Document:

THE  WARRANT AND THE SHARES OF COMMON  STOCK  ISSUABLE  HEREUNDER  HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THE WARRANT NOR
THE SHARES ISSUABLE HEREUNDER MAY BE SOLD, ASSIGNED OR OTHERWISE  TRANSFERRED IN
THE  ABSENCE OF A  REGISTRATION  STATEMENT  FOR THE  WARRANT OR THOSE  SHARES OR
UNLESS THE HOLDER HEREOF IS ABLE TO DEMONSTRATE THROUGH EVIDENCE SATISFACTORY TO
THE ISSUER,  THAT SUCH SALE,  ASSIGNMENT  OR OTHER  TRANSFER IS EXEMPT FROM SUCH
REGISTRATION REQUIREMENTS.

                     COMMON STOCK EXCHANGE WARRANT AGREEMENT

                            VIRTUAL WALL STREET, INC.

         For consideration,  receipt of which is duly acknowledged, Virtual Wall
Street,  Inc., a California  Corporation,  (the  "Issuer")  hereby grants to the
person or persons whose  signatures  appear below (the  "Holder") a warrant (the
"Warrant")  to purchase  from the Issuer at any time during the Exercise  Period
shares of fully paid and non-assessable shares of Common Stock of the Issuer set
forth above upon exchange of the Preferred Stock of Virtual Stock Market,  Inc.,
held by the Holder, subject to the terms and conditions set forth herein.

1 Definitions

         1.1 Common  Stock.  "Common  Stock"  shall mean the Common Stock of the
Issuer.

         1.2 Exercise Period.  The term "Exercise Period" shall mean that period
during which the Holder may exercise the Warrant. The Exercise Period will begin
on December 31, 1999 at 9:00am Pacific Time and continue until December 31, 2000
at 5:00pm  Pacific  Time. If either of such dates fall on a weekend or a federal
holiday, then such dates shall be deemed to be the next business day thereafter.
The  Issuer,  in its sole  discretion,  may  extend the  Exercise  Period for an
additional  term of as long as one year  thereafter.  The  Issuer  will  provide
notice of any such extension to the Holder by no later than December 20, 2000.

         1.3 Exchange Ratio.  The term "Exchange Ratio" shall mean the number of
shares of Common Stock  issuable upon the delivery and  assignment to the Issuer
of each share of VSM Stock. As of the date of this Agreement, the Exchange Ratio
shall be one share of Common  Stock for every two shares of VSM Stock  delivered
and assigned.  The Exchange  Ratio shall be subject to adjustment as provided in
Section 3 of the Warrant.

         1.4 VSM.  "VSM" shall mean  Virtual  Stock  Market,  Inc., a California
corporation

         1.5 VSM Stock. The term "VSM Stock" shall mean the Series A Convertible
Preferred  Stock of Virtual Stock Market,  Inc. If the VSM Stock is converted or
exchanged into another class of security of VSM or any successor  entity of VSM,
the term "VSM  Stock"  shall  refer to those  securities  which were issued upon
conversion of or in exchange for the VSM Stock.

2.  Warrant  Certificate.  The  Warrant  shall  be  evidenced  by  one  or  more
certificates  setting  forth the number of shares of Common  Stock  which may be
acquired  upon  exercise of the Warrant  and the date of  issuance.

                                      -1-

<PAGE>

The Warrant shall be signed on behalf of the Company by the facsimile  signature
of the President and the Secretary of the Company. The Company may adopt and use
the facsimile signature of any person who holds one of these offices at the time
a Warrant is executed, or of any person now or subsequently holding one of these
offices,  notwithstanding  the fact that at the time the Unit  Warrant is issued
the person has ceased to hold that office.

3 Method of Exercise.

         3.1 Exchange of Shares.  The Warrant may be exercised  only through the
delivery  and  assignment  of  VSM  Stock  to  the  Issuer.  No  other  form  of
consideration will be accepted for the purpose of exercising the Warrant.

         3.2 Delivery of Documents.  The Holder may exercise the Warrant in full
or in part at any time during the  Exercise  Period by  delivering  the Warrant,
together  with a duly  executed  notice of exercise in the form  attached to the
Warrant,  to the Issuer at the Issuer's  principal  address  accompanied  by the
delivery to the Issuer of a  certificate  or  certificates,  duly  endorsed  for
transfer to the Issuer, representing the VSM Stock being exchanged therefor. The
Holder  shall be treated for all purposes as the holder of such shares of record
as of the close of  business  on the date that the  Holder  completes  all steps
necessary  to  exercise  the  Warrant  and the  Issuer  receives  the  documents
described above. If the Warrant is exercised in part, the Holder shall surrender
the  Warrant  in the  manner  and at the  place  above.  Upon any  such  partial
exercise, the Issuer, at its expense, will issue and deliver to the Holder a new
Warrant  certificate  containing the same  expiration date and provisions as the
Warrant which had been surrendered, and for the number of shares with respect to
which the Warrant was not yet exercised.

         3.3  Delivery  of  Stock   Certificates  upon  Exercise.   As  soon  as
practicable  after the exercise of the Warrant,  and in any event within 30 days
thereafter,  the Issuer, at its expense, will cause to be issued in the name of,
and delivered to, Holder a certificate or  certificates  for the number of fully
paid and  non-assessable  shares of Common  Stock to which the  Holder  shall be
entitled. In lieu of any fractional share to which the Holder would otherwise be
entitled,  the Issuer may pay the Holder cash equal to such fraction  multiplied
by the then current fair market value of one full share, together with any other
stock or other  securities or property  (including  cash,  where  applicable) to
which the Holder is entitled upon such exercise.

4 Conditions to Exercise - Securities Laws Compliance.  As of this date, neither
the Warrant nor the shares of Common Stock which may be purchased  upon exercise
hereof have been  registered  under the Securities Act of 1933, as amended,  nor
can there be any  assurance  that such shares will be so  registered at the time
that the  Warrant  is  exercised.  Consequently,  the  Issuer  may  require as a
condition  to issuing the Common  Stock upon  exercise  of the Warrant  that the
Holder  execute  additional  documents  verifying  the  net  worth,  income  and
investment  experience  of the Holder and such other matters as the Issuer deems
appropriate  to  establish  that the  Common  Stock may be issued to the  Holder
without registration under the Act.

5 Adjustment  of Number of Shares and Purchase  Price.  The Number of Shares and
the Exchange Ratio in effect shall be subject to adjustment from time to time as
follows:

         5.1 Stock Dividends, Stock Splits,  Combinations.  If the Issuer pays a
dividend in the form of its Common  Stock or effects a split or  subdivision  of
the Issuer's  Common Stock without payment of any  consideration  by the holders
thereof,  then  as  of  the  date  of  such  dividend  distribution,   split  or
subdivision,  the Exchange  Ratio shall be adjusted so that the number of shares
of Common Stock  issuable upon the

                                      -2-
<PAGE>

surrender  of each share of VSM Stock shall be increased  in  proportion  to the
increase in the number of shares of Common Stock  outstanding.  If the number of
shares  of  Common  Stock  is  decreased  by a  reverse  stock  split  or  other
combination  of the  outstanding  shares of Common  Stock,  then,  following the
effective  date of the reverse stock split or  combination,  the Exchange  Ratio
shall be  adjusted  so that the  number of shares of Common  Stock  issuable  on
exercise of the Warrant  shall be decreased in proportion to the decrease in the
number of shares of Common Stock outstanding.

         5.2  Conversion/Exchange  of Issuer's Common Stock. If the Common Stock
is converted  into or exchanged for a different  class or type of security,  the
Holder  shall be  entitled  to  purchase  that  class or type of  security  upon
exercise of the Warrant. For the purpose of calculating the Exchange Ratio, each
share or unit of that  security will be deemed to equal that number of shares of
Common Stock for which that share or unit was converted or exchanged.

         5.3 Stock Dividends, Stock Splits,  Combinations and Adjustments of VSM
Stock.  If VSM declares and pays a dividend to the holders of VSM Stock which is
payable in VSM Stock,  or effects a split or subdivision  of the VSM Stock,  the
Exchange  Ratio shall be  adjusted so that the number of shares of the  Issuer's
Common  Stock  issuable  upon  surrender  of each  share of VSM  Stock  shall be
decreased  in  proportion  to the  increase in the number of shares of VSM Stock
outstanding.  If VSM effects a reverse stock split or other  combination  of the
VSM Stock,  the Exchange Ratio shall be adjusted so that the number of shares of
the Issuer's  Common Stock  issuable  upon  surrender of each share of VSM Stock
shall be increased in  proportion to the decrease in the number of shares of VSM
Stock outstanding.

         5.4  Conversion/Exchange of VSM Stock. If the VSM Stock being delivered
and  surrendered  upon  exercise  of the  Warrant is a class or type of security
other than the Series A Convertible  Preferred  Stock of VSM, each share or unit
of that security  shall be deemed to equal the number of shares of that security
issuable upon conversion or exchange of the Series A Convertible Preferred Stock
of VSM.

         5.5  Notification of Adjustment.  The Issuer shall promptly  deliver to
the Holder a notice announcing any adjustment in the Exchange Ratio or change in
the securities  purchasable under the Warrant,  accompanied by a brief statement
of the facts requiring that adjustment.

6 No Separate Assignment. The Warrant has been issued simultaneously with shares
of the Series A Preferred Stock of VSM as a single  investment unit. The Warrant
may not be sold,  assigned or transferred in any way,  including by operation of
law, separately from such shares of VSM Stock.

7 Notices,  Etc.  All notices and other  communications  contemplated  under the
Warrant shall be in writing and delivered personally, by Federal Express, DHL or
Airborne Express  (overnight  delivery,  paid by sender) or by first class mail,
postage prepaid.  Notices and other communications addressed to the Issuer shall
be sent to the  address  set forth  beneath the  signature  of the  Issuer,  and
notices and communications  addressed to the Holder shall be sent to the address
set forth on the cover page hereof.  Each party shall promptly  notify the other
of any change of the address to which all notices and other communications shall
be sent. Notices shall be deemed given when delivered,  if delivered personally,
or upon deposit with Federal Express,  DHL,  Airborne Express or with the United
Postal Service.

8 No Shareholder Rights. The Holder shall have no rights as a shareholder of the
Issuer by virtue of possessing the Warrant. The Holder shall have no such rights
with  respect to the any of the  Common  Stock

                                      -3-
<PAGE>

issuable upon exercise of the Warrant  until,  and only to the extent that,  the
Holder has taken all actions required to exercise the Warrant.

9 Miscellaneous.  The Warrant may not be amended, or any right hereunder waived,
except by an instrument in writing signed by both the Issuer and the Holder. The
Warrant shall be governed by the laws of California, exclusive of any principles
of  conflicts  of laws which would  require  application  of the laws of another
jurisdiction.  The headings in the Warrant are for  purposes of reference  only,
and shall not limit or otherwise affect any of the terms hereof.

IN WITNESS WHEREOF,  this Agreement is entered into as of this __________ day of
__________, 199_.

THE HOLDER                                        VIRTUAL WALL STREET, INC.

___________________________                       ___________________________
[Signature of Holder]                             A. Jonathan Buhalis, President

___________________________                       11755 Wilshire Blvd.,
[Printed Name and Title of Holder]                Suite 2440
                                                  Los Angeles, CA 90025

___________________________
[Signature of Joint Holder]

___________________________
[Printed Name and Title of Joint Holder]

Address:

___________________________

___________________________

___________________________

                                      -4-Online Stock Market Group
                             1998 Stock Option Plan
             for Directors and Employees of and Key Consultants to

                           Online Stock Market Group

1.   Purpose.  The purpose of this Stock Option Plan is to promote the interests
     of Online Stock Market Group  ("Company") and its  shareholders by enabling
     it to offer stock options to better attract,  retain,  and reward directors
     and  employees of and key  consultants  to the Company and any other future
     subsidiaries  that may qualify under the terms of this Plan. The goal is to
     strengthen  the  mutuality  of  interests  between  those  persons  and the
     shareholders  of the Company by providing  those persons with a proprietary
     interest in pursuing the Company's long-term growth and financial success.

2.   Definitions.  For purposes of this Plan, the following terms shall have the
     meanings set forth below.

     a.   "Administrator"  shall mean the Committee or, if no Committee has been
          created, the Board of Directors.

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

     c.   "Code" means the Internal Revenue Code of 1986, as amended.  Reference
          to any specific  section of the code shall be deemed to be a reference
          to any successor provision of the Code.

     d.   "Committee"  means the  administrative  committee of this Plan that is
          provided in Section 3 below.

     e.   "Common  Stock"  means the common stock of the Company or any security
          issued in substitution, exchange, or in lieu thereof.

     f.   "Company"  means Online Stock Market Group, a California  corporation,
          or any  successor  corporation.  Except  where the  context  indicates
          otherwise,   the  term   "Company"   shall   include  its  parent  and
          Subsidiaries.

     g.   "Director"  means any  person  who  serves as a member of the Board of
          Directors  of the  Company.  "Outside  Director"  means any person who
          serves as a member of the Board of Directors of the Company and is not
          a full-time employee of the Company or its subsidiaries.

     h.   "Disabled"  means permanent and total  disability,  as defined in Code
          Section 22(e)(3).

                                       1

<PAGE>

     i.   "Employee"  means any  person  who is  employed  by the  Company or ts
          subsidiaries  on a full or part-time  basis,  so that they have income
          taxes withheld and are eligible to  participate  in employee  benefits
          programs.

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

     k.   "Fair Market Value" per share means, on any given date:

          i.   The last sale price of the Common Stock on a national  securities
               exchange,  Nasdaq  National Market or the Nasdaq Small Cap Market
               or in  case no  such  reported  sales  take  place  on any of the
               foregoing  exchanges or on Nasdaq, the average of the closing bid
               and ask prices on such date; or

          ii.  If there is no  established  market for the  Common  Stock of the
               Company,  the  fair  market  value  shall  be  determined  by the
               Administrator in accordance with any reasonable  valuation method
               selected  by the  Administrator,  including  those  described  in
               Treasury Regulation Section. 20.2031-2.

     l.   "Incentive  Stock Option" means an option to purchase shares of Common
          Stock that is  intended to be an  incentive  stock  option  within the
          meaning of Section 422 of the Code.

     m.   "Insider"  means a person who is subject to the  provisions of Section
          16 of the Exchange Act.

     n.   "Key  Consultant"  means a person who is engaged by the Company or its
          Subsidiaries as a non-employee to perform tasks on a contractual basis
          over  a  sufficient  period  of  time  that  he or she  satisfies  the
          eligibility   criteria  set  forth  by  the  Securities  and  Exchange
          Commission  for a non-employee  to  participate in a registered  stock
          option plan.

     o.   "Non-Employee  Director" means a director who: (i) is not currently an
          officer (as defined in Rule  16a-1(f) of the  Securities  and Exchange
          Commission of the Company or one of its principal subsidiaries,  or is
          not  otherwise  currently  employed  by the  Company  or a  parent  or
          subsidiary  of the Company;  (ii) does not receive  direct or indirect
          compensation  for  services  rendered  to the  Company  or a parent or
          subsidiary of the Company,  unless the amount of  compensation is less
          than $60,000 per year; (iii) is not engaged in a business relationship
          with the Company or any parent or  subsidiary  of the Company which is
          required to be disclosed under Rule 404(a) of Regulation S-K or S-B of
          the Securities and Exchange  Commission (or any successor  provision);
          or (iv) does not have an interest in a transaction with the Company or
          any parent or  subsidiary of the Company which would be required to be
          disclosed  pursuant  to  that  rule  of the  Securities  and  Exchange
          Commission.

     p.   "Non-Qualified  Stock Option"  means any option to purchase  shares of
          Common Stock that is not an Incentive Stock Option.

                                       2

<PAGE>

     q.   "Officer"  is an employee of the  Company or its  Subsidiaries  who is
          granted the authority to commit the corporation to binding  agreements
          and  to  function  as  one of the  executives  of the  Company  or its
          Subsidiaries.

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

     s.   "Parent"  shall mean any  corporation  (other than the  Company) in an
          unbroken chain of corporations  ending with the Company if each of the
          corporations  (other than the  Company)  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 the  chain,  as
          determined in accordance with the rules of Section 424(e) of the Code.

     t.   "Participant" means a person who has been granted an Option.

     u.   "Plan"  means this Online  Stock  Market  Group Stock  Option plan for
          Directors and Employees of and Key  Consultants to the Company and its
          Subsidiaries, as it may be amended from time to time.

     v.   "Severance"  means, with respect to a Participant,  the termination of
          the Participant's  provision of services to the Company as an employee
          or  director,  whether  by reason of death,  disability,  or any other
          reason. A Participant who is on a leave of absence that exceeds ninety
          (90) days will be  considered  to have  incurred  a  Severance  on the
          ninety-first   (91st)  day  of  the  leave  of  absence,   unless  the
          Participant's  rights to reemployment or reappointment  are guaranteed
          by statute or contract.

     w.   "Subsidiary"  means any  corporation  or entity in which the  Company,
          directly or  indirectly,  controls  fifty percent (50%) or more of the
          total voting power of all classes of its stock having voting power, as
          determined in accordance with the rules of Code Section 424(f).

     x.   "Ten Percent Shareholder" means any person who owns (after taking into
          account  the  constructive  ownership  rules of Section  424(d) of the
          Code) more than ten percent (10%) of the stock of the Company.

3.   Administration.

     a.   This Plan  shall be  administered  by the  Board  or,  at the  Board's
          discretion,  a Committee  appointed by the Board.  The  Committee,  if
          appointed,  will  be  comprised  solely  of two or  more  Non-Employee
          Directors.  The Board may remove  members from, or add members to, the
          Committee at any time.

     b.   The Committee  may conduct its meetings in person or by  telephone.  A
          majority of the members of the  Committee  shall  constitute a quorum,
          and any  action  shall  constitute  action of the  Committee  if it is
          authorized by:

                                       3

<PAGE>

          i.   A majority of the members present at any meeting; or

          ii.  The unanimous  consent of all of the members in writing without a
               meeting.

     c.   The Committee is authorized to interpret  this Plan and to adopt rules
          and  procedures  relating  to the  administration  of this  Plan.  All
          actions of the Committee in  connection  with the  interpretation  and
          administration of this Plan shall be binding upon all parties.

     d.   The  Committee  may  designate  persons  other  than  members  of  the
          Committee to carry out its responsibilities  under such conditions and
          limitations  as it may  prescribe,  except that the  Committee may not
          delegate  its  authority  with  regard to the  granting  of Options to
          Insiders.

     e.   Subject  to the  limitations  of Section 16 below,  the  Committee  is
          expressly  authorized to make such  modifications  to this Plan as are
          necessary  to  effectuate  the  intent of this Plan as a result of any
          changes  in the tax,  accounting,  or  securities  laws  treatment  of
          Participants and the Plan.

4.   Duration of Plan.

     a.   This Plan  shall be  effective  as of April 1,  1998,  the date of its
          adoption by the Board,  provided this Plan is approved by the majority
          of the Company's  shareholders,  in accordance  with the provisions of
          Code  Section  422,  on or prior  to  twelve  (12)  months  after  its
          adoption.  In the event that this Plan is not so  approved,  this Plan
          shall  terminate and any Options granted under this Plan to an Insider
          shall be void and have no  further  effect  if the  issuance  of those
          Options would result in Section 16(b) liability to the Insider.

     b.   This Plan shall expire on April 1, 2008;  provided,  however,  that no
          expiration of this Plan shall affect any Options then outstanding.

5.   Number of Shares.

     a.   The  aggregate  number of shares of Common  Stock  which may be issued
          pursuant to this Plan shall be one million (1,000,000). This aggregate
          number may be  adjusted  from time to time as set forth in Sections 16
          and 17 of this Plan.

     b.   Upon the  expiration or  termination  of an  outstanding  Option which
          shall not have been  exercised  in full,  any  shares of Common  Stock
          remaining  unissued  shall again become  available for the granting of
          additional Options.

6.   Eligibility.  Persons eligible for Options under this Plan shall be limited
     to the  directors,  employees  and Key  Consultants  to the Company and its
     Subsidiaries.

                                       4

<PAGE>

7.   Form of Options.  Options  granted  under this Plan may be Incentive  Stock
     Options or  Non-Qualified  Stock  Options.  Options shall be subject to the
     following terms and conditions.

     a.   Options may be granted  under this Plan on such terms and in such form
          as  the  Committee  may  approve,   which   conditions  shall  not  be
          inconsistent   with  the  provisions  of  this  Plan.  The  terms  and
          conditions of any Options granted pursuant to this Plan, including but
          not limited to the vesting  schedules,  exercise price,  the number of
          shares  purchasable upon exercise thereof,  shall be determined by the
          Board of Directors or the Committee (if one is appointed) and shall be
          set forth in a separate stock option agreement between the Company and
          the  person  granted  the  Option.  The  execution  of such an  option
          agreement  by the person to receive the option shall be a condition to
          the grant of an option to that person.  The Option  Agreement  may not
          contain any provisions which are  inconsistent  with this Plan and, if
          any provision of an agreement or this Plan shall  conflict,  this Plan
          shall control.

     b.   The  exercise  price per share of Common  Stock  purchasable  under an
          Option shall be set forth in the Option Agreement.  The exercise price
          of an option,  determined  on the date of the grant,  shall be no less
          than:

          i.   One hundred  ten percent  (110%) of the Fair Market of the Common
               Stock in the case of a Ten Percent Shareholder;

          ii.  One hundred percent (100%) of the Fair Market Value of the Common
               Stock in the case of any Incentive Stock Option; or

          iii. Eighty-five  percent (85%) of the Fair Market Value of the Common
               Stock in the case of any Non-Qualified Stock Option.

8.   Modification.  The Administrator  may modify an existing Option,  including
     the right to,  accelerate  the right to exercise it; extend or renew it; or
     cancel it and issue a new Option,  provided,  however, that no modification
     so made may  impair  the rights of the  Option  holder  without  his or her
     consent.  Whether a modification of an existing Incentive Stock Option will
     be  treated  as the  issuance  of a new  Incentive  Stock  Option  will  be
     determined in accordance with the rules of Section 424(h) of the Code.

9.   Limits on Grants of Incentive  Stock  Options.  The  aggregate  Fair Market
     Value  (determined  as of the date of  grant)  of the  number  of shares of
     Common Stock with respect to which  Incentive Stock Options are exercisable
     for the first  time by a  Participant  during any  calendar  year shall not
     exceed one hundred thousand  dollars  ($100,000) or such other limit as may
     be required by Code Section 422.  Should anyone  exercise  Incentive  Stock
     Options   that  exceed  this  limit,   such  options  will  be  treated  as
     Non-Qualified Stock Options for tax purposes.

                                       5

<PAGE>

10.  Manner of Exercise.

     a.   Exercise  of  Options.   Optionees  may  exercise   their  options  by
          delivering payment in the form of cash,  certified or cashier's check,
          personal  bank check,  or the  equivalent  thereof  acceptable  to the
          Board,  together  with written  notice to the Secretary of the Company
          identifying  the option being  exercised and  specifying the number of
          shares being purchased.  In addition, the Board may allow the optionee
          to use the  following  forms of payment of the purchase  price,  under
          terms which the Board deems to be acceptable:

          i.   The  surrender  of shares  of the  Company's  stock  owned by the
               optionee having a value, as determined by the Board, equal to the
               exercise  price,  provided  that if the  optionee  is  subject to
               short-swing profit liability under ss.16 of the Exchange Act, the
               timing of the  exercise  must  satisfy the  requirements  of Rule
               16b-3 of the SEC;

          ii.  The  optionee's  recourse  promissory  note,  provided  that  the
               promissory  note shall be due and  payable not more than four (4)
               years after the option is exercised  and that  interest  shall be
               payable at least  annually at a rate not less than that necessary
               to avoid assessment of imputed interest under the Code; or

          iii. The  assignment of the proceeds of the sale of some or all of the
               shares being acquired upon exercise of the option.

          iv.  Any other method of payment to the extent permitted by applicable
               laws.

     b.   No method of  exercising  an option  shall be permitted if that method
          would result in the  violation of any  applicable  law, the  Company's
          articles of incorporation  or bylaws or any agreement  restricting the
          redemption or repurchase of the Company's stock.

11.  Vesting  Requirements.  Options  granted  pursuant to this Plan may vest in
     accordance  with  periods of time or upon the  occurrence  of events as are
     determined  by the Board of Directors or the Committee and are specified in
     the stock option agreement. The foregoing notwithstanding,  options granted
     under this Plan must vest at a rate of no less than twenty percent (20%) of
     the  number of shares  granted  under  this Plan per year and must,  unless
     otherwise earlier terminated,  become fully vested after no later than five
     (5) years after the date of grant.

12.  Termination of Options.

     a.   No Option  may have a term in excess of 10 (10) years from its date of
          grant.  In the  event  that an  Option is an  Incentive  Stock  Option
          granted  to a Ten  Percent  Shareholder,  no option may have a term in
          excess of 5 years from its date of grant.

     b.   The  foregoing  notwithstanding,  an Option may provide that it can be
          terminated  upon Severance in accordance  with the following rules and
          procedures,  provided that the

                                       6

<PAGE>

          Option Agreement or the  Administrator can provide for a longer period
          of time within  which to exercise  the Option (but not longer than the
          period of time allowed under paragraph a above):

     c.   The Option may provide that the  unvested  portion of the Option shall
          terminate  immediately  or as of a later date as is  specified  in the
          Option or by resolution of the Administrator.

     d.   The Option may provide that the vested  portion of an Incentive  Stock
          Option shall terminate no earlier than thirty (30) days after the date
          of  Severance  in the case of a  Non-Qualified  Stock Option or ninety
          (90) days  after  the date of  Severance  in the case of an  Incentive
          Stock (if Severance is due other than to death or Disability).

     e.   If  Severance  is due to death or  Disability,  the Option may provide
          that the vested portion of the Option shall  terminate no earlier than
          six (6) months after the date of Severance.

13.  Termination  on Certain  Events.  All options  granted under the Plan shall
     immediately  terminate,  notwithstanding  the fact that the  Options  could
     otherwise be exercised,  two (2) days prior to the occurrence of any of the
     following events:

     a.   The merger or consolidation of the Company, whether or not the Company
          is the surviving corporation,  if the beneficial owners of the Company
          immediately  prior to the merger or  consolidation  as a group are the
          beneficial  owners of less than fifty  percent  (50%) of the surviving
          entity's outstanding voting securities immediately after the merger or
          consolidation;

     b.   The sale or exchange of all or  substantially  all of the  outstanding
          voting securities of the Company;

     c.   The sale,  exchange  or transfer  of all or  substantially  all of the
          assets of the Company  other than in the ordinary  course of business;
          or

     d.   The dissolution or liquidation of the Company.

14.  Notice  Procedures  -  Termination.  The  Company  shall give notice to all
     holders of Options of an event  described  above on the earlier of: (i) ten
     (10) days prior to the date that the event is proposed  to take  place;  or
     (ii)  eight (8) days  prior to the date  that the  Options  are  terminated
     pursuant  to  Section  13.  The  Administrator  or the  Board may allow for
     acceleration  of the vesting of options prior to such an event  pursuant to
     the  terms of the  Option  Agreement  or  otherwise,  but shall be under no
     obligation  to include such a provision in the Option  Agreement or (unless
     such a provision  requiring  vesting of options is in the Option Agreement)
     to allow for  acceleration  of vesting.  There shall be no  termination  of
     options under this Section if the person(s) or  entity(ies)  which acquired
     the  Company  or its  securities  or assets  by virtue of the  transactions
     described in Section 13 above owned more than 10% of the outstanding voting
     stock of the Company immediately prior to the date of such an acquisition.

                                       7

<PAGE>

15.  Non-Transferability  of Options a. During the lifetime of the  Participant,
each Option is exercisable only by the Participant.  b. No option under the Plan
shall be  assignable  or  transferable,  except by will or laws of  descent  and
distribution.

16.  Adjustments.  a. In the event of any  change in the  capitalization  of the
Company  affecting  its Common Stock (e.g. a stock split,  reverse  stock split,
stock  dividend,  combination,   recaptitalization,  or  reclassification),  the
Administrator  shall authorize such  adjustments as it may deem appropriate with
respect to: i. The aggregate  number of shares of Common Stock for which Options
may be granted under this Plan; ii. The number of shares of Common Stock covered
by each outstanding  Option; and iii. The exercise price per share in respect of
each outstanding  Option. b. The Administrator may also make such adjustments in
the event of a spin-off or other distribution (other than normal cash dividends)
of the Company's assets to shareholders.

17. Amendment and Termination. The Board may at any time amend or terminate this
Plan.   The   Board   may   not,   however,   without   the   approval   of  the
majority-in-interest of the shareholders of the Company, amend the provisions of
this Plan regarding:  a. The class of individuals  entitled to receive Incentive
Stock  Options.  b. The  aggregate  number of shares of Common Stock that may be
issued under the Plan,  except as provided in Section 16 of this Plan. c. To the
extent  necessary to comply with Rule 16(b)-3  under the Exchange Act, the first
Board may not make any amendment without approval of the majority in-interest of
the shareholders of the Company that would: i. Materially increase the aggregate
number of shares of Common  Stock  which may be issued to  Insiders  (except for
adjustments   under  Section  16  of  this  Plan);  ii.  Materially  modify  the
requirements  as  to  the  eligibility  of  Insiders  to  participate;  or  iii.
Materially increase the benefits accruing to Insiders under this Plan.

18. Tax  Withholding.  The Company  shall have the right to take such actions as
may be  necessary  to satisfy its tax  withholding  obligations  relating to the
operation  of this Plan.  If Common Stock is used to satisfy the  Company's  tax
withholding  obligations,  the stock  shall be valued  based on its Fair  Market
Value when the tax withholding is required to be made.

19. No Additional  Rights.  The  existence of this Plan and the Options  granted
hereunder  shall not effect or  restrict  in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable law. Neither
the  adoption of this Plan nor the  granting of any Option shall confer upon any
Participant  the  right to  continue  services  for the  Company,  nor  shall it
interfere in any way with the right of the Company to terminate  the services of
any Participant at any time,  with or without cause.  No Participant  shall have
any rights as a  shareholder  with  respect  to any shares  covered by an Option
until the date a certificate  for such shares has been issued to the Participant
following the exercise of the Option.

20.  Securities Law Restrictions No shares of Common Stock shall be issued under
this Plan unless the Administrator  shall be satisfied that the issuance will be
in  compliance  with  applicable   federal  and  state   securities   laws.  The
Administrator  may  require  certain  investment  or other  representations  and
undertakings by the Participant (or other person acquiring the right to exercise
the Option by reason of the death of the  Participant)  in order to comply  with
applicable  law.  Certificates  for shares of Common Stock  delivered under this
Plan  may be  subject  to  such  restrictions  as  the  Administrator  may  deem
advisable. The Administrator may cause a legend to be placed on the certificates
to refer to these restrictions.

21.  Indemnification.  To the maximum extent permitted by law, the Company shall
indemnify  each member of the Board and of the  Committee,  as well as any other
Employee  of or Key  Consultant  to the  Company  with  duties  under this Plan,
against expenses  (including any amount paid in settlement)  reasonably incurred
by him or her in connection  with any claims against him or her by reason of the
performance  of his or her duties under this Plan,  unless the losses are due to
the individual's gross negligence or lack of good faith.

22.  Information  to Option  Holders.  The Company  shall  provide to its option
holders  copies  of all  annual  reports  and  other  information  given  to the
Company's  shareholders.  In addition, for such period of time as it is required
by law to do so,  the  Company  shall  provide  holders  of  Options  with  that
information which it is required to give them by law or pursuant to the rules of
the California Commissioner of Corporations.

23.  Governing Law. This Plan and all actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of California.

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