Amendment to Lease, dated
July 1, 1999. Sublandlord shall duly pay each installment of basic and
additional rent under the terms of the Overlease and will duly observe and
perform every term and condition of the Overlease to the extent that such term
and condition is not provided in this Sublease to be observed or performed by
Sublandlord (and except to the extent that any failure so to pay or any failure
in such observance or performance shall have resulted, directly or indirectly,
from any default by Subtenant in its obligations to pay any amount of fixed
annual rent or additional rent hereunder).

                           (b) For purposes of incorporation into this Sublease,
the Overlease is subject to modification so that Subtenant's proportionate share
is 78.2%.

                           (c) Throughout the Sublease Term, Subtenant agrees to
pay Sublandlord, as additional rent, a sum equal to a proportionate share of all
amounts, if any, that become due and payable from time to time by Sublandlord to
Landlord on account of "Real Estate Taxes" and "Operating Expenses" pursuant to
Article 14 of the Overlease.

                           (d) Throughout the Sublease Term, Subtenant agrees to
pay to Sublandlord, as additional rent, a sum equal to Subtenants proportionate
share of all amounts, if any, that become due and payable from time to time by
Sublandlord to Landlord on account of any additional rents and charges payable
by Sublandlord pursuant to the Overlease, in addition to the Subtenants
proportionate share of amounts payable by Sublandlord pursuant to Article 15 of
the Overlease ("HVAC")

                           (e) Subtenant shall be entitled to receive from
Sublandlord a proportionate share of all credits and rebates to which
Sublandlord shall be entitled under the Overlease and which are attributable in
whole or in part to any period of time on or after the date hereof.

                                      -2-
<PAGE>   3
                           (f) The amounts payable by Subtenant, and credits and
rebates to which Subtenant shall be entitled hereunder shall be payable to
Subtenant by Sublandlord, or credited or rebated to Subtenant, as the case may
be, at the same time and manner as Sublandlord is required to pay such charges
to Landlord or received such credits or rebates from Landlord under the
provisions of the Overlease.

                  (4) Deposit. Subtenant assumes any and all obligation for its
prorated amount of Additional Security under the terms and conditions contained
in the First Amendment to the Original Lease Agreement.

                  (5) Utilities Payments. Subtenant assumes any and all
obligation for its public utilities fees, monthly assessments, and/or its own
privately contracted obligations for services. The basis for such fees shall be
assessed based on the sub-metering available on the premise and therefore the
responsibility of Subtenant.

                  (6) Work Credit. The "Work Credit", as defined in First
Amendment to Lease, dated July 1, 1999, shall be shared by Sublandlord and
Subtenant and calculated as the proportionate rate of space to be developed and
used by each party, as contained in Exhibit A hereto. Subtenant shall pay all
costs associated with work effort required for the space leased hereunder in
excess of the Work Credit.

                  (7) Missed Payments. In the event that Subtenant fails to make
or causes to be made any payments as required under the foregoing provisions of
this Section after fifteen (15) days written notice, the item or installment not
so paid shall continue as an obligation of the Subtenant until the amount not so
paid has been paid in full, together with interest thereon from the date due at
the applicable interest rate stated in this Agreement at three percent (3%) per
annum over the Prime Rate. All rights shall be reserved by Sublandlord in the
collection of any such fees or Missed Payments.

                  (8) Payments Payable Absolutely Net. The obligation of
Subtenant to make payments provided for in this Agreement shall be absolutely
net to Sublandlord without any abatement, recoupment, diminution, reduction,
deduction, counterclaim, set-off or offset whatsoever, so that this Agreement
shall yield, net, to Sublandlord, the payments provided for herein, and all
costs, expenses and charges of any kind and nature relating to the Sublet
Premises, arising or becoming due and payable during or after the term of this
Agreement, shall be paid by Subtenant and Sublandlord shall be indemnified and
held harmless by Subtenant for, and Subtenant shall hold the Sublandlord, its
officers, directors, and employees, harmless from, any such costs, expenses and
charges (including reasonable attorney's fees).

                                      -3-
<PAGE>   4
                  (9) Nature of Subtenant's Obligation Unconditional. Except as
provided in the Overlease to the contrary Subtenant's obligations under this
Agreement to pay rent and Additional Rent shall be absolute and, unconditional
and irrespective of any defense or any rights of set-off, recoupment or
counterclaim or deduction and without any rights of suspension, deferment,
diminution or reduction it might otherwise have against Sublandlord or any other
Person and the obligation of Subtenant shall arise whether or not Subtenant has
completed its work described in the Work Credit Documents (as such term is
defined in the Original Lease Agreement and First Amendment thereto between
InterWorld and the Original landlord). Subtenant will not suspend or discontinue
payment of any rent or Additional Rent due and payable hereunder or performance
or observance of any covenant or agreement required on the part of Subtenant
hereunder for any cause whatsoever, and Subtenant waives all rights now or
hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction in the Rental Payments hereunder.

                  (10) Assignment and Subletting. In addition to restrictions on
assignment and subleasing contained in the Overlease and amended Lease
Agreement, Subtenant may not assign its interest in this Agreement or sublease
the space without the prior written approval of Sublandlord. Any attempt to
assign or further sublet without such consent shall be null and void.
Notwithstanding anything set forth in the Overlease or herein. Subtenant may,
upon not less than fifteen (15) days' prior written notice to Landlord and
Sublandlord, but without requiring the consent of either, assign the Sublet
Premises to an entity which controls, is controlled by, or is under common
control with Subtenant (herein referred to as "related entity")

                  (11) Early Termination. Either party may terminate this
Agreement of Sublease under the following conditions:

                           (a) Specific to a certain square footage defined as
Space A on the attached Exhibit A for general purpose use by Subtenant ("Space
A"), either party may notify the other of its intention to terminate the
sublease for all of such Space A. Such written notice to the other party to be
provided no later than one year prior to such Early Termination date and shall
be effective no earlier than the third anniversary of this Agreement;

                           (b) Provided either party has exercised its option to
terminate this sublease as to Space A, either party may notify the other party
of its intention to terminate the sublease for all of Space B such written
notice to the other party to be provided no later than one year prior to such
Early Termination date and shall be effective no earlier than the fifth
anniversary of this Agreement;

                           (c) Sublandlord refunds' subject to release of space
in rentable condition, the applicable portion of the prorated Deposit under
Section 3C, subject to and proportionate to any staged release from lease
hereof;

                           (d) Sublandlord undertakes to pay Subtenant the
differential between the base and additional charge per rentable square foot
between Subtenant's new space and the square footage in Exhibit A for a period
of six months; and

                                      -4-
<PAGE>   5
                           (e) Sublandlord releases tenant of any and all
obligations pursuant to this Agreement subsequent to such Early Termination
date, with the exception of any outstanding and due fees or rents owed, whether
to Sublandlord or any other third party, and deposit obligations.

                           (f) Sublandlord shall acquire from Subtenant the
unamortized leasehold improvements made to Premises. Amortization shall be
calculated based on a seven (7) year estimated useful life (straight line
monthly).

                  12. Insurance. In addition to any insurance requirements
assumed by the Subtenant under the Overlease, Subtenant shall comply with the
following:

                           (a) Subtenant shall carry commercial public liability
insurance in respect of the Sublet Premises and the conduct of its operations
therein, with InterWorld Corporation named as additional insured in a minimum
amount of $1,000,000 per occurrence. The insurance may be effected under overall
blanket or excess coverage policies of Subtenant or any affiliates thereof, so
long as at least $2,000,000 is effected by a comprehensive liability insurance
policy.

                           (b) All insurance carried by Subtenant in connection
with the Building shall name InterWorld Corporation as an additional insured
party.

                           (c) Subtenant shall send copies to Sublandlord of all
proofs of loss filed by Subtenant, and take all other steps necessary or
reasonably requested by Sublandlord to collect from insurers for any loss
covered by any insurance required to be obtained under this Section or under the
Original Lease Agreement or as Amended, and at the request of Sublandlord shall
cause any Subtenant personnel, contractor or other insuring party to take
similar action with respect to such party's insurance. Subtenant shall not do
any act, or permit any act to be done, whereby any insurance required by this
Section would or might be suspended or impaired.

                           (d) Sublandlord and Subtenant each agrees to have
included in their respective insurance policies insuring the Sublet Premises a
waiver of the insurer's right of subrogation against the other and its officers
directors, employees, and agents.

                  13. No Additional Waiver Implied by One Waiver. In the event
any covenant or agreement contained in this Agreement should be breached by
either party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder. No waiver shall be binding unless it is in writing and
signed by the party making such waiver. No course of dealing between the
Sublandlord and Subtenant or any delay or omission on the part of Sublandlord in
exercising any rights hereunder or under any Work Credit Document shall operate
as a waiver.

                                      -5-
<PAGE>   6
                  14. Effect of Discontinuance of Proceedings. In case any
proceeding taken by Sublandlord under this Agreement on account of any Event of
Default hereunder or thereunder shall have been discontinued or abandoned for
any reason or shall have been determined adversely to Sublandlord, then, and in
every such case, Sublandlord shall be restored to its former position and rights
hereunder and thereunder, and all rights, remedies, powers and duties of
Sublandlord shall continue as in effect prior to the commencement of such
proceedings.

                  15. Anything in this Sublease to the contrary notwithstanding,
any failure of Subtenant to comply with the provisions of this Sublease, other
than a failure to pay rent or other sums payable to Sublandlord hereunder, shall
not constitute a default under this Sublease, if Landlord shall consent in
writing to such non-compliance.

                  16. Sublandlord agrees that it will not make any modification
of the Overlease without Subtenant's prior written consent, where such
modification would result in an increase of any obligations or liability or
diminish the rights of Sublandlord thereunder and, correspondingly, result in an
increase of any obligations or liability, or diminish the rights, of Subtenant
hereunder.

                  17. Sublandlord and Subtenant covenant, warrant and represent
to the other that there were no brokers or finders instrumental in consummating
this Sublease and that no conversations or negotiations were had by Sublandlord
or Subtenant with any broker concerning the renting of the Sublet Premises to
the Subtenant. Subtenant and Sublandlord each agree to indemnify and hold the
other harmless from and against (a) any and all claims for brokerage commissions
or fees by any person or company which is based in whole or part on any dealings
or communications by Subtenant or Sublandlord with such person or company, and
(b) all expenses, including reasonable attorneys' fees and court arising out of
any such claims. The Provision of this paragraph shall survive the expiration or
termination of this Sublease.

                  18. No property or assets of any, member, officer, or director
of Subtenant, disclosed or undisclosed, shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Sublandlord's remedies and
said parties shall have no personal liability, under or with respect to this
Sublease, the relationship of Sublandlord and Subtenant hereunder, or
Subtenant's use or occupancy of the Sublet Premises. Notwithstanding anything
contained in this Sublease to the contrary, Sublandlord shall look solely to the
estate and interest of the Subtenant in this Sublease for this satisfaction of
any right of Sublandlord, for the collection of any judgment or other judicial
process or arbitration award requiring the payment of money by Sublease in the
event of any default or breach by Sublease under the Sublease.

                  19. So long as this Sublease is in full force and effect,
Subtenant shall Peaceably and quietly have, hold and enjoy the Sublet Premises
subject, nevertheless, to the obligations of this Sublease and the Overlease,
and to superior leases and superior mortgages, if any.

                                      -6-
<PAGE>   7
                  20. All references herein to InterWorld Corporation shall also
mean Sublandlord, and all references to Sublandlord shall also mean InterWorld
Corporation. All references herein to UGO Networks, Inc. shall also mean
Subtenant, and all references to Subtenant shall also mean UGO Networks, Inc.

                  21. Agreement to Pay Attorneys' Fees and Expenses. In the
event Subtenant should default under any of the provisions of this Agreement
beyond applicable grace periods after notice in accordance with Section 25.02 of
the Overlease and Sublandlord should employ attorneys or incur other expenses
for the collection of the rent or additional rent payable hereunder or the
enforcement of performance or observance of any obligation or agreement on the
part of Subtenant herein contained, Subtenant agrees that it will within (10)
days of request therefor pay to Sublandlord the reasonable fees and
disbursements of such attorneys and such other expenses so incurred.

                  22. Notices. Notices to Sublandlord and Subtenant shall be
valid only if sent by certified mail, return receipt requested, or by overnight
courier which provides a receipt for delivery, to the parties address on page 1
Either party may, by notice as aforesaid, designate a different address or
address for notices, statements, demand or other communications intended for
it.

                  23. Survival: Any obligation of Subtenant to make payments to,
for, or on behalf of Sublandlord including, but not limited to, rent, Additional
Rent and the other payments provided in Section 3 shall survive the termination
of this Agreement.

                  24. Definitions: As used in this Agreement, the following
terms have the following meaning:

                           (a) "Any"; means "any and all".

                           (b) "Including": means "including but not limited
to".

                           (c) "Work Credit": means the definition contained in
the Original Lease Agreement and First Amendment thereto to include the design,
construction, reconstruction and rehabilitation, improvement, renovation and
installation of necessary improvement to the space. The Work Credit shall be
prorated by Sublandlord and receipts shall be submitted only to Sublandlord for
reimbursement thereof.

                  25. Sublandlord- This agreement may not be changed orally.
This agreement is binding on Sublandlord, Subtenant, their successors and
assigns.

                                      -7-
<PAGE>   8
                  IN WITNESS WHEREOF, each party has executed this agreement.

INTERWORLD CORPORATION:                      UGO NETWORKS, INC.:

By:    __________________________            By:    ____________________________

Name:  __________________________            Name:  ____________________________

Title: __________________________            Title: ____________________________

Date:  __________________________            Date:  ____________________________

                                      -8-
<PAGE>   9
                                    EXHIBIT A

                         ADDITIONAL PREMISES FIXED RENT

<TABLE>
<CAPTION>
         PERIOD                                                                               BASE RENT
                                                                                          (BEFORE PRORATION)

Period Commencement Date                           Period End Date                           (in dollars
------------------------                           ---------------                            per annum)
<S>                                   <C>                                                 <C>
Additional Premises Commencement      The day prior to the first anniversary of the           1,517,280
Date                                  Additional Premises Commencement Date

First anniversary of the Additional   The day prior to the second anniversary of the          1,562,798
Premises Commencement Date            Additional Premises Commencement Date

Second anniversary of the             The day prior to the third anniversary of the           1,608,317
Additional Premises Commencement      Additional Premises Commencement Date
Date

Third anniversary of the Additional   The day prior to the fourth anniversary of the          1,653,835
Premises Commencement Date            Additional Premises Commencement Date

Fourth anniversary of the             The day prior to the fifth anniversary of the           1,699,354
Additional Premises Commencement      Additional Premises Commencement Date
Date

Fifth anniversary of the Additional   The day prior to the sixth anniversary of the           1,846,024
Premises Commencement Date            Additional Premises Commencement Date

Sixth anniversary of the Additional   The day prior to the seventh anniversary of the         1,894,577
Premises Commencement Date            Additional Premises Commencement Date

Seventh anniversary of the            The day prior to the eighth anniversary of the          1,943,130
Additional Premises Commencement      Additional Premises Commencement Date
Date

Eighth anniversary of the             The day prior to the ninth anniversary of the           1,991,683
Additional Premises Commencement      Additional Premises Commencement Date
Date

Ninth anniversary of the Additional   The day prior to the tenth anniversary of the           2,040,236
Premises Commencement Date            Additional Premises Commencement Date

Tenth anniversary of the Additional   The day prior to the eleventh anniversary of the        2,240,517
Premises Commencement Date            Additional Premises Commencement Date

Eleventh anniversary of the           The day prior to the twelfth anniversary of the         2,293,622
Additional Premises Commencement      Additional Premises Commencement Date
Date

Twelfth anniversary of the            The day prior to the thirteenth anniversary of the      2,346,726
Additional Premises Commencement      Additional Premises Commencement Date
Date

Thirteenth anniversary of the         The day prior to the fourteenth anniversary of the      2,399,831
Additional Premises Commencement      Additional Premises Commencement Date
Date

Fourteenth anniversary of the         The day prior to the fifteenth anniversary of the       2,452,936
Additional Premises Commencement      Additional Premises Commencement Date
Date
</TABLE>

                                      -9-
<PAGE>   10
<TABLE>
<S>                                   <C>                                                     <C>
Fifteenth anniversary of the          Expiration Date                                         1,253,020*
Additional Premises Commencement
Date
</TABLE>

1.       Total Space on 8th Floor of 395 Hudson St, New York, NY 10014, leased
         to InterWorld:

         53,492 rentable square feet

2.       SUBTENANT Allocation of total of 8th Floor:

         Space A: approximately 25,057 rentable square feet

                  approximately 46.8% of total rentable square feet leased to
                    InterWorld

         Space B: approximately 16,806 rentable square feet

                  approximately 31.4% of total rentable square feet leased to
                    InterWorld

--------

         *        The Additional Premises Fixed Rent for this period is for a
                  six (6) month period prior to the Expiration Date; if the
                  period prior to the Expiration Date is less than or greater
                  than six (6) months, the Additional Premises Fixed Rent for
                  this period shall be appropriately prorated.

                                      -10-<PAGE>   1
                                                                    EXHIBIT 10.9

                             INTERWORLD CORPORATION
                           2000 EQUITY INCENTIVE PLAN

SECTION 1. PURPOSE

     The purposes of this InterWorld Corporation 2000 Equity Incentive Plan (the
"Plan") are to encourage selected employees, outside directors and consultants
of InterWorld Corporation (together with any successor thereto, the "Company")
and its Affiliates (as defined below) to acquire a proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity, thus enhancing the
value of the Company for the benefit of its shareholders, and to enhance the
ability of the Company and its Affiliates to attract and retain exceptionally
qualified individuals upon whom, in large measure, the sustained progress,
growth and profitability of the Company depend.

SECTION 2. DEFINITIONS

     As used in the Plan, the following terms shall have the meanings set forth
below:

     (a) "Affiliate" shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the Committee.

     (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent, or Other
Stock-Based Award granted under the Plan.

     (c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted under the Plan.

     (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

     (e) "Consultant" shall mean a consultant or adviser who provides bona fide
services to the Company or an Affiliate as an independent contractor. Service as
a consultant shall be considered employment for all purposes of the Plan, except
for purposes of satisfying the requirements of Incentive Stock Options.

     (f) "Committee" shall mean a committee of the Board of Directors of the
Company, acting in accordance with the provisions of Section 3, designated by
the Board to administer the Plan and composed of not less than two directors,
each of whom is not an employee of the Company or an Affiliate and meets the
eligibility requirements imposed by Rule 16b-3 (or its successor) under the
Securities Exchange Act of 1934, as amended, and each of whom is an outside
director for purposes of Section 162(m) of the Code.

     (g) "Dividend Equivalent" shall mean any right granted under Section 6(e)
of the Plan.

                                       A-1
<PAGE>   2

     (h) "Employee" shall mean any employee of the Company or of any Affiliate.

     (i) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.

     (j) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code, or any successor provision thereto.

     (k) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.

     (l) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

     (m) "Other Stock-Based Award" shall mean any right granted under Section
6(f) of the Plan.

     (n) "Outside Director" shall mean a member of the Board of Directors of the
Company or any Affiliate who is not an Employee. Service as an Outside Director
shall be considered employment for all purposes of the Plan, except for purposes
of satisfying the requirements of Incentive Stock Options.

     (o) "Participant" shall mean an Employee, Outside Director or Consultant
who receives an Award under the Plan.

     (p) "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.

     (q) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.

     (r) "Predecessor Plan" shall mean the Company's Amended and Restated 1996
Stock Option Plan.

     (s) "Released Securities" shall mean shares of Restricted Stock as to which
all restrictions imposed by the committee have expired, lapsed, or been waived.

     (t) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan.

     (u) "Restricted Stock Unit" shall mean any right granted under Section 6(c)
of the Plan that is denominated in Shares.

                                      A-2

<PAGE>   3

     (v) "Shares" shall mean the shares of common stock of the Company, $.01 par
value, and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(b) of the Plan.

     (w) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.

SECTION 3. ADMINISTRATION

     Except as otherwise provided herein, the Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, the Committee
shall have full power and authority to: (i) designate Participants; (ii)
determine the type or types of Awards to be granted to each Participant under
the Plan; (iii) determine the number of Shares to be covered by (or with respect
to which payments, rights, or other matters are to be calculated in connection
with) Awards; (iv) determine the terms and conditions of any Award; (v)
determine the time or times when each Award shall become exercisable and the
duration of the exercise period; (vi) determine whether, to what extent, and
under what circumstances Awards may be settled in or exercised for cash, Shares,
other securities, other Awards, or other property, or canceled, forfeited, or
suspended, and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vii) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award under the Plan
shall be deferred either automatically or at the election of the holder thereof
or of the Committee; (viii) interpret and administer the Plan and any instrument
or agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (x) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time, and shall be
final, conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
shareholder, and any employee, director or consultant of the Company or of any
Affiliate. In the case of any Award that is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Code, once
the Award is made, the Committee shall not have discretion to increase the
amount of compensation payable under the Award that would otherwise be due upon
attainment of the performance goal. Actions of the Committee may be taken either
(i) by a subcommittee, designated by the Committee, composed of two or more
members, or (ii) by the Committee but with one or more members abstaining or
recusing himself or herself from acting on the matter, so long as two or more
members remain to act on the matter. Such action, authorized by such a
subcommittee or by the Committee upon the abstention or recusal of such members,
shall be the action of the Committee for purposes of the Plan.

SECTION 4. SHARES AVAILABLE FOR AWARDS

     (a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b):

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<PAGE>   4

               (i) CALCULATION OF NUMBER OF SHARES AVAILABLE. The number of
          Shares available for granting Awards under the Plan shall be (A)
          3,000,000, plus the Shares remaining available for issuance under the
          Predecessor Plan on the effective date of this Plan, plus (B) the
          additional Shares as follows. As of January 1 of each year, commencing
          with the year 2001 and ending with the year 2006, the aggregate number
          of Shares available for granting Awards under the Plan shall
          automatically increase by a number of Shares equal to the lesser of
          (x) 5% of the total number of Shares then outstanding and (y) 750,000
          subject to adjustment as provided in Section 4(b). Further, if, after
          the effective date of the Plan, any Shares covered by an Award granted
          under the Plan or by an award granted under the Predecessor Plan, or
          to which such an Award or award relates, are forfeited, or if an Award
          or award otherwise terminates without the delivery of Shares or of
          other consideration, then the Shares covered by such Award or award,
          or to which such Award or award relates, or the number of Shares
          otherwise counted against the aggregate number of Shares available
          under the Plan with respect to such Award or award, to the extent of
          any such forfeiture or termination, shall again be, or shall become,
          available for granting Awards under the Plan. Notwithstanding the
          foregoing, the maximum number of Shares with respect to which
          Incentive Stock Options may be granted in any year shall be 5,000,000.

               (ii) ACCOUNTING FOR AWARDS. For purposes of this Section 4,

                         (A) if an Award (other than a Dividend Equivalent) is
                    denominated in Shares, the number of Shares covered by such
                    Award, or to which such Award relates, shall be counted on
                    the date of grant of such Award against the aggregate number
                    of Shares available for granting Awards under the Plan; and

                         (B) Dividend Equivalents and Awards not denominated in
                    Shares shall not be counted against the aggregate number of
                    Shares available for granting Awards under the Plan.

               (iii) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares
          delivered pursuant to an Award may consist, in whole or in part, of
          authorized and unissued Shares or of treasury Shares.

     (b) ADJUSTMENTS. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or property) which thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or property)
subject to outstanding Awards, (iii) the number and type of Shares (or other
securities or property) specified as the annual per-participant limitation under
Section 6(g)(vi), and (iv) the grant,

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<PAGE>   5

purchase, or exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, in each case, that with respect to Awards of Incentive
Stock Options no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the Code or any
successor provision thereto; and provided, further, however, that the number of
Shares subject to any Award denominated in Shares shall always be a whole
number.

SECTION 5. ELIGIBILITY

     Any Employee, Outside Director or Consultant shall be eligible to receive
Awards under the Plan. Any Awards granted to members of the Committee shall be
approved by the Board of Directors of the Company.

SECTION 6. AWARDS

     (a) OPTIONS. The Committee is hereby authorized to grant Options with the
following terms and conditions and with such additional terms and conditions, in
either case not inconsistent with the provisions of the Plan, as the Committee
shall determine:

               (i) EXERCISE PRICE. The exercise price per Share of each Option
          shall be determined by the Committee; provided, however, that such
          exercise price per Share under any Incentive Stock Option shall not be
          less than 100% of the Fair Market Value of a Share on the date of
          grant of such Incentive Stock Option, and such exercise price per
          share under any Non-Qualified Stock Option shall not be less than 85%
          of the Fair Market Value of a Share on the date of grant of such
          Non-Qualified Stock Option (or if the Committee so determined, in the
          case of any Option retroactively granted in tandem with or in
          substitution for another Award or any outstanding award granted under
          any other plan of the Company, on the date of grant of such other
          Award or award).

               (ii) OPTION TERM. The term of each Option shall be fixed by the
          Committee.

               (iii) TIME AND METHOD OF EXERCISE. The Committee shall determine
          the time or times at which an Option may be exercised in whole or in
          part, and the method or methods by which, and the form or forms,
          including, without limitation, cash, Shares, other Awards, or other
          property, or any combination thereof, having a Fair Market Value on
          the exercise date equal to the relevant exercise price, in which,
          payment of the exercise price with respect thereto may be made or
          deemed to have been made.

               (iv) INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
          Option granted under the Plan shall comply in all respects with the
          provisions of Section 422 of the Code, or any successor provision
          thereto, and any regulations promulgated thereunder.

     (b) STOCK APPRECIATION RIGHTS. The Committee is hereby authorized to grant
Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan
shall confer on the holder thereof a right to receive, upon exercise thereof,
the excess of (i) the Fair Market Value of one Share on the date of exercise or,
if the Committee shall so determine in the

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<PAGE>   6

case of any such right other than one related to any Incentive Stock Option, at
any time during a specified period before or after the date of exercise over
(ii) the grant price of the right as specified by the Committee, which shall not
be less than the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right (or, if the Committee so determines, in the case of any
Stock Appreciation Right retroactively granted in tandem with or in substitution
for another Award or any outstanding award granted under any other plan of the
Company, on the date of grant of such other Award or award). Subject to the
terms of the Plan, the grant price, term, methods of exercise, methods of
settlement, and any other terms and conditions of any Stock Appreciation Right
shall be as determined by the Committee. The Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation Right as it
may deem appropriate.

     (c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS.

               (i) ISSUANCE. The Committee is hereby authorized to grant Awards
          of Restricted Stock and Restricted Stock Units.

               (ii) RESTRICTIONS. Shares of Restricted Stock and Restricted
          Stock Units shall be subject to such restrictions as the Committee may
          impose (including, without limitation, any limitation on the right to
          vote a Share of Restricted Stock or the right to receive any dividend
          or other right or property), which restrictions may lapse separately
          or in combination at such time or times, in such installments or
          otherwise, as the Committee may deem appropriate.

               (iii) REGISTRATION. Any Restricted Stock granted under the Plan
          may be evidenced in such manner as the Committee may deem appropriate,
          including, without limitation, book-entry registration or issuance of
          a stock certificate or certificates. In the event any stock
          certificate is issued in respect of Shares of Restricted Stock granted
          under the Plan, such certificate shall be registered in the name of
          the Participant and shall bear an appropriate legend referring to the
          terms, conditions, and restrictions applicable to such Restricted
          Stock.

               (iv) FORFEITURE. Except as otherwise determined by the Committee,
          upon termination of employment (as determined under criteria
          established by the Committee) for any reason during the applicable
          restriction period, all Shares of Restricted Stock and all Restricted
          Stock Units still, in either case, subject to restriction shall be
          forfeited and reacquired by the Company; provided, however, that the
          Committee may, when it finds that a waiver would be in the best
          interests of the Company, waive in whole or in part any or all
          remaining restrictions with respect to Shares of Restricted Stock or
          Restricted Stock Units. Unrestricted Shares, evidenced in such manner
          as the Committee shall deem appropriate, shall be delivered to the
          Participant promptly after such Restricted Stock shall become Released
          Securities.

     (d) PERFORMANCE AWARDS. The Committee is hereby authorized to grant
Performance Awards. Subject to the terms of the Plan, a Performance Award
granted under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock), other securities, other
Awards, or other property and (ii) shall confer on the

                                      A-6
<PAGE>   7

holder thereof rights valued as determined by the Committee and payable to, or
exercisable by, the holder of the Performance Award, in whole or in part, upon
the achievement of such performance goals during such performance periods as the
Committee shall establish. Subject to the terms of the Plan and any applicable
Award Agreement, the performance goals to be achieved during any performance
period, the length of any performance period, the amount of any Performance
Award granted, and the amount of any payment or transfer to be made pursuant to
any Performance Award shall be determined by the Committee. The goals
established by the Committee shall be based on any one, or combination of,
earnings per share, return on equity, return on assets, total shareholder
return, net operating income, cash flow, revenue, economic value added, increase
in Share price or cash flow return on investment. Partial achievement of the
goal(s) may result in a payment or vesting corresponding to the degree of
achievement.

     (e) DIVIDEND EQUIVALENTS. The Committee is hereby authorized to grant
Awards under which the holders thereof shall be entitled to receive payments
equivalent to dividends or interest with respect to a number of Shares
determined by the Committee, and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested. Subject to the terms of the Plan, such Awards may have such terms
and conditions as the Committee shall determine.

     (f) OTHER STOCK-BASED AWARDS. The Committee is hereby authorized to grant
such other Awards that are denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Committee
to be consistent with the purposes of the Plan, provided, however, that such
grants must comply with applicable law. Subject to the terms of the Plan, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms, including, without limitation,
cash, Shares, other securities, other Awards, or other property, or any
combination thereof, as the Committee shall determine, the value of which
consideration, as established by the Committee, shall not be less than 85% of
the Fair Market Value of such Shares or other securities as of the date such
purchase right is granted (or if the Committee so determines, in the case of any
such purchase right retroactively granted in tandem with or in substitution for
another Award or any outstanding award granted under any other plan of the
Company, on the date of grant of such other Award or award).

     (g) GENERAL.

               (i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for
          no cash consideration or for such minimal cash consideration as may be
          required by applicable law.

               (ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in
          the discretion of the Committee, be granted either alone or in
          addition to, in tandem with, or in substitution for any other Award or
          any award granted under any other plan of the Company or any
          Affiliate. Awards granted in addition to or in tandem with other
          Awards, or in addition to or in tandem with awards

                                      A-7
<PAGE>   8

          granted under any other plan of the Company or any Affiliate, may
          be granted either at the same time as or at a different time from the
          grant of such other Awards or awards.

               (iii) FORMS OF PAYMENT UNDER AWARDS. Subject to the terms of the
          Plan and of any applicable Award Agreement, payments or transfers to
          be made by the Company or an Affiliate upon the grant, exercise, or
          payment of an Award may be made in such form or forms as the Committee
          shall determine, including, without limitation, cash, Shares, other
          securities, other Awards, or other property, or any combination
          thereof, and may be made in a single payment or transfer, in
          installments, or on a deferred basis, in each case in accordance with
          rules and procedures established by the Committee. Such rules and
          procedures may include, without limitation, provisions for the payment
          or crediting of reasonable interest on installment or deferred
          payments or the grant or crediting of Dividend Equivalents in respect
          of installment or deferred payments.

               (iv) LIMITS ON TRANSFER OF AWARDS. No Award (other than Released
          Securities), and no right under any such Award, shall be assignable,
          alienable, saleable, or transferable by a Participant otherwise than
          by will or by the laws of descent and distribution; provided, however,
          that, if so determined by the Committee, a Participant may, in the
          manner established by the Committee, (A) designate a beneficiary or
          beneficiaries to exercise the rights of the Participant, and to
          receive any property distributable, with respect to any Award upon the
          death of the Participant or (B) transfer any Award other than an
          Incentive Stock Option for bona fide estate planning purposes. Each
          Award, and each right under any Award, shall be exercisable, during
          the Participant's lifetime, only by the Participant, a permitted
          transferee or, if permissible under applicable law, by the
          Participant's guardian or legal representative. No Award (other than
          Released Securities), and no right under any such Award, may be
          pledged, alienated, attached, or otherwise encumbered, and any
          purported pledge, alienation, attachment, or encumbrance thereof shall
          be void and unenforceable against the Company or any Affiliate.

               (v) TERM OF AWARDS. The term of each Award shall be for such
          period as may be determined by the Committee; provided, however, that
          in no event shall the term of any Incentive Stock Option exceed a
          period of ten years from the date of its grant.

               (vi) PER-PERSON LIMITATION ON AWARDS. The number of Shares with
          respect to which Options, Stock Appreciation Rights, Restricted Stock,
          Restricted Stock Units and other Awards may be granted under the Plan
          to an individual Participant in any one fiscal year of the Company
          shall not exceed 3,000,000 Shares, subject to adjustment as provided
          in Section 4(b). The maximum fair market value of payments to an
          individual Participant under Performance Awards in any one fiscal year
          of the Company shall not exceed $5,000,000.

               (vii) SHARE CERTIFICATES. All certificates for Shares or other
          securities delivered under the Plan pursuant to any Award or the
          exercise thereof shall be subject to such stop transfer orders and
          other restrictions as the Committee may deem advisable under the Plan
          or the rules, regulations, and other requirements of the Securities

                                      A-8

<PAGE>   9

          and Exchange Commission, any stock exchange upon which such Shares or
          other securities are then listed, and any applicable Federal or state
          securities laws, and the Committee may cause a legend or legends to be
          put on any such certificates to make appropriate reference to such
          restrictions.

SECTION 7. AMENDMENT AND TERMINATION

         Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:

     (a) AMENDMENTS TO THE PLAN. The Board of Directors of the Company may
amend, alter, suspend, discontinue, or terminate the Plan, including, without
limitation, any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any Participant, or any other holder
or beneficiary of any Award theretofore granted, without the consent of any
share owner, Participant, other holder or beneficiary of an Award, or other
Person.

     (b) AMENDMENTS TO AWARDS. The Committee may waive any conditions or rights
under, amend any terms of, or amend, alter, suspend, discontinue, or terminate,
any Awards theretofore granted, prospectively or retroactively, without the
consent of any Participant, other holder or beneficiary of an Award.

     (c) ADJUSTMENTS OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. Except as provided in the following sentence, the Committee
shall be authorized to make adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4(b) hereof)
affecting the Company, any Affiliate, or the financial statements of the Company
or any Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits to be made available under the Plan. In the case of any Award
that is intended to qualify as performance-based compensation for purposes of
Section 162(m) of the Code, the Committee shall not have authority to adjust the
Award in any manner that would cause the Award to fail to meet the requirements
of Section 162(m).

     (d) CORRECTION OF DEFECTS, OMISSIONS, AND INCONSISTENCIES. The Committee
may correct any defect, supply any omission, or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.

SECTION 8. GENERAL PROVISIONS

     (a) NO RIGHTS TO AWARDS. No Employee, Participant or other Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Employees, Outside Director,
Consultants, other holders or beneficiaries of Awards under the Plan. The terms
and conditions of Awards need not be the same with respect to each recipient.

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<PAGE>   10

     (b) DELEGATION. The Committee may delegate to one or more officers or
managers of the Company or any Affiliate, or a committee of such officers or
managers, the authority, subject to such terms and limitations as the Committee
shall determine, to grant Awards to, or to cancel, modify, waive rights with
respect to, alter, discontinue, suspend, or terminate Awards held by, Employees,
Consultants, other holders or beneficiaries of Awards under the Plan who are not
officers or directors of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended, and who also are not "covered
employees" for purposes of Section 162(m) of the Code.

     (c) WITHHOLDING. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under any
Award or under the Plan the amount (in cash, Shares, other securities, other
Awards, or other property) of withholding taxes due in respect of an Award, its
exercise, or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.

     (d) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.

     (e) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be construed as
giving a Participant the right to remain an employee, director or consultant of
the Company or any Affiliate. Further, the Company or an Affiliate may at any
time terminate the service of any employee, director or consultant, free from
any liability, or any claim under the Plan, unless otherwise expressly provided
in the Plan or in any Award Agreement.

     (f) GOVERNING LAW. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable Federal law.

     (g) SEVERABILITY. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as
to any Person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person, or Award, and the remainder of the Plan and any such Award
shall remain in full force and effect.

     (h) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.

                                      A-10

<PAGE>   11

     (i) NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares, or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.

     (j) HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

SECTION 9. EFFECTIVE DATE OF THE PLAN

     The Plan shall be effective as of the date of its approval by the
stockholders of the Company.

SECTION 10. TERM OF THE PLAN

     No Award shall be granted under the Plan after January 25, 2010. However,
unless otherwise expressly provided in an applicable Award Agreement, any Award
theretofore granted may extend beyond such date, and the authority of the
Committee to amend, alter, adjust, suspend, discontinue, or terminate any such
Award, or to waive any conditions or rights under any such Award, and the
authority of the Board of Directors of the Company to amend the Plan, shall
extend beyond such date.

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