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                                                                    EXHIBIT 10.7



                     1997 STOCK INCENTIVE COMPENSATION PLAN


                            EMERALD SOLUTIONS, INC.,
                            A WASHINGTON CORPORATION


                                OCTOBER 29, 1997


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                             EMERALD SOLUTIONS, INC.

                     1997 STOCK INCENTIVE COMPENSATION PLAN



                               SECTION 1. PURPOSE

        The purpose of the Emerald Solutions, Inc. 1997 Stock Incentive
Compensation Plan (the "Plan") is to enhance the long-term shareholder value of
Emerald Solutions, Inc., a Washington corporation (the "Company"), by offering
opportunities to employees, directors, officers, consultants, agents, advisors
and independent contractors of the Company and its Subsidiaries (as defined in
Section 2) to participate in the Company's growth and success, and to encourage
them to remain in the service of the Company and its Subsidiaries 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 to a Participant pursuant to the
Plan, including, without limitation, awards or grants of Options and Stock
Awards, or any combination of the foregoing.

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

        "Cause" shall, with respect to a participant, have the same meaning as
assigned to that term in the employment agreement by and between the Participant
and the Company.

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

        "Common Stock" means the common stock, par value $0.001 per share, of
the Company.

        "Corporate Transaction" means any of the following events:

               (a) the consummation of any merger or consolidation of the
Company in which the Company is not the continuing or surviving corporation, or
pursuant to which shares of the Common Stock are converted into cash, securities
or other property, if following such merger or consolidation the holders of the
Company's outstanding voting securities immediately prior to such merger or
consolidation own less than 66-2/3% of the outstanding voting securities of the
surviving corporation;

               (b) the consummation of any sale, lease, exchange or other
transfer or disposition in one transaction or a series of related transactions
of all or substantially all of the Company's


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assets, including the capital stock of the Company's Subsidiaries), other than a
transfer of the Company's assets to a majority-owned Subsidiary of the Company;

               (c) the approval by the holders of the Common Stock of any plan
or proposal for the liquidation or dissolution of the Company; or

               (d) the 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) pursuant to the Exchange Act.

        "Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.

        "Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.

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

        "Fair Market Value" on any given date means the value of a share of
Common Stock which 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 average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market for the trading day prior to the
time of determination, or (b) if the Common Stock is listed on the New York
Stock Exchange or the American Stock Exchange, the average of the high and low
per share sales prices for the Common Stock as such price is officially quoted
in the composite tape of transactions on such exchange for the trading day prior
to the time of determination. 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.

        "Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice by the Holder:

               (a) a change in the Holder's status, title, position or
responsibilities (including reporting responsibilities) that, in the Holder's
reasonable judgment, represents a substantial reduction in the status, title,
position or responsibilities in effect immediately prior thereto; the assignment
to the Holder of any duties or responsibilities that, in the Holder's reasonable
judgment, are materially inconsistent with such status, title, position or
responsibilities; or any removal of the Holder from or failure to re-appoint or
reelect the Holder to any position held by


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Holder immediately prior thereto, except in connection with the termination of
the Holder's employment for Cause, for Disability or as a result of his or her
death, or by the Holder other than for Good Reason;

               (b) the Successor Corporation's requiring the Holder (without the
Holder's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Corporate Transaction;

               (c) the Successor Corporation's failure to (i) continue in effect
any material compensation or benefit plan (or the substantial equivalent
thereof) in which the Holder was participating at the time of a Corporate
Transaction, including, but not limited to, the Plan, or (ii) provide the Holder
with compensation and benefits substantially equivalent (in terms of benefit
levels and/or reward opportunities) to those provided for under each material
employee benefit plan, program and practice as in effect immediately prior to
the Corporate Transaction;

               (d) any material breach by the Successor Corporation of its
obligations to the Holder under the Plan or any substantially equivalent plan of
the Successor Corporation; or

               (e) any purported termination of the Holder's employment or
service for Cause by the Successor Corporation that does not comply with the
terms of the Plan or any substantially equivalent plan of the Successor
Corporation.

        "Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.

        "Holder" means the Participant to whom an Award is granted or, for a
Holder who has died, the personal representative of the Holder's estate, the
person(s) to whom the Holder's rights under the Award have passed by will or the
applicable laws of descent and distribution or the beneficiary designated
pursuant to Section 10.

        "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.

        "Parent" means a "parent corporation" as defined in Section 424(e) of
the Code.


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        "Participant" means an individual who is a Holder of an Award or, as the
context may require, any employee, director, officer, consultant, agent, advisor
or independent contractor of the Company or a Subsidiary who has been designated
by the Plan Administrator as eligible to participate in the Plan.

        "Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.

        "Restricted Stock" means shares of Common Stock granted under Section 9,
the rights of ownership of which are subject to restrictions prescribed by the
Plan Administrator.

        "Retirement" means retirement as of the individual's normal retirement
date, as that term is defined by the Plan Administrator from time to time for
purposes of the Plan.

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

        "Service Provider" means an employee, director, officer, consultant,
agent, advisor or independent contractor of the Company or a Subsidiary.

        "Stock Award" means an Award granted under Section 9.

        "Subsidiary" means a "parent corporation" as defined in Section 424(f)
of the Code.

        "Successor Corporation" has the meaning set forth under Section 11.2.

                            SECTION 3. ADMINISTRATION

3.1     PLAN ADMINISTRATOR

        With respect to grants of Awards to employees who are also officers or
directors of the Company, the Plan shall be administered by the Board or a
committee or committees (which term includes subcommittees) designated by the
Board, which committee shall be constituted in such a manner as to satisfy
applicable law and to permit such grants and related transactions under the Plan
to be exempt from Section 16(b) of the Exchange Act in accordance with Rule
16b-3.

        With respect to grants of Awards to Participants who are neither
directors nor officers of the Company, the Plan shall be administered by the
Board or a committee or committees (which term includes subcommittees)
designated by the Board, which committee shall be constituted in such a manner
as to satisfy applicable law.

        The Board may delegate the responsibility for administering the Plan
with respect to designated classes of eligible Participants to different
committees, 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.


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3.2     ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR

        Subject to 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 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 11.1, a
maximum aggregate of 15,000,000 shares of Common Stock shall be available for
issuance under the Plan. Shares issued under the Plan shall be drawn from
authorized and unissued shares. In addition, the total number of shares issuable
upon exercise of all outstanding Awards shall not exceed a number of shares
which is equal to 30% of the then outstanding shares of the Company, as
calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, unless a
percentage higher than 30% is approved by at least two-thirds of the outstanding
shares entitled to vote.

4.2     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 shares), shall again
be available for issuance in connection with future grants of Awards under the
Plan.

                             SECTION 5. ELIGIBILITY

        Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Incentive Stock Options may only be granted to employees
(including directors who are employees) of the Company. Awards (other than
Incentive Stock Options) may also be made to consultants, agents, advisors and
independent contractors who provide services to the Company and its
Subsidiaries.


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                                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     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 of stock, reorganization or liquidation (the
"Acquisition Transaction") with or of the Acquired Entity. 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 and Holders.

                          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 the following:
(A) with respect to Incentive Stock Options (i) 100% of the Fair Market Value of
the Common Stock on the Grant Date, and (ii) not less than 110% of the Fair
Market Value if the Holder possesses more than 10% of the total voting power of
all classes of the Company's stock or the stock of any Parent or Subsidiary, and
(B) with respect to Nonqualified Stock Options (i) not less than 85% of the Fair
Market Value of the Common Stock on the Grant Date, and (ii) not less than 110%
of the Fair Market Value if the Holder possesses more than 10% of the total
voting power of all classes of the Company's stock or the stock of any Parent or
Subsidiary.


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7.3     TERM OF OPTIONS

        The term of each Option shall be as established by the Plan
Administrator, to a maximum of 10 years from the Grant Date or, if not so
established, shall be 10 years from the Grant Date. However, in the case of an
Incentive Stock Option granted to a Participant who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Award Agreement.

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, provided, however, that in the
case of an Option, such Option shall in no case become exercisable at a rate of
less than 20% per year over five (5) years from the date the Option is granted,
subject to reasonable conditions such as continued employment. However, in the
case of an Option granted to an officer, director or consultant, the Award
Agreement may provide that the Option may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during any
period established in the Award Agreement. If not otherwise established in the
instrument evidencing the Option, the Option will become exercisable according
to the following schedule, which may be waived or modified by the Plan
Administrator at any time:


<TABLE>
<CAPTION>
  PERIOD OF HOLDER'S CONTINUOUS EMPLOYMENT OR
  SERVICE WITH THE COMPANY OR ITS SUBSIDIARIES               PERCENT OF TOTAL OPTION
           FROM THE OPTION GRANT DATE                          THAT IS EXERCISABLE
  --------------------------------------------               -----------------------
<S>                                                          <C>
           During the first 11 months                                   0%

                  At month 12                                          20%

        Each one-month period of service
              completed thereafter                             An additional 1.667%

                   At 5 years                                          100%
</TABLE>


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        To the extent that the right to purchase shares has accrued thereunder,
an Option may be exercised from time to time by written notice to the Company,
in accordance with procedures established by the Plan Administrator, setting
forth the number of shares with respect to which the Option is being exercised
and accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of remaining
shares covered by the Option).

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, to the extent permitted by the Plan
Administrator in its sole discretion, either at the time the Option is granted
or at any time before it is exercised, a combination of cash and/or check and
one or more of the following alternative forms: (a) 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) Common Stock already owned by the
Holder 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; (b) 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 (c) such other consideration as the Plan Administrator may
permit.

7.6     POST-TERMINATION EXERCISES

        In case of termination of the Holder's employment or services other than
by reason of death or Cause, the Option shall be exercisable, to the extent of
the number of shares purchasable by the Holder at the date of such termination,
only (a) within three years after the date the Holder ceases to be a Service
Provider if the termination of the Holder's employment or services are
coincident with Retirement, Early Retirement at the Company's request, or
Disability or, (b) within six months after the date the Holder ceases to be a
Service Provider if the termination of the Holder's employment or services is
due to a disability that does not qualify as a Disability; or (c) within three
months after the date the Holder ceases to be a Service Provider if termination
of the Holder's employment or services is for any reason other than Retirement,
Early Retirement at the Company's request, or Disability, but in no event later
than the remaining term of the Option. Any Option exercisable at the time of the
Holder's death may be exercised, to the extent of the number of shares
purchasable by the Holder at the date of the Holder's death, by the


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personal representative of the Holder's estate, the person(s) to whom the
Holder's rights under the Award have passed by will or the applicable laws of
descent and distribution or the beneficiary designated pursuant to Section 10,
at any time or from time to time within one year after the date of death, but in
no event later than the remaining term of the Option. Any portion of an Option
that is not exercisable on the date of termination of the Holder's employment or
services shall terminate on such date, unless the Plan Administrator determines
otherwise. In case of termination of the Holder's employment or services for
Cause, the Option shall automatically terminate upon first notification to the
Holder of such termination, unless the Plan Administrator determines otherwise.
If a Holder's employment or services with the Company are suspended pending an
investigation of whether the Holder shall be terminated for Cause, all the
Holder's rights under any Option likewise shall be suspended during the period
of investigation.

        A transfer of employment or services between or among the Company and
its Subsidiaries shall not be considered a termination of employment or
services. 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, in accordance with applicable law.

        The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
not be inconsistent with this subsection and which may be waived or modified by
the Plan Administrator at any time.

                  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     10% SHAREHOLDERS

        If a Participant owns more than 10% of the total voting power of all
classes of the Company's stock or the stock of any Parent or Subsidiary, 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


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Stock on the Grant Date and the Option term shall not exceed five years. The
determination of 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 Parents
or Subsidiaries may not be granted Incentive Stock Options.

8.4     TERM

        The term of an Option shall not exceed 10 years. The term of an
Incentive Stock Option shall not exceed 5 years if the Holder possesses more
than 10% of the total voting power of all classes of the Company's stock or the
stock of any Parent or Subsidiary.

8.5     EXERCISABILITY

        To qualify for Incentive Stock Option tax treatment, an Option
designated as an Incentive Stock Option must be exercised within three months
after termination of employment for reasons other than death, except that, in
the case of termination of employment due to total disability, such Option must
be exercised within one year after such termination. Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Participant's re-employment rights are guaranteed by statute or contract. For
purposes of this Section 8.5, "total disability" shall mean 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 and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.

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 of the Incentive Stock Option 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 Plan Administrator may require a
Participant to 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 13 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in


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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 to
Participants 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
Restricted Stock shall occur by reason of termination of the Holder's services.
Provided, however that if provisions of an Award Agreement grant to the Company
the right to repurchase shares upon termination of the Participant's status as a
Service Provider, the Award Agreement shall provide that the repurchase price
will be either:

        (a) Not less than the Fair Market Value of the shares to be repurchased
on the date of termination of the Participant's status as a Service Provider,
and the right to repurchase must be exercised for cash or cancellation of
purchase money indebtedness for the shares within ninety (90) days of the
termination of the Participant's status as a Service Provider (or in the case of
shares issued upon exercise of Awards after the date of termination of the
Participant within ninety (90) days after the date of the Award exercise), and
the right terminates when the Company's securities become publicly traded; or


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        (b) The original purchase price, provided that the right to repurchase
at the original purchase price lapses at the rate of at least twenty percent
(20%) of the shares subject to the Award per year over five (5) years from the
date the Award is granted (without respect to the date the Award was exercised
or became exercisable), and the right to repurchase must be exercised for cash
or cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of the Participant's status as a Service Provider (or in the
case of shares issued upon exercise of Awards after the date of termination of
the Participant's continuous status as a Service Provider within (90) days after
the date of the Award exercise).

        (c) In addition to the restrictions set forth in (a) and (b) above, the
shares held by an officer, director or consultant may be subject to additional
or greater restrictions.

9.2     ISSUANCE OF SHARES

        Upon the satisfaction of any terms, conditions and restrictions
prescribed in respect to a Stock Award, or upon the Holder's release from any
terms, conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall deliver, as soon as practicable, to the Holder
or, in the case of the Holder's death, to the personal representative of the
Holder's estate or as the appropriate court directs, a stock certificate for 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 Restricted Stock under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate.

                            SECTION 10. ASSIGNABILITY

        No Option granted under the Plan may be sold, pledged, assigned,
transferred or disposed of in any manner by the Holder other than by will or by
the laws of descent and distribution, and during the Holder's lifetime, such
Awards may be exercised only by the Holder or a permitted assignee or transferee
of the Holder (as provided below). 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 Holder of such Awards to designate a beneficiary who may exercise the
Award or receive compensation under the Award after the Holder'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.


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<PAGE>   14
                             SECTION 11. ADJUSTMENTS

11.1    ADJUSTMENT OF SHARES

        Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each outstanding Award, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Awards have yet been granted or which have been
returned to the Plan, as well as the price per share of Common Stock covered by
each such outstanding Award, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other similar event resulting in an
increase or decrease in the number of issued shares of Common Stock. Such
adjustment shall be made by the Plan Administrator, and its determination in
that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason hereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Award.

11.2    CORPORATE TRANSACTION

        Except as otherwise provided in the instrument that evidences the Award,
in the event of any Corporate Transaction, each Award that is at the time
outstanding shall automatically accelerate so that each such Award shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested, except that such acceleration will not occur, if in the
opinion of the Company's accountants, it would render unavailable "pooling of
interest" accounting for a Corporate Transaction that would otherwise qualify
for such accounting treatment. Such Award shall not so accelerate, however, if
and to the extent that (a) such Award is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation or parent thereof
(the "Successor Corporation") or to be replaced with a comparable award for the
purchase of shares of the capital stock of the Successor Corporation or (b) such
Award is to be replaced with a cash incentive program of the Successor
Corporation that preserves the spread existing at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to such Award. The determination of Award
comparability shall be made by the Plan Administrator, and its determination
shall be conclusive and binding. All such Awards shall terminate and cease to
remain outstanding immediately following the consummation of the Corporate
Transaction, except to the extent assumed by the Successor Corporation. Any such
Awards that are assumed or replaced in the Corporate Transaction and do not
otherwise accelerate at that time shall be accelerated in the event that the
Holder's employment or services should subsequently terminate within two years
following such Corporate Transaction, unless such employment or services are
terminated by the Successor Corporation for Cause or by the Holder voluntarily
without Good Reason.


                                       13


<PAGE>   15
11.3    FURTHER ADJUSTMENT OF AWARDS

        Subject to Section 11.2, 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 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.

11.4    LIMITATIONS

        The grant of Awards will 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.

                             SECTION 12. WITHHOLDING

        The Company may require the Holder 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 Holder to
satisfy withholding obligations, in whole or in part, by paying cash, by
electing to have the Company withhold shares of Common Stock or by transferring
shares of Common Stock to the Company, 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. The Company may also
deduct from any Award any other amounts due from the Participant to the Company
or a Subsidiary.

           SECTION 13. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES

        To assist a Holder (including a Holder who is an officer or 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, (a) the extension of a loan to the Holder by the Company,
(b) the payment by the Holder of the purchase price, if any, of the Common Stock
in installments, or (c) the guarantee by the Company of a loan obtained by the


                                       14


<PAGE>   16
grantee from a third party. The terms of any loans, installment payments or loan
guarantees, including the interest rate and terms of and security for repayment,
will be subject to the Plan Administrator's discretion. Loans, installment
payments and loan guarantees may be granted with or without security. The
maximum credit available is the purchase price, if any, of the Common Stock
acquired, plus the maximum federal and state income and employment tax liability
that may be incurred in connection with the acquisition.

                  SECTION 14. AMENDMENT AND TERMINATION OF PLAN

14.1    AMENDMENT OF PLAN

        The Plan may be amended only by the Board at any time in such respects
as it shall deem advisable; however, to the extent required for compliance with
Section 422 of the Code or any applicable law or regulation, the Company shall
obtain shareholder approval in such a manner and to such a degree as required
for any amendment that will (a) increase the total number of shares as to which
Options may be granted under the Plan or that may be issued as Stock Awards, (b)
modify the class of persons eligible to receive Options, or (c) otherwise
require shareholder approval under any applicable law or regulation.

14.2    TERMINATION OF PLAN

        The Company's shareholders or the Board may suspend or terminate the
Plan at any time. No Awards may be granted more than 10 years after the earlier
of the Plan's adoption by the Board or approval by the shareholders. No Award
may be granted during any suspension or after termination of the Plan.

14.3    CONSENT OF HOLDER

        The amendment or termination of the Plan shall not, without the consent
of the Holder of any Award under the Plan, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the
consent of the Holder, 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.

                               SECTION 15. GENERAL

15.1    AWARD AGREEMENTS

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


                                       15


<PAGE>   17
15.2    SHAREHOLDER AGREEMENT

        Concurrent with the issuance under the Plan to a Holder of the shares
that are the subject of an Award, such Holder shall enter into that certain
Shareholders' Agreement by and among the Company and all of its shareholders, as
may from time to time be amended, providing, among other things, for certain
restrictions on the transfer of such shares and for the repurchase of such
shares by the Company under certain circumstances.

15.3    CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN AWARDS

        None of the Plan, participation in the Plan as a Participant or any
action of the Plan Administrator taken under the Plan shall be construed as
giving any Participant or employee of the Company any right to be retained in
the employ of the Company or limit the Company's right to terminate the
employment or services of the Participant.

15.4    REGISTRATION; CERTIFICATES FOR SHARES

        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.

        Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the non-issuance or
sale of such shares as to which such requisite authority shall not have been
obtained.

        As a condition to the exercise of an Option or any other receipt of
Common Stock pursuant to an Award under the Plan, the Company may require the
Participant to represent and warrant at the time of any such exercise or receipt
that such shares are being purchased or received only for the Participant's own
account and without any present intention to sell or distribute such shares if,
in the opinion of counsel for the Company, such a representation is required by
any relevant provision of the aforementioned laws. At the option of the Company,
a stop-transfer order against any such shares may be placed on the official
stock books and records of the Company, and a legend indicating that such shares
may not be pledged, sold or otherwise transferred, unless an opinion of counsel
is provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Participants as may from time
to time be necessary to comply with the federal and state securities laws.


                                       16


<PAGE>   18
15.5    NO RIGHTS AS A SHAREHOLDER

        No Option shall entitle the Holder to any cash dividend, voting or other
right or privilege of a shareholder unless and until the date of issuance under
the Plan of the shares that are the subject of such Award, free of all
applicable restrictions.

15.6    COMPLIANCE WITH LAWS AND REGULATIONS

        Notwithstanding anything in the Plan to the contrary, the Board, 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 16 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.

15.7    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.

15.8    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.

15.9    INFORMATION TO HOLDERS.

        The Company shall provide to each Holder, during the period for which
such Holder has one or more Awards outstanding, copies of financial statements
at least annually.


                                       17


<PAGE>   19
                           SECTION 16. EFFECTIVE DATE

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

        Adopted by the Board as of October 28, 1997.


        APPROVAL:

        By:
           ---------------------------------
           Shareholder


        Date:
             -------------------------------


                                       18


<PAGE>   20
                                   APPENDIX A

                    PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS


<TABLE>
<CAPTION>
        DATE OF
       ADOPTION/
       AMENDMENT/                                   EFFECT OF              DATE OF SHAREHOLDER
       ADJUSTMENT                SECTION            AMENDMENT                   APPROVAL
       ----------                -------            ---------              -------------------
<S>                              <C>              <C>                      <C>
March 14, 1997                     4.1            Number of shares                 N/A
                                                  available for
(five-for-one stock                               issuance under the
split)                                            Plan increased to
                                                  15,000,000

October 28, 1997                                  Amend and Restate Plan      _____________
</TABLE>





                                   Appendix A
<PAGE>   21
                                                                    EXHIBIT 10.7



                           1997 STOCK OPTION AGREEMENT


                                 BY AND BETWEEN


                             EMERALD-DELAWARE, INC.,
                             A DELAWARE CORPORATION


                                       AND


                            -------------------------
                            (INSERT NAME OF EMPLOYEE)


<PAGE>   22


                             EMERALD-DELAWARE, INC.

                        1997 INCENTIVE COMPENSATION PLAN

                             STOCK OPTION AGREEMENT


        Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.



I.      NOTICE OF STOCK OPTION GRANT.

        ---------------------------------
        ---------------------------------
        ---------------------------------

        The Company has granted you an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:

        Date of Grant                       _________________

        Vesting Commencement Date           _________________

        Exercise Price per Share            _________________

        Total Number of Shares Granted      _________________

        Total Exercise Price                _________________

        Type of Option                      _______   Incentive Stock Option

                                            _______   Nonstatutory Stock Option

        Term:                               10 years


                                       1
<PAGE>   23

Vesting Schedule:

        You may exercise this Option, in whole or in part, in accordance with
the following schedule:


  PERIOD OF YOUR CONTINUOUS EMPLOYMENT OR
SERVICE WITH THE COMPANY OR ITS SUBSIDIARIES          PERCENT OF TOTAL OPTION
      FROM THE OPTION GRANT DATE                        THAT IS EXERCISABLE
--------------------------------------------          -----------------------
               At month 12                                      20%

   Each one-month period of service completed
                   thereafter                          An additional 1.667%

                 After 5 years                                 100%


Termination Period:

        You may exercise this Option at any time until ninety (90) days after
termination of your employment or consulting relationship with the Company, or
such longer period as may be applicable upon your death or disability as
provided in the Plan, but in no event later than the Term/Expiration Date as
provided above.

                                       2
<PAGE>   24

II.     AGREEMENT.

        1. GRANT OF OPTION.

            Emerald-Delaware, Inc., a Delaware corporation (the "Company"),
hereby grants to the Optionee (the "Optionee") named above in the Notice of
Stock Option Grant, an option (the "Option") to purchase the total number of
shares of Common Stock (the "Shares") set forth in the Notice of Stock Option
Grant, at the exercise price per share set forth in the Notice of Stock Option
Grant (the "Exercise Price") subject to the terms, definitions and provisions of
the Emerald-Delaware 1997 Incentive Compensation Plan (the "Plan") adopted by
the Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option.

            If designated in the Notice of Stock Option Grant as an Incentive
Stock Option ("ISO"), the Company and the Optionee intend this Option to qualify
as an Incentive Stock Option as defined in Section 422 of the Code. However, if
the Company and the Optionee intend this Option to be an Incentive Stock Option,
then, to the extent that it exceeds the $100,000 rule of Code Section 422(d),
the parties shall treat the Option as a Nonstatutory Stock Option ("NSO").

        2. EXERCISE OF OPTION.

            This Option shall be exercised during its term in accordance with
the Vesting Schedule set out in the Notice of Stock Option Grant and with the
provisions of Section 7 of the Plan as follows:

            (a) Right to Exercise.

                (i) This Option may not be exercised for a fraction of a Share.

                (ii) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability of
the Option is governed by Sections 6, 7 or 8 below, subject to the limitation
contained in ((iii)) immediately below.

                (iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock Option
Grant.

            (b) Method of Exercise.

                Optionee may exercise by written notice (in the form attached as
Exhibit A), that shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Optionee shall sign such written notice and deliver the
notice in person or by certified mail to the Secretary of the Company. The
Optionee

                                       3
<PAGE>   25

shall tender payment of the Exercise Price with the written notice. This Option
shall be deemed to be exercised upon receipt by the Company of such written
notice accompanied by the Exercise Price.

                The Company shall issue no Shares pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes,
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.

                Upon his or her exercise of the Option, the Optionee shall enter
into that certain Shareholders' Agreement (the "Shareholders' Agreement") dated
July 31, 1997, and as may be amended from time to time, by and among the Company
and all of its Stockholders, a copy of which the Company has provided to the
Optionee.

        3. OPTIONEE'S REPRESENTATIONS.

            In the event the Shares purchasable pursuant to the exercise of the
Option have not been registered under the Securities Act of 1933, as amended, at
the time this Option is exercised, Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion this Option, deliver to the
Company his or her Investment Representation Statement in the form attached
hereto as Exhibit B, and shall (if the Optionee is a resident of the state of
California) read the rules of the Commissioner of Corporations of the State of
California attached to such Investment Representation Statement.

        4. METHOD OF PAYMENT.

            At his or her election, Optionee may pay the Exercise Price by any
of the following methods, or a combination thereof:

            (a) cash; or

            (b) check; or

            (c) surrender of other shares of Common Stock of the Company which
(i) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (ii) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or

            (d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.

                                       4
<PAGE>   26

        5. RESTRICTIONS ON EXERCISE.

            The Optionee may not exercise this Option until such time as the
Plan has been approved by the stockholders or the Company, or if the issuance of
the Shares upon such exercise or the method of payment of consideration for such
shares would constitute a violation of any applicable federal or state
securities or other law or regulation, including any rule under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by
the Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

        6. TERMINATION OF RELATIONSHIP.

            If the Optionee's employment or consulting arrangement with the
Company terminates, Optionee may, to the extent otherwise so entitled at the
date of such termination (the "Termination Date"), exercise this Option during
the Termination Period set out in the Notice of Stock Option Grant. To the
extent that Optionee was not entitled to exercise this Option at the date of
such termination, or if the Optionee does not exercise this Option within the
time specified herein, the Option shall terminate.

        7. DISABILITY OF OPTIONEE.

            Notwithstanding the provisions of Section 6 above, if the Optionee's
employment or consulting arrangement with the Company terminates as a result of
his or her disability, then Optionee may, but only within twelve (12) months
from the date of such termination (and in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the day three months and one day following
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

        8. DEATH OF OPTIONEE.

            If the Optionee's employment or consulting arrangement with the
Company terminates as a result of the death of Optionee, then the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance from Optionee may exercise the Option at any time within twelve
(12) months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 10 below), but
only to the extent the Optionee could exercise the Option at the date of death.

                                       5
<PAGE>   27

        9. NON-TRANSFERABILITY OF OPTION.

            The Optionee may not transfer this Option in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by Optionee. The terms of this Option shall
be binding upon the executors, administrators, heirs, successors and assigns of
the Optionee.

        10. TERM OF OPTION.

            The Optionee may exercise this Option only within the term set out
in the Notice of Stock Option Grant, and only in accordance with the Plan and
the terms of this Option. The limitations set out in Section 7 of the Plan
regarding Options designated as Incentive Stock Options and Options granted to
more than ten percent (10%) stockholders shall apply to this Option.

        11. TAXATION UPON EXERCISE OF OPTION.

            Optionee understands that, upon exercising a Nonstatutory Option, he
or she will recognize income for tax purposes in an amount equal to the excess
of the then Fair Market Value of the Shares over the exercise price. However,
the timing of this income recognition may be deferred for up to six months if
Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). If the Optionee is an employee, the Company will
be required to withhold from Optionee's compensation, or collect from Optionee
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income. Additionally, the Optionee may at some point be
required to satisfy tax withholding obligations with respect to the
disqualifying disposition of an Incentive Stock Option. The Optionee shall
satisfy his or her tax withholding obligation arising upon the exercise of this
Option out of Optionee's compensation or by payment to the Company.

        12. TAX CONSEQUENCES.

            Set forth below is a brief summary as of the date of this Option of
some of the federal and state tax consequences of exercise of this Option and
disposition of the Shares.

        THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
        ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
        EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

            (a) Exercise of ISO.

                If this Option qualifies as an ISO, there will be no regular
federal income tax liability or state income tax liability upon the exercise of
the Option, although the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price will

                                       6
<PAGE>   28

be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.

            (b) Exercise of ISO Following Disability.

                If the Optionee's employment or consulting arrangement with the
Company terminates as a result of disability that is not total and permanent
disability as defined in Section 22(e)(3) of the Code, then, to the extent
permitted on the date of termination, the Optionee must exercise an ISO within
90 days of such termination for the ISO to be qualified as an ISO.

            (c) Exercise of Nonstatutory Stock Option.

                There may be a regular federal income tax liability and state
income tax liability upon the exercise of a Nonstatutory Stock Option. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee or a former employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.

            (d) Disposition of Shares.

                In the case of an NSO, if Shares are held for at least one year,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal and state income tax purposes. In the case of an ISO,
if Shares transferred pursuant to the Option are held for at least one year
after exercise and are disposed of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and state income tax purposes. If Shares purchased
under an ISO are disposed of within such one-year period or within two years
after the Date of Grant, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the Fair Market
Value of the Shares on the date or exercise, or (ii) the sale price of the
Shares.

            (e) Notice of Disqualifying Disposition of ISO Shares.

                If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
the ISO on or before the later of (i) the date two (2) years after the Date of
Grant, or (ii) the date one (1) year after the date of exercise, the Optionee
shall immediately notify the Company in writing of such disposition. Optionee
agrees that Optionee may be subject to income tax withholding by the Company on
the compensation income recognized by the Optionee.

                                       7
<PAGE>   29

        13. ENTIRE AGREEMENT: GOVERNING LAW.

            The Plan is incorporated herein by reference. The Plan, this Option
Agreement and the Shareholders' Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by Washington law except for that body of
law pertaining to conflict of laws.

                              *********************



                                     EMERALD-DELAWARE, INC., a
                                     Delaware corporation




                                     by:
                                         ---------------------------------------

                                         Jerry N. Grant, Chief Financial Officer


             (signatures and acknowledgments continued on next page)


                                       8
<PAGE>   30

        OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
        THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT
        AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
        GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
        ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE
        COMPANY'S 1997 INCENTIVE COMPENSATION PLAN WHICH IS INCORPORATED HEREIN
        BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
        CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT
        INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
        TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR
        WITHOUT CAUSE.

        Optionee acknowledges receipt of a copy of the Plan and the
        Shareholders' Agreement, and represents that he or she is familiar with
        the terms and provisions thereof, and hereby accepts this Option subject
        to all of the terms and provisions thereof. Optionee has reviewed the
        Plan, this Option and the Shareholders' Agreement in their entirety, has
        had an opportunity to obtain the advice of counsel prior to executing
        this Option and fully understands all provisions of the Option. Optionee
        hereby agrees to accept as binding, conclusive and final all decisions
        or interpretations of the Administrator upon any questions arising under
        the Plan or this Option. Optionee further agrees to notify the Company
        upon any change in the residence address indicated below.



Dated:________________________      Signed:_________________________

                                    Optionee Residence Address:

                                    <Insert Name of Employee>

                                    ______________________________

                                    ______________________________


                                       9
<PAGE>   31

                                    EXHIBIT A

                        1997 INCENTIVE COMPENSATION PLAN

                                 EXERCISE NOTICE

Emerald-Delaware, Inc.
500 -- 108th Avenue NE, Suite 1800
Bellevue, Washington   98004


        1. EXERCISE OF OPTION.

            Effective as of today, ______________, 19__, the undersigned
("Optionee") hereby elects to exercise Optionee's option to purchase ___________
shares of the Common Stock (the "Shares") of Emerald-Delaware, Inc. (the
"Company") under and pursuant to the 1997 Incentive Compensation Plan, as
amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated ______________, 19__ (the "Option Agreement").

        2. REPRESENTATIONS OF OPTIONEE.

            Optionee acknowledges that he or she has received, read and
understood the Plan, the Option Agreement and that certain Shareholders'
Agreement dated July 31, 1997, and as may be amended from time to time, by and
among the Company and all of its stockholders (the "Shareholders' Agreement"),
and agrees to abide by and be bound by their terms and conditions.

        3. RIGHTS AS STOCKHOLDER.

            Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.

            Optionee shall enjoy rights as a stockholder, subject to the rights
and duties imposed upon him or her as a party to the Shareholders' Agreement,
until such time as Optionee disposes of the Shares in accordance with the terms
and conditions of the Shareholders' Agreement.

                                 Exercise Notice
                                        1

<PAGE>   32

        4. TAX CONSULTATION.

            Optionee understands that he or she may suffer adverse tax
consequences as a result of Optionee's purchase or disposition of the Shares.
Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.

        5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

            (a) Legends.

                Optionee understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, and any
others that in the opinion of the Company are necessary to comply with state or
federal securities laws, to be placed upon any certificate(s) evidencing
ownership of the Shares together with any other legends that may be required by
the Company or by state or federal securities laws:

        "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED NOR QUALIFIED UNDER ANY
        STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
        SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS
        QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES
        LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO
        EMERALD-DELAWARE, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED.
        ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
        FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND CONDITIONS WHICH ARE
        SET FORTH IN A SHAREHOLDERS' AGREEMENT AMONG EMERALD-DELAWARE AND ALL OF
        ITS STOCKHOLDERS."

            Optionee understands that transfer of the Shares may be restricted
by Section 260.141.11 of the Rules of the California Corporations Commissioner,
a copy of which is attached to Exhibit B, the Investment Representation
Statement.

            (b) Stop-Transfer Notices.

                Optionee agrees that, in order to ensure compliance with the
restrictions referred to herein and the Shareholders' Agreement, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

                                 Exercise Notice
                                       2

<PAGE>   33

        6. SUCCESSORS AND ASSIGNS.

            The Company may assign any of its rights under this Agreement to
single or multiple assignees, and this Agreement shall inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, this Agreement shall be binding upon Optionee and his
or her heirs, executors, administrators, successors and assigns.

        7. INTERPRETATION.

            Any dispute regarding the interpretation of this Agreement shall be
submitted by Optionee or by the Company forthwith to the Company's Board of
Directors or the committee thereof that administers the Plan, which shall review
such dispute at its next regular meeting. The resolution of such a dispute by
the Board or committee shall be final and binding on the Company and on
Optionee.

        8. GOVERNING LAW; SEVERABILITY.

            This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington excluding that body of law pertaining to
conflicts of law. Should any provision of this Agreement be determined by a
court of law to be illegal or unenforceable, the other provisions shall
nevertheless remain effective and shall remain enforceable.

        9. NOTICES.

            Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States mail by certified mail, with postage and fees prepaid,
addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

        10. FURTHER INSTRUMENTS.

            The parties agree to execute such further instruments and to take
such further action as may be reasonably necessary to carry out the purposes and
intent of this Agreement.

        11. DELIVERY OF PAYMENT.

            Optionee herewith delivers to the Company the full Exercise Price
for the Shares.

        12. ENTIRE AGREEMENT.

            The Plan and Notice of Stock Option Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement, the Shareholders' Agreement and the Investment Representation
Statement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior under-

                                 Exercise Notice
                                       3
<PAGE>   34

takings and agreements of the Company and Purchaser with respect to the subject
matter hereof, and may not be modified adversely to the Purchaser's interest
except by means of a writing signed by the Company and Purchaser.

                              *********************



SUBMITTED BY:                       ACCEPTED BY:

                                    EMERALD-DELAWARE, INC., a
                                      Delaware corporation




                                    by:
-------------------------------         ---------------------------------------
         (Print Name)                   Jerry N. Grant, Chief Financial Officer

-------------------------------
         (Signature)


                                 Exercise Notice
                                       4
<PAGE>   35


                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT



OPTIONEE              :

COMPANY               :            EMERALD-DELAWARE, INC.

SECURITY              :            COMMON STOCK

AMOUNT                :

DATE                  :

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

            (a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

            (b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon among other things, the bona fide nature
of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities, except as may be provided in that certain Shareholders'
Agreement dated July 31, 1997, and as may be amended from time to time, by and
among the Company and all of its stockholders (the "Shareholders' Agreement").
Optionee understands that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel satisfactory to the Company, and certain other requirements as set forth
in the Shareholders' Agreement.

                       Investment Representation Statement
                                       1
<PAGE>   36

            (c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.

        In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

            (d) Optionee hereby agrees that if so requested by the Company or
any representative of the underwriters in connection with any registration of
the offering of any securities of the Company under the Securities Act, Optionee
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall only apply to the first registration statement of the
Company become effective under the Securities which includes securities to be
sold on behalf of the Company to the public in an underwritten public offering
under the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such 180-day period.

            (e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available

                       Investment Representation Statement
                                       2
<PAGE>   37

for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee understands
that no assurances can be given that any such other registration exemption will
be available in such event.

            (f) Optionee understands that, if he or she is a resident of the
state of California, the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities without the consent
of the Commissioner of Corporations of California. Optionee has read the
applicable Commissioner's Rules with respect to such restriction, a copy of
which is attached.

                                            Signature of Optionee:

                                            ------------------------------------


                                            Date:                    ,
                                                 -------------------  ----------



                       Investment Representation Statement
                                       3
<PAGE>   38

                                  ATTACHMENT 1

              STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE


         Title 10. Investment - Chapter 3. Commissioner of Corporations



        260.141.11: Restriction on Transfer. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.

        (b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:

            (1) to the issuer;

            (2) pursuant to the order or process of any court;

            (3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;

            (4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;

            (5) to holders of securities of the same class of the same issuer;

            (6) by way of gift or donation inter vivos or on death;

            (7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such securities
is not in violation of any securities law of the foreign state, territory or
country concerned;

            (8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;

            (9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;

            (10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;

            (11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;

            (12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;

            (13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;

            (14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state; or

            (15) by the State Controller pursuant to the Unclaimed Property law
or by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;

            (16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;

            (17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.

<PAGE>   39

        (c) The certificate representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:

               "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY
               OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
               THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
               OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED
               IN THE COMMISSIONER'S RULES."