Document:

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                                                                    EXHIBIT 4(B)

        UNLESS THIS SECURITY (AS DEFINED HEREIN) IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE
"DEPOSITARY"), TO THE COMPANY (AS DEFINED HEREIN) OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE TO BE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY AND ANY AMOUNT PAYABLE THEREUNDER IS MADE
PAYABLE TO CEDE & CO. OR TO SUCH OTHER NAME, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

        UNLESS AND UNTIL THIS SECURITY IS EXCHANGED IN WHOLE OR IN PART FOR
CERTIFICATED SECURITIES REGISTERED IN THE NAMES OF THE VARIOUS BENEFICIAL
HOLDERS HEREOF AS THEN CERTIFIED TO THE COMPANY BY THE DEPOSITARY OR A SUCCESSOR
DEPOSITARY, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.

                             WASHINGTON MUTUAL, INC.
                        8.25% SUBORDINATED NOTE DUE 2010

No. 2                                                        $100,000,000
                                                             CUSIP:  939322 AE 3

        WASHINGTON MUTUAL, INC., a Washington corporation (herein called the
"Company," which term shall refer to such Company until a successor corporation
shall have become such pursuant to the provisions of the Indenture referred to
herein and thereafter "Company" shall mean such successor corporation), for
value received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ONE HUNDRED MILLION DOLLARS ($100,000,000) on April 1, 2010,
and to pay interest thereon from April 4, 2000, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semiannually
on April 1 and October 1 in each year, commencing October 1, 2000, at the rate
of 8.25% per annum, until the principal hereof is paid or made available for
payment.

        The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name

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this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be (in
each case whether or not a Business Day) the March 15 or September 15 as the
case may be, next preceding such Interest Payment Date. Any interest not
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.

        Payment of the principal of (and premium, if any, on) and interest on
this Security will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, in The City of New York, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company, payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register.

        This security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of April 4, 2000 (herein called the
"Indenture"), between the Company and Harris Trust and Savings Bank, as Trustee
(herein called the "Trustee," which term includes any successor trustee or
trustees under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $1,000,000,000.

        The Securities are not redeemable at the option of the Company prior to
Stated Maturity.

        If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

        The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Securities at the time Outstanding of all series to be

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affected (acting as one class). The Indenture also provides that, regarding the
Securities of any series, the Holders of not less than a majority in principal
amount of the Securities at the time outstanding of such series may waive
certain past defaults and their consequences on behalf of the Holders of all
Securities of such series. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

        As provided in the Indenture, the Company shall be discharged from its
obligations with respect to the Securities of any series when (1) with respect
to all Outstanding Securities of such series, the Company has deposited or
caused to be deposited with the Trustee as a trust fund specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of the
Securities of such series (i) money in an amount as will, or (ii) U.S.
Government Obligations as will, together with the predetermined and certain
income to accrue thereon without consideration of any reinvestment thereof, or
(iii) a combination of (i) and (ii) as will (in a written opinion with respect
to (ii) or (iii) of independent public accountants delivered to the Trustee), be
sufficient to pay and discharge the entire indebtedness on all Outstanding
Securities of such series for principal (and premium, if any) and interest, if
any, to the Stated Maturity; and (2) the Company has paid or caused to be paid
all other sums payable with respect to the Outstanding Securities of such
series; and (3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all such conditions precedent
have been complied with; and (4) the Company has delivered to the Trustee (i) a
ruling directed to the Company and the Trustee from the United States Internal
Revenue Service to the effect that Holders of the Securities of such series will
not recognize income, gain or loss for Federal income tax purposes as a result
thereof and will be subject to Federal income tax as if such option had not been
exercised or (ii) an opinion of Counsel to the same effect and based upon a
change in law.

        No reference herein to the Indenture and no provisions of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest, if any, on this Security at the times, place and rate, and in the coin
or currency, herein and in the Indenture provided; subject, however, to the
provisions for the discharge of the Company from its obligations under the
Securities upon satisfaction of the conditions set forth in the preceding
paragraph or in the Indenture.

        As provided in the Indenture, upon any consolidation or merger or any
conveyance, transfer or lease of the properties and assets of the Company
substantially as an entirety in accordance with the provisions of the Indenture,
the successor corporation formed by such consolidation or into which the
predecessor corporation is merged or to which such conveyance, transfer or lease
is made shall be substituted for the predecessor

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corporation with the same effect as if such successor corporation had been named
as the Company. Thereafter the predecessor corporation shall be relieved of the
performance and observance of all obligations and covenants of the Indenture and
the Securities, including but not limited to the obligation to make payment of
the principal of (and premium, if any, on) and interest, if any, on all the
Securities then Outstanding, and, in the event of any such conveyance, transfer
or lease, may be liquidated and dissolved.

        As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, when duly endorsed
by, or accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by, the Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new
Securities of this series, of authorized denominations and for a like aggregate
principal amount and tenor, will be issued to the designated transferee or
transferees.

        The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any larger amount that is an
integral multiple of $1,000. As provided in the indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount and tenor of Securities of this series of a
different authorized denomination, upon surrender of the Securities to be hanged
at any such office or agency.

        No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

        Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

        As provided in the Indenture, no recourse shall be had for the payment
of the principal of (or premium, if any, on) or the interest, if any, on this
Security, or any part hereof, or for any claim based hereon or otherwise in
respect hereof, or of the indebtedness represented hereby, or upon any
obligation, covenant or agreement of the Company in the Indenture, against any
incorporator, direct or indirect stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation (either
directly or through the Company or any such successor corporation), whether by
virtue of any constitutional provision, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all liability, if any, of
that character against every such incorporator, stockholder, officer and
director being by the

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acceptance hereof, and as a condition of and as part of the consideration for
the issue hereof, expressly waived and released.

        The indebtedness evidenced by this Security is, to the extent permitted
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same (1) agrees to and shall be bound by such provisions, (2)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination so provided, and (3)
appoints the Trustee his attorney-in-fact for any and all such purposes.

        The Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.

        All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

        Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.

        IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

                                            WASHINGTON MUTUAL, INC.

                                            By:
                                               ---------------------------------
                                            Authorized Signatory

(SEAL)

Attest:

----------------------------------
        Secretary

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                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

        This is one of the Securities of the series designated and issued under
the within mentioned Indenture.

        Dated:                   , 2000.
              -------------------

                                            HARRIS TRUST AND SAVINGS BANK,
                                            as Trustee

                                            By:
                                               --------------------------------
                                            Authorized Signatory

                                  ABBREVIATIONS

        The following abbreviations, when used in the inscription on this
Security, shall be construed as though they were written out in full according
to applicable laws or regulations.

<TABLE>
<CAPTION>

<S>            <C>                                        <C>
TEN COM -      as tenants in common                       UNIF GIFT MIN ACT
TEN ENT -      as tenants by the entireties with right
               of survivorship and not as tenants in
               common                                                            Custodian
JT TEN -       as joint tenants with right of             ----------------------
               survivorship and not as tenants in         (Cust)
               common

                                                          ----------------------
                                                          (Minor)
                                                          Under Uniform Gifts to Minor Act

                                                          ----------------------
                                                          (State)
</TABLE>

     Additional abbreviations may also be used though not in the above list.

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<PAGE>   7

        FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers

        to

INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE

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

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

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        PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE

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the within Security of Washington Mutual, Inc., and irrevocably constitutes and
appoints ______________________to transfer said Security on the books of the
within named Company, with full power of substitution in the premises.

Dated:
      ---------------------------           -----------------------------------

                                            -----------------------------------
                                            The signature to this assignment
                                            must correspond with the name as
                                            written upon the face of the
                                            Security in every particular without
                                            alteration or enlargement, or any
                                            change whatsoever.

                                            Signatures must be guaranteed by an
                                            "eligible guarantor institution"
                                            meeting the requirements of the
                                            Security Registrar, which
                                            requirements include membership or
                                            participation in the Security
                                            Transfer Agent Medallion Program
                                            ("STAMP") or such other "signature
                                            guarantee program" as may be
                                            determined by the Security Registrar
                                            in addition to, or in substitution
                                            for, STAMP, all in accordance with
                                            the Securities Exchange Act of 1934,
                                            as amended.

                                       7<PAGE>   1

                                                                    EXHIBIT 10.1

                                   N2H2, INC.
                             2000 STOCK OPTION PLAN

        ARTICLE 1. INTRODUCTION.

        The purpose of the Plan is to promote the long-term success of the
Company and the creation of shareholder value by encouraging the attraction and
retention of Employees and Consultants with exceptional qualifications and
linking Employees and Consultants directly to shareholder interests through
increased stock ownership.

        The Plan shall be governed by, and construed in accordance with, the
laws of the State of Washington.

        ARTICLE 2. ADMINISTRATION.

        2.1 Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:

        (a) Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and

        (b) Such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under
Section 162(m)(4)(C) of the Code.

        2.2 Committee Responsibilities. The Committee shall (a) select the
Employees and Consultants who are to receive Options under the Plan, (b)
determine the type, number, vesting requirements and other features and
conditions of Options, (c) interpret the Plan and (d) make all other decisions
relating to the operation of the Plan. The Committee may adopt such rules or
guidelines as it deems appropriate to implement the Plan. The Committee's
determinations under the Plan shall be final and binding on all persons.

        2.3 Committee for Non-Officer Grants. The Board may also appoint a
secondary committee of the Board, which shall be composed of two or more
directors of the Company who need not satisfy the requirements of Section 2.1.
Such secondary committee may administer the Plan with respect to Employees and
Consultants who are not considered executive officers or directors of the
Company under Section 16 of the Exchange Act, may grant Options under the Plan
to such Employees and Consultants and may determine all features and conditions
of such Options. Within the limitations of this Section 2.3, any reference in
the Plan to the Committee shall include such secondary committee.

        ARTICLE 3. SHARES AVAILABLE FOR GRANTS.

        3.1 Basic Limitation. Common Shares issued pursuant to the Plan shall be
authorized but unissued shares. The aggregate number of Common Shares issued
pursuant to Options awarded under the Plan shall not exceed (a) 4,000,000 plus
(b) the additional Common Shares described in Section 3.2. The limitation of
this Section 3.1 shall be subject to adjustment pursuant to Article 7.

        3.2 Additional Shares. If Options are forfeited or terminate for any
other reason before being exercised, then the corresponding Common Shares shall
again become available for the grant of Options under the Plan.

        ARTICLE 4.    ELIGIBILITY.

        4.1 Nonstatutory Stock Options. Only Employees and Consultants shall be
eligible for the grant of NSOs.

        4.2 Incentive Stock Options. Only Employees who are common-law employees
of the Company, a Parent or a Subsidiary shall be eligible for the grant of
ISOs.

<PAGE>   2

In addition, an Employee who owns more than 10% of the total combined voting
power of all classes of outstanding stock of the Company or any of its Parents
or Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in Section 422(c)(6) of the Code are satisfied.

        ARTICLE 5. OPTIONS.

        5.1 Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical.

        5.2 Number of Shares. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 7. Options granted to any
Optionee in a single fiscal year of the Company shall not cover more than
100,000 Common Shares, except that Options granted to a new Employee in the
fiscal year of the Company in which his or her service as an Employee first
commences shall not cover more than 200,000 Common Shares. The limitations set
forth in the preceding sentence shall be subject to adjustment in accordance
with Article 7.

        5.3 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a Common Share on the date of
grant.

        5.4 Exercisability and Term. Each Stock Option Agreement shall specify
the date or event when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement or
other events and may provide for expiration prior to the end of its term in the
event of the termination of the Optionee's service.

        5.5 Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Common Shares subject to such Option in the
event that a Change in Control occurs with respect to the Company provided that
in the case of an ISO, the acceleration of exercisability shall not occur
without the Optionee's written consent.

        5.6 Modification of Options. Within the limitations of the Plan, the
Committee may modify outstanding options. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, alter or
impair his or her rights or obligations under such Option.

        5.7 Buyout Provisions. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

        ARTICLE 6. PAYMENT FOR OPTION SHARES.

        6.1 General Rule. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash or cash equivalents at the time
when such Common Shares are purchased, except as follows:

        (a) In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made in
any form(s) described in this Article 6.

        (b) In the case of an NSO, the Committee may at any time accept payment
in any form(s) described in this Article 6.

<PAGE>   3

        6.2 Surrender of Stock. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Shares that are already owned by the
Optionee. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. The Optionee shall
not surrender, or attest to the ownership of, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.

        6.3 Exercise/Sale. To the extent that this Section 6.3 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Common
Shares being purchased under the Plan and to deliver all or part of the sales
proceeds to the Company.

        6.4 Exercise/Pledge. To the extent that this Section 6.4 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to
pledge all or part of the Common Shares being purchased under the Plan to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company.

        6.5 Other Forms of Payment. To the extent that this Section 6.5 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.

        ARTICLE 7 PROTECTION AGAINST DILUTION.

        7.1 Adjustments. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of:

        (a) The number of Options available for future grants under Article 3;

        (b) The limitations set forth in Section 5.2;

        (c) The number of Common Shares covered by each outstanding Option; or

        (d) The Exercise Price under each outstanding Option.

Except as provided in this Article 7, an Optionee shall have no rights by reason
of any issue by the Company of stock of any class or securities convertible into
stock of any class, any subdivision or consolidation of shares of stock of any
class, the payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class.

        7.2 Dissolution or Liquidation. To the extent not previously exercised,
Options shall terminate immediately prior to the dissolution or liquidation of
the Company.

        7.3 Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for:

        (a) The continuation of the outstanding Options by the Company, if the
Company is a surviving corporation;

        (b) The assumption of the outstanding Options by the surviving
corporation or its parent or subsidiary;

<PAGE>   4

        (c) The substitution by the surviving corporation or its parent or
subsidiary of its own options for the outstanding Options;

        (d) Full exercisability or vesting and accelerated expiration of the
outstanding Options; or

        (e) Settlement of the full value of the outstanding Options in cash or
cash equivalents followed by cancellation of such Options.

        ARTICLE 8. LIMITATION ON RIGHTS.

        8.1 Retention Rights. Neither the Plan nor any Option granted under the
Plan shall be deemed to give any individual a right to remain an Employee or
Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the
right to terminate the service of any Employee or Consultant at any time, with
or without cause, subject to applicable laws, the Company's Articles of
Incorporation and Bylaws and a written employment agreement (if any).

        8.2 Shareholders' Rights. A Participant shall have no dividend rights,
voting rights or other rights as a shareholder with respect to any Common Shares
covered by his or her Option prior to the time when he or she becomes entitled
to receive such Common Shares by filing a notice of exercise and paying the
Exercise Price. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to such time, except as expressly provided in
the Plan.

        8.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Option prior to the satisfaction of all legal requirements relating to
the issuance of such Common Shares, to their registration, qualification or
listing or to an exemption from registration, qualification or listing.

        ARTICLE 9. WITHHOLDING TAXES.

        9.1 General. To the extent required by applicable federal, state, local
or foreign law, an Optionee or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.

        9.2 Share Withholding. The Committee may permit an Optionee to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.

        ARTICLE 10. FUTURE OF THE PLAN.

        10.1 Term of the Plan. The Plan, as set forth herein, shall become
effective upon approval by the Company's shareholders. The Plan shall remain in
effect until it is terminated under Section 10.2, except that no ISOs shall be
granted on or after the 10th anniversary of the later of (a) the date when the
Board adopted the Plan or (b) the date when the Board adopted the most recent
increase in the number of Common Shares available under Article 3 which was
approved by the Company's shareholders.

        10.2 Amendment or Termination. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's shareholders to the extent required by
applicable laws, regulations or rules. The termination of the Plan, or any
amendment thereof, shall not affect any Option previously granted under the
Plan.

<PAGE>   5

        ARTICLE 11. DEFINITIONS.

        11.1 "Affiliate" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of such entity.

        11.2 "Board" means the Company's Board of Directors, as constituted from
time to time.

        11.3 "Change in Control" shall mean:

        (a) The execution of an agreement by the Company or the shareholder of
the Company providing for the merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than 50% of
the combined voting power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation or other reorganization
is owned by persons who were not shareholders of the Company immediately prior
to such merger, consolidation or other reorganization;

        (b) The execution of an agreement by the Company or the shareholder of
the Company providing for the sale, transfer or other disposition of all or
substantially all of the Company's assets;

        (c) A change in the composition of the Board, as a result of which fewer
than 50% of the incumbent directors are directors who either (i) had been
directors of the Company on the date 24 months prior to the date of the event
that may constitute a Change in Control (the "original directors") or (ii) were
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the aggregate of the original directors who were still in
office at the time of the election or nomination and the directors whose
election or nomination was previously so approved; or

        (d) Any transaction as a result of which any person is the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing at least 40% of the total
voting power represented by the Company's then outstanding voting securities.
For purposes of this Subsection (d), the term "person" shall have the same
meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall
exclude (i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of a Parent or Subsidiary and (ii) a corporation
owned directly or indirectly by the shareholders of the Company in substantially
the same proportions as their ownership of the common stock of the Company.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

        11.4 "Code" means the Internal Revenue Code of 1986, as amended.

        11.5 "Committee" means a committee of the Board, as described in
Article 2.

        11.6 "Common Share" means one share of the common stock of the Company,
no par value per share.

        11.7 "Company" means N2H2, Inc., a Washington corporation.

        11.8 "Consultant" means a consultant or adviser who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in Section 4.2.

        11.9 "Employee" means a common-law employee of the Company, a Parent, a
Subsidiary or an Affiliate.

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

<PAGE>   6

        11.11 "Exercise Price" means the amount for which one Common Share may
be purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.

        11.12 "Fair Market Value" means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Wall Street Journal. Such determination
shall be conclusive and binding on all persons.

        11.13 "ISO" means an incentive stock option described in Section 422(b)
of the Code.

        11.14 "NSO" means a stock option not described in Sections 422 or 423 of
the Code.

        11.15 "Option" means an ISO or NSO granted under the Plan and entitling
the holder to purchase Common Shares.

        11.16  "Optionee" means an individual or estate who holds an Option.

        11.17 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.

        11.18 "Plan" means this N2H2, Inc. 2000 Stock Option Plan, as amended
from time to time.

        11.19 "Stock Option Agreement" means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.

        11.20 "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.

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