Document:

Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

                                       by

                   The Subscribing Reinsurer(s) Executing the
                     Interests and Liabilities Agreement(s)
                                 Attached Hereto
                  (hereinafter referred to as the "Reinsurer")

<PAGE>

                                Table of Contents

    Article                                                           Page

           I      Classes of Business Reinsured                        3
          II      Commencement and Termination                         3
         III      Territory (BRMA 51A)                                 3
          IV      Exclusions                                           4
           V      Retention and Limit                                  6
          VI      Reinstatement                                        6
         VII      Definitions                                          7
        VIII      Other Reinsurance                                   10
          IX      Florida Hurricane Catastrophe Fund                  10
           X      Loss Notices and Settlements                        10
          XI      Salvage and Subrogation                             11
         XII      Reinsurance Premium                                 11
        XIII      Offset (BRMA 36C)                                   11
         XIV      Access to Records (BRMA 1D)                         11
          XV      Liability of the Reinsurer                          12
         XVI      Net Retained Lines (BRMA 32E)                       12
        XVII      Errors and Omissions (BRMA 14F)                     12
       XVIII      Currency (BRMA 12A)                                 12
         XIX      Taxes (BRMA 50B)                                    13
          XX      Federal Excise Tax (BRMA 17A)                       13
         XXI      Loss Reserves                                       13
        XXII      Insolvency                                          15
       XXIII      Arbitration                                         15
        XXIV      Service of Suit (BRMA 49C)                          16
         XXV      Agency Agreement                                    17
        XXVI      Intermediary (BRMA 23A)                             17

<PAGE>

Article I - Classes of Business Reinsured

A.    By this  Contract the  Reinsurer  agrees to reinsure the excess  liability
      which may accrue to the Company under its policies,  contracts and binders
      of insurance or reinsurance  (hereinafter  called  "policies") in force on
      the effective  date hereof or issued or renewed on or after that date, and
      classified  by the Company as Fire,  Allied  Lines,  Homeowners  (property
      sections only), Mobile Homeowners (property sections only), Inland Marine,
      Earthquake,  Private Passenger  Automobile  Physical Damage and Commercial
      Automobile Physical Damage business,  subject to the terms, conditions and
      limitations hereinafter set forth.

B. It is understood  that the classes of business  reinsured under this Contract
are deemed to include:

       1.   Coverages required for non-resident  drivers under the motor vehicle
            financial   responsibility  law  or  the  motor  vehicle  compulsory
            insurance law or any similar law of any state or province, following
            the  provisions of the  Company's  policies when they include or are
            deemed to include so-called "Out of State Insurance" provisions;

       2.   Coverages required under Section 30 of the Motor Carrier Act of 1980
            and/or any amendments thereto.

Article II - Commencement and Termination

A.    This  Contract  shall become  effective  on July 1, 1999,  with respect to
      losses arising out of loss  occurrences  commencing on or after that date,
      and shall remain in force until June 30, 2000, both days inclusive.

B.    If this Contract expires while a loss occurrence  covered  hereunder is in
      progress,  the Reinsurer's liability hereunder shall, subject to the other
      terms and conditions of this Contract, be determined as if the entire loss
      occurrence had occurred prior to the expiration of this Contract, provided
      that no part of such loss  occurrence  is claimed  against  any renewal or
      replacement of this Contract.

C.    In the  event  negotiations  for  the  renewal  of this  Contract  are not
      completed by June 30, 2000, this Contract shall, at the Company's  option,
      be extended to 15 months.

Article III - Territory (BRMA 51A)

The  territorial  limits of this Contract  shall be identical  with those of the
Company's policies.

Article IV - Exclusions

A.    This Contract does not apply to and specifically excludes the following:

       1.   Reinsurance assumed by the Company, except inter-company reinsurance
            between any of the reinsured companies hereunder.

       2. Financial guarantee and insolvency.

       3.   Business  written by the Company on a  co-indemnity  basis where the
            Company is not the controlling carrier.

       4.   Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
            Physical  Damage - Reinsurance  (U.S.A.)"and  the "Nuclear  Incident
            Exclusion Clause - Physical Damage - Reinsurance  (Canada)" attached
            to and forming part of this Contract.

       5.   Liability  as  a  member,  subscriber  or  reinsurer  of  any  Pool,
            Syndicate  or  Association;  and  any  combination  of  insurers  or
            reinsurers  formed for the  purpose  of  covering  specific  perils,
            specific  classes of business  or for the purpose of insuring  risks
            located

<PAGE>

            in specific  geographical areas.  However,  this exclusion shall not
            apply to residual  market  mechanisms,  including but not limited to
            FAIR Plans, Joint Underwriting Associations, Assigned Risk Plans, or
            to Coastal Pools,  Beach Plans or similar plans,  however styled. It
            is understood and agreed,  however,  that this  reinsurance does not
            include any increase in liability to the Company  resulting from (a)
            the  inability  of  any  other  participant  in  a  residual  market
            mechanism,   including  but  not  limited  to  a  FAIR  Plan,  Joint
            Underwriting  Association,  Assigned Risk Plan,  Coastal Pool, Beach
            Plan or  similar  plan,  to meet  its  liability,  or (b) any  claim
            against such a residual market mechanism,  including but not limited
            to a FAIR Plan, Joint Underwriting Association,  Assigned Risk Plan,
            Coastal  Pool,  Beach  Plan  or  similar  plan,  or any  participant
            therein,  including the Company,  whether by way of  subrogation  or
            otherwise, brought by or on behalf of any insolvency fund.

            Notwithstanding  the foregoing,  this  exclusion  shall not apply to
            loss  assessments  made against the Company by the Hawaii  Hurricane
            Relief Fund or loss adjustment  expenses  incurred by the Company on
            Hawaii Hurricane Relief Fund policies issued by the Company.

6.   All  liability  of the Company  arising by  contract,  operation of law, or
     otherwise,  from its  participation  or  membership,  whether  voluntary or
     involuntary,  in  any  insolvency  fund.  "Insolvency  fund"  includes  any
     guaranty fund,  insolvency  fund, plan,  pool,  association,  fund or other
     arrangement,  however denominated,  established or governed, which provides
     for any  assessment  of or payment or  assumption by the Company of part or
     all of any claim, debt,  charge, fee or other obligation of an insurer,  or
     its  successors  or  assigns,  which  has been  declared  by any  competent
     authority to be insolvent,  or which is otherwise deemed unable to meet any
     claim, debt, charge, fee or other obligation in whole or in part.

       7.   Seepage and  pollution in  accordance  with the full ISO Seepage and
            Pollution  Exclusion,  except when such loss is due to  explosion or
            hostile fire,  unless  otherwise  restricted by state law.  However,
            where a court  renders  an  adverse  judgment  interpreting  the ISO
            Exclusion  wording,  the  Reinsurer  will cover that  portion of the
            judgment regarding losses due to pollution.

       8. Business produced under the New York Motorcycle Program.

B.    The Company  shall have the option to exclude a class of business  subject
      to this Contract by providing the Reinsurer with prior written notice.

<PAGE>

Article V - Retention and Limit

A.    The Company shall retain and be liable for $3,000,000 of ultimate net loss
      arising out of each loss  occurrence.  The Reinsurer  shall then be liable
      for the amount by which  such  ultimate  net loss  exceeds  the  Company's
      retention,  but the  liability  of the  Reinsurer  under each excess layer
      shall not exceed $2,000,000 as respects any one loss occurrence.

B. No claim shall be made hereunder unless two or more risks are involved in the
same loss occurrence.

C. The Company shall be the sole judge of what constitutes one risk.

Article VI - Reinstatement

A.    In the event all or any portion of the reinsurance  hereunder is exhausted
      by loss, the amount so exhausted shall be reinstated  immediately from the
      time the loss occurrence  commences hereon.  For each amount so reinstated
      the Company agrees to pay  additional  premium equal to the product of the
      following:

       1.   The percentage of the occurrence limit reinstated (based on the loss
            paid by the Reinsurer); times

       2.  The  earned  reinsurance  premium  for  the  term  of  this  Contract
           (exclusive of reinstatement premium).

B.   Whenever  the  Company  requests  payment  by the  Reinsurer  of  any  loss
     hereunder,  the  Company  shall  submit a  statement  to the  Reinsurer  of
     reinstatement premium due the Reinsurer.  If the earned reinsurance premium
     for the term of this  Contract  has not been finally  determined  as of the
     date of any such statement,  the calculation of  reinstatement  premium due
     shall be based on the annual deposit  premium and shall be readjusted  when
     the  earned  reinsurance  premium  for the term of this  Contract  has been
     finally determined. Any reinstatement premium shown to be due the Reinsurer
     as reflected by any such statement (less prior  payments,  if any) shall be
     payable by the Company  concurrently  with payment by the  Reinsurer of the
     requested  loss.  Any  return  reinstatement  premium  shown  to be due the
     Company  shall be remitted by the  Reinsurer as promptly as possible  after
     receipt and verification of the Company's statement.

C.    Notwithstanding  anything  stated  herein,  the liability of the Reinsurer
      shall not exceed  $2,000,000 as respects loss or losses arising out of any
      one  loss  occurrence,  or  $4,000,000  in all  during  the  term  of this
      Contract.

<PAGE>

Article VII - Definitions

A.    "Ultimate  net  loss"  as  used  herein  is  defined  as the  sum or  sums
      (including loss in excess of policy limits, extra contractual  obligations
      and any loss adjustment expense,  as hereinafter  defined) paid or payable
      by the Company in  settlement of claims and in  satisfaction  of judgments
      rendered on account of such claims,  after  deduction of all salvage,  all
      recoveries  and all claims on inuring  insurance or  reinsurance,  whether
      collectible or not.  Nothing herein shall be construed to mean that losses
      under this Contract are not recoverable  until the Company's  ultimate net
      loss has been ascertained.

B.    "Loss in excess of policy limits" and "extra  contractual  obligations" as
      used herein shall be defined as follows:

       1.   "Loss in excess of policy  limits" shall mean 90% of any amount paid
            or  payable  by the  Company  in excess of its  policy  limits,  but
            otherwise  within the terms of its policy,  as a result of an action
            against  it by its  insured  or its  insured's  assignee  to recover
            damages  the  insured is  legally  obligated  to pay  because of the
            Company's  alleged or actual  negligence or bad faith in rejecting a
            settlement  within  policy  limits,  or in  discharging  its duty to
            defend or prepare the defense in the trial of an action  against its
            insured,  or in  discharging  its duty to  prepare or  prosecute  an
            appeal consequent upon such an action.

       2.   "Extra  contractual  obligations"  shall  mean 90% of any  punitive,
            exemplary, compensatory or consequential damages, other than loss in
            excess of policy limits,  paid or payable by the Company as a result
            of an action  against it by its insured or its  insured's  assignee,
            which  action  alleges  negligence  or bad  faith on the part of the
            Company in handling a claim under a policy subject to this Contract.
            An extra contractual  obligation shall be deemed to have occurred on
            the same date as the loss covered or alleged to be covered under the
            policy.

      However, loss in excess of policy limits and extra contractual obligations
      arising out of any one loss occurrence shall not exceed an amount equal to
      25.0% of the  contractual  loss under all  policies  involved in that loss
      occurrence.

      Notwithstanding  anything stated herein,  this Contract shall not apply to
      any loss in excess of policy  limits or any extra  contractual  obligation
      incurred by the Company as a result of any fraudulent  and/or criminal act
      by  any  officer  or  director  of  the  Company  acting  individually  or
      collectively  or in collusion  with any  individual or  corporation or any
      other  organization  or party  involved  in the  presentation,  defense or
      settlement of any claim covered hereunder.

C.    "Loss  occurrence"  as used  herein is  defined as all  individual  losses
      directly  occasioned by any one disaster,  occurrence or loss or series of
      disasters,  occurrences  or losses  arising  out of one  occurrence  which
      occurs anywhere in the world,  but limited in the United States of America
      and Canada to any one state of the United States or province of Canada and
      states or provinces  contiguous thereto and to one another.  However,  the
      duration and extent of any one "loss  occurrence"  shall be limited to all
      individual  losses sustained by the Company occurring during any period of
      168 consecutive  hours arising out of and directly  occasioned by the same
      event,  except that the term "loss occurrence" shall be further defined as
      follows:

       1.   As regards windstorm, hail, tornado,  hurricane,  cyclone, including
            ensuing collapse and water damage,  all individual  losses sustained
            by the Company  occurring during any period of 72 consecutive  hours
            arising out of and directly  occasioned by the same loss occurrence.
            However,  the loss  occurrence  need not be  limited to one state or
            province or states or provinces contiguous thereto.

       2.   As regards riot, riot attending a strike, civil commotion, vandalism
            and  malicious  mischief,  all  individual  losses  sustained by the
            Company  occurring during any period of 72 consecutive  hours within
            the area of one  municipality  or county and the  municipalities  or
            counties  contiguous thereto arising out of and directly  occasioned
            by the same loss occurrence.  The maximum duration of 72 consecutive
            hours may be extended in respect of  individual  losses  which occur
            beyond such 72 consecutive hours during the continued  occupation of
            an  assured's   premises  by  strikers,   provided  such  occupation
            commenced during the aforesaid period.

       3.   As regards  earthquake  (the epicenter of which need not necessarily
            be within  the  territorial  confines  referred  to above)  and fire
            following  directly   occasioned  by  the  earthquake,   only  those
            individual  fire  losses  which  commence  during  the period of 168
            consecutive   hours  may  be   included  in  the   Company's   "loss
            occurrence."

       4.   As regards "freeze," only individual  losses directly  occasioned by
            collapse,  breakage  of glass and water  damage  (caused by bursting
            frozen  pipes and tanks and  melting  snow) may be  included  in the
            Company's "loss occurrence."

            Except for those "loss occurrences" referred to in subparagraphs (1)
            and (2)  above,  the  Company  may choose the date and time when any
            such period of consecutive hours commences,  provided that it is not
            earlier  than  the  date and  time of the  occurrence  of the  first
            recorded  individual  loss  sustained by the Company  arising out of
            that  disaster,  occurrence or loss, and provided that only one such
            period of 168 consecutive hours shall apply with respect to one loss
            occurrence.

            However,  as  respects  those  "loss  occurrences"  referred  to  in
            subparagraphs (1) and (2) above, if the disaster, occurrence or loss
            occasioned  by  the  occurrence  is  of  greater  duration  than  72
            consecutive  hours,  then the  Company  may  divide  that  disaster,
            occurrence  or loss into two or more  "loss  occurrences,"  provided
            that no two periods  overlap and no  individual  loss is included in
            more than one such  period,  and provided  that no period  commences
            earlier  than  the  date and  time of the  occurrence  of the  first
            recorded  individual  loss  sustained by the Company  arising out of
            that disaster, occurrence or loss.

<PAGE>

            No individual losses occasioned by an event that would be covered by
            72 hours  clauses may be included in any "loss  occurrence"  claimed
            under the 168 hours provision.

            Losses  arising from the date change to the year 2000,  or any other
            date change,  including leap year calculations,  shall not in and of
            themselves be regarded as a "loss  occurrence"  for purposes of this
            Contract. Such losses shall include any loss, damage, cost, claim or
            expense,  whether preventative,  remedial or otherwise,  directly or
            indirectly arising out of or relating to:

             a.   The calculation,  comparison,  differentiation,  sequencing or
                  processing of data involving the date change to the year 2000,
                  or any other date change, including leap year calculations, by
                  any computer system, hardware,  program or software and/or any
                  microchip,  integrated  circuit or similar  device in computer
                  equipment or non-computer  equipment,  whether the property of
                  the insured or not; or

             b.   Any change,  alteration  or  modification  involving  the date
                  change to the year 2000 or any other  date  change,  including
                  leap year calculations, to any such computer system, hardware,
                  program or software or any  microchip,  integrated  circuit or
                  similar   device  in  computer   equipment   or   non-computer
                  equipment, whether the property of the insured or not.

            This  subparagraph  applies  regardless  of any other cause or event
            that  contributes  concurrently  or in any  sequence  to  the  loss,
            damage, cost claim or expense.

            However,  this  subparagraph  shall not apply in respect of physical
            damage occurring at the insured's premises arising out of the perils
            covered by this  Contract.  None of the  circumstances  described in
            subparagraphs (a) and (b) above shall, in and of itself,  constitute
            an event for purposes of this Contract.

D.    "Loss adjustment  expense" as used herein shall mean expenses allocable to
      the investigation, defense and/or settlement of specific claims, including
      litigation  expenses,  interest on judgments,  and  declaratory  judgments
      expenses  incurred in  connection  with claims  under  policies  reinsured
      hereunder,  but not including office expenses or salaries of the Company's
      regular employees.

E.    "Net earned  premium" as used herein is defined as gross earned premium of
      the  Company for the classes of  business  reinsured  hereunder,  less the
      earned  portion of premiums  ceded by the Company  for  reinsurance  which
      inures to the benefit of this Contract.

Article VIII - Other Reinsurance

The Company  shall be permitted  to carry other  reinsurance,  recoveries  under
which shall inure to the benefit of the Company and be entirely  disregarded  in
applying all of the provisions of this Contract.

Article IX - Florida Hurricane Catastrophe Fund

A.   Any loss  reimbursement  the Company  receives under the Florida  Hurricane
     Catastrophe Fund (FHCF) as a result of loss occurrences  commencing  during
     the term of this  Contract  shall be deemed to be salvage  received  by the
     Company  in  determining  ultimate  net loss under  this  Contract.  If the
     salvage  amount  is based on the  Company's  losses  in more  than one loss
     occurrence  and the FHCF does not  designate  the amount  allocable to each
     loss  occurrence,  the salvage  amount shall be prorated in the  proportion
     that the  Company's  losses in each loss  occurrence  bear to the Company's
     total  losses  arising  out of all loss  occurrences  to which the  salvage
     applies.  If, as a result of such salvage,  the loss to the Reinsurer under
     any excess layer of this Contract in any one loss  occurrences is less than
     the amount  previously paid by the Reinsurer  under that excess layer,  the
     Company shall promptly remit the difference to the Reinsurer.

B.    Any return reinstatement premium due the Company under any excess layer of
      this Contract as a result of a salvage payment made to the Reinsurer under
      that excess layer in accordance  with  paragraph A shall be payable by the
      Reinsurer concurrently with payment by the Company of the salvage amount.

C.    Any  reimbursement  premiums or emergency  assessment  paid by the Company
      under  the  FHCF  shall  be  deemed  to  be  premiums   paid  for  inuring
      reinsurance.

Article X - Loss Notices and Settlements

A.    Whenever  losses  sustained  by the Company  appear  likely to result in a
      claim hereunder, the Company shall notify the Reinsurer, and the Reinsurer
      shall have the right to  participate  in the  adjustment of such losses at
      its own expense.

B.    All loss  settlements  made by the Company,  provided  they are within the
      terms of this  Contract,  shall be  binding  upon the  Reinsurer,  and the
      Reinsurer  agrees  to pay all  amounts  for  which it may be  liable  upon
      receipt of  reasonable  evidence  of the amount paid (or  scheduled  to be
      paid) by the Company.

<PAGE>

Article XI - Salvage and Subrogation

The Reinsurer  shall be credited with salvage (i.e.,  reimbursement  obtained or
recovery  made by the  Company,  less the actual  cost,  excluding  salaries  of
officials  and  employees of the Company and sums paid to attorneys as retainer,
of obtaining  such  reimbursement  or making such recovery) on account of claims
and settlements involving reinsurance hereunder. Salvage thereon shall always be
used to reimburse  the excess  carriers in the reverse  order of their  priority
according to their  participation  before being used in any way to reimburse the
Company for its primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation  relating to any loss, a part of which loss was sustained
by the Reinsurer, and to prosecute all claims arising out of such rights.

Article XII - Reinsurance Premium

A.    As premium for the reinsurance  provided hereunder,  the Company shall pay
      the  Reinsurer  1.26%  of its net  earned  premium  for  the  term of this
      Contract, subject to a minimum premium of $126,000.

B.    The Company shall pay the Reinsurer a deposit  premium of $180,000 in four
      equal  installments of $45,000 on July 1 and October 1, 1999 and January 1
      and April 1, 2000.

C.    Within 60 days after the  expiration of this  Contract,  the Company shall
      provide a report to the Reinsurer setting forth the premium due hereunder,
      computed in accordance  with paragraph A, and any  additional  premium due
      the  Reinsurer  or  return  premium  due the  Company  shall  be  remitted
      promptly.

Article XIII - Offset (BRMA 36C)

The  Company  and the  Reinsurer  shall have the right to offset any  balance or
amounts  due from one party to the other under the terms of this  Contract.  The
party asserting the right of offset may exercise such right any time whether the
balances due are on account of premiums or losses or otherwise.

Article XIV - Access to Records (BRMA 1D)

The  Reinsurer  or its  designated  representatives  shall  have  access  at any
reasonable  time to all records of the Company  which pertain in any way to this
reinsurance.

<PAGE>

Article XV - Liability of the Reinsurer

A.    The liability of the  Reinsurer  shall follow that of the Company in every
      case and be  subject  in all  respects  to all the  general  and  specific
      stipulations, clauses, waivers and modifications of the Company's policies
      and any endorsements thereon. However, in no event shall this be construed
      in any way to provide  coverage outside the terms and conditions set forth
      in this Contract.

B.    Nothing herein shall in any manner create any obligations or establish any
      rights  against the  Reinsurer  in favor of any third party or any persons
      not parties to this Contract.

Article XVI - Net Retained Lines (BRMA 32E)

A.    This Contract applies only to that portion of any policy which the Company
      retains  net for its own account  (prior to  deduction  of any  underlying
      reinsurance  specifically permitted in this Contract),  and in calculating
      the  amount of any loss  hereunder  and also in  computing  the  amount or
      amounts in excess of which this Contract attaches,  only loss or losses in
      respect of that  portion of any policy  which the Company  retains net for
      its own account shall be included.

B.    The amount of the Reinsurer's  liability  hereunder in respect of any loss
      or losses shall not be increased by reason of the inability of the Company
      to collect from any other reinsurer(s),  whether specific or general,  any
      amounts  which may have become due from such  reinsurer(s),  whether  such
      inability  arises  from  the  insolvency  of such  other  reinsurer(s)  or
      otherwise.

Article XVII - Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract or
any  transaction  hereunder  shall not relieve  either party from any  liability
which would have  attached  had such  delay,  error or  omission  not  occurred,
provided  always that such error or omission  is  rectified  as soon as possible
after discovery.

Article XVIII - Currency (BRMA 12A)

A.    Whenever the word "Dollars" or the "$" sign appears in this Contract, they
      shall be  construed  to mean United  States  Dollars and all  transactions
      under this Contract shall be in United States Dollars.

<PAGE>

B.    Amounts  paid or received by the  Company in any other  currency  shall be
      converted  to United  States  Dollars at the rate of  exchange at the date
      such transaction is entered on the books of the Company.

Article XIX - Taxes (BRMA 50B)

In consideration  of the terms under which this Contract is issued,  the Company
will not claim a  deduction  in respect of the  premium  hereon  when making tax
returns,  other than income or profits tax returns, to any state or territory of
the United States of America or the District of Columbia.

Article XX - Federal Excise Tax (BRMA 17A)

(Applicable to those  reinsurers,  excepting  Underwriters at Lloyd's London and
other reinsurers  exempt from Federal Excise Tax, who are domiciled  outside the
United States of America.)

A.    The  Reinsurer  has agreed to allow for the  purpose of paying the Federal
      Excise Tax the  applicable  percentage of the premium  payable  hereon (as
      imposed  under  Section 4371 of the Internal  Revenue  Code) to the extent
      such premium is subject to the Federal Excise Tax.

B.    In the event of any return of premium becoming due hereunder the Reinsurer
      will deduct the  applicable  percentage  from the return  premium  payable
      hereon and the  Company or its agent  should take steps to recover the tax
      from the United States Government.

Article XXI - Loss Reserves

A.    If the  Reinsurer  is  unauthorized  in any state of the United  States of
      America or the  District of Columbia  or the  Reinsurer  has an A. M. Best
      rating  equal to or below B++, the  Reinsurer  agrees to fund its share of
      the Company's ceded outstanding loss and loss adjustment  expense reserves
      (including  all case reserves plus any reasonable  amount  estimated to be
      unreported from known loss occurrences) by:

       1.   Clean,  irrevocable and  unconditional  letters of credit issued and
            confirmed,  if confirmation is required by the insurance  regulatory
            authorities involved, by a bank or banks meeting the NAIC Securities
            Valuation  Office credit  standards for issuers of letters of credit
            and acceptable to said insurance regulatory authorities; and/or

       2. Escrow accounts for the benefit of the Company; and/or

       3.   Cash advances;

      if,  without such  funding,  a penalty  would accrue to the Company on any
      financial  statement it is required to file with the insurance  regulatory
      authorities involved. The Reinsurer, at its sole option, may fund in other
      than  cash  if its  method  and  form of  funding  are  acceptable  to the
      insurance regulatory authorities involved.

B.   With  regard to funding  in whole or in part by  letters  of credit,  it is
     agreed that each letter of credit will be in a form acceptable to insurance
     regulatory authorities involved,  will be issued for a term of at least one
     year and will include an "evergreen  clause," which  automatically  extends
     the term for at least one additional  year at each  expiration  date unless
     written notice of non-renewal is given to the Company not less than 30 days
     prior to said expiration date. The Company and the Reinsurer further agree,
     notwithstanding  anything  to the  contrary  in this  Contract,  that  said
     letters  of credit may be drawn upon by the  Company or its  successors  in
     interest at any time,  without  diminution because of the insolvency of the
     Company  or the  Reinsurer,  but  only  for one or  more  of the  following
     purposes:

       1.   To reimburse itself for the Reinsurer's  share of losses and/or loss
            adjustment  expense  paid  under  the  terms of  policies  reinsured
            hereunder, unless paid in cash by the Reinsurer;

       2.   To reimburse  itself for the Reinsurer's  share of any other amounts
            claimed to be due hereunder, unless paid in cash by the Reinsurer;

       3.   To fund a cash account in an amount equal to the  Reinsurer's  share
            of any ceded  outstanding loss and loss adjustment  expense reserves
            reserves  (including  all case reserves plus any  reasonable  amount
            estimated to be unreported  from known loss  occurrences)  funded by
            means of a letter of credit which is under  non-renewal  notice,  if
            said  letter of  credit  has not been  renewed  or  replaced  by the
            Reinsurer 10 days prior to its expiration date;

       4.   To refund to the  Reinsurer  any sum in excess of the actual  amount
            required  to fund  the  Reinsurer's  share  of the  Company's  ceded
            outstanding  loss  and loss  adjustment  expense  reserves  reserves
            (including all case reserves plus any reasonable amount estimated to
            be unreported from known loss  occurrences),  if so requested by the
            Reinsurer.

      In the event the amount drawn by the Company on any letter of credit is in
      excess of the actual  amount  required for B(1) or B(3), or in the case of
      B(2),  the actual amount  determined to be due, the Company shall promptly
      return to the Reinsurer the excess amount so drawn.

<PAGE>

Article XXII - Insolvency

A.   In the event of the  insolvency of one or more of the reinsured  companies,
     this  reinsurance  shall  be  payable  directly  to the  company  or to its
     liquidator,  receiver,  conservator or statutory successor immediately upon
     demand,  with reasonable  provision for  verification,  on the basis of the
     liability of the company  without  diminution  because of the insolvency of
     the company or because the liquidator,  receiver,  conservator or statutory
     successor  of the  company has failed to pay all or a portion of any claim.
     It is  agreed,  however,  that the  liquidator,  receiver,  conservator  or
     statutory  successor  of the  company  shall  give  written  notice  to the
     Reinsurer of the  pendency of a claim  against the company  indicating  the
     policy or bond reinsured which claim would involve a possible  liability on
     the part of the  Reinsurer  within a  reasonable  time  after such claim is
     filed in the conservation or liquidation proceeding or in the receivership,
     and that during the pendency of such claim,  the Reinsurer may  investigate
     such claim and interpose,  at its own expense, in the proceeding where such
     claim  is to be  adjudicated,  any  defense  or  defenses  that it may deem
     available  to the  company  or its  liquidator,  receiver,  conservator  or
     statutory  successor.  The expense thus incurred by the Reinsurer  shall be
     chargeable,  subject to the  approval of the Court,  against the company as
     part of the expense of  conservation  or liquidation to the extent of a pro
     rata  share of the  benefit  which may  accrue to the  company  solely as a
     result of the defense undertaken by the Reinsurer.

B.    Where two or more reinsurers are involved in the same claim and a majority
      in interest elect to interpose defense to such claim, the expense shall be
      apportioned  in accordance  with the terms of this Contract as though such
      expense had been incurred by the company.

C.   It is further understood and agreed that, in the event of the insolvency of
     one or more of the reinsured companies, the reinsurance under this Contract
     shall  be  payable  directly  by the  Reinsurer  to the  company  or to its
     liquidator,  receiver or statutory successor, except as provided by Section
     4118(a) of the New York  Insurance  Law or except  (1) where this  Contract
     specifically provides another payee of such reinsurance in the event of the
     insolvency  of the company or (2) where the  Reinsurer  with the consent of
     the direct  insured or insureds has assumed such policy  obligations of the
     company as direct  obligations  of the  Reinsurer  to the payees under such
     policies and in  substitution  for the  obligations  of the company to such
     payees.

Article XXIII - Arbitration

A.   As a condition precedent to any right of action hereunder,  in the event of
     any dispute or difference of opinion hereafter arising with respect to this
     Contract,  it is hereby  mutually agreed that such dispute or difference of
     opinion shall be submitted to  arbitration.  One Arbiter shall be chosen by
     the Company,  the other by the Reinsurer,  and an Umpire shall be chosen by
     the two Arbiters before they enter upon  arbitration,  all of whom shall be
     active  or  retired  disinterested   executive  officers  of  insurance  or
     reinsurance  companies or Lloyd's  London  Underwriters.  In the event that
     either  party should fail to choose an Arbiter  within 30 days  following a
     written  request  by the other  party to do so,  the  requesting  party may
     choose two Arbiters who shall in turn choose an Umpire before entering upon
     arbitration.  If the two  Arbiters  fail to agree upon the  selection of an
     Umpire  within 30 days  following  their  appointment,  each Arbiter  shall
     nominate three candidates within 10 days thereafter,  two of whom the other
     shall decline, and the decision shall be made by drawing lots.

B.    Each party shall present its case to the Arbiters within 30 days following
      the date of  appointment  of the Umpire.  The Arbiters shall consider this
      Contract  as  an  honorable  engagement  rather  than  merely  as a  legal
      obligation  and they are  relieved  of all  judicial  formalities  and may
      abstain  from  following  the strict  rules of law.  The  decision  of the
      Arbiters shall be final and binding on both parties; but failing to agree,
      they shall call in the Umpire and the  decision of the  majority  shall be
      final and binding upon both parties.  Judgment upon the final  decision of
      the Arbiters may be entered in any court of competent jurisdiction.

C.    If more than one  reinsurer  is  involved  in the same  dispute,  all such
      reinsurers  shall  constitute  and act as one party for  purposes  of this
      Article  and  communications  shall be made by the  Company to each of the
      reinsurers constituting one party, provided,  however, that nothing herein
      shall impair the rights of such reinsurers to assert several,  rather than
      joint,  defenses or claims,  nor be construed as changing the liability of
      the reinsurers participating under the terms of this Contract from several
      to joint.

D.    Each party shall bear the expense of its own  Arbiter,  and shall  jointly
      and  equally  bear with the other the  expense  of the  Umpire  and of the
      arbitration.  In the event that the two  Arbiters are chosen by one party,
      as above  provided,  the  expense  of the  Arbiters,  the  Umpire  and the
      arbitration shall be equally divided between the two parties.

E.    Any  arbitration  proceedings  shall take place at El Segundo,  California
      unless otherwise mutually agreed upon by the parties to this Contract, but
      notwithstanding the location of the arbitration,  all proceedings pursuant
      hereto  shall be governed by the law of the state in which the Company has
      its principal office.

Article XXIV - Service of Suit (BRMA 49C)

(Applicable  if the  Reinsurer is not domiciled in the United States of America,
and/or is not  authorized  in any State,  Territory  or  District  of the United
States where authorization is required by insurance regulatory authorities)

A.    It is  agreed  that in the  event the  Reinsurer  fails to pay any  amount
      claimed to be due hereunder, the Reinsurer, at the request of the Company,
      will  submit  to the  jurisdiction  of a court of  competent  jurisdiction
      within the United States. Nothing in this Article constitutes or should be
      understood to constitute a waiver of the Reinsurer's rights to commence an

<PAGE>

      action in any court of competent  jurisdiction  in the United  States,  to
      remove an action to a United States  District Court, or to seek a transfer
      of a case to another  court as permitted by the laws of the United  States
      or of any state in the United States.

B.    Further,  pursuant to any statute of any state,  territory  or district of
      the United States which makes  provision  therefor,  the Reinsurer  hereby
      designates the party named in its Interests and Liabilities Agreement,  or
      if no party is named therein, the Superintendent, Commissioner or Director
      of Insurance or other  officer  specified for that purpose in the statute,
      or his successor or successors in office,  as its true and lawful attorney
      upon  whom  may be  served  any  lawful  process  in any  action,  suit or
      proceeding  instituted  by or on behalf of the Company or any  beneficiary
      hereunder arising out of this Contract.

Article XXV - Agency Agreement

If more than one  reinsured  company is named as a party to this  Contract,  the
first named company shall be deemed the agent of the other  reinsured  companies
for  purposes  of  sending  or  receiving  notices  required  by the  terms  and
conditions  of this  Contract,  and for purposes of  remitting or receiving  any
monies due any party.

Article XXVI - Intermediary (BRMA 23A)

E. W. Blanch Co., Inc. is hereby recognized as the Intermediary negotiating this
Contract for all  business  hereunder.  All  communications  (including  but not
limited to notices,  statements,  premium, return premium,  commissions,  taxes,
losses, loss adjustment expense, salvages and loss settlements) relating thereto
shall be transmitted  to the Company or the Reinsurer  through E. W. Blanch Co.,
Inc.,  3600 West 80th  Street,  Minneapolis,  Minnesota  55431.  Payments by the
Company  to the  Intermediary  shall be  deemed  to  constitute  payment  to the
Reinsurer.  Payments by the  Reinsurer  to the  Intermediary  shall be deemed to
constitute  payment to the  Company  only to the extent that such  payments  are
actually received by the Company.

In Witness  Whereof,  the  Company  by its duly  authorized  representative  has
executed this Contract as of the date undermentioned at:

Calabasas, California,       this ____ day of _______________ in the year _____.

                             ---------------------------------------------------
                             Condor Insurance Company
                             Amwest Surety Insurance Company
                             Far West Insurance Company

<PAGE>

U.S.A.

        NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE

      1. This Reinsurance  does not cover any loss or liability  accruing to the
Reassured,  directly or indirectly and whether as Insurer or Reinsurer, from any
Pool of Insurers  or  Reinsurers  formed for the  purpose of covering  Atomic or
Nuclear Energy risks.

      2. Without in any way  restricting  the operation of paragraph (1) of this
Clause,  this Reinsurance  does not cover any loss or liability  accruing to the
Reassured,  directly or indirectly and whether as Insurer or Reinsurer, from any
insurance   against  Physical  Damage   (including   business   interruption  or
consequential loss arising out of such Physical Damage) to:

         I.    Nuclear reactor power plants including all auxiliary property on
               the site,  or  II.  Any  other  nuclear  reactor   installation,
               including laboratories handling radioactive materials in
               connection with reactor installations, and "critical facilities"
               as such, or
       III.    Installations for fabricating complete fuel elements or for
               processing substantial quantities of
               "special  nuclear  material,"  and for  reprocessing,  salvaging,
               chemically  separating,  storing or disposing of "spent"  nuclear
               fuel or waste materials, or
        IV.    Installations  other than those listed in paragraph (2) III above
               using  substantial  quantities of  radioactive  isotopes or other
               products of nuclear fission.

      3. Without in any way restricting the operations of paragraphs (1) and (2)
hereof,  this  Reinsurance  does not cover any loss or liability by  radioactive
contamination accruing to the Reassured,  directly or indirectly, and whether as
Insurer or Reinsurer,  from any insurance on property  which is on the same site
as a  nuclear  reactor  power  plant or other  nuclear  installation  and  which
normally  would be insured  therewith  except that this  paragraph (3) shall not
operate

           (a)    where  Reassured  does  not  have  knowledge  of such  nuclear
                  reactor power plant or nuclear installation, or
           (b)    where said insurance  contains a provision  excluding coverage
                  for damage to property caused by or resulting from radioactive
                  contamination,  however  caused.  However  on  and  after  1st
                  January 1960 this  sub-paragraph (b) shall only apply provided
                  the said  radioactive  contamination  exclusion  provision has
                  been   approved   by   the   Governmental   Authority   having
                  jurisdiction thereof.

      4. Without in any way  restricting  the operations of paragraphs  (1), (2)
and (3)  hereof,  this  Reinsurance  does not  cover  any loss or  liability  by
radioactive contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer,  when such radioactive contamination is a named
hazard specifically insured against.

      5. It is understood  and agreed that this Clause shall not extend to risks
using  radioactive  isotopes  in any form  where  the  nuclear  exposure  is not
considered by the Reassured to be the primary hazard.

      6. The term "special nuclear  material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.

      7. Reassured to be sole judge of what constitutes:

           (a) substantial quantities, and (b) the extent of installation, plant
           or site.

Note.-Without in any way restricting the operation of paragraph (1) hereof, it
is understood and agreed that

           (a)    all  policies  issued  by  the  Reassured  on or  before  31st
                  December 1957 shall be free from the  application of the other
                  provisions  of this Clause until expiry date or 31st  December
                  1960  whichever  first occurs  whereupon all the provisions of
                  this Clause shall apply.
           (b)    with respect to any risk located in Canada  policies issued by
                  the  Reassured on or before 31st  December  1958 shall be free
                  from the  application  of the other  provisions of this Clause
                  until expiry date or 31st December 1960 whichever first occurs
                  whereupon all the provisions of this Clause shall apply.

12/12/57
N.M.A. 1119
BRMA 35B

<PAGE>

        NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE
                                     CANADA

1.  This  Agreement  does  not  cover  any  loss or  liability  accruing  to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any
Pool of Insurers  or  Reinsurers  formed for the  purpose of covering  Atomic or
Nuclear Energy risks.

2. Without in any way  restricting  the operation of paragraph 1 of this clause,
this Agreement  does not cover any loss or liability  accruing to the Reinsured,
directly or indirectly,  and whether as Insurer or Reinsurer, from any insurance
against Physical Damage (including  business  interruption or consequential loss
arising out of such Physical Damage) to:

           (a)    nuclear reactor power plants including all auxiliary property
                  on the site, or

           (b)    any other nuclear reactor installation, including laboratories
                  handling  radioactive  materials  in  connection  with reactor
                  installations, and critical facilities as such, or

           (c)    installations  for  fabricating  complete fuel elements or for
                  processing  substantial  quantities of prescribed  substances,
                  and  for  reprocessing,   salvaging,   chemically  separating,
                  storing or disposing of spent nuclear fuel or waste materials,
                  or

           (d)    installations  other  than  those  listed in (c)  above  using
                  substantial   quantities  of  radioactive  isotopes  or  other
                  products of nuclear fission.

3. Without in any way  restricting  the  operation of paragraphs 1 and 2 of this
clause,  this  Agreement  does not cover any loss or  liability  by  radioactive
contamination accruing to the Reinsured,  directly or indirectly, and whether as
Insurer or Reinsurer,  from any insurance on property  which is on the same site
as a  nuclear  reactor  power  plant or other  nuclear  installation  and  which
normally  would be insured  therewith,  except  that this  paragraph 3 shall not
operate:

           (a)    where the  Reinsured  does not have  knowledge of such nuclear
                  reactor power plant or nuclear installation, or

           (b)    where  the  said  insurance  contains  a  provision  excluding
                  coverage for damage to property  caused by or  resulting  from
                  radioactive contamination, however caused.

4. Without in any way restricting the operation of paragraphs 1, 2 and 3 of this
clause,  this  Agreement  does not cover any loss or  liability  by  radioactive
contamination accruing to the Reinsured,  directly or indirectly, and whether as
Insurer or  Reinsurer,  when such  radioactive  contamination  is a named hazard
specifically insured against.

5. This clause shall not extend to risks using radioactive  isotopes in any form
where the nuclear  exposure is not considered by the Reinsured to be the primary
hazard.

6. The term  "prescribed  substances"  shall have the meaning given to it by the
Atomic Energy Control Act R.S.C. 1985(c), A-16 or by any law amendatory thereof.

7. Reinsured to be sole judge of what constitutes:

           (a)    substantial quantities, and

           (b)    the extent of installation, plant or site.

8. Without in any way  restricting  the operation of paragraphs 1, 2, 3 and 4 of
this clause, this Agreement does not cover any loss or liability accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, caused:

           (1)    by any nuclear  incident,  as defined in the Nuclear Liability
                  Act or any other nuclear liability act, law or statute, or any
                  law  amendatory  thereof  or  nuclear  explosion,  except  for
                  ensuing  loss or damage  which  results  directly  from  fire,
                  lightning or explosion of natural, coal or manufactured gas;

           (2)    by contamination by radioactive material.

NOTE:         Without in any way restricting the operation of paragraphs 1, 2, 3
              and 4 of this clause,  paragraph 8 of this clause shall only apply
              to all original  contracts of the Reinsured,  whether new, renewal
              or  replacement,  which become  effective on or after December 31,
              1992.

<PAGE>

                                 Addendum No. 1

                                     to the

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

It is Hereby Agreed, effective October 1, 1999, that subparagraph 8 of paragraph
A of Article IV -  Exclusions - shall be deleted and the  following  substituted
therefor:

  "8.   Business produced under the California and New York Motorcycle Program."

The provisions of this Contract shall remain otherwise unchanged.

In Witness  Whereof,  the  Company  by its duly  authorized  representative  has
executed this Addendum as of the date undermentioned at:

Calabasas, California,       this _____ day of ______________ in the year _____.

                             ---------------------------------------------------
                             Condor Insurance Company
                             Amwest Surety Insurance Company
                             Far West Insurance Company

<PAGE>

                                 Addendum No. 1

                                     to the

                       Interests and Liabilities Agreement

                                       of

                           Gerling Global Reinsurance
                             Corporation of America
                               New York, New York
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

The Subscribing Reinsurer hereby accepts Addendum No. 1, as duly executed by the
Company, as part of the Contract, effective October 1, 1999.

In  Witness   Whereof,   the  Subscribing   Reinsurer  by  its  duly  authorized
representative has executed this Addendum as of the date undermentioned at:

New York, New York,          this ____ day of ________________ in the year ____.

                             ---------------------------------------------------
                             Gerling Global Reinsurance Corporation of America

<PAGE>

                                 Addendum No. 1

                                     to the

                       Interests and Liabilities Agreement

                                       of

                  Hannover Ruckversicherungs-Aktiengesellschaft
                                Hannover, Germany
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

The Subscribing Reinsurer hereby accepts Addendum No. 1, as duly executed by the
Company, as part of the Contract, effective October 1, 1999.

In  Witness   Whereof,   the  Subscribing   Reinsurer  by  its  duly  authorized
representative has executed this Addendum as of the date undermentioned at:

Hannover, Germany,           this ____ day of ________________ in the year ____.

                             ---------------------------------------------------
                             Hannover Ruckversicherungs-Aktiengesellschaft

<PAGE>

                                 Addendum No. 1

                                     to the

                       Interests and Liabilities Agreement

                                       of

                        Underwriters Reinsurance Company
                             Concord, New Hampshire
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

The Subscribing Reinsurer hereby accepts Addendum No. 1, as duly executed by the
Company, as part of the Contract, effective October 1, 1999.

In  Witness   Whereof,   the  Subscribing   Reinsurer  by  its  duly  authorized
representative has executed this Addendum as of the date undermentioned at:

Calabasas, California,       this ____ day of ________________ in the year ____.

                             ---------------------------------------------------
                             Underwriters Reinsurance Company

<PAGE>

                                 Addendum No. 1

                                     to the

                       Interests and Liabilities Agreement

                                       of

                     Certain Underwriting Members of Lloyd's
                  shown in the Signing Schedule attached hereto
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

The Subscribing Reinsurer hereby accepts Addendum No. 1, as duly executed by the
Company, as part of the Contract, effective October 1, 1999.

Signed for and on behalf of the  Subscribing  Reinsurer in the Signing  Schedule
attached hereto.

<PAGE>

                                 Addendum No. 1

                                     to the

                       Interests and Liabilities Agreement

                                       of

                           Certain Insurance Companies
                shown in the Signing Schedule(s) attached hereto
            (hereinafter referred to as the "Subscribing Reinsurer")

                               with respect to the

                               Excess Catastrophe
                              Reinsurance Contract
                             Effective: July 1, 1999

                                    issued to

                            Condor Insurance Company
                              Calabasas, California
                         Amwest Surety Insurance Company
                                 Omaha, Nebraska
                                       and
                           Far West Insurance Company
                                 Omaha, Nebraska
             (hereinafter referred to collectively as the "Company")

The Subscribing Reinsurer hereby accepts Addendum No. 1, as duly executed by the
Company, as part of the Contract, effective October 1, 1999.

Signed for and on behalf of the Subscribing Reinsurer in the Signing Schedule(s)
attached hereto.CHANGE OF CONTROL AGREEMENT

         This  Change  of  Control  Agreement  (this  "Agreement"),  dated as of
______________,  199_, is between  Itron,  Inc., a Washington  corporation  (the
"Company"), and NAME (the "Executive").

         The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its  stockholders  to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the  possibility,  threat or  occurrence  of a Change of Control  (as defined in
Appendix A to this Agreement, which is incorporated herein by this reference) of
the Company.  The Board  believes it is  imperative  to diminish the  inevitable
distraction of the Executive  arising from the personal  uncertainties and risks
created  by a  pending  or  threatened  Change  of  Control,  to  encourage  the
Executive's  full attention and  dedication to the Company  currently and in the
event  of any  threatened  or  pending  Change  of  Control,  to  encourage  the
Executive's  willingness to serve a successor in an equivalent capacity,  and to
provide the Executive with reasonable  compensation and benefits arrangements in
the event that a Change of Control results in the Executive's loss of equivalent
employment.

         In order to  accomplish  these  objectives,  the Board has  caused  the
Company to enter into this Agreement.

1.       EMPLOYMENT

         1.1        Certain Definitions

                  (a)  "Effective  Date"  shall mean the first  date  during the
Change of  Control  Period (as  defined in Section  1.1(b)) on which a Change of
Control occurs.

                  (b)  "Change  of  Control   Period"   shall  mean  the  period
commencing  on the date of this  Agreement  and  ending  on the  [first][second]
anniversary  of the date the  Company  gives  notice to the  Executive  that the
Change of Control Period shall be terminated.

         1.2        Employment Period

         The Company hereby agrees to continue the Executive in its employ or in
the employ of its  affiliated  companies,  and the  Executive  hereby  agrees to
remain in the employ of the Company or its affiliated  companies,  in accordance
with the terms and provisions of this  Agreement,  for the period  commencing on
the Effective Date and ending on the [first][second][third]  anniversary of such
date (the "Employment Period").

         1.3        Position and Duties

         During the Employment  Period,  the  Executive's  position,  authority,
duties and  responsibilities  shall be at least  reasonably  commensurate in all
material  respects  with  the most  significant  of those  held,  exercised  and
assigned  at any  time  during  the  90-day  period  immediately  preceding  the
Effective Date.

         1.4        Location

         During  the  Employment  Period,  the  Executive's  services  shall  be
performed at the  Company's  headquarters  on the  Effective  Date or any office
which is subsequently  designated as the headquarters of the Company and is less
than 50 miles from such location.

         1.5        Employment at Will

         The Executive and the Company acknowledge that, except as may otherwise
be expressly provided under any other written  employment  agreement between the
Executive and the Company, the employment of the Executive by the Company or its
affiliated  companies is "at will" and may be terminated by either the Executive
or the Company or its affiliated  companies at any time.  Moreover,  if prior to
the Effective Date the Executive's employment with the Company or its affiliated
companies terminates, then the Executive shall have no further rights under this
Agreement.

         1.6        Board of Directors

         The  Executive is either  currently or at some future time may become a
member of the Board.  His  continuation  as such shall be subject to the will of
the Company's  stockholders and the Board, as provided in the Company's  by-laws
and certificate of incorporation.  Removal of the Executive from, or nonelection
of the Executive to, the Board by the Company's  stockholders  or the Board,  as
provided in the  Company's  by-laws and articles of  incorporation,  shall in no
event be deemed a breach of this Agreement by the Company.

2.       ATTENTION AND EFFORT

         During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled,  the Executive will devote all of
his professional productive time, ability,  attention and effort to the business
and affairs of the Company and the discharge of the responsibilities assigned to
him  hereunder,  and  will  use his  best  efforts  to  perform  faithfully  and
efficiently such responsibilities. It shall not be a violation of this Agreement
for the  Executive  to (a) serve on  corporate,  civic or  charitable  boards or
committees,  (b) deliver  lectures,  fulfill  speaking  engagements  or teach at
educational institutions,  and (c) manage personal investments,  so long as such
activities  do  not   significantly   interfere  with  the  performance  of  the
Executive's  responsibilities in accordance with this Agreement. It is expressly
understood and agreed that to the extent any such activities have been conducted
by the Executive prior to the Employment  Period,  the continued conduct of such
activities  (or the conduct of activities  similar in nature and scope  thereto)
during the  Employment  Period shall not  thereafter be deemed to interfere with
the performance of the Executive's responsibilities to the Company.

3.       COMPENSATION

         During the Employment  Period, the Company agrees to pay or cause to be
paid to the  Executive,  and the Executive  agrees to accept in exchange for the
services rendered hereunder by him, the following compensation:

         3.1        Salary

         The  Executive  shall  receive an annual base salary (the  "Annual Base
Salary"),  at least equal to the annual salary  established  by the Board or the
Compensation Committee of the Board (the "Compensation  Committee") prior to the
Effective Date for the fiscal year in which the Effective Date occurs or, if the
Executive's  annual salary has not been established for the fiscal year in which
the  Effective  Date occurs prior to the  Effective  Date,  then the Annual Base
Salary shall be the Executive's annual salary for the preceding fiscal year. The
Annual Base Salary shall be paid in substantially  equal installments and at the
same intervals as the salaries of other officers of the Company are paid.

         3.2        Bonus

         In addition to Annual Base Salary,  the  Executive  shall be awarded an
annual  bonus  (the  "Annual  Bonus")  in cash at  least  equal  to the  average
annualized  (for any fiscal year  consisting  of less than 12 full months) bonus
paid or payable,  including by reason of any  deferral,  to the Executive by the
Company  and its  affiliated  companies  in  respect of the three  fiscal  years
immediately  preceding  the  fiscal  year in which the  Effective  Date  occurs;
provided,  however,  that  payment  of the  Annual  Bonus  may be tied to either
personal or Company  performance  goals reasonably  consistent with those in the
Company's bonus plan during the immediately  preceding three fiscal years.  Each
such  Annual  Bonus  shall be paid no later  than 90 days  after  the end of the
fiscal year for which the Annual Bonus is awarded,  unless the  Executive  shall
elect to defer the receipt of such Annual Bonus.

4.       BENEFITS

         4.1        Benefit Plans; Vacation

         During the  Employment  Period,  the  Executive  shall be  entitled  to
participate,   subject  to  and  in  accordance  with   applicable   eligibility
requirements,  in such  fringe  benefit  programs  as shall be provided to other
executives of the Company and its affiliated  companies from time to time during
the  Employment  Period  by action  of the  Board  (or any  person or  committee
appointed  by  the  Board  to  determine   fringe  benefit  programs  and  other
emoluments),  including,  without  limitation,  paid  vacations;  any incentive,
savings  and  retirement  plan,  practice,  policy or  program;  and all welfare
benefit plans, practices, policies and programs (including,  without limitation,
medical,  prescription,  dental, disability, salary continuance,  employee life,
group life, accidental death and travel accident insurance plans and programs).

         4.2        Expenses

         During the  Employment  Period,  the  Executive  shall be  entitled  to
receive prompt reimbursement for all reasonable  employment expenses incurred by
him in accordance with the policies, practices and procedures of the Company and
its  affiliated  companies in effect for the  executives  of the Company and its
affiliated companies during the Employment Period.

5.       TERMINATION

         Employment  of  the  Executive  during  the  Employment  Period  may be
terminated as follows but, in any case,  the  nondisclosure  and  noncompetition
provisions  set forth in Section 8 hereof shall survive the  termination of this
Agreement and the termination of the Executive's employment with the Company:

         5.1        By the Company or the Executive

         Upon giving Notice of Termination (as defined  below),  the Company may
terminate  the  employment  of the  Executive  with or without Cause (as defined
below),  and the  Executive may  terminate  his  employment  for Good Reason (as
defined below) or for any reason, at any time during the Employment Period.

         5.2        Automatic Termination

         This  Agreement and the  Executive's  employment  during the Employment
Period shall terminate  automatically  upon the death or Total Disability of the
Executive. The term "Total Disability" as used herein shall mean the Executive's
inability,  as determined by a physician  selected by the Company and acceptable
to the  Executive,  to perform  the duties set forth in Section 1.3 hereof for a
period or periods  aggregating  120 calendar  days in any  12-month  period as a
result of physical or mental illness,  loss of legal capacity or any other cause
beyond  the  Executive's  control,  unless the  Executive  is granted a leave of
absence by the Board; provided,  however, that the Executive shall not be deemed
to have a "Total  Disability"  if the  Executive  is capable of  performing  the
essential functions of his position after being provided with such accommodation
as may be necessary so long as such accommodation does not place undue burden on
the  Company.  The  Executive  and  the  Company  hereby  acknowledge  that  the
Executive's  presence and ability to perform the duties specified in Section 1.3
hereof is of the essence of this Agreement.

         5.3        Notice of Termination

         Any  termination  by  the  Company  or  by  the  Executive  during  the
Employment  Period shall be  communicated  by Notice of Termination to the other
party  given  in  accordance  with  Section  10  hereof.  The  term  "Notice  of
Termination"  shall  mean a written  notice  which (a)  indicates  the  specific
termination  provision  in this  Agreement  relied  upon  and (b) to the  extent
applicable,  sets forth in reasonable detail the facts and circumstances claimed
to  provide a basis for  termination  of the  Executive's  employment  under the
provision so indicated. The failure by the Executive or the Company to set forth
in the Notice of Termination  any fact or  circumstance  which  contributes to a
showing of Good  Reason or Cause shall not waive any right of the  Executive  or
the Company  hereunder or preclude the  Executive or the Company from  asserting
such fact or circumstance  in enforcing the Executive's or the Company's  rights
hereunder.

         5.4        Date of Termination

         During the Employment  Period,  "Date of Termination"  means (a) if the
Executive's  employment  is  terminated  by reason  of death,  at the end of the
calendar month in which the  Executive's  death occurs,  (b) if the  Executive's
employment  is  terminated  by reason of Total  Disability,  immediately  upon a
determination by the Company of the Executive's Total Disability, and (c) in all
other cases,  five days after the date of personal delivery of or mailing of, as
applicable,   the  Notice  of  Termination.   The  Executive's   employment  and
performance  of services will continue  during such five-day  period;  provided,
however, that the Company may, upon notice to the Executive and without reducing
the Executive's  compensation during such period,  excuse the Executive from any
or all of his duties during such period.

6.       TERMINATION PAYMENTS

         In the event of termination of the  Executive's  employment  during the
Employment  Period,  all  compensation  and benefits set forth in this Agreement
shall terminate except as specifically provided in this Section 6.

         6.1 Termination by the Company for Other Than Cause or by the Executive
for Good Reason

         If the Company  terminates the  Executive's  employment  other than for
Cause or the Executive  terminates  his  employment for Good Reason prior to the
end of the Employment Period, the Executive shall be entitled to:

                  (a)      receive payment of the following accrued obligations
         (the "Accrued Obligations"):

                           (i)      the Executive's Annual Base Salary through
         the Date of Termination to the extent not theretofore paid;

                           (ii) the product of (x) the Annual Bonus payable with
         respect to the fiscal year in which the Date of Termination  occurs and
         (y) a  fraction,  the  numerator  of which is the number of days in the
         current  fiscal  year  through  the  Date  of   Termination,   and  the
         denominator of which is 365; and

                           (iii) any  compensation  previously  deferred  by the
         Executive  (together with accrued interest or earnings thereon, if any)
         as such deferred  compensation becomes payable under the deferral plan,
         and  any  accrued  vacation  pay,  in  each  case  to  the  extent  not
         theretofore paid;

                  (b) for [one][two] year[s] after the Date of Termination,  the
Executive and/or the Executive's  family,  as the case may be, shall be eligible
for participation in and shall receive all benefits under group health insurance
plans and other group insurance programs (such as life,  disability,  etc.) such
that the Executive and/or the Executive's  family is provided with benefits that
are, in the aggregate,  substantially  equivalent to those which would have been
provided  to them in  accordance  with the  Company  plans  that would have been
available to Executive if the  Executive's  employment had not been  terminated;
provided,  however,  that  if the  Executive  becomes  reemployed  with  another
employer  and is eligible to receive  health or other group  insurance  benefits
under  another  employer-provided  plan,  the health and other  group  insurance
benefits  described herein shall be secondary to those provided under such other
plan during such  applicable  period of eligibility  (such  continuation of such
benefits for the period herein set forth shall be hereinafter referred to as the
"Welfare Benefit Continuation"); and

                  (c)  subject to  adjustment  as  provided  in Section  6.2, an
amount as severance pay equal to the product of (i)  [three][two][one]  and (ii)
the sum of the  Executive's  (x) Annual Base Salary and (y) Annual Bonus payable
for the fiscal year in which the Date of Termination occurs.

         6.2        Option Acceleration Value Adjustment to Severance Pay

         If the  multiplicand in clause 6.1(c)(i) above is "three" or "two," the
amount  otherwise  payable  to  Executive  under  Section  6.1(c) is  subject to
reduction  as  provided  in this  Section  6.2 in the event  that the  Executive
receives value from  acceleration of vesting of stock options in connection with
the Change of Control which  triggered the Effective  Date of this Agreement (as
further  defined  below,  the "Option  Acceleration  Value").  In such case, any
amounts payable to Executive under Section 6.1(c) shall be reduced by the lesser
of (a) the amount  calculated  pursuant  to clause  6.1(c)(ii)  above or (b) the
Option Acceleration Value.

         The  "Option  Acceleration  Value,"  if any,  shall  be  calculated  by
multiplying (y) the amount by which the per share consideration  received by the
Company's  shareholders in connection with the Change of Control exceeds the per
share  exercise  price of options  held by the  Executive,  by (z) the number of
options  accelerated  in  connection  with the Change of Control which would not
have subsequently vested prior to the termination of Executive's employment.  If
Executive holds more than one option at varying exercise  prices,  the foregoing
calculation  shall be done with  respect to each  option and the results of such
calculations shall be aggregated to determine the Option Acceleration Value.

         The  following   example  is  intended  to  illustrate   the  foregoing
calculation of Option  Acceleration Value. Facts assumed for purposes of example
only:  (a) Executive is granted an option on November 1, 1998 to purchase  1,000
shares of the Company's common stock at an exercise price of $10 per share, with
vesting 25% annually over a four-year period;  (b) a Change of Control occurs on
March 31,  2000,  in which the  Company's  shareholders  exchange  each of their
shares of the  Company's  common  stock  for $25  worth of  common  stock of the
acquiring  company;  (c)  vesting  of  the  unvested  portion  (750  shares)  of
Executive's option is accelerated in connection with the Change of Control;  and
(d)  Executive's  employment  is  terminated  by the  Company  without  Cause on
November  30,  2000.  Although  vesting of options  to  purchase  750 shares was
accelerated in connection  with the Change of Control,  because  Executive would
have  vested  (on  November  1,  2000) an  additional  250  shares  prior to his
termination,   the  benefit   Executive   realized  from  the  acceleration  was
acceleration of vesting of 500 shares.  Executive's Option Acceleration Value is
therefore ($25 - $10) x 500, which equals $7,500.

         6.3        Termination for Cause or Other Than for Good Reason

         If the  Executive's  employment  shall be terminated by the Company for
Cause or by the  Executive  for other than Good  Reason  during  the  Employment
Period,  this  Agreement  shall  terminate  without  further  obligation  to the
Executive  other than the  obligation  to pay to the  Executive  his Annual Base
Salary  through  the Date of  Termination  plus the  amount of any  compensation
previously  deferred by the  Executive (as such  deferred  compensation  becomes
payable under the deferral plan), in each case to the extent theretofore unpaid.

         6.4        Stay Bonus

         If the  Executive's  employment  is not  terminated  prior to the first
anniversary of the Effective Date,  upon the first  anniversary of the Effective
Date the Executive  shall be entitled to receive a bonus equal to the sum of the
Executive's  then  current  Annual Base Salary and Annual  Bonus paid or payable
with respect to the Company's most recently  completed  fiscal year,  whether or
not  Executive's   employment  with  the  Company  continues  beyond  the  first
anniversary  of the  Effective  Date.  The bonus  payable under this Section 6.4
shall be in  addition  to all  other  compensation  to which  the  Executive  is
entitled.

         6.5        Termination Because of Death or Total Disability

         If  the   Executive's   employment  is  terminated  by  reason  of  the
Executive's  death  or Total  Disability  during  the  Employment  Period,  this
Agreement  shall  terminate  automatically  without  further  obligations to the
Executive  or his legal  representatives  under this  Agreement,  other than for
payment of Accrued Obligations (which shall be paid to the Executive's estate or
beneficiary, as applicable in the case of the Executive's death), and the timely
payment or provision of the Welfare Benefit Continuation.

         6.6        Payment Schedule

         All  payments  under  Section  6.1(a)  and  (c)  shall  be  paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.

         6.7        Excise Taxes

                  (a) In the event that the  Executive  becomes  entitled to the
payments or other  benefits  described  in Section 6.1 hereof and the  Executive
becomes subject to the tax imposed by Section 4999 of the Internal  Revenue Code
of 1986, as amended (the "Code"),  or any successor provision (the "Excise Tax")
as a result of such  payments and  benefits  and any other  payments or benefits
from the Company required to be taken into account under Code Section 280G(b)(2)
(collectively,  "Parachute  Payments"),  the Company  shall pay to  Executive an
additional amount (the "Make-Whole  Payment") equal to the sum of (i) the Excise
Tax  payable  to the  Executive  prior to the  Make-Whole  Payment  and (ii) the
Federal,  state and local income tax and Excise Tax  (including  any interest or
penalties  thereon) payable upon all payments made under  subparagraphs  (i) and
(ii) of this Section 6.7(a).

                  (b) All determinations  required to be made under this Section
6.7, including whether the Executive has received a Parachute Payment,  shall be
made by the  Company's  accounting  firm (the  "Accounting  Firm")  which  shall
provide detailed  supporting  calculations both to the Company and the Executive
within 15 business  days of the receipt of notice  from the  Executive  that the
Executive  has received a payment  under Section 6.1, or such earlier time as is
requested by the Company.  In the event that the  Accounting  Firm is serving as
accountant or auditor for the  individual,  entity or group effecting the Change
of Control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations  required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder).  All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the Accounting Firm
determines that no Excise Tax is payable by the Executive,  it shall furnish the
Executive  with a written  opinion  that failure to report the Excise Tax on the
Executive's  applicable  federal  income  tax  return  would  not  result in the
imposition  of a  negligence  or similar  penalty.  As promptly  as  practicable
following  such  determination,  the Company shall pay to or distribute  for the
benefit of the Executive  such  payments as are then due to the Executive  under
this Agreement.  Any  determination by the Accounting Firm shall be binding upon
the Company and Executive.

         6.8        Cause

         For  purposes  of this  Agreement,  "Cause"  means  cause  given by the
Executive to the Company and shall include,  without limitation,  the occurrence
of one or more of the following events:

                  (a)  Failure or refusal to carry out any lawful  duties of the
Executive  described  in  Section  1.3  hereof  or any  directions  of the Board
reasonably  consistent  with the duties  herein set forth to be performed by the
Executive;

                  (b) Violation by the Executive of a state or federal  criminal
law  involving  the  commission  of a crime  against  the  Company  or any other
criminal act involving moral turpitude;

                  (c) Current  abuse by the  Executive of alcohol or  controlled
substances;  deception, fraud, misrepresentation or dishonesty by the Executive;
any incident  materially  compromising the Executive's  reputation or ability to
represent  the  Company  with the public;  any act or omission by the  Executive
which substantially impairs the Company's business,  goodwill or reputation;  or
any other misconduct; or

                  (d) Any other  material  violation  of any  provision  of this
Agreement.

         6.9        Good Reason

         For purposes of this Agreement, "Good Reason" means

                  (a) The assignment to the Executive of any duties inconsistent
in any material  respect with the  Executive's  position,  authority,  duties or
responsibilities  as  contemplated  by Section 1.3 hereof or any other action by
the Company which results in a diminution in such position, authority, duties or
responsibilities,  excluding for this purpose an isolated and inadvertent action
not taken in bad  faith and which is  remedied  by the  Company  promptly  after
receipt  of  notice  thereof  given  by the  Executive,  and  further  excluding
reasonable changes in particular duties and reporting responsibilities which may
result from the Company becoming part of a larger business  organization at some
future  time  provided  that such  changes in the  aggregate  do not result in a
material  alteration  in  the  Executive's   position,   authority,   duties  or
responsibilities;

                  (b) Any  failure  by the  Company  to  comply  with any of the
provisions of Section 3 hereof,  other than an isolated and inadvertent  failure
not occurring in bad faith and which is remedied by the Company  promptly  after
receipt of notice thereof given by the Executive;

                  (c) The  Company's  requiring the Executive to be based at any
office or location other than that described in Section 1.4 hereof; or

                  (d) Any  failure  by the  Company to comply  with and  satisfy
Section 11 hereof,  provided that the Company's  successor has received at least
ten  days'  prior  written  notice  from the  Company  or the  Executive  of the
requirements of Section 11 hereof.

7.       REPRESENTATIONS, WARRANTIES AND OTHER CONDITIONS

         In order to  induce  the  Company  to enter  into this  Agreement,  the
Executive represents and warrants to the Company as follows:

         7.1        Health

         The  Executive  is in good  health and knows of no  physical  or mental
disability which, with or without any accommodation which may be required by law
and  which  places  no undue  burden  on the  Company,  would  prevent  him from
fulfilling  his  obligations  hereunder.  The Executive  agrees,  if the Company
requests,  to  submit  to  periodic  medical  examinations  by  a  physician  or
physicians  designated  by, paid for and arranged by the Company.  The Executive
agrees that the examination's medical report shall be provided to the Company.

         7.2        No Violation of Other Agreements

         The Executive represents that neither the execution nor the performance
of this  Agreement by the Executive will violate or conflict in any way with any
other agreement by which the Executive may be bound.

8.       NONDISCLOSURE; NONCOMPETITION; RETURN OF MATERIALS

         The Company and the Executive  hereby  reaffirm the Employee  Invention
and Nondisclosure  Agreement  previously  executed by the Executive (attached as
Exhibit A to this Agreement),  and expressly incorporated herein as part of this
Agreement.  Consistent with the Employee Invention and Nondisclosure  Agreement,
Employee agrees that at no time during the Employment  Period or within one year
thereafter  will Employee  become  involved in any activity or with any business
entity  anywhere in the world which  directly or  indirectly  competes  with any
material product or service of the Company or its affiliates.

         All documents,  records, notebooks, notes, memoranda, drawings or other
documents  pertaining  to the Company and its  business  made or compiled by the
Executive  at any  time,  or in his  possession,  including  any and all  copies
thereof, shall be the property of the Company and shall be held by the Executive
in trust and solely for the benefit of the  Company,  and shall be  delivered to
the Company by the Executive upon termination of employment or at any other time
upon request by the Company.

         The  Executive  understands  that the  Company  will be relying on this
Agreement in continuing the  Executive's  employment,  paying him  compensation,
granting him any promotions or raises,  or entrusting  him with any  information
which helps the Company compete with others.

9.       NOTICE AND CURE OF BREACH

         Whenever a breach of this  Agreement  by either party is relied upon as
justification  for any action taken by the other party pursuant to any provision
of this  Agreement,  other than  clause  (b),  (c) or (d) of Section 6.8 hereof,
before such action is taken,  the party  asserting the breach of this  Agreement
shall  give the  other  party at least  ten days'  prior  written  notice of the
existence and the nature of such breach before taking further  action  hereunder
and shall give the party purportedly in breach of this Agreement the opportunity
to correct such breach during the ten-day period.

10.      FORM OF NOTICE

         Every notice  required by the terms of this Agreement shall be given in
writing by serving the same upon the party to whom it was  addressed  personally
or by registered or certified mail, return receipt requested, at the address set
forth below or at such other  address as may  hereafter be  designated by notice
given in compliance with the terms hereof:

         If to the Executive:

         If to the Company:                          Itron, Inc.
                              2818 N. Sullivan Rd.
                                Spokane, WA 99215
                                                     Attention:  President

or such other address as shall be provided in accordance  with the terms hereof.
Except as set forth in Section  5.4  hereof,  if notice is mailed,  such  notice
shall be effective upon mailing.

11.      ASSIGNMENT

         This Agreement is personal to the Executive and shall not be assignable
by the  Executive.  The  Company  may  assign its  rights  hereunder  to (a) any
corporation resulting from any merger,  consolidation or other reorganization to
which the Company is a party or (b) any corporation, partnership, association or
other person to which the Company may transfer all or  substantially  all of the
assets and  business  of the Company  existing  at such time.  All the terms and
provisions of this  Agreement  shall be binding upon and inure to the benefit of
and be  enforceable by the parties  hereto and their  respective  successors and
permitted assigns.

         The Company will require any successor (whether direct or indirect,  by
purchase,  merger,  consolidation or otherwise) to all or substantially  all the
business  and/or assets of the Company to assume  expressly and agree to perform
this  Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement,  "Company"  shall mean Itron,  Inc. and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

12.      FULL SETTLEMENT

         The  Company's  obligation  to make the  payments  provided for in this
Agreement  and  otherwise  to perform  its  obligations  hereunder  shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action that the Company may have against the Executive or others. In no event
shall the  Executive  be obligated  to seek other  employment  or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this  Agreement,  and,  except as provided in Section  6.1(b),
such amounts  shall not be reduced  whether or not the  Executive  obtains other
employment.  The Company agrees to pay promptly upon invoice, to the full extent
permitted by law, all legal fees and expenses  that the Executive may incur as a
result of any contest  (regardless of the outcome  thereof) by the Company,  the
Executive or others of the validity or  enforceability  of, or liability  under,
any  provision  of  this  Agreement  or any  guarantee  of  performance  thereof
(including as a result of any contest by the  Executive  about the amount of any
payment pursuant to this Agreement).

13.      WAIVERS

         No delay or failure by any party hereto in  exercising,  protecting  or
enforcing any of its rights,  titles,  interests or remedies  hereunder,  and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof.  The express waiver by a party hereto of any right, title,  interest or
remedy in a particular  instance or  circumstance  shall not constitute a waiver
thereof in any other instance or circumstance.  All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.

14.      TERMINATION; AMENDMENTS IN WRITING

         The Company may unilaterally  terminate the Change of Control Period by
notice given to the  Executive in accordance  with Section  1.1(b) and Section 9
hereof. No other amendment,  modification,  waiver,  termination or discharge of
any  provision  of this  Agreement,  nor consent to any  departure  therefrom by
either party hereto, shall in any event be effective unless the same shall be in
writing,  specifically  identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by the Company
and the Executive, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific  instance and for the specific
purpose  for which  given.  No  provision  of this  Agreement  shall be  varied,
contradicted  or  explained  by  any  oral  agreement,   course  of  dealing  or
performance  or any other  matter not set forth in an  agreement  in writing and
signed by the Company and the Executive.

15.      APPLICABLE LAW

         This  Agreement  shall  in  all  respects,  including  all  matters  of
construction,  validity  and  performance,  be governed  by, and  construed  and
enforced in accordance with, the laws of the State of Washington, without regard
to any rules governing conflicts of laws.

16.      SEVERABILITY

         If any provision of this  Agreement  shall be held invalid,  illegal or
unenforceable  in  any  jurisdiction,   for  any  reason,   including,   without
limitation, the duration of such provision, its geographical scope or the extent
of the  activities  prohibited  or  required  by it,  then,  to the full  extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such  jurisdiction and shall be liberally  construed in order to carry
out the  intent of the  parties  hereto as nearly as may be  possible,  (b) such
invalidity,  illegality  or  unenforceability  shall not  affect  the  validity,
legality or enforceability  of any other provision hereof,  and (c) any court or
arbitrator  having  jurisdiction  thereover  shall have the power to reform such
provision to the extent  necessary for such  provision to be  enforceable  under
applicable law.

17.      ENTIRE AGREEMENT

         This  Agreement  on and as of the date  hereof  constitutes  the entire
agreement  between  the Company and the  Executive  with  respect to the subject
matter hereof and all prior or contemporaneous  oral or written  communications,
understandings or agreements  between the Company and the Executive with respect
to such subject matter are hereby  superseded and nullified in their entireties,
with  the  exception  of the  Employee  Invention  and  Nondisclosure  Agreement
referenced in Section 8.

18.      WITHHOLDING

         The Company may withhold from any amounts  payable under this Agreement
such federal,  state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.

19.      COUNTERPARTS

         This  Agreement  may  be  executed  in  counterparts,   each  of  which
counterpart  shall  be  deemed  an  original,  but all of which  together  shall
constitute one and the same instrument.

         IN WITNESS  WHEREOF,  the parties  have  executed and entered into this
Agreement on the date set forth above.

                                               EXECUTIVE

                                               [Executive]

                                               ITRON, INC.

                                               By
                                               Its Chairman of the Board,
                                               President & CEO

                                  APPENDIX A TO

                           CHANGE OF CONTROL AGREEMENT

         For purposes of this Agreement, a "Change of Control" shall mean:

         (a) A "Board Change" which, for purposes of this Agreement,  shall have
occurred if a majority  (excluding  vacant  seats) of the seats on the Company's
Board are occupied by  individuals  who were neither (i) nominated by a majority
of the  Incumbent  Directors nor (ii)  appointed by directors so  nominated.  An
"Incumbent  Director" is a member of the Board who has been either (i) nominated
by a majority of the  directors of the Company then in office or (ii)  appointed
by directors so nominated,  but excluding, for this purpose, any such individual
whose  initial  assumption  of office  occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A  promulgated  under the  Securities  Exchange  Act of 1934,  as amended (the
"Exchange  Act")) or other  actual or  threatened  solicitation  of  proxies  or
consents  by or on behalf of a Person (as  hereinafter  defined)  other than the
Board; or

         (b) The  acquisition  by any  individual,  entity or group  (within the
meaning of Section  13(d)(3) or 14(d)(2) of the  Exchange  Act) (a  "Person") of
beneficial  ownership  (within the meaning of Rule 13d-3  promulgated  under the
Exchange  Act) of (i) 20% or more of either (A) the then  outstanding  shares of
Common Stock of the Company (the "Outstanding  Company Common Stock") or (B) the
combined voting power of the then outstanding  voting  securities of the Company
entitled to vote  generally  in the  election  of  directors  (the  "Outstanding
Company  Voting  Securities"),  in the case of either (A) or (B) of this  clause
(i), which acquisition is not approved in advance by a majority of the Incumbent
Directors,  or (ii) 33% or more of either  (A) the  Outstanding  Company  Common
Stock or (B) the Outstanding  Company Voting  Securities,  in the case of either
(A) or (B) of this clause (ii),  which  acquisition  is approved in advance by a
majority of the  Incumbent  Directors;  provided,  however,  that the  following
acquisitions  shall not  constitute  a Change of  Control:  (w) any  acquisition
directly  from  the  Company,  (x)  any  acquisition  by the  Company,  (y)  any
acquisition  by any  employee  benefit  plan (or  related  trust)  sponsored  or
maintained  by the Company or any  corporation  controlled by the Company or (z)
any  acquisition  by any  corporation  pursuant to a  reorganization,  merger or
consolidation,  if, following such reorganization,  merger or consolidation, the
conditions  described in clauses (i), (ii) and (iii) of  subsection  (c) of this
Appendix A are satisfied; or

         (c) Approval by the  stockholders  of the Company of a  reorganization,
merger or  consolidation,  in each  case,  unless,  immediately  following  such
reorganization, merger or consolidation, (i) more than 60% of, respectively, the
then outstanding  shares of common stock of the corporation  resulting from such
reorganization,  merger or  consolidation  and the combined  voting power of the
then  outstanding  voting  securities  of  such  corporation  entitled  to  vote
generally in the election of directors is then beneficially  owned,  directly or
indirectly,  by all or  substantially  all the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the   Outstanding   Company  Voting   Securities   immediately   prior  to  such
reorganization,  merger or consolidation in substantially the same proportion as
their   ownership   immediately   prior  to  such   reorganization,   merger  or
consolidation  of the  Outstanding  Company  Common  Stock  and the  Outstanding
Company  Voting  Securities,  as the case may be, (ii) no Person  (excluding the
Company,  any employee  benefit  plan (or related  trust) of the Company or such
corporation resulting from such reorganization,  merger or consolidation and any
Person beneficially owning, immediately prior to such reorganization,  merger or
consolidation,  directly or indirectly,  33% or more of the Outstanding  Company
Common  Stock  or the  Outstanding  Voting  Securities,  as  the  case  may  be)
beneficially owns,  directly or indirectly,  33% or more of,  respectively,  the
then outstanding  shares of common stock of the corporation  resulting from such
reorganization, merger or consolidation or the combined voting power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of  directors,  and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such reorganization, merger
or  consolidation  were the Incumbent  Directors at the time of the execution of
the   initial   agreement   providing   for  such   reorganization,   merger  or
consolidation; or

         (d)  Approval  by the  stockholders  of the  Company  of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other  disposition
of  all or  substantially  all  the  assets  of the  Company,  other  than  to a
corporation  with  respect  to which  immediately  following  such sale or other
disposition, (A) more than 60% of, respectively,  the then outstanding shares of
common  stock of such  corporation  and the  combined  voting  power of the then
outstanding voting securities of such corporation  entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
all or  substantially  all the  individuals and entities who were the beneficial
owners,   respectively,   of  the  Outstanding  Company  Common  Stock  and  the
Outstanding  Company Voting  Securities  immediately prior to such sale or other
disposition in substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding  the  Company,  any employee  benefit plan (or related  trust) of the
Company or such  corporation  and any Person  beneficially  owning,  immediately
prior to such sale or other disposition,  directly or indirectly, 33% or more of
the  Outstanding   Company  Common  Stock  or  the  Outstanding  Company  Voting
Securities,  as the case may be) beneficially owns, directly or indirectly,  33%
or more of,  respectively,  the then outstanding  shares of common stock of such
corporation  and the  combined  voting  power  of the  then  outstanding  voting
securities  of such  corporation  entitled to vote  generally in the election of
directors  and (C) at least a majority of the members of the board of  directors
of such  corporation  were approved by a majority of the Incumbent  Directors at
the time of the  execution  of the  initial  agreement  or  action  of the Board
providing for such sale or other disposition of assets of the Company.

         Notwithstanding  the foregoing,  there shall not be a Change of Control
if, in advance of such event,  the  Executive  agrees in writing that such event
shall not constitute a Change of Control.

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