Document:

<PAGE>

EXHIBIT 10.21

                                AMENDMENT NO. 2

  AMENDMENT NO. 2 dated as of July 15, 1999, between FRONTIERVISION OPERATING
PARTNERS, L.P., a limited partnership duly organized and validly existing under
the laws of the State of Delaware (the "Company"); each of the Subsidiaries of
                                        -------
the Company identified under the caption "SUBSIDIARY GUARANTORS" on the
signature pages hereto (individually, a "Subsidiary Guarantor" and, collectively
                                         --------------------
the "Subsidiary Guarantors" and, together with the Company, the "Obligors"); and
     ---------------------                                       --------
THE CHASE MANHATTAN BANK, in its capacity as Administrative Agent pursuant to
authority granted by the Majority Lenders pursuant to Section 11.04 of the
Credit Agreement (as defined below).

  The Company, certain lenders, The Chase Manhattan Bank, as Administrative
Agent, J.P. Morgan Securities Inc., as Syndication Agent, and CIBC Inc., as
Documentation Agent, are parties to a Second Amended and Restated Credit
Agreement dated as of December 19, 1997 (as heretofore amended, the "Credit
                                                                     ------
Agreement").  The Obligors and the Administrative Agent (pursuant to the
---------
authority granted by, and having obtained all necessary consents of, the
Majority Lenders) wish to amend the Credit Agreement in certain respects and,
accordingly, the parties hereto hereby agree as follows:

  Section 1.  Definitions.  Except as otherwise defined in this Amendment No. 2,
              -----------
terms defined in the Credit Agreement are used herein as defined therein.

  Section 2.  Amendments.  The Credit Agreement shall be amended as follows:
              ----------

  Section 2.01.  Certain Defined Terms.  Section 1.01 of the Credit Agreement is
                 ---------------------
amended by adding the following new defined terms (to the extent not already
included in said Section 1.01) and inserting the same in the appropriate
alphabetical locations, and amending the following defined terms (to the extent
already included in said Section 1.01) to read in their entirety, as follows:

          "1999 Acquisition Transaction" shall mean the acquisition by Adelphia
           ----------------------------
     pursuant to the Purchase Agreement dated as of February 22, 1999 (the

     Purchase Agreement") among FrontierVision LP, FVP GP, L.P., the Direct and
     ------------------
     Indirect Limited Partners of FrontierVision LP party thereto and Adelphia
     of all the partnership interests in FrontierVision LP.

           "Adelphia" shall mean Adelphia Communications Corporation.
            --------

          "Change of Control" shall mean any event that requires the Company or
           -----------------
     FrontierVision Capital pursuant to the provisions of the Senior
     Subordinated Debt Documents (or any other agreement or instrument relating
     to or providing for any other Subordinated Indebtedness), or that requires
     FrontierVision Holdings, FrontierVision Holdings Capital Corporation or
     FrontierVision Holdings II Capital Corporation pursuant to the Senior
     Discount Debt Documents, to redeem or repurchase, or make an offer to
     redeem or repurchase, all or any portion of the Subordinated Indebtedness,
     or the Senior Discount

                                Amendment No. 2
                                ---------------

<PAGE>
                                      -2-

     Debt, as a result of a change of control (as defined in the Senior
     Subordinated Debt Documents or any other agreement or instrument relating
     to or providing for any other Subordinated Indebtedness or the Senior
     Discount Debt Documents), provided that the term "Change of
                               --------
     Control" shall not include any such event that occurs as a result of the
     1999 Acquisition Transaction.

          "Debt Ratio" shall mean, as at any date (but subject in any event to
           ----------
      the provisions of Section 8.10(e) hereof), the ratio of:

                (a) the sum of the aggregate amount of all Indebtedness (other
          than Junior Subordinated Indebtedness) of the Company and its
          Restricted Subsidiaries and all letters of credit contemplated by
          Section 8.07(e) hereof, but excluding all performance bonds
          contemplated by said Section as at such date minus, for purposes of
                                                       -----
          Section 8.10(b) only (and not for purposes of the definition of
          "Applicable Margin"), for any date on or before March 30, 2000,
          $20,000,000 to
                      --

                (b) the product of EBITDA for the fiscal quarter ending on, or
          most recently ended prior to such date times four.
                                                 -----

          "Debt Service" shall mean, for any period, the sum, for the Company
           ------------
     and its Restricted Subsidiaries (determined on a consolidated basis without
     duplication in accordance with GAAP), of the following: (a) in the case of
     Loans under this Agreement, the aggregate amount of payments of principal
     of such Loans that, giving effect to Commitment reductions or terminations
     scheduled to be made during such period pursuant to Section 2.03 hereof,
     were required to be made pursuant to Section 3.01 hereof during such period
     plus (b) in the case of all other Indebtedness, all regularly scheduled
     ----
     payments or prepayments of principal of such Indebtedness (including,
     without limitation, the principal component of any payments in respect of
     Capital Lease Obligations but excluding prepayments of principal in respect
     of Junior Subordinated Indebtedness) made or payable during such period
     plus (c) all Interest Expense for such period (excluding, however, non-cash
     ----
     amortization of loan facility fees and other deferred debt costs, in each
     case to the extent included in determining Interest Expense for such
     period).

          "Initial Equityholders" shall mean, collectively, (i) J.P. Morgan
           ---------------------
     Investment Corp., (ii) 1818 II Cable Corp., (iii) Olympus Cable Corp., (iv)
     First Union Capital Partners, Inc., (v) any Control Affiliate of any of the
     foregoing entities, (vi) any limited partnership of which any Control
     Affiliate of any of the foregoing entities is the sole general partner (so
     long as the aggregate equity interests of FrontierVision LP that shall have
     been transferred to all such limited partnerships by any such entity shall
     not exceed 25% of the aggregate equity interests held by such entity in
     FrontierVision LP) and (vii) following consummation of the 1999 Acquisition
     Transaction, Adelphia.

          "Interest Expense" shall mean, for any period, the sum, for the
           ----------------
     Company and its Restricted Subsidiaries (determined on a consolidated basis
     without duplication in

                                Amendment No. 2
                                ---------------
<PAGE>
                                      -3-

     accordance with GAAP), of the following: (a) all interest in respect of
     Indebtedness (including, without limitation, the interest component of any
     payments in respect of Capital Lease Obligations but excluding all interest
     in respect of Junior Subordinated Indebtedness) accrued or capitalized
     during such period (whether or not actually paid during such period) plus
                                                                          ----
     (b) the net amount payable (or minus the net amount receivable) under
                                    -----
     Interest Rate Protection Agreements during such period (whether or not
     actually paid or received during such period).

          "Junior Subordinated Indebtedness" shall mean the Indebtedness of the
           --------------------------------
     Company in respect of junior subordinated notes, in the form attached
     hereto as Exhibit J, issued from time to time to Adelphia.

          "Subordinated Indebtedness" shall mean, collectively, (i) the
           -------------------------
     Indebtedness of the Company and FrontierVision Capital in respect of the
     senior subordinated notes of the Company and FrontierVision Capital due
     2006 issued pursuant to the Senior Subordinated Debt Indenture and (ii) the
     Junior Subordinated Indebtedness."

          Section 2.02. EBITDA. Paragraph (b) of the definition EBITDA in
                        ------
Section 1.01 of the Credit Agreement is hereby amended to read in its entirety
as follows:

          "(b)  all operating expenses for such period, including, without
     limitation, technical, programming, selling and general administration
     expenses incurred by the Company and its Restricted Subsidiaries during
     such period, but excluding (to the extent included in operating expenses)
     depreciation, amortization, Interest Expense, interest in respect of Junior
     Subordinated Indebtedness, any non-cash charges (including, without
     limitation, non-cash pension expenses and any Tax Payment Amount for the
     relevant period), any non-recurring expenses incurred in connection with
     the 1999 Acquisition Transaction, including but not limited to employee
     severance expenses (provided that such expenses are recognized in
     accordance with GAAP prior to the fiscal year ending December 31, 1999)
     plus"
     -----

          Section 2.03. Financial Statements Etc. Section 8.01 (a), (b) and (f)
                        ------------------------
of the Credit Agreement are hereby amended to read their entirety as follows:

          "(a) as soon as available and in any event within 90 days after the
     end of each of the first three quarterly fiscal periods of each fiscal year
     of the Company, consolidated statements of income, changes in partners'
     capital and cash flows of the Company and its Subsidiaries (and, separately
     stated, for the Company and its Restricted Subsidiaries) for such period
     and for the period from the beginning of the respective fiscal year to the
     end of such period, and the related consolidated balance sheets of the
     Company and its Subsidiaries (and, separately stated, for the Company and
     its Restricted Subsidiaries) as at the end of such period, setting forth in
     each case in comparative form the corresponding consolidated figures for
     the corresponding periods in the preceding fiscal year (except that, in the
     case of balance sheets, such comparison shall be to the last day of the
     prior fiscal year), accompanied by a certificate of a Senior Officer, which
     certificate shall state that said

                                Amendment No. 2
                                ---------------
<PAGE>
                                      -4-

     consolidated financial statements fairly present the consolidated financial
     condition and results of operations of the Company and its Subsidiaries (or
     the Company and its Restricted Subsidiaries, as the case may be), in each
     case in accordance with generally accepted accounting principles,
     consistently applied, as at the end of, and for, such period (subject to
     normal year-end audit adjustments), provided that the requirements of this
                                         --------
     Section 8.01(a) with respect to financial statements of the Company and its
     Subsidiaries may be satisfied by delivery by the Company (in accordance
     with this Section 8.01(a)) of the Company's quarterly report filed on Form
     10-Q with the Securities and Exchange Commission;

           (b) as soon as available and in any event within 120 days after the
     end of each fiscal year of the Company, consolidated statements of income,
     changes in partners' capital and cash flows of the Company and its
     Subsidiaries (and, separately stated, for the Company and its Restricted
     Subsidiaries) for such fiscal year and the related consolidated balance
     sheets of the Company and its Subsidiaries (and, separately stated, for the
     Company and its Restricted Subsidiaries) as at the end of such fiscal year,
     setting forth in each case in comparative form the corresponding
     consolidated figures for the preceding fiscal year, accompanied by an
     opinion thereon of independent certified public accountants of recognized
     national standing, which opinion shall state that said consolidated
     financial statements fairly present the consolidated financial condition
     and results of operations of the Company and its Subsidiaries (or the
     Company and its Restricted Subsidiaries, as the case may be) as at the end
     of, and for, such fiscal year in accordance with generally accepted
     accounting principles, and a statement of such accountants to the effect
     that, in making the examination necessary for their opinion, nothing came
     to their attention that caused them to believe that the Company was not in
     compliance with Sections 8.07, 8.08, 8.09 or 8.10 hereof as at the end of
     such fiscal year, insofar as such Sections relate to accounting matters in
     accordance with generally accepted accounting principles, consistently
     applied, as at the end of, and for, such fiscal year, provided that the
                                                           --------
     requirements of this Section 8.01(b) with respect to financial statements
     of the Company and its Subsidiaries may be satisfied by delivery by the
     Company (in accordance with this Section 8.01(b)) of the Company's annual
     report filed on Form 10-K with the Securities and Exchange Commission;

          (f)  concurrently with the delivery of financial statements referred
     to in paragraphs (a) and (b) above, a Quarterly Officer's Report as at the
     end of such periods;"

          Section 2.04. Indebtedness. Section 8.07 of the Credit Agreement is
                        ------------
hereby amended by deleting the word "and" at the end of paragraph (e) thereof,
adding the word "and" at the end of paragraph (f) thereof and by adding new
paragraph (g) at the end thereof to read in its entirety as follows:

          "(g) Junior Subordinated Indebtedness."

          Section 2.05. Subordinated Indebtedness; Other Equity Interests.
                        -------------------------------------------------
Section 8.13(b) of the Credit Agreement is hereby amended by adding the
following paragraph at the end thereof to read in its entirety as follows:

                                Amendment No. 2
                                ---------------
<PAGE>
                                      -5-

          "Notwithstanding the foregoing, the Company may make payments in
     respect of principal and interest on Junior Subordinated Indebtedness if at
     the time of such payments and after giving effect thereto (i) the Debt
     Ratio shall not exceed 5.00 to 1, and (ii) at the time of such payments and
     after giving effect thereto no Default shall have occurred and be
     continuing."

          Section 2.06. Events of Default. Sections 9(m)(ii) and (iii) of the
                        -----------------
Credit Agreement shall be amended to read in their entirety as follows:

          "(ii)  at any time prior to the consummation of the 1999 Acquisition
     Transaction, either James Vaughn or John S. Koo shall, for any reason,
     cease to be actively involved in the day to day management and operation of
     the Company and its Subsidiaries (and Persons with equivalent knowledge and
     experience in the cable television industry reasonably acceptable to the
     Majority Lenders are not appointed to replace one or both of the them
     within 90 days thereof); or

          "(iii)  prior to a Qualified Public Offering, either (x) the Initial
     Equityholders shall cease to own, collectively, on a fully-diluted basis
     (in other words, giving effect to the exercise of any warrants, options and
     conversion and other rights), equity interests representing at least 51% of
     the aggregate fair market value (or, if greater, the aggregate liquidation
     value) of the equity interests of all classes of FrontierVision LP or (y)
     James Vaughn or John S. Koo shall sell, transfer, hypothecate or otherwise
     dispose of more than 50% of their direct or indirect economic interest in
     FrontierVision LP (other than any transfer to the spouse of either of such
     individuals, to his immediate family members, to trusts for the benefit of
     such spouse or immediate family members or pursuant to the 1999 Acquisition
     Transaction); or"

          Section 2.07. Exhibits. The Credit Agreement shall be amended by
                        --------
adding Exhibit J thereto to read in its entirety as Exhibit J hereto.

          Section 3. Miscellaneous. Except as herein provided, the Credit
                     -------------
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 2 by signing any such counterpart. This
Amendment No. 2 shall be governed by, and construed in accordance with, the law
of the State of New York.

                                Amendment No. 2
                                ---------------
<PAGE>
                                      -6-

  IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to be
duly executed and delivered as of the day and year first above written.

                           FRONTIERVISION OPERATING
                           PARTNERS, L.P.

                        By:   FrontierVision Holdings, L.P., as general partner
                              of FrontierVision Operating Partners, L.P.

                              By:   FrontierVision Partners, L.P., as
                                    general partner of FrontierVision Holdings,
                                    L.P.

                                    By:      FVP GP, L.P., as general partner of
                                             FrontierVision Partners, L.P.

                                             By: FrontierVision Inc., as
                                                 general partner of FVP GP, L.P.

                                    By____________________________
                                      Title:

                             SUBSIDIARY GUARANTORS
                             ---------------------

          By its signature below each Subsidiary Guarantor (i) consents to the
foregoing Amendment No. 2 and confirms that the obligations of the Company under
the Credit Agreement as herein amended and under the Notes (if any) and in
respect of Pari Passu Obligations are entitled to the benefits of the Subsidiary
Guarantee Agreement executed by each Subsidiary Guarantor, respectively, (and
shall constitute "Guaranteed Obligations" (as defined in such Subsidiary
Guarantee Agreement) under and for all purposes of such Subsidiary Guarantee
Agreement) and (ii) together with the Administrative Agent (acting with the
consent of the Majority Lenders under the Credit Agreement) agrees that
references in such Subsidiary Guarantee Agreement to the "Credit Agreement"
shall be deemed to be references to the Credit Agreement as amended herein.

FRONTIERVISION CAPITAL           FRONTIERVISION CABLE NEW ENGLAND, INC.
 CORPORATION

By____________________________   By____________________________
  Title:                             Title:

                                Amendment No. 2
                                ---------------
<PAGE>
                                      -7-

                                      ADMINISTRATIVE AGENT
                                      --------------------

                                          THE CHASE MANHATTAN BANK,
                                             as Administrative Agent

                                          By____________________________
                                            Title:

                                Amendment No. 2
                                ---------------
<PAGE>

                                                                       EXHIBIT J

                       [Form of Junior Subordinated Note]

                          Junior Subordinated Note of
                    FrontierVision Operating Partners, L.P.
                            due ___________, _____

$____________                                               ____________, ____
                                                            New York, New York

  FrontierVision Operating Partners, L.P., a limited partnership duly organized
and validly existing under the laws of the State of Delaware (the "Maker"), for
                                                                   -----
value received, hereby promises to pay to [________] (the "Payee") the principal
                                                           -----
sum of [AMOUNT IN WORDS] ($___________) on ___________, ____ [not to be earlier
than one year after the latest maturity of all Loans under the Credit
Agreement], subject to the terms and conditions hereinafter set forth.

          Section 1.  Payment.  The Maker shall pay the principal of this Junior
                      -------
Subordinated Note in immediately available funds at the offices of the Payee at
________________________ or at such other place as the Payee shall designate in
writing.

          If any principal of this Junior Subordinated Note shall become due and
payable on any date other than a business day at the place of payment, the time
for the payment thereof shall be extended to the immediately succeeding business
day.

          Notwithstanding anything to the contrary herein contained, the Maker
may make payments of principal hereunder only at such times and to the extent
permitted under the Credit Agreement. As used herein, the term "Credit
                                                                ------
Agreement" shall mean, collectively, (i) the Second Amended and Restated Credit
---------
Agreement dated as of December 19, 1997, between the Maker, certain lenders, The
Chase Manhattan Bank as Administrative Agent, J.P. Morgan Securities Inc. as
syndication agent and CIBC Inc. as documentation agent, and (ii) any extension,
renewal, increase, modification or restatement thereof, or any agreement
refinancing any of the indebtedness thereunder, in each case as the same shall
from time to time be successively extended, renewed, increased, modified,
restated or refinanced.

          Section 2. Interest. This Junior Subordinated Note shall bear interest
                     --------
at the rate of [a market interest rate, subject to approval of the
Administrative Agent], which interest shall be payable only at such times and to
the extent permitted by the Credit Agreement.
<PAGE>
                                      -2-

          Section 3. Prepayment. The Maker may prepay this Junior Subordinated
                     ----------
Note, at any time in whole or in part without penalty or premium, provided that
no such prepayment shall be made to the extent not expressly permitted under the
Credit Agreement.

          Section 4. Subordination. Anything in this Junior Subordinated Note to
                     -------------
the contrary notwithstanding, the indebtedness evidenced by this Junior
Subordinated Note shall be subordinate and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all indebtedness or other
liabilities of the Maker outstanding from time to time including, without
limitation, (x) the Maker's obligation to principal, interest and other amounts
under the Credit Agreement, and (y) any interest accruing after the commencement
of any proceedings referred to in clause (ii) below, whether or not such
interest is an allowed claim in such proceeding (all such indebtedness or other
liabilities and interest being herein called "Senior Indebtedness"):
                                              -------------------

               (i)  The holders of Senior Indebtedness shall be entitled to
     receive payment in full in cash of all amounts constituting Senior
     Indebtedness before the Payee is entitled to receive any payment on account
     of this Junior Subordinated Note, provided that the Maker may make, and the
     Payee shall be entitled to receive and retain from time to time, payments
     and prepayments in respect of the principal and interest of this Junior
     Subordinated Note to the extent permitted under Sections 1, 2 or 3 above.

               (ii)  In the event of any insolvency or bankruptcy proceedings,
     and any receivership, liquidation, reorganization or other similar
     proceedings in connection therewith, relative to the Maker or to its
     creditors, as such, or to its property, and in the event of any proceedings
     for voluntary liquidation, dissolution or other winding up of the Maker,
     whether or not involving insolvency or bankruptcy, then the holders of
     Senior Indebtedness shall be entitled to receive payment in full of all
     amounts constituting Senior Indebtedness before the Payee is entitled to
     receive, or make any demand for, any payment on account of this Junior
     Subordinated Note, and to that end the holders of Senior Indebtedness shall
     be entitled to receive for application in payment thereof any payment or
     distribution of any kind or character, whether in cash or property or
     securities.

               (iii)  If any payment or distribution of any character, whether
     in cash, securities or other property, in respect of this Junior
     Subordinated Note shall (despite these subordination provisions) be
     received by the Payee before all Senior Indebtedness shall have been paid
     in full in cash, such payment or distribution shall be held in trust for
     the benefit of, and shall be paid over or delivered to, the holders of
     Senior Indebtedness (or their representatives), ratably according to the
     respective aggregate amounts remaining unpaid thereon, to the extent
     necessary to pay all Senior Indebtedness in full.

          No present or future holder of Senior Indebtedness shall be prejudiced
in its right to enforce subordination of this Junior Subordinated Note by any
act or failure to act on the part of the Maker or by any act or failure to act,
in good faith on the part of such holder or any trustee or agent for such
holder. The foregoing provisions are solely for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the one hand, and the
Payee on the other
<PAGE>
                                      -3-

hand, and nothing herein shall impair, as between the Maker and the Payee, the
obligation of the Maker, which is unconditional and absolute, to pay to the
Payee the principal hereof in accordance with the terms hereof, nor shall
anything herein prevent the Payee from exercising all remedies otherwise
permitted by applicable law in respect hereof, subject to the rights, if any,
under this Junior Subordinated Note of holders of Senior Indebtedness to receive
cash, property or securities otherwise payable or deliverable to the Payee.

          Section 5. Subrogation. The Payee shall be subrogated to the rights of
                     -----------
the holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of, interest on, and other amounts owing pursuant to, the Senior
Indebtedness shall be paid in full in cash. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Payee would be entitled except for the
provisions of Section 4, and no payments over pursuant to the provisions of
Section 4 to the holders of Senior Indebtedness by the Payee, shall, as between
the Maker, its creditors other than holders of Senior Indebtedness, and the
Payee, be deemed to be a payment or distribution by the Maker to or on account
of the Senior Indebtedness.

          Section 6.  Defaults.  If after payment in full in cash of the Senior
                      --------
Indebtedness, any payment is not made when due hereunder, the Payee may declare
all amounts owing under this Junior Subordinated Note due and payable, provided
that if after repayment in full of the Senior Indebtedness, any payments of
Senior Indebtedness shall at any time be rescinded or otherwise must be returned
by the holder of any Senior Indebtedness, such demand, if made, shall be
automatically rescinded.

          THIS JUNIOR SUBORDINATED NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

                              By:   FrontierVision Partners, L.P., as
                                    general partner of FrontierVision Holdings,
                                    L.P.

                                    By:   FVP GP, L.P., as general partner of
                                          FrontierVision Partners, L.P.

                                          By:  FrontierVision Inc., as general
                                               partner of FVP GP, L.P.

                                    By______________________
                                      Title:<PAGE>   1
                                                                   EXHIBIT 10.24
                              STAR SCIENTIFIC, INC.

                             1998 STOCK OPTION PLAN

            AS APPROVED BY THE BOARD OF DIRECTORS ON OCTOBER 2, 1998
                  AND BY THE STOCKHOLDERS ON DECEMBER 15, 1998.
      AS AMENDED AND RESTATED BY THE BOARD OF DIRECTORS ON APRIL 12, 1999.
          AS AMENDED BY THE BOARD OF DIRECTORS ON SEPTEMBER 24, 1999.

       1.     PURPOSE. The purposes of the Star Scientific, Inc. 1998 Stock
Option Plan (the "Plan") are to provide additional incentives to those officers,
key employees, nonemployee Directors and Consultants of the Star Scientific,
Inc. and its Subsidiaries (as hereinafter defined) whose substantial
contributions are essential to the continued growth and success of the Company's
business, to strengthen their commitment to the Company and its Subsidiaries, to
motivate those officers, key employees, nonemployee Directors and Consultants to
perform their assigned responsibilities faithfully and diligently, and to
attract and retain competent and dedicated individuals whose efforts will result
in the long-term growth and profitability of the Company. To accomplish these
purposes, the Plan provides that the Company may grant Stock Options and
Nonqualified Stock Options (as each term is hereinafter defined).

       2.     DEFINITIONS. For purposes of the Plan:

              a.     "ADJUSTED FAIR MARKET VALUE" means, in the event of a
       Change in Control, the greater of (i) the highest price per Share paid to
       holders of the Shares in any transaction (or series of transactions)
       constituting or resulting in a Change in Control or (ii) the highest Fair
       Market Value of a Share during the ninety (90) day period ending on the
       date of a Change in Control.

              b.     "AGREEMENT" means the written agreement between the Company
       and an Optionee evidencing the grant of an Option and setting forth the
       terms and conditions thereof.

              c.     "APPLICABLE LAWS" means the legal requirements relating to
       the administration of stock option plans, if any, under applicable
       provisions of federal securities laws, state corporate and securities
       laws, the Code, the rules of any applicable stock exchange or national
       market system, and the rules of any foreign jurisdiction applicable to
       Options granted to residents therein.

              d.     "BOARD" means the Board of Directors of the Company.

              e.     "CHANGE IN CAPITALIZATION" means any increase or reduction
       in the number of Shares, or any change (including, but not limited to, a
       change in value) or exchange of Shares for a different number or kind of
       shares or other securities of the Company, by reason of a
       reclassification, recapitalization, merger, consolidation,

<PAGE>   2

       reorganization, spin-off, split-up, issuance of warrants or rights or
       debentures, stock dividend, stock split, or reverse stock split, cash
       dividend, property dividend, combination or exchange of shares,
       repurchase of shares, public offering, private placement, change in
       corporate structure or otherwise, which in the judgment of the
       Compensation Committee is material or significant.

              f.     "CHANGE IN CONTROL" means any of the following events:

                     (i)    The acquisition (other than from the Company) by any
              "Person" (as the term is used for purposes of Sections 13(d) or
              14(d) of the Exchange Act) of beneficial ownership (within the
              meaning of Rule 13d-3 promulgated under the Exchange Act) of
              twenty percent (20%) or more of the combined voting power of the
              Company's then outstanding voting securities; or

                     (ii)   The individuals who, immediately after the 1998
              Annual Meeting of Stockholders of the Company are members of the
              Board (the "Incumbent Board"), cease for any reason to constitute
              at least a majority of the Board; provided, however, that if the
              election, or nomination for election by the Company's
              stockholders, of any new Director was approved by a vote of at
              least two-thirds of the Incumbent Board, such new Director shall,
              for purposes of this Agreement, be considered as a member of the
              Incumbent Board; or

                     (iii)  Approval by the stockholders of the Company of (a) a
              merger or consolidation involving the Company if the Company's
              stockholders, immediately before such merger or consolidation, do
              not, as a result of such merger or consolidation, own, directly or
              indirectly, more than seventy percent (70%) of the combined voting
              power of the then outstanding voting securities of the corporation
              resulting from such merger or consolidation in substantially the
              same proportion as their ownership of the combined voting power of
              the voting securities of the Company outstanding immediately
              before such merger or consolidation or (b) a complete liquidation
              or dissolution of the Company or an agreement for the sale or
              other disposition of all or substantially all of the assets of the
              Company.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
pursuant to clause (i) above solely because twenty percent (20%) or more of the
combined voting power of the Company's then outstanding securities is acquired
by (i) a trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Company or any Subsidiary or (ii) any
corporation which, immediately prior to such acquisition, is owned directly or
indirectly by the stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such acquisition.

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

                                       2
<PAGE>   3

              h.     "COMMITTEE" means a committee consisting of at least two
       (2) Disinterested Persons appointed by the Board to administer the Plan
       and to perform the functions set forth herein and which committee shall
       otherwise be constituted in such a manner as to satisfy the Applicable
       Laws and to permit grants of options and related transactions under the
       Plan to be exempt from Section 16(b) of the Exchange Act in accordance
       with Rule 16b-3.

              i.     "COMPANY" means Star Scientific, Inc., a Delaware
       corporation.

              j.     "CONSULTANT" means any person performing consulting or
       advisory services for the Company or any Subsidiary, with or without
       compensation, to whom the Company chooses to grant Nonqualified Stock
       Options in accordance with the Plan, provided that bona fide services
       must be rendered by such person and such services shall not be rendered
       in connection with the offer or sale of securities in a capital-raising
       transaction.

              k.     "DIRECTOR" means a member of the Board.

              l.     "DISINTERESTED PERSON" means a disinterested administrator
       with respect to the Company or any Subsidiary as described in Rule
       16b-3(b)(2) under the Exchange Act.

              m.     "DIVISION" means any of the operating units or Divisions of
       the Company designated as a Division by the Board.

              n.     "ELIGIBLE EMPLOYEE" means any officer or other designated
       employees of the Company or a Subsidiary designated by the Board as
       eligible to receive Options subject to the conditions set forth herein.

              o.     "EMPLOYEE" means an employee of the Company or any
       Subsidiary of the Company that adopts the Plan, as defined under Section
       3401(c) of the Code and regulations thereunder.

              p.     "EXCHANGE ACT" means the Securities Exchange Act of 1934,
       as amended.

              q.     "FAIR MARKET VALUE" means, as of any date, the value of the
       Shares.

                     (i)    Where there exists a public market for the Shares,
              the Fair Market Value shall be (A) the closing sales price for a
              Share for the last market trading day prior to the time of the
              determination (or, if no sales were reported on that date, on the
              last trading date on which sales were reported) on the stock
              exchange determined by the Board to be the primary market for the
              Common Stock or the Nasdaq National Market, whichever is
              applicable or (B) if the Common Stock is not traded on any such
              exchange or national market system, the average of the closing bid
              and asked

                                       3
<PAGE>   4

              prices of a Share on the Nasdaq SmallCap Market for the day prior
              to the time of the determination (or, if no such prices were
              reported on that date, on the last date on which such prices were
              reported), in each case, as reported in The Wall Street Journal or
              such other source as the Board deems reliable; or

                     (ii)   In the absence of an established market of the type
              described in (i), above, for the Shares, the Fair Market Value
              thereof shall be determined by the Board in good faith.

              r.     "NONQUALIFIED STOCK OPTION" means an Option which is not a
       Stock Option.

              s.     "OPTION" means a Stock Option, a Nonqualified Stock Option,
       or either or both of them.

              t.     "OPTIONEE" means a person to whom an Option has been
       granted under the Plan.

              u.     "SHARES" means the Common Stock, one cent ($.01) par value
       per share, of the Company (including any new, additional or different
       stock or securities resulting from a Change in Capitalization).

              v.     "STOCK OPTION" means an Option within the meaning of
       Section 422 of the Code.

              w.     "SUBSIDIARY" means any corporation in an unbroken chain of
       corporations, beginning with the Company, if each of the corporations,
       other than the last corporation in the unbroken chain, owns stock
       possessing fifty percent (50%) or more of the total combined voting power
       of all classes of stock in one of the other corporations in such chain.

              x.     "TEN PERCENT SHAREHOLDER" means an Eligible Employee, who,
       at the time a Stock Option is to be granted to such Eligible Employee,
       owns (within the meaning of Section 422(b)(6) of the Code) stock
       possessing more than ten percent (10%) of the total combined voting power
       of all classes of stock of the Company, or of a parent or a Subsidiary
       within the meaning of Section 422(b)(6) of the Code.

       3.     ADMINISTRATION

                                       4
<PAGE>   5

              a.     The Plan shall be administered by the Board. The Board may,
       to the fullest extent permitted by law, delegate any or all of its powers
       under the Plan to a Committee of two or more Directors each of whom is a
       Disinterested Person, and if a Committee is so appointed all references
       to the Board in the Plan shall mean and relate to such Committee. No
       member of the Board shall be personally liable for any action,
       determination or interpretation made in good faith with respect to the
       Plan, Agreements or Options, and all members of the Board shall be fully
       indemnified by the Company with respect to any such action, determination
       or interpretation.

              b.     Subject to the express terms and conditions set forth
       herein, the Board shall have the power from time to time to determine
       those Eligible Employees, nonemployee Directors or Consultants to whom
       Options shall be granted under the Plan, the number of Stock Options
       and/or Nonqualified Stock Options to be granted to each Eligible
       Employee, the number of Nonqualified Stock Options to be granted to each
       nonemployee Director or Consultant, and to prescribe the terms and
       conditions (which need not be identical) of each Option, including the
       purchase price per Share subject to each Option, and make any amendment
       or modification to any Agreement consistent with the terms of the Plan.

              c.     Subject to the express terms and conditions set forth
       herein, the Board shall have the power from time to time:

                     (i)    to construe and interpret the Plan and the Options
              granted thereunder and to establish, amend and revoke rules and
              regulations for the administration of the Plan, including, without
              limitation, correcting any defect or supplying any omission, or
              reconciling any inconsistency in the Plan or in any Agreement, in
              the manner and to the extent it shall deem necessary or advisable
              to make the Plan fully effective, and all decisions and
              determinations by the Board in the exercise of this power shall be
              final, binding and conclusive upon the Company, a Subsidiary, and
              the Optionees;

                     (ii)   to determine the duration and purposes for leave of
              absence which may be granted to an Optionee on an individual basis
              without constituting a termination of employment or service for
              purposes of the Plan;

                     (iii)  to exercise its discretion with respect to the
              powers and rights granted to it as set forth in the Plan; and

                     (iv)   generally, to exercise such powers and to perform
              such acts as are deemed necessary or advisable to promote the best
              interests of the Company with respect to the Plan.

       4.     STOCK SUBJECT TO PLAN.

                                       5
<PAGE>   6

              a.     The maximum number of Shares that may be issued or
       transferred pursuant to Options under the Plan is 4,000,000 Shares (or
       the number and kind of shares of stock or other securities to which such
       Shares are adjusted upon a Change in Capitalization pursuant to Section
       8) and the Company shall reserve for the purposes of the Plan, out of its
       authorized but unissued Shares or out of Shares held in the Company's
       treasury, or partly out of each, such number of Shares as shall be
       determined by the Board.

              b.     Whenever any outstanding Option or portion thereof expires,
       is canceled or is otherwise terminated for any reason (other than by
       exercise of the Option), the Shares allocable to the canceled or
       otherwise terminated portion of such Option may again be the subject of
       Options hereunder.

              c.     Whenever any Shares subject to an Option are forfeited for
       any reason pursuant to the terms of the Plan, such Shares may again be
       the subject of Options hereunder.

       5.     ELIGIBILITY. Subject to the provisions of the Plan, the Board
shall have full and final authority to select those Eligible Employees who will
receive Options and those nonemployee Directors and Consultants who will receive
Nonqualified Stock Options; provided, however, that no Eligible Employee shall
receive any Stock Options, unless such Eligible Employee is an employee of the
Company or a Subsidiary (within the meaning of Section 422 of the Code) at the
time the Stock Option is granted. Stock Options may be granted only to persons
who are Eligible Employees.

       6.     OPTIONS. The Board may grant Options in accordance with the Plan,
and the terms and conditions of the Option shall be set forth in an Agreement;
provided, however, no Eligible Employee shall receive in any fiscal year of the
Company options to purchase in excess of 1,000,000 Shares. Each Option and
Agreement shall be subject to the following conditions:

              a.     DESIGNATION OF OPTIONS. Each Option shall be designated as
       either a Stock Option or a Nonqualified Stock Option. However,
       notwithstanding such designation, to the extent that the aggregate Fair
       Market Value of Shares subject to Options designated as Stock Options
       which become exercisable for the first time by an Optionee during any
       calendar year (under all plans of the Company or Subsidiary) exceeds one
       hundred thousand dollars ($100,000), such excess Options, to the extent
       of the Shares covered thereby in excess of the foregoing limitation,
       shall be treated as Nonqualified Stock Options. For this purpose, Stock
       Options shall be taken into account in the order in which they were
       granted, and the Fair Market Value of the Shares shall be determined as
       of the date the Option with respect to such Shares is granted.

              b.     PURCHASE PRICE. The purchase price or the manner in which
       the purchase price is to be determined for Shares under each Option shall
       be set forth in the Agreement, provided that the purchase price per Share
       under each Stock Option shall not be less than (i) one hundred percent
       (100%) of the Fair Market Value of a Share at the time the Stock Option
       is granted, and (ii) one hundred ten percent (110%) in the case of a
       Stock Option granted to a Ten Percent Shareholder.

                                       6
<PAGE>   7

              c.     DURATION. Options granted hereunder shall be for such term
       as the Board shall determine, provided that no Stock Option shall be
       exercisable after the expiration of ten (10) years from the date it is
       granted (five (5) years in the case of a Stock Option granted to a Ten
       Percent Shareholder). The Board may, subsequent to the granting of any
       Option, extend the term thereof but in no event shall the term as so
       extended exceed the maximum term provided for in the preceding sentence.

              d.     NON-TRANSFERABILITY. Except as otherwise approved by the
       Board, during the life of the holder thereof an Option shall be
       exercisable only by or on behalf of such person and no Option granted
       under the Plan shall be assignable or transferable by the person to whom
       it is granted, either voluntarily or by operation of law, except by will
       or the laws of descent and distribution. An Option may be exercised
       during the lifetime of such Optionee only by the Optionee or, in the
       event that the Optionee is disabled, by such Optionee's guardian or legal
       representative. In addition, such Option may be exercised by the estate
       of the Optionee. The terms of such Option shall be final, binding and
       conclusive upon the beneficiaries, executors, administrators, heirs and
       successors of the Optionee.

              e.     VESTING. Subject to Section 6(j) hereof, each Option shall
       be exercisable in such installments (which need not be equal) and at such
       times as may be designated by the Board and set forth in the Agreement.
       To the extent not exercised, installments shall accumulate and be
       exercisable, in whole or in part, at any time after becoming exercisable,
       but not later than the date the Option expires. The Board may accelerate
       the exercisability of any Option or portion thereof at any time.

              f.     METHOD OF EXERCISE. The exercise of any Option shall be
       made only by a written notice delivered in person or by mail to the
       Secretary of the Company at the Company's principal executive office,
       specifying the number of Shares to be purchased and accompanied by
       payment therefor and otherwise in accordance with the Agreement pursuant
       to which the Option was granted. The purchase price for any Shares
       purchased pursuant to the exercise of an Option shall be paid in full
       upon such exercise, as determined by the Board. In addition to any other
       types of consideration the Board may determine, the Board is authorized
       to accept as consideration for Shares issued under the Plan the
       following: (i) cash; (ii) check; (iii) delivery of Optionee's promissory
       note with such recourse, interest, security, and redemption provisions as
       the Board determines as appropriate; (iv) surrender of Shares (including,
       withholding of Shares otherwise deliverable upon exercise of the Option)
       which have a Fair Market Value on the date of surrender equal to the
       aggregate exercise price of the Shares as to which said Option shall be
       exercised; or (v) any combinations of the foregoing. The written notice
       pursuant to this Section 6(f) may also provide instructions from the
       Optionee to the Company that upon receipt of the purchase price in cash
       from the Optionee's broker or dealer, designated as such on the written
       notice, in payment for any Shares purchased pursuant to the exercise of
       an Option, the Company shall issue such Shares directly to the designated
       broker or dealer. If requested by the Board, the Optionee shall deliver
       the Agreement evidencing the Option to the Secretary of the Company, who
       shall endorse thereon a notation of such exercise and return such
       Agreement

                                       7
<PAGE>   8

       to the Optionee. No fractional Shares shall be issued upon exercise of an
       Option, and the number of Shares that may be purchased upon exercise
       shall be rounded to the nearest number of whole Shares.

              g.     RIGHTS OF OPTIONEES. No Optionee shall be deemed for any
       purpose to be the owner of any Shares subject to any Option unless and
       until (i) the Option shall have been exercised pursuant to the terms
       thereof, (ii) the Company shall have issued and delivered the Shares to
       the Optionee, and (iii) the Optionee's name shall have been entered as a
       shareholder of record on the books of the Company. Thereupon, the
       Optionee shall have full voting, dividend and other ownership rights with
       respect to such Shares.

              h.     TERMINATION OF EMPLOYMENT OR SERVICE.

                     (i)    Termination of Employment or Service Other Than Upon
              Retirement In Good Standing, Disability or Death of Optionee. Upon
              termination of an Optionee's status as an Employee, Director or
              Consultant, other than upon the Optionee's retirement in good
              standing for reason of age, death or disability, the Optionee may
              exercise his or her Option within such period of time as is
              specified in the Agreement to the extent that the Option is vested
              on the date of termination (but in no event later than the
              expiration of the term of such Option as set forth in the
              Agreement). If, on the date of termination, the Optionee is not
              vested as to his or her entire Option, the Shares covered by the
              unvested portion of the Option shall revert to the Plan. If, after
              termination, the Optionee does not exercise his or her Option
              within the time specified in the Agreement, the Option shall
              terminate, and the Shares covered by such Option shall revert to
              the Plan.

                     (ii)   Retirement in Good Standing of Optionee. Upon
              termination of an Optionee's status as an Employee, Director or
              Consultant, as a result of retirement in good standing for reason
              of age but not due to disability, the Optionee may exercise his or
              her Option within such period of time as is specified in the
              Agreement, to the extent that the Option is vested on the date of
              termination (but in no event later than the expiration of the term
              of such Option as set forth in Option Agreement). If on the date
              of termination, the Optionee is not vested as to his or her entire
              Option, the Shares covered by the unvested portion shall revert to
              the Plan. If, after termination, the Optionee does not exercise
              his or her Option within the time specified in the Agreement, the
              Option shall terminate, and the Shares covered by such Option
              shall revert to the Plan.

                     (iii)  Disability of Optionee. If an Optionee's status as
              an Employee, Director or Consultant terminates as a result of the
              Optionee's disability, the Optionee may exercise his or her Option
              within such period of time as is specified in the Agreement, to
              the extent the Option is vested on the date of termination (but in
              no event later than the expiration date of the term of such Option
              as set forth in the Agreement). If such disability is not a
              "disability" as such term is defined in Section

                                       8
<PAGE>   9

              22(e)(3) of the Code, in the case of a Stock Option, such Stock
              Option shall automatically convert to a Nonqualified Stock Option
              on the day three (3) months and one (1) day following such
              termination. If, on the date of termination, the Optionee is not
              vested as to her or her entire Option, the Shares covered by the
              unvested portion of the Option shall revert to the Plan. If, after
              termination, the Option does not exercise his or her Option within
              the time specified in the Agreement, the Option shall terminate,
              and the Shares covered by such Option shall revert to the Plan.

                     (iv)   Death of Optionee. If an Optionee's status as an
              Employee, Director or Consultant terminates as a result of the
              death of the Optionee, the Option may be exercised at any time
              within such period of time as is specified in the Agreement, to
              the extent the Option is vested on the date of death (but in no
              event later than the expiration of the term of such Option as set
              forth in the Agreement). If, at the time of death, the Optionee is
              not vested as to his or her entire Option, the Shares covered by
              the unvested portion of the Option shall revert to the Plan. If
              the Option is not exercised within the time specified in the
              Agreement, the Option shall terminate, and the Shares covered by
              such Option shall revert to the Plan. The Option may be exercised
              by the executor or administrator of the Optionee's estate or, if
              none, by the person(s) entitled to exercise the Option under the
              Optionee's will or the laws of descent or distribution.

              i.     MODIFICATION OR SUBSTITUTION. Subject to the terms of the
       Plan, the Board may, in its discretion, modify outstanding Options or
       accept the surrender of outstanding Options (to the extent not exercised)
       and grant new Options in substitution for them. Notwithstanding the
       foregoing, no modification of an Option shall adversely alter or impair
       any rights or obligations under any Agreement without the Optionee's
       consent.

              j.     EFFECT OF CHANGE IN CONTROL. Notwithstanding anything
       contained in the Plan or any Agreement to the contrary, in the event of a
       Change in Control, all Options outstanding immediately prior to the
       specified effective date of such Change in Control shall become
       immediately and fully exercisable and all of the Shares at the time
       represented by such Options shall be released from any restrictions on
       transfer and repurchase or forfeiture rights and either (i) if and to the
       extent such Options are, in connection with such Change of Control,
       either to be assumed by the successor corporation or parent corporation
       thereof or to be replaced with comparable Options (as solely determined
       by the Board) with respect to shares of the capital stock of the
       successor corporation or parent corporation thereof, such assumption or
       replacement shall be binding on all Optionees, or (ii) in the event such
       successor corporation or parent corporation thereof shall refuse to
       assume or replace Options, an Optionee will be permitted to surrender for
       cancellation within sixty (60) days after such Change in Control any
       Option or portion of an Option to the extent not yet exercised, and the
       Optionee will be entitled to receive a cash payment in an amount equal to
       the excess, if any, of (x)(A) in the case of Nonqualified Stock Options,
       the greater of (1) the Fair Market Value, on the date preceding the date
       of surrender, of the Shares subject to the Option or

                                       9
<PAGE>   10

       portion thereof surrendered or (2) the Adjusted Fair Market Value of the
       Shares subject to the Option or portion thereof surrendered or (B) in the
       case of a Stock Option, the Fair Market Value, at the time of surrender,
       of the Shares subject to the Option or portion thereof surrendered, over
       (y) the aggregate purchase price for such Shares under the Option;
       provided, however, that in the case of an Option granted within six (6)
       months prior to the Change in Control to any Optionee who may be subject
       to liability under Section 16(b) of the Exchange Act, such Optionee shall
       be entitled to surrender for cancellation such Optionee's Option during
       the sixty (60) day period commencing upon the expiration of six (6)
       months from the date of grant of any such Option.

              k.     BUYOUT PROVISIONS. The Board may at any time offer to buy
       out for a payment in cash or Shares, an Option previously granted, based
       on such terms and conditions as the Board shall establish and communicate
       to the Optionee at the time that such offer is made.

       7.     ANNUAL AUTOMATIC AWARDS TO OUTSIDE DIRECTORS.

              a.     ANNUAL AUTOMATIC AWARDS OF NONQUALIFIED STOCK OPTIONS TO
       OUTSIDE DIRECTORS. Each non-employee director of the Company (each, an
       "Outside Director") shall be granted, upon his or her election as an
       Outside Director, Nonqualified Stock Options to purchase up to 50,000
       Shares.

              b.     TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS TO
       OUTSIDE DIRECTORS. Nonqualified Stock Options granted to Outside
       Directors pursuant to this Section 7 shall be exercisable over a two year
       period with respect to (i) 50% of the number of Shares originally
       underlying such Nonqualified Stock Option (or 25,000 Shares) after the
       first anniversary of the date of grant and (ii) the remaining 50% of the
       number of Shares originally underlying such Nonqualified Stock Option (or
       25,000 Shares) after the second anniversary of the date of grant, in each
       case at a purchase price equal to the Fair Market Value of the Shares on
       the date of grant. Each such Nonqualified Stock Option shall expire ten
       (10) years after the date of grant and shall be subject to earlier
       termination as provided in the Plan.

              c.     PLAN APPLICABLE. Except as modified by the preceding
       provisions of this Section 7, Nonqualified Stock Options granted to
       Outside Directors shall remain subject to all provisions of the Plan
       applicable to Options generally.

              d.     OTHER OUTSIDE DIRECTOR COMPENSATION. Nothing in this
       Section 7 shall preclude the payment by the Company to Outside Directors
       of any other form of compensation, including the granting of Options
       pursuant to other provisions of the Plan.

                                       10
<PAGE>   11

       8.     ADJUSTMENT UPON CHANGE IN CAPITALIZATION.

              a.     In the event of a Change in Capitalization, the Board shall
       conclusively determine the appropriate adjustments, if any, to the
       maximum number and class of Shares or other stock or securities with
       respect to which Options may be granted under the Plan, the number and
       class of Shares or other stock or securities which are subject to
       outstanding Options granted under the Plan, and the purchase price
       therefor, if applicable.

              b.     Any such adjustment in the Shares or other stock or
       securities subject to outstanding Stock Options (including any
       adjustments in the purchase price) shall be made in such manner as not to
       constitute a modification as defined by Section 424(h)(3) of the Code and
       only to the extent otherwise permitted by Sections 422 and 424 of the
       Code.

              c.     If, by reason of a Change in Capitalization, an Optionee
       shall be entitled to exercise an Option with respect to, new, additional
       or different shares of stock or securities (other than rights or warrants
       to purchase securities), such new, additional or different shares shall
       thereupon be subject to all of the conditions, restrictions and
       performance criteria which were applicable to the Shares subject to the
       Option prior to such Change in Capitalization.

       9.     EFFECT OF CERTAIN TRANSACTIONS. Subject to Section 6(j), in the
event of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), all Options issued hereunder
shall continue in effect in accordance with their respective terms and each
Optionee shall be entitled to receive in respect of each Share subject to any
outstanding Options, as the case may be, upon exercise of any Option, the same
number and kind of stock, securities, cash, property or other consideration that
each holder of a Share was otherwise entitled to receive in the Transaction in
respect of a Share.

       10.    RELEASE OF FINANCIAL INFORMATION. A copy of the Company's annual
report to stockholders shall be delivered to each Optionee at the time such
report is distributed to the Company's stockholders.

       11.    TERMINATION AND AMENDMENT OF THE PLAN.

              a.     The Plan shall terminate on September 1, 2008, and no
       Option may be granted thereafter. The Board may sooner terminate or amend
       the Plan (other than to reduce the rights of Optionees under Section
       6(j), at any time and from time to time; provided, however, that to the
       extent necessary under Section 16(b) of the Exchange Act and the rules
       and regulations promulgated thereunder, no amendment shall be effective
       unless approved by the stockholders of the Company in accordance with
       applicable law and regulations at an annual or special meeting held
       within twelve (12) months before or after the date of adoption of such
       amendment.

                                       11
<PAGE>   12

              b.     Except as provided in Sections 8 and 9 hereof, rights and
       obligations under any Option granted before any amendment of the Plan
       shall not be adversely altered or impaired by such amendment, except with
       the consent of the Optionee.

       12.    NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable.

       13.    LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:

              a.     give any person any right to be granted an Option other
       than at the sole discretion of the Board;

              b.     give any person any rights whatsoever with respect to
       Shares except as specifically provided in the Plan;

              c.     limit in any way the right of the Company to terminate the
       employment of any person at any time; or

              d.     be evidence of any agreement or understanding, expressed or
       implied, that the Company will employ any person in any particular
       position at any particular rate of compensation or for any particular
       period of time.

       14.    REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.

              a.     This Plan and the rights of all persons claiming hereunder
       shall be construed and determined in accordance with the laws of the
       State of Delaware without giving effect to the conflicts of laws
       principles thereof, except to the extent that such law is preempted by
       federal law.

              b.     The obligation of the Company to sell or deliver Shares
       with respect to Options granted under the Plan shall be subject to all
       applicable laws, rules and regulations, including all applicable federal
       and state securities laws, and the obtaining of all such approvals by
       governmental agencies as may be deemed necessary or appropriate by the
       Board.

              c.     The Plan is intended to comply with Rule 16b-3 promulgated
       under the Exchange Act, and the Board shall interpret and administer the
       provisions of the Plan or any Agreement in a manner consistent therewith.
       Any provisions inconsistent with such Rule shall be inoperative and shall
       not affect the validity of the Plan.

                                       12
<PAGE>   13

              d.     The Board may make such changes as may be necessary or
       appropriate to comply with the rules and regulations of any government
       authority or to obtain for Eligible Employees granted Stock Options the
       tax benefits under the applicable provisions of the Code and regulations
       promulgated thereunder.

              e.     Each Option is subject to the requirement that, if at any
       time the Board determines, in its discretion, that the listing,
       registration or qualification of Shares issuable pursuant to the Plan is
       required by any securities exchange or under any state or federal law, or
       the consent or approval of any governmental regulatory body is necessary
       or desirable as a condition of, or in connection with, the grant of an
       Option or the issuance of Shares, no Options shall be granted or payment
       made or Shares issued, in whole or in part, unless listing, registration,
       qualification, consent or approval has been effected or obtained free of
       any conditions as acceptable to the Board.

              f.     Notwithstanding anything contained in the Plan to the
       contrary, in the event that the disposition of Shares acquired pursuant
       to the Plan is not covered by a then current registration statement under
       the Securities Act of 1933, as amended (the "Act"), and is not otherwise
       exempt from such registration, such Shares shall be restricted against
       transfer to the extent required by the Act and Rule 144 or other
       regulations thereunder. The Board may require any individual receiving
       Shares pursuant to the Plan, as a condition precedent to receipt of such
       Shares (including upon exercise on an Option), to represent and warrant
       to the Company in writing, in addition to other applicable
       representations, that the Shares acquired by such individual are acquired
       without a view to any distribution thereof and will not be sold or
       transferred other than pursuant to an effective registration thereof
       under the Act or pursuant to an exemption applicable under the Act or the
       rules and regulations promulgated thereunder. The certificates evidencing
       any of such Shares shall be appropriately legended to reflect their
       status as restricted securities as aforesaid.

       15.    MISCELLANEOUS.

              a.     MULTIPLE AGREEMENTS. The terms of each Option may differ
       from other Options granted under the Plan at the same time, or at some
       other time. The Board may also grant more than one Option to a given
       Eligible Employee, nonemployee Director or Consultant during the term of
       the Plan, either in addition to, or in substitution for, one or more
       Options previously granted to that Eligible Employee, nonemployee
       Director or Consultant. The grant of multiple Options may be evidenced by
       a single Agreement or multiple Agreements, as determined by the Board.

              b.     WITHHOLDING OF TAXES.

                     (i)    The Company shall have the right to deduct from any
              distribution of cash to any Optionee an amount equal to the
              federal, state and local income taxes and other amounts as may be
              required by law to be withheld (the "Withholding Taxes") with
              respect to any Option. If an Optionee is entitled to receive
              Shares upon exercise

                                       13
<PAGE>   14

              of an Option, the Optionee shall pay the Withholding Taxes to the
              Company prior to the issuance or release from escrow of such
              Shares. In satisfaction of the Withholding Taxes to the Company,
              the Optionee may make a written election (the "Tax Election"),
              which may be accepted or rejected in the discretion of the Board,
              to have withheld a portion of the Shares issuable to such Optionee
              upon exercise of the Option having an aggregate Fair Market Value
              equal to the Withholding Taxes, provided that: (i) in respect of
              an Optionee who may be subject to liability under Section 16(b) of
              the Exchange Act (unless such Optionee's employment was terminated
              due to disability or death), the Tax Election is made either at
              least six (6) months prior to the date that the amount of the
              Withholding Taxes are determined (the "Tax Date") or during the
              ten (10) day period beginning on the third (3rd) business day and
              ending on the twelfth (12th) business day following the release
              for publication of the Company's quarterly or annual statements of
              earnings, (ii) the Tax Election is made prior to the Tax Date, and
              (iii) the Tax Election is irrevocable; provided, however, in the
              event that the Tax Date occurs subsequent to the exercise of the
              Option or issuance of Shares, the Optionee shall tender back to
              the Company on the Tax Date that number of Shares having a Fair
              Market Value on the date preceding the Tax Date at least equal to
              the Withholding Taxes.

                     (ii)   If an Optionee makes a disposition, within the
              meaning of Section 424(c) of the Code and regulations promulgated
              thereunder, of any Share or Shares issued to Optionee pursuant to
              Optionee's exercise of an Option within the two (2) year period
              commencing on the day after the date of the grant or within the
              one (1) year period commencing on the day after the date of
              transfer of such Share or Shares to the Optionee pursuant to such
              exercise, the Optionee shall, within ten (10) days of such
              disposition, notify the Company thereof, by delivery of written
              notice to the Company at its principal executive office, and
              immediately deliver to the Company the amount of Withholding
              Taxes.

              c.     DESIGNATION OF BENEFICIARY. Each Optionee may designate a
       person or persons to receive, in the event of such Optionee's death, any
       Option or any amount payable pursuant thereto, to which such Optionee
       would then be entitled. Such designation will be made upon forms supplied
       by and delivered to the Company and may be revoked in writing. If an
       Optionee fails effectively to designate a beneficiary, then such
       Optionee's estate will be deemed to be the beneficiary.

       16.    EFFECTIVE DATE. The effective date of the Plan shall be June 29,
1998.

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