Document:

SECOND LEASE MODIFICATION AND
                          -----------------------------
                               EXTENSION AGREEMENT
                               -------------------

                  SECOND  LEASE  MODIFICATION  AND  EXTENSION  AGREEMENT  ("this
Second  Amendment") made as of this 29th day of June, 2000,  between ONE STATION
PLACE, LIMITED PARTNERSHIP, a Connecticut limited partnership with an office c/o
W&M Properties of Connecticut,  Inc., One Station Place,  Stamford,  Connecticut
06902  (hereinafter  called  "Landlord"),  and SMARTSERV ONLINE,  INC. (formerly
known as SmartPhone Communications, Inc.), a Delaware corporation with an office
at One Station Place, Stamford, Connecticut 06902 ("Tenant")

                               W I T N E S S T H:
                               - - - - - - - - -

                  Landlord and Tenant are the landlord and tenant, respectively,
under a certain Lease dated as of March 4, 1994 as amended by that certain Lease
Modification  and Extension  Agreement  dated as of February 6, 1996 (the "First
Amendment")  (together,  the "Lease"),  which Lease covers 6,306 rentable square
feet of space (the  "Existing  Space") on the fifth (5th) floor in the  building
known  as  Metro  Center,  One  Station  Place,  Stamford,   Connecticut,   (the
"Building"),

                  The Lease term is currently scheduled to expire on October 31,
2002.

                  The  parties  hereto  wish to extend the term of the Lease and
amend the Lease so as to add to the Existing Space two units  aggregating  4,127
rentable  square feet of space located on the first (1st) floor of the Building,
as more  particularly  shown on the floor plan attached as Schedule I hereto and
made a part hereof.  One such unit comprises  2,200 rentable  square feet and is
shown as outlined in red on  Schedule I (the "First  Additional  Space") and the
second such unit consists of 1,927 rentable square feet and is shown as outlined
in blue on Schedule I (the "Second Additional Space").

                  In connection with the leasing of such units, the parties have
agreed to make various modifications to the Lease, as hereinafter set forth:

                  NOW, THEREFORE, in consideration of the mutual premises herein
contained,  and for other good and valuable consideration,  the receipt of which
is hereby acknowledged, the parties hereto agree that the Lease be, and that the
same hereby is modified and amended as follows:

                  1. In modification of the  "WITNESSETH"  section of the Lease,
the term of the Lease is hereby extended  through October 31, 2010 or until such
term shall  sooner cease and  terminate  as  elsewhere  provided in the Lease as
modified by this Second Amendment.

                  2. In  modification  of Exhibit  A-2 and  Section  1.06 of the
Lease of March 4,  1994 and  Section  2 of the First  Amendment,  the  following
provisions shall apply:

<PAGE>

                  (i)  Commencing  on the  earlier of (a) August 1, 2000 and (b)
the date that Tenant  accepts  possession  of the First  Additional  Space (such
earlier date being the "First Additional Space Commencement  Date"), the demised
premises shall be deemed to consist of 8,506 rentable  square feet and the First
Additional  Space shall be deemed part of the demised  premises for all purposes
under the Lease.

                  (ii)  Commencing on the earlier of (a) October 1, 2000 and (b)
the date that Tenant  accepts  possession of the Second  Additional  Space (such
earlier date being the "Second Additional Space Commencement Date"), the demised
premises  shall be deemed to  consist  of 10,433  rentable  square  feet and the
Second  Additional  Space shall be deemed part of the demised  premises  for all
purposes under the Lease.

                  Landlord shall, in accordance with the foregoing,  fix each of
the  First  Additional  Space  Commencement  Date and  Second  Additional  Space
Commencement  Date (each an  "Additional  Space  Commencement  Date") and notify
Tenant of the dates so fixed. When each such Additional Space  Commencement Date
has so been  determined,  the  parties  hereto  shall,  within  thirty (30) days
thereafter,  at Landlord's request,  execute a written agreement confirming such
date as the relevant  Additional  Space  Commencement  Date.  Any failure of the
parties to execute  such  written  agreement  shall not affect the  validity  of
either the First Additional Space  Commencement  Date or Second Additional Space
Commencement Date as fixed and determined by Landlord, as aforesaid.

                  3. In  modification  of Section  1.01 of the  Lease,  from and
after the date of this  Second  Amendment,  the  fixed  annual  rent  (excluding
electricity) for the demised premises shall be:

                     (i) with respect to the Existing Space:

                         (a)  from  the date of this  Second  Amendment  through
                  October 31,  2002,  at the rates set forth in Section 3 of the
                  First Amendment;

                         (b) from November 1, 2002 through October 31, 2003, the
                  sum of $245,934.00 per annum;

                         (c) from November 1, 2003 through October 31, 2004, the
                  sum of $252,240.00 per annum;

                         (d) from November 1, 2004 through October 31, 2005, the
                  sum of $258,546.00 per annum;

                         (e) from November 1, 2005 through October 31, 2006, the
                  sum of $264,852.00 per annum;

                         (f) from November 1, 2006 through October 31, 2007, the
                  sum of $271,158.00 per annum;

                         (g) from November 1, 2007 through October 31, 2008, the
                  sum of $277,464.00 per annum;

                                      -2-
<PAGE>

                         (h) from November 1, 2008 through October 31, 2009, the
                  sum of $283,770.00 per annum; and

                         (i) from November 1, 2009 through October 31, 2010, the
                  sum of $290,076.00 per annum.

                     (ii) with respect to the First Additional Space:

                         (a) from the First Additional Space  Commencement  Date
                  through July 31, 2001,  the sum of $83,600.00  per annum,  the
                  first  monthly  installment  of which is being  paid  upon the
                  execution hereof;

                         (b) from August 1, 2001 through July 31, 2002,  the sum
                  of $85,800.00 per annum;

                         (c) from August 1, 2002 through July 31, 2003,  the sum
                  of $88,000.00 per annum;

                         (d) from August 1, 2003 through July 31, 2004,  the sum
                  of $90,200.00 per annum;

                         (e) from August 1, 2004 through July 31, 2005,  the sum
                  of $92,400.00 per annum;

                         (f) from August 1, 2005 through July 31, 2006,  the sum
                  of $94,600.00 per annum;

                         (g) from August 1, 2006 through July 31, 2007,  the sum
                  of $96,800.00 per annum;

                         (h) from August 1, 2007 through July 31, 2008,  the sum
                  of $99,000.00 per annum;

                         (i) from August 1, 2008 through July 31, 2009,  the sum
                  of $101,200.00 per annum;

                         (j) from August 1, 2009 through July 31, 2010,  the sum
                  of $103,400.00 per annum; and

                         (k) from August 1, 2010 through  October 31, 2010,  the
                  sum of $26,400.00 for all three months.

                     (iii) with respect to the Second Additional Space:

                         (a) from the Second Additional Space  Commencement Date
                  through  September 30, 2001,  the sum of $73,226.00 per annum,
                  the first monthly  installment of which is being paid upon the
                  execution hereof;

                                      -3-
<PAGE>

                         (b) from  October 1, 2001 through  September  30, 2002,
                  the sum of $75,153.00 per annum;

                         (c) from  October 1, 2002 through  September  30, 2003,
                  the sum of $77,080.00 per annum;

                         (d) from  October 1, 2003 through  September  30, 2004,
                  the sum of $79,007.00 per annum;

                         (e) from  October 1, 2004 through  September  30, 2005,
                  the sum of $80,934.00 per annum;

                         (f) from  October 1, 2005 through  September  30, 2006,
                  the sum of $82,861.00 per annum;

                         (g) from  October 1, 2006 through  September  30, 2007,
                  the sum of $84,788.00 per annum;

                         (h) from  October 1, 2007 through  September  30, 2008,
                  the sum of $86,715.00 per annum;

                         (i) from  October 1, 2008 through  September  30, 2009,
                  the sum of $88,642.00 per annum;

                         (j) from  October 1, 2009 through  September  30, 2010,
                  the sum of $90,569.00 per annum; and

                         (k) from October 1, 2010 through  October 31, 2010, the
                  sum of $7,708.00.

                  4. Notwithstanding  anything herein set forth to the contrary,
if Landlord shall fail to tender possession of the First Additional Space or the
Second Additional Space by the relevant Additional Space Commencement Date, then
Tenant  shall  receive a credit of one (1) day's fixed  annual rent for each day
that such tendering of possession is so delayed.

                  5.  Section 4 of the First  Amendment  shall be of no force or
effect from and after November 1, 2002.

                  6. In  modification  of Section  4.03 of the  Lease,  from and
after the Second Additional Space Commencement Date, so long as Tenant is not in
default beyond any grace period under the terms, covenants and conditions of the
Lease,  as hereby  amended,  Landlord  will  provide  Tenant  with access to the
parking area for the parking of an aggregate of twenty-six  (26)  automobiles at
no charge.  Two (2) of said parking spaces shall be marked reserved for Tenant's
exclusive use.

                  7.  Article 5 of the Lease shall  apply to the entire  demised
premises  throughout  the term with the  following  modifications  to apply,  as
follows:

                                      -4-
<PAGE>

                     (i) With  respect  to the  First  Additional  Space and the
Second Additional Space:

                         (a) the "Tax Base  Factor"  shall mean the real  estate
                  taxes for the period  beginning  on July 1, 2000 and ending on
                  June 30, 2001; and

                         (b) the term  "comparative  year" shall mean the fiscal
                  (tax) year  commencing  July 1, 2001 and ending  June 30 2002,
                  and each  subsequent  period of twelve  months,  or such other
                  period of twelve  months as  hereafter  may be  adopted by the
                  governmental  authority  as the  fiscal  (tax)  year  for real
                  estate tax purposes.

                     (ii)  With  respect  to  the  First  Additional  Space  The
Percentage shall be deemed to be .79%.

                     (iii)  With  respect  to the  Second  Additional  Space The
Percentage shall be deemed to be .69%.

                     (iv) With  respect to the  Existing  Space,  commencing  on
November 1, 2002, The Percentage shall remain unchanged and:

                         (a) the "Tax Base  Factor"  shall mean the real  estate
                  taxes for the period  beginning  on July 1, 2000 and ending on
                  June 30, 2001; and

                         (b) the term  "comparative  year" shall mean the fiscal
                  (tax) year  commencing  July 1, 2001 and ending  June 30 2002,
                  and each  subsequent  period of twelve  months,  or such other
                  period of twelve  months as  hereafter  may be  adopted by the
                  governmental  authority  as the  fiscal  (tax)  year  for real
                  estate tax purposes.

                  8.  Article 6 of the Lease shall  apply to the entire  demised
premises  throughout  the term with the  following  modifications  to apply,  as
follows:

                     (i) With  respect  to the  First  Additional  Space and the
Second Additional Space:

                         (a) the "Expense  Base Factor"  shall mean the expenses
                  for the calendar year 2000; and

                         (b) the term "comparative year" shall mean the calendar
                  year 2001 and each subsequent period of twelve months.

                     (ii)  With  respect  to  the  First  Additional  Space  The
Percentage shall be deemed to be .79%.

                     (iii)  With  respect  to the  Second  Additional  Space The
Percentage shall be deemed to be .69%.

                                      -5-
<PAGE>

                     (iv) With  respect to the  Existing  Space,  commencing  on
November 1, 2002, The Percentage shall remain unchanged and:

                         (a) the "Expense  Base Factor"  shall mean the expenses
                  for the calendar year 2000; and

                         (b) the term "comparative year" shall mean the calendar
                  year 2001 and each subsequent period of twelve months.

                  9.  Article  7 shall  apply  to the  entire  demised  premises
throughout the term. In  modification  of Article 7 of the Lease  (Electricity),
effective  as of each of the  First and  Second  Additional  Space  Commencement
Dates, ERIF shall also be charged with respect to the First Additional Space and
Second Additional Space at an initial rate of $2.19 per rentable square foot.

                  10. Tenant agrees to accept possession of the First Additional
Space in its "as is" condition on the First Additional Space  Commencement Date.
The  Existing  Space shall be accepted in its "as is"  condition  on November 1,
2002.  Landlord  shall have no obligation to perform any work or contribute  any
moneys for work or  installations  in either of such premises.  Tenant agrees to
accept possession of the Second Additional Space in its "as is" condition on the
Second Additional Space Commencement Date.  Landlord shall have no obligation to
perform  any work or  contribute  any  moneys for work or  installations  in the
Second  Additional  Premises,  except as  provided  in Section 11 of this Second
Amendment.

                  11. Article 33 is hereby deleted from the Lease. Provided that
Tenant  shall  not  then be in  default  of any  obligations  on its  part to be
performed  under  the  Lease,   Landlord  shall   contribute  up  to  $14,452.50
("Landlord's Contribution") for such leasehold improvements as Tenant may desire
to make to the Second  Additional  Space,  only, and further  provided that such
leasehold  improvements  are performed in accordance  with terms of Article 8 of
the Lease.  Landlord's  Contribution  shall be paid to the  general  contractor.
Tenant agrees to be responsible for and to pay all costs in excess of Landlord's
Contribution  for all such work and the entire cost of such work not included in
Landlord's  Contribution  shall be  payable  fifteen  (15)  business  days after
demand.  Landlord and Tenant agree that the general contractor for all such work
shall be W & M  Construction  Corporation.  The cost of such work shall include,
without limitation,  the costs of labor, materials and general conditions,  plus
ten percent  (10%) of the cost of such work for overhead and seven  percent (7%)
of the cost of such work (including overhead) for profit.

                  12. Tenant  represents and warrants that it neither  consulted
nor negotiated with any broker or finder with regard to this Second Amendment of
the  leasing  of the First or  Second  Additional  Space  other  than  Cushman &
Wakefield of CT., Inc. and W&M Properties of Connecticut,  Inc. Tenant agrees to
indemnify,  defend and save  Landlord  harmless  from and against any claims for
fees or commissions by anyone with whom Tenant has dealt in connection with this
Second Amendment  and/or the leasing of the First or Second  Additional Space or
otherwise  in  connection  with  this  Second  Amendment  other  than  Cushman &
Wakefield of CT., Inc. and W&M Properties of Connecticut,  Inc.  Landlord agrees
to pay any  commission  or fee due to Cushman & Wakefield  of CT.  Inc.  and W&M
Properties of  Connecticut,  Inc. for leasing

                                      -6-
<PAGE>

of the First or Second Additional Space and for the extension of the term of the
Lease pursuant to separate agreement.

                  13.  Each party  hereby  represents  that,  to the best of its
knowledge,  the other party is in full  compliance  with the Lease and is not in
default of any of its respective obligations under the Lease.

                  14. In further modification of the second paragraph of Article
35 of the Lease as modified by the First  Amendment,  the security deposit shall
be  increased  as  of  the  date  hereof  by  $131,548.13  to  an  aggregate  of
$202,490.63. If said increase is to be accounted for by a letter of credit, then
the letter of credit  heretofore  delivered  to Landlord  as security  under the
Lease shall be likewise  increased  and its expiry date shall be extended  until
November  30,  2010.  An  endorsement  to said letter of credit  effecting  such
modifications is being delivered simultaneously herewith to Landlord.

                  15.  Article 50 and  Article 51 are  hereby  deleted  from the
Lease.

                  16.  Tenant  shall  have a right  that may be  exercised  once
during  each of the  first  five (5)  calendar  years  from and  after the first
additional space commencement date to notify Landlord,  in writing,  that Tenant
desires  to  lease  additional  first  or  fifth  floor  space  adjacent  to and
contiguous  with any  portion of the demised  premises  (also  specifying  which
portion). If, after receipt of such Tenant's notice, any such space shall during
such calendar year become vacant and available for leasing (i.e., not then under
offer to a  proposed  tenant or subject to the  renewal or  expansion  option of
another tenant or subject to the right or privilege of any then existing tenant,
subtenant  or other  occupant to renew and extend its  occupancy of such space),
then provided  that Tenant is not then in default of any  obligation on its part
to be performed  under the Lease as amended by this Second  Amendment,  Landlord
shall notify  Tenant of the  availability  of such space for leasing.  If Tenant
shall notify Landlord within five (5) business days after Landlord's notice that
Tenant is interested in leasing such available  space,  then Landlord and Tenant
shall  negotiate  for not more  than ten (10) days the terms of a lease for such
available  space.  The  terms of lease  for such  available  space  shall not be
dependent  upon the terms or the form of the  Lease as  amended  by this  Second
Amendment.  If (i) Tenant  shall not have  timely  given any  notice  heretofore
referred to in this  Section 16 or (ii) if Landlord and Tenant have not executed
a lease for such  available  space  within  ten day  period,  time  being of the
essence with respect to all time periods,  then Landlord  shall be free to enter
into a lease of such  available  space with any other  person upon such terms as
Landlord in its absolute discretion may find acceptable.  The provisions of this
Section 16 are personal to the named Tenant herein and may not be assigned to or
exercised by any other person. Nothing herein shall be deemed to limit, restrict
or prohibit Landlord from granting any tenant an option to renew the term of its
lease or a right of first refusal or right of offer or option to match any offer
for such space (including,  without limitation,  any offer made pursuant to this
Section 16).  Notwithstanding  anything  heretofore  set forth to the  contrary,
space shall not be deemed to have become  available  for leasing if Landlord and
the then current or proposed new tenant, subtenant or other occupant of any such
space are negotiating the terms of a new or renewal lease for such space.

                  17. The demised  premises are deemed to be one unit consisting
of the Existing  Space,  the First  Additional  Space and the Second  Additional
Space and neither the separate

                                      -7-
<PAGE>

payment  schedules for the Existing  Space,  First  Additional  Space and Second
Additional  Space nor the fact that the  demised  premises  shall be  located on
non-contiguous  floors shall give rise to a claim that the demised  premises are
not one unit for the purposes of the Lease or that a default in paying rent with
regard to any such space is not a default under the Lease as to the whole of the
demised premises.

                  18. Except as herein modified, all of the terms, covenants and
conditions  of the  lease  are and shall  remain  in full  force and are  hereby
ratified and confirmed.

                  19.  All terms  used but not  defined  herein  shall  have the
meanings set forth in the Lease.

                  20.  The   provisions  of  the   WITNESSETH   paragraphs   are
incorporated  into the body of this Second  Amendment  and  Landlord  and Tenant
shall be bound by such provisions.

                  21. This Second  Amendment  shall be binding upon and inure to
the benefit of the parties hereto and their  respective  legal  representatives,
successors and permitted assigns.

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the day and year first above written.

                                  ONE STATION PLACE, LIMITED PARTNERSHIP,
                                  Landlord

WITNESS:                          By: W&M Properties of Connecticut, Inc., Agent

                                         By: /s/ Jeffrey H. Newman
-------------------------------             -------------------------------
(as to Landlord)                            Name: Jeffrey H. Newman,
                                            Title: Executive Vice President

                                         SMARTSERV ONLINE, INC.,
                                         Tenant

                                         By: /s/ Thomas W. Haller
-------------------------------             -------------------------------
(as to Tenant)                              Name: Thomas W. Haller
                                            Title: Vice President, Chief
                                                    Accounting Officer

                                      -8-
<PAGE>

STATE OF CONNECTICUT                }
                                    }        ss:
COUNTY OF FAIRFIELD                 }

                  On this ___ day of July, 2000, before me, personally  appeared
Jeffrey H. Newman,  who acknowledged  himself to be the Executive Vice President
of W&M Properties of Connecticut, Inc., a Connecticut corporation, Agent for ONE
STATION PLACE, LIMITED PARTNERSHIP, a Connecticut partnership, and that he being
authorized to do so, executed the foregoing  instrument for the purposes therein
contained by signing as such officer of W&M Properties of Connecticut,  Inc., as
agent for and on behalf of said Partnership.

                  IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                  -------------------------------
                                  Notary Public

                                  My Commission Expires:
                                                        --------

STATE OF CONNECTICUT                }
                                    }        ss:
COUNTY OF FAIRFIELD                 }

                  On this ___ day of June, 2000, before me, personally appeared
,  who  acknowledged  himself  to be  of  SMARTSERV  ONLINE,  INC.,  a  Delaware
corporation,  and that he/she being  authorized so to do, executed the foregoing
instrument  for the  purposes  therein  contained  by  signing on behalf of said
_______________ and that he/she as such ________________, being authorized so to
do,  executed the foregoing  instrument  for the purposes  therein  contained by
signing on behalf of said corporation as ____________________.

                  IN WITNESS WHEREOF, I hereunto set my hand and official seal.

                                  -------------------------------
                                  Notary Public

                                  My Commission Expires:
                                                        --------

                                      -9-2000 STOCK OPTION PLAN

                                       OF

                             SMARTSERV ONLINE, INC.

1.  PURPOSES OF THE PLAN.  This stock  option  plan (the  "Plan") is designed to
provide an incentive to key employees  (including directors and officers who are
key  employees)  and to  consultants  and  directors  who are not  employees  of
SmartServ Online,  Inc., a Delaware  corporation (the "Company"),  or any of its
Subsidiaries (as defined in Paragraph 19), and to offer an additional inducement
in obtaining  the services of such  persons.  The Plan provides for the grant of
nonqualified  stock options which do not qualify as  "incentive  stock  options"
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code").

2. STOCK  SUBJECT TO THE PLAN.  Subject to the  provisions  of Paragraph 12, the
aggregate  number of shares of common  stock,  $.01 par value per share,  of the
Company  ("Common  Stock") for which options may be granted under the Plan shall
not exceed  750,000.  Such shares of Common Stock may, in the  discretion of the
Board of Directors of the Company (the "Board of Directors"),  consist either in
whole or in part of authorized but unissued  shares of Common Stock or shares of
Common Stock held in the treasury of the Company.  Subject to the  provisions of
Paragraph  13, any  shares of Common  Stock  subject  to an option  that for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be  exercisable  shall  again  become  available  for the  granting of
options  under the Plan.  The Company  shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.

3.  ADMINISTRATION OF THE PLAN. The Plan shall be administered by a committee of
the  Board of  Directors  (the  "Committee")  consisting  of not  less  than two
directors;   provided,  however,  that,  with  respect  to  options  granted  to
Non-Employee  Directors  (as  defined  in  Paragraph  19),  the  Plan  shall  be
administered  by the Board of Directors (any  reference  herein to the Committee
shall refer to Board of Directors  where the context so  requires).  During such
time as the Company has a class of equity securities registered under Section 12
of the Securities  Exchange Act of 1934, as amended (the "Act"),  each member of
the  Committee  shall be a  "non-employee  director"  within the meaning of Rule
16b-3 (as the same may be in effect  and  interpreted  from time to time,  "Rule
16b-3").  A majority of the members of the Committee shall  constitute a quorum,
and the acts of a majority  of the  members  present  at any  meeting at which a
quorum is present,  and any acts  approved  in writing by all members  without a
meeting, shall be the acts of the Committee.

         Subject to the express provisions of the Plan, the Committee shall have
the  authority,  in its sole  discretion:  to determine  those key employees who
shall be granted  options,  the consultants who shall be granted options and the
Non-Employee  Directors  who shall be granted  options;  the times when  options
shall be  granted;  the  number of shares of Common  Stock to be subject to each
option; the term of each option; the date each option shall become  exercisable;
whether an option shall be exercisable in whole, in part or in installments and,
if in  installments,  the number of shares of Common Stock to be subject to each
installment,  whether

<PAGE>

the installments  shall be cumulative,  the date each  installment  shall become
exercisable and the term of each installment;  whether to accelerate the date of
exercise of any option or  installment;  whether  shares of Common  Stock may be
issued upon the  exercise of an option as partly paid and, if so, the dates when
future  installments  of the exercise  price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the
exercise price;  whether to restrict the sale or other disposition of the shares
of Common Stock  acquired upon the exercise of an option and, if so,  whether to
waive any such  restriction;  whether  to  subject  the  exercise  of all or any
portion of an option to the  fulfillment  of  contingencies  as specified in the
contract  referred  to in  Paragraph  11  (the  "Contract"),  including  without
limitation,  contingencies  relating to entering  into a covenant not to compete
with the Company,  any of its  Subsidiaries or a Parent (as defined in Paragraph
19), to financial  objectives  for the  Company,  any of its  Subsidiaries  or a
Parent,  a division of any of the foregoing,  a product line or other  category,
and/or the period of continued  employment of the optionee with the Company, any
of its  Subsidiaries or a Parent,  and to determine  whether such  contingencies
have been met; whether an optionee is Disabled (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the Company's  obligation to withhold taxes
or other amounts;  the fair market value of a share of Common Stock; to construe
the  respective  Contracts and the Plan;  with the consent of the  optionee,  to
cancel or modify an option,  provided,  that the modified provision is permitted
to be  included  in an  option  granted  under  the  Plan  on  the  date  of the
modification;  to prescribe, amend and rescind rules and regulations relating to
the Plan; to approve any provision  which under Rule 16b-3 requires  approval by
the Board of Directors of the Company, a committee of Non-Employee  Directors or
the  stockholders  of the Company in order to be exempt under Rule 16b-3 (unless
otherwise  specifically  provided herein);  and to make all other determinations
necessary or advisable for  administering  the Plan.  Any  controversy  or claim
arising out of or relating to the Plan, any option granted under the Plan or any
Contract  shall  be  determined  unilaterally  by  the  Committee  in  its  sole
discretion.  The  determinations  of the Committee on the matters referred to in
this  Paragraph 3 shall be conclusive  and binding on the parties.  No member or
former member of the Committee shall be liable for any action, failure to act or
determination  made  in good  faith  with  respect  to the  Plan  or any  option
hereunder.

4.  ELIGIBILITY;  GRANTS.  The  Committee  may from  time to  time,  in its sole
discretion,  consistent  with the  purposes  of the Plan,  grant  options to key
employees (including officers and directors who are key employees),  consultants
and  Non-Employee  Directors  of the  Company or any of its  Subsidiaries.  Such
options  granted  shall  cover  such  number of  shares  of Common  Stock as the
Committee may determine,  in its sole discretion;  provided,  however,  that the
maximum  number of shares  subject  to  options  that may be  granted to any key
employee  during any calendar year under the Plan (the "162(m)  Maximum")  shall
not exceed 125,000 shares.

5. EXERCISE  PRICE.  The exercise price of the shares of Common Stock under each
option shall be determined by the Committee in its sole discretion.

         The fair  market  value of a share of Common  Stock on any day shall be
(a) if the  principal  market  for the  Common  Stock is a  national  securities
exchange, the average of the highest and lowest sales prices per share of Common
Stock on such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange,  (b) if the principal market for the Common Stock
is not a national  securities  exchange  and the  Common  Stock is

                                      -2-

<PAGE>

quoted on The Nasdaq  Stock  Market  ("Nasdaq"),  and (i) if actual  sales price
information  is available  with respect to the Common Stock,  the average of the
highest and lowest sales prices per share of Common Stock on such day on Nasdaq,
or (ii) if such information is not available, the average of the highest bid and
lowest asked  prices per share of Common Stock on such day on Nasdaq,  or (c) if
the principal market for the Common Stock is not a national  securities exchange
and the Common Stock is not quoted on Nasdaq, the average of the highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin  Board  Service or by  National  Quotation  Bureau,  Incorporated  or a
comparable service; provided,  however, that if clauses (a), (b) and (c) of this
Paragraph are all inapplicable,  or if no trades have been made or no quotes are
available  for such day,  the fair  market  value of the Common  Stock  shall be
determined by the Board by any method  consistent  with  applicable  regulations
adopted by the Treasury Department relating to stock options.

6. TERM. The term of each option granted pursuant to the Plan shall be such term
as is established by the Committee, in its sole discretion.

7. EXERCISE.  An option (or any part or installment thereof), to the extent then
exercisable,  shall be exercised by giving  written notice to the Company at its
principal office stating which option is being exercised,  specifying the number
of  shares of  Common  Stock as to which  such  option  is being  exercised  and
accompanied  by payment in full of the aggregate  exercise price therefor (a) in
cash or by  certified  check or (b) if the  applicable  Contract  permits,  with
previously acquired shares of Common Stock having an aggregate fair market value
on the date of exercise (determined in accordance with Paragraph 5) equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash,  certified  check or shares of Common  Stock.  The Company shall not be
required to issue any shares of Common  Stock  pursuant to any such option until
all required payments, including any required withholding, have been made.

         The  Committee  may,  in its sole  discretion,  permit  payment  of the
exercise  price of an option by delivery by the optionee of a properly  executed
notice,  together  with  a copy  of his  irrevocable  instructions  to a  broker
acceptable  to the  Committee  to deliver  promptly to the Company the amount of
sale or loan  proceeds  sufficient  to pay such  exercise  price.  In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.

         A person  entitled  to receive  Common  Stock upon the  exercise  of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock  certificate  to him for such
shares;  provided,  however,  that until such stock  certificate is issued,  any
optionee  using  previously  acquired  shares of Common  Stock in  payment of an
option  exercise price shall  continue to have the rights of a stockholder  with
respect to such previously acquired shares.

         In no case may a fraction of a share of Common  Stock be  purchased  or
issued under the Plan.

8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly provided in
the applicable  Contract,  any option granted to an employee or consultant whose

                                      -3-

<PAGE>

relationship  with the Company,  its Parent and  Subsidiaries has terminated for
any reason  (other than as a result of the death or  Disability of the optionee)
may  exercise  such  option,  to the  extent  exercisable  on the  date  of such
termination, at any time within three months after the date of termination,  but
not  thereafter  and in no event after the date the option would  otherwise have
expired;  provided,  however, that if such relationship is terminated either (a)
for  cause,  or (b)  without  the  consent of the  Company,  such  option  shall
terminate immediately.

         For the  purposes  of the Plan,  an  employment  relationship  shall be
deemed to exist between an individual  and a corporation  if, at the time of the
determination,  the individual was an employee of such  corporation for purposes
of Section  422(a) of the Code. As a result,  an  individual  on military,  sick
leave or other bona fide leave of absence  shall  continue to be  considered  an
employee  for  purposes of the Plan during such leave if the period of the leave
does not exceed 90 days,  or, if longer,  so long as the  individual's  right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute  or by  contract.  If the  period  of  leave  exceeds  90  days  and the
individual's right to re-employment is not guaranteed by statute or by contract,
the employment  relationship  shall be deemed to have terminated on the 91st day
of such leave.

         Except  as may  otherwise  be  expressly  provided  in  the  applicable
Contract,  options granted to a key employee or consultant  under the Plan shall
not be  affected  by any  change in the  status of the  optionee  so long as the
optionee continues to be an employee of, or a consultant to, the Company, or any
of the  Subsidiaries  or a Parent  (regardless of having changed from one to the
other or having been transferred from one corporation to another).

         Except as otherwise  provided in the  applicable  Contract,  any option
granted to a Non-Employee Director shall not be affected by the optionee ceasing
to be a director of the Company or becoming an employee  of, or  consultant  to,
the Company, any of its Subsidiaries or a Parent; provided, however, that if (a)
he is  terminated  as a director  of the Company  for cause,  such option  shall
terminate immediately,  or (b) he ceases to be a director of the Company because
he is not nominated by the Board of Directors for reelection as a director, such
option  may be  exercised  at any time  within  one year after he ceases to be a
director of the Company,  but not  thereafter and in no event after the date the
option otherwise would have expired.

         Nothing  in the Plan or in any  option  granted  under  the Plan  shall
confer  on any  optionee  any  right  to  continue  in the  employ  of,  or as a
consultant  to,  the  Company,  any of its  Subsidiaries  or a  Parent,  or as a
director of the Company,  or interfere in any way with any right of the Company,
any of its  Subsidiaries  or a Parent  or the  stockholders  of the  Company  to
terminate  the  optionee's  relationship  at any time for any reason  whatsoever
without liability to the Company, any of its Subsidiaries or a Parent.

9. DEATH OR  DISABILITY  OF AN  OPTIONEE.  Except as may  otherwise be expressly
provided in the  applicable  Contract,  if an optionee who is an employee of, or
consultant to, the Company,  any of its  Subsidiaries or a Parent dies (a) while
he is such an  employee  or  consultant,  (b)  within  three  months  after  the
termination  of such  relationship  (unless  such  termination  was for cause or
without  the  consent  of the  Company)  or (c) within  one year  following  the
termination of such relationship by reason of his Disability,  his option may be
exercised,  to the extent  exercisable  on the date of his  death,  by his Legal
Representative  (as

                                      -4-

<PAGE>

defined in  Paragraph  19) at any time within one year after his death,  but not
thereafter  and in no event  after  the date the  option  would  otherwise  have
expired.

         Except  as may  otherwise  be  expressly  provided  in  the  applicable
Contract,  any optionee whose  relationship as an employee of, or consultant to,
the  Company,  its  Parent and  Subsidiaries  has  terminated  by reason of such
optionee's  Disability may exercise his option,  to the extent  exercisable upon
the effective date of such  termination,  at any time within one year after such
date,  but not  thereafter  and in no event  after  the date  the  option  would
otherwise have expired.

         The term of an option granted to a  Non-Employee  Director shall not be
affected by the death or Disability of the optionee. If an optionee holding such
an option dies during the term of such  option,  the option may be  exercised at
any time during its term by his Legal Representative.

10.  COMPLIANCE  WITH  SECURITIES  LAWS. The Committee may require,  in its sole
discretion,  as a  condition  to the  exercise  of any option  that either (a) a
Registration  Statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities  Act"), with respect to the shares of Common Stock to be issued upon
such  exercise  shall be effective  and current at the time of exercise,  or (b)
there  is an  exemption  from  registration  under  the  Securities  Act for the
issuance of the shares of Common Stock upon such exercise.  Nothing herein shall
be construed as requiring the Company to register  shares  subject to any option
under the  Securities  Act or to keep any  Registration  Statement  effective or
current.

         The Committee may require,  in its sole  discretion,  as a condition to
the exercise of any option that the optionee  execute and deliver to the Company
his representations and warranties, in form, substance and scope satisfactory to
the  Committee,  which the Committee  determines  are necessary or convenient to
facilitate the perfection of an exemption from the registration  requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including  without  limitation  that (a) the shares of Common Stock to be issued
upon the  exercise of the option are being  acquired by the optionee for his own
account,  for investment  only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such  optionee  will be made only  pursuant to (i) a  Registration  Statement
under the  Securities  Act which is  effective  and current  with respect to the
shares of  Common  Stock  being  sold,  or (ii) a  specific  exemption  from the
registration requirements of the Securities Act, but in claiming such exemption,
the  optionee  shall prior to any offer of sale or sale of such shares of Common
Stock  provide  the  Company  with  a  favorable   written  opinion  of  counsel
satisfactory to the Company,  in form,  substance and scope  satisfactory to the
Company,  as to the  applicability  of such  exemption to the  proposed  sale or
distribution.

         In addition, if at any time the Committee shall determine,  in its sole
discretion,  that the  listing or  qualification  of the shares of Common  Stock
subject  to  such  option  on any  securities  exchange,  Nasdaq  or  under  any
applicable law, or the consent or approval of any governmental  regulatory body,
is necessary or desirable as a condition to, or in connection with, the granting
of an option or the issuance of shares of Common Stock  thereunder,  such option
may not be  exercised  in whole or in part unless such  listing,  qualification,
consent or approval  shall have been effected or obtained free of any conditions
not acceptable to the Committee.

                                      -5-

<PAGE>

11. STOCK  OPTION  CONTRACTS.  Each option shall be evidenced by an  appropriate
Contract,  which shall be duly  executed by the  Company and the  optionee,  and
shall contain such terms, provisions and conditions not inconsistent herewith as
may be determined by the Committee.

12.  ADJUSTMENTS  UPON  CHANGES  IN  COMMON  STOCK.  Notwithstanding  any  other
provision  of the  Plan,  in the  event of a stock  dividend,  recapitalization,
merger in which the Company is the surviving  corporation,  spin-off,  split-up,
combination  or exchange of shares or the like which  results in a change in the
number or kind of shares of Common Stock which is outstanding  immediately prior
to such event,  the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each  outstanding  option and the
exercise price thereof,  and the number and kind of shares subject to the 162(m)
Maximum  shall  be  appropriately  adjusted  by the  Board of  Directors,  whose
determination  shall be conclusive and binding on all parties.  Such  adjustment
may provide for the  elimination  of fractional  shares that might  otherwise be
subject to options without payment therefor.

         All outstanding  options shall become  immediately  exercisable in full
upon the  occurrence  of a "Change in Control".  For this  purpose,  a Change in
Control  shall be deemed to have  occurred if (a) there has occurred a change in
control as the term  "control"  is defined in Rule 12b-2  promulgated  under the
Act;  (b) when any  "person"  (as such term is defined in  Sections  3(a)(9) and
13(d)(3) of the Act),  except for an employee stock  ownership  trust (or any of
the trustees thereof),  becomes a beneficial owner,  directly or indirectly,  of
securities  of the  Company  representing  15% or  more  of the  Company's  then
outstanding  securities  having the right to vote on the election of  directors,
unless the transaction in which such person becomes such a beneficial  owner was
approved by a vote of at least  two-thirds of the directors then still in office
who were  directors  before such  transaction  was  consummated;  (c) during any
period of not more than two consecutive years,  individuals who at the beginning
of such period  constitute  the Board of Directors,  and any new director  whose
election by the Board or nomination  for election by the Company's  stockholders
was approved by a vote of at least  two-thirds  of the  directors  then still in
office  who were  either  directors  at the  beginning  of the  period  or whose
election or  nomination  for election  was  previously  approved,  cease for any
reason to constitute  at least 51% of the entire Board of Directors;  (d) when a
majority  of  the  directors  elected  at  any  annual  or  special  meeting  of
stockholders  (or by written  consent in lieu of a meeting) are not  individuals
nominated by the Company's incumbent Board of Directors; (e) if the stockholders
of the Company approve a merger or  consolidation  of the Company with any other
corporation,  other than a merger or  consolidation  which  would  result in the
holders  of voting  securities  of the  Company  outstanding  immediately  prior
thereto  being the  holders  of at least  80% of the  voting  securities  of the
surviving entity outstanding immediately after such merger or consolidation; (f)
if the stockholders of the Company approve a plan of complete liquidation of the
Company;  or (g) if the stockholders of the Company approve an agreement for the
sale or disposition of all or substantially all of the Company's assets.

13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the Board of
Directors on May 30, 2000. No option may be granted under the Plan after May 29,
2010.  The  Board  of  Directors,  without  further  approval  of the  Company's
stockholders,  may at any time  suspend or  terminate  the Plan,  in whole or in
part, or amend it from time to time in such  respects as it may deem  advisable;
provided,  however,  that no amendment shall be effective

                                      -6-

<PAGE>

without the requisite prior or subsequent  stockholder approval which would make
any change for which applicable law or regulatory authority requires stockholder
approval. No termination, suspension or amendment of the Plan shall, without the
consent of the holder of an existing and outstanding  option  affected  thereby,
adversely  affect his rights  under such option.  The power of the  Committee to
construe  and  administer  any  options  granted  under  the  Plan  prior to the
termination  or suspension of the Plan  nevertheless  shall  continue after such
termination or during such suspension.

14.  NON-TRANSFERABILITY  OF OPTIONS.  No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options  may be  exercised,  during the  lifetime of the  optionee,  only by the
optionee  or his Legal  Representatives.  Except to the extent  provided  above,
options may not be assigned,  transferred,  pledged, hypothecated or disposed of
in any way (whether by operation of law or  otherwise)  and shall not be subject
to execution,  attachment or similar process, and any such attempted assignment,
transfer, pledge,  hypothecation or disposition shall be null and void ab initio
and of no force or effect.

15.  WITHHOLDING  TAXES.  The Company may withhold (a) cash,  (b) subject to any
limitations  under Rule 16b-3,  shares of Common Stock to be issued with respect
thereto having an aggregate  fair market value on the exercise date  (determined
in accordance  with Paragraph 5), or (c) any combination  thereof,  in an amount
equal to the amount which the  Committee  determines is necessary to satisfy the
Company's obligation to withhold Federal,  state and local income taxes or other
amounts  incurred  by  reason  of  the  grant  or  exercise  of an  option,  its
disposition,  or the  disposition  of the  underlying  shares of  Common  Stock.
Alternatively,  the Company  may  require the holder to pay to the Company  such
amount, in cash, promptly upon demand.

16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or legends
upon the  certificates  for shares of Common  Stock  issued upon  exercise of an
option  under the Plan and may issue such "stop  transfer"  instructions  to its
transfer agent in respect of such shares as it determines, in its discretion, to
be  necessary  or  appropriate  to (a) prevent a violation  of, or to perfect an
exemption  from,  the  registration  requirements  of the Securities Act and any
applicable state securities laws, or (b) implement the provisions of the Plan or
any  agreement  between the Company and the optionee with respect to such shares
of Common Stock.

         The Company  shall pay all issuance  taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.

17. USE OF PROCEEDS.  The cash  proceeds from the sale of shares of Common Stock
pursuant to the exercise of options under the Plan shall be added to the general
funds  of the  Company  and used for such  corporate  purposes  as the  Board of
Directors may determine.

18.   SUBSTITUTIONS   AND   ASSUMPTIONS   OF  OPTIONS  OF  CERTAIN   CONSTITUENT
CORPORATIONS.  Anything in this Plan to the contrary notwithstanding,  the Board
of Directors may, without further approval by the  stockholders,  substitute new
options for

                                      -7-

<PAGE>

prior  options of a  Constituent  Corporation  (as defined in  Paragraph  19) or
assume the prior options of such Constituent Corporation.

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

            (a)  Constituent  Corporation.  The term  "Constituent  Corporation"
shall  mean  any  corporation  which  engages  with  the  Company,  any  of  its
Subsidiaries  or a Parent in a transaction  to which Section  424(a) of the Code
applies, or any Parent or any Subsidiary of such corporation.

            (b)  Disability.  The term  "Disability"  shall mean a permanent and
total disability within the meaning of Section 22(e)(3) of the Code.

            (c) Legal Representative. The term "Legal Representative" shall mean
the executor,  administrator  or other person who at the time is entitled by law
to exercise the rights of a deceased or  incapacitated  optionee with respect to
an option granted under the Plan.

            (d) Non-Employee  Director.  The term "Non-Employee  Director" shall
mean a  person  who is a  director  of the  Company  but  who is not a  salaried
employee of the Company or any of its Subsidiaries.

            (e) Parent.  The term  "Parent"  shall have the same  definition  as
"parent corporation" in Section 424(e) of the Code.

            (f) Subsidiary. The term "Subsidiary" shall have the same definition
as "subsidiary corporation" in Section 424(f) of the Code.

20.  GOVERNING  LAW;  CONSTRUCTION.  The Plan,  such  options  as may be granted
hereunder  and all  related  matters  shall be  governed  by, and  construed  in
accordance  with, the laws of the State of Delaware,  without regard to conflict
of law provisions.

         Neither the Plan nor any Contract  shall be  construed  or  interpreted
with any  presumption  against the Company by reason of the Company  causing the
Plan  or  Contract  to  be  drafted.   Whenever  from  the  context  it  appears
appropriate,  any term stated in either the singular or plural shall include the
singular and plural,  and any term stated in the  masculine,  feminine or neuter
gender shall include the masculine, feminine and neuter.

21. PARTIAL  INVALIDITY.  The invalidity,  illegality or unenforceability of any
provision in the Plan or any Contract shall not affect the validity, legality or
enforceability  of any other provision,  all of which shall be valid,  legal and
enforceable to the fullest extent permitted by applicable law.

22.  STOCKHOLDER  APPROVAL.  The Plan shall not be subject  to  approval  by the
Company's stockholders.

                                      -8-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]