F5 NETWORKS, INC.

                           1998 EQUITY INCENTIVE PLAN

                            Adopted November 12, 1998
                   Approved By Shareholders November 12, 1998
               Amended to Increase Authorized Shares to 1,400,000
                     on November 9, 1999 (amendment approved
                      by Shareholders on February 17, 2000)
                       Termination Date: November 11, 2008

1.       PURPOSES.

     (a) Eligible Stock Award Recipients.  Eligible Stock Award Recipients.  The
persons  eligible  to receive  Stock  Awards are the  Employees,  Directors  and
Consultants of the Company and its Affiliates.

     (b) Available  Stock Awards.  The purpose of the Plan is to provide a means
by which  eligible  recipients  of Stock Awards may be given an  opportunity  to
benefit from  increases in value of the Common Stock through the granting of the
following Stock Awards:  (i) Incentive Stock Options,  (ii)  Nonstatutory  Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to secure and
retain the services of new members of this group and to provide  incentives  for
such  persons to exert  maximum  efforts  for the success of the Company and its
Affiliates.

2.       DEFINITIONS

     (a) "Affiliate" means any parent  corporation or subsidiary  corporation of
the Company,  whether now or hereafter  existing,  as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

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

     (c) "Code" means the Internal Revenue Code of 1986, as amended.

     (d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).

     (e) "Common Stock" means the common stock of the Company.

     (f) "Company" means F5 Networks, Inc., a Washington corporation.

<PAGE>

     (g) "Consultant" means any person, including an advisor, (i) who is engaged
by the Company or an Affiliate to render  services  other than as an Employee or
as a Director or (ii) who is a member of the Board of Directors of an Affiliate.

     (h)  "Continuous  Service"  means that the  Participant's  service with the
Company or an Affiliate,  whether as an Employee, Director or Consultant, is not
interrupted or terminated.  The  Participant's  Continuous  Service shall not be
deemed to have  terminated  merely  because of a change in the capacity in which
the  Participant  renders service to the Company or an Affiliate as an Employee,
Consultant  or  Director  or a change in the  entity  for which the  Participant
renders such service,  provided that there is no  interruption or termination of
the Participant's  Continuous  Service.  For example, a change in status from an
Employee of the Company to a  Consultant  of an  Affiliate  or a Director of the
Company will not constitute an interruption of Continuous Service.  The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party,  including sick leave,  military
leave or any other personal leave.

     (i) "Covered  Employee" means the chief executive  officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to  shareholders  under the Exchange  Act, as determined
for purposes of Section 162(m) of the Code.

     (j) "Director" means a member of the Board of Directors of the Company.

     (k)  "Disability"  means (i) before the Listing  Date,  the  inability of a
person, in the opinion of a qualified  physician  acceptable to the Company,  to
perform  the major  duties of that  person's  position  with the  Company  or an
Affiliate  of the  Company  because of the  sickness or injury of the person and
(ii) after the Listing  Date,  the  permanent  and total  disability of a person
within the meaning of Section 22(e)(3) of the Code.

     (l)  "Employee"  means any person  employed by the Company or an Affiliate.
Mere service as a Director or payment of a  director's  fee by the Company or an
Affiliate  shall not be sufficient to constitute  "employment" by the Company or
an Affiliate.

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

     (n) "Fair  Market  Value"  means,  as of any date,  the value of the Common
Stock determined as follows:

                                       2

<PAGE>

     i. If the  Common  Stock is listed on any  established  stock  exchange  or
traded on the NASDAQ  National Market or the NASDAQ  SmallCap  Market,  the Fair
Market  Value of a share of Common  Stock shall be the  closing  sales price for
such stock (or the  closing  bid, if no sales were  reported)  as quoted on such
exchange  or market  (or the  exchange  or market  with the  greatest  volume of
trading  in the  Common  Stock)  on the day of  determination  or, if the day of
determination  is not a market  trading day, then on the last market trading day
prior to the day of  determination,  as reported  in The Wall Street  Journal or
such other source as the Board deems reliable.

     ii. In the absence of such  markets for the Common  Stock,  the Fair Market
Value shall be determined in good faith by the Board.

     iii.  Prior to the  Listing  Date,  the value of the Common  Stock shall be
determined  in a manner  consistent  with Section  260.140.50 of Title 10 of the
California Code of Regulations.

     (o)  "Incentive  Stock  Option"  means an Option  intended to qualify as an
incentive  stock  option  within the  meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (p)  "Listing  Date"  means the first date upon  which the Common  Stock is
listed (or  approved  for  listing)  upon notice of  issuance on any  securities
exchange or designated (or approved for designation)  upon notice of issuance as
a national market security on an interdealer quotation system if such securities
exchange or interdealer  quotation  system has been certified in accordance with
the provisions of Section 25100(o) of the California Corporate Securities Law of
1968.

     (q) "Non-Employee  Director" means a Director of the Company who either (i)
is not a  current  Employee  or  Officer  of the  Company  or  its  parent  or a
subsidiary,  does not receive  compensation  (directly or  indirectly)  from the
Company or its parent or a subsidiary  for services  rendered as a consultant or
in any  capacity  other  than as a  Director  (except  for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other  transaction  as to which  disclosure  would be required under Item
404(a) of  Regulation  S-K and is not engaged in a business  relationship  as to
which  disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is other-wise considered a "non-employee director" for purposes of Rule 16b-3.

     (r) "Nonstatutory  Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.

     (s) "Officer"  means (i) before the Listing Date, any person  designated by
the Company as an officer and (ii) on and after the Listing  Date,  a person who
is an officer of the Company  within the  meaning of Section 16 of the  Exchange
Act and the rules and regulations promulgated thereunder.

                                       3

<PAGE>

     (t) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.

     (u) "Option Agreement" means a written agreement between the Company and an
Optionholder  evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (v) "Optionholder"  means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

     (w)  "Outside  Director"  means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury  Regulations  promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation  for prior  services  (other than  benefits  under a tax  qualified
pension plan), was not an officer of the Company or an "affiliated  corporation"
at any time and is not currently receiving direct or indirect  remuneration from
the Company or an  "affiliated  corporation"  for services in any capacity other
than as a Director or (ii) is otherwise  considered  an "outside  director"  for
purposes of Section 162(m) of the Code.

     (x) "Participant"  means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable,  such other person who holds an outstanding Stock
Award.

     (y) "Plan" means this F5 Networks, Inc. 1998 Equity Incentive Plan.

     (z) "Rule ]6b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

     (aa) "Securities Act" means the Securities Act of 1933, as amended.

     (bb) "Stock  Award" means any right  granted  under the Plan,  including an
Option, a stock bonus and a right to acquire restricted stock.

     (cc) "Stock Award Agreement" means a written  agreement between the Company
and a  holder  of a Stock  Award  evidencing  the  terms  and  conditions  of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

     (dd) "Ten Percent Shareholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
or of any of its Affiliates.

                                       4

<PAGE>

3.       ADMINISTRATION

     (a) Administration by Board. The Board shall administer the Plan unless and
until  the  Board  delegates  administration  to a  Committee,  as  provided  in
subsection 3(c).

     (b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

     i. To determine  from time to time which of the persons  eligible under the
Plan shall be granted  Stock  Awards;  when and how each  Stock  Award  shall be
granted;  what type or combination of types of Stock Award shall be granted; the
provisions of each Stock Award granted (which need not be identical),  including
the time or times when a person shall be permitted to receive stock  pursuant to
a Stock  Award,  and the number of shares  with  respect to which a Stock  Award
shall be granted to each such person.

     ii. To construe and interpret  the Plan and Stock Awards  granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board,  in the exercise of this power,  may correct any defect,  omission or
inconsistency  in the Plan or in any Stock Award  Agreement,  in a manner and to
the  extent  it shall  deem  necessary  or  expedient  to make  the  Plan  fully
effective.

     iii. To amend the Plan or a Stock Award as provided in Section 12.

     iv.  Generally,  to exercise  such  powers and to perform  such acts as the
Board deems  necessary or expedient to promote the best interests of the Company
which are not in conflict with the provisions of the Plan.

     (c) Delegation to Committee.

     i.  General.  The  Board  may  delegate  administration  of the  Plan  to a
Committee  or  Committees  of one or more  members  of the  Board,  and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated.  If administration  is delegated to a Committee,  the Committee shall
have, in connection with the  administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the  administrative   powers  the  Committee  is  authorized  to  exercise  (and
references  in this Plan to the Board shall  thereafter  be to the  Committee or
subcommittee),  subject, however, to such resolutions, not inconsistent with the
provisions  of the Plan,  as may be adopted from time to time by the Board.  The
Board  may  abolish  the  Committee  at any time and  revest  in the  Board  the
administration of the Plan.

                                       5

<PAGE>

     ii. Committee  Composition  when Common Stock is Publicly  Traded.  At such
time as the Common Stock is publicly  traded,  in the discretion of the Board, a
Committee  may consist  solely of two or more Outside  Directors,  in accordance
with  Section  162(m) of the  Code,  and/or  solely of two or more  Non-Employee
Directors,  in accordance  with Rule 16b-3.  Within the scope of such authority,
the  Board or the  Committee  may (i)  delegate  to a  committee  of one or more
members of the Board who are not Outside  Directors the authority to grant Stock
Awards to eligible persons who are either (1) not then Covered Employees and are
not  expected  to be  Covered  Employees  at the time of  recognition  of income
resulting  from such Stock  Award or (2) not  persons  with  respect to whom the
Company  wishes to comply with Section  162(m) of the Code and/or) (ii) delegate
to a  committee  of one or more  members  of the Board who are not  Non-Employee
Directors  the  authority to grant Stock Awards to eligible  persons who are not
then subject to Section 16 of the Exchange Act.

4.       SHARES SUBJECT TO THE PLAN.

     (a) Share  Reserve.  Subject to the  provisions  of Section II  relating to
adjustments  upon  changes in stock,  the stock that may be issued  pursuant  to
Stock Awards shall not exceed in the aggregate One Million Four Hundred Thousand
(1,400,000) shares of Common Stock.

     (b) Reversion of Shares to the Share Reserve.  If any Stock Award shall for
any reason expire or otherwise  terminate,  in whole or in part,  without having
been  exercised  in full,  the stock not  acquired  under such Stock Award shall
revert to and again become  available for issuance under the Plan. The number of
shares of Common Stock that may be issued pursuant to Stock Awards, as specified
in  subsection  4(a),  shall  only be reduced  to  reflect  new shares  that are
actually delivered under the Plan. Therefore,  a stock-for-stock  exercise of an
Option shall result in only the net number of additional  shares of Common Stock
being counted against the share reserve.

     (c) Source of Shares.  The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

     (d) Share Reserve  Limitation.  Prior to the Listing Date, at no time shall
the total number of shares issuable upon exercise of all outstanding Options and
the total number of shares provided for under any stock bonus or similar plan of
the Company  exceed the applicable  percentage as calculated in accordance  with
the  conditions  and  exclusions  of  Section  260.140.45  of  Title  10 of  the
California  Code of  Regulations,  based on the shares of the Company  which are
outstanding at the time the calculation is made.<F1>

<F1>  Section  260.140.45  generally  provides  that the total  number of shares
issuable upon exercise of all outstanding  options (exclusive of certain rights)
and the total number of shares  called for under any stock bonus or similar plan
shall  not  exceed  a  number  of  shares  which  is  equal  to 30% of the  then
outstanding  shares of the issuer  (convertible  preferred or convertible senior
common shares counted on an as if converted basis),  exclusive of shares subject
to promotional  waivers under Section 260.141,  unless a percentage  higher than
30% is approved by at least  two-thirds of the  outstanding  shares  entitled to
vote.

                                       6

<PAGE>

5.       ELIGIBILITY.

     (a) Eligibility  for Specific Stock Awards.  Incentive Stock Options may be
granted only to Employees.  Stock Awards other than Incentive  Stock Options may
be granted to Employees, Directors and Consultants.

     (b) Ten Percent Shareholders.  No Ten Percent Shareholder shall be eligible
for the grant of an  Incentive  Stock Option  unless the exercise  price of such
Option is at least one hundred ten  percent  (110%) of the Fair Market  Value of
the Common  Stock at the date of grant and the Option is not  exercisable  after
the expiration of five (5) years from the date of grant.

     Prior to the Listing Date, no Ten Percent Shareholder shall be eligible for
the grant of a  Nonstatutory  Stock  Option  unless the  exercise  price of such
Option is at least one hundred ten  percent  (110%) of the Fair Market  Value of
the Common Stock at the date of grant.

     Prior to the Listing Date, no Ten Percent Shareholder shall be eligible for
a restricted stock award unless the purchase price of the restricted stock is at
least one hundred percent (100%) of the Fair Market Value of the Common Stock at
the date of grant.

     (c) Section  162(m)  Limitation.  Subject to the  provisions  of Section II
relating to adjustments  upon changes in stock, no employee shall be eligible to
be granted Options covering more than Two Hundred  Thousand  (200,000) shares of
the Common Stock during any calendar year.  This subsection 5(c) shall not apply
prior to the Listing Date and,  following the Listing Date, this subsection 5(c)
shall not apply until (i) the earliest of. (1) the first  material  modification
of the Plan  (including  any  increase  if the  number  of shares  reserved  for
issuance  under the Plan in accordance  with Section 4); (2) the issuance of all
of the shares of Common  Stock  reserved for  issuance  under the Plan;  (3) the
expiration  of the  Plan;  or (4) the first  meeting  of  shareholders  at which
Directors  of the Company are to be elected  that occurs  after the close of the
third  calendar year  following  the calendar year in which  occur-red the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such  other  date  required  by  Section  162(m)  of the Code and the  rules and
regulations promulgated thereunder.

6.       OPTION PROVISIONS.

     Each  Option  shall be in such  form  and  shall  contain  such  terms  and
conditions as the Board shall deem appropriate.  All Options shall be separately
designated  Incentive Stock Options or Nonstatutory Stock Options at the time of
grant,  and, if a certificate  is issued for shares  purchased on exercise of an
Option,  a  separate  certificate  or  certificates  will be issued  for  shares
purchased on exercise of each type of Option. The provisions of separate Options
need not be identical,  but each Option shall include (through  incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:

                                       7

<PAGE>

     (a) Term.  Subject to the  provisions of  subsection  5(b)  regarding.  Ten
Percent Shareholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

     (b) Exercise Price of an Incentive Stock Option.  Subject to the provisions
of subsection  5(b)  regarding Ten Percent  Shareholders,  the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock  subject to the Option on the date the Option
is granted.  Notwithstanding  the  foregoing,  an Incentive  Stock Option may be
granted  with an  exercise  price  lower  than that set  forth in the  preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another  option in a manner  satisfying  the provisions of Section 424(a) of the
Code.

     (c)  Exercise  Price  of  a  Nonstatutory  Stock  Option.  Subject  to  the
provisions of subsection 5(b) regarding Ten Percent  Shareholders,  the exercise
price of each Nonstatutory  Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted.  The exercise  price of
each Nonstatutory Stock Option granted on or after the Listing Date shall be not
less than fifty  percent  (50%) of the Fair Market Value of the stock subject to
the Option on the date the Option is granted.  Notwithstanding the foregoing,  a
Nonstatutory  Stock Option may be granted with an exercise price lower than that
set forth in the  preceding  sentence if such  Option is granted  pursuant to an
assumption  or  substitution  for  another  option  in a manner  satisfying  the
provisions of Section 424(a) of the Code.

     (d)  Consideration.  The purchase  price of stock  acquired  pursuant to an
Option  shall be paid,  to the  extent  permitted  by  applicable  statutes  and
regulations,  either (i) in cash at the time the Option is  exercised or (ii) at
the  discretion  of the  Board  at the  time  of the  grant  of the  Option  (or
subsequently in the case of a Nonstatutory  Stock Option) by (1) delivery to the
Company of other Common  Stock.  (2)  according  to a deferred  payment or other
arrangement  (which  may  include,   without  limiting  the  generality  of  the
foregoing,  the use of other Common  Stock) with the  Participant  or (3) in any
other form of legal consideration that may be acceptable to the Board.

     In  the  case  of any  deferred  payment  arrangement,  interest  shall  be
compounded  at least  annually  and  shall be  charged  at the  minimum  rate of
interest  necessary to avoid the  treatment as  interest,  under any  applicable
provisions of the Code, of any amounts other than amounts  stated to be interest
under the deferred payment arrangement.

                                       8

<PAGE>

     (e) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall  not be  transferable  except  by  will  or by the  laws  of  descent  and
distribution  and shall be exercisable  during the lifetime of the  Optionholder
only by the  Optionholder.  Notwithstanding  the  foregoing  provisions  of this
subsection  6(e),  the  Optionholder  may, by delivering  written  notice to the
Company, in a form satisfactory to the Company,  designate a third party who, in
the event of the death of the  Optionholder,  shall  thereafter  be  entitled to
exercise the Option.

     (f)  Transferability  of a Nonstatutory  Stock Option. A Nonstatutory Stock
Option  granted  prior to the Listing Date shall be  transferable  to the extent
that  transferability is both permitted by Section  260.140.41(d) of Title 10 of
the  California  Code of  Regulations  at the time the  Option  is  granted  and
provided for in the Option Agreement.  A Nonstatutory Stock Option granted on or
after the  Listing  Date shall be  transferable  to the extent  provided  in the
Option  Agreement.  If the  Nonstatutory  Stock  Option  does  not  provide  for
transferability,  then the  Nonstatutory  Stock Option shall not be transferable
except  by  will  or by the  laws of  descent  and  distribution  and  shall  be
exercisable  during the lifetime of the Optionholder  only by the  Optionholder.
Notwithstanding   the  foregoing   provisions  of  this  subsection   6(f),  the
Optionholder  may,  by  delivering  written  notice  to the  Company,  in a form
satisfactory  to the  Company,  designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (g) Vesting  Generally.  The total number of shares of Common Stock subject
to an Option  may,  but need  not,  vest and  therefore  become  exercisable  in
periodic  installments  which  may,  but need not,  be equal.  The Option may be
subject to such other terms and  conditions  on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem  appropriate.  The vesting  provisions of individual  Options may vary. The
provisions  of  this  subsection  6(g)  are  subject  to any  Option  provisions
governing the minimum number of shares as to which an Option may be exercised.

     (h)  Minimum  Vesting  Prior  to  the  Listing  Date.  Notwithstanding  the
foregoing  subsection  6(g),  an Option  granted  prior to the Listing Date to a
Participant  who is not an Officer,  Director or  Consultant  shall  provide for
vesting of the total number of shares at a rate of at least twenty percent (20%)
per year over five (5) years from the date the Option  was  granted,  subject to
reasonable conditions such as continued employment.

     (i)  Termination  of  Continuous  Service.  In the event an  Optionholder's
Continuous  Service  terminates  (other  than upon the  Optionholder's  death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the  Optionholder was entitled to exercise it as of the date of termination) but
only  within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the  Optionholder's  Continuous  Service (or
such longer or shorter  period  specified in the Option  Agreement,  which,  for
Options  granted prior to the Listing  Date,  shall not be less than thirty (30)
days,  unless such termination is for cause), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement.  If, after termination,  the
Optionholder  does not exercise his or her Option  within the time  specified in
the Option Agreement, the Option shall terminate.

                                       9

<PAGE>

     (j) Extension of Termination Date. An  Optionholder's  Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's  Continuous Service (other than upon the Optionholder's  death or
Disability)  would be  prohibited  at any time solely  because  the  issuance of
shares would violate the  registration  requirements  under the Securities  Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's  Continuous Service
during  which the  exercise  of the  Option  would not be in  violation  of such
registration requirements.

     (k) Disability of Optionholder.  In the event an Optionholder's  Continuous
Service   terminates  as  a  result  of  the  Optionholder's   Disability,   the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period  of time  ending  on the  earlier  of (i) the  date  twelve  (12)  months
following such  termination  (or such longer or shorter period  specified in the
Option  Agreement,  which,  for Options granted prior to the Listing Date, shall
not be less  than  six (6)  months)  or (ii) the  expiration  of the term of the
Option  as set  forth  in the  Option  Agreement.  If,  after  termination,  the
Optionholder  does not  exercise  his or her Option  within  the time  specified
herein, the Option shall terminate.

     (l) Death of Optionholder.  In the event (i) an  Optionholder's  Continuous
Service  terminates  as a  result  of  the  Optionholder's  death  or  (ii)  the
Optionholder  dies within the period (if any) specified in the Option  Agreement
after the  termination  of the  Optionholder's  Continuous  Service for a reason
other  than  death,  then  the  Option  may be  exercised  (to  the  extent  the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person  designated to exercise the option upon
the  Optionholder's  death pursuant to subsection  6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months  following
the date of death (or such  longer or  shorter  period  specified  in the Option
Agreement,  which,  for Options granted prior to the Listing Date,  shall not be
less than six (6)  months) or (2) the  expiration  of the term of such Option as
set forth in the Option Agreement.  If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

     (m) Re-Load Options. Without in any way limiting the authority of the Board
to make or not to make  grants of Options  hereunder,  the Board  shall have the
authority (but not an  obligation) to include as part of any Option  Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the  event  the  Optionholder  exercises  the  Option  evidenced  by the  Option
Agreement,  in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option  Agreement.
Any such  Re-Load  Option  shall (i) provide for a number of shares equal to the
number  of  shares  surrendered  as part or all of the  exercise  price  of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the  exercise of which gave rise to such  Re-Load  Option;  and (iii)
have an exercise  price  which is equal to one  hundred  percent (I 00%) of the.
Fair Market Value of the Common Stock subject to the Re-Load  Option on the date
of exercise of the original  Option.  Notwithstanding  the foregoing,  a Re-Load
Option  shall  be  subject  to the  same  exercise  price  and  term  provisions
heretofore described for Options under the Plan.

                                       10

<PAGE>

     Any such Re-Load Option may be an Incentive  Stock Option or a Nonstatutory
Stock  Option,  as the  Board  may  designate  at the  time of the  grant of the
original Option;  provided,  however, that the designation of any Re-Load Option
as an  Incentive  Stock  Option  shall be  subject to the one  hundred  thousand
dollars  ($100,000)  annual  limitation  on  exercisability  of Incentive  Stock
Options  described in subsection  10(d) and in Section 422(d) of the code. There
shall be no Re-Load Options on a Re-Load  Option.  Any such Re-Load Option shall
be subject to the  availability of sufficient  shares under  subsection 4(a) and
the "Section 162(m)  Limitation" on the grants of Options under  subsection 5(c)
and  shall be  subject  to such  other  terms  and  conditions  as the Board may
determine  which are not  inconsistent  with the express  provisions of the Plan
regarding the terms of Options.

7.       PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

     (a) Stock Bonus Awards.  Each stock bonus  agreement  shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and  conditions  of separate  stock bonus  agreements  need not be
identical,  but each stock bonus agreement shall include (through  incorporation
of provisions  hereof by reference in the agreement or otherwise)  the substance
of each of the following provisions:

     i. Consideration.  A stock bonus shall be awarded in consideration for past
services actually rendered to the Company for its benefit.

     ii. Vesting.  Subject to the "Repurchase  Limitation" in subsection  10(h),
shares of Common Stock  awarded  under the stock bonus  agreement  may, but need
not,  be  subject  to a share  repurchase  option  in  favor of the  Company  in
accordance with a vesting Schedule to be determined by the Board.

     iii.  Termination  of  Participant's  Continuous  Service.  Subject  to the
"Repurchase  Limitation"  in  subsection  10(h),  in the  event a  Participant's
Continuous  Service  terminates,  the  Company may  reacquire  any or all of the
shares of Common Stock held by the  Participant  which have not vested as of the
date of termination under the terms of the stock bonus agreement.

     iv. Transferability.  For a stock bonus award made before the Listing Date,
rights  to  acquire  shares  under  the  stock  bonus  agreement  shall  not  be
transferable except by will or by the laws of descent and distribution and shall
be exercisable  during the lifetime of the Participant  only by the Participant.
For a stock  bonus award made on or after the  Listing  Date,  rights to acquire
shares under the stock bonus  agreement shall be transferable by the Participant
only  upon  such  terms  and  conditions  as are set  forth in the  stock  bonus
agreement,  as the Board shall  determine  in its  discretion,  so long as stock
awarded  under the stock  bonus  agreement  remains  subject to the terms of the
stock bonus agreement.

                                       11

<PAGE>

     (b) Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall  contain such terms and  conditions as the Board shall
deem  appropriate.  The terms and  conditions of the  restricted  stock purchase
agreements  may  change  from  time to time,  and the terms  and  conditions  of
separate  restricted stock purchase  agreements need not be identical,  but each
restricted  stock purchase  agreement shall include  (through  incorporation  of
provisions  hereof by reference in the agreement or otherwise)  the substance of
each of the following provisions:

     i. Purchase  Price.  Subject to the provisions of subsection 5(b) regarding
Ten  Percent  Shareholders,  the  purchase  price  under each  restricted  stock
purchase  agreement  shall be such  amount  as the  Board  shall  determine  and
designate in such  restricted  stock purchase  agreement.  For restricted  stock
awards made prior to the Listing Date, the purchase price shall not be less than
eighty-five  percent  (85%) of the stock's  Fair  Market  Value on the date such
award is made or at the time the purchase is consummated.  For restricted  stock
awards made on or after the Listing Date,  the purchase  price shall not be less
than fifty percent (50%) of the stock's Fair Market Value on the date such award
is made or at the time the purchase is consummated.

     ii.  Consideration.  The purchase price of stock  acquired  pursuant to the
restricted  stock purchase  agreement  shall be paid either:  (i) in cash at the
time of purchase;  (ii) at the discretion of the Board,  according to a deferred
payment or other arrangement with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the Board in its discretion.

     iii. Vesting.  Subject to the "Repurchase  Limitation" in subsection 10(h),
shares of Common Stock acquired under the  restricted  stock purchase  agreement
may,  but need not,  be  subject  to a share  repurchase  option in favor of the
Company in accordance with a vesting Schedule to be determined by the Board.

     iv.  Termination  of  Participant's  Continuous  Service.  Subject  to  the
"Repurchase  Limitation"  in  subsection  10(h),  in the  event a  Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant  which have not
vested as of the date of  termination  under the terms of the  restricted  stock
purchase agreement.

     v.  Transferability.  For a restricted  stock award made before the Listing
Date,  rights to acquire  shares under the restricted  stock purchase  agreement
shall  not be  transferable  except  by  will  or by the  laws  of  descent  and
distribution  and shall be  exercisable  during the lifetime of the  Participant
only by the  Participant.  For a  restricted  stock  award  made on or after the
Listing  Date,  rights to acquire  shares under the  restricted  stock  purchase
agreement  shall be  transferable  by the  Participant  only upon such terms and
conditions as are set forth in the restricted stock purchase  agreement,  as the
Board shall  determine in its  discretion,  so long as stock  awarded  under the
restricted  stock  purchase  agreement  remains  subject  to  the  terms  of the
restricted stock purchase agreement.

                                       12

<PAGE>

8.       COVENANTS OF THE COMPANY.

     (a)  Availability  of  Shares.  During the terms of the Stock  Awards,  the
Company  shall keep  available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

     (b) Securities Law  Compliance.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock  Awards and to issue and sell shares of Common
Stock  upon  exercise  of  the  Stock  Awards;  provided,   however,  that  this
undertaking  shall not require the Company to register  under the Securities Act
the Plan,  any Stock Award or any stock issued or issuable  pursuant to any such
Stock Award. If, after reasonable efforts,  the Company is unable to obtain from
any such  regulatory  commission or agency the  authority  which counsel for the
Company  deems  necessary  for the lawful  issuance  and sale of stock under the
Plan,  the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.

9.       USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock  pursuant to Stock Awards shall  constitute
general funds of the Company.

10.      MISCELLANEOUS.

     (a) Acceleration of  Exercisability  and Vesting.  The Board shall have the
power to  accelerate  the time at which a Stock Award may first be  exercised or
the time during which a Stock Award or any part thereof will vest in  accordance
with the Plan,  notwithstanding  the  provisions  in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

     (b) Shareholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares  subject to
such  Stock  Award  unless  and  until  such   Participant   has  satisfied  all
requirements for exercise of the Stock Award pursuant to its terms.

     (c) No  Employment  or other  Service  Rights.  Nothing  in the Plan or any
instrument  executed or Stock Award granted  pursuant  thereto shall confer upon
any  Participant  or other holder of Stock Awards any right to continue to serve
the  Company or an  Affiliate  in the  capacity  in effect at the time the Stock
Award was granted or shall  affect the right of the Company or an  Affiliate  to
terminate (i) the  employment of an Employee with or without  notice and with or
without  cause,  (ii) the service of a Consultant  pursuant to the terms of such
Consultant's  agreement with the Company or an Affiliate or (iii) the service of
a Director  pursuant  to the  Bylaws of the  Company  or an  Affiliate,  and any
applicable  provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

                                       13

<PAGE>

     (d)  Incentive  Stock Option  $100,000  Limitation.  To the extent that the
aggregate  Fair  Market  Value  (determined  at the time of grant) of stock with
respect to which  Incentive  Stock Options are exercisable for the first time by
any  Optionholder  during any calendar  year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000),  the Options or
portions  thereof which exceed such limit  (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

     (e)  Investment  Assurances.  The Company may require a  Participant,  as a
condition of  exercising or acquiring  stock under any Stock Award,  (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and  experience in financial and business  matters  and/or to employ a purchaser
representative  reasonably  satisfactory to the Company who is knowledgeable and
experienced  in financial and business  matters and that he or she is capable of
evaluating, alone or together with the purchaser representative,  the merits and
risks  of  exercising  the  Stock  Award;  and (ii) to give  written  assurances
satisfactory  to the Company stating that the Participant is acquiring the stock
subject to the Stock  Award for the  Participant's  own account and not with any
present intention of selling or otherwise  distributing the stock. The foregoing
requirements,  and any assurances given pursuant to such requirements,  shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock  under  the  Stock  Award has been  registered  under a then  currently
effective  registration  statement  under the  Securities  Act or (iv) as to any
particular requirement,  a determination is made by counsel for the Company that
such requirement need not be met in the circumstances  under the then applicable
securities  laws. The Company may, upon advice of counsel to the Company,  place
legends  on stock  certificates  issued  under  the Plan as such  counsel  deems
necessary or appropriate  in order to comply with  applicable  securities  laws,
including, but not limited to, legends restricting the transfer-of the stock.

     (f) Withholding Obligations. To the extent provided by the terms of a Stock
Award  Agreement,  the Participant  may satisfy any federal,  state or local tax
withholding  obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means (in addition to the Company's right to
withhold from any  compensation  paid to the Participant by the Company) or by a
combination of such means:  (i) tendering a cash payment;  (ii)  authorizing the
Company  to  withhold  shares  from the  shares of the  Common  Stock  otherwise
issuable to the  Participant as a result of the exercise or acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock.

     (g)  Information  Obligation.  Prior to the  Listing  Date,  to the  extent
required  by  Section   260.140.46  of  Title  10  of  the  California  Code  of
Regulations,  the Company shall deliver financial  statements to Participants at
least  annually.  This subsection  10(g) shall not apply to  Participants  whose
duties  in  connection  with  the  Company  assure  them  access  to  equivalent
information.

                                       14

<PAGE>

     (h)  Repurchase  Limitation.  The terms of any  repurchase  option shall be
specified  in the Stock Award and may be either at Fair Market Value at the time
of  repurchase  or at the original  purchase  price.  To the extent  required by
Section  260.140.41 and Section 260.140.42 of Title 10 of the California Code of
Regulations,  any repurchase  option contained in a Stock Award granted prior to
the Listing Date to a Participant who is not an Officer,  Director or Consultant
shall be upon the terms described below:

     i. Fair Market Value. If the repurchase  option gives the Company the right
to  repurchase  the shares upon  termination  of employment at not less than the
Fair Market Value of the shares to be purchased  on the date of  termination  of
Continuous Service, then (i) the right to repurchase shall be exercised for cash
or cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of Continuous  Service (or in the case of shares issued upon
exercise of Stock Awards after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company  and the  Participant  (for  example,  for  purposes of  satisfying  the
requirements  of  Section  1202(c)(3)  of the Code  regarding  "qualified  small
business  stock") and (ii) the right  terminates when the shares become publicly
traded.

     ii. Original Purchase Price. If the repurchase option gives the Company the
right to repurchase  the shares upon  termination  of Continuous  Service at the
original  purchase  price,  then (i) the  right to  repurchase  at the  original
purchase  price shall lapse at the rate of at least twenty  percent (20%) of the
shares  per year over five (5) years  from the date the Stock  Award is  granted
(without   respect  to  the  date  the  Stock  Award  was  exercised  or  became
exercisable)  and (ii) the right to  repurchase  shall be exercised  for cash or
cancellation  of purchase money  indebtedness  for the shares within ninety (90)
days of termination of Continuous  Service (or in the case of shares issued upon
exercise  of Options  after such date of  termination,  within  ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company  and the  Participant  (for  example,  for  purposes of  satisfying  the
requirements  of  Section  1202(c)(3)  of the Code  regarding  "qualified  small
business stock").

     (i) Cancellation and Re-Grant of Options.

     i. Authority to Reprice.  The Board shall have the authority to effect,  at
any time and from time to time,  (i) the  repricing of any  outstanding  Options
under the Plan and/or (ii) with the consent of any adversely affected holders of
Options,  the  cancellation  of any  outstanding  Options under the Plan and the
grant in  substitution  therefor of new Options under the Plan covering the same
or different  numbers of shares of Common  Stock.  The exercise  price per share
shall be not less than that  specified  under the Plan for newly  granted  Stock
Awards.  Notwithstanding  the  foregoing,  the Board may grant an Option with an
exercise price lower than that set forth above if such Option is granted as part
of a transaction to which Section 424(a) of the Code applies.

                                       15

<PAGE>

     ii. Effect of Repricing under Section 162(m) of the Code. Shares subject to
an Option  which is amended or canceled in order to set a lower  exercise  price
per share  shall  continue to be counted  against  the maximum  award of Options
permitted to be granted  pursuant to subsection 5(c). The repricing of an Option
under this subsection 10(i) resulting in a reduction of the exercise price shall
be  deemed  to be a  cancellation  of the  original  Option  and the  grant of a
substitute  Option;  in the event of such  repricing,  both the original and the
substituted  Options  shall be counted  against  the  maximum  awards of Options
permitted to be granted  pursuant to  subsection  5(c).  The  provisions of this
subsection  10(i)(b) shall be applicable  only to the extent required by Section
162(m) of the Code.

11.      ADJUSTMENTS UPON CHANGES IN STOCK.

     (a) Capitalization  Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation,  stock  dividend,  dividend in property other than cash,  stock
split,  liquidating dividend,  combination of shares, exchange of shares, change
in  corporate  structure  or other  transaction  not  involving  the  receipt of
consideration by the Company),  the Plan will be  appropriately  adjusted in the
class(es)  and  maximum  number of  securities  subject to the Plan  pursuant to
subsection  4(a) and the maximum  number of  securities  subject to award to any
person  pursuant to subsection  5(c), and the  outstanding  Stock Awards will be
appropriately  adjusted in the class(es) and number of securities  and price per
share  of stock  subject  to such  outstanding  Stock  Awards.  The  Board,  the
determination of which shall be final,  binding and conclusive,  shall make such
adjustments.  (The conversion of any convertible securities of the Company shall
not be treated  as a  transaction  "without  receipt  of  consideration"  by the
Company.)

     (b)  Change  in  Control--Dissolution  or  Liquidation.  In the  event of a
dissolution  or  liquidation  of the  Company,  then such Stock  Awards shall be
terminated if not exercised (if applicable) prior to such event.

     (c) Change in Control--Asset Sale, Merger, Consolidation or Reverse Merger.
In the event of (1) a sale of  substantially  all of the assets of the  Company,
(2) a  merger  or  consolidation  in  which  the  Company  is not the  surviving
corporation  or (3) a  reverse  merger  in which the  Company  is the  surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of  securities,  cash or  otherwise,  then  any  surviving  corporation  or
acquiring  corporation shall assume any Stock Awards  outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the same
consideration  paid to the  shareholders  in the  transaction  described in this
subsection II (c) for those outstanding under the Plan).

                                       16

<PAGE>

     ii. For purposes of subsection 11 (c) an Award shall be deemed  assumed if,
following  the change in  control,  the Award  confers  the right to purchase in
accordance with its terms and conditions, for each share of Common Stock subject
to the Award  immediately  prior to the  change in  control,  the  consideration
(whether  stock,  cash or other  securities  or property) to which a holder of a
share of  Common  Stock on the  effective  date of the  change  in  control  was
entitled.  iii. In the event any surviving  corporation or acquiring corporation
refuses to assume such Stock Awards or to  substitute  similar  stock awards for
those  outstanding  under the Plan,  then with  respect to Stock  Awards held by
Participants whose Continuous Service has not terminated,  the vesting of 50% of
such Stock Awards (and, if  applicable,  the time during which such Stock Awards
may be  exercised)  shall be  accelerated  in full,  and the Stock  Awards shall
terminate  if not  exercised  (if  applicable)  at or prior to such event.  With
respect to any other Stock Awards  outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.

12.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

     (a) Amendment of Plan.  The Board at any time,  and from time to time,  may
amend  the  Plan.  However,  except  as  provided  in  Section  II  relating  to
adjustments  upon  changes in stock,  no  amendment  shall be  effective  unless
approved by the shareholders of the Company to the extent  shareholder  approval
is necessary to satisfy the  requirements of Section 422 of the Code, Rule 16b-3
or any NASDAQ or securities exchange listing requirements.

     (b) Shareholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for shareholder approval, including, but not limited
to,  amendments  to the Plan  intended  to satisfy the  requirements  of Section
162(m) of the Code and the  regulations  thereunder  regarding  the exclusion of
performance-based  compensation  from the limit on  corporate  deductibility  of
compensation paid to certain executive officers.

     (c) Contemplated  Amendments.  It is expressly  contemplated that the Board
may amend the Plan in any respect  the Board deems  necessary  or  advisable  to
provide eligible  Employees with the maximum benefits provided or to be provided
under the  provisions  of the Code and the  regulations  promulgated  thereunder
relating to Incentive  Stock Options  and/or to bring the Plan and/or  Incentive
Stock Options granted under it into compliance therewith.

     (d) No  Impairment of Rights.  Rights under any Stock Award granted  before
amendment of the Plan shall not be impaired by any  amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

                                       17

<PAGE>

     (e)  Amendment  of Stock  Awards.  The Board at any time,  and from time to
time,  may amend the terms of any one or more Stock Awards;  provided,  however,
that the  rights  under  any  Stock  Award  shall  not be  impaired  by any such
amendment  unless (i) the Company  requests the consent of the  Participant  and
(ii) the Participant consents in writing.

13.      TERMINATION OR SUSPENSION OF THE PLAN.

     (a) Plan Term.  The Board may  suspend or  terminate  the Plan at any time.
Unless sooner  terminated,  the Plan shall terminate on the day before the tenth
(10th)  anniversary  of the date the Plan is adopted by the Board or approved by
the  shareholders of the Company,  whichever is earlier.  No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

     (b) No Impairment of Rights.  Suspension or  termination  of the Plan shall
not impair rights and  obligations  under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.

14.      EFFECTIVE DATE OF PLAN.

     The Plan shall become  effective as determined  by the Board,  but no Stock
Award shall be exercised  (or, in the case of a stock  bonus,  shall be granted)
unless and until the Plan has been approved by the  shareholders of the Company,
which  approval  shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.

15.      CHOICE OF LAW.

     All questions  concerning the construction,  validity and interpretation of
this  Plan  shall be  governed  by the law of the State of  Washington,  without
regard to such states conflict of laws rules.

                                       18