Document:

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                                                                    Exhibit 10.6

                               MEDIA METRIX, INC.

                                      LEASE

                                 Entire Building
                                 432 Clay Street
                            San Francisco, California

                           Fulbright & Jaworski L.L.P.
                                666 Fifth Avenue
                               New York, New York
                                 (212) 318-3000

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Landlord:                              Grace Brusseau, individually and Grace
                                       Brusseau and Stephen Kay, as co-trustees
                                       of Testamentary Trust of Michael J.
                                       Borelli, dba Grazia Investment Company.

Tenant:                                Media Metrix, Inc.

Premises:                              Entire building consisting of a 1st
(P.) 1                                 floor, 2nd floor and basement, at 432
                                       Clay Street, San Francisco, California.

Date of Lease:                         January 4, 2000.

Term:                                  5 years from commencement date.
(P.) 2(A)

Commencement Date:                     Earlier of substantial completion of
(P.) 2(A)                              tenant improvements or on January
                                       15, 2000.

Tenant Improvements:                   Replace and use best efforts to
(P.) 10(C)                             waterproof the access door leading to the
                                       basement.

Fixed Expiration Date:                 Five years after the Commencement Date.

Rent Commencement Date:                Commencement Date.
(P.) 2(A)(1)

Rent Payment Date:                     First business date of the month for
(P.) 2(A)                              which payment is applicable (except that
                                       the first month's rent is payable on
                                       execution of lease).

Annual Fixed Rent:                     lst year -- $187,000 ($15,583.33 per
(P.)2(A)(1), (2), (3), (4) and (5)     month). No rent is payable or due
                                       for the second and third months of the
                                       first year of the lease term.

                                       2nd year -- $192,500 ($16,041.67 per
                                       month). No rent is payable or due for the
                                       thirteenth and twenty-fourth months of
                                       the lease term.

                                       3rd year -- $198,000 ($16,500 per month).

                                       4th year -- $203,500 ($16,958.33 per
                                       month).

                                       5th year -- $209,000 ($17,416.67 per
                                       month).

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Tax Payment:                           An amount equal to the increase in the
(P.) 3(A)                              real estate taxes over the 1999-2000
                                       tax year.

Utilities:                             Lessee to pay for all water, sewer, fuel,
(P.) 3(C)                              gas, oil, heat, electricity and power.

HVAC:                                  Lessee to pay the increase of the cost of
(P.) 3(D)                              Lessor's service contract for the HVAC
                                       system over the Lessor's cost for the
                                       period from date of execution of the
                                       Lease until the expiration of one year
                                       thereafter.

Elevator                               Lessee to pay the increase of the cost of
(P.) 3(E)                              Lessor's service contract for the
                                       elevator over the Lessor's cost for the
                                       period from date of execution of the
                                       Lease until the expiration of one year
                                       thereafter.

Insurance:                             (i)   Comprehensive plate glass and
(P.) 3(B)(1), (2) and (4)                    general liability insurance with
                                             minimum limits of $1,000,000
                                             combined single limit for bodily
                                             injury and property damage;

                                       (ii)  All risk insurance; and

                                       (iii) Lessee to pay to Lessor the
                                             increase in all other insurance
                                             costs over the insurance costs paid
                                             by lessor during the base period
                                             7/1/1999 through 6/30/2000. (Base
                                             period insurance costs are $2,212).

Assignment/Subletting:                 Lessor's written consent required, but
(P.) 14(A)                             not to be unreasonably withheld. Tenant
                                       shall share profits on sublease with
                                       Landlord, Tenant to retain 40% and
                                       Landlord to receive 60%.

Renewal Option:                        Lessee has one option to renew the Lease
(P.) 2(B)                              for an additional 5 year period beginning
                                       immediately after expiration of the
                                       initial lease term. Rent to be
                                       determined, but to be fair market value.
                                       Lessee to give Lessor at least 120 days,
                                       but not more than 270 days notice of the
                                       exercise of such option.

Security:                              Standby letter of credit in the amount of
(P.) 13                                $99,000 in favor of Lessor.

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                LEASE: 432 CLAY STREET, SAN FRANCISCO, CALIFORNIA

      THIS LEASE is executed in San Francisco, California between Grace
Brusseau, individually, and Grace Brusseau and Stephen Kay, co-trustees of
Testamentary Trust of Michael J. Borelli, dba Grazia Investment Company,
hereafter called Lessor, and Media Metrix, Inc., hereafter called Lessee.

      1. PREMISES AND USE THEREOF: The property being leased is located in the
City and County of San Francisco, State of California, consisting of the entire
building commonly known as 432 Clay Street, consisting of a basement, a first
floor and a second floor (hereafter "the leased premises" or "the premises").
The leased premises is to be used for office space and for no other purpose
unless Lessee sublets to a retail subtenant with Lessor's prior written
approval. The parties agree that the rentable space included within the leased
premises consists of five thousand five hundred (5500) square feet and that the
rental amount per square foot shall apply only to the rentable square feet, i.e.
5500 square feet.

      2. TERMS AND RENTAL:

            A. Initial Lease Term: The term of this lease shall commence upon
substantial completion of tenant improvements or on January 15, 2000, whichever
first occurs, and shall terminate five (5) years thereafter. This five (5) year
period shall be known as "the lease term." Lessee shall pay rent to Lessor,
without deduction or offset, at 832 Cerrito Street, Albany, California 94706, or
such other place as may be designated upon reasonable notice from Lessor. Rent
is payable monthly. All rental payments are due, in advance, commencing on the
commencement date of the lease term on the first business date of the month for
which such payment is applicable. The rent during the lease term shall be as
follows:

                  1) Thirty four dollars ($34.00) per rentable square foot
during the first year of the lease term. This is a yearly rent during the first
year of the lease term of One Hundred Eighty Seven Thousand Dollars
($187,000.00), payable at the rate of Fifteen Thousand Five Hundred Eighty Three
Dollars and Thirty Three Cents ($15,583.33) per month, in advance, on the first
business date of the month for which such payment is applicable except that the
first month's rent shall be payable upon Lessee's execution of this Lease and
such payment is a condition precedent to the effectiveness of this Lease. No
rent is payable or due, and shall abate, for the second and third months of the
first year of the lease term.

                  2) Thirty five dollars ($35.00) per rentable square foot
during the second year of the lease term. This is a yearly rent during the
second year of the lease term of One Hundred Ninety Two Thousand Five Hundred
Dollars ($192,500.00), payable at the rate of Sixteen

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

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Thousand Forty One Dollars and Sixty Seven Cents ($16,041.67) per month, in
advance, on the first business date of the month for which such payment is
applicable. No rent is payable or due for the thirteenth and twenty fourth
months of the lease term.

                  3) Thirty six dollars ($36.00) per rentable square foot during
the third year of the lease term. This is a yearly rent during the third year of
the lease term of One Hundred Ninety Eight Thousand Dollars ($198,000.00),
payable at the rate of Sixteen Thousand Five Hundred Dollars ($16,500.00) per
month, in advance, on the first business date of the month for which such
payment is applicable.

                  4) Thirty seven dollars ($37.00) per rentable square foot
during the fourth year of the lease term. This is a yearly rent during the
fourth year of the lease term of Two Hundred Three Thousand Five Hundred Dollars
($203,500), payable at the rate of Sixteen Thousand Nine Hundred Fifty Eight
Dollars and Thirty Three Cents ($16,958.33) per month, in advance, on the first
business date of the month for which such payment is applicable.

                  5) Thirty eight dollars ($38.00) per rentable square foot
during the fifth year of the lease term. This is a yearly rent during the fifth
year of the lease term of Two Hundred Nine Thousand Dollars ($209,000), payable
at the rate of Seventeen Thousand Four Hundred Sixteen Dollars and Sixty Seven
Cents ($17,416.67) per month, in advance, on the first business date of the
month for which such payment is applicable.

            B. Option: Lessor grants to Lessee one option to renew this Lease
for an additional five (5) year period beginning immediately after expiration of
the initial lease term. This five year period shall be known as the Option
Period. This option may not be exercised if, after receiving notice from Lessor
of a default, Lessee has not cured said default at the time Lessee is to
exercise such option. The option shall be exercised by the Lessee giving the
Lessor written notice of exercise of the option not less than one hundred twenty
(120) days and not more than two hundred seventy days (270) days before the
expiration of the initial lease term. In the absence of such notice, the option
shall conclusively be deemed not to have been exercised. In the event of the
exercise of such option, Lessee's tenancy shall be pursuant to all of the terms
and conditions of this Lease except that there shall not be any further Option
Period. In the event the option is exercised, the terms "Lease" and " lease
term" shall be construed to include the Option Period.

                  1) If the option is exercised Lessor and Lessee agree to
negotiate in good faith in an effort to agree upon an acceptable market rental
rate for the Option Period. If no agreement is reached within thirty (30) days
of Lessee's exercise of the option then the monthly rental during the Option
Period shall be one hundred percent (100%) of the then fair market rental value
of the premises determined as set forth below. The phrase "then fair market
rental value" means what a Lessor and Lessee with no bias to lease the premises
would determine as rent for the Option Period, as of the commencement of the
Option Period, taking into consideration the uses permitted under this

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       2
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Lease, the quality, size, design and location of the premises, and the rent for
comparable space located in the same vicinity within the city and County of San
Francisco.

                  2) Within fifteen (15) days after the expiration of the thirty
day period set forth in subparagraph B.1), above, Lessor and Lessee shall each
appoint a licensed commercial real estate agent or broker who is knowledgeable
about the rental values of commercial property in the area in the City and
County of San Francisco where the leased premises are located to determine the
then fair market rental value of the premises. If either the Lessor or Lessee
does not appoint its agent or broker within ten (10) days after the other has
given notice of the name of its agent or broker, the single agent or broker
appointed will be the sole agent or broker and will set the then fair market
rental value of the premises. If two (2) agents or brokers are appointed, the
Lessor and Lessee and the two agents or brokers will promptly meet and attempt
to set the then fair market rental value. If there is no agreement within thirty
(30) days after the second agent or broker is identified, the two agents or
brokers shall within forty five (45) days after the second agent or broker is
identified jointly select a third licensed agent or broker who is knowledgeable
about the rental values of commercial property in the area in the City and
County of San Francisco where the leased premises are located. Within thirty
(30) days of the selection of the third agent or broker a majority of the agents
or brokers will set the then fair market rental value of the premises. If a
majority of the agents or brokers are unable to agree upon the then fair market
rental value of the premises within that thirty (30) day period, the decision of
the third agent or broker shall become the then fair market rental value of the
premises. Each party shall bear the cost of its own agent or broker and the
parties shall share equally the cost of the third agent or broker. If the first
two agents or brokers cannot agree upon a third agent or broker, then either
Lessor or Lessee may make such application or petition to the court or otherwise
as is necessary to obtain the appointment of a third agent or broker.

                  3) Notwithstanding any decision made pursuant to the terms of
subparagraph B.2), above, in no event shall the then fair market rental value of
the premises during the Option Period be less than the monthly rental payable
during the fifth year of the Initial Lease term.

            C. Lessee's Access For Improvements: Lessee shall have access to the
leased premises from and after the date of this lease to the date of the
commencement of the lease term to complete its improvements.

      3. ADDITIONAL RENTAL:

            A. TAXES: Lessee shall pay during the lease term, as additional
rental, an amount equal to the increase in the real estate taxes over the
1999-2000 tax year upon the whole of the land and building upon which the leased
premises are situated. Lessor shall provide Lessee with a copy of the 1999-2000
tax bill when the bill is available. The total amounts due shall be paid to
Lessor on or before

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       3
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the date that the first installment of taxes shall become delinquent. As used in
this Lease the words "real estate taxes" mean municipal, state or county real
estate taxes including the amount of any general or special assessments, or
levies or charges made by any municipal or political subdivision for local
improvements; any tax or charge made by any authority having jurisdiction for
parking facilities used by Lessee; any sewer, water control, environmental
control, business, or any similar tax or charge that may hereafter become
effective whether such real estate tax is caused by increased or added rate,
increased assessed valuation (except an increase during the initial lease term
resulting from a sale or transfer of the property) or by increase in, or by
reason of any new, general or special assessment or any charges in lieu of
taxes. Lessor represents to Lessee that as of the date of execution of this
Lease Lessor knows of no facts that would result in the reassessment of the
property for real estate taxes.

            B. INSURANCE:

                  1) As additional rental, Lessee agrees to carry a
comprehensive plate glass and general liability insurance policy which names the
Lessor (and Lessor's partners) as an additional named insured. This policy shall
have minimum limits of $1,000,000.00 combined single limit for bodily injury and
property damage. If Lessee should fail to obtain the said policies after five
(5) days notice to Lessee, Lessor may obtain and pay the premium on same; that
premium so paid by Lessor shall be deemed rent and shall be paid to Lessor by
Lessee with the next monthly rental installment after Lessor's payment of the
premium. Lessee agrees to provide Lessor a Certificate of Insurance on these
policies providing ten (10) days prior notice to Lessor in the event of
cancellation. Said insurance shall be obtained through a company reasonably
acceptable to Lessor.

                  2) As additional rental, Lessee, at its cost, shall maintain a
policy of All Risk insurance, including standard fire, unextended coverage,
insurance with vandalism and malicious mischief endorsements insuring the full
replacement value of Lessee's personal property and all improvements and
alterations to the premises paid for by Lessee. The proceeds from any such
policy shall be used by Lessee for the replacement of personal property or the
restoration of Lessee's improvements or alterations.

                  3) From time to time, but not more often than once every two
years, as the situation warrants if in the good faith judgment of Lessor, the
minimum limits of personal injury, property damage and liability insurance as
set forth above shall be reasonably increased. Lessee shall be solely
responsible to pay the cost of such increases. Lessor shall maintain all risk
insurance on the building.

                  4) As additional rental, Lessee shall pay to Lessor, on or
before the premium due date, the increase in all other insurance costs over the
insurance costs paid by Lessor during the base period July 1, 1999 through June
30, 2000 for the land and building upon which the leased premises are located.
Lessor's total insurance costs for the base period is two thousand two hundred
and twelve dollars ($2212.00).

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       4
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                  5) Lessor shall be named and maintained during the lease term
as an additional insured and/or additional loss payee on all Tenant's insurance
policies related to the premises. Lessor shall receive copies of declarations
pages each year and shall receive notice directly from each insurance company of
any revocation or cancellation of any insurance policy. Lessor shall cooperate
with Lessee in allowing any proceeds from any such insurance claim to be used in
the manner required by this Lease and provide Lessee access to such proceeds to
complete any restoration of Lessee's improvements, if required by the terms of
this lease, and to replace Lessee's personal property insured thereby.

                  6) Lessor shall be named and maintained during the lease term
as an additional insured on all insurance policies of any contractors or others
who perform any improvements or repairs to the premises. Lessor shall receive
copies of declarations pages and shall receive notice directly from each
insurance company of any revocation or cancellation of any insurance policy.

            C. UTILITIES: As additional rental, Lessee agrees to pay for all the
water, sewer, fuel, gas, oil, heat, electricity, power, materials, and services
(including but not limited to janitorial services) which may be furnished to or
used in or about the leased premises during the term of this Lease.

            D. HVAC MAINTENANCE: Lessor shall obtain a service contract for the
HVAC system(s). As additional rental, Lessee shall pay the increase of the cost
of Lessor's service contract for the HVAC system(s) over the Lessor's cost for
the one year period beginning with the execution of this lease. Lessor will bill
Lessee not more often than twice yearly for Lessee's obligation under the terms
of this paragraph.

            E. ELEVATOR: Lessor shall obtain a service contract for the
elevator. As additional rental, Lessee shall pay the increase of the cost of
Lessor's service contract for the elevator over the Lessor's cost for the one
year period beginning with the execution of this lease. Lessor will bill Lessee
not more often than twice yearly for Lessee's obligation under the terms of this
paragraph.

      4. PERFORMANCE: Lessee shall pay rent at the time and in the amount and
manner provided and to do, perform, and meet each and every covenant, condition
and obligation of Lessee contained in this Lease.

      5. POSSESSION AND ACCEPTANCE OF PREMISES: Prior to taking possession of
the premises and prior to beginning its improvements, Lessee will inspect the
premises and confirm in writing that, to Lessee's satisfaction, the premises are
in a good state of repair and in sanitary condition and that Lessee accepts the
premises in their then condition. The form of Lessee's written acceptance shall
be as shown by Exhibit A which is attached hereto and incorporated by this
reference. Lessee's written acceptance shall not be unreasonably withheld.

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       5
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      6. HOLDING OVER: If Lessee holds possession of the premises after this
Lease expires, Lessee shall be a tenant from month to month upon the terms and
conditions of this Lease that were in effect during the last month of the lease
term.

      7. ENTRY BY LESSOR: Lessor has the right to enter on the premises at
reasonable times to inspect them, to perform required maintenance and repairs or
to make additions or alterations to any part of the building in which the leased
premises are located. Except in the case of emergency, Lessor shall give Lessee
reasonable notice of Lessor's exercise of its right to enter the premises.
Lessor may, in connection with such alterations, additions or repairs, erect
scaffolding, fences, and similar structures, post relevant notices, and place
movable equipment. During such period(s) Lessor shall not incur liability to
Lessee for disturbance of quiet enjoyment of the premises or for any loss of
occupation thereof, except that rent will be reduced proportionally to the
extent that Lessor's activities interfere with the normal conduct of Lessee's
business on the premises. In doing any of the things stated in this paragraph,
Lessor shall use its best efforts not to interfere with Lessee's business, and
to complete such work as expeditiously as possible.

      8. POSTING "FOR SALE", "FOR LEASE", OR "FOR RENT" SIGNS: Lessor shall not
have the right to place "For Sale" signs on the premises at any time during the
lease term. Lessor shall have the right to place "For Lease" or "For Rent" signs
on the premises at any time within one hundred twenty (120) of expiration of the
Lease.

      9. AGREEMENT REGARDING BANKRUPTCY PROVISIONS:

            A. The parties recognize that the Federal Bankruptcy Law in
existence at the date of execution of this Lease prohibits, among other things,
the automatic forfeiture of a Lessee's lease as a result of the institution of
bankruptcy proceedings by, or against, the Lessee.

            B. The parties further agree that the various "forfeiture upon
bankruptcy" clauses contained in this Lease are invalid under the present
Federal Bankruptcy Law but nonetheless they desire to retain such clauses in
this Lease, it being expressly recognized that such clauses are of no effect
unless the appropriate Court declares that the relevant portions of the Federal
Bankruptcy Law are unconstitutional or otherwise invalid or, unless the relevant
portions of the Federal Bankruptcy clauses are repealed by the appropriate
legislative body or executive direction.

      10. REPAIRS AND IMPROVEMENTS:

            A. Repairs: Lessee shall, at Lessee's sole cost, keep and maintain
the leased premises and appurtenances and every part, (excepting exterior walls,
structural members, sidewalks, elevators and roofs which Lessor agrees to
repair), including but not limited to electrical, plumbing, glazing, and store
front and the interior of the premises, in good and sanitary order, condition or
repair and shall promptly repair or replace any such portion if reasonably
necessary. With regard to the areas that Lessor agrees to maintain and repair,

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       6
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Lessor shall not be responsible to maintain or repair any area damaged as a
result of any action of Lessee, its agents, employees or customers. Lessee shall
clean and sweep the sidewalk and keep it free of debris. Lessee also shall
immediately notify Lessor if Lessee has any reason to believe that repairs are
needed to any areas that Lessor has agreed to maintain and repair. Lessor and
Lessee agree that Lessee's repair responsibilities under the terms of this
subparagraph are not intended to impose responsibility upon Lessee to replace
entire electrical or plumbing systems at the leased premises due to latent
defects in the systems which were not caused by Lessee's use of the premises.

            B. Improvements To Be Made With Written Consent Of Lessor: Lessee is
leasing the premises in an "as is" condition. In the event Lessee desires to
make alterations or improvements with a value in excess of One Thousand Dollars
($1,000.00) to the leased premises, other than improvements of a decorative
nature, such as painting, wall covering or floor covering, Lessee shall obtain
the prior written consent of Lessor, which consent shall not be unreasonably
withheld. Any such improvements shall be performed in a workmanlike manner and
shall satisfy the requirements of all applicable laws, codes, and ordinances.
Lessee shall keep the premises free of any liens for work, materials or services
done for or provided to the Lessee. Lessee will properly discharge, by filing
the necessary bond or otherwise, any mechanics' or other liens filed or claimed
because of any such work, materials or services. Lessor may post the premises
with a Notice of Non-Responsibility in connection with any repairs,
alterations, rebuilding or restoration of the premises by Lessee. Lessee shall
notify Lessor in writing ten (10) days prior to commencement of any such work.
All such alterations, repairs and improvements shall be performed at Lessee's
sole expense and by licensed contractors chosen by Lessee.

            C. Improvements To Be Made By Lessor: Prior to the commencement
date, Lessor shall replace the access door leading to the basement to mitigate
the noise from said door. Further, Lessor shall use best efforts to eliminate
any intrusion of water into the basement from the said door.

      11. WASTE AND ALTERATIONS: Lessee shall not commit or allow to be
committed, any illegal act, nuisance or waste upon the leased premises. Lessee
shall not make, or allow to be made, any alterations of the leased premises, or
any part thereof, except as allowed by the terms of this Lease, without the
prior written consent of Lessor, which shall not be unreasonably withheld. Any
additions to, or alterations of, the leased premises, except movable furniture
and trade fixtures, shall become at once a part of the realty and belong to
Lessor. If Lessee assigns this lease or sublets any portion of the premises,
then Lessee shall have no obligation to assure the quiet enjoyment of the
premises for any such assignee or subtenant. Lessee shall indemnify Lessor
against and hold Lessor harmless from all costs, expenses, demands and liability
incurred by Lessor if Lessor becomes or is made a party to any claim or action
by such assignee or subtenant in which a claim is made that Lessor has a duty to
assure said assignee's or said subtenant's quiet enjoyment of the premises.
Lessor's rights to indemnity and to be held harmless as stated in this paragraph
are in

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       7
<PAGE>   11

addition to any rights Lessor has under any other terms of this Lease, including
but not limited to paragraphs 15 and 22.

      12. ABANDONMENT: Lessee shall not abandon the premises at any time during
the term. If Lessee shall abandon or surrender the leased premises, or be
dispossessed by process of law, or otherwise, any personal property belonging to
Lessee and left on the premises shall be deemed to be abandoned, at the option
of the Lessor.

      13. SECURITY DEPOSIT; TRANSFER: As a condition precedent to the
effectiveness of this Lease, Lessee shall obtain a standby letter of credit
from an acceptable issuer in the amount Ninety Nine Thousand Dollars
($99,000.00) in favor of Lessor, and containing terms reasonably acceptable to
Lessor, to guarantee and secure Lessee's faithful performance of all, or any, of
the covenants of this Lease, including but not limited to, the payment of rent
and the payment of damages in the event of any breach of this lease. Lessor's
proof of such breach shall be made in writing and under penalty of perjury and
shall also be sent to Lessee. Such standby letter of credit shall be irrevocable
and shall remain in full force and effect until released by Lessor. In the event
that Lessor's interest in the leased premises be sold, Lessor may transfer,
assign and/or deliver this security to the purchaser of the interest and
thereupon Lessor shall be discharged from any further liability in reference
thereto. If there is no claim against the letter of credit made by Lessor,
Lessor shall return the letter of credit at the expiration of the lease term.

      14. ASSIGNMENT AND SUBLETTING:

            A. Lessee shall not assign or sublease all or any portion of the
leased premises, any right or privilege connected with this Lease or allow any
other person, except Lessee's agents, affiliates and employees, to occupy all or
any portion of the premises without Lessor's express written consent. Lessor
shall not unreasonably withhold its consent to such assignment or subleasing.
Lessor agrees that, in considering whether to consent to an assignment or
subleasing, the suitability of the proposed assignee or subtenant will be
Lessor's prime concern. Lessee shall pay Lessor any reasonable, actual and
documented expenses, not to exceed two thousand five hundred dollars ($2500.00)
incurred by Lessor in considering a sublease or assignment and in preparing any
necessary legal documents.

            B. Lessee's Unauthorized assignment, sublease, or license to occupy
shall be void, and shall terminate the Lease at Lessor's option. Lessee's
interest in this Lease is not assignable by operation of law or in any other
manner, whether by testacy or intestacy. No trustee, sheriff, creditor or
purchaser at any judicial sale, or any officer of any court or receiver, except
if appointed as herein specifically provided, shall acquire any right under
this Lease or to the possession or use of the premises or any part thereof
without the prior written consent of Lessor. Any violation or attempt to violate
the terms of this Paragraph shall, at the option of the Lessor, be deemed a
breach of this Lease and, at Lessor's option, shall terminate this Lease.

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       8
<PAGE>   12

            C. Each of the following acts shall be considered an involuntary
assignment:

                  1) If Lessee makes an assignment for the benefit of creditors,
or institutes a proceeding under the Bankruptcy Act in which Lessee is the
debtor; or,

                  2) If a Writ of Attachment or Execution is levied on this
Lease and not removed within sixty (60) days of such attachment or levy; or,

                  3) If, in any proceeding or action to which Lessee is party, a
receiver is appointed with authority to take possession of the premises.

            D. An involuntary assignment shall constitute default by Lessee and
Lessor shall have the right to elect to terminate this Lease in which case the
Lease shall not be treated as an asset of Lessee.

            E. If any sublease is made whereby the sub-rental (including other
charges) exceeds the rent as set forth in this Lease, plus other charges paid by
Lessee (prorated proportionately if the sublease covers only a portion of the
premise) and the amount necessary to amortize any improvements made by Lessee
for the sublease (and any real estate commission or other reasonable expense
connected therewith) on a straight line basis over the term of the sublease, the
Lessee shall immediately notify Lessor and shall pay sixty percent (60%) of the
excess amount to Lessor each month as additional rent without affecting or
reducing any other obligations of Lessee hereunder.

            F. Lessor specifically consents to a sublease or assignment of this
Lease to a company related to Lessee or into which or with which Lessee is
merged or consolidated with equal or greater financial resources provided that
Lessee either remains responsible for, or guarantees, performance of the terms
of this Lease. In the event of a sublease or assignment pursuant to the terms of
this paragraph F of Article 14 Lessee need not pay any portion of the excess
rent to Lessor.

      15. INDEMNIFICATION OF LESSOR: Lessee, as a material part of the
consideration to be rendered to Lessor, waives all claims against Lessor for
damages to goods, wares and merchandise, in, upon or about said premises
including, but, not limited to sidewalks and other areas adjacent to the leased
premises, from any cause arising at any time other than Lessor's or its agent's
or employee's negligent action or willful misconduct. Lessee will indemnify,
defend and hold Lessor exempt and harmless from any damage or injury to any
person, or to the foods, wares and merchandise of any person, arising from the
use of the premises by Lessee, or from failure of Lessee to keep the premises in
good condition and repair, as herein provided. Notwithstanding the foregoing,
nothing shall be effective to require Lessee to indemnify or hold Lessor
harmless for any negligent action or willful misconduct of Lessor or its
employees or agents.

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       9
<PAGE>   13

      16. LEASE BREACHED BY Lessee'S RECEIVERSHIP ASSIGNMENT FOR BENEFIT OR
CREDITORS, INSOLVENCY OR BANKRUPTCY: Appointment of a receiver to take
possession of Lessee's assets which is not dismissed within 60 days after Lessee
becomes aware thereof (except a receiver appointed at Lessor' s request as
herein provided), Lessee's general assignment for benefit of creditors, or
Lessee's taking or suffering action under the Bankruptcy Act is a breach of this
Lease.

      17. DEFAULT: The occurrence of any of the following shall constitute a
default by Lessee:

            A. Failure to pay rent when due, if the failure continues for ten
(10) days after notice has been given to Lessee.

            B. Abandonment of the premises.

            C. Failure to fulfill any other provisions of this Lease if not
cured within thirty (30) days after notice of the failure has been given to
Lessee. However, if such default is not capable of being cured within thirty
(30) days, and Lessee shall have begun to cure such default within that notice
period, Lessee shall not be deemed to be in default under the terms of this
subparagraph provided that Lessee uses its best efforts to diligently work
towards cure of the said default.

            Notices given under this paragraph shall specify the alleged default
and the applicable Lease provision, and shall demand that Lessee perform the
provisions of this Lease or pay the rent that is in arrears, as the case may be,
within the applicable period of time, or quit the premises. No such notice shall
be deemed a forfeiture or a termination of this Lease unless Lessor elects in
the notice.

      18. TERMINATION UPON BANKRUPTCY: Notwithstanding any other provision of
this Lease except the paragraph entitled AGREEMENT REGARDING BANKRUPTCY
PROVISIONS upon the filing of a voluntary or involuntary Petition in Bankruptcy,
if the same remains undismissed 60 days after Lessee becomes aware thereof, on
behalf of, or against, Lessee, this Lease shall automatically terminate.

      19. SURRENDER OF PREMISES: Lessee shall surrender the premises to Lessor
in the same condition as when Lessee originally took possession allowing for
reasonable use and wear, and damage by casualty, including fire and storms, and
except for any alterations or improvements consented to by Lessor. Lessee shall
remove all business signs or symbols and shall restore the portion of the
premises on which they were placed in the same condition as before their
placement.

      20. USES PROHIBITED: Lessee shall not use, or permit any use, other than
the use or purpose for which the premises are leased. No use shall be made, or
permitted, of the leased premises which will increase the existing rate of
insurance upon the building or cause a cancellation of any insurance policy
covering the building in which the leased premises are located. Nor shall Lessee
sell, or permit to be kept, used or sold, on or about the leased premises, any
article which may be prohibited by the standard form of fire insurance policies.
Lessee shall, at Lessee's sole cost and expense, comply with any and all

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       10
<PAGE>   14

requirements of any insurance organization or company necessary for the
maintenance of reasonable fire and public liability insurance, covering said
building and appurtenances.

      21. COMPLIANCE WITH GOVERNMENTAL REGULATIONS:

            A. Lessee has obtained permits and specific permission to do its
improvements without the necessity of installing a sprinkler system. Lessor
shall have no responsibility to install a sprinkler system. Lessor shall, at
Lessor's sole cost, be responsible for all work required, if any, to make the
restrooms, common areas or other facilities comply with all applicable codes,
including handicap codes, Title 24, and the Americans With Disabilities Act
(ADA), including any costs of fees for filing for variances and hardships, and
all costs for compliance with "path of travel exiting" for the leased premises
and all life safety systems and engineering, including exit signage, emergency
lighting, fire alarm system and fire extinguishers in flush-mount cabinets, if
required.

            B. Except as stated in paragraph A of this Article 21, Lessee shall,
at his sole cost and expense, comply with the requirements of all Municipal,
State and federal authorities now in effect, or which may be promulgated in the
future, pertaining to the leased premises and shall faithfully observe in the
use of the premises all Municipal ordinances and State and Federal Statutes now
in force or which may hereafter be in force. The judgment of any court or
competent jurisdiction, or the admission of Lessee in any action or proceeding,
whether Lessor be a party or not, that Lessee has Violated any such ordinance or
statute in the use of the premises, shall be conclusive of that fact as between
Lessor and Lessee.

      22. LEGAL COSTS AND ATTORNEYS' FEES: Lessee shall reimburse Lessor, upon
demand, for any costs or expenses incurred by Lessor in connection with any
breach or default of Lessee under this Lease, whether or not suit is commenced
or judgment entered. Such costs shall include legal fees, out-of-pocket
expenses, and statutory costs incurred in or for the negotiation of a
settlement, enforcement of rights or otherwise. Furthermore, if any action for
breach of or to enforce the provisions of this Lease is commenced, the court in
such action shall award to the party in whose favor a judgment is entered, a
reasonable sum as attorneys' fees, out-of-pocket expenses, and statutory
costs. Such attorneys' fees, out-of-pocket expenses, and statutory costs shall
be paid by the losing party in such action. Lessee shall also indemnify Lessor
against and hold Lessor harmless from all costs, expenses, demands and liability
incurred by Lessor if Lessor becomes or is made a party to any claim or action
(a) instituted by Lessee (except a claim by Lessee against Lessor under the
terms of this Lease), or a claim by any third party against Lessor or Lessee
related to the leased premises if such claim is alleged to have arisen during
the lease term, or by or against any person holding any interest under or using
the Property by license of or agreement with Lessee; (b) for foreclosure of any
lien for labor or material furnished to or for Lessee or such other person; (c)
otherwise arising out of or resulting from any act or transaction of Lessee or
such other person; or (d) necessary to protect Lessor's

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       11
<PAGE>   15

interest under this Lease in a bankruptcy proceeding, or other proceeding under
Title 11 of the United States Code, as amended. Lessee shall defend Lessor
against any such claim or action at Lessee's expense with counsel reasonably
acceptable to Lessor or, at Lessor's election, Lessee shall reimburse Lessor for
any reasonable legal fees out-of-pocket expenses and statutory costs incurred by
Lessor in any such claim or action. Lessee shall pay Lessor's reasonable
attorneys' fees incurred in connection with any act which Lessee proposes to do
and which requires Lessor's consent, except that Lessee's responsibility for
Lessor's legal costs, including attorneys fees, in connection with Lessor's
consent to assignment and subletting is subject to the maximum limit as set
forth in the paragraph titled ASSIGNMENT AND SUBLETTING.

      23. LIENS: Lessee shall keep the leased premises free and clear of any
lien or encumbrance created by Lessee's acts or omissions.

      24. SUBORDINATION OF MORTGAGE: This Lease shall be subject and subordinate
to any deed(s) of trust or mortgage(s) that any owner of the leased premises may
hereafter at any time elect to place on the premises as well as to all advances
that may be hereafter made on account of said deed(s) of trust or mortgage(s) to
the full extent of the principal sum secured and interest thereon. Lessee's
obligation to subordinate is conditioned upon Lessee's receiving a
nondisturbance agreement from the holder of any such deed of trust or mortgage,
which shall be in form and substance satisfactory to Lessee. Lessee shall not
unreasonably fail or refuse to subordinate and, if Lessee does so fail or refuse
to subordinate then, within fifteen (15) days of Lessor's written request for
subordination, Lessee must respond in writing and state in detail the reasons
Lessee is withholding its consent and why Lessee believes it is being reasonable
in withholding its consent to the subordination requested by Lessor. Lessee's
failure to comply with its obligations under the immediately preceding paragraph
shall be deemed to be a consent to the requested subordination.

      25. NOTICES: All notices concerning this Lease shall be in writing, and
delivered personally to the person to whom the notice is to be given, or mailed,
United States certified mail, return receipt requested, postage prepaid,
addressed to such person. Lessor's address for this purpose shall be as stated
in Paragraph 2A or such other address as it may designate to Lessee in writing.
Notices to Lessee may be addressed to Lessee at the premises leased or to such
other address as may be designated to Lessor in writing with a copy sent in the
same manner to Fulbright & Jaworski, LLP, Attn: Richard Gilden, Esq., 666 Fifth
Avenue, New York, NY 10103.

      26. ADVERTISEMENTS AND SIGNS: The removal of the existing "Nevada Bob's"
sign and any apparatus relating to same shall be at Lessor's sole cost and
expense and Lessor shall, at its sole expense, repair any damage to the building
occurring as a result of such removal prior to the commencment date as long as
the sign company doing the removal can schedule the removal by that time. All
other costs related to signage to be sole responsibility of Lessee and all
signage to be installed with required governmental permits. Lessee will not
inscribe, paint, or affix any sign, advertisement, placard, or awning on the
exterior or

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       12
<PAGE>   16

roof of the building without the prior written consent of Lessor. Lessor shall
not unreasonably withhold its consent. Lessor consents in advance to the same
type of signage installed and maintained by prior tenant, Nevada Bob's. Lessor
consents in advance to any sign, advertisement, placard or awning that is
approved by the City and County of San Francisco governmental authorities. Upon
termination or surrender of this Lease, Lessee shall remove all business signs,
advertisements, placards, awnings or symbols and shall restore the portion of
the premises on which they were placed in the same condition as before their
placement.

      27. PARTIAL DESTRUCTION OF PREMISES:

            A. Partial destruction of the leased premises shall not render this
Lease void or voidable, or terminate it except as herein provided. Lessee hereby
waives any rights it may have under Civil Code Section 1932(2) and ss.1933(4).

            B. If the premises are partially destroyed during the term of this
Lease, Lessor shall repair them if the repairs can be made within one hundred
twenty (120) days of the date of destruction in conformity with local, state,
and federal laws and regulations. Rent for the premises will be reduced
proportionally to the extent that (1) the repair operations interfere with the
normal conduct of Lessee's business on the premises or (2) if, in Lessee's
reasonable judgment, the premises cannot be used for Lessee's normal business
purpose. If the repairs cannot be made within one hundred twenty (120) days,
Lessor has the option to make them within a reasonable time and continue this
Lease in effect with proportional rent rebate to Lessee as provided for herein.
If the repairs cannot reasonably be made in one hundred twenty (120) days, and
if Lessor does not make an election to perform them within a reasonable time,
Lessor or Lessee have the option to terminate this Lease. However, if the
building in which the leased premises are located is more than one-third (1/3)
destroyed, Lessor or Lessee may at its option terminate the Lease.

            C. Disputes between Lessor and Lessee relating to the provisions of
this paragraph shall be arbitrated in accordance with the then existing rules of
the American Arbitration Association for commercial disputes. The decision of
the American Arbitration Association shall be binding and final.

      28. WAIVER: The waiver by Lessor of any breach of any term, covenant or
condition of this Lease shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition of this Lease. Any subsequent acceptance of rent by Lessor
shall not be deemed to be a waiver of any preceding breach by Lessee of any
term, covenant or condition of this Lease (other than the failure of Lessee to
pay the particular rental Lessor accepted) regardless of Lessor's knowledge of
such preceding breach at the time of acceptance of such rent.

      29. EMINENT DOMAIN: Eminent domain proceedings resulting in the
condemnation of a part of the premises leased herein that leave the rest useable
by Lessee for purposes of the business for which the premises are leased will
not terminate this Lease, unless Lessor at his option

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       13
<PAGE>   17

terminates it by giving written notice of termination to Lessee, except that if
more than ten percent (10%) of the premises is taken, Lessee may terminate this
Lease by notice to Lessor. The effect of such condemnation, should such option
not be exercised, will be to terminate the Lease as to the portion of the
premises condemned and leave it in effect as to the remainder of the premises.
Lessee's rental for the remainder of the Lease term shall in such case be
reduced by the amount that the usefulness of the premises to it for such
business purposes is reduced. All compensation awarded in the eminent domain
proceeding as a result of such condemnation shall be Lessor's, except that any
expenses Lessee recovers from the condemnor for moving expenses and Lessee's
personal property shall be paid to Lessee. Lessee hereby assigns and transfers
to Lessor any claim it may have to compensation for damage as a result of such
condemnation, except damages for Lessee's moving expenses and Lessee's personal
property.

      30. MERGER: The surrender of this Lease by Lessee, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing subleases or subtenancies, or may, at the
option of Lessor, operate as an assignment to him of any or all such subleases
or subtenancies.

      31. SUCCESSORS AND ASSIGNS: The covenants and agreements contained in this
Lease shall be binding upon the parties and upon their respective heirs,
executors, administrators, successors and assigns; and all of the parties shall
be jointly and severally liable hereunder.

      32. TIME: Time is of the essence of this Lease.

      33. CAPTIONS: The captions of this Lease are for convenience only and are
not a part of this Lease and do not in any way limit or amplify the terms and
provisions of this Lease.

      34. LAW-CALIFORNIA: This Lease shall be construed and interpreted in
accordance with the laws of the State of California.

      35. INTEGRATED AGREEMENT: This Lease contains all the agreements of the
parties and cannot be amended or modified except by written agreement.

      36. VENUE AND JURISDICTION: This Lease is entered into and executed in the
City and County of San Francisco, State of California. The parties hereto agree
that if suit is brought to enforce any term of this Lease, it shall be
instituted only in the appropriate court in the said County of the State of
California. Any attempt to institute suit in any other court shall be null and
void and of no effect and the parties agree that such suit shall, upon
appropriate motion by either party, be dismissed or transferred to San Francisco
County.

      37. ESTOPPEL CERTIFICATE:

            A. Lessee shall at any time upon not less than twenty (20) days
prior written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       14
<PAGE>   18

nature of such modification and certifying that this Lease, as modified, is in
full force and effect) and the date to which the rent and other charges are paid
in advance, if any, and (ii) acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder, or specifying
such defaults if any are claimed. Any such statement may be conclusively relied
upon by a prospective purchaser or encumbrancer of the premises.

            B. Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there are
no uncured defaults in Lessor's performance and (iii) that not more than one
month's rent has been paid in advance.

            C. If Lessor desires to finance or refinance said premises, or any
part thereof, Lessee hereby agrees to deliver to any lender designated by Lessor
such financial statements of Lessee as may be reasonably required by such
lender. Such statements shall include the past three years' financial statements
of Lessee. All such financial statements shall be received by Lessor in
confidence and shall be used only for the purposes herein set forth.

      38. SEVERABILITY: If any term or provision of this Lease shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by law.

      39. RECORDING: Lessee shall not record this Lease without Lessor's written
consent but either party shall, upon request, execute and deliver to the other
party any short form memorandum of this Lease that has been approved by Lessor
in writing.

      40. INTEREST ON PAST DUE OBLIGATIONS: Any amount due to Lessor that is not
paid within five days of the due date shall bear interest at ten percent (10%)
per annum from the due date. Payment of such interest shall not excuse or cure
any default of Lessee under this Lease.

      41. HAZARDOUS MATERIALS:

            A. Lessee shall not use, or allow to be used, on the leased premises
any materials regulated by federal, state or municipal laws or regulations
without first obtaining the written permission of Lessor. If any clean-up or
remediation is necessary because of Lessee's use, or allowing the use, of any
such materials, Lessee shall be solely responsible for payment of all such
clean-up or remediation costs. In the event Lessor must pay such costs, Lessee
shall indemnify and hold Lessor harmless for all costs incurred by Lessor in
such clean-up or remediation.

            B. Lessor represents and warrants that to Lessor's knowledge there
are no hazardous wastes nor materials located at or under the leased premises.
If such hazardous wastes or materials are later discovered, and if the same
pre-date Lessee's occupancy of the premises,

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       15
<PAGE>   19

Lessor shall, at its sole cost and expense, comply with any governmental laws,
ordinances, regulations or orders relating to the remediation of said hazardous
waste or material. Lessor shall, at its sole cost indemnify Lessee against any
liability and claims arising from the existence of such hazardous waste or
material, including reasonable attorneys fees incurred by Lessee, provided that
Lessor or Lessor's insurance carrier shall have the right to select counsel to
represent Lessee. If the process of remediation, in Lessee's reasonable
judgment, make it impractical for Lessee to continue its tenancy, Lessee may,
upon thirty (30) days written notice, terminate its tenancy.

            C. Disputes between Lessor and Lessee relating to the provisions of
this paragraph shall be arbitrated in accordance with the then existing rules of
the American Arbitration Association for commercial disputes. The decision of
the American Arbitration Association shall be binding and final.

      42. QUIET ENJOYMENT: Lessor covenants that, upon Lessee paying its rent
and complying with the other terms of this Lease, Lessor will not do anything to
wrongfully interfere with Lessee's quiet enjoyment of the premises during the
terms of the lease and any extensions thereof.

      43. WORK BY LESSEE: In connection with any work to be performed by Lessee,
Lessor covenants and agrees to respond to any written requests from Lessee for
approval of plans, specifications (or revisions to same) and any other matters
concerning such work within ten (10) working days of receiving same with its
approval or by providing specific, written comments to same. If Lessor fails to
respond to Lessee within such time, Lessor shall be deemed to have consented to
same.

(Lease is concluded on page 17)

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       16
<PAGE>   20

      44. AUTHORITY TO EXECUTE:

            Lessor and Lessee each state that the person(s) who have signed this
Lease have the full power and authority to do so and, in the case of a
corporation, that the corporation has approved the Lease and all necessary
corporate documents and authority exists for the signatures below to bind the
corporation to the terms of this Lease.

      AGREED TO THIS DATE:

                                        Media Metrix, Inc.
                                        Lessee

12/17/99                                by /s/ Steven R Coffey
------------------                        --------------------------------------
Dated                                     Executive Vice President
                                          --------------------------------------
                                          [insert name and title]

12/17/99                                by /s/ Mary Ann Packo
------------------                        --------------------------------------
Dated                                     President
                                          --------------------------------------
                                          [insert name and title]

                                        Grazia Investment Company
                                        Lessor

1/04/00                                 by /s/ Grace Brusseau
------------------                         -------------------------------------
Dated                                      Grace Brusseau

1/04/00                                 by /s/ Grace Brusseau
------------------                         -------------------------------------
Dated                                      Grace Brusseau, co-trustee of the
                                           Testamentary Trust of Michael J.
                                           Borelli

1/04/00                                 by /s/ Steven Kay
------------------                         -------------------------------------
Dated                                      Steven Kay, co-trustee of the
                                           Testamentary Trust of Michael J.
                                           Borelli

/s/ SRC             /s/ MP                                            /s/ gb
------------        ------------                                      ----------
Media Metrix        Media Metrix                                      Grazia Co.

                                       17
<PAGE>   21

            EXHIBIT A TO LEASE FOR 432 CLAY STREET, SAN FRANCISCO, CA

      In accordance with the terms of paragraph 5 of this Lease, Lessee has
inspected the leased premises prior to beginning Lessee's improvements and
Lessee confirms in writing that, to Lessee's satisfaction, the premises are in a
good state of repair and in sanitary condition and that Lessee accepts the
premises in their current condition.

                                        Media Metrix, Inc.

12/17/99                                by /s/ Steven R Coffey
----------------                          --------------------------------------
Dated                                     Executive Vice President
                                          --------------------------------------
                                          [insert name and title]
                                          Lessee

12/17/99                                by /s/ Mary Ann Packo
----------------                          --------------------------------------
Dated                                     President
                                          --------------------------------------
                                          [insert name and title]
                                          Lessee<PAGE>   1

                              NET RADIO CORPORATION
            AMENDED AND RESTATED 1998 STOCK OPTION AND INCENTIVE PLAN

                                    ARTICLE 1

                            ESTABLISHMENT AND PURPOSE

         Net Radio Corporation (the "Company") hereby establishes the Net Radio
Corporation 1998 Stock Option and Incentive Plan (the "Plan"). The purpose of
the Plan is to enable the Company and its Affiliates to retain and attract
employees, directors and consultants who contribute to the Company's success by
their ability, ingenuity and industry, and to enable such individuals to
participate in the long-term success and growth of the Company by giving them a
proprietary interest in the Company.

                                    ARTICLE 2

                                   DEFINITIONS

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

         2.1      "Affiliate" means any Parent or Subsidiary.

         2.2      "Award" means an Option, Deferred Stock award, Restricted
Stock award, or Stock Appreciation Right granted pursuant to the terms of the
Plan.

         2.3      "Board" means the Board of Directors of the Company.

         2.4      "Broker Exercise Notice" means the written notice described in
Section 6.6 of the Plan.

         2.5      "Cause" means a felony conviction of a Participant or the
failure of a Participant to contest prosecution for a felony, or a particular
Participant's willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company.

         2.6      "Change in Control" means an event described in Section 12.1
of the Plan.

         2.7      "Code" means the Internal Revenue Code of 1986, as amended.

         2.8      "Committee" means a committee of the Board as may be
designated by the Board, from time to time, for the purpose of administering
this Plan as contemplated by Section 3.1 hereof. If at any time no Committee
shall be in office, then the functions of the Committee specified in the Plan
shall be exercised by the Board.

<PAGE>   2

         2.9      "Common Stock" means the common stock of the Company, no par
value, or the number and kind of shares of stock or other securities into which
such Common Stock may be changed in accordance with Section 4.3 of the Plan.

         2.10     "Deferred Stock" means an award made pursuant to Article 9
below of the right to receive Stock at the end of a specified period.

         2.11     "Disability" means the disability of the Participant as
defined in the long-term disability plan of the Company then covering the
Participant or, if no such plan exists, the permanent and total disability of
the Participant within the meaning of Section 22(e)(3) of the Code.

         2.12     "Eligible Recipient" means all employees (including, without
limitation, officers and directors who are also employees), nonemployee
directors, consultants and independent contractors of the Company and any
Affiliate.

         2.13     "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.14     "Fair Market Value" means, with respect to the Common Stock,
the following:

                  (a) If the Common Stock is traded publicly, the Fair Market
         Value of a share of Common Stock on any date shall be the average of
         the representative closing bid and asked prices, as quoted by the
         National Association of Securities Dealers, Inc. ("NASD") through
         Nasdaq (its automated system for reporting quotes), for the date in
         question or, if the Common Stock is quoted on The Nasdaq National
         Market or is listed on a national stock exchange, the officially quoted
         closing price on The Nasdaq National Market or such exchange, as the
         case may be, on the date in question.

                  (b) If the Common Stock is not traded publicly, the Fair
         Market Value of a share of Common Stock on any date shall be
         determined, in good faith, by the Board or the Committee after such
         consultation with outside legal, accounting and other experts as the
         Board or the Committee may deem advisable, and the Board or the
         Committee shall maintain a written record of its method of determining
         such value.

         2.15     "Incentive Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Article 6 of the Plan that is
intended to be, designated as, and qualifies as an "incentive stock option"
within the meaning of Section 422 of the Code.

         2.16     "Non-Employee Director" means a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) under the Exchange Act or any successor rule.

         2.17     "Non-Qualified Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Article 6 of the Plan that
does not qualify as an Incentive Stock Option.

                                      -2-

<PAGE>   3

         2.18     "Option" means an Incentive Stock Option or a Non-Qualified
Stock Option.

         2.19     "Outside Director" means a director who (a) is not a current
employee of the Company or any member of an affiliated group which includes the
Company; (b) is not a former employee of the Company who receives compensation
for prior service (other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the Company; and (d)
does not receive remuneration from the Company, either directly or indirectly,
in any capacity other than as a director, except as otherwise permitted under
Code Section 162(m) and regulations thereunder. For this purpose, remuneration
includes any payment in exchange for goods or services. This definition shall be
further governed by the provisions of Code Section 162(m) and regulations
promulgated thereunder.

         2.20     "Parent" means any parent corporation of the Company within
the meaning of Section 424(e) of the Code.

         2.21     "Participant" means an Eligible Recipient who receives one or
more Awards under the Plan.

         2.22     "Person" means any individual, corporation, partnership,
group, association or other "person" (as such term is used in Section 14(d) of
the Exchange Act), other than the Company, a wholly owned subsidiary of the
Company or any employee benefit plan sponsored by the Company or a wholly owned
subsidiary of the Company.

         2.23     "Previously Acquired Shares" means shares of Common Stock that
are already owned by the Participant and shares of Common Stock that are to be
acquired by the Participant pursuant to the exercise of an Option, the
termination of restrictions of a Restricted Stock Award, or the termination of a
period of deferral of a Deferred Stock award.

         2.24     "Restricted Stock" means an award of shares of Common Stock
that are subject to restrictions under Article 8 below.

         2.25     "Retirement" means the retirement of a Participant pursuant to
and in accordance with the regular or, if approved by the Board for purposes of
the Plan, early retirement/pension plan or practice of the Company or Affiliate
then covering the Participant.

         2.26     "Securities Act" means the Securities Act of 1933, as amended.

         2.27     "Stock Appreciation Right" means the right pursuant to an
award granted under Article 7 below to surrender to the Company all or a portion
of an Option in exchange for an amount equal to the difference between (i) the
Fair Market Value, as of the date such Option or such portion thereof is
surrendered, of the shares of Common Stock covered by such Option or such
portion thereof, and (ii) the aggregate exercise price of such Option or such
portion thereof.

         2.28     "Subsidiary" means any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.

                                      -3-

<PAGE>   4

         2.29     "Tax Date" means the date any withholding tax obligation
arises under the Code for a Participant with respect to an Award.

                                    ARTICLE 3

                               PLAN ADMINISTRATION

         3.1      THE COMMITTEE. The Plan shall be administered by the Board or
a Committee of at least two directors, all of whom shall be Outside Directors
and Non-Employee Directors. The Committee may be a subcommittee of the
Compensation Committee of the Board. Members of such a Committee, if
established, 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. A majority of the members of such a Committee shall constitute a quorum.
Such a Committee shall act by majority approval of the members, shall keep
minutes of its meetings and shall provide copies of such minutes to the Board.
Action of such a Committee may be taken without a meeting if unanimous written
consent is given. Copies of minutes of such a Committee's meetings and of its
actions by written consent shall be provided to the Board and kept with the
corporate records of the Company. As used in this Plan, the term "Committee"
will refer to the Board or to such a Committee, if established.

         3.2      AUTHORITY OF THE COMMITTEE.

                  (a) The Committee shall have the power and authority to grant
         to Eligible Recipients, pursuant to the terms of the Plan: (i) Options,
         (ii) Stock Appreciation Rights, (iii) Restricted Stock awards, or (iv)
         Deferred Stock awards. In particular, the Committee shall have the
         authority:

                           (i)   to select the Eligible Recipients to whom
                  Options, Stock Appreciation Rights, Restricted Stock awards
                  and/or Deferred Stock awards may from time to time be granted
                  hereunder;

                           (ii)  to determine whether and to what extent
                  Incentive Stock Options, Non-Qualified Stock Options, Stock
                  Appreciation Rights, Restricted Stock awards or Deferred Stock
                  awards, or a combination of the foregoing, are to be granted
                  hereunder;

                           (iii) to determine the number of shares to be covered
                  by each Award granted hereunder;

                           (iv)  to determine the terms and conditions, not
                  inconsistent with the terms of the Plan, of any Award
                  (including, but not limited to, any restriction on any Option
                  or other Award and/or the shares of Common Stock relating
                  thereto) and, with the consent of the Participant affected
                  thereby, to amend such terms and conditions (including, but
                  not limited to, any amendment which accelerates the vesting of
                  any award); and

                                      -4-

<PAGE>   5

                           (v) to determine whether, to what extent and under
                  what circumstances Common Stock and other amounts payable with
                  respect to an Award shall be deferred either automatically or
                  at the election of the Participant.

                  (b) The Committee shall have the authority, subject to the
         provisions of the Plan, to establish, adopt and revise such rules and
         regulations relating to the Plan as it may deem necessary or advisable
         for the administration of the Plan. The Committee's decisions and
         determinations under the Plan need not be uniform and may be made
         selectively among Participants, whether or not such Participants are
         similarly situated. Each determination, interpretation or other action
         made or taken by the Committee pursuant to the provisions of the Plan
         shall be conclusive and binding for all purposes and on all persons,
         including, without limitation, the Company and its Affiliates, the
         shareholders of the Company, the Committee and each of its members, the
         directors, officers, employees of and consultants to the Company and
         its Affiliates, and the Participants and their respective successors in
         interest. No member of the Committee shall be liable for any action or
         determination made in good faith with respect to the Plan or any Award.

                                    ARTICLE 4

                            STOCK SUBJECT TO THE PLAN

         4.1      NUMBER OF SHARES. Subject to adjustment as provided in Section
4.3 below, the maximum number of shares of Common Stock that shall be authorized
and reserved for issuance under the Plan shall be 2,000,000 shares of Common
Stock. The maximum number of shares authorized may also be increased from time
to time by approval of the Board and, if required pursuant to Rule 16b-3 under
the Exchange Act, Section 422 of the Code, or the applicable rules of any
securities exchange or the NASD, the shareholders of the Company.

         4.2      SHARES AVAILABLE FOR USE. Shares of Common Stock that may be
issued upon exercise of Options, or as Deferred Stock awards or Restricted Stock
awards shall be applied to reduce the maximum number of shares of Common Stock
available for use under the Plan. Any shares of Common Stock that are subject to
an Option or a Deferred Stock award or Restricted Stock award (or any portion
thereof) that lapses, expires or for any reason is terminated unexercised shall
automatically again become available for use under the Plan.

         4.3      ADJUSTMENTS TO SHARES. In the event of any reorganization,
merger, consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering, extraordinary
dividend or divestiture (including a spin-off) or any other change in the
corporate structure or shares of the Company, the Committee (or, if the Company
is not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) shall make appropriate adjustment (which
determination shall be conclusive) as to the number and kind of securities
subject to and reserved under the Plan and, in order to prevent dilution or
enlargement of the rights of Participants, the number, kind and

                                      -5-

<PAGE>   6

exercise price of securities subject to outstanding Options, Deferred Stock
awards and Restricted Stock awards (subject to Section 8.3(e)). The adjusted
Option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right associated with any Option,
without limiting the generality of the foregoing, in the event that any of such
transactions are effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities or assets, including cash, with respect to
or in exchange for such Common Stock, all Participants holding outstanding
Options, Deferred Stock awards or Restricted Stock awards shall upon the
exercise of such Options, upon the termination of restrictions of such
Restricted Stock award, or upon the termination of the deferral period of such
Deferred Stock award shall receive, in lieu of any shares of Common Stock they
may be entitled to receive, such stock, securities or other assets, including
cash, as would have been issued to such Participants if their Options had been
exercised or the deferral period or restrictions of a Deferred Stock award or
Restricted Stock award had lapsed or terminated and such Participants had
received Common Stock prior to such transaction.

                                    ARTICLE 5

                                  PARTICIPATION

         5.1      PARTICIPANTS. Participants in the Plan shall be those Eligible
Participants who have performed, are performing, or will perform services in the
management, operation and development of the Company or any Affiliate, and
significantly contributed, are significantly contributing or are expected to
significantly contribute to the achievement of corporate objectives. Eligible
Recipients may be granted from time to time one or more Awards, as may be
determined by the Committee in its discretion. The number, type, terms and
conditions of Awards need not be uniform, consistent or in accordance with any
program, regardless of whether such Eligible Recipients are similarly situated.

         5.2      AGREEMENTS. Upon determination by the Committee that an
Incentive Stock Option is to be granted to an Eligible Recipient, written notice
shall be given to such person, specifying the terms, conditions, rights and
duties related thereto. Each Eligible Recipient to whom an Option, Deferred
Stock award, Restricted Stock award, or Stock Appreciation Right is to be
granted shall, if requested by the Committee, enter into an agreement with the
Company, in such form as the Committee shall determine and which is consistent
with the provisions of the Plan, specifying such terms, conditions, rights and
duties. Awards shall be deemed to be granted as of the date specified in the
grant resolution of the Committee, which date shall be the date of the related
agreement with the Participant.

                                    ARTICLE 6

                                  STOCK OPTIONS

         6.1      GRANT. An Eligible Recipient may be granted one or more
Options under the Plan, and such Options shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as shall be
determined by the Committee in its discretion. The Committee

                                     -6-
<PAGE>   7

shall designate whether an Option is to be considered an Incentive Stock Option
or a Non-Qualified Stock Option; provided, however, that an Incentive Stock
Option shall be granted only to an Eligible Employee who is an employee of the
Company or an Affiliate. The terms of the agreement relating to a Qualified or
Non-Qualified Stock Option shall expressly provide that such Option shall be
treated as an Incentive Stock Option or Non-Qualified Stock Option, as the case
may be.

         6.2      EXERCISE. An Option shall become exercisable at such times and
in such installments (which may be cumulative) as shall be determined by the
Committee, in its discretion, at the time the Option is granted. Upon the
completion of its exercise period, an Option, to the extent not then exercised,
shall expire. Notwithstanding the foregoing and subject to the discretionary
acceleration rights of the Committee, an Option granted to a director, officer
or 10% shareholder of the Company shall not be exercisable for a period of six
(6) months unless the Option has been approved by the Board, the Committee or
the shareholders of the Company.

         6.3      EXERCISE PRICE.

                  (a) INCENTIVE STOCK OPTIONS. The per share price to be paid by
         the Participant at the time an Incentive Stock Option is exercised
         shall be determined by the Committee, in its discretion, at the time
         the Option is granted; provided, however, that such price shall not be
         less than (i) 100% of the Fair Market Value of one share of Common
         Stock on the date the Option is granted, or (ii) 110% of the Fair
         Market Value of one share of Common Stock on the date the Option is
         granted if, at the time the Option is granted, the Participant owns,
         directly or indirectly (as determined pursuant to Section 424(d) of the
         Code), more than 10% of the total combined voting power of all classes
         of stock of the Company or any Affiliate.

                  (b) NON-QUALIFIED STOCK OPTIONS. The per share price to be
         paid by the Participant at the time a Non-Qualified Stock Option is
         exercised shall be determined by the Committee, in its discretion, at
         the time the Option is granted.

         6.4      DURATION.

                  (a) INCENTIVE STOCK OPTIONS. The period during which an
         Incentive Stock Option may be exercised shall be fixed by the
         Committee, in its discretion, at the time the Option is granted;
         provided, however, that in no event shall such period exceed 10 years
         from its date of grant or, in the case of a Participant who owns,
         directly or indirectly, (as determined pursuant to Section 424(d) of
         the Code), more than 10% of the total combined voting power of all
         classes of stock of the Company or any Affiliate, five years from its
         date of grant.

                  (b) NON-QUALIFIED STOCK OPTIONS. The period during which a
         Non-Qualified Stock Option may be exercised shall be fixed by the
         Committee, in its discretion, at the time the Option is granted.

                                      -7-

<PAGE>   8

                  (c) EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE.
         Notwithstanding this Section 6.4, except as provided in Articles 11 and
         12 of the Plan, all Options granted to a Participant shall terminate
         and may no longer be exercised if the Participant's employment or other
         service with the Company and all Affiliates ceases.

         6.5      MANNER OF EXERCISE. An Option may be exercised by a
Participant in whole or in part from time to time, subject to the conditions
contained therein and in the agreement evidencing such Option, by delivery, in
person or through certified or registered mail, of written notice of exercise to
the Company at its principal executive office in Minneapolis, Minnesota
(Attention: President), and by paying in full the total Option exercise price
for the shares of Common Stock purchased. Such notice shall be in a form
satisfactory to the Committee and shall specify the particular Option (or
portion thereof) that is being exercised and the number of shares with respect
to which the Option is being exercised. Subject to compliance with Section 15.1
of the Plan, the exercise of the Option shall be deemed effective upon receipt
of such notice and payment complying with the terms of the Plan and the
agreement evidencing such Option. As soon as practicable after the effective
exercise of the Option, the Participant shall be recorded on the stock transfer
books of the Company as the owner of the shares purchased, and the Company shall
deliver to the Participant one or more duly issued stock certificates evidencing
such ownership. If a Participant exercises any Option with respect to some, but
not all, of the shares of Common Stock subject to such Option, the right to
exercise such Option with respect to the remaining shares shall continue until
it expires or terminates in accordance with its terms. An Option shall only be
exercisable with respect to whole shares.

                                      -8-
<PAGE>   9

         6.6      PAYMENT OF PURCHASE PRICE.

                  (a) The total purchase price of the shares to be purchased
         upon exercise of an Option shall be paid entirely either by certified
         check or bank check, or by any other form of legal consideration deemed
         sufficient by the Committee and consistent with the Plan's purpose and
         applicable law, including promissory notes, Previously Acquired Shares,
         or a Broker Exercise Notice, or any combination thereof. As determined
         by the Committee, in its sole discretion, in the case of a
         Non-Qualified Stock Option, payment in full or in part may also be made
         in the form of Restricted Stock or Deferred Stock subject to an award
         under the Plan (based in each case on the fair market value of the
         Common Stock on the date the Option is exercised, as determined by the
         Committee); provided that in the event payment is made in the form of
         shares of Restricted Stock or Deferred Stock, the Participant will
         receive a portion of the Option shares in the form of, and in an amount
         equal to, the Restricted Stock award or Deferred Stock award tendered
         as payment by the Participant. In the case of an Incentive Stock
         Option, the right to make a payment in the form of Previously Acquired
         Shares may be authorized only at the time the Option is granted. If the
         terms of an Option so permit, a Participant may elect to pay all or
         part of the option exercise price by having the Company withhold from
         the shares of Common Stock that would otherwise be issued upon exercise
         that number of shares of Common Stock having a Fair Market Value equal
         to the aggregate option exercise price for the shares with respect to
         which such election is made. In determining whether or upon what terms
         and conditions a Participant will be permitted to pay the purchase
         price of an Option in a form other than cash, the Company may consider
         all relevant facts and circumstances, including, without limitation,
         the tax and securities law consequences to the Participant and the
         Company and the financial accounting consequences to the Company. No
         shares of Common Stock shall be issued until full payment therefor has
         been made.

                  (b) For purposes of this Section 6.6, a "Broker Exercise
         Notice" shall mean a written notice from a Participant to the Company
         at its principal executive office in Minneapolis, Minnesota (Attention:
         President), made on a form and in such manner as the Committee may from
         time to time determine, pursuant to which the Participant irrevocably
         elects to exercise all or any portion of an Option and irrevocably
         directs the Company to deliver the stock certificates to be issued to
         such Participant under such Option exercise directly to a broker or
         dealer. A Broker Exercise Notice must be accompanied by or contain
         irrevocable instructions to the broker or dealer (i) to promptly sell a
         sufficient number of shares of such Common Stock or to loan the
         Participant a sufficient amount of money to pay the exercise price for
         the Options and, if not otherwise satisfied by the Participant, to fund
         any related employment and withholding tax obligations due upon such
         exercise, and (ii) to promptly remit such to the Company upon the
         broker's or dealer's receipt of the stock certificates.

         6.7      RIGHTS AS A SHAREHOLDER. The Participant shall have no rights
as a shareholder with respect to any shares of Common Stock covered by an Option
until the Participant shall have become the holder of record of such shares, and
no adjustments shall be

                                      -9-

<PAGE>   10

made for dividends or other distributions or other rights as to which there is a
record date preceding the date the Participant becomes the holder of record of
such shares, except as the Committee may determined pursuant to Section 4.3 of
the Plan.

         6.8      DISPOSITION OF COMMON STOCK ACQUIRED PURSUANT TO THE EXERCISE
OF INCENTIVE STOCK OPTIONS. Prior to making a disposition (as defined in Section
424(c) of the Code) of any shares of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option granted under the Plan before the
expiration of two years after its date of grant or before the expiration of one
year after its date of exercise and the date on which such shares of Common
Stock were transferred to the Participant pursuant to the exercise of the
Option, the Participant shall send written notice to the Company of the proposed
date of such disposition, the number of shares to be disposed of, the amount of
the proceeds to be received from such disposition and any other information
relating to such disposition that the Company may reasonably request. The right
of a Participant to make any such disposition shall be conditioned on the
receipt by the Company of all amounts necessary to satisfy any federal, state or
local withholding and employment-related tax requirements attributable to such
disposition. The Committee shall have the right, in its discretion, to endorse
the certificates representing such shares with a legend restricting transfer and
to cause a stop transfer order to be entered with the Company's transfer agent
until such time as the Company receives the amounts necessary to satisfy such
withholding and employment-related tax requirements or until the later of the
expiration of two years from its date of grant or one year from its date of
exercise and the date on which such shares were transferred to the Participant
pursuant to the exercise of the Option.

         6.9      AGGREGATE LIMITATION OF STOCK SUBJECT TO INCENTIVE STOCK
OPTIONS. To the extent that the aggregate Fair Market Value (determined as of
the date an Incentive Stock Option is granted) of the shares of Common Stock
with respect to which incentive stock options (within the meaning of Section 422
of the Code) are exercisable for the first time by a Participant during any
calendar year (under the Plan and any other incentive stock option plans of the
Company or any Affiliate) exceeds $100,000 (or such other amounts as may be
prescribed by the Code from time to time), such excess Options shall be treated
as Non-Qualified Options. The determination shall be made by taking Incentive
Stock Options into account in the order in which they were granted. If such
excess only applies to a portion of an Incentive Stock Option, the Committee, in
its discretion, shall designate which shares shall be treated as shares to be
acquired upon exercise of an Incentive Stock Option.

                                      -10-
<PAGE>   11

                                    ARTICLE 7

                            STOCK APPRECIATION RIGHTS

         7.1      GRANT. Stock Appreciation Rights may be granted in conjunction
with all or part of any Option granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Option. In the case of an Incentive Stock Option, such
rights may be granted only at the time of the grant of the Option. A Stock
Appreciation Right or applicable portion thereof granted with respect to a given
Option shall terminate and no longer be exercisable upon the termination or
exercise of the related Option, except that a Stock Appreciation Right granted
with respect to less than the full number of shares covered by a related Option
shall not be reduced until the exercise or termination of the related Option
exceeds the number of shares not covered by the Stock Appreciation Right.

         7.2      EXERCISE. A Stock Appreciation Right may be exercised by a
Participant, in accordance with Section 7.3 below by surrendering the applicable
portion of the related Option. Upon such exercise and surrender, the Participant
shall be entitled to receive an amount determined in the manner prescribed in
Section 7.3. Options which have been so surrendered, in whole or in part, shall
no longer be exercisable to the extent the related Stock Appreciation Rights
have been exercised.

         7.3      TERMS AND CONDITIONS. Stock Appreciation Rights shall be
subject to applicable regulations relating to the exercise of Stock Appreciation
Rights by Participants subject to reporting responsibilities under Section 16 of
the Exchange Act, and to such terms and conditions, not inconsistent with the
provisions of the Plan, as shall be determined from time to time by the
Committee, including the following:

                  (a) Stock Appreciation Rights shall be exercisable only at
         such time or times and to the extent that the Options to which they
         relate shall be exercisable in accordance with the provisions of
         Article 6 and this Article 7 of the Plan.

                  (b) Upon the exercise of a Stock Appreciation Right, a
         Participant shall be entitled to receive up to, but not more than, an
         amount in cash or shares of Common Stock equal in value to the excess
         of the Fair Market Value of one share of Common Stock over the option
         exercise price per share specified in the related Option multiplied by
         the number of shares in respect of which the Stock Appreciation Right
         shall have been exercised, with the Committee having the right to
         determine the form of payment.

                  (c) Stock Appreciation Rights shall be transferable only when
         and to the extent that the underlying Option would be transferable
         under Section 14.2 of the Plan.

                  (d) Upon the exercise of a Stock Appreciation Right, the
         Option or part thereof to which such Stock Appreciation Right is
         related shall be deemed to have been exercised for the purpose of the
         limitation set forth in Section 4.1 of the Plan on the number of shares
         of Common Stock to be issued under the Plan, but only to the extent of

                                      -11-
<PAGE>   12

         the number of shares issued or issuable under the Option at the time of
         exercise based on the value of the Stock Appreciation Right at such
         time.

                  (e) A Stock Appreciation Right granted in connection with an
         Incentive Stock Option may be exercised only if and when the market
         price of the Common Stock subject to the Incentive Stock Option exceeds
         the exercise price of such Option.

                                    ARTICLE 8

                             RESTRICTED STOCK AWARDS

         8.1      ADMINISTRATION. Shares of Restricted Stock may be issued
either alone or in addition to other Awards. The Committee shall determine the
Eligible Participants to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of shares to be awarded, the time or
times within which such awards may be subject to forfeiture, and all other
conditions of the awards. The Committee may also condition the grant of
Restricted Stock upon the attainment of specified performance goals. The
provisions of Restricted Stock Awards need not be the same with respect to each
recipient.

          8.2     AWARDS AND CERTIFICATES. The prospective recipient of an award
of shares of Restricted Stock shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement evidencing the
award and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.

                  (a) Each Participant who has received a Restricted Stock Award
         shall be issued a stock certificate in respect of shares of Restricted
         Stock awarded 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
         award, substantially in the following form:

                  "The transferability of this certificate and the shares of
                  stock represented hereby are subject to the terms and
                  conditions (including forfeiture) of the Net Radio Corporation
                  1998 Stock Option and Incentive Plan and an agreement entered
                  into between the registered owner and Net Radio Corporation.
                  Copies of such Plan and Agreement are on file in the offices
                  of Net Radio Corporation, Riverplace - Exposition Hall, 43
                  Main Street SE; Suite 149, Minneapolis, Minnesota 55414."

                  (b) The Committee shall require that the stock certificates
         evidencing such shares be held in custody by the Company until the
         restrictions thereon shall have lapsed, and that, as a condition of any
         Restricted Stock award, the Participant shall have delivered a stock
         power, endorsed in blank, relating to the Common Stock covered by such
         award.

                                      -12-

<PAGE>   13

         8.3      RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following restrictions and
conditions:

                  (a) Subject to the provisions of this Plan and the award
         agreement, during a period set by the Committee commencing with the
         date of such award (the "Restriction Period"), the Participant shall
         not be permitted to sell, transfer, pledge or assign shares of
         Restricted Stock awarded under the Plan. Within these limits, the
         Committee may provide for the lapse of such restrictions in
         installments where deemed appropriate.

                  (b) Except as provided in Section 8.3(a), the Participant
         shall have, with respect to the shares of Restricted Stock, all of the
         rights of a shareholder of the Company, including the right to vote the
         shares and the right to receive any cash dividends. The Committee, in
         its sole discretion, may permit or require the payment of cash
         dividends to be deferred and, if the Committee so determines,
         reinvested in additional shares of Restricted Stock (but only to the
         extent shares are available under Article 4). Certificates for shares
         of unrestricted Common Stock shall be delivered to the Participant
         promptly after, and only after, the period of forfeiture shall have
         expired without forfeiture of such shares of Restricted Stock.

                  (c) Subject to the provisions of the award agreement and of
         Section 8.3(d) below, upon termination of employment for any reason
         during the Restriction Period, all shares still subject to restriction
         shall be forfeited by the Participant.

                  (d) In the event of special hardship circumstances of a
         Participant whose employment is terminated (other than for Cause),
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a Participant still in service, the
         Committee may, in its sole discretion, when it finds that a waiver
         would be in the best interest of the Company, waive in whole or in part
         any or all of the remaining restrictions with respect to such
         Participant's shares of Restricted Stock.

                  (e) Notwithstanding the foregoing, in the event of the sale by
         the Company of substantially all of its assets and the consequent
         discontinuance of its business, or in the event of a merger, exchange,
         consolidation or liquidation of the Company, the Board shall, in its
         sole discretion, in connection with the Board'sadoption of the plan for
         sale, merger, exchange, consolidation or liquidation, provide for one
         or more of the following with respect to Restricted Stock awards that
         are, on such date, still subject to a Restriction Period: (i) the
         removal of the restrictions on any or all outstanding Restricted Stock
         awards; (ii) the complete termination of this Plan and forfeiture of
         outstanding Restricted Stock awards prior to a date specified by the
         Board; and (iii) the continuance of the Plan with respect to the
         Restricted Stock awards which were outstanding as of the date of
         adoption by the Board of such plan for sale, merger, exchange,
         consolidation or liquidation and provide to Participants holding
         Restricted Stock awards the right to an equivalent number of restricted
         shares of stock of the corporation succeeding the Company by reason of
         such sale, merger, exchange, consolidation or liquidation. The grant of
         a Restricted Stock award pursuant to the Plan shall not limit in any
         way the right

                                      -13-

<PAGE>   14

         or power of the Company to make adjustments, reclassifications,
         reorganizations or changes to its capital or business structure or to
         merge, exchange or consolidate or to dissolve, liquidate, sell or
         transfer all or any part of its business or assets.

                  (f) Subject to Article 13 below, recipients of Restricted
         Stock awards under the Plan are not required to make any payment or
         provide consideration other than the rendering of services.

                                    ARTICLE 9

                              DEFERRED STOCK AWARDS

         9.1      ADMINISTRATION. Deferred Stock may be awarded either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the Eligible Recipients to whom and the time or times at which
Deferred Stock shall be awarded, the number of shares of Deferred Stock to be
awarded to any Participant or group of Participants, the duration of the period
(the "Deferral Period") during which, and the conditions under which, receipt of
the Common Stock will be deferred, and the terms and conditions of the award in
addition to those contained in Section 9.2. The Committee may also condition the
grant of Deferred Stock upon the attainment of specified performance goals. The
provisions of Deferred Stock awards need not be the same with respect to each
recipient.

         9.2      TERMS AND CONDITIONS.

                  (a) Subject to the provisions of this Plan and the award
         agreement, Deferred Stock awards may not be sold, assigned,
         transferred, pledged or otherwise encumbered during the Deferral
         Period. At the expiration of the Deferral Period (or Elective Deferral
         Period, where applicable), share certificates shall be delivered to the
         Participant, or his legal representative, in a number equal to the
         shares covered by the Deferred Stock award.

                  (b) Amounts equal to any dividends declared during the
         Deferral Period with respect to the number of shares covered by a
         Deferred Stock award will be paid to the Participant currently or
         deferred and deemed to be reinvested in additional Deferred Stock or
         otherwise reinvested, all as determined at the time of the award by the
         Committee, in its sole discretion.

                  (c) Subject to the provisions of the award agreement and
         Section 9.2(d) below, upon termination of employment for any reason
         during the Deferral Period for a given award, the Deferred Stock in
         question shall be forfeited by the Participant.

                  (d) In the event of special hardship circumstances of a
         Participant whose employment is terminated (other than for Cause)
         including death, Disability or Retirement, or in the event of an
         unforeseeable emergency of a Participant still in service, the
         Committee may, in its sole discretion, when it finds that waiver would
         be in the best

                                      -14-

<PAGE>   15

         interest of the Company, waive in whole or in part any or all of the
         remaining deferral limitations imposed hereunder with respect to any or
         all of the Participant's Deferred Stock.

                  (e) A Participant may elect to further defer receipt of the
         award for a specified period or until a specified event (the "Elective
         Deferral Period"), subject in each case to the Committee's approval and
         to such terms as are determined by the Committee, all in its sole
         discretion. Subject to any exceptions adopted by the Committee, such
         election must generally be made prior to completion of one half of the
         Deferral Period for a Deferred Stock award (or for an installment of
         such an award).

                  (f) Each award shall be confirmed by, and subject to the terms
         of, a Deferred Stock agreement executed by the Company and the
         Participant.

                                   ARTICLE 10

                                  CASH BONUSES

         In connection with any grant of Options, Restricted Stock awards or
Deferred Stock Awards, or at any time thereafter, the Committee may, in its
discretion, grant a cash bonus to a Participant in connection with the grant or
vesting or exercise of an Award. The determination of whether to grant such a
cash bonus, the nature and amount of any such cash bonus and the terms and
conditions of such cash bonus shall be within the discretion of the Committee.

                                   ARTICLE 11

                      TERMINATION OF EMPLOYMENT OR SERVICE

         11.1     TERMINATION OF EMPLOYMENT OR OTHER SERVICE DUE TO DEATH,
DISABILITY OR RETIREMENT. Except as otherwise provided in Article 12 of the
Plan, in the event a Participant's employment or other service with the Company
and all Affiliates is terminated by reason of such Participant's death,
Disability or Retirement, all outstanding Options then held by the Participant
shall remain exercisable to the extent exercisable as of such termination for a
period of three months after such termination in the event of the Participant's
death or Retirement, or for a period of one year after such termination in the
event of the Participant's Disability (but in no event after the expiration date
of any such Option).

         11.2     TERMINATION OF EMPLOYMENT OR OTHER SERVICE FOR REASONS OTHER
THAN DEATH, DISABILITY OR RETIREMENT. Except as otherwise provided in Article 12
of the Plan, in the event a Participant's employment or other service with the
Company and all Affiliates is terminated for any reason other than death,
Disability or Retirement, all rights of the Participant under the Plan shall
immediately terminate within notice of any kind, and no Options then held by the
Participant shall thereafter be exercisable.

                                      -15-

<PAGE>   16

         11.3     MODIFICATION OF EFFECT OF TERMINATION. Notwithstanding the
provisions of this Article 11, upon a Participant's termination of employment or
other service with the Company and all Affiliates, other than for Cause, the
Committee may, in its discretion (which may be exercised before or following
such termination), cause Options, or any portions thereof, then held by such
Participant to become exercisable and remain exercisable following such
termination in the manner determined by the Committee; provided, however, that
no Option shall be exercisable after the expiration date thereof and any
Incentive Stock Option that remains unexercised more than three months following
employment termination by reason of Retirement or more than one year following
employment termination by reason of Disability shall thereafter be deemed to be
a Non-Qualified Stock Option.

         11.4     DATE OF TERMINATION. Unless the Committee shall otherwise
determine in its discretion, a Participant's employment or other service shall,
for purposes of the Plan, be deemed to have terminated on the date such
Participant ceases to perform services for the Company and all Affiliates, as
determined in good faith by the Committee.

         11.5     TRANSFER, LEAVE OF ABSENCE, ETC. For purposes of the Plan, the
following events shall not be deemed a termination of employment:

                  (a) a transfer of an employee from the Company to an
         Affiliate, from an Affiliate to the Company, or from one Affiliate to
         another;

                  (b) a leave of absence, approved in writing by the Committee,
         for military service or sickness, or for any other purpose approved by
         the Company if the period of such leave does not exceed ninety (90)
         days (or such longer period as the Committee may approve, in its sole
         discretion); and

                  (c) a leave of absence in excess of ninety (90) days, approved
         in writing by the Committee, but only if the employee's right to
         reemployment is guaranteed either by a statute or by contract, and
         provided that, in the case of any leave of absence, the employee
         returns to work within 30 days after the end of such leave.

                                      -16-

<PAGE>   17

                                   ARTICLE 12

                                CHANGE OF CONTROL

         12.1     CHANGE IN CONTROL. For purposes of this Article 12, a "Change
in Control" of the Company shall mean (a) the sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to a corporation that is not
controlled by the Company, (b) the approval by the shareholders of the Company
of any plan or proposal for the liquidation or dissolution of the Company, or
(c) a change in control of the Company of a nature that would be required to be
reported (assuming such event has not been "previously reported") in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on the effective date
of the Plan, pursuant to Section 13 or 15(d) of the Exchange Act, whether or not
the Company is then subject to such reporting requirement; provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred at such time as (x) any Person becomes after the effective date of the
Plan the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% or more of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at election
of directors or (y) individuals who constitute the board of directors of the
Company on the effective date of the Plan cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the effective date of the Plan whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors comprising the board of directors of the Company on
the effective date of the Plan (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be, for the purposes of
this clause (y), considered as though such person were a member of the board of
directors of the Company on the effective date of this Plan.

         12.2     ACCELERATION OF VESTING. If a Change in Control of the Company
shall occur, then, without any action by the Committee or the Board, all
outstanding Options shall become immediately exercisable in full and shall
remain exercisable during the remaining term thereof, regardless of whether the
Participants to whom such Options have been granted remain in the employ or
service of the Company or any Affiliate.

         12.3     CASH PAYMENT. If a Change in Control of the Company shall
occur, then the Committee, in its discretion, and without the consent of any
Participant affected thereby, may determine that some or all Participants
holding outstanding Options shall receive, with respect to some or all of the
shares of Common Stock subject to such Options, as of the effective date of any
such Change in Control of the Company, cash in an amount equal to the excess of
the Fair Market Value of such shares immediately prior to the effective date of
such Change in Control of the Company over the exercise price per share of such
Options.

         12.4     LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding
anything in Section 12.2 or 12.3 above to the contrary, if, with respect to a
Participant, the acceleration of the exercisability of an Option as provided in
Section 12.2 or the payment of cash

                                      -17-
<PAGE>   18

in exchange for all or part of an Option as provided in Section 12.3 above
(which acceleration or payment could be deemed a "payment" within the meaning of
Section 280G(b)(2) of the Code), together with any other payments which such
Participant has the right to receive from the Company or any corporation which
as member of an "affiliated group" (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the Company is a member,
would constitute a "parachute payment" (as defined in Section 280G(b)(2) of the
Code), then the payments to such Participant pursuant to Section 12.2 or 12.3
above shall be reduced to the largest amount as will result in no portion of
such payments being subject to the excise tax imposed by Section 4999 of the
Code.

                                   ARTICLE 13

                 RIGHT TO WITHHOLD: PAYMENT OF WITHHOLDING TAXES

         13.1     GENERAL RULES. The Company is entitled to (a) withhold and
deduct from future wages of the Participant (or from other amounts which may be
due and owing to the Participant from the Company), or make other arrangements
for the collection of, all legally required amounts necessary to satisfy any and
all federal, state and local withholding and employment-related tax
requirements: (i) attributable to the grant or exercise of an Option, a
Restricted Stock award, a Deferred Stock Award or a Stock Appreciation Right or
to a disqualifying disposition of stock received upon exercise of an Incentive
Stock Option, or (ii) otherwise incurred with respect to an Award or (b) require
the Participant promptly to remit the amount of such withholding to the Company
before taking any action with respect to an Award.

         13.2     SPECIAL RULES.

                  (a) Without limiting the generality of Section 13.1 above, the
         Committee may, in its discretion and subject to such rules as the
         Committee may adopt, permit a Participant to satisfy, in whole or in
         part, any withholding or employment-related tax obligations described
         in Section 13.1 above by electing to use Previously Acquired Shares or
         by electing to have the Company accept a Broker Exercise Notice with
         respect to that number of shares, in any such case, having a Fair
         Market Value, on the Tax Date, equal to the amount necessary to satisfy
         the withholding or employment-related taxes due, or by agreeing to
         deliver to the Company a promissory note in payment for some or all of
         the necessary amounts (containing such terms and conditions as the
         Committee in its discretion may determine).

                  (b) A Participant's election to use Previously Acquired
         Shares, a Broker Exercise Notice or a promissory note must be made on
         or prior to the Tax Date, is irrevocable and is subject to the consent
         or disapproval of the Committee. If the Participant is an officer,
         director or beneficial owner of more than 10% of the outstanding Common
         Stock and the Company has a class of equity securities registered under
         Section 12 of the Exchange Act, an election to use Previously Acquired
         Shares may not be made within six months of the date the Option is
         granted (unless the death or

                                     -18-

<PAGE>   19

         Disability of the Participant occurs prior to the expiration of such
         six-month period), and (unless otherwise permitted by the Committee in
         its discretion) must be made either six months prior to the Tax Date or
         at any time prior to the Tax Date between the third and twelfth
         business days following public release of any of the Company's
         quarterly or annual summary earnings statements. When shares of Common
         Stock are issued prior to the Tax Date to a Participant making an
         election to use Previously Acquired Shares, the Participant shall agree
         in writing to surrender that number of shares on the Tax Date having an
         aggregate Fair Market Value equal to the tax due.

                                   ARTICLE 14

                 RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS:
                                 TRANSFERABILITY

         14.1     EMPLOYMENT OR SERVICE. Nothing in the Plan shall interfere
with or limit in any way the right of the Company or any Affiliate with respect
to the employment or service of any Eligible Recipient or Participant at any
time, nor confer upon any Eligible Recipient or Participant any right to
continue in the employ or service of the Company or any Affiliate.

         14.2     RESTRICTIONS ON TRANSFER. Other than pursuant to a qualified
domestic relations order (as defined by the Code), no right or interest of any
Participant in an Option prior to the exercise of such Options shall be
assignable or transferable, or subjected to any lien, during the lifetime of the
Participant, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, pledge, divorce or bankruptcy. A Participant shall, however, be
entitled to designate a beneficiary to receive an Option upon such Participant's
death. In the event of a Participant's death, such Participant's rights and
interest in Options shall be transferable by testamentary will or the laws of
descent and distribution, and payment of any amounts due under the Plan shall be
made to, and exercise of any Options (to the extent permitted pursuant to
Article 11 of the Plan) may be made by, the Participant's legal representatives,
heirs or legatees. If in the opinion of the Committee a Participant holding an
Option is disabled from caring for his or her affairs because of mental
condition, physical condition or age, any payments due the Participant may be
made to, and any rights of the Participant under the Plan shall be exercised by,
such Participant's guardian, conservator or other legal personal representative
upon furnishing the Committee with evidence satisfactory to the Committee of
such status. Notwithstanding the foregoing, the Board or the Committee may, in
its discretion, determine that an Option may be exercised by someone other than
the optionee and that the Option may be transferable based on the tax and
federal securities laws then in effect for such Options.

         14.3     NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to amend, modify or rescind any previously approved compensation plans
or programs entered into by the Company. The Plan will be construed to be in
addition to any and all such other plans or programs. Neither the adoption of
the Plan nor the submission of the Plan to the shareholders of the Company for
approval will be construed as creating any limitations on the

                                      -19-
<PAGE>   20

power or authority of the Board to adopt such additional or other compensation
arrangements as the Board may deem necessary or desirable.

                                   ARTICLE 15

                           SECURITIES LAW RESTRICTIONS

         15.1     SHARE ISSUANCES. Notwithstanding any other provision of the
Plan or any agreement entered into pursuant hereto, the Company shall not be
required to issue or deliver any certificate for shares of Common Stock under
this Plan, and an Option shall not be considered to be exercised notwithstanding
the tender by the Participant of any consideration therefor, unless and until
each of the following conditions has been fulfilled:

                  (a) (i) there shall be in effect with respect to such shares a
         registration statement under the Securities Act and any applicable
         state securities laws if the Committee, in its discretion, shall have
         determined to file, cause to become effective and maintain the
         effectiveness of such registration statement; or (ii) if the Committee
         has determined not to so register the shares of Common Stock to be
         issued under the Plan, (A) exemptions from registration under the
         Securities Act and applicable state securities laws shall be available
         for such issuance (as determined by counsel to the Company) and (B)
         there shall have been received from the Participant (or, in the event
         of death or disability, the Participant's heir(s) or legal
         representative(s)) any representations or agreements requested by the
         Company in order to permit such issuance to be made pursuant to such
         exemptions; and

                  (b) there shall have been obtained any other consent, approval
         or permit from any state or federal governmental agency which the
         Committee shall, in its discretion upon the advice of counsel, deem
         necessary or advisable.

         15.2     SHARE TRANSFERS. Shares of Common Stock issued pursuant to
Options, Restricted Stock awards or Deferred Stock Awards granted under the Plan
may not be sold, assigned, transferred, pledged, encumbered or otherwise
disposed of, whether voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise, except pursuant to registration under the
Securities Act and applicable state securities laws or pursuant to exemptions
from such registrations. The Company may condition the sale, assignment,
transfer, pledge, encumbrance or other disposition of such shares not issued
pursuant to an effective and current registration statement under the Securities
Act and all applicable state securities laws on the receipt from the party to
whom the shares of Common Stock are to be so transferred of any representations
or agreements requested by the Company in order to permit such transfer to be
made pursuant to exemptions from registration under the Securities Act and
applicable state securities laws.

         15.3     LEGENDS.

                                      -20-

<PAGE>   21

                  (a) Unless a registration statement under the Securities Act
         is in effect with respect to the issuance or transfer of shares of
         Common Stock under the Plan, each certificate representing any such
         shares shall be endorsed with a legend in substantially the following
         form, unless counsel for the Company is of the opinion as to any such
         certificate that such legend is unnecessary:

                  THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR UNDER
                  APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
                  ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
                  ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
                  DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
                  STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR PURSUANT TO AN
                  EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS,
                  THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
                  SATISFACTION OF THE COMPANY.

                  (b) The Committee, in its discretion, may endorse certificates
         representing shares issued pursuant to the exercise of Incentive Stock
         Options with a legend in substantially the following form:

                  THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
                  TRANSFERRED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF
                  ON OR BEFORE [THE LATER OF THE ONE-YEAR OR TWO-YEAR INCENTIVE
                  STOCK OPTION HOLDING PERIODS], WITHOUT THE PRIOR WRITTEN
                  CONSENT OF THE COMPANY.

                                   ARTICLE 16

                  PLAN AMENDMENT, MODIFICATION AND TERMINATION

         The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the Board
may deem advisable in order that Awards under the Plan shall conform to any
change in applicable laws or regulations or in any other respect the Board may
deem to be in the best interests of the Company; provided, however, that no such
amendment shall be effective, without approval of the shareholders of the
Company, if shareholder approval of the amendment is then required pursuant to
Rule 16b-3 under the Exchange Act or any successor rule or Section 422 of the
Code or under the applicable rules or regulations of any securities exchange or
the NASD. No termination, suspension or amendment of the Plan shall alter or
impair any outstanding Award without the consent of the Participant affected
thereby; provided, however, that this sentence shall not impair the right of the

                                      -21-

<PAGE>   22

Committee to take whatever action it deems appropriate under Section 4.3 or
Article 12 of the Plan.

                                   ARTICLE 17

                           EFFECTIVE DATE OF THE PLAN

         17.1     EFFECTIVE DATE. The Plan is effective as of June 1, 1998, the
date it was adopted by the Board, subject to approval within 12 months of such
adoption by a vote of the holders of a majority of the voting stock of the
Company represented in person or by proxy at a duly held shareholders' meeting,
or by written consent of all shareholders.

         17.2     DURATION OF THE PLAN. The Plan shall terminate at midnight on
ten years from effective date and may be terminated prior thereto by Board
action, and no Award shall be granted after such termination. Options
outstanding upon termination of the Plan may continue to be exercised in
accordance with their terms.

                                   ARTICLE 18

                                  MISCELLANEOUS

         18.1     CONSTRUCTION AND HEADINGS. The use of the masculine gender
shall also include within its meaning the feminine, and the singular may include
the plural and may include the singular, unless the context clearly indicates to
the contrary. The headings of the Articles, Sections and subparts of the Plan
are for convenience of reading only and are not meant to be of substantive
significance and shall not add or detract from the meaning of such Article,
Section or subpart.

         18.2     PUBLIC POLICY. No person shall have any claim or right to
receipt of an Award if, in the opinion of counsel to the Company, such receipt
conflicts with law or is opposed to governmental or public policy.

         18.3     GOVERNING LAW. The place of administration of the Plan shall
be conclusively deemed to be within the State of Minnesota, and the rights and
obligations of any and all persons having or claiming to have had an interest
under the Plan or under any agreements evidencing Awards shall be governed by
and construed exclusively and solely in accordance with the laws of the State of
Minnesota without regard to the conflict of laws provisions of any
jurisdictions. All parties agree to submit to the jurisdiction of the state and
federal courts of Minnesota with respect to matters relating to the Plan and
agree not to raise or assert the defense that such forum is not convenient for
such party.

         18.4     SUCCESSORS AND ASSIGNS. This Plan shall be binding upon and
inure to the benefit of the successors and permitted assigns of the Company,
including, without limitation, whether by way of merger, consolidation,
operation of law, assignment, purchase or other acquisition of substantially all
of the assets or business of the Company and any and all

                                      -22-
<PAGE>   23

such successors and assigns shall absolutely and unconditionally assume all of
the Company's obligations under the Plan.

          18.5    SURVIVAL OF PROVISIONS. The rights, remedies, agreements,
obligations and covenants contained in or made pursuant to the Plan, any
agreement evidencing an Award and any other notices or agreements in connection
therewith, including, without limitation, any notice of exercise of any Option,
shall survive the execution and delivery of such notices and agreements and the
delivery and receipt of shares of Common Stock and shall remain in full force
and effect.

                                      -23-

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