<PAGE>

   As filed with the Securities and Exchange Commission on June 28, 2000

                                                          Registration No. 333-
-------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                             ----------------------

                                   ITRON, INC.
             (Exact name of registrant as specified in its charter)

          Washington                                      91-1011792
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)


                              2818 N. Sullivan Road
                         Spokane, Washington 99216-1897
          (Address of principal executive offices, including zip code)

               ITRON, INC. 2000 STOCK INCENTIVE COMPENSATION PLAN
                            (Full title of the plan)


                                LeRoy D. Nosbaum
                      President and Chief Executive Officer
                                   Itron, Inc.
                              2818 N. Sullivan Road
                         Spokane, Washington 99216-1897
                                 (509) 924-9900
 (Name, address and telephone number, including area code, of agent for service)
                             ----------------------
                                    Copy to:

                               LINDA A. SCHOEMAKER
                                Perkins Coie LLP
                          1201 Third Avenue, 48th Floor
                         Seattle, Washington 98101-3099
                             ----------------------


<TABLE>
<CAPTION>

                                          CALCULATION OF REGISTRATION FEE
------------------------------------------ ----------- -------------------- ------------------- --------------

Title of Securities                          Number to        Proposed Maximum       Proposed Maximum      Amount of
to Be Registered                             Be               Offering Price         Aggregate             Registration
Registered(1)                                Offering Price   Fee
------------------------------------------   --------------   --------------------   -------------------   --------------
<S>                                          <C>              <C>                    <C>                   <C>

Common Stock, par value $0.01 per share,
subject to outstanding options underthe:
Itron, Inc. 2000 Stock Incentive                  1,800,000   $         13,725,000(2)$        13,725,000(2)$        3,624
Compensation Plan
------------------------------------------   --------------   --------------------   -------------------   --------------
</TABLE>


(1)      Together with an indeterminate  number of additional shares that may be
         necessary to adjust the number of shares reserved for issuance pursuant
         to such employee  benegit plan as the result of any future stock split,
         stock dividend or similar  adjustment of the  Registrant's  outstanding
         Common Stock.

(2)      Estimated  solely for the purpose of calculating the  registration  fee
         pursuant to Rule 457(c) under the  Securities  Act of 1933, as amended,
         based on the average of high and low sales  prices for the Common Stock
         on June 26,  2000,  as  reported  for such date on the Nasdaq  National
         Market.




<PAGE>



                                     PART II

                 INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3.  INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The  following   documents  filed  with  the  Securities  and  Exchange
Commission  (the  "Commission")  are hereby  incorporated  by  reference in this
Registration Statement:

                  (a) The  registrant's  annual report on Form 10-K for the year
ended  December  31,  1999  filed on March  30,  2000,  which  contains  audited
financial  statements for the most recent fiscal year for which such  statements
have been filed;

                  (b) The registrant's quarterly report on Form 10-Q for the
quarter ended March 31, 2000 filed on May 15, 2000;

                  (c) All other  reports  filed by the  registrant  pursuant  to
Section  13(a) or 15(d) of the  Securites  Exchange Act of 1934, as amended (the
"Exchange  Act"),  since the end of the fiscal year covered by the Annual Report
on Form 10-K referred to in (a) above; and

                  (d) The description of the registrant's common stock contained
in the  registration  statement on Form 8-A filed on September  18, 1993,  under
Section 12(g) of the Exchange Act, including any amendments or reports filed for
the purpose of updating such description.

         All  documents  filed by the  registrant  pursuant to  Sections  13(a),
13(c), 14 and 15(d) of the Exchange Act after the date hereof,  and prior to the
filing of a post-effective amendment which indicates that the securities offered
hereby have been sold or which  deregisters  the securities  covered hereby then
remaining unsold, shall also be deemed to be incorporated by reference into this
Registration  Statement  and to be a part hereof  commencing  on the  respective
dates on which such documents are filed.

Item 4.  DESCRIPTION OF SECURITIES

         Not applicable.

Item 5.  INTERESTS OF NAMED EXPERTS AND COUNSEL

         None.

Item 6.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Sections  23B.08.500  through  23B.08.600  of the  Washington  Business
Corporation  Act (the  "WBCA")  authorize a court to award,  or a  corporation's
board of directors to grant,  indemnification to directors and officers on terms
sufficiently  broad to permit  indemnification  under certain  circumstances for
liabilities   arising  under  the  Securities  Act  of  1933,  as  amended  (the
"Securities Act"). Section 10 of the registrant's Restated Bylaws (the "Bylaws")
provides for  indemnification  of the  registrant's  directors and officers and,
with Board approval, the registrant's employees and agents to the maximum extent
permitted by Washington law. Certain of the directors of the registrant, who are
affiliated  with  principal   shareholders  of  the  registrant,   also  may  be
indemnified  against liability they may incur in their capacity as a director of
the  registrant,  including  pursuant to a liability  insurance  policy for such
purpose.

         Section  23B.08.320  of the WBCA  authorizes a  corporation  to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director,  except in certain circumstances  involving
intentional misconduct, knowing violations of law or unlawful distributions,  or
any transaction from which the director  personally receives a benefit in money,
property or services to which the director is not legally entitled. Article 9 of
the registrant's  Restated Articles of Incorporation  (the "Articles")  contains
provisions implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to the registrant and its shareholders.

         Any  repeal of or  modification  to the  Bylaws  and  Articles  may not
adversely affect any right of indemnification  under the Bylaws or Articles of a
director or officer who is or was a director or officer of the registrant at the
time of such repeal or modification.

         The registrant has entered into an indemnification  agreement with each
of its executive  officers and directors in which the registrant  agrees to hold
harmless and indemnify the officer or director to the fullest  extent  permitted
by Washington law. In addition,  the registrant  agrees to indemnify the officer
or director against any and all losses, claims, damages, liabilities or expenses
incurred in  connection  with any actual,  pending or threatened  action,  suit,
claim or proceeding,  whether civil,  criminal,  administrative or investigative
and whether  formal or  informal,  in which the  officer or director  is, was or
becomes  involved by reason of the fact that the officer or director is or was a
director,  officer, employee or agent of the registrant, or that being or having
been such a  director,  officer,  employee  or agent,  such  director  is or was
serving at the  request of the  registrant  as a  director,  officer,  employee,
trustee or agent of another  corporation  or of a  partnership,  joint  venture,
trust or other enterprise, including service with respect to an employee benefit
plan,  whether the basis of such  proceeding is alleged  action (or inaction) by
the  officer  or  director  in an  official  capacity  as a  director,  officer,
employee,  trustee or agent.  The officer or director is not indemnified for any
action,  suit,  claim or  proceeding  instituted  by or at the  direction of the
officer or director  unless such action,  suit,  claim or  proceeding  is or was
authorized  by the  registrant's  Board of  Directors or unless the action is to
enforce the provisions of the indemnification agreement.

         No indemnity pursuant to the indemnification agreements may be provided
by the registrant on account of any suit in which a final, unappealable judgment
is rendered  against an officer or director  for an  accounting  of profits made
from the  purchase  or sale by the  officer or  director  of  securities  of the
registrant in violation of the  provisions of Section 16(b) of the Exchange Act,
and  amendments  thereto,  or for  damages  that have been paid  directly to the
executive  officer  or  director  by an  insurance  carrier  under a  policy  of
directors' and officers' liability insurance maintained by the registrant.

         Officers and directors of the registrant are covered by insurance (with
certain exceptions and certain limitations) that indemnifies them against losses
and liabilites  arising from certain alleged  "wrongful acts," including alleged
errors or  misstatements,  or certain other  alleged  wrongful acts or omissions
constituting neglect or breach of duty.

Item 7.  EXEMPTION FROM REGISTRATION CLAIMED

         Not applicable.

Item 8.  EXHIBITS

      Exhibit
      Number                              Description

       5.1           Opinion of Perkins Coie LLP regarding legality of the
                     Common Stock being registered

      23.1           Consent of Deloitte & Touche LLP, Independent Auditors

      23.2           Consent of Perkins Coie LLP (included in opinion filed
                     as Exhibit 5.1)

      24.1           Power of Attorney (see signature page)

      99.1           Itron, Inc. 2000 Stock Incentive Compensation Plan

Item 9.  UNDERTAKINGS

A.       The undersigned registrant hereby undertakes:

         (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:

                  (i)  To include any prospectus required by Section 10(a)(3)
 of the Securities Act;

                  (ii) To reflect in the  prospectus any facts or events arising
after the  effective  date of this  Registration  Statement  (or the most recent
post-effective  amendment  thereof)  which,  individually  or in the  aggregate,
represent a fundamental change in the information set forth in this Registration
Statement; and

                  (iii) To include any material  information with respect to the
plan of distribution not previously disclosed in this Registration  Statement or
any material change to such information in this Registration Statement;

provided,  however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information  required  to be  included in a  post-effective  amendment  by those
paragraphs is contained in periodic reports filed by the registrant  pursuant to
Section  13 or  Section  15(d) of the  Exchange  Act that  are  incorporated  by
reference in this Registration Statement.

         (2) That,  for the  purpose  of  determining  any  liability  under the
Securities Act, each such  post-effective  amendment shall be deemed to be a new
registration  statement  relating to the  securities  offered  therein,  and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

         (3) To remove from registration by means of a post-effective  amendment
any of the securities being registered which remain unsold at the termination of
the offering.

B.  The  undersigned   registrant   hereby  undertakes  that,  for  purposes  of
determining  any  liability  under  the  Securities  Act,  each  filing  of  the
registrant's  annual  report  pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where  applicable,  each filing of an employee  benefits plan's annual
report  pursuant to Section 15(d) of the Exchange Act) that is  incorporated  by
reference  in  this  Registration   Statement  shall  be  deemed  to  be  a  new
registration  statement  relating to the  securities  offered  therein,  and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

C. Insofar as indemnification  for liabilities  arising under the Securities Act
may  be  permitted  to  directors,  officers  and  controlling  persons  of  the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Commission such  indemnification  is
against  public  policy as expressed in the  Securities  Act and is,  therefore,
unenforceable.  In the  event  that a claim  for  indemnification  against  such
liabilities  (other than the payment by the  registrant of expenses  incurred or
paid by a  director,  officer or  controlling  person of the  registrant  in the
successful  defense of any  action,  suit or  proceeding)  is  asserted  by such
director,  officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been  settled by  controlling  precedent,  submit to a court of  appropriate
jurisdiction the question whether such  indemnification  by it is against public
policy as  expressed  in the  Securities  Act and will be  governed by the final
adjudication of such issue.




<PAGE>


                                   SIGNATURES

         Pursuant  to the  requirements  of the  Securities  Act  of  1933,  the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized,  in the City of  Spokane,  State of  Washington,  on the 28th day of
June, 2000.

                                                      ITRON, INC.

                                             By: /s/ LEROY D. NOSBAUM
                                                     ---------------------
                                                     LeRoy D. Nosbaum
                                                     President and 
                                                     Chief Executive Officer


                                POWER OF ATTORNEY

         Each person whose individual  signature appears below hereby authorizes
LeRoy D. Nosbaum and David G. Remington, or either of them, as attorneys-in-fact
with full  power of  substitution,  to  execute in the name and on the behalf of
each person,  individually  and in each capacity stated below,  and to file, any
and  all  amendments  to  this  Registration  Statement,  including  any and all
post-effective amendments.

         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities indicated below on the 28th day of June, 2000.

        Signature                                   Title

/s/ LEROY D. NOSBAUM                President and Chief Executive Officer
--------------------                (Principal Executive Officer)
    LeRoy D. Nosbaum


/s/ DAVID G. REMINGTON              Vice President and Chief Financial Officer
----------------------              (Principal Financial and Accounting Officer)
    David G. Remington


/s/ S. EDWARD WHITE                 Chairman of the Board
--------------------
    S. Edward White


/s/ MICHAEL B. BRACY                Director
----------------------
    Michael B. Bracy


/s/ MICHAEL J. CHESSER              Director
----------------------
    Michael J. Chesser


/s/ TED C. DEMERRITT                Director
---------------------
    Ted C. DeMerritt


/s/ JON E. ELIASSEN                 Director
--------------------
    Jon E. Eliassen


/s/ MARY ANN PETERS                 Director
--------------------
    Mary Ann Peters


/s/ PAUL A. REDMOND                 Director
--------------------
    Paul A. Redmond


/s/ GRAHAM M. WILSON                Director
--------------------
    Graham M. Wilson




<PAGE>



                                INDEX TO EXHIBITS

      Exhibit
      Number                             Description

       5.1           Opinion of Perkins Coie LLP regarding legality of the
                     Common Stock being registered

      23.1           Independent Auditors Consent

      23.2           Consent of Perkins Coie LLP (included in opinion filed
                     as Exhibit 5.1)

      24.1           Power of Attorney (see signature page)

      99.1           Itron, Inc. 2000 Stock Incentive Compensation Plan






                                                                     EXHIBIT 5.1


                          [Perkins Coie LLP Letterhead]



                                  June 28, 2000



Itron, Inc.
2818 N. Sullivan Road
Spokane, Washington  99216-1897

         Re:      Registration Statement on Form S-8 of Shares of Common Stock,
                  par value $0.01 per share, of Itron, Inc.

Ladies and Gentlemen:

         We have acted as counsel to you in connection with the preparation of a
Registration  Statement  on Form S-8 (the  "Registration  Statement")  under the
Securities  Act of 1933,  as amended (the "Act"),  which you are filing with the
Securities  and Exchange  Commission  with respect to up to 1,800,000  shares of
Common  Stock,  par value $0.01 per share,  which may be issued  pursuant to the
Itron, Inc. 2000 Stock Incentive Compensation Plan (the "Plan").

         We have  examined the  Registration  Statement  and such  documents and
records of the  Company  and other  documents  as we have  deemed  relevant  and
necessary  for the  purpose of this  opinion.  In giving  this  opinion,  we are
assuming the authenticity of all instruments  presented to us as originals,  the
conformity with originals of all  instruments  presented to us as copies and the
genuineness of all signatures.

         Based upon and subject to the foregoing, we are of the opinion that any
shares  that may be issued  pursuant to the Plan have been duly  authorized  and
that,
  upon  the  due  execution  by the  Company  and the  registration  by its
registrar of such shares, the sale thereof by the Company in accordance with the
terms of the Plan and the receipt of  consideration  therefor in accordance with
the terms of the Plan,  such  shares  will be  validly  issued,  fully  paid and
nonassessable.

         We hereby  consent to the  filing of this  opinion as an exhibit to the
Registration  Statement.  In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.

                                              Very truly yours,

                                              /s/ PERKINS COIE LLP


                                                                    

                                                                    EXHIBIT 23.1

                          INDEPENDENT AUDITORS CONSENT

We consent to the incorporation by reference in this  Registration  Statement by
Itron,  Inc. on Form S-8 of our report  dated  March 28,  2000,  included in
Itron, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999.

                                                     /s/ Deloitte & Touche LLP

Seattle, Washington
June 28, 2000






                                                                    EXIHBIT 99.1

                                   ITRON, INC.

                     2000 STOCK INCENTIVE COMPENSATION PLAN

                               SECTION 1. PURPOSE

         The purpose of the Itron,  Inc. 2000 Stock Incentive  Compensation Plan
(the "Plan") is to enhance the  long-term  shareholder  value of Itron,  Inc., a
Washington  corporation (the "Company"),  by offering  opportunities to selected
persons to  participate  in the Company's  growth and success,  and to encourage
them to remain in the service of the Company  and its Related  Corporations  (as
defined in  Section  2) and to  acquire  and  maintain  stock  ownership  in the
Company.

                             SECTION 2. DEFINITIONS

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

         "Award" means an award or grant made  pursuant to the Plan,  including,
without  limitation,  awards or  grants  of Stock  Awards  and  Options,  or any
combination of the foregoing.

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

         "Cause"  means  dishonesty,  fraud,  misconduct,  unauthorized  use  or
disclosure  of  confidential  information  or trade  secrets,  or  conviction or
confession of a crime punishable by law (except minor violations),  in each case
as  determined  by the  Plan  Administrator,  and  its  determination  shall  be
conclusive and binding.

         "Code" means the Internal Revenue Code of 1986, as amended
 from time to
time.

         "Common Stock" means the common stock, par value $0.01 per share, of
the Company.

         "Corporate Transaction" has the meaning set forth in Section 12.3.1.

         "Disability," unless otherwise defined by the Plan Administrator, means
a mental or physical impairment of the Participant that is expected to result in
death or that has lasted or is  expected to last for a  continuous  period of 12
months or more and that causes the  Participant to be unable,  in the opinion of
the  Company,  to  perform  his or her  duties  for  the  Company  or a  Related
Corporation and to be engaged in any substantial gainful activity.

         "Effective Date" has the meaning set forth in Section 15.

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

         "Fair Market Value" shall be as  established  in good faith by the Plan
Administrator  or (a) if the  Common  Stock is  listed  on the  Nasdaq  National
Market,  the closing  sales price for the Common Stock as reported by the Nasdaq
National Market for a single trading day or (b) if the Common Stock is listed on
the New York Stock  Exchange or the American Stock  Exchange,  the closing sales
price for the Common Stock as such price is  officially  quoted in the composite
tape of  transactions  on such exchange for a single trading day. If there is no
such  reported  price for the Common Stock for the date in  question,  then such
price  on the  last  preceding  date  for  which  such  price  exists  shall  be
determinative of Fair Market Value.

         "Grant Date" means the date on which the Plan  Administrator  completes
the  corporate  action  relating  to the  grant of an Award  and all  conditions
precedent to the grant have been  satisfied,  provided  that  conditions  to the
exercisability or vesting of Awards shall not defer the Grant Date.

         "Incentive  Stock  Option"  means an Option to  purchase  Common  Stock
granted  under  Section 7 with the  intention  that it qualify as an  "incentive
stock option" as that term is defined in Section 422 of the Code.

         "Nonqualified  Stock Option"  means an Option to purchase  Common Stock
granted under Section 7 other than an Incentive Stock Option.

         "Option" means the right to purchase Common Stock granted under 
Section 7.

         "Option Term" has the meaning set forth in Section 7.3.

         "Parent,"  except as  otherwise  provided in Section 8.3 in  connection
with  Incentive  Stock  Options,  means any  entity,  whether  now or  hereafter
existing, that directly or indirectly controls the Company.

         "Participant" means (a) the person to whom an Award is granted; (b) for
a Participant  who has died, the personal  representative  of the  Participant's
estate,  the  person(s)  to whom the  Participant's  rights under the Award have
passed by will or by the  applicable  laws of descent and  distribution,  or the
beneficiary  designated in  accordance  with Section 11; or (c) the person(s) to
whom an Award has been transferred in accordance with Section 11.

         "Plan  Administrator"  means the Board or any  committee or  committees
designated by the Board or any person to whom the Board has delegated  authority
to administer the Plan under Section 3.1.

         "Related Corporation" means any Parent or Subsidiary of the Company.

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

         "Stock  Award"  means shares of Common  Stock or units  denominated  in
Common Stock  granted  under  Section 9, the rights of ownership of which may be
subject to restrictions prescribed by the Plan Administrator.

         "Subsidiary," except as otherwise provided in Section 8.3 in connection
with Incentive  Stock  Options,  means any entity that is directly or indirectly
controlled by the Company.

         "Successor Corporation" has the meaning set forth in Section 12.3.2.

         "Termination Date" has the meaning set forth in Section 7.6.

                            SECTION 3. ADMINISTRATION

3.1      Plan Administrator

         The Plan  shall be  administered  by the Board  and/or a  committee  or
committees (which term includes  subcommittees)  appointed by, and consisting of
two or more  members of, the Board (a "Plan  Administrator").  If and so long as
the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
the Board shall  consider in selecting  the members of any  committee  acting as
Plan  Administrator,  with  respect to any  persons  subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as  contemplated  by Section 162(m) of the Code and (b)  "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. Notwithstanding
the foregoing,  the Board may delegate the  responsibility for administering the
Plan with  respect to  designated  classes  of  eligible  persons  to  different
committees  consisting  of two or more  members  of the  Board,  subject to such
limitations as the Board deems  appropriate.  Committee  members shall serve for
such term as the Board may  determine,  subject  to  removal by the Board at any
time. To the extent  consistent with applicable law, the Board may authorize one
or more senior  executive  officers of the Company to grant Awards to designated
classes of eligible persons,  within the limits  specifically  prescribed by the
Board.

3.2      Administration and Interpretation by Plan Administrator

         Except for the terms and  conditions  explicitly set forth in the Plan,
the Plan Administrator  shall have exclusive  authority,  in its discretion,  to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common  Stock  subject to an Award,  all  terms,  conditions,  restrictions  and
limitations,  if any, of an Award and the terms of any instrument that evidences
the  Award.  The Plan  Administrator  shall  also have  exclusive  authority  to
interpret the Plan and the terms of any instrument  evidencing the Award and may
from time to time adopt and change rules and regulations of general  application
for the Plan's  administration.  The Plan Administrator's  interpretation of the
Plan and its rules and  regulations,  and all actions  taken and  determinations
made by the Plan  Administrator  pursuant to the Plan,  shall be conclusive  and
binding on all parties involved or affected. The Plan Administrator may delegate
administrative duties to such of the Company's officers as it so determines.

                      SECTION 4. STOCK SUBJECT TO THE PLAN

4.1      Authorized Number of Shares

         Subject to  adjustment  from time to time as provided in Section  12.1,
the number of shares of Common Stock that shall be available for issuance  under
the Plan shall be 1,800,000.

         In  addition,  (a) any  authorized  shares  not  issued or  subject  to
outstanding awards under the Company's 1989 Stock Option Plan (the "Prior Plan")
on the Effective Date and (b) any shares subject to outstanding awards under the
Prior Plan on the Effective  Date that cease to be subject to such awards (other
than by reason of  exercise  or payment  of the  awards to the  extent  they are
exercised  for or  settled  in  shares),  up to an  aggregate  maximum of 25,000
shares,  which shares shall cease, as of the date of shareholder approval of the
Plan, to be available be available for grant and issuance  under the Prior Plan,
but shall be available for issuance under the Plan.

         Shares  issued  under  the  Plan  shall be drawn  from  authorized  and
unissued shares or shares now held or subsequently acquired by the Company.

4.2      Limitations

         (a)  Subject to  adjustment  from time to time as  provided  in Section
12.1,  not more than an  aggregate  of 400,000  shares  shall be  available  for
issuance pursuant to grants of Stock Awards under the Plan.

         (b)  Subject to  adjustment  from time to time as  provided  in Section
12.1, not more than 300,000 shares of Common Stock may be made subject to Awards
under the Plan to any  individual in the aggregate in any one fiscal year of the
Company,  except that the Company may make  additional  one-time grants of up to
600,000 shares to newly hired  individuals,  such  limitation to be applied in a
manner  consistent with the requirements of, and only to the extent required for
compliance   with,  the  exclusion  from  the  limitation  on  deductibility  of
compensation under Section 162(m) of the Code.

4.3      Reuse of Shares

         Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the  Award  to  the  extent  it is  exercised  for  or  settled  in  vested  and
nonforfeitable  shares) shall again be available for issuance in connection with
future grants of Awards under the Plan; provided,  however, that for purposes of
Section  4.2,  any  such  shares  shall  be  counted  in  accordance   with  the
requirements of Section 162(m) of the Code.

                             SECTION 5. ELIGIBILITY

         Awards may be granted under the Plan to those  officers,  directors and
employees of the Company and its Related  Corporations as the Plan Administrator
from  time to time  selects.  Awards  may also be made to  consultants,  agents,
advisors and independent contractors who provide services to the Company and its
Related Corporations; provided, however, that such Participants render bona fide
services  that are not in  connection  with the offer and sale of the  Company's
securities in a  capital-raising  transaction  and do not directly or indirectly
promote or maintain a market for the Company's securities.

                                SECTION 6. AWARDS

6.1      Form and Grant of Awards

         The  Plan  Administrator   shall  have  the  authority,   in  its  sole
discretion,  to determine the type or types of Awards to be made under the Plan.
Such  Awards may  include,  but are not  limited to,  Incentive  Stock  Options,
Nonqualified Stock Options and Stock Awards.  Awards may be granted singly or in
combination.

6.2      Settlement of Awards

         The Company may settle Awards  through the delivery of shares of Common
Stock,  cash  payments,  the granting of replacement  Awards or any  combination
thereof  as the  Plan  Administrator  shall  determine.  Any  Award  settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Plan Administrator shall determine.  The Plan Administrator
may permit or require the deferral of any Award  payment,  subject to such rules
and procedures as it may establish, which may include provisions for the payment
or crediting of interest,  or dividend  equivalents,  including  converting such
credits into deferred stock equivalents.  The Plan Administrator may at any time
offer to buy out,  for a payment in cash or Common  Stock,  an Award  previously
granted  based on such  terms and  conditions  as the Plan  Administrator  shall
establish and communicate to the Participant at the time such offer is made.

6.3      Acquired Company Awards

         Notwithstanding  anything  in  the  Plan  to  the  contrary,  the  Plan
Administrator  may grant Awards under the Plan in substitution for awards issued
under other plans,  or assume under the Plan awards issued under other plans, if
the  other  plans  are or were  plans  of  other  acquired  entities  ("Acquired
Entities")  (or  the  parent  of the  Acquired  Entity)  and the  new  Award  is
substituted, or the old award is assumed, by reason of a merger,  consolidation,
acquisition  of  property  or  stock,   reorganization   or   liquidation   (the
"Acquisition  Transaction").  In the event that a written agreement  pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement  sets  forth the  terms  and  conditions  of the  substitution  for or
assumption  of  outstanding  awards  of the  Acquired  Entity,  said  terms  and
conditions  shall be deemed to be the action of the Plan  Administrator  without
any further  action by the Plan  Administrator,  except as may be  required  for
compliance  with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Participants.

                          SECTION 7. AWARDS OF OPTIONS

7.1      Grant of Options

         The Plan  Administrator  is  authorized  under  the  Plan,  in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.

7.2      Option Exercise Price

         The  exercise  price for shares  purchased  under an Option shall be as
determined  by the Plan  Administrator,  but  shall not be less than 100% of the
Fair  Market  Value of the  Common  Stock on the  Grant  Date  with  respect  to
Incentive  Stock  Options and not less than 85% of the Fair Market  Value of the
Common Stock on the Grant Date with respect to Nonqualified  Stock Options.  For
Incentive  Stock  Options  granted  to a more than 10%  shareholder,  the Option
exercise price shall be as specified in Section 8.2.

7.3      Term of Options

         The term of each Option (the "Option  Term") shall be as established by
the Plan  Administrator  or, if not so established,  shall be ten years from the
Grant Date.  For Incentive  Stock  Options,  the maximum Option Term shall be as
specified in Sections 8.2 and 8.4.

7.4      Exercise of Options

         The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the  installments  in which,  the
Option  shall vest and become  exercisable,  which  provisions  may be waived or
modified by the Plan  Administrator  at any time. If not so  established  in the
instrument  evidencing the Option,  the Option shall vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:

Period of Participant's Continuous Employment
      or Service With the Company
      or Its Related Corporations                  Percent of Total Option
      From the Option Grant Date                that Is Vested and Exercisable  
---------------------------------------------   -------------------------------
               
   After 1 year                                                   25%

   After 2 years                                                  50%

   After 3 years                                                  75%

   After 4 years                                                 100%


         The Plan  Administrator  may adjust the  vesting  schedule of an Option
held by a Participant who works less than "full-time" as that term is defined by
the Plan Administrator.

         To the extent  that an Option has  vested and become  exercisable,  the
Option  may be  exercised  from time to time by  delivery  to the  Company  of a
written stock option exercise  agreement or notice,  in a form and in accordance
with procedures established by the Plan Administrator,  setting forth the number
of shares with respect to which the Option is being exercised,  the restrictions
imposed on the shares purchased under such exercise agreement,  if any, and such
representations  and  agreements  as may be required by the Plan  Administrator,
accompanied by payment in full as described in Section 7.5. An Option may not be
exercised  for less than a  reasonable  number  of  shares  at any one time,  as
determined by the Plan Administrator.

7.5      Payment of Exercise Price

         The exercise price for shares  purchased  under an Option shall be paid
in full to the Company by delivery of consideration  equal to the product of the
Option  exercise price and the number of shares  purchased.  Such  consideration
must be paid in cash or by check or, unless the Plan  Administrator  in its sole
discretion determines otherwise,  either at the time the Option is granted or at
any time before it is exercised, in any combination of

                  (a)      cash or check;

                  (b)  tendering  (either  actually  or,  if and so  long as the
Common Stock is registered  under Section 12(b) or 12(g) of the Exchange Act, by
attestation)  shares of Common Stock  already  owned by the  Participant  for at
least six  months  (or any  shorter  period  necessary  to avoid a charge to the
Company's earnings for financial  reporting purposes) having a Fair Market Value
on the day prior to the exercise  date equal to the  aggregate  Option  exercise
price;

                  (c) if and so long as the  Common  Stock is  registered  under
Section  12(b) or 12(g) of the  Exchange  Act,  delivery of a properly  executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated  by the Company to deliver  promptly  to the  Company  the  aggregate
amount  of sale or  loan  proceeds  to pay the  Option  exercise  price  and any
withholding tax  obligations  that may arise in connection with the exercise and
(ii) the Company to deliver the  certificates for such purchased shares directly
to such brokerage  firm, all in accordance  with the  regulations of the Federal
Reserve Board; or

                  (d) such other  consideration  as the Plan  Administrator  may
permit.

         In addition, to assist a Participant (including a Participant who is an
officer  or a director  of the  Company)  in  acquiring  shares of Common  Stock
pursuant to an Award granted under the Plan, the Plan Administrator, in its sole
discretion,  may  authorize,  either at the Grant Date or at any time before the
acquisition  of  Common  Stock  pursuant  to the  Award,  (i) the  payment  by a
Participant  of a  full-recourse  promissory  note,  (ii)  the  payment  by  the
Participant of the purchase price, if any, of the Common Stock in  installments,
or (iii) the  guarantee by the Company of a  full-recourse  loan obtained by the
Participant from a third party. Subject to the foregoing, the Plan Administrator
shall  in its sole  discretion  specify  the  terms  of any  loans,  installment
payments  or loan  guarantees,  including  the  interest  rate and  terms of and
security for repayment.

7.6      Post-Termination Exercises

         The Plan Administrator shall establish and set forth in each instrument
that evidences an Option  whether the Option shall  continue to be  exercisable,
and the terms and  conditions of such  exercise,  if a Participant  ceases to be
employed by, or to provide services to, the Company or its Related Corporations,
which  provisions  may be waived or  modified by the Plan  Administrator  at any
time. If not so established in the instrument  evidencing the Option, the Option
shall be exercisable according to the following terms and conditions,  which may
be waived or modified by the Plan Administrator at any time:

                  (a)  Any   portion  of  an  Option  that  is  not  vested  and
exercisable  on the  date of  termination  of the  Participant's  employment  or
service relationship (the "Termination Date") shall expire on such date.

                  (b) Any portion of an Option that is vested and exercisable on
the Termination Date shall expire upon the earliest to occur of

                            (i)     the last day of the Option Term;

                           (ii)     if the Participant's Termination Date occurs
for reasons other than Cause, death or Disability, the three-month anniversary
of such Termination Date; and

                          (iii)    if the Participant's Termination Date occurs
by reason of Disability or death, the one-year anniversary of such Termination
Date.

         Notwithstanding  the  foregoing,  if the  Participant  dies  after  the
Termination Date while the Option is otherwise  exercisable,  the portion of the
Option that is vested and exercisable on such Termination Date shall expire upon
the  earlier to occur of (y) the last day of the  Option  Term and (z) the first
anniversary  of the date of  death,  unless  the Plan  Administrator  determines
otherwise.

         Also  notwithstanding  the  foregoing,  in case of  termination  of the
Participant's  employment or service  relationship  for Cause,  the Option shall
automatically  expire  upon  first  notification  to  the  Participant  of  such
termination,   unless  the  Plan  Administrator   determines  otherwise.   If  a
Participant's  employment or service  relationship with the Company is suspended
pending an  investigation  of whether the  Participant  shall be terminated  for
Cause, all the Participant's rights under any Option likewise shall be suspended
during the period of investigation.

         A Participant's  transfer of employment or service relationship between
or among the Company and its Related Corporations, or a change in status from an
employee to a consultant, agent, advisor or independent contractor, shall not be
considered a termination of employment or service  relationship  for purposes of
this Section 7. The effect of a  Company-approved  leave of absence on the terms
and  conditions of an Option shall be determined by the Plan  Administrator,  in
its sole discretion.

                  SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

         To the extent  required  by Section  422 of the Code,  Incentive  Stock
Options shall be subject to the following additional terms and conditions:

8.1      Dollar Limitation

         To the extent the  aggregate  Fair Market Value  (determined  as of the
Grant Date) of Common Stock with respect to which  Incentive  Stock  Options are
exercisable  for the first time during any calendar year (under the Plan and all
other stock  option  plans of the  Company)  exceeds  $100,000,  such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event
the Participant  holds two or more such Options that become  exercisable for the
first time in the same calendar year,  such  limitation  shall be applied on the
basis of the order in which such Options are granted.

8.2      More Than 10% Stockholders

         If an  individual  owns more than 10% of the total  voting power of all
classes  of the  Company's  stock,  then  the  exercise  price  per  share of an
Incentive  Stock  Option shall not be less than 110% of the Fair Market Value of
the Common  Stock on the Grant Date and the  Option  Term shall not exceed  five
years. The  determination of more than 10% ownership shall be made in accordance
with Section 422 of the Code.

8.3      Eligible Employees

         Individuals  who are not  employees of the Company or one of its parent
corporations  or  subsidiary  corporations  may not be granted  Incentive  Stock
Options.  For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation"  shall have the meanings  attributed to those terms for purposes of
Section 422 of the Code.

8.4      Term

         Subject to Section 8.2, the Option Term shall not exceed ten years.

8.5      Exercisability

         An Option  designated  as an  Incentive  Stock  Option  shall  cease to
qualify for favorable  tax treatment as an Incentive  Stock Option to the extent
it is  exercised  (if  permitted by the terms of the Option) (a) more than three
months after the  Termination  Date for reasons other than death or  Disability,
(b) more than one year after the  Termination  Date by reason of Disability,  or
(c) after the  Participant  has been on leave of absence  for more than 90 days,
unless  the  Participant's  reemployment  rights  are  guaranteed  by statute or
contract.

         For purposes of this Section 8.5, Disability shall mean "disability" as
that term is defined for purposes of Section 422 of the Code.

8.6      Taxation of Incentive Stock Options

         In order to obtain  certain tax benefits  afforded to  Incentive  Stock
Options  under  Section 422 of the Code,  the  Participant  must hold the shares
issued upon the  exercise of an  Incentive  Stock Option for two years after the
Grant Date and one year from the date of exercise.  A Participant may be subject
to the  alternative  minimum tax at the time of exercise of an  Incentive  Stock
Option.  The Participant shall give the Company prompt notice of any disposition
of shares  acquired by the  exercise of an  Incentive  Stock Option prior to the
expiration of such holding periods.

8.7      Promissory Notes

         The amount of any promissory note delivered  pursuant to Section 7.5 in
connection  with  an  Incentive  Stock  Option  shall  bear  interest  at a rate
specified by the Plan Administrator,  but in no case less than the rate required
to avoid  imputation  of interest  (taking  into account any  exceptions  to the
imputed interest rules) for federal income tax purposes.

                             SECTION 9. STOCK AWARDS

9.1      Grant of Stock Awards

         The Plan  Administrator is authorized to make Awards of Common Stock or
Awards  denominated  in units of Common Stock on such terms and  conditions  and
subject to such  restrictions,  if any (which may be based on continuous service
with the Company or the  achievement  of  performance  goals related to profits,
profit  growth,  profit-related  return ratios,  cash flow or total  shareholder
return,  where  such  goals may be  stated  in  absolute  terms or  relative  to
comparison  companies),  as the Plan Administrator shall determine,  in its sole
discretion,  which terms,  conditions and restrictions shall be set forth in the
instrument evidencing the Award. The terms, conditions and restrictions that the
Plan  Administrator  shall have the power to determine  shall  include,  without
limitation,  the manner in which shares  subject to Stock Awards are held during
the periods they are subject to restrictions and the  circumstances  under which
forfeiture  of the Stock  Award  shall  occur by reason  of  termination  of the
Participant's employment or service relationship.

9.2      Issuance of Shares

         Upon  the  satisfaction  of  any  terms,  conditions  and  restrictions
prescribed in respect to a Stock Award, or upon the  Participant's  release from
any terms,  conditions and  restrictions  of a Stock Award, as determined by the
Plan Administrator,  the Company shall release,  as soon as practicable,  to the
Participant  or,  in  the  case  of the  Participant's  death,  to the  personal
representative of the Participant's  estate or as the appropriate court directs,
the appropriate number of shares of Common Stock.

9.3      Waiver of Restrictions

         Notwithstanding   any  other   provisions   of  the   Plan,   the  Plan
Administrator  may, in its sole discretion,  waive the forfeiture period and any
other  terms,   conditions  or  restrictions  on  any  Stock  Award  under  such
circumstances and subject to such terms and conditions as the Plan Administrator
shall deem appropriate;  provided,  however, that the Plan Administrator may not
adjust performance goals for any Stock Award intended to be exempt under Section
162(m) of the Code for the year in which the Stock  Award is  settled  in such a
manner as would  increase  the  amount of  compensation  otherwise  payable to a
Participant.

                             SECTION 10. WITHHOLDING

         The  Company  may  require  the  Participant  to pay to the Company the
amount of any  withholding  taxes that the Company is required to withhold  with
respect to the grant,  vesting or exercise of any Award. Subject to the Plan and
applicable law, the Plan Administrator  may, in its sole discretion,  permit the
Participant  to satisfy  withholding  obligations,  in whole or in part,  (a) by
paying cash, (b) by electing to have the Company withhold shares of Common Stock
(up to the minimum required federal tax withholding rate) or (c) by transferring
to the Company shares of Common Stock (already owned by the  Participant for the
period  necessary  to avoid a charge to the  Company's  earnings  for  financial
reporting purposes),  in such amounts as are equivalent to the Fair Market Value
of the withholding obligation. The Company shall have the right to withhold from
any Award or any shares of Common  Stock  issuable  pursuant to an Award or from
any  cash  amounts  otherwise  due or to  become  due from  the  Company  to the
Participant an amount equal to such taxes..

                            SECTION 11. ASSIGNABILITY

         Awards  granted  under  the Plan and any  interest  therein  may not be
assigned,  pledged or transferred by the Participant and may not be made subject
to attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution,  and, during the Participant's  lifetime, such
Awards may be exercised only by the Participant.  Notwithstanding the foregoing,
and to the extent permitted by Section 422 of the Code, the Plan  Administrator,
in its sole discretion, may permit such assignment,  transfer and exercisability
and may permit a  Participant  to designate a  beneficiary  who may exercise the
Award or receive  compensation  under the Award after the  Participant's  death;
provided, however, that any Award so assigned or transferred shall be subject to
all the same terms and  conditions  contained in the  instrument  evidencing the
Award.

                             SECTION 12. ADJUSTMENTS

12.1     Adjustment of Shares

         In the event that, at any time or from time to time, a stock  dividend,
stock  split,  spin-off,  combination  or exchange of shares,  recapitalization,
merger,  consolidation,  distribution to  stockholders  other than a normal cash
dividend,  or other  change in the  Company's  corporate  or  capital  structure
results in (a) the outstanding  shares, or any securities  exchanged therefor or
received in their  place,  being  exchanged  for a different  number or class of
securities of the Company or of any other  corporation or (b) new,  different or
additional  securities of the Company or of any other corporation being received
by the  holders  of  shares  of  Common  Stock  of the  Company,  then  the Plan
Administrator shall make proportional  adjustments in (i) the maximum number and
kind of  securities  subject  to the Plan as set  forth in  Section  4.1 and the
maximum  number and kind of securities  that may be made subject to Stock Awards
and to Awards to any individual as set forth in Section 4.2, and (ii) the number
and kind of  securities  that are subject to any  outstanding  Award and the per
share price of such securities,  without any change in the aggregate price to be
paid therefor.  The  determination by the Plan  Administrator as to the terms of
any  of  the   foregoing   adjustments   shall  be   conclusive   and   binding.
Notwithstanding the foregoing,  a dissolution or liquidation of the Company or a
Corporate  Transaction  shall not be governed by this  Section 12.1 but shall be
governed by Sections 12.2 and 12.3, respectively.

12.2     Dissolution or Liquidation

         In the event of the proposed dissolution or liquidation of the Company,
the Plan  Administrator  shall notify each  Participant  as soon as  practicable
prior to the effective date of such proposed transaction. The Plan Administrator
in its  discretion may permit a Participant to exercise an Option until ten days
prior to such transaction  with respect to all vested and exercisable  shares of
Common Stock covered  thereby and with respect to such number of unvested shares
as the Plan Administrator shall determine.  In addition,  the Plan Administrator
may  provide  that  any  forfeiture   provision  or  Company  repurchase  option
applicable  to any  Award  shall  lapse as to such  number of shares as the Plan
Administrator  shall  determine,  contingent upon the occurrence of the proposed
dissolution or liquidation  at the time and in the manner  contemplated.  To the
extent an Option has not been previously  exercised,  the Option shall terminate
automatically  immediately  prior to the consummation of the proposed action. To
the  extent a  forfeiture  provision  applicable  to a Stock  Award has not been
waived  by  the  Plan   Administrator,   the  Stock  Award  shall  be  forfeited
automatically immediately prior to the consummation of the proposed action.

12.3     Corporate Transaction

         12.3.1          Definition

         "Corporate Transaction" means any of the following events:

                  (a)      Consummation of any merger or consolidation of the
 Company with or into another corporation;

                  (b)  Consummation  of  any  sale,  lease,  exchange  or  other
transfer  in one  transaction  or a series  of  related  transactions  of all or
substantially all the Company's outstanding  securities or substantially all the
Company's   assets  other  than  a  transfer  of  the  Company's   assets  to  a
majority-owned  subsidiary  corporation  (as  defined  in  Section  8.3)  of the
Company; or

                  (c)  Acquisition  by a person,  within the  meaning of Section
3(a)(9)  or of Section  13(d)(3)  (as in effect on the date of  adoption  of the
Plan) of the  Exchange  Act of a majority or more of the  Company's  outstanding
voting securities  (whether directly or indirectly,  beneficially or of record).
Ownership  of voting  securities  shall  take  into  account  and shall  include
ownership as  determined by applying  Rule  13d-3(d)(1)(i)  (as in effect on the
date of adoption of the Plan) under the Exchange Act.

         "Related Party  Transaction" means (i) a merger of the Company in which
the holders of shares of Common  Stock  immediately  prior to the merger hold at
least a majority of the shares of Common Stock in the surviving  corporation  or
parent thereof immediately after the merger, (ii) a mere  reincorporation of the
Company or (iii) a  transaction  undertaken  for the sole  purpose of creating a
holding company.

         12.3.2          Options

         In the event of a Corporate  Transaction,  except as otherwise provided
in the  instrument  evidencing  the  Award,  each  outstanding  Option  shall be
assumed, continued or an equivalent option or right substituted by the surviving
corporation, the successor corporation or its parent corporation, as applicable,
(the  "Successor  Corporation").  If the Corporate  Transaction is not a Related
Party Transaction, upon consummation of the Corporate Transaction the assumed or
substituted  options  shall  automatically  become fully vested and  exercisable
whether  or not the  vesting  requirements  set forth in the  applicable  option
agreement have been satisfied;  provided,  that such acceleration will not occur
if, in the opinion of the Company's outside accountants, such acceleration would
render unavailable "pooling of interests" accounting treatment for any Corporate
Transaction for which pooling of interests accounting treatment is sought by the
Company.  If the  Corporate  Transaction  is a Related  Party  Transaction,  the
vesting  schedule  set  forth in the  instrument  evidencing  the  Option  shall
continue to apply to the assumed or substituted options.

         In the  event  that the  Successor  Corporation  refuses  to  assume or
substitute  for the  Option,  the  Participant  shall fully vest in and have the
right to  exercise  the Option as to all of the shares of Common  Stock  subject
thereto,  including  shares as to which the Option would not otherwise be vested
or exercisable. If an Option will become fully vested and exercisable in lieu of
assumption or  substitution  in the event of a Corporate  Transaction,  the Plan
Administrator shall notify the Participant in writing or electronically that the
Option shall be fully vested and  exercisable  for a specified time period after
the date of such notice,  and the Option shall  terminate upon the expiration of
such period,  in each case  conditioned  on the  consummation  of the  Corporate
Transaction.  For the  purposes  of this  Section  12.3,  the  Option  shall  be
considered assumed if, following the Corporate Transaction,  the option or right
confers the right to purchase or receive, for each share of Common Stock subject
to the Option, immediately prior to the Corporate Transaction, the consideration
(whether stock, cash, or other securities or property) received in the Corporate
Transaction by holders of Common Stock for each share held on the effective date
of the transaction (and if holders were offered a choice of  consideration,  the
type of  consideration  chosen by the holders of a majority  of the  outstanding
shares); provided, however, that if such consideration received in the Corporate
Transaction  is not solely common stock of the Successor  Corporation,  the Plan
Administrator  may, with the consent of the Successor  Corporation,  provide for
the consideration to be received upon the exercise of the Option, for each share
of Common Stock  subject  thereto,  to be solely  common stock of the  Successor
Corporation equal in fair market value to the per share  consideration  received
by holders of Common  Stock in the  Corporate  Transaction.  All  Options  shall
terminate and cease to remain outstanding immediately following the consummation
of the  Corporate  Transaction,  except to the extent  assumed by the  Successor
Corporation.

         12.3.3          Stock Awards

         In the event of a Corporate  Transaction,  except as otherwise provided
in the instrument  evidencing the Award,  the vesting of Shares subject to Stock
Awards shall accelerate,  and the forfeiture provisions to which such Shares are
subject  shall  lapse,   if  and  to  the  same  extent  that  the  vesting  and
exercisability  of  outstanding   Options  accelerate  in  connection  with  the
Corporate  Transaction.  If unvested  Options are to be  assumed,  continued  or
substituted by a Successor  Corporation without acceleration upon the occurrence
of a Corporate  Transaction,  the forfeiture provisions to which such shares are
subject will continue with respect to shares of the Successor  Corporation  that
may be issued in exchange for such Shares.

12.4     Further Adjustment of Awards

         Subject to Sections 12.2 and 12.3,  the Plan  Administrator  shall have
the discretion,  exercisable at any time before a sale,  merger,  consolidation,
reorganization,  liquidation or change in control of the Company,  as defined by
the Plan  Administrator,  to take such  further  action as it  determines  to be
necessary or advisable, and fair and equitable to the Participants, with respect
to Awards.  Such  authorized  action may  include  (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions  on,  Awards so as to  provide  for  earlier,  later,  extended  or
additional time for exercise, lifting restrictions and other modifications,  and
the Plan  Administrator  may take such actions with respect to all Participants,
to certain  categories of Participants or only to individual  Participants.  The
Plan Administrator may take such action before or after granting Awards to which
the action relates and before or after any public  announcement  with respect to
such  sale,  merger,  consolidation,  reorganization,  liquidation  or change in
control that is the reason for such action.

12.5     Limitations

         The grant of  Awards  shall in no way  affect  the  Company's  right to
adjust,  reclassify,  reorganize  or  otherwise  change its  capital or business
structure or to merge, consolidate,  dissolve, liquidate or sell or transfer all
or any part of its business or assets.

12.6     Fractional Shares

         In the event of any  adjustment in the number of shares  covered by any
Award, each such Award shall cover only the number of full shares resulting from
such adjustment.

                  SECTION 13. AMENDMENT AND TERMINATION OF PLAN

13.1     Amendment of Plan

         The Plan may be amended only by the Board in such  respects as it shall
deem advisable;  provided,  however,  that to the extent required for compliance
with Section 422 of the Code or any applicable  law or  regulation,  shareholder
approval  shall be required for any amendment  that would (a) increase the total
number of shares  available for issuance under the Plan, (b) modify the class of
persons  eligible  to receive  Options,  or (c)  otherwise  require  shareholder
approval under any applicable law or regulation.  Any amendment made to the Plan
that would constitute a "modification" to Incentive Stock Options outstanding on
the date of such amendment shall not, without the consent of the Participant, be
applicable  to  such   outstanding   Incentive  Stock  Options  but  shall  have
prospective effect only.

13.2     Termination of Plan

         The Board may suspend or terminate the Plan at any time. The Plan shall
have no fixed  expiration  date;  provided,  however,  that no  Incentive  Stock
Options  may be  granted  more than ten years  after the later of (a) the Plan's
adoption by the Board and (b) the adoption by the Board of any  amendment to the
Plan that  constitutes the adoption of a new plan for purposes of Section 422 of
the Code.

13.3     Consent of Participant

         The  amendment  or  termination  of the  Plan  or the  amendment  of an
outstanding  Award  shall not,  without  the  Participant's  consent,  impair or
diminish any rights or obligations  under any Award  theretofore  granted to the
Participant under the Plan. Any change or adjustment to an outstanding Incentive
Stock Option  shall not,  without the consent of the  Participant,  be made in a
manner so as to  constitute  a  "modification"  that would cause such  Incentive
Stock  Option to fail to  continue  to qualify  as an  Incentive  Stock  Option.
Notwithstanding the foregoing, any adjustments made pursuant to Section 12 shall
not be subject to these restrictions.

                               SECTION 14. GENERAL

14.1     Evidence of Awards

         Awards  granted  under  the  Plan  shall  be  evidenced  by  a  written
instrument   that  shall  contain  such  terms,   conditions,   limitations  and
restrictions  as the Plan  Administrator  shall deem  advisable and that are not
inconsistent with the Plan.

14.2     No Individual Rights

         Nothing in the Plan or any Award granted under the Plan shall be deemed
to  constitute  an  employment  contract or confer or be deemed to confer on any
Participant  any right to continue  in the employ of, or to  continue  any other
relationship  with,  the Company or any Related  Corporation or limit in any way
the right of the Company or any Related Corporation to terminate a Participant's
employment or other relationship at any time, with or without Cause.

14.3     Registration

         Notwithstanding any other provision of the Plan, the Company shall have
no  obligation  to issue or deliver any shares of Common Stock under the Plan or
make any other  distribution  of benefits  under the Plan unless such  issuance,
delivery or  distribution  would  comply with all  applicable  laws  (including,
without limitation,  the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.

         The Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption  under the Securities Act, or
to register or qualify under state  securities laws, any shares of Common Stock,
security  or  interest in a security  paid or issued  under,  or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue  certificates  for shares with such legends and subject to
such restrictions on transfer and stop-transfer  instructions as counsel for the
Company deems  necessary or desirable for compliance by the Company with federal
and state securities laws.

         To the  extent  that the  Plan or any  instrument  evidencing  an Award
provides for issuance of stock certificates to reflect the issuance of shares of
Common Stock,  the issuance may be effected on a  noncertificated  basis, to the
extent not  prohibited by applicable  law or the  applicable  rules of any stock
exchange.

14.4     No Rights as a Shareholder

         No  Option  or Stock  Award  denominated  in units  shall  entitle  the
Participant to any cash dividend,  voting or other right of a shareholder unless
and until the date of issuance under the Plan of the shares that are the subject
of such Award.

14.5     Compliance With Laws and Regulations

         Notwithstanding  anything  in  the  Plan  to  the  contrary,  the  Plan
Administrator, in its sole discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Participants  who are
officers  or  directors  subject to Section 14 of the  Exchange  Act  without so
restricting,   limiting  or   conditioning   the  Plan  with  respect  to  other
Participants.  Additionally,  in interpreting and applying the provisions of the
Plan,  any Option  granted as an  Incentive  Stock  Option  pursuant to the Plan
shall,  to the extent  permitted  by law, be construed  as an  "incentive  stock
option" within the meaning of Section 422 of the Code.

14.6     Participants in Foreign Countries

         The  Plan  Administrator   shall  have  the  authority  to  adopt  such
modifications,  procedures  and  subplans as may be  necessary  or  desirable to
comply with provisions of the laws of foreign  countries in which the Company or
its Related  Corporations  may operate to assure the  viability  of the benefits
from Awards granted to  Participants  employed in such countries and to meet the
objectives of the Plan.

14.7     No Trust or Fund

         The  Plan  is  intended  to  constitute  an  "unfunded"  plan.  Nothing
contained  herein  shall  require the Company to  segregate  any monies or other
property,  or shares of Common  Stock,  or to create any trusts,  or to make any
special   deposits  for  any  immediate  or  deferred  amounts  payable  to  any
Participant,  and no  Participant  shall have any rights that are  greater  than
those of a general unsecured creditor of the Company.

14.8     Severability

         If any  provision of the Plan or any Award is determined to be invalid,
illegal or  unenforceable  in any  jurisdiction,  or as to any person,  or would
disqualify  the Plan or any Award  under any law deemed  applicable  by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without,  in
the Plan  Administrator's  determination,  materially altering the intent of the
Plan or the Award,  such  provision  shall be stricken as to such  jurisdiction,
person or Award,  and the  remainder of the Plan and any such Award shall remain
in full force and effect.

14.9     Choice of Law

         The Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the laws of the United States,  shall be
governed  by the laws of the  State  of  Washington  without  giving  effect  to
principles of conflicts of laws.

                           SECTION 15. EFFECTIVE DATE

         The  Effective  Date is the date on which  the Plan is  adopted  by the
Board,  so long as it is  approved  by the  Company's  stockholders  at any time
within 12 months of such adoption.




<PAGE>




                    PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
                                  SUMMARY PAGE

                                             Section/Effect  Date of Shareholder
Date of Board Action   Action                of Amendment    Approval
--------------------   -----------------     -------------   -------------------
March 7, 2000          Initial Plan Adoption                 June 28, 2000