Document:

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                           EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered
into this 1st day of November, 1999, by and between Strouds, Inc. ("Employer")
and Harry Brown ("Employee").

1.  EMPLOYMENT AND TERM.  Employer hereby employs Employee and Employee hereby
accepts employment with and agrees to serve Employer in the capacities and
subject to and upon the terms and conditions hereinafter set forth.  The term
of Employee's employment hereunder shall be the period commencing on the date
hereof, subject to termination as provided in Paragraph 12 hereof, and
continuing in effect until after the second anniversary of the date hereof.

2.  DUTIES.  Employee shall be employed by Employer as Executive Vice
President, Merchandising and Marketing of Strouds, Inc. reporting to the Chief
Executive Officer of Employer.  Employee shall perform the duties normally
associated with such position, subject at all times to the general supervision
and pursuant to the orders, advice and direction of the Chief Executive
Officer of Employer, and Employee shall perform such other duties as the Chief
Executive Officer of Employer may reasonably assign to Employee from time to
time.  Employee agrees that so long as this Agreement continues in effect,
Employee shall devote his full business time and energies to the business and
affairs of Employer, use his best efforts, skills and abilities to promote
Employer's interests, and perform the duties described herein and such other
duties as may be reasonably assigned to Employee.

3.  BASE SALARY.  Employer shall pay Employee, and Employee hereby agrees to
accept, as compensation for services rendered hereunder, a salary of Three
Hundred Thousand Dollars ($300,000.00) per year ($11,538.46 bi-weekly)
effective as of November 1, 1999, subject to an upward adjustment at the sole
discretion of Employer.  Employer shall reevaluate Employee's base salary each
year.  Employee understands and agrees that Employer has no obligation to
increase his base salary as a result of such evaluation.  However, once
Employee's salary is increased, it shall not be subject to reduction without
the consent of Employee (except for across-the-board salary reductions
affecting all management personnel of Employer). Employee's compensation is
payable in arrears in installments at such intervals as Employer pays the
salaries of Employer's executive officers, subject to the termination
provisions of Paragraphs 12 and 13 hereof.

4.  ANNUAL BONUS.

     (a)  Employer shall pay to Employee a cash bonus for fiscal year 1999 in
the amount of $75,000 to be paid May 1, 2000, subject to Employee being
employed by Employer on February 29, 2000.

     (b)  Effective as of March 1, 2000 and during the term of this Agreement,
Employee shall participate in Employer's bonus plans, such as Strouds, Inc.
Corporate Exempt Employee Incentive Plan 1998, as may be in effect from time
to time in accordance with Employer's compensation practices and the terms and
provisions of such plan as in effect from time to time.

     (c)  Any bonus payments shall be paid as soon as practicable, but not

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more than 14 days, after Employer s independent public accounting firm,
currently KPMG LLP, delivers its audit of Strouds, Inc. fiscal year end.

     (d)  No bonus payments shall be paid to Employee with respect to a fiscal
year during which this Agreement terminates pursuant to Paragraphs 12 (a),
(b), (c), (d), or (e) hereof.

     (e)  To the extent any bonus payments (or portion thereof) to Employee
would cause Employer's federal income tax deduction to be disallowed pursuant
to Section 162(m) of the Code, or any successor thereto, the payment of such
bonuses (or portion thereof) shall be deferred until such time as the payment
of the bonuses is no longer subject to the limitations of Section 162(m) of
the Code.  During such deferral period, Employer shall credit interest on the
deferred amounts at the rate of one percent (1%) above the Bank prime rate, as
it may be adjusted from time to time.  At such time as the aggregate amount of
any deferred bonuses and accrued interest exceed One Hundred Thousand Dollars
($100,000), Employer, at Employee s written request,  shall fund such amounts
in a "rabbi trust" pursuant to the Internal Revenue Service's Revenue
Procedure 92-64.

5.  STOCK OPTIONS.

     (a)  As an inducement for Employee to enter into this Agreement, Employer
shall grant Employee an option to purchase 200,000 shares of common stock
(subject to adjustment as provided under any applicable stock option plans of
Employer (the "Plan")) in Strouds, Inc. (the "Common Stock") with an exercise
price equal to the fair market value of the Common Stock on November 1, 1999
("Initial Grant").  On the first anniversary of such date of Initial Grant
during the term of this Agreement while Employee is employed by Employer,
Employer shall grant Employee an option to purchase an additional 100,000
shares of Common Stock with an exercise price equal to the fair market value
of the Common Stock on such date.  To the extent not inconsistent with the
terms of this Agreement, the options shall be subject to the terms of a stock
option agreement in substantially the form attached hereto as Exhibit A.

     (b)  All options granted pursuant to the above provision shall vest at
the rate of 25% per year on each anniversary date of the date of the grant of
such options, as long as Employee remains employed by Employer on the
anniversary date of the granting of such options.  In the event of a Change in
Control (as defined in the stock option agreement in Exhibit A), any
outstanding options shall be immediately and fully vested and exercisable.

6.  BENEFITS.  Employer shall provide Employee with medical, hospital,
surgical, disability, accidental death, travel and/or life insurance coverage,
if any, on the same basis as such coverage is provided to Employer's executive
officers, subject to Employee's satisfaction of any eligibility criteria for
such coverage. Employee shall be entitled to participate in Employer's
retirement plans, if any, on the same basis as Employer's comparable
employees, subject to Employee's satisfaction of any eligibility criteria for
such participation.  Employee shall be entitled to four weeks paid vacation
for each 12 months of employment, subject to the terms of Employer's vacation
policy for employees as it now exists and as changed from time-to-time.  Such
vacation shall be taken at such time or times as shall not unduly disrupt the
orderly conduct of business of Employer.

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7.  RELOCATION EXPENSES.

     (a)  Employer (i) shall reimburse Employee for all normal and reasonable
expenses (including closing costs on the sale of Employee s home in Houston,
Texas such as brokers fees (not to exceed 6%), documentary stamps, transfer
taxes and title insurance premiums (excluding any loss on the sale of such
home) and the closing costs on the purchase of Employee's new home in southern
California such as title search fees, attorney's fees, recording/notary fees,
credit report, mortgage origination fees, mortgage placement fees, loan points
(not to exceed 1.65%), title examination, home inspection, and other
miscellaneous closing costs normally paid by the buyer) incurred by Employee
in relocating his family and personal effects to California; (ii) for a period
of ninety (90) days from the date hereof, shall reimburse Employee for
reasonable temporary living expenses and rental costs incurred by Employee in
maintaining a temporary residence near Employer's headquarters; and (iii)
shall provide a relocation service to assist Employee in locating a new home
in southern California.

     (b)  With respect to the reimbursements set forth in Paragraph 7(a),
Employer shall reimburse Employee for the amount of any federal and state
income tax liabilities with respect to Employee's receipt of such
reimbursements from Employer, after taking into account any deductions or
other tax benefits attributable to such reimbursements.

8.  INDEMNIFICATION.  During the term of this Agreement and for six (6) years
following the termination of Employee's employment, Employer shall extend to
Employee the same indemnification arrangements and maintain directors' and
officers' liability insurance as are generally provided to other similarly
situated management personnel of Employer.  Notwithstanding anything to the
contrary, the provisions of this Paragraph 8 shall survive the termination of
this Agreement and the termination of Employee's employment.

9.  EXPENSES.  Employer will reimburse Employee for all ordinary and
reasonable out-of-pocket business expenses incurred by Employee in connection
with his performance of services hereunder during the term of this Agreement
in accordance with Employer's expense approval procedures then in effect,
including, $269.23 bi-weekly for lease, insurance, maintenance and fuel of one
vehicle.  Air travel for business will be by coach class for domestic flights
and international flights not exceeding six (6) hours.  For international
flights exceeding six (6) hours, air travel for business may be by business
class.

10.  CONFIDENTIALITY.  Employee recognizes and acknowledges that in the course
of Employee's employment by Employer pursuant to this Agreement, Employee will
have access to or may obtain information of a secret, special and unique value
to Employer concerning customers, customer lists, marketing strategies,
business plans, contracts, personnel information, financial information,
relationships between Employer and those persons, entities, and others with
which Employer has contracted and others who have business dealings with
Employer, processes, products, formulas, devices, designs, inventions,
discoveries and methods of operation (collectively and individually

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"Confidential Information").  Employee further recognizes and acknowledges
that all Confidential Information which is now or may hereafter be in
Employee's possession is the property of Employer and that protection of the
Confidential Information against unauthorized disclosure or use is of critical
importance to Employer in order to protect Employer from unfair competition
and irreparable harm.  To protect Employer from such harm, Employee therefore
agrees to make the promises set forth in this Paragraph.

     (a)  PROMISE NOT TO DISCLOSE.  Employee promises never to use or disclose
any Confidential Information before it has become generally known within the
relevant industry through no fault of Employee.  Employee agrees that this
promise shall never expire.

     (b)  PROMISE NOT TO SOLICIT.  To prevent Employee from inevitably
breaking this promise, Employee further agrees that, while this Agreement is
in effect and for 24 months after its termination: (i) as to any customer or
supplier of Employer with whom Employee had dealings or about whom Employee
acquired proprietary information during his employment, Employee will not
solicit or attempt to solicit the customer or supplier to do business with any
person or entity other than Employer; and (ii) Employee will not solicit for
employment any person who is, or within the preceding 6 months was, an
officer, manager, employee or consultant of Employer.

     (c)  PROMISE NOT TO ENGAGE IN CERTAIN EMPLOYMENT.  Employee agrees that,
while this Agreement is in effect and for 24 months after its termination,
Employee will not accept any employment or engage in any activity in the
retail industry where the sale of bed and bath products exceeds twenty-five
percent (25%) of the business, without the written consent of the Executive
Committee of the Board, excluding Employee (the "Executive Committee"), if the
loyal and complete fulfillment of Employee's duties would inevitably require
Employee to reveal or utilize any Confidential Information that Employee has
promised in this Paragraph 10 not to disclose, as reasonably determined by the
Executive Committee.  Notwithstanding any provision to the contrary in this
Agreement, this promise shall only be enforceable while Employee is receiving
payments pursuant to Paragraph 13(b).

     (d)  RETURN OF CONFIDENTIAL INFORMATION.   When Employee's employment
with Employer ends, Employee will promptly deliver to Employer or, at its
written instruction, destroy all documents, data, drawings, manuals, letters,
notes, reports, electronic mail, recordings and copies thereof relating to any
Confidential Information in Employee's possession or control.

     (e)  PROMISE TO DISCUSS PROPOSED ACTIONS IN ADVANCE.  To prevent the
inevitable use or disclosure of Confidential Information, Employee promises
that, before Employee discloses or uses information and before Employee
commences employment, solicitations or any other activity that could possibly
violate the promises made by Employee in this Paragraph 10, Employee will
discuss his proposed actions with the Executive Committee, who will advise
Employee whether his proposed actions would violate these promises.

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11.  RELIEF.  It is recognized that in the event of Employee's breach of
Paragraph 10, the damages resulting from such breach would be difficult, if
not impossible, to ascertain and that Employer would be subject to irreparable
injury therefrom.  It is agreed, therefore, that Employer, in addition to and
without limiting any other remedy or right it may have, shall be entitled to
such equitable and injunctive relief as may be available to restrain Employee
from violation of any of said covenants, such right to injunctive and
equitable relief to be cumulative and in addition to whatever other remedies
Employer may have in the premises, including the recovery of damages from
Employee.

12.  BASES FOR TERMINATION.  This Agreement and the employment of Employee
hereunder shall terminate upon the occurrence of the first to occur of the
following events or conditions:

     (a)  the expiration of the term specified in Paragraph 1 hereof;

     (b)  the death of Employee;

     (c)  the voluntary resignation of Employee, without Good Reason (as
defined below), by giving Employer at least 60 days written notice of
termination;

     (d)  Employee s disability, subject to the Employee's right to receive a
disability benefit as provided in Paragraph 6 hereof, if any;

     (e)  the election of Employer to terminate Employee's employment for
Cause.  For purposes of this Agreement, "Cause" shall mean (i) a determination
by Employer or the Board in its sole discretion exercised in good faith that
there has been (A) willful and continued failure by Employee to substantially
perform his duties with Employer (other than any such failure resulting from
Employee's incapacity due to physical or mental illness or any such actual or
anticipated failure after Employee's issuance of a notice of termination for
Good Reason), after a written demand for substantial performance is delivered
to Employee by the Board, which demand specifically identifies the manner in
which the Board believes that Employee has not substantially performed his
duties, or (B) willful and continued failure by Employee to substantially
follow and comply with the specific and lawful directives of the Board, as
reasonably determined by the Board (other than any such failure resulting from
Employee's incapacity due to physical or mental illness or any such actual or
anticipated failure after Employee's issuance of a notice of termination for
Good Reason), after a written demand for substantial performance is delivered
to Employee by the Board, which demand specifically identifies the manner in
which the Board believes that Employee has not substantially performed his
duties; (ii) Employee's willful commission of an act of fraud or dishonesty
resulting in material economic or financial injury to Employer; or (iii)
Employee's willful engagement in illegal conduct or gross misconduct, in each
case which is materially and demonstrably injurious to Employer; provided
that, in each case of (i), (ii) or (iii), Employee has received written notice
of the described activity, has been afforded a reasonable opportunity to cure,
or correct the activity described in the notice (provided such circumstances

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are curable or capable of correction), and has failed to substantially cure,
correct or cease the activity, as appropriate.  No act, or failure to act, on
Employee's part shall be deemed "willful" unless done, or omitted to be done,
by Employee not in good faith;

     (f)  the election of Employer to terminate Employee's employment upon the
entry of any order for relief in respect of Employee under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt or similar law
of any jurisdiction now or hereafter in effect;

     (g)  the election of Employee to terminate for Good Reason at any time by
giving Employer written notice of termination.  For purposes of this
Agreement, "Good Reason" shall mean, without Employee's express consent, the
occurrence of any of the following circumstances unless, in the case of
subparagraphs 12(g)(i), (iii) or (iv), such circumstances are fully corrected
(provided such circumstances are capable of correction) prior to the date of
Employee's termination of this Agreement:

          (i)  the assignment to Employee of any duties which are materially
inconsistent with the position in Strouds, Inc. that Employee held on the date
hereof, a significant alteration in the nature or status of Employee's
responsibilities or the conditions of Employee's employment or any other
action by Employer that results in a material diminution in Employee's
position, authority, title, duties or responsibilities;

          (ii)  the relocation of Employer's offices at which Employee is
principally employed on the date hereof to a location outside the greater Los
Angeles metropolitan area;

          (iii)  Employer's material breach of the provisions in this
Agreement;

          (iv)  Employer's reduction of Employee's base salary as provided in
Paragraph 3 (except for across-the-board salary reductions similarly affecting
all management personnel of Employer); or

          (v)  the removal of Employee from the position of Executive Vice
President, Merchandising and Marketing.

     (h)  the election of Employer to terminate Employee's employment without
Cause.

     (i)  Any termination of this Agreement pursuant to subparagraphs (a), (b)
or (c) above, shall be effective on the expiration date of this Agreement or
the date of death or resignation, as the case may be.  Any termination
pursuant to subparagraphs (d), (e), (f), (g), or (h) shall be effective
immediately upon delivery of notice of termination to Employee or Employer, as
the case may be.  For purposes of this Agreement, the term "disability" shall
mean a physical or mental illness or injury of a permanent nature which
prevents Employee from performing his essential duties and other services
which he is employed to perform, even with reasonable accommodation.  Employer

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and Employee will cooperate with each other and comply with all reasonable
requests to determine whether a disability exists and, if so, whether there is
a reasonable accommodation that does not produce undue hardship to Employer's
operation.  It is the parties' intent to comply with the Americans with
Disabilities Act and the California Fair Employment and Housing Act with
respect to disability.

13.  PARTIES' RIGHTS AND OBLIGATIONS UPON TERMINATION.  Except as noted
hereinafter, upon the expiration or earlier termination of this Agreement
Employer's sole obligation shall be to pay Employee or Employee's estate any
compensation remaining unpaid through the effective date of termination, and,
in the case of the death of Employee, to pay to Employee's estate or
designated beneficiary the insurance benefits to which they are entitled, if
any, and Employee shall have no other right to wages, salaries, bonuses,
benefits (except as required by COBRA), fees, commissions, non-vested stock
options, expenses not yet incurred of the types specified in Paragraph 9
hereof, severance pay, or debt or equity interest in Employer not already
owned by Employee.  The parties' rights and obligations on expiration or
earlier termination of this Agreement are further limited as follows:

     (a)  If this Agreement is terminated pursuant to subparagraphs 12(b),
(c), (d), (e), (f), (g), or (h)  Employer shall be obligated to pay Employee's
salary and earned but unused vacation, prorated on a daily basis, through the
date of termination.

     (b)  If this Agreement is terminated pursuant to subparagraphs 12 (f),
(g) or (h), Employer shall be obligated to pay to Employee, in addition to the
obligations set forth in subparagraph 13(a), Employee's base salary and
targeted bonus in effect at the time of termination, for a period of 12 months
(the "Severance Period"), which shall be paid in equal installments at the
same intervals as Employee has been paid during his employment by Employer;
PROVIDED, HOWEVER, that Employee shall be required to seek reasonably
comparable employment or self-employment during the Severance Period and any
compensation or other benefits received by Employee from such employment or
self-employment during the Severance Period shall offset the obligations of
Employer pursuant to this subparagraph 13(b).  Employee shall promptly notify
Employer of any employment or self-employment after the termination of
Employee's employment with Employer and any compensation or other benefits
received from such employment or self-employment during the Severance Period.
Employee shall not be restricted from seeking or accepting employment, except
as limited by Paragraph 10(c).

     (c)  If by reason of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code") any payment or benefit received or to be received by
Employee (whether payable pursuant to the terms of this Agreement ("Contract
Payments") or any other plan, arrangements or agreement with Employer or
Affiliate (as defined below) (collectively with the Contract payments, "Total
Payments") would not be deductible (in whole or part) by Employer, an
Affiliate or other person making such payment or providing such benefit, then
any payment, benefit or distribution by Employer to the Employee (or
acceleration thereof) pursuant to this subparagraph  (the "Severance
Payments") shall be reduced (to zero if necessary) and if the Severance

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Payments are reduced to zero, other Contract Payments shall be reduced (to
zero if necessary) and, if Contract Payments are reduced to zero, other Total
Payments shall be reduced (to zero if necessary) until no portion of the Total
Payments is not deductible by Employer by reason of Section 280G of the Code.
For purposes of this limitation, (1) no portion of the Total Payments the
receipt or enjoyment of which Employee has effectively waived in writing prior
to the date of payment of the Severance Payments shall be taken into account;
(2) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by Employer's independent auditors and
acceptable to Employee does not constitute a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code; (3) the Severance Payments (and,
thereafter, other Contract Payments and other Total Payments) shall be reduced
only to the extent necessary so that the Total Payments  in their entirety
constitute reasonable compensation for services actually rendered within the
meaning of section 280G(b)(4) of the Code, in the opinion of the tax counsel
referred to in clause (2), and (4) the value of any noncash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by Employer s independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.  For purposes of this subparagraph
(c), the term "Affiliate" means Employer's successors, any Person whose
actions result in a Change in Control or any corporation affiliated (or which,
as a result of the completion of the transactions causing a Change in Control
shall become affiliated) with Employer within the meaning of Section 1504 of
the Code.

     (d)  The respective rights and obligations of Employer and Employee
pursuant to Paragraphs 10 and 11 hereof, shall survive the expiration or
earlier termination of this Agreement.

14.  INVESTMENT OPPORTUNITIES.  Subject to Board approval, Employer shall
provide Employee and other management personnel of Employer with the
opportunity to acquire at the time of formation of any internet joint venture
by Employer not more than an aggregate amount of 10% of the equity interest in
such joint venture upon such terms and conditions as the Board may determine.

15.  PERSONS BOUND.  This Agreement shall inure to the benefit of and be
binding upon Employee, his legal representatives and testate or intestate
distributes, and Employer, its successors and assigns.  This Agreement may not
be assigned by Employee.  This Agreement may be assigned by Employer.

16.  NOTICES.  Any notice or request required or permitted under this
Agreement shall be in writing and given or made by hand delivery or registered
or certified mail, return receipt requested, addressed to Employer or to
Employee at Employer's then principal place of business, with a copy to
Employee at Employee's home address, as set forth on the records of Employer,
or to either party hereto at such other address or addresses as such party may
from time to time specify for the purpose in a notice similarly given to the
other party.

17.  NO WAIVER, MODIFICATION.  The waiver of the breach of any term or
condition of this Agreement shall not be deemed to constitute the waiver of

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any other or subsequent breach of the same or any other term or condition.  No
amendment or modification of this Agreement shall be valid or binding unless
made in writing and signed by the other party against whom such waiver or
modification is to be enforced.

18.  GOVERNING LAW.  This Agreement shall be construed and enforced in
accordance with the laws of the State of California applicable to agreements
made and to be performed in said State.

19.  DISPUTES.  Any controversy or claim arising out of or relating to this
Agreement or for the breach thereof or to Employee's employment by Employer,
including without limitation any dispute relating to the termination of this
Agreement or Employee's employment, if not otherwise settled by the parties
hereto, shall be finally settled by arbitration to be held in Los Angeles,
California, in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association.  The parties
hereto hereby consent to personal jurisdiction in Los Angeles, California with
respect to such arbitration.  The award resulting from such arbitration shall
be final and binding upon both parties hereto.  Judgment upon said award may
be entered in any court having jurisdiction thereof.  In the event that any
arbitration or other proceeding shall be brought by Employee or Employer in
respect of an alleged breach by or default in the performance of the other
party hereto, each party shall bear his or its own attorneys' fees and costs
associated with or arising from such arbitration or other proceeding.
Notwithstanding the foregoing, Employer may institute and prosecute to
judgment in any court having jurisdiction an action, suit or proceeding for
equitable or injunctive relief under Paragraph 11 hereof and Employee shall
reimburse Employer for all reasonable costs and expenses (including attorneys'
fees) incurred by Employer, if successful, in connection therewith.

20.  ENTIRE AGREEMENT.  This Agreement represents the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements, understandings, representations, or written or oral, express
or implied, if any, between Employer and Employee.  No representation,
condition, provision or term related to or connected with this Agreement
exists, or has been relied upon by either party hereto except as specifically
set forth herein.

21.  EMPLOYEE S WARRANTY.  Employee represents and warrants to Employer that
Employee is not bound by any agreement or subject to any restriction which
would interfere with or prevent Employee from entering into and carrying out
this Agreement.

22.  SEVERABILITY.  The invalidity of all or any part of any paragraph or
subparagraph of this Agreement shall not render invalid the remainder of this
Agreement or of any such paragraph or subparagraph.

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

Date:  12/10/99                           STROUDS, INC.
       --------                           By:  /s/ Charles Chinni
                                          Title:  CEO

Date:                                     /s/ Harry Brown
       --------                           ---------------
                                          Harry Brown

                                    Page 10<PAGE>

                                                                     Exhibit 4.7

                    AMERICAN TELESOURCE INTERNATIONAL, INC.

                             1998 STOCK OPTION PLAN

1.   PURPOSE.  The purpose of the American TeleSource International, Inc. 1998
     -------
     Stock Option Plan (this "Plan") is to promote the interest of American
     TeleSource International, Inc., a Delaware corporation (the "Company"), and
     its stockholders by providing an effective means to attract, retain and
     increase the commitment of certain individuals and to provide such
     individuals with additional incentive to contribute to the success of the
     Company.

2.   ELIGIBILITY.  Options may be granted under the Plan to directors and
     -----------
     employees of, and advisors and consultants to, the Company, or of any
     parent or subsidiary of the Company (if any) provided, however, in the case
     of consultants or advisors, that such grant be in consideration of bona
     fide services rendered by such consultant or advisor and such services not
     be in connection with the offer or sale of securities in a capital-raising
     transaction. The Committee (defined below) shall select from such eligible
     class the individuals to whom Options shall be granted from time to time.

3.   ADMINISTRATION OF THE PLAN.  The Plan shall be administered by a committee
     --------------------------
     (the "Committee") consisting of at least two outside "non-employee
     directors, " as defined in Rule 16b-3 ("Rule 16b-3") under the Securities
     Exchange Act of 1934, as amended (the "Exchange Act"). A quorum of such
     Committee shall consist of a majority of the members of such Committee, or
     as may be otherwise provided in the Company's bylaws. The Committee shall
     hold meetings at such times and places and conduct its business at such
     meetings as it may determine, subject to any express provisions of the
     Company's bylaws. Acts of a majority of the Committee members attending a
     meeting at which a quorum is present, or such acts as are reduced to or
     approved in writing by the majority of the members of the Committee, shall
     be the valid acts of the Committee. The Committee shall from time to time
     in its discretion determine which individuals shall be granted Options, the
     amount of shares covered by such Options (as defined below), and certain
     other specific terms and conditions of such Options subject to the terms
     and conditions contained herein. Notwithstanding anything in this Plan to
     the contrary, the full Board of Directors of the Company shall determine
     whether any member of the Committee shall be granted Nonqualified Stock
     Options (as defined below) under the Plan, the terms and provisions of the
     respective agreements evidencing such options, the times at which such
     options shall be granted, and the number of shares of Common Stock subject
     to each such option and shall make all determinations under the Plan with
     respect to such options (which determinations of the Board of Directors
     shall be conclusive).The Committee shall have the sole authority and power,
     subject to the express provisions and conditions hereof, to construe this
     Plan and the Options granted hereunder, and to adopt, prescribe, amend, and
     rescind rules and regulations relating to this Plan, and to make all
     determinations necessary or advisable for administering this Plan. The
     Committee shall also have the authority and power to modify any provision
     of this Plan to render the Plan consistent with any amendments to Rule 16b-
     3 or Form S-8 of the Securities Act of 1933, as amended (the "Securities
     Act"), including amendments which permit the grant of Options on terms
     which are less restrictive than the terms set forth herein. The
     interpretation by the Committee of any provision of this Plan with respect
     to any incentive stock option granted hereunder shall be in accordance with
     section 422 of the Internal Revenue Code of 1986 and the regulations issued
     thereunder, as amended from time to time (the "Internal Revenue Code"), in
     order that the incentive stock options granted hereunder ("Incentive Stock
     Options") shall constitute "incentive stock options" within the meaning of
     section 422 of the Internal Revenue Code. Options granted under the Plan
     which are not intended to be Incentive Stock Options are referred to herein
     as "Nonqualified Stock Options." The term "Options" as used herein shall
     refer to Incentive Stock Options and Nonqualified Stock

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     Options, either collectively or without distinction. The interpretation and
     construction by the Committee, if any, of any provisions of the Plan or of
     any Option granted hereunder shall be final and conclusive. No member of
     the Committee shall be liable for any action or determination made in good
     faith with respect to the Plan or any Option granted hereunder.

4.   SHARES SUBJECT TO THE PLAN.  Subject to the provisions of Section 6, the
     --------------------------
     number of shares subject to Options granted hereunder shall not exceed
     2,000,000 shares of the Company's authorized but unissued or reacquired
     Common Stock (the "Common Stock"). Such number of shares shall be subject
     to adjustment as provided in Section 6 below. Shares that by reason of the
     expiration, termination, cancellation or surrender of an Option are no
     longer subject to purchase pursuant to an Option granted under the Plan
     (other than by reason of exercise of such Option) may be reoptioned
     hereunder. The maximum number of shares of Common Stock for which Options
     granted hereunder to an eligible person shall not exceed 50% of the total
     number of shares authorized for issuance hereunder.

5.   TERMS AND CONDITIONS.
     --------------------

(A)  Option Price.  Each Option shall state the number of shares that may be
     purchased thereunder, shall expressly designate such Option as an Incentive
     Stock Option or a Nonqualified Stock Option, and shall state the option
     price per share (the "Option Price") which shall be paid in the manner
     specified in this Section 5(A) in order to exercise such Option.  The
     Option Price shall not be less than the lesser of (i) 100% of the fair
     market value of a share on the date the Option is granted or (ii) the
     average fair market value of a share during the 10-day trading period
     immediately preceding the day the Option is granted (but not less than 85%
     of the fair market value on the date of grant) with respect to any
     Nonqualified Stock Option granted under the Plan.  The Option Price shall
     not be less than 100% of the fair market value of the shares on the date
     the Option is granted with respect to any Incentive Stock Option.

          For purposes of the Plan, the fair market value per share of
     Common Stock on any date shall be deemed to be the closing price of a share
     of Common Stock on the principal national securities exchange on which the
     Common Stock is then listed or admitted to trading, if the Common Stock is
     then listed or admitted to trading on any national securities exchange. The
     closing price shall be the last reported sale price regular way, or, in
     case no such sale takes place on such day, the average of the closing bid
     and asked prices regular way, as reported by such exchange. If the Common
     Stock is not then so listed on a national securities exchange, the fair
     market value per share of Common Stock on any date shall be deemed to be
     the closing price (the last reported sale price regular way) in the over-
     the-counter market as reported by the Nasdaq National Market, if the Common
     Stock closing price is then reported on the Nasdaq National Market, or, if
     the Common Stock closing price of the Common Stock is not then reported by
     the Nasdaq National Market, shall be deemed to be the mean of the highest
     closing bid and lowest closing asked price of the Common Stock in the over-
     the-counter market as reported on the Nasdaq Stock Market or, if the Common
     Stock is not then quoted by Nasdaq Stock Market, as furnished by any member
     of the National Association of Securities Dealers, Inc. selected from time
     to time by the Company for that purpose. If no member of the National
     Association of Securities Dealers, Inc. furnishes quotes with respect to
     the Common Stock of the Company, such fair market value shall be determined
     by resolution of the Committee. Notwithstanding the foregoing provisions of
     this Section 5(A), if the Committee shall at any time determine that it is
     impracticable to apply the foregoing methods of determining fair market
     value, the Committee is empowered to adopt other reasonable methods for
     such purpose. The Committee may, if it deems it appropriate, engage the
     services of an independent qualified expert or experts to appraise the
     value of the Common Stock.
          Options under the Plan may be exercised by payment of the Option
     Price per share in cash or, if the Common Stock is then registered under
     the Exchange Act and an established

                                       2
<PAGE>

     market exists for the Common Stock, by delivery of the equivalent fair
     market value of Common Stock or by a "cashless exercise" procedure in which
     an Optionee is permitted to exercise an Option by arranging with the
     Company and his or her broker to deliver the appropriate Option Price from
     the concurrent market sale of the acquired shares, or a combination of the
     foregoing (subject to the discretion of the Committee). An employee's
     withholding tax due upon exercise of a Nonqualified Stock Option may be
     satisfied either by a cash payment or the retention from the exercise of a
     number of shares of Common Stock with a fair market value equal to the
     required withholding tax, as the Committee may permit.

               In addition, with respect to the exercise of any Nonqualified
          Stock Option, the Committee (or an authorized representative) shall
          advise the Optionee, upon receipt of notice of intent to exercise such
          Option, of the income tax withholding consequences to such Optionee of
          such exercise, the amount of the appropriate withholding tax and any
          other payments due by reason thereof.  Such Optionee must satisfy all
          of the preceding payment requirements in order to receive stock upon
          exercise of such Option.

     (B)  Option Period. Any Options granted pursuant to this Plan must be
          -------------
          granted within three years from the date the Plan was adopted by the
          Board of Directors of the Company (September 9, 1998).

               Each Option shall state the date upon which it is granted.
          Subject to the requirements under the Internal Revenue Code with
          respect to Incentive Stock Options, each Option shall be exercisable
          at such times and during such period as is determined by the Committee
          and set forth in the agreement evidencing the Option, but in no event
          shall an Option be exercisable after the expiration of ten years from
          the date of grant.  Subject to such limitations, the Committee shall
          have broad discretion to determine the circumstances under which each
          Option shall become exercisable, remain exercisable and terminate, and
          the Committee may waive any condition, restriction or limitation on
          the exercisability or duration of any outstanding Option.

     (C)  Assignability.  An Option granted pursuant to this Plan shall be
          -------------
          exercisable during the Optionee's lifetime only by the Optionee and
          shall not be assignable or transferable by the Optionee (except with
          the Committee's prior written approval, and only in any such
          additional circumstances as shall not affect the Plan's qualification
          with the requirements of the incentive stock option provisions of the
          Internal Revenue Code, the requirements of Rule 16b-3 under the
          Exchange Act, or the plan eligibility requirements for the use of Form
          S-8 of the Securities Act), and shall not be subject to levy,
          attachment or similar process. Upon any other attempt to transfer,
          assign, pledge or otherwise dispose of Options granted under this
          Plan, such Options shall immediately terminate and become null and
          void.

     (D)  Limit on 10% Shareholders. No Incentive Stock Option may be granted
          --------------------------
          under this Plan to any individual who would, immediately after the
          grant of such Incentive Stock Option directly or indirectly own more
          than 10% of the total combined voting power of all classes of stock of
          the Company or of any parent or subsidiary corporation unless (i) such
          Incentive Stock Option is granted at an Option Price not less than
          110% of the fair market value of a share on the date the Incentive
          Stock Option is granted, and (ii) such Incentive Stock Option expires
          on a date not later than five years from the date the Incentive Stock
          Option is granted.

     (E)  Limits on Options. Except as provided herein, an individual may be
          -----------------
          granted one or more Options, provided that the aggregate fair market
          value (determined as of the time the Option is granted) of Common
          Stock for which an individual may be granted Incentive Stock Options
          that are first exercisable in any calendar year (under all stock
          option plans of the Company and any parent or subsidiary corporations,
          if any) may not exceed $100,000 .

     (F)  Rights as Shareholder. An Optionee, or a transferee by will or
          ---------------------
          inheritance of an Option, shall have no rights with respect to any
          shares covered by an Option until the date of the issuance of a stock
          certificate for such shares and the recording of such issuance upon
          the Company's stock

                                       3
<PAGE>

          ledger by its duly appointed, regular transfer agent. No adjustment
          shall be made for dividends (ordinary or extraordinary, whether in
          cash, securities or other property) or distributions or other rights
          for which the record date is prior to such date, except as provided in
          Section 6 hereof.

     (G)  Additional Provisions. The Options granted under this Plan shall
          ---------------------
          contain such other provisions as the Board or Committee shall deem
          advisable, including, without limitation, further restrictions upon
          the exercise of the Option. Any Incentive Stock Option shall contain
          such limitations and restrictions upon the exercise of the Option as
          shall be necessary in order that the Option shall be an "incentive
          stock option" as defined in section 422 of the Internal Revenue Code.

     (H)  Compliance With Securities Laws. At the time of exercise of any
          -------------------------------
          Option, the Company may require the Optionee to execute any documents
          or take any action which may then be necessary to comply with the
          Securities Act and the rules and regulations adopted thereunder, or
          any other applicable federal or state laws regulating the sale and
          issuance of securities, and the Company may, if it deems necessary,
          include provisions in the Options to assure such compliance. The
          Company may from time to time change its requirements with respect to
          enforcing compliance with federal and state securities laws, including
          the request for, or insistence upon, letters of investment intent,
          such requirements to be determined by the Company in its judgment as
          necessary to assure compliance with such securities laws. Such changes
          may be made with respect to any particular Option or to any stock
          issued upon exercise thereof.

6.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.  In the event of any change in
     ------------------------------------------
the number of issued and outstanding shares of Common Stock which results from a
stock split, reverse stock split, the payment of a stock dividend or any other
change in the capital structure of the Company, such as a reorganization or
recapitalization, the Committee shall appropriately adjust (a) the maximum
number of shares which may be issued under this Plan, (b) the number of shares
subject to each outstanding Option, and (c) the Option Price per share thereof,
so that upon exercise of the Option the Optionee shall receive the same number
of shares the Optionee would have received had the Optionee been the holder of
all shares subject to such outstanding Options immediately before the effective
date of such change in the number of issued shares of the Common Stock of the
Company. Any such adjustment shall not result in or entitle the Optionee to the
issuance of fractional shares. Instead, appropriate adjustments to any such
Option and, in the aggregate, all other options of the Company of the same class
(that is, Incentive Stock Options or Nonqualified Stock Options) held by each
Optionee shall be made so that such Option and other options of the same class,
if any, held by any such Optionee cover the greatest whole number of shares of
the Common Stock which does not exceed the number of shares which would be
covered applying such adjustments in the absence of any restriction on the
issuance of fractional shares. Any excess fractional share shall be redeemed in
cash at the then-current fair market value of the Common Stock (determined as
provided in Section 5(A) hereof) multiplied by the appropriate fraction of a
share.

7.   TERMINATION OR AMENDMENT OF THE PLAN.  The Board of Directors may at any
     ------------------------------------
time suspend, amend, or terminate this Plan. No amendment may be adopted without
shareholder approval that will: (a) increase the number of shares of Common
Stock which may be issued under this Plan; (b) materially modify the
requirements as to eligibility for participation in this Plan, or (c) effect any
other change requiring shareholder approval under the Internal Revenue Code. No
amendment or termination of the Plan shall, without the consent of the Optionee,
materially decrease any rights or benefits under any Option previously granted
under this Plan.

                                       4

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