<PAGE>
 
                                                                   EXHIBIT 10.21


                      RAGEN MACKENZIE GROUP INCORPORATED

                          DEFERRED COMPENSATION PLAN
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
 
ARTICLE I      PURPOSE                                                      1
 
ARTICLE II     DEFINITIONS                                                  1
 
               2.1   Account Earnings                                       1
               2.2   Beneficiary                                            1
               2.3   Cause                                                  1
               2.4   Committee                                              1
               2.5   Common Stock                                           1
               2.6   Company                                                2
               2.7   Compensation                                           2
               2.8   Corporate Transaction                                  2
               2.9   Deferral Commitment                                    2
               2.10  Deferral Period                                        3
               2.11  Determination Date                                     3
               2.12  Disability                                             3
               2.13  Earnings Index                                         3
               2.14  Elective Deferral Account                              3
               2.15  Elective Deferred Compensation                         4
               2.16  Participant                                            4
               2.17  Participation Agreement                                4
               2.18  Plan Benefit                                           4
 
ARTICLE III    PARTICIPATION AND DEFERRAL COMMITMENTS                       4
 
               3.1   Eligibility and Participation                          4 
               3.2   Form of Deferral                                       5 
               3.3   Limitations on Deferral Commitments                    5 
               3.4   Modification of Deferral Commitment                    5 
                                                                              
ARTICLE IV     DEFERRED COMPENSATION ACCOUNTS                               5 
 
               4.1   Accounts                                               5
               4.2   Elective Deferred Compensation                         6
               4.3   Allocation of Elective Deferred Compensation           6
               4.4   Crediting of Earnings                                  7
               4.5   Determination of Accounts                              7
               4.6   Vesting of Accounts                                    7
               4.7   Statement of Accounts                                  8 
</TABLE>

                                                                            i
<PAGE>
 
                               TABLE OF CONTENTS
                                  (Continued)
<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
 
ARTICLE V      PLAN BENEFITS                                                8
 
               5.1    Distributions Prior to Termination of Employment      8
               5.2    Distributions Following Termination of Employment     8
               5.3    Form of Benefit Payment                               8
               5.4    Method of Benefit Payment                             8
               5.5    Commencement of Deferral Payment                      9
               5.6    Changing Pay-out Election                             9
               5.7    Withholding for Taxes                                 9
               5.8    Valuation and Settlement                              9
               5.9    Payment to Guardian                                  10
 
 
ARTICLE VI     BENEFICIARY DESIGNATION                                     10
 
               6.1    Beneficiary Designation                              10
               6.2    Changing Beneficiary                                 10
               6.3    Community Property                                   10
               6.4    No Beneficiary Designation                           11
 
 
ARTICLE VII     ADMINISTRATION                                             12
 
               7.1    Committee; Duties                                    12
               7.2    Agents                                               12
               7.3    Binding Effect of Decisions                          12
               7.4    Indemnity of  Committee                              12
 
 
ARTICLE VIII   CLAIMS PROCEDURE                                            12
 
               8.1    Claim                                                12
               8.2    Review of Claim                                      13
               8.3    Notice of Denial of Claim                            13
               8.4    Reconsideration of Denied Claim                      13
               8.5    Company to Supply Information                        14
</TABLE> 

                                                                           ii
<PAGE>
 
                              TABLE OF CONTENTS 
                                  (Continued)

<TABLE> 
<CAPTION> 
                                                                          PAGE
                                                                          ----
<S>                                                                       <C> 
 
ARTICLE IX     AMENDMENT AND TERMINATION OF PLAN                           14
 
               9.1    Amendment                                            14
               9.2    Company's Right to Terminate                         14
 
 
ARTICLE X      MISCELLANEOUS                                               15
 
               10.1   Unfunded Plan                                        15
               10.2   Unsecured General Creditor                           15
               10.3   Trust Fund                                           15
               10.4   Nonassignability                                     16
               10.5   Not a Contract of Employment                         16
               10.6   Protective Provisions                                16
               10.7   Governing Law                                        16
               10.8   Validity                                             17
               10.9   Notice                                               17
               10.10  Successors                                           17
</TABLE>

                                                                           iii
<PAGE>
 
                      RAGEN MACKENZIE GROUP INCORPORATED

                          DEFERRED COMPENSATION PLAN

                                        
                                   ARTICLE I
                                        
                                    PURPOSE

     The purpose of this Deferred Compensation Plan (the "Plan") is to provide
current tax planning opportunities as well as supplemental funds for the
retirement of certain select key employees of Ragen MacKenzie Group Incorporated
(the "Company").  The Plan shall be in addition to existing deferred
compensation plans and arrangements maintained by the Company.  It is intended
that the Plan will aid in retaining and attracting employees of exceptional
ability.  This Plan shall be effective as of July 15, 1998.

                                  ARTICLE II

                                  DEFINITIONS

     For purposes of this Plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:

     2.1  Account Earnings.  "Account Earnings" means the amount to be credited
          ----------------                                                     
to the Participant's Elective Deferral Account pursuant to Section 4.4.

     2.2  Beneficiary.  "Beneficiary" means the person, persons or entity
          -----------                                                    
entitled under Article VI to receive any Plan benefits payable after a
Participant's death.

     2.3  Cause.  "Cause" means a reportable matter under Section 13, 14, or 15
          -----                                                                
of Form U-5 Uniform Termination Notice (or equivalent sections of its successor
notice) or other misconduct or disclosure of confidential information.
 
     2.4  Committee.  " Committee" means the Compensation Committee of the
          ---------                                                       
Company's Board of Directors (the Board).  The Committee shall be responsible
for the administration of the Plan.

     2.5  Common Stock.  "Common Stock" means the Common Stock, par value $.01
          ------------                                                        
per share, of the Company.

Deferred Compensation Plan                                                Page 1
<PAGE>
 
     2.6  Company.  "Company" means Ragen MacKenzie Group Incorporated or any
          -------                                                            
successor to the business thereof, and any affiliated or subsidiary corporations
designated by the Committee.
 
     2.7  Compensation.  "Compensation" means regular cash compensation,
          ------------                                                  
including cash bonuses and commissions, but excluding severance pay, relocation
bonuses, payments in lieu of vacation, sick leave, or any other special
payments.

     2.8  Corporate Transaction.  "Corporate Transaction" means any of the
          ---------------------                                           
following events:

     (a)  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)  Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as the term "subsidiary corporation" is
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended) of
the Company;

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

     (d)  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
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of a majority
or more of the Company's outstanding voting securities (whether directly or
indirectly, beneficially or of record).  Ownership of voting securities shall
take into account and shall include ownership as determined by applying Rule 
13d-3(d)(1)(i) (as in effect on the date of adoption of the Plan) under the
Exchange Act.

     2.9  Deferral Commitment.  "Deferral Commitment" means an election to defer
          -------------------                                                   
Compensation made by a Participant pursuant to Article III and for which a
separate Participation Agreement has been submitted by the Participant to the
Committee.

Deferred Compensation Plan                                                Page 2
<PAGE>
 
     2.10  Deferral Period.  "Deferral Period" means the period over which a
           ---------------                                                  
Participant has elected to defer a portion of his or her Compensation.  The
periods from January 1 through June 30 and July 1 through December 31 of each
year shall be separate Deferral Periods; provided, however, that the Initial
Deferral Period shall begin on the later of the closing date of the Company's
initial public offering, or on an administratively feasible date to be
determined by the Company.

     2.11  Determination Date.  "Determination date" means the last business day
           ------------------                                                   
of each Deferral Period.

     2.12  Disability.  "Disability" means a mental or physical impairment of 
           ----------   
the Participant which is expected to result in death or which has lasted or is
expected to last for a continuous period of 12 months or more and which 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.  Disability shall be deemed to have occurred
on the first day after the Company and the two independent physicians have
furnished their opinion of Disability to the Committee.
 
     2.13   Earnings Index.  "Earnings Index" means the portfolio, fund, or
           --------------                                                 
security selected by the Committee to be used as an index in calculating Account
Earnings.  Each Earnings Index shall be a phantom investment fund which shall be
credited with earnings (whether gain or loss), dividends, and interest according
to the performance of the actual fund, portfolio, or security.  The Committee
shall initially offer two Earnings Indices under the Plan: Ragen MacKenzie Group
Incorporated common stock (the "Company Stock Index") and short-term U.S.
Treasury securities (the "Treasury Index").   The Company Stock Indices shall be
denominated in units, each unit representing one share of Common Stock.  The
Treasury Index shall be denominated in units, where each unit represents $1 par
value of short-term U.S. Treasury Notes.

     2.14  Elective Deferral Account (or "Account").  "Elective Deferral 
           ----------------------------------------   
Account" (or "Account") means the Account maintained by the Company in
accordance with Article IV with respect to any elective deferral of Compensation
pursuant to Section 4.2 of the Plan.  A

Deferred Compensation Plan                                               Page 3
<PAGE>
 
Participant's Elective Deferral Account shall be utilized solely as a device for
the determination and measurement of the amounts to be paid to the Participant
pursuant to the Plan.  A Participant's Elective Deferral Account shall not
constitute or be treated as a trust fund of any kind.

     2.15  Elective Deferred Compensation.  "Elective Deferred Compensation"
           ------------------------------                                   
means the amount of Compensation that a Participant elects to defer pursuant to
a Deferral Commitment.
 
     2.16  Participant.  "Participant" means any individual who is participating
           -----------                                                          
or has participated in this Plan as provided in Article III.

     2.17  Participation Agreement.  "Participation Agreement" means the
           -----------------------                                      
agreement submitted by a Participant to the Committee prior to the beginning of
the Deferral Period, with respect to a Deferral Commitment made for such
Deferral Period.

     2.18  Plan Benefit.  "Plan Benefit" means the benefit payable to a
           ------------                                                
Participant as calculated in Article V.
 
                                  ARTICLE III

                    PARTICIPATION AND DEFERRAL COMMITMENTS
                                        
     3.1  Eligibility and Participation.
          ----------------------------- 

          (a)  Eligibility.  An employee of the Company shall be eligible to
               -----------                                                  
     participate in this Plan if the employee earned Compensation greater than
     or equal to $100,000 in the immediately preceding calendar year.
     Employee's who are employed for less than a full calendar year shall have
     their Compensation annualized when determining their eligibility to
     participate for the following year.  New employees and other key employees
     shall be eligible to participate at the discretion of the Committee.

          (b)  Participation.  An eligible employee may elect to participate in 
               -------------                                                
     the Plan with respect to a Deferral Period by submitting a Participation
     Agreement to the Committee by the June 15 and December 15 immediately
     preceding the next Deferral Period; provided, however, that Participants,
     may submit a Participation Agreement with respect to the Initial Deferral
     Period by a date to be established by the Company.  

Deferred Compensation Plan                                               Page 4
<PAGE>
 
     Failure to timely submit a separate Participation Agreement with respect to
     a Deferral Period will preclude participation in the Plan for that Deferral
     Period.

          (c)  Part-Year Participation.  In the event that an employee first
               -----------------------                                      
     becomes eligible to participate during a Deferral Period, the Participant
     shall be allowed to enter the Plan at the beginning of the following
     Deferral Period by submitting a Participation Agreement as required by
     Section 3.1(b).

     3.2  Form of Deferral.   Deferral Commitments shall be stated in the
          ----------------                                               
Participation Agreement as a percentage of Compensation to be paid to the
Participant during a Deferral Period.

     3.3  Limitations on Deferral Commitments. The minimum Deferral Commitment
          -----------------------------------                                 
shall be two percent (2%).  The maximum Deferral Commitment shall be determined
by reference to the following table:

<TABLE>
<CAPTION>
       Prior Calendar Year Compensation        Maximum Deferral Percentage
     ------------------------------------      ---------------------------
<S>                                         <C>       
      greater than, or equal to, $500,000                  25.0%

            $400,000 - 499,999                             22.5%

            $300,000 - 399,999                             20.0%

            $200,000 - 299,999                             17.5%

      less than, or equal to, 199,999                      15.0%
</TABLE>

The Committee may change the minimum or maximum deferral amounts from time to
time by giving written notice to all Participants. No such change may affect a
Deferral Commitment entered into prior to the Committee's action.

     3.4  Modification of Deferral Commitment.  A Deferral Commitment shall be
          -----------------------------------                                 
irrevocable for the Deferral Period to which it applies.

                                  ARTICLE IV

                        DEFERRED COMPENSATION ACCOUNTS
                                        
     4.1  Accounts.   Separate Accounts shall be maintained for each Participant
          --------                                                              
to reflect their Elective Deferral Account.  Separate sub-accounts shall be
maintained to the 

Deferred Compensation Plan                                               Page 5
<PAGE>
 
extent necessary to properly reflect investment elections, total vested or
nonvested Account balances, or elections regarding time and form of payment.

     4.2  Elective Deferred Compensation.  A Participant's Elective Deferred
          ------------------------------                                    
Compensation shall be credited to the Participant's Elective Deferral Account as
the corresponding nondeferred portion of the Participant's Compensation becomes
or would have become payable.  Any withholding of taxes or other amounts with
respect to deferred Compensation which is required by state, federal or local
law shall be withheld from the Participant's nondeferred Compensation to the
maximum extent possible with any excess reducing the Elective Deferred
Compensation.

     4.3  Allocation of Elective Deferred Compensation.  A Participant shall
          --------------------------------------------                      
allocate the Elective Deferred Compensation between the Earnings Indices
provided by the Committee.  Allocation elections shall be made in the
Participation Agreement in whole percentage increments and shall be irrevocable
on December 15 and June 15 of the then applicable Deferral Period.  The
Participant's Elective Deferred Compensation shall be accumulated without
interest and allocated each July 1 and January 1 to the Earnings Indices elected
by the Participant.  Allocations to the Company Stock Index and Treasury Index
shall be credited with a number of units determined by dividing the Elective
Deferred Compensation corresponding to each Earnings Index by the average
closing price of the Common Stock and short-term U.S. Treasury securities during
the five (5) trading days preceding the allocation date less the applicable
discount.  The discount shall be based upon the Participant's Compensation
during the prior calendar year and is determined according to the following
schedule:

<TABLE>
<CAPTION>
       Prior Calendar Year Compensation            Discount Percentage
     ------------------------------------          -------------------
<S>                                              <C>
     greater than, or equal to, $500,000                   25.0%

            $400,000 - 499,999                             22.5%

            $300,000 - 399,999                             20.0%

            $200,000 - 299,999                             17.5%

     less than, or equal to, 199,999                       15.0%
</TABLE>

Deferred Compensation Plan                                               Page 6
<PAGE>
 
The Committee may change the discount from time to time by giving written notice
to all Participants.  No such change may affect a Deferral Commitment entered
into prior to the  Committee's action.

     The number of units in the portion of the Elective Deferral Account which
is allocated to the Company Stock Index shall be appropriately adjusted to
reflect stock splits, stock dividends, and other like adjustments in the Common
Stock.

     4.4  Crediting of Earnings.   The Account of each Participant shall be
          ----------------------                                           
credited with earnings as if such account held actual assets and those assets
were allocated among such Earnings Indices as the Participant elected pursuant
to Section 4.3.

     4.5  Determination of Accounts.  Each Participant's Elective Deferral
          -------------------------                                       
Account as of each Determination Date shall consist of the balance of the
Account as of the immediately preceding Determination Date, plus (i) additional
Elective Deferred Compensation credited during the current Deferral Period, and
(ii) the applicable Account Earnings, minus the amount of any distributions made
since the immediately preceding Determination Date.

     4.6  Vesting of Accounts.  Each Participant shall be 100% vested in the
          -------------------                                               
amounts credited to such Participant's Account and earnings thereon two years
after the last day of the Deferral Period during which the Elective Deferred
Compensation was credited to the Participant's Account.  In the event the
Participant (i) is involuntarily terminated during the two-year vesting period
for any reason other than Cause, or (ii) terminates employment during the two-
year vesting period due to retirement at or after age 65, Disability, or death,
then the unvested portion of the Participant's Account shall immediately become
100% vested. In the event the Participant is involuntarily terminated for Cause
or voluntarily terminates employment with the Company prior to the expiration of
the two-year vesting period, the unvested portion of the Participant's Account,
including any Account Earnings thereon, shall be forfeited and no benefit will
be payable to the Participant with respect thereto.  Notwithstanding the
foregoing, in the event of any Corporate Transaction during the two-year vesting
period, each Participant's Account shall immediately become 100% vested.

Deferred Compensation Plan                                               Page 7
<PAGE>
 
     4.7  Statement of Accounts.  The  Committee shall submit to each
          ---------------------                                      
Participant, within ninety (90) days after the close of each calendar year and
at such other time as determined by the  Committee, a statement setting forth
the balance to the credit of the Elective Deferral Account maintained for a
Participant.

                                   ARTICLE V

                                 PLAN BENEFITS
                                        
     5.1  Distributions Prior to Termination of Employment.   A Participant may
          ------------------------------------------------                     
elect to receive payment prior to termination of employment of the portion of
the  Participant's vested Account attributable to amounts deferred during a
Deferral Period.   Such payment will take place at the time specified in the
Participation Agreement filed with respect to the corresponding Deferral Period.
Each Participation Agreement filed with the Company may provide a different date
for pre-termination payments.  Any distribution pursuant to this section shall
be payable in a lump sum within thirty (30) days of the date specified in the
Participation Agreement.
 
     5.2  Distributions Following Termination of Employment.  Upon a
          -------------------------------------------------         
Participant's termination of employment with Company for any reason, including
death, Disability, or retirement at or after age 65, the Company shall pay the
Participant or, in the case of death, the Participant's Beneficiary, benefits
equal to the vested balance in the Participant's Elective Deferral Account.

     5.3  Form of Benefit Payment.  All benefits paid under this plan shall be
          -----------------------                                             
paid in the form of Company Stock or cash.  That portion of the Elective
Deferral Account which is allocated to the Company Stock Index shall be paid in
Common Stock, which shall be issued under the Company's 1998 Stock Incentive
Compensation Plan.  That portion of the Elective Deferral Account which is
allocated to the Treasury Index shall be paid in cash.

     5.4  Method of Benefit Payment
          --------------------------

          (a)  Termination.  Subject to Section 5.4(b), benefits shall be paid 
               -----------                                               
     according to the method selected by the Participant at the time of the
     Deferral 

Deferred Compensation Plan                                               Page 8
<PAGE>
 
     Commitment.  The method of payment elected in a Participation Agreement
     shall control with regard to the portion of the Account attributable to the
     corresponding Deferral Period for which the Participation Agreement was
     filed.  Payment options include:

               (i)    A lump sum payment, or
               (ii)   Substantially equal annual installments of the Elective
     Deferral Account over a period of five (5), ten (10), or fifteen (15)
     years.   Account Earnings shall continue to accrue during the payment
     period on the unpaid Account balance.

          (b)  Small Account(s).  Notwithstanding Section 5.4(a), if a
               ----------------                                       
     terminated Participant's Elective Deferral Account is under five thousand
     dollars ($5,000) on a Determination Date, the Elective Deferral Account
     shall be paid in a lump sum.

          (c)  Termination Due to Death.  Upon the death of a Participant, the
               ------------------------                                       
  Company shall pay to the Participant's Beneficiary an amount equal to the
  remaining unpaid balance of the Participant's Elective Deferral Account in a
  lump sum.

     5.5  Commencement of Benefit Payment.   Payment of benefits shall commence
          -------------------------------                                      
as soon as practical after termination of employment but in no case more than
ninety (90) days after termination.
 
     5.6  Changing Pay-out Election.   A Participant may change the method of
          -------------------------                                          
benefit payment or the timing of benefit commencement with the consent of the
Committee.  In no case may a Participant change such elections in the 12 months
preceding termination of employment.  Any change in election filed with the
Committee during the 12 month-period preceding termination shall be ineffective
and reference shall be made to the prior election form.

     5.7  Withholding for Taxes.  To the extent required by the law in effect at
          ---------------------                                                 
the time payments are made, the Company shall withhold from the benefit payments
made hereunder any taxes required to be withheld by the federal or any state or
local government.

     5.8  Valuation and Settlement.  The amount of a lump sum payment and the
          ------------------------                                           
initial amount of installments shall be based on the value of the Participant's
Accounts on the last 

Deferred Compensation Plan                                               Page 9
<PAGE>
 
Determination Date coincident with or preceding the Participant's termination of
employment.

     5.9  Payment to Guardian.  The  Committee may direct payment to the duly
          -------------------                                                
appointed guardian, conservator, or other similar legal representative of a
Participant or Beneficiary to whom payment is due.  In the absence of such a
legal representative, the Committee may, in its sole and absolute discretion,
make payment to a person having the care and custody of a minor, incompetent or
person incapable of handling the disposition of property upon proof satisfactory
to the Committee of incompetency, minority, or incapacity.  Such distribution
shall completely discharge the  Committee from all liability with respect to
such benefit.

                                  ARTICLE VI

                            BENEFICIARY DESIGNATION
                                        
     6.1  Beneficiary Designation.  Subject to Section 6.3, each Participant
          -----------------------                                           
shall have the right, at any time, to designate one (1) or more persons or an
entity as Beneficiary (both primary as well as secondary) to whom benefits under
this Plan shall be paid in the event of Participant's death prior to complete
distribution of the Participant's Accounts.  Each Beneficiary designation shall
be in a written form prescribed by the  Committee and shall be effective only
when filed with the  Committee during the Participant's lifetime.

     6.2  Changing Beneficiary.  Subject to Section 6.3, any Beneficiary
          --------------------                                          
designation may be changed by a Participant without the consent of the
previously named Beneficiary by the filing of a new designation with the
Committee.  The filing of a new designation shall cancel all designations
previously filed.

     6.3  Community Property.  If the Participant resides in a community
          ------------------                                            
property state, the following rules shall apply:

          (a)  Designation by a married Participant of a Beneficiary other
     than the Participant's spouse shall not be effective unless the spouse
     executes a written consent that acknowledges the effect of the designation,
     or it is established the consent cannot be obtained because the spouse
     cannot be located.

Deferred Compensation Plan                                               Page 10
<PAGE>
 
          (b)  A married Participant's Beneficiary designation may be
     changed by a Participant with the consent of the Participant's spouse as
     provided for in Section 6.3(a) by the filing of a new designation with the
     Committee.

          (c)  If the Participant's marital status changes after the Participant
     has designated a Beneficiary, the following shall apply:

               (i)    If the Participant is married at the time of death but was
          unmarried when the designation was made, the designation shall be void
          unless the spouse has consented to it in the manner prescribed in
          Section 6.3(a).

               (ii)   If the Participant is unmarried at the time of death but
          was married when the designation was made:

                      a)   The designation shall be void if the spouse was named
               as Beneficiary.

                      b)   The designation shall remain valid if a nonspouse
               Beneficiary was named.

               (iii)  If the Participant was married when the designation was
          made and is married to a different spouse at death, the designation
          shall be void unless the new spouse has consented to it in the manner
          prescribed above.

     6.4  No Beneficiary Designation.  If any Participant fails to designate a
          --------------------------                                          
Beneficiary in the manner provided above, if the designation is void, or if the
Beneficiary designated by a deceased Participant dies before the Participant or
before complete distribution of the Participant's Accounts, the Participant's
Beneficiary shall be the person in the first of the following classes in which
there is a survivor:

          (a)  The Participant's spouse;

          (b)  The Participant's children in equal shares, except that if any of
          the children predeceases the Participant but leaves issue surviving,
          then such issue shall take by right of representation the share the
          parent would have taken if living;

          (c)  The Participant's estate.

Deferred Compensation Plan                                               Page 11
<PAGE>
 
                                  ARTICLE VII

                                ADMINISTRATION
                                        
     7.1  Committee; Duties.  This Plan shall be administered by the
          ------------------                                          
Committee.  The  Committee shall have the authority to amend or terminate the
Plan, interpret and enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and all questions,
including interpretations of the Plan, as may arise.  A majority vote of the
Committee members shall control any decision.

     7.2  Agents.  The Committee may, from time to time, employ agents and
          ------                                                           
delegate to them such administrative duties as it sees fit, and may from time to
time consult with counsel who may be counsel to the Company.

     7.3  Binding Effect of Decisions.  The decision or action of the Committee
          ---------------------------                                           
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final, conclusive and binding upon
all persons having any interest in the Plan.

     7.4  Indemnity of  Committee.  The Company shall indemnify and hold
          -----------------------                                       
harmless the members of the Committee against any and all claims, loss, damage,
expense or liability arising from any action or failure to act with respect to
this Plan on account of such person's service on the Committee, except in the
case of gross negligence or willful misconduct.

                                 ARTICLE VIII

                               CLAIMS PROCEDURE
                                        
     8.1  Claim.  The Committee shall establish rules and procedures to be
          -----                                                            
followed by Participants and Beneficiaries in (a) filing claims for benefits,
and (b) for furnishing and verifying proofs necessary to establish the right to
benefits in accordance with the Plan, consistent with the remainder of this
Article.  Such rules and procedures shall require that claims and proofs be made
in writing and directed to the Committee.

Deferred Compensation Plan                                               Page 12
<PAGE>
 
     8.2  Review of Claim.  The Committee shall review all claims for benefits.
          ---------------   
Upon receipt by the  Committee of such a claim, it shall determine all facts
which are necessary to establish the right of the claimant to benefits under the
provisions of the Plan and the amount thereof as herein provided within ninety
(90) days of receipt of such claim.  If prior to the expiration of the initial
ninety (90) day period, the Committee determines additional time is needed to
come to a determination on the claim, the Committee shall provide written notice
to the Participant, Beneficiary or other claimant of the need for the extension,
not to exceed a total of one hundred eighty (180) days from the date the
application was received.

     8.3  Notice of Denial of Claim.  In the event that any Participant,
          -------------------------                                     
Beneficiary or other claimant claims to be entitled to a benefit under the Plan,
and the Committee determines that such claim should be denied in whole or in
part, the Committee shall, in writing, notify such claimant that the claim has
been denied, in whole or in part, setting forth the specific reasons for such
denial.  Such notification shall be written in a manner reasonably expected to
be understood by such claimant and shall refer to the specific sections of the
Plan relied on, shall describe any additional material or information necessary
for the claimant to perfect the claim and an explanation of why such material or
information is necessary, and where appropriate, shall include an explanation of
how the claimant can obtain reconsideration of such denial.

     8.4  Reconsideration of Denied Claim.
          ------------------------------- 

          (a)  Within sixty (60) days after receipt of the notice of the denial
     of a claim, such claimant or duly authorized representative may request, by
     mailing or delivery of such written notice to the Committee, a
     reconsideration by the Committee of the decision denying the claim. If the
     claimant or duly authorized representative fails to request such a
     reconsideration within such sixty (60) day period, it shall be conclusively
     determined for all purposes of this Plan that the denial of such claim by
     the Committee is correct. If such claimant or duly authorized
     representative requests a reconsideration within such sixty (60) day
     period, the claimant or duly authorized representative shall have thirty
     (30) days after filing a 

Deferred Compensation Plan                                               Page 13
<PAGE>
 
     request for reconsideration to submit additional written material in
     support of the claim, review pertinent documents, and submit issues and
     comments in writing.

          (b)  After such reconsideration request, the Committee shall determine
     within sixty (60) days of receipt of the claimant's request for
     reconsideration whether such denial of the claim was correct and shall
     notify such claimant in writing of its determination.  The written notice
     of decision shall be in writing and shall include specific reasons for the
     decision, written and calculated in a manner reasonably expected to be
     understood by the claimant, as well as specific references to the pertinent
     Plan provisions on which the decision is based.  In the event of special
     circumstances determined by the Committee, the time for the Committee to
     make a decision may be extended by an additional sixty (60) days upon
     written notice to the claimant prior to the commencement of the extension.

     8.5  Company to Supply Information.  To enable the  Committee to perform
          -----------------------------                                      
its functions, the Company shall supply full and timely information to the
Committee of all matters relating to the retirement, death or other cause for
termination of employment of all Participants, and such other pertinent facts as
the  Committee may require.

                                  ARTICLE IX

                       AMENDMENT AND TERMINATION OF PLAN

     9.1   Amendment.  The Board or the Committee may at any time amend the Plan
           ---------                                                            
by written instrument, notice of which is given to all Participants and to any
Beneficiaries to whom a benefit is due.  No amendment shall reduce the amount
accrued in any Account to the date such notice of the amendment is given.
 
     9.2  Company's Right to Terminate.  Notwithstanding any other provision of
          ----------------------------                                         
this plan; the Board or the Committee may at any time partially or completely
terminate the Plan if, in its judgment, the tax, accounting or other effects of
the continuance of the Plan, or potential payments thereunder would not be in
the best interests of the Company.

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<PAGE>
 
          (a)  Partial Termination.  The  Board or the Committee may partially 
               -------------------                                  
     terminate the Plan by not accepting any additional Deferral Commitments.  
     If such a partial termination occurs, the Plan shall continue to operate
     and be effective with regard to Deferral Commitments entered into prior to
     the effective date of such partial termination.

          (b)  Complete Termination.  The Board or the Committee may completely 
               --------------------                                 
     terminate the Plan by not accepting any additional Deferral Commitments,
     and by terminating all ongoing Deferral Commitments. If such a complete
     termination occurs, the Plan shall cease to operate and the Company shall
     pay out each Account.  Payment shall be made in a lump sum within sixty
     (60) days after the Board or the Committee terminates the Plan.

                                   ARTICLE X

                                 MISCELLANEOUS
                                        
     10.1  Unfunded Plan.  This plan is an unfunded plan maintained primarily to
           -------------                                                        
provide deferred compensation for a select group of "management or highly-
compensated employees" within the meaning of Sections 201, 301 and 401 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
therefore is exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.

     10.2  Unsecured General Creditor.  Participants and Beneficiaries shall be
           --------------------------                                          
unsecured general creditors, with no secured or preferential right to any assets
of Company or any other party for payment of benefits under this Plan.  Any
property held by Company in connection with this Plan shall remain its general,
unpledged and unrestricted assets.  Company's obligation under the Plan shall be
an unfunded and unsecured promise to pay money in the future.

     10.3  Trust Fund.
           ---------- 

          (a)  At its discretion, the Company may establish one or more trusts,
     with such trustees as the Committee may approve, for the purpose of
     providing for the payment of benefits owed under the Plan. Such trusts
     assets shall be held for payment of all the Company's general creditors in
     the event of insolvency or

Deferred Compensation Plan                                               Page 15
<PAGE>
 
     bankruptcy.  To the extent any benefits provided under the Plan are paid
     from any such trust, the Company shall have no further obligation to pay
     them.  If not paid from the trust, such benefits shall remain the
     obligation of Company.

          (b)  In the event of a Corporate Transaction, the Company shall
     establish such trust, if it has not already done so.  Immediately after the
     Corporate Transaction the Company shall deposit an amount in the trust
     which will cause the value of the trust's assets to be no less than the sum
     of all Participant Accounts on the date of the Corporate Transaction.
     Thereafter, the trust shall be valued no less often than annually and the
     Company shall deposit any additional amounts necessary to cause the value
     of the trust's assets to equal or exceed the sum of all Participant
     Accounts on the date of the valuation.

     10.4 Nonassignability.  Neither a Participant nor any other person shall
          ----------------                                                   
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are, expressly declared to be unassignable and
nontransferable.  No part of the amounts payable shall, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency.

     10.5 Not a Contract of Employment.  This Plan shall not constitute a
          ----------------------------                                   
contract of employment between Company and the Participant.  Nothing in this
Plan shall give a Participant the right to be retained in the service of Company
or to interfere with the right of Company to discipline or discharge a
Participant at any time.

     10.6 Protective Provisions.  A Participant will cooperate with Company by
          ---------------------                                               
furnishing any and all information and taking other actions as requested by
Company in order to facilitate the administration of the Plan and the payment of
benefits hereunder.

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<PAGE>
 
     10.7  Governing Law.  The provisions of this Plan shall be construed and
           -------------                                                     
interpreted according to the laws of the state of Washington, except as
preempted by federal law.

     10.8  Validity.  In case any provision of this Plan shall be held illegal 
           --------   
or invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted herein.

     10.9  Notice.  Any notice required or permitted under the Plan shall be
           ------                                                           
sufficient if in writing and hand delivered or sent by registered or certified
mail.  Such notice shall be deemed as given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification. Mailed notice to the Committee shall be
directed to the Company's address. Mailed notice to a Participant or Beneficiary
shall be directed to the individual's last known address in the Company's
records.

     10.10 Successors.  The provisions of this Plan shall bind and inure to the
           ----------                                                          
benefit of Company and its successors and assigns.  The term successors as used
herein shall include any corporate or other business entity which shall, whether
by merger, consolidation, purchase or otherwise acquire all or substantially all
of the business and assets of Company, and successors of any such corporation or
other business entity.

                                                                         Page 17