UTILX CORP, DEF 14A, 2000-06-21

UTILX CORP
DEF 14A, 2000-06-21
WATER, SEWER, PIPELINE, COMM & POWER LINE CONSTRUCTION

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant /X/
Filed by a party other than the Registrant / /

Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12

UTILX CORPORATION
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(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[GRAPHIC]

22820 RUSSELL ROAD
P. O. BOX 97009
KENT, WASHINGTON 98064-9709

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NOTICE OF 2000 ANNUAL MEETING AND PROXY STATEMENT

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You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of UTILX Corporation which will be held at 10:30 a.m. on Friday, July 28, 2000,
at the corporate headquarters, 22820 Russell Road, Kent, Washington 98032 for
the following purposes:

1. To elect directors;

2. To amend the Director Stock Option Plan;

3. To amend the Employee Stock Option Plan; and

4. To transact such other business as may properly come before the meeting.

By Order of the Board of Directors

/s/ Anne G. Cameron

Anne G. Cameron
Corporate Secretary

Kent, Washington
June 23, 2000

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YOU MAY VOTE IN ONE OF THREE WAYS:

1. SIGN, DATE AND RETURN YOUR PROXY CARD IN THE ENVELOPE
PROVIDED.

2. USE THE TOLL-FREE TELEPHONE NUMBER ON YOUR PROXY CARD TO
VOTE BY PHONE; OR

3. VISIT THE WEB SITE NOTED ON YOUR PROXY CARD TO VOTE VIA THE
INTERNET.
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IT IS IMPORTANT THAT YOUR STOCK BE VOTED

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GENERAL INFORMATION

STOCKHOLDERS ENTITLED TO VOTE

Holders of shares of Common Stock of the Company at the close of business
on June 2, 2000, the record date, are entitled to notice of and to vote at the
Annual Meeting and at any and all adjournments or postponements of the meeting.
Each share entitles its owner to one vote. Under Delaware law and the Company's
Certificate of Incorporation, if a quorum is present at the meeting (i) the
nominees for election as directors must be elected by a plurality vote and (ii)
approval of the amendments to the stock option plans must be approved by the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting. On the record date, there were 7,475,944 shares
outstanding.

In the election of directors, shares that are not voted for the election of
directors will not count in determining the total number of votes for each
nominee. Abstention from voting on the proposal to amend the stock option plans
will have the practical effect of voting against the proposal since it is one
less vote for approval. Broker nonvotes will have no impact on such proposal
since they are not considered "shares present and entitled to vote" for voting
purposes, other than to reduce the number of votes "FOR" necessary to approve
the proposals.

Shares for which proxies are properly executed and returned will be voted
at the meeting in accordance with the directions noted thereon, and in the
absence of directions to the contrary, such shares will be voted (i) "FOR" the
election of the nominees for the Board of Directors named in the following
pages, provided that if such nominees should become unavailable for election for
any reason, such shares will be voted for the election of a substitute nominee
as the Board of Directors may propose; and (ii) "FOR" the amendments to the
stock option plans.

HOW TO VOTE

Stockholders can vote any one of three ways:

1) By Mail - sign, date and return your proxy card in the enclosed
postage-paid envelope. If you sign and return your proxy card but
do not give voting instructions, the shares represented by that proxy
will be voted as recommended by the Board of Directors.

2) By Telephone - call the toll-free number on your proxy card to vote by
phone. You will need to follow the instructions on your proxy card and
the voice prompts.

3) By Internet - go to the web site listed on your proxy card to vote
through the Internet. You will need to follow the instructions on your
proxy card and the web site. If you vote through the Internet, you may
incur telephone and Internet access charges.

If you vote by telephone or the Internet, your electronic vote authorizes
the named proxies in the same manner as if you signed, dated and returned your
proxy card. If you vote by telephone or the Internet, you should not return your
proxy card.

If your shares are held in the name of a bank, broker or other holder of
record (that is, "street name"), you will receive instructions from the holder
of record that you should follow in order for your shares to be voted.

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CHANGING YOUR VOTE

You may change your vote at any time before the proxy is exercised. If you
voted by mail, you may revoke your proxy at any time before it is voted by
executing and delivering a timely and valid later-dated proxy, by voting by
ballot at the meeting or by giving written notice to the Secretary of the
Company. If you voted by telephone or the Internet you may also change your vote
with a timely and valid later telephone or Internet vote, as the case may be.
Attendance at the meeting will not have the effect of revoking a proxy unless
you give proper written notice of revocation to the Secretary before the proxy
is exercised or you vote by written ballot at the meeting.

EXPENSES OF PROXY SOLICITATION

The accompanying proxy is solicited by the Board of Directors of the
Company. In that connection, this Proxy Statement is being mailed to the
stockholders on or about June 23, 2000 concurrently with the mailing of the
Company's 2000 Annual Report and Form 10-K. In addition to this solicitation by
mail, officers, directors and regular supervisory and executive employees of the
Company, none of whom will receive any additional compensation for their
services, may solicit proxies in person or by telephone. All of the costs of the
solicitation of proxies will be paid by the Company.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors selected PricewaterhouseCoopers L.L.P., certified
public accountants, to act as independent auditor of the Company for the fiscal
year ending March 31, 2000. Coopers & Lybrand L.L.P., which merged with
PricewaterhouseCoopers L.L.P., was previously the auditor since 1986.

A representative of PricewaterhouseCoopers L.L.P. is expected to be present
at the Annual Meeting, with the opportunity to make a statement, if the
representative so desires, and is expected to be available to respond to
appropriate questions from stockholders.

1. PROPOSAL TO ELECT DIRECTORS

BOARD OF DIRECTORS

The Company's Board of Directors currently consists of seven directors who,
in accordance with the Company's By-laws, are divided into three classes. This
provision is designed to ensure that one-third of the Board is eligible for
reelection in any given year. At the 2000 Annual Meeting of Stockholders, two
directors will be elected to serve for a term of three years, expiring in 2003.
The remaining four directors are divided into two classes of two directors each,
whose terms expire in 2001 and 2002, respectively. The directors elected will
continue in office until a successor has been elected or until resignation or
removal in the manner provided by the By-laws of the Company. The names of the
nominees and continuing members of the Board of Directors are listed below.
Shares represented by a properly executed proxy in the form of the accompanying
Proxy Card will be voted for such nominees. However, discretionary authority is
reserved to vote such shares in the best judgment of the persons named in the
proxy in the event that any person other than the nominees listed below is to be
voted upon at the meeting due to the unavailability of the nominees so listed.

Mr. Robert Runice is retiring and has tendered his resignation from the
Board of Directors and Board Committees effective July 28, 2000, the date of the
Annual Meeting. The Board has accepted Mr. Runice's resignation. Effective June
9, 2000, Board expanded the positions on the Board from six to seven, and
elected Mr. Robert P. Gannon to the Board of Directors and nominated him to
stand for election for a three year term at this year's Annual Meeting.
Consequently, all persons named below are directors of the Company at the
present time. No family relationships exist between any nominees, directors or
executive officers of the Company.

BOARD RECOMMENDED NOMINEES

The names of the nominees for the Board of Directors, together with certain
information regarding them, follows:

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JOHN W. ELLIS (age 71) has been a director of the Company since August
1988. Mr. Ellis' term as a director expires in 2000. Since October 1999, he has
held the position of Chairman Emeritus of the Seattle Mariners' Baseball Club,
and from 1992 to October 1999, was its Chairman of the Board and Chief Executive
Officer. Since 1969, he has been a director of Puget Sound Energy, Inc.
(formerly Puget Sound Power & Light Company), a diversified gas and electric
utility, where he was President from 1976 to 1987, and Chief Executive Officer
from 1976 until his retirement in 1993. Mr. Ellis is also a director of
Washington Mutual Savings Bank, a banking company, SAFECO Corporation, an
insurance company, and AEGIS, Ltd., an insurance company, and serves as Chairman
of the Board of Trustees of Seattle University. He is past Chairman of the
Edison Electric Institute and the Electric Power Research Institute.

ROBERT P. GANNON (age 56) has been a director of the Company since June 9,
2000 and will stand for election for a three year term commencing July 28, 2000.
Mr. Gannon is the Chairman, President and Chief Executive Officer of the Montana
Power Company and Touch America, the telecommunications subsidiary of Montana
Power. He first joined the Montana Power Company in 1974 as an attorney and
became its Vice President and General Counsel in 1984. Mr. Gannon was named its
President in 1990, Chief Executive Officer in 1997 and Chairman in 1998. He is a
director of the Edison Electric Institute, the Mansfield Foundation and the
Butte-Silver Bow Chamber of Commerce and past director and president of the
Western Electric Power Institute.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE ABOVE
NOMINEES FOR THE BOARD OF DIRECTORS.

CURRENT MEMBERS OF THE BOARD OF DIRECTORS

In addition to John W. Ellis and Robert P. Gannon, the names of the current
members of the Board of Directors, together with certain information regarding
them, are as follows:

STANLEY J. BRIGHT (age 60) has been a director of the Company since January
1995. Mr. Bright's term as a director expires in 2002. Mr. Bright is a director
of MidAmerican Energy Holdings Company (MidAmerican), a subsidiary of Berkshire
Hathaway, Inc. which has domestic and international utility operations.
MidAmerican was formed on March 12, 1999 in the merger of the prior MidAmerican
Energy Holdings Company (MidAmerican Energy) and CalEnergy Company, Inc. Prior
to the merger, Mr. Bright served as Chairman, President and Chief Executive
Officer of MidAmerican Energy from June 1, 1997, as President and Chief
Executive Officer from July 1, 1996, and as President, Office of the Chief
Executive Officer from July 1, 1995 when MidAmerican Energy was formed in the
merger of Iowa-Illinois Gas and Electric Company (Iowa-Illinois) and Midwest
Resources, Inc. He had been Chairman, President and Chief Executive Officer of
Iowa-Illinois, a utility company, since May 1991. Mr. Bright is also a director
of TransAlta Corporation and Utech Venture Capital Corporation.

JOHN D. DURBIN (age 65) has been a director of the Company since April
1997. Mr. Durbin's term as a director expires in 2001. Since February 2000, Mr.
Durbin is Chief Executive Officer of Infrastrux Group, Inc. a new subsidiary at
Puget Sound Energy, Inc. (formerly Puget Sound Power & Light Company), a
diversified gas and electric utility. Mr. Durbin has been a Principal of Olympic
Capital Partners, an investment banking firm, from 1996 to 1998 and Executive
Director, Emerge Corporation from August 1999 to February 2000. He is also a
general Partner of John Durbin & Associates, a 26 year old firm which owns and
manages commercial and agricultural real estate. Previously, he was Chairman,
President and Chief Executive Officer of Bellevue-based Hostar International, a
hotel equipment manufacturer, which he co-founded in 1988. In addition, he is a
board member of several Northwest companies, including Puget Sound Energy, Inc.,
ConnexT, Inc. and Frank Russell Trust Co. and is a member of the Advisory Board
of Barclay Dean Interiors, Inc. and Glant Pacific Companies. Mr. Durbin's
community service includes being a past member of the Board of Trustees of
Seattle University and a former board member of Children's Hospital Foundation,
a board member of Junior Achievement of Greater Seattle, past Chairman and board
member of the Washington Athletic Club. Mr. Durbin is a past Chairman of United
Way of King County and past President of the Seattle Rotary Club.

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WALTER M. HIGGINS (age 55) has been a director of the Company since January
1998. Mr. Higgins' term as a director expires in 2001. Mr. Higgins was named
President and Chief Executive Officer of AGL Resources, Inc., an Atlanta-based
energy holding company in January 1998 and became Chairman, President and Chief
Executive Officer of AGL Resources in May 1999. He is also Chairman and Chief
Executive Officer of Atlanta Gas Light Company, the largest natural gas
distributor in the Southeastern United States. Mr. Higgins joined Sierra Pacific
Resources, a utility holding company in late 1993, and was named Chairman of the
Board, President and Chief Executive Officer in January 1994. He also served as
President and Chief Executive Officer of Sierra Pacific Power Co., a subsidiary
of Sierra Pacific Resources. Prior to joining Sierra Pacific Resources, he was
President and Chief Operating Officer of Louisville Gas and Electric Co., the
principal subsidiary of LG&E Energy, a Louisville, Kentucky-based utility
holding company. In addition, he is a board member of AGL Resources, Inc. and
AEGIS, Ltd., an insurance company, and serves on the board of trustees of
numerous business and community organizations. Mr. Higgins is the 2000 Campaign
Chairman for the United Way of Metropolitan Atlanta and is the Chairman of the
Board of Trustees of the National Environmental Education and Training
Foundation.

ROBERT E. RUNICE (age 70) has been a director of the Company since
November 1988 and is retiring from the Board effective July 28, 2000, the date
of the Annual Meeting. Mr. Runice is a private investor and business consultant.
From 1983 until his retirement in 1991, Mr. Runice had been Vice President of U
S West Inc., a diversified telecommunications company, and President of its
Commercial Development Division. Mr. Runice is also a director of The Bombay
Company, Inc., a specialty retail company, and Tandy Brands Accessories, Inc., a
manufacturer of men's, women's and boys' accessories.

WILLIAM M. WEISFIELD (age 58) has been a director of the Company since
January 1995, Chairman of the Board since January 1996 and the Company's
President and Chief Executive Officer since November 1998. Mr. Weisfield's term
as a director expires in 2002. Mr. Weisfield was Senior Vice President of
Benaroya Capital Company, a privately held investment company specializing in
development of Pacific Northwest real estate and other investments, since
January 1, 1994. Mr. Weisfield previously served as Chief Operating Officer for
Robbins Company, an underground tunnel boring manufacturing company from
November 1992 to December 1993. Mr. Weisfield also acts as a director of Lindal
Cedar Homes, Inc., Lifespan Biosciences, Inc., the Downtown Seattle Association,
and is a member and past President of the Seattle Rotary Club.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established standing committees, including an
Audit Committee, a Compensation Committee and a Nominating and Organization
Committee. All committees are responsible to the full Board of Directors and
their activities are therefore subject to approval of the Board of Directors. As
provided in the Company's By-laws, each committee is appointed annually by the
Board of Directors and consists of not less than three directors, at least a
majority of whom must be independent and not members of management. The
functions performed by these Committees are summarized as follows:

AUDIT COMMITTEE. The Audit Committee reviews and makes recommendations
regarding the selection of outside auditors, the scope and results of the annual
audit, internal controls, procedures and the adequacy of staff for the safeguard
of the Company's assets, related-party transactions, potential conflicts of
interest and compliance with corporate policies including the Company's Code of
Ethical Conduct. The members of the Audit Committee are presently John D. Durbin
(Chairman), Robert E. Runice and Stanley J. Bright. The Audit Committee met six
times during fiscal year 2000.

COMPENSATION COMMITTEE. The Compensation Committee reviews and makes
recommendations regarding compensation, including salaries and other incentives,
of directors, officers and other executives of the Company. Those members of the
Compensation Committee who are "nonemployee directors" within the meaning of the
rules adopted under Section 16 of the Securities Exchange Act of 1934, as
amended, and "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, also act as plan administrator of the
Company's stock option plans. The members of the Compensation Committee are
presently Robert E. Runice (Chairman), John W. Ellis, John D. Durbin and Walter
M. Higgins. The Compensation Committee met three times during fiscal year 2000.

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NOMINATING AND ORGANIZATION COMMITTEE. The Nominating and Organization
Committee reviews and makes recommendations regarding the size and composition
of the Board of Directors, nominees for directors, election of officers and the
organization of the Company. The Nominating and Organization Committee also
considers nominees for directors recommended by any stockholder of the Company.
Any stockholder desiring to do so must mail a written recommendation and any
comments to the Chairman of the Nominating and Organization Committee addressed
in care of the Secretary of the Company at the Company's corporate offices at
P.O. Box 97009, Kent, Washington 98064-9709. The members of the Nominating and
Organization Committee are presently John W. Ellis (Chairman), Stanley J. Bright
and Robert E. Runice. The Nominating and Organization Committee met three times
during fiscal year 2000.

FISCAL YEAR 2000 DIRECTOR MEETING ATTENDANCE

During fiscal year 2000, there were six meetings of the Board of Directors.
Each director attended at least 80% of the total number of the meetings of the
Board of Directors and the Committees of the Board of Directors on which each
such director served.

DIRECTOR COMPENSATION

Directors who are employees of the Company do not receive any fees for
their services as directors. Directors of the Company who are not employees are
paid a quarterly retainer of $1,500 and committee chairpersons are paid an
additional quarterly retainer of $500. Nonemployee directors are also paid $750
for each Board of Directors meeting and $400 for each committee meeting attended
in person and one-half of those amounts for participation in telephonically
conducted meetings, plus reimbursement of expenses incurred in attending such
meetings. For extraordinary services beyond those incidental to service on the
Board and its committees, nonemployee directors receive fees for work on matters
specially requested by the Board at a rate of $125 per hour with a daily minimum
of $500 and a daily maximum of $1,000.

The Company has also adopted the 1987 Restated Stock Option Plan for
Nonemployee Directors (the "1987 Director Plan"), which currently provides for
the grant of options to acquire up to an aggregate 300,000 shares of Common
Stock to nonemployee directors. As discussed below, the Board of Directors has
approved, and is seeking shareholder approval of, an amendment to the 1987
Director Plan to increase the number of authorized shares of Common Stock under
the Plan. Pursuant to the 1987 Director Plan, each nonemployee director receives
an option to purchase 10,000 shares of Common Stock upon initial appointment to
the Board, which options vest 40% one year after the date of grant and 20% each
year thereafter. Each nonemployee director then automatically receives annually
an option to purchase 5,000 shares of Common Stock, concurrently with each
year's Annual Meeting of Stockholders. Such options vest upon the date of grant.
All grants under the 1987 Director Plan are made at an exercise price equal to
the fair market value of the Common Stock on the date of grant. The purpose of
the 1987 Director Plan is to help the Company attract and retain qualified
nonemployee directors.

2. PROPOSAL TO APPROVE AMENDMENT OF THE 1987 RESTATED
STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS

Recognizing that insufficient shares were available under the 1987 Restated
Stock Option Plan for NonEmployee Directors (the "1987 Director Plan") to
continue the Company's longstanding practice of providing grants of stock
options to its directors, the Compensation Committee recommended to the Board of
Directors that they approve a resolution amending the 1987 Director Plan to
increase the number of shares available for issuance. Accordingly, on April 28,
2000 the Board of Directors approved a proposed amendment, subject to
stockholder approval, that effective April 1, 2000 the number of shares
available for issuance in the 1987 Director Plan be increased by 150,000 to a
maximum number of 450,000. Any unused shares, including those previously
available as of April 1, 2000 would be carried forward and available for
issuance in succeeding years.

The 1987 Director Plan presently provides for the issuance of a maximum
number of 300,000 shares as option grants. As of April 1, 2000, there were
23,000 outstanding shares available under the 1987 Director Plan for issuance
and five eligible participants.

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO
THE 1987 RESTATED STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS.

THE FOLLOWING IS A SUMMARY OF THE 1987 DIRECTOR PLAN, AS PROPOSED TO BE
AMENDED, AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE PLAN, WHICH IS
INCLUDED AS PART OF THIS PROXY STATEMENT AS APPENDIX A.

ADMINISTRATION OF THE 1987 DIRECTOR PLAN

The 1987 Director Plan is administered by a committee appointed by the
Board of Directors, that has been designated to act as plan administrator by the
Board. The committee currently consists of the Compensation Committee of the
Board of Directors, all of whom are "nonemployee directors" within the meaning
of the rules adopted under Section 16 of the Securities and Exchange Act of 1934
and "outside directors" within the meaning of the regulation adopted under
Section 162(m) of the Internal Revenue Code. See "Committees of the Board of
Directors--COMPENSATION COMMITTEE." Subject to the express provisions and
limitations stated in the 1987 Director Plan, the Committee has the power to
interpret the provisions of the Plan and to adopt and amend such rules and
regulations relating to the administration of the Plan as it may deem desirable.

ELIGIBILITY

Each nonemployee director of the Company is eligible to receive grants of
stock options under the 1987 Director Plan.

SHARES AVAILABLE FOR THE 1987 DIRECTOR PLAN

The 1987 Director Plan presently provides that the maximum number of shares
for which stock options may be granted is 300,000. As of April 1, 2000,
directors as a group had been issued 195,000 options which remain outstanding,
with 23,000 shares of Common Stock available for issuance as options. Of the
issued and outstanding options, 187,000 are currently exercisable and options
for 8,000 shares become exercisable on the following dates: 2,000 on April 17,
2000; 2,000 on January 29, 2001; 2,000 on April 17, 2001 and 2,000 on January
29, 2002.

The 1987 Director Plan as proposed to be amended would provide that
effective April 1, 2000, the number of shares of Common Stock that would be
available for issuance as stock options will be increased by 150,000 shares to a
maximum of 450,000 shares. Any unused portion of the available shares, including
those previously available as of April 1, 2000 will be carried forward and
available for issuance as stock option grants in succeeding years.

OPTIONS

GRANT OF OPTIONS. Options shall be granted to eligible nonemployee
directors of the Company during the term of the 1987 Director Plan as follows:
upon initial appointment to the Board, each nonemployee director receives an
option to purchase 10,000 shares of Common Stock which vest 40% one year after
date of grant and 20% each year thereafter. In addition to the initial grant of
stock options, each nonemployee director automatically receives at the time of
the Company's Annual Meeting of Stockholders an option to purchase 5,000 shares
of Common Stock which vest immediately upon date of grant. Consequently, if the
two nominees for director are elected by the shareholders at the Annual Meeting,
each will receive an option for 5,000 shares exercisable immediately, in
addition to similar grants to the four continuing directors.

<PAGE>

TERMINATION OR AMENDMENT TO THE 1987 DIRECTOR PLAN

The Committee may amend, terminate or suspend the 1987 Director Plan at any
time in its sole and absolute discretion provided that stockholder approval is
required (a) to increase the number of shares subject to the Plan; (b) reduce
the option price below 100% of the market value of the Shares at the time the
option is granted; (c) change the timing of or increase the number of shares
granted to each nonemployee director or (d) materially increase the benefits
accruing to the participants under the 1987 Director Plan.

3. PROPOSAL TO APPROVE AMENDMENT OF THE AMENDED AND
RESTATED 1994 OPTION AND RESTRICTED STOCK PLAN

The Compensation Committee also recommended to the Board of Directors that
they approve a resolution amending the Amended and Restated 1994 Option and
Restricted Stock Plan ("1994 Plan") to increase the maximum number of shares
issuable under the Plan as incentive stock options ("ISOs") from 900,000 to
1,300,000. On April 28, 2000, the Board of Directors approved the proposed
amendment, subject to stockholder approval.

The 1994 Plan, which combines the features of a stock option and restricted
stock plan, was amended in 1997 when the stockholders approved a proposal to
increase the number of shares of Common Stock available for issuance to permit
greater flexibility and to broaden the number of employees able to participate
under the Plan. The amendment at that time also limited the number of those
shares which could be issued as ISOs from May 30, 1997 through the Plan's
termination in 2004, to 900,000. The Board is committed to offering a
competitive compensation package to existing and future executive officers and
employees, and desires the ability to issue an increased number of those shares
as ISOs.

As of April 28, 2000 through the termination of the 1994 Plan in 2004,
under the present provisions of the 1994 Plan, the Company is limited to issuing
no more than 177,850 shares as ISOs. The amendment would increase that number by
400,000.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT TO
THE 1994 OPTION AND RESTRICTED STOCK PLAN.

THE FOLLOWING IS A SUMMARY OF THE 1994 PLAN, AS PROPOSED TO BE AMENDED, AND
IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF THE 1994 PLAN, WHICH IS
INCLUDED AS PART OF THIS PROXY STATEMENT AS APPENDIX B.

ADMINISTRATION OF THE 1994 PLAN

The 1994 Plan is administered by a committee, consisting of selected
members of the Board of Directors, that has been designated to act as plan
administrator of the 1994 Plan by the Board. The committee currently consists of
the Compensation Committee of the Board of Directors, all of whom are
"nonemployee directors" within the meaning of the rules adopted under Section 16
of the Securities and Exchange Act of 1934 and "outside directors" within the
meaning of the regulation adopted under Section 162(m) of the Internal Revenue
Code. See "Committees of the Board of Directors--COMPENSATION COMMITTEE."
Subject to the express provisions and limitations stated in the 1994 Plan, the
Committee has the discretion to decide when and to whom to grant options and
restricted stock and to establish the terms and conditions relating to such
awards. The Committee has full authority to construe and interpret the 1994
Plan, to establish, amend and rescind rules and regulations relating to the 1994
Plan, to grant options and restricted stock, to administer the 1994 Plan and to
take all such steps and make all such determinations in connection with the 1994
Plan and the awards granted thereunder as it may deem necessary or advisable,
which determinations are final and binding upon participants in the 1994 Plan.

ELIGIBILITY

To be eligible for selection by the Committee to receive a grant of an
option or restricted stock under the 1994 Plan, an individual must be an officer
or an employee of the Company (or a related corporation of the Company as
defined in the 1994 Plan) as of the date of such grant. Nonemployee directors
are not eligible to receive awards or grants under the 1994 Plan. As of March
31, 2000, approximately 850 persons were eligible to participate in the 1994
Plan.

<PAGE>

SHARES AVAILABLE FOR THE 1994 PLAN

The 1994 Plan originally provided that the maximum number of shares for
which options and restricted stock may at any time be granted was 600,000 shares
of Common Stock. As of March 31, 2000, 69,994 shares of Common Stock were
available for issuance. The 1994 Plan provides that effective April 1, 1997 and
on April 1 of each year thereafter until April 1, 2001, the number of shares of
Common Stock that would be available for issuance under the 1994 Plan will be
increased by an amount of 3.4% of the outstanding common shares on that date.
Any unused portion of the available shares in any fiscal year, including those
previously available as of April 1, 1997, will be carried forward and available
for grants and options in succeeding fiscal years. The maximum number of
incentive stock options issuable under the 1994 Plan after May 30, 1997 is
1,300,000. The issuance of restricted shares would be limited to 50,000 is any
one fiscal year. The closing price of the Common Stock on March 31, 2000, as
reported by The Nasdaq Stock Market, was $6.25.

In the event of a recapitalization, stock split, stock dividend, exchange
of shares, merger, reorganization, change in corporate structure of shares of
the Company or similar event, the Committee may make appropriate adjustments in
the number of shares and the exercise price with respect to previously granted
options, the maximum number of shares as to which options may be granted, and
the aggregate number and class of shares available under the 1994 Plan.

As of March 31, 2000, each executive officer named in the Summary
Compensation Table ("named executive officer"), the current executive officers
as a group, and all employees, including all current officers who are not
executive officers, held outstanding options for shares of Commons Stock under
the 1994 Plan as follows:

<TABLE>
<S> <C>
James E. Bartholomew: 82,500
Glen J. Bertini: 94,000
Darla V. Norris: 75,000
Scott E. Reynolds: 105,000
William M. Weisfield: 200,000

Executive Officers as a Group: 674,500

All employees, except Executive Officers: 443,916
</TABLE>

OPTIONS

GRANT OF OPTIONS. Options may be granted to eligible persons in such number
and at such times during the term of the 1994 Plan as the Committee determines,
taking into account the duties of the respective participants, their present and
potential contributions to the success of the Company, and such other factors as
the Committee deems relevant. An option granted under the 1994 Plan may be
either an incentive stock option (an "ISO"), which is intended to meet the
requirements defined in Section 422 of the Code, or a nonqualified stock option
(an "NSO"). In any one fiscal year, no individual may receive option grants
under the 1994 Plan representing more than 100,000 shares of Common Stock,
provided, however, that during the first calendar year of a Participant's
employment with the Company, the maximum annual grant shall be 300,000.

TERMS AND CONDITIONS OF OPTIONS. The price per share of Common Stock at
which each option is exercisable (the "exercise price") is determined by the
Committee at the time of the grant, but may not be less than 100% of the fair
market value of the Common Stock on the date the option is granted. Options are
exercisable at such time and under such conditions as are set forth in the
option grant, but in no event may an option be exercisable more than 10 years
from the date of grant. In general, an optionee may not exercise an option until
completion of one year of continuous employment with the Company from the date
on which the option is granted, or such other period as the Committee may
determine.

<PAGE>

RESTRICTED STOCK

Restricted stock may be granted to eligible persons in such number and at
such times during the term of the 1994 Plan as the Committee determines, taking
into account the duties of the respective participants, their present and
potential contributions to the success of the Company, and such other factors as
the Committee deems relevant. Under the proposed amendment, the issuance of
restricted shares is limited to 50,000 in any one fiscal year. Participants who
receive restricted stock have all the rights of stockholders with respect to
such shares, including the right to vote the shares and receive all dividends or
other distributions made or paid with respect to such shares. During a period of
years following the date of grant, as determined by the Committee (the
"Restriction Period"), which in no event will be less than one year (except for
35,000 shares granted on April 20, 1994), the restricted stock is forfeited if
the participant terminates the relationship with the Company for any reason
(other than death, retirement or a change of control) before the expiration of
the Restriction Period or if the participant attempts to sell, exchange,
transfer, pledge or otherwise dispose of such restricted stock; provided,
however, that the Committee may waive or modify such restrictions.

TERM OF THE 1994 PLAN

Within the limitations described in the 1994 Plan, grants under the 1994
Plan may be made from time to time until April 21, 2004. Grants made under the
1994 Plan may extend beyond that date and the terms and conditions of the 1994
Plan will continue to apply to such grants and to shares of Common Stock
acquired upon exercise thereof.

CHANGE OF CONTROL

Under the 1994 Plan, upon a Change of Control, each outstanding option will
automatically become exercisable in full for the total remaining number of
shares covered thereby. In addition, during the 90-day period following a Change
of Control an optionee may choose to receive cash equal to the difference
between the exercise price of the option and the fair market value of a share of
Common Stock in lieu of exercising the option and paying the option price. Also,
all restrictions on shares of restricted stock will lapse upon a Change of
Control. A Change of Control is defined in the 1994 Plan as: (i) a change in the
Board of Directors such that a majority of the seats on the Board are occupied
by individuals who were neither nominated by a majority of the Incumbent
Directors of the Company then in office nor appointed by directors so nominated;
(ii) the acquisition by any person (other than the Company or a Company employee
benefit plan) of, in the case of transactions not approved by a majority of the
Incumbent Directors, 15% or more of the combined general voting power of the
Common Stock and any other voting securities of the Company and, in the case of
other transactions, 33% or more of such combined voting power; or (iii) the
approval by the stockholders of the Company of a Business Combination, other
than a Business Combination in which all or substantially all the stockholders
of the Company receive or hold 60% or more of the stock of the corporation
resulting from the Business Combination in substantially the same proportions as
their ownership before the Business Combination, no holder has more than 33% of
the combined voting power of the capital stock of the resulting corporation and
at least a majority of the board of directors of the resulting corporation are
Incumbent Directors or were approved by a majority of the Incumbent Directors.

AMENDMENTS TO THE 1994 PLAN

Except as described below, the Committee may from time to time amend the
1994 Plan as it deems proper and in the best interests of the Company without
further approval of the stockholders. Certain features of the 1994 Plan may not
be amended without the approval of the Company's stockholders to the extent such
approval is required for compliance with Section 422 of the Code with respect to
ISOs. Such amendments would include (a) materially increasing the maximum number
of shares of Common Stock that may be issued under the 1994 Plan, or (b)
materially modifying the requirements as to eligibility for participation in the
1994 Plan.

FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes the material federal income tax
consequences of participation in option grants under the 1994 Plan. This
discussion is general in nature and does not address issues related to the tax
circumstances of any particular employee. The discussion is based on federal
income tax

<PAGE>

laws in effect on the date hereof and is, therefore, subject to possible
future changes in the law. This discussion does not address state, local or
foreign consequences.

ISOS. An optionee will not recognize any income upon either grant or
exercise of an ISO, although the exercise may subject the optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time of exercise over the purchase
price of the shares is included in income for purposes of alternate minimum tax.
The treatment of any gain realized upon sale or other disposition of Common
Stock received upon exercise of an ISO will depend on the holding period. If the
optionee does not dispose of the shares received within either one year after
exercise of the ISO or two years after grant, any gain realized upon disposition
will be characterized as long-term capital gain. If the optionee disposes of the
shares within either one year after exercise of the ISO or two years after
grant, such disposition will be a "disqualifying disposition." In the case of a
disqualifying disposition, the portion of the gain realized on disposition equal
to the excess of the fair market value of the shares at the time the ISO was
exercised over the exercise price will be ordinary income taxable as
compensation in the year of disposition. The balance, if any, of the gain will
be capital gain.

If the optionee sells the shares in a disqualifying disposition at a price
that is below the fair market value of the shares at the time the ISO was
exercised, the optionee's ordinary income will be limited to the excess of the
amount realized upon the disposition over the adjusted basis in the shares. The
Company is entitled to a deduction with respect to an ISO only in the taxable
year of the Company in which a disqualifying disposition occurs. In that event,
the deduction would be equal to the ordinary income, if any, recognized by the
optionee upon disposition of the shares, provided that the deduction is not
otherwise disallowed under the Code.

NSOS. An optionee will not recognize any income upon either grant or
vesting of an NSO. Upon exercise of an NSO, the optionee will recognize ordinary
income in an amount equal to the difference between the exercise price and the
then fair market value of the shares acquired.

In general, upon a subsequent disposition of the shares, the optionee's
basis for determining taxable gain or loss would be the amount paid for such
shares plus the amount that was includable in the optionee's income at the time
of exercise. Any gain recognized on such disposition would generally be taxed as
long-term or short-term capital gain depending on the length of time the
optionee is deemed to have held these shares and the holding period in effect at
the time. The Company will be entitled to a deduction for federal income tax
purposes upon exercise of an NSO in an amount equal to the ordinary income
recognized by the optionee, provided that the deduction is not otherwise
disallowed under the Code.

CAP ON COMPANY DEDUCTIONS FOR CERTAIN COMPENSATION. As discussed above,
under Section 162(m) of the Code, certain compensation payments in excess of $1
million are subject to a cap on deductibility for the Company. The limitation on
deductibility applies with respect to that portion of a compensation payment for
a taxable year in excess of $1 million to either the chief executive officer of
the Company or any one of the other four highest paid executives. Certain
performance-based compensation is not subject to the cap on deductibility.
Options can qualify for this performance-based exception, but only if they are
granted at fair market value, the total number of shares that can be granted to
an executive during a specified period is stated, and stockholder and Board
approval is obtained. The option portion of the 1994 Plan has been drafted to
comply with these performance-based criteria.

4. OTHER MATTERS

The Company knows of no other matters that are likely to be brought before
the meeting. If, however, other matters not now known or determined come before
the meeting, the persons named in the enclosed Proxy Card or their substitutes
will vote such proxy in accordance with their judgment in such matters.

11
<PAGE>

STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth as of June 2, 2000 (unless otherwise noted
below) information regarding the beneficial ownership of the Common Stock by
each stockholder who, to the Company's knowledge, owned more than 5% of the
outstanding Common Stock, by each of the directors, nominees and by each of the
executive officers named in the Summary Compensation Table, and by all directors
and executive officers, as a group. Each of the named persons and members of the
group has sole voting and investment power with respect to the shares shown,
except as stated below.

BENEFICIAL OWNERSHIP OF COMMON STOCK
------------------------------------------------------------------
OPTIONS AND
OTHER
OUTSTANDING RIGHTS
SHARES EXERCISABLE
OF COMMON WITHIN 60
STOCK DAYS
NAME AND ADDRESS* OF BENEFICIALLY OF JUNE 2,
-------------------- ------------ ---------- PERCENT OF
BENEFICIAL OWNER OWNED 2000 TOTAL CLASS(1)
-------------------- --------------- --------------- ------- ----------
<S> <C> <C> <C> <C>
Dimensional Fund Advisors Inc.(2) 566,720 0 566,720 7.58%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401

Trigran Investments, L.P.(3) 535,000 0 535,000 7.15%
155 Pfingsten Road, Suite 360
Deerfield, IL 60015

Stanley J. Bright 163,500 30,000(4) 193,500(5) 2.59%
John D. Durbin 8,000 28,000(4) 36,000 **
John W. Ellis 5,000 55,000(4) 60,000 **
Robert P. Gannon 0 5,000(4) 5,000
Walter M. Higgins 3,000 21,000(4) 24,000 **
Robert E. Runice 4,000 45,000 49,000 **
William M. Weisfield 15,285 80,000(6) 95,285 1.27%

James E. Bartholomew 4,574 63,750(7) 68,324 **
Glen J. Bertini 10,649 37,800(7) 48,449 **
Darla V. Norris 2,000 16,250(7) 18,250 **
Scott E. Reynolds 1,842 58,250(7) 60,092 **

All directors and executive 217,850 476,300 694,150 9.28%
officers, as a group (12 persons):
</TABLE>

NOTES TO BENEFICIAL OWNERSHIP TABLE:

* Addresses are listed of owners of more than 5% of the outstanding
Common Stock.

** Less than 1% of the outstanding Common Stock.

(1) In calculating the percentage ownership of any stockholder holding
options or other rights exercisable within 60 days of June 2, 2000,
it is assumed that such options or rights were exercised.

(2) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 566,720 shares of
the Company's common stock as of December 31, 1999, all of which shares
are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee

<PAGE>

benefit plans, all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.

(3) The voting and dispositive power of 26,000 of these shares is shared
with Castle Creek Partners LLP.

(4) Consists of options to purchase shares of Common Stock granted under
the 1987 Director Plan and includes options to purchase 5,000 shares
of Common Stock that will be granted on July 28, 2000. See "Director
Compensation."

(5) Includes 158,500 shares owned by UVCC Fund I which may be deemed
beneficially owned by Mr. Bright. Utech Venture Capital Corporation
has a majority interest in the UTILX Common Stock held in UVCC Fund I.
Mr. Bright serves as a board member of Utech Venture Capital
Corporation. Mr. Bright disclaims beneficial ownership of such shares.

(6) Consists of options to purchase 30,000 shares of Common Stock granted
under the Company's 1987 Director Plan and 50,000 shares of Common
Stock granted under the Company's Amended and Restated 1994 Option and
Restricted Stock Plan (the "1994 Plan").

(7) Consists of options to purchase shares of Common Stock granted under
the Company's 1994 Plan.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who beneficially own more than
10% of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than 10% stockholders are
required by Commission regulation to furnish the Company with copies of all
Section16(a) forms that they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, the Company believes that during the 2000 fiscal
year all filing requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with, other than one late filing
relating to a purchase of stock on behalf of Mr. George Taylor, an executive
officer.

EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to the Company's Chief
Executive Officer and the four most highly compensated executive officers whose
salary and bonuses exceeded $100,000 (the "named executive officers") for
services rendered in fiscal year 2000 and the two prior fiscal years:

<PAGE>

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL ---------
COMPENSATION COMPENSATION
---------------------- ------------
SECURITIES
UNDERLYING
OPTIONS
NAME AND ------- ALL OTHER
PRINCIPAL POSITION YEAR(1) SALARY ($) BONUS ($) AWARDED (#) COMPENSATION ($)
------------------ ----- ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
William M. Weisfield(2) 2000 $300,019 $ 70,000 0 $ 5,319(3)
President/Chief 1999 $142,754 $ 0 205,000 $ 346(3)
Executive Officer

Scott E. Reynolds(4) 2000 $125,766 $ 40,000 45,000 $ 4,561(5)
Chief Operating
Officer

Glen J. Bertini(6) 2000 $123,848 $ 35,000 45,000 $ 5,443(7)
Senior Vice President
Business Development

James E. Bartholomew(8) 2000 $115,003 $ 35,000 25,000 $ 5,317(9)
Senior Vice President 1999 $102,091 0 0 $ 4,702(9)
Eastern Region

Darla V. Norris(10) 2000 $111,859 $ 35,000 25,000 $ 1,096(11)
Senior Vice President
Chief Financial Officer
</TABLE>

NOTES TO SUMMARY COMPENSATION TABLE:

(1) The Company's fiscal year ended March 31 of the year identified.

(2) Mr. Weisfield served as a board member for the Company during the
entire 1999 and 2000 fiscal years, and as an executive officer since
November 1, 1998.

(3) Consists of $3,808 for Company matching contributions to qualified
benefit plan ("Company matching contributions") and $1,511 for taxable
life benefits ("insurance benefits") for 2000 and $346 for insurance
benefits for 1999.

(4) Mr. Reynolds became an executive officer of the Company in January
1996. Because his annual compensation received during 1999 and 1998
did not exceed $100,000, it is not included in the table above.

(5) Consists of $4,399 for Company matching contributions and $162 for
insurance benefits for 2000.

(6) Mr. Bertini became an executive officer of the Company in December
1998. Because his annual compensation received during 1999 did not
exceed $100,000, it is not included in the table above.

(7) Consists of $5,348 for Company matching contributions and $95 for
insurance benefits for 2000.

(8) Mr. Bartholomew became an executive officer of the Company in March
1994. Because his annual compensation did not exceed $100,000 during
1998, it is not included in the table above.

(9) Consists of $5,175 for Company matching contributions and $142 for
insurance benefits for 2000 and $4,594 and $108 respectively for 1999.

<PAGE>

(10) Ms. Norris became an executive officer of the Company in December
1998. Because her annual compensation received during 1999 did not
exceed $100,000, it is not included in the table above.

(11) Consists of $944 for Company matching contributions and $152 for
insurance benefits for 2000.

The following tables set forth information concerning option grants and
exercises during the Company's 2000 fiscal year to or by the named executive
officers and the value of the options held by such officers as of March 31,
2000:

OPTION GRANTS IN FISCAL YEAR 2000

INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
NAME GRANTED YEAR 2000 PER SHARE(1) DATE(1) 5% 10%
---- ------- --------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William M. Weisfield 0 N/A N/A N/A $ 0 $ 0

James E. Bartholomew 25,000(3) 4.79% $2.1875 4/30/09 $ 34,392 $ 87,157

Glen J. Bertini 25,000(3) 4.79% $2.1875 4/30/09 $ 34,392 $ 87,157

20,000(3) 3.83% $3.9375 10/29/09 $ 49,525 $125,507

Darla V. Norris 15,000(3) 2.87% $2.1875 4/30/09 $ 20,635 $ 52,294

10,000(3) 1.91% $3.9375 10/29/09 $ 24,762 $ 62,753

Scott E. Reynolds 25,000(3) 4.79% $2.1875 4/30/09 $ 34,392 $ 87,157

20,000(3) 3.83% $3.9375 10/29/09 $ 49,525 $125,507
</TABLE>

NOTES TO OPTION GRANTS TABLE:

(1) The exercise price for the options is the fair market value of the
Common Stock on the date of grant. Exercise of an option requires
payment in cash of the exercise price. The options under the Company's
1994 Plan have a term of 10 years and become exercisable in four equal
annual installments beginning one year after the date of grant,
subject to acceleration upon the occurrence of certain transactions,
including certain mergers and other business combinations involving
the Company. The Compensation Committee also has the authority to
accelerate exercisability before the originally designated exercise
date. The exercise price may be paid by the delivery of already owned
shares or a full-recourse promissory note, and tax withholding
obligations relating to exercise may be paid by the delivery of
already owned shares or by offsetting the underlying shares, subject
to certain conditions.

(2) The dollar amounts under these columns are the result of calculations
at the 5% and 10% assumed appreciation rates set by the Securities
and Exchange Commission and therefore are not intended to forecast
possible future appreciation, if any, in the price of the Common Stock.

(3) Options granted under the Company's 1994 Plan.

<PAGE>

AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000
AND 2000 FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME OPTIONS AT MARCH 31, 2000(1) MARCH 31, 2000(2)
---- ----------------------------- -----------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
William M. Weisfield 80,000 150,000 $289,062 $637,500

James E. Bartholomew 44,000 46,500 $113,625 $171,250

Glen J. Bertini 27,684 76,316 $ 53,574 $249,738

Darla V. Norris 12,500 62,500 $ 53,125 $243,437

Scott E. Reynolds 39,000 66,000 $116,875 $215,937

</TABLE>

NOTES TO AGGREGATED OPTION EXERCISES TABLE:

(1) Consists of options granted under the Company's 1987 Director Plan and
1994 Plan.

(2) Based on a closing price of $6.25 per share on March 31, 2000.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

EMPLOYMENT AGREEMENTS. The Company has entered into an executive employment
agreement with William M. Weisfield. This agreement establishes a starting
annual base salary and eligibility to participate in Company bonus and stock
plans. The agreement obligates the Company to continue employment and
compensation of Mr. Weisfield until November 1, 2001 unless terminated by Mr.
Weisfield upon 60 days' notice or by the Company upon 30 days' notice. If the
Company terminates Mr. Weisfield's employment during the term of the agreement
for reasons other than "cause" (as defined in the agreement), the Company will
be obligated to pay to Mr. Weisfield an amount equal to four month's salary,
presently $108,333. The Company has also entered into a senior management
employment agreement with Mr. Weisfield with an initial term of two years.
Unless earlier terminated by either the Company or Mr. Weisfield upon 30 days'
notice, on each annual anniversary date, this agreement shall automatically be
renewed for successive two-year terms. This agreement also obligates the Company
to make certain payments to Mr. Weisfield in the event of termination for
reasons other than "cause" or in the event of a "Change of Control" (as defined
in the agreement) up to an amount equal to two times his annual base salary then
in effect plus an amount equal to the bonus paid to Mr. Weisfield for the prior
fiscal year. Based on Mr. Weisfield's present base salary, two years salary
amounts to the sum of $650,000.

The executive employment agreement with Mr. Weisfield, effective November
1, 1998, established an initial annual base salary of $300,000. The agreement
required the Company to grant to Mr. Weisfield at the commencement of his
employment, options to purchase 200,000 shares of Common Stock under the 1994
Plan.

An Incentive Compensation Agreement with Mr. Bertini, effective October 29,
1999, established a royalty sharing arrangement relating to gross revenues
received by the Company for any sale or other transfer of products or services
related to Trynergy, including any disposition of the Company's Trynergy
business to another party.

AMENDED AND RESTATED 1994 OPTION AND RESTRICTED STOCK PLAN (the 1994 Plan).
The named executive officers participate in the 1994 Plan. For a summary of the
material features of the Plan, including Change of Control provisions, see the
discussion above under "Proposal to Approve Amendment of the Amended and
Restated 1994 Option and Restricted Stock Plan."

<PAGE>

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of directors who are not employees of the Company. Current
members of the Committee are Robert E. Runice, Chairman, John W. Ellis, John D.
Durbin and Walter M. Higgins. None of the members of the Committee participate
in the compensation programs described in this report.

PHILOSOPHY, PROCEDURES AND GENERAL POLICIES. In determining executive
compensation, the Committee and the Board are guided by the following
objectives:

- Attracting, retaining and motivating highly qualified and committed
executives.

- Using the competitive employment marketplace as a guide to assessing and
establishing compensation levels.

- Determining total compensation to a meaningful degree by returns to the
Company's stockholders.

- Exercising appropriate discretion and judgment in making individual
compensation determinations based on the performance and particular
employment position of the affected executive, the current economic and
business circumstances of the Company, and the prevailing conditions in
the relevant employment marketplace.

- Encouraging executives to obtain and hold an equity stake in the Company.

The responsibility of the Committee is to review and make recommendations
regarding executive compensation to the Board of Directors. The Board of
Directors exercises final authority with respect to approval of executive
compensation, except with regard to grants under the Company's stock plans for
which the Committee has final authority. The Committee and the Board also
specifically approve the compensation of individual executives, including any
merit or promotional adjustments, and individually review the performance of
those executives on at least an annual basis. Base salary increases are based
upon the results of such performance reviews and, for executives other than the
President and Chief Executive Officer, such increases are also based upon the
recommendation of the President and Chief Executive Officer.

EXECUTIVE COMPENSATION PLAN. Under the Company's fiscal year 2000 Executive
Compensation Plan, executive compensation consisted of the following components:

- Annual base salary

- Annual incentive bonus

- Long-term compensation in the form of stock option grants

In establishing this plan, comparative executive compensation information
was collected by the Company using both publicly available sources as well as
compensation surveys produced by independent, outside compensation firms. That
information included, but was not specifically limited to, the group of
companies comprising the peer issuers index in the Stock Performance Graph. See
footnote 2 to "Stock Performance Graph" below.

ANNUAL COMPENSATION -- BASE SALARIES. The Company seeks to establish base
salaries of executives at median levels in those employment markets within which
the Company competes in order to recruit and retain qualified executive
employees. The Company reviews base salaries of each executive periodically,
generally on an annual basis, to ensure that the Company remains competitive.
Such annual reviews, conducted in conjunction with annual merit reviews, provide
the basis for assessments of base salary and adjustments, several of which were
made during fiscal 2000 to executive officers.

The Committee considers recommendations from the President and Chief
Executive Officer when making adjustments to executive salaries. The Committee
also considers the initial base salaries set forth in the employment agreements
of certain executives and such variables as relative responsibility, expertise,
past years' compensation and performance, and comparative market data, including
median salary data for similar positions within the industry.

<PAGE>

ANNUAL COMPENSATION -- ANNUAL INCENTIVE BONUSES. The Committee has an
established program of annual cash incentives to executives in the form of
performance awards. This program is intended to encourage achievement of certain
goals developed and specified at the beginning of the fiscal year. A performance
award target is established for each participating executive, based on median
competitive levels in those employment markets within which the Company
competes. Performance awards are to be distributed out of a performance award
fund whose size is determined by the success of the management group as a whole
in achieving the annual financial goals of the Company. If Company goals are
met, the performance award fund is divided among all participating executives
based on their respective performance award targets. Although performance award
targets are specified at the beginning of the fiscal year, the relative share of
the performance award fund received by a specific executive may be increased or
decreased at the time of distribution of performance awards, based upon an
assessment by the Board and Committee of the individual's performance.

In April 1997, the Board and the Committee established performance award
targets for executives ranging from 20% to 50% of earned base salary and
established Company performance goals relating to achieving profitability of
specific profit centers and the entire Company. During fiscal year 2000,
performance awards totaling $262,500 were paid to executive officers.

LONG-TERM COMPENSATION -- STOCK PLANS. Long-term incentives are designed to
link management reward with the long-term interest of the Company's
stockholders. Currently, the Company grants stock options and restricted stock
as long-term incentives.

During fiscal 2000, the Committee and the Board granted a total of 452,250
stock options to executive officers and senior managers. These options were
scheduled to vest in either three or four years after the grant date.

In fiscal 1998, the Committee and the Board approved an Exempt Employee
Stock Option Plan, designed to make every salaried employee of the Company
eligible for annual nonqualified stock option awards upon achievement of
individual performance objectives. During fiscal 2000, 39 of the Company's
employees received these nonqualified stock options as a result of achieving
their individual objectives.

COMPENSATION OF CHIEF EXECUTIVE OFFICER. In November 1998, William
Weisfield was elected President and Chief Executive Officer to replace Mr.
Davies. Under the terms of his employment contract, Mr. Weisfield received an
initial annual base salary of $300,000 and a performance-based target bonus of
up to 100% of his annual base salary. Pursuant to his employment agreement, the
Company granted Mr. Weisfield at the commencement of his employment, options to
purchase 200,000 shares of Common Stock under the 1994 Plan. On April 28, 2000
the Board and Committee approved an annual salary increase of $25,000 for Mr.
Weisfield, a $70,000 bonus and options to purchase an additional 50,000 shares
of Common Stock under the 1994 Plan.

The compensation package for Mr. Weisfield was determined with the
assistance of a compensation consultant and was based upon a number of factors,
including market data indicating median salaries and annual bonuses for similar
positions in the employment market within which the Company competes. In
determining compensation, the Committee considered Mr. Weisfield's past services
to the Company, his expertise and relevant operational experience as well as his
demonstrated achievement in his prior and present position.

CAP ON COMPANY DEDUCTIONS FOR CERTAIN COMPENSATION. Under Section 162(m) of
the Code, certain compensation payments in excess of $1 million are subject to a
cap on deductibility for the Company. The limitation on deductibility applies
with respect to that portion of a compensation payment for a taxable year in
excess of $1 million to either the Company's chief executive officer or any one
of the other four highest paid executives. Certain performance-based
compensation is not subject to the cap on deductibility. Options can qualify for
this performance-based exception, but only if they are granted at fair market
value, the total number of shares that can be granted to an executive for any
period is stated, and stockholder and Board approval is obtained. Restricted
stock does not satisfy the definition of performance-based compensation unless
the lapse of the Restricted Period is based on the attainment of specified
performance goals approved by the issuer's stockholders. Restricted stock grants
under the 1994 Plan will not satisfy the performance-based criteria. The option
portion of the 1994 Plan is intended to comply with the performance-based
criteria.

<PAGE>

COMPENSATION COMMITTEE MEMBERS. The foregoing report has been provided by
the Compensation Committee of the Board of Directors.

Robert E. Runice (Chairman)
John W. Ellis
John D. Durbin
Walter M. Higgins

STOCK PERFORMANCE GRAPH

The graph below compares for each of the last five fiscal years ending
March 31, 2000 the cumulative total return of the Company, The Nasdaq Stock
Market index and the SIC 1600 - 1699 index. The cumulative total return of
Common Stock assumes $100 invested on March 31, 1995 in UTILX Common Stock and
for the comparator indices that all dividends are fully reinvested. The Company
has paid no dividend during the period indicated.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
UTILX CORPORATION, NASDAQ INDEX,(1) AND SIC 1600 - 1699 INDEX(2)

[GRAPH]

NOTES TO CUMULATIVE TOTAL RETURN CHART:

(1) Broad market index consisting of all United States companies traded on
The Nasdaq Stock Market during the period indicated.

(2) Peer issuers index consisting of all United States companies traded
on The Nasdaq Stock Market during the period indicated, including
the Company, whose Standard Industrial Classification ("SIC") code
is within Major Group 16, "Heavy Construction other than Building
Construction-Contractors." The Company's SIC code is 1623, "Water,
Sewer, Pipeline and Communications and Power Line Construction."
The following companies (and their ticker symbols) comprise the
group of peer issuers: Guy F. Atkinson Company of California (ATKN);
Cerbco, Inc. (CERB); Devcon International Corporation (DEVC);
Enviroq Corporation (EROQ); Euroweb International Corporation
(EWEB); Global Industries, Ltd. (GLBL); Granite Construction, Inc.
(GCCO); Harding Associates, Inc. (HRDG); Horizon Offshore, Inc.
(HOFF); Hungarian Teleconstruction Corporation (HTEL); Insituform
East, Inc. (INEI); Insituform Mid America, Inc. (INSMA); Insituform
Technologies, Inc. (INSUA); International Fibercom, Inc. (IFCI);
Mastec, Inc. (MASX); Meadow Valley Corporation (MVCO); Noxso
Corporation (NOXO); Transcoastal Marine Services, Inc. (TCMS) and
UTILX Corporation (UTLX).

<PAGE>

PROPOSALS OF STOCKHOLDERS

The Company intends to hold its 2001 Annual Meeting on approximately July
27, 2001. In order for proposals of stockholders to be considered for inclusion
in the Proxy Statement and Proxy for the 2001 Annual Meeting, such proposals
must be received by the Secretary of the Company no later than February 23,
2001.

2000 ANNUAL REPORT

A copy of the Company's 2000 Annual Report for the year ended March 31,
2000, as filed with the Securities and Exchange Commission is being mailed with
this Proxy Statement to each stockholder of record as of June 2, 2000. Any
stockholder not receiving this report will be provided such report without
charge by submitting a written request addressed to the Corporate Secretary,
UTILX Corporation, P.O. Box 97009, Kent, Washington 98064-9709.

By Order of the Board of Directors

/s/ Anne G. Cameron

Anne G. Cameron

Corporate Secretary

<PAGE>

APPENDIX A

UTILX CORPORATION

1987 RESTATED STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS

ARTICLE I
PURPOSE

The purposes of the 1987 UTILX Corporation Stock Option Plan for
Nonemployee Directors (the "Plan") are to attract and retain the services of
experienced and knowledgeable nonemployee directors of UTILX Corporation (the
"Corporation") and to provide an incentive for such directors to increase their
proprietary interest in the Corporation's long-term success and progress.

ARTICLE II
SHARES SUBJECT TO THE PLAN

The total number of shares of common stock, par value $.O1 (the "Shares"),
of the Corporation for which options may be granted under the Plan is 450,000,
subject to adjustment in accordance with Article VI hereof. Such Shares shall be
shares presently authorized but unissued or now held or subsequently acquired by
the Corporation as treasury shares and shall include shares representing the
unexercised portion of any option granted under the Plan which expires or
terminates without being exercised in full.

ARTICLE III
ADMINISTRATION OF THE PLAN

The administrator of the Plan (the "Plan Administrator") shall consist of a
committee appointed by the Board of Directors of the Corporation (the "Board").
Subject to the terms of the Plan, the Plan Administrator shall have the power to
construe the provisions of the Plan, to determine all questions arising
thereunder and to adept and amend such rules and regulations for the
administration of the Plan as it may deem desirable. No member of the Plan
Administrator shall participate in any vote by the Plan Administrator on any
matter materially affecting the rights of any such member under the Plan.

ARTICLE IV
PARTICIPATION IN THE PLAN

Each director of the Corporation who is not otherwise an employee of the
Corporation or any subsidiary ("Director") shall receive annually an option to
acquire 5,000 Shares under the Plan concurrent with the annual election of
Directors by the Stockholders of the Corporation, whether or not such Director
is a nominee for a director position at such annual meeting; provided, however,
that if such election is a Director's initial election, such grant shall be for
the acquisition of 10,000 Shares. The aforesaid grants shall commence at the
1988 annual meeting of stockholders of the Corporation. In addition, upon the
earlier of a Director's initial election or appointment, each Director initially
elected or appointed after January 26, 1988 other than at an annual meeting
shall receive an option for the acquisition of 10,000 Shares.

ARTICLE V
OPTION TERMS

Each option granted to a Director under the Plan and the issuance of shares
thereunder shall be subject to the following terms.

1. OPTION AGREEMENT. Each option granted under the Plan shall be evidenced
by an option agreement (the "Agreement") duly executed on behalf of the
Corporation and by the Director to whom such option is granted. Each Agreement
shall comply with and be subject to the terms and conditions of the Plan and
shall conclusively evidence by the optionee's signature thereon that it is the
intent of the optionee to continue to serve as a Director of the Corporation for
the remainder of the calendar year in which the option was granted. Any
Agreement may contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Plan Administrator. No
option shall be granted within the meaning of the Plan and no purported grant of
any option shall be effective until such an option agreement shall have been
duly executed on behalf of the Corporation and the Director to whom the option
is to be granted.

<PAGE>

2. OPTION EXERCISE PRICE. The option exercise price for an option granted
under the Plan shall be the fair market value of the Shares covered by the
option at the time the option is granted. For purposes of the Plan, "fair market
value" shall mean the closing price, or if there is no closing price, the mean
between the high and low sale prices quoted on the day of grant on the National
Association of Securities Dealers Automatic Quotation System.

3. TIME AND MANNER OF EXERCISE OF OPTION. Options shall vest and are
exercisable immediately after their grant and may be exercised in full at one
time or in part from time to time; provided, however, that the initial grant of
an option to acquire 10,000 Shares under the Plan shall vest according to the
following schedule:

Period of Optionee's Continuous
Relationship with the Corporation from Portion of Initial Grant
The Date the Option is Granted which is Exercisable
--------------------------------------- --------------------------
<S> <C>
After one year 40%
Each additional year thereafter 20%
</TABLE>

Any vested option may be exercised by giving written notice, signed by the
person exercising the option, to the Corporation stating the number of Shares
with respect to which the option is being exercised, accompanied by payment in
full for such Shares, which payment may be in whole or in part in shares of the
common stock of the Corporation already owned for at least six months by the
person exercising the option, valued at fair market value at the time of such
exercise.

4. TERM OF OPTIONS. Each option shall expire not more than ten (10) years
and one (1) week from the date of the granting thereof, but shall be subject to
earlier termination as follows:

(a) In the event of the death of an optionee, the option granted to
such optionee may be exercised within one (1) year after the date of death of
such optionee or prior to the date on which the option expires by its terms,
whichever is earlier, by the estate of such optionee, or by any person or
persons whom the optionee shall have designated in writing on forms prescribed
by and filed with the Corporation or, if no such designation has been made by
the person or persons to whom the optionee's rights have passed, by will or the
laws of descent and distribution.

(b) In the event that an optionee ceases to be a Director of the
Corporation, the option granted to such optionee may be exercised by him or her
within one (1) year after the date such optionee ceases to be a Director of the
Corporation or prior to the date on which the option expires by its terms,
whichever is earlier.

5. TRANSFERABILITY. The right of any optionee to exercise an option granted
to him or her under the Plan shall not be assignable or transferable by such
optionee otherwise than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Internal
Revenue Code of 1986, as amended, and any such option shall be exercisable
during the lifetime of such optionee only by such optionee.

6. HOLDING PERIOD. Shares of Common Stock obtained upon the exercise of any
option granted under the Plan may not be sold by persons subject to Section 16
of the Exchange Act until six months after the date the option was granted.

7. PARTICIPANT'S OR SUCCESSOR'S RIAHTS AS STOCKHOLDER. Neither the
recipient of an option under the Plan nor his or her successors) in interest
shall have any rights as a stockholder of the Corporation with respect to any
Shares subject to an option granted to such person until such person becomes a
holder of record of such Shares.

8. REGULATORY APPROVAL AND COMPLIANCE. The Corporation shall not be
required to issue any certificate or certificates for Shares upon the exercise
of an option granted under the Plan, or record as a holder of record of Shares
the name of the individual exercising an option under the Plan, without
obtaining to the complete satisfaction of the Plan Administrator the approval of
all regulatory bodies deemed necessary by the Plan Administrator, and without
complying, to the Plan Administrator's complete satisfaction, with all rules and
regulations, under federal, state or local law deemed applicable by the Plan
Administrator.

<PAGE>

ARTICLE VI
CAPITAL ADJUSTMENTS

The aggregate number of Shares with respect to which options may be granted
under the Plan, as provided in Article II, the aggregate number of shares with
respect to which an option may be granted annually to a Director under the Plan
as provided in Article IV, the number of Shares subject to each outstanding
option and the price per share specified in each such option, all may be
adjusted, as the Plan Administrator shall determine at its sole discretion or as
may be required, for any increase or decrease in the number of issued shares of
common stock of the Corporation resulting from a subdivision or consolidation of
shares or any other similar capital adjustment, the payment of a stock dividend,
or other increase or decrease in such shares effected without receipt of
consideration by, or a merger or consolidation of, the Corporation, or the sale
of all or substantially all of the assets of, or the liquidation of, the
Corporation.

ARTICLE VII
EXPENSES OF THE PLAN

All costs and expenses of the adoption and administration of the Plan shall
be borne by the Corporation, and none of such expenses shall be charged to any
optionee.

ARTICLE VIII
APPROVAL OF STOCKHOLDERS

The Plan shall be effective upon adoption by the Board so long as it
receives any required approval by the holders of a majority of the Corporation's
outstanding shares of voting capital stock at any time within twelve (12) months
before or after the adoption of this Plan.

ARTICLE IX
TERMINATION AND AMENDMENT OF THE PLAN

The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that without the approval of
stockholders no amendment shall (1) increase the number of Shares subject to the
Plan; (2) reduce the option price below 100% of the market value of the Shares
subject to the option at the time the option was granted; (3) increase beyond
5,000 shares the number of Shares for which options may be granted to each
Director in a calendar year; (4) change the timing with respect to which such
options are granted or (5) otherwise materially increase the benefits accruing
to the participants under the Plan; and provided, further, that if and to the
extent required for exemption from Section 16(b) of the Securities Exchange Act
of 1934, no such amendment may be made more than once every six months.

ARTICLE X
INDEMNIFICATION

In addition to all other rights of indemnification they may have as
Directors of the Corporation or as members of the body serving as the Plan
Administrator, members of the Board and Plan Administrator shall be indemnified
by the Corporation for all reasonable expenses and liabilities of any type and
nature, including attorneys' fees, incurred in connection with any action, suit
or proceeding to which they or any of them are a party by reason of, or in
connection with, any stock option granted hereunder, and against all amounts
paid by them in settlement thereof (if such settlement is approved by
independent legal counsel selected by the Corporation); provided, however, that
if such member or members are adjudged liable for willful misconduct, the
indemnification provisions of this Article % shall not apply to expenses which
relate to matters involving such willful misconduct. This indemnification shall
apply only if such member or members notify the Corporation of such action, suit
or proceeding in writing, within fifteen (15) days after institution of any such
action, suit or proceeding so that the Corporation may have the opportunity to
make appropriate arrangements to prosecute or defend any such action.

Adopted by the Board of Directors on August 14, 1987 and approved by the
stockholders on August 28, 1987.

Amended and restated by the Board of Directors on October 5, 1987 and approved
by the stockholders on October 16, 1987.

<PAGE>

Amended and restated by the Board of Directors on January 26, 1988 and
approved by the stockholders on February 11, 1988.

Amended (Articles I, III, V and IX) and restated by the Board of Directors on
April 16, 1991.

Amended (Article II) and restated by the Board of Directors on April 15, 1991
and approved by the stockholders on July 25, 1991.

Amended (Article II) and restated by the Board of Directors on April 28, 2000.

<PAGE>

APPENDIX B

UTILX CORPORATION
AMENDED AND RESTATED 1994 OPTION AND RESTRICTED STOCK PLAN

1. DEFINITIONS

The following terms have the corresponding meanings for purposes of the Plan:

"Change of Control" means the occurrence of any one of the following events:

(a) a "Board Change." For purposes of the Plan, a Board Change occurs if a
majority of the seats (other than vacant seats) on the Corporation's Board of
Directors (the "Board") become 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 (A) nominated by a majority of the directors of the Corporation then
in office or (B) appointed by directors so nominated, but excluding any such
individual whose initial assumption of office occurs as a result of either an
actual or threatened election contest (as defined by Rule 14a-11 of Regulation
14A under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board.
(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 under the Exchange Act) of

(i) 15% or more of either (A) the then-outstanding shares of Common Stock
(the "Outstanding Corporation Common Stock") or (B) the combined voting power of
the then-outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Corporation Voting
Securities"), which is not approved in advance by a majority of the Incumbent
Directors, or

(ii) 33% or more of either (A) the Outstanding Corporation Common Stock or
(B) the Outstanding Corporation Voting Securities, which is approved in advance
by a majority of the Incumbent Directors. The following acquisitions, however,
shall not constitute a Change of Control: (x) any acquisition by the
Corporation, (y) any acquisition by any employee benefit plan (or related trust)
sponsored by or maintained by the Corporation or any corporation controlled by
the Corporation, or (z) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following the reorganization,
merger or consolidation, the conditions described in Section 1(c) (i), (ii) and
(iii) of the following subsection (c) are satisfied.
(c) approval by the stockholders of the Corporation of a reorganization,
merger or consolidation, unless, immediately following the reorganization,
merger or consolidation,

(i) all or substantially all of the individuals and entities who were the
beneficial owners of, respectively, the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately before the reorganization,
merger or consolidation then beneficially own, directly or indirectly, more than
66-2/3% of both the then-outstanding shares of common stock of the corporation
resulting from the reorganization, merger or consolidation and the combined
voting power of the then-outstanding voting securities of the resulting
corporation entitled to vote generally in the election of directors, in
substantially the same proportions as their ownership, immediately before the
reorganization, merger or consolidation, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities,

(ii) no Person (excluding the Corporation, any employee benefit plan (or
related trust) of the Corporation or the corporation resulting from the
reorganization, merger or consolidation and any Person beneficially owning,
directly or indirectly, immediately before the reorganization, merger or
consolidation, 33% or more of the Outstanding Corporation Common Stock or
Outstanding Corporation Voting Securities) beneficially owns, directly or
indirectly, 33% or more of either the then-outstanding shares of common stock of
the corporation resulting from the reorganization, merger or consolidation or
the combined voting power of the then-outstanding voting securities of the
resulting 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 the reorganization, merger or consolidation were
Incumbent Directors at the time the Board executed the initial agreement
providing for the reorganization, merger or consolidation.
(d) approval by the Corporation's stockholders of

(i) a complete liquidation or dissolution of the Corporation or

(ii) the sale or other disposition of all or substantially all of the
assets of the Corporation, other than to a corporation, in which immediately
following the sale or other disposition, (A) all or substantially all of the
individuals and entities who were the beneficial owners of, respectively, the
Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities immediately before the sale or other

25
<PAGE>

disposition then beneficially own, directly or indirectly, more than 66-2/3%
of both the then-outstanding shares of common stock of the resulting
corporation and the combined voting power of the then-outstanding voting
securities of the resulting corporation entitled to vote generally in the
election of directors, in substantially the same proportion as their ownership
of the Outstanding Corporation Common Stock and Outstanding Corporation Voting
Securities immediately before the sale or other disposition, (B) no Person
(excluding the Corporation and any employee benefit plan (or related trust) of
the Corporation or the resulting corporation and any Person beneficially owning,
directly or indirectly, immediately before the sale or other disposition, 33% or
more of the Outstanding Corporation Common Stock or Outstanding Corporation
Voting Securities) beneficially owns, directly or indirectly, 33% or more of
either the then-outstanding shares of common stock of the resulting corporation
or the combined voting power of the then-outstanding voting securities of the
resulting 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 the
resulting corporation were approved by a majority of the Incumbent Directors at
the time the Board executed the initial agreement of action providing for the
sale or other disposition of assets of the Corporation.

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

"Committee" means the Committee or Committees provided for in Section 4, which
shall administer the Plan.

"Common Stock" means the Corporation's common stock, par value $0.01 per share.

"Corporation" means UTILX Corporation, a Delaware corporation.

"Designated Beneficiary" means any person designated in writing by a Participant
as a legal recipient of payments due under an award in the event of the
Participant's death or, in the absence of such designation, the Participant's
estate. This designation must be on file with the Corporation in order to be
effective but, unless the Participant has made an irrevocable designation, may
be changed from time to time by the Participant.

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

"Fair Market Value" of the Common Stock as of any trading day means the closing
sales price of the Common Stock as reported on that trading day by the Nasdaq
National Market. If Nasdaq reports no closing sales price for the Common Stock
on that trading day, then "Fair Market Value" shall mean the highest bid price
reported for the Common Stock on that trading day by the National Quotation
Bureau Incorporated or any similar nationally recognized organization. The
Committee, at its sole discretion, shall make all determinations required by
this definition.

"Incentive Stock Option" means an incentive stock option as defined in Section
422 of the Code.

"Maximum Annual Participant Grant" means the maximum number of shares for which
an Option or Options may be granted to any optionee Participant in any one
fiscal year of the Corporation.

"Nonqualified Stock Option" means an Option that does not qualify as an
Incentive Stock Option.

"Officer" means a duly elected officer of the Corporation as defined in the
Corporation's Bylaws.

"Option" means an option to purchase shares of Common Stock granted under the
Plan, whether an Incentive Stock Option or a Nonqualified Stock Option.

"Participant" means an employee or Officer who has received an award under
the Plan.

"Plan" means this UTILX Corporation Amended and Restated 1994 Option and
Restricted Stock Plan.

"Related Corporation" (other than a parent corporation) means any corporation
(other than the Corporation) in an unbroken chain of corporations ending with
the Corporation, if one of the other corporations in the chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock of each of the corporations other than the Corporation. When referring to
a parent corporation, the term "Related Corporation" means any corporation in an
unbroken chain of corporations ending with the Corporation if, at the time of
the granting of the Option or Restricted Stock, each of the corporations other
than the Corporation

26
<PAGE>

owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.

"Restricted Period" shall have the meaning set forth in Section 7(c).

"Restricted Stock" means the shares of Common Stock referred to in Section 7.

"Retirement" means the termination of the services of a Participant because of
normal retirement or early retirement, as may be approved by the Committee.

"Rule 16b-3" means Rule 16b-3 under the Exchange Act.

"Withholding Tax" means any tax, including any federal, state or local income
tax or payroll tax, required by any governmental entity to be withheld or
otherwise deducted and paid with respect to the transfer of shares of Common
Stock as a result of the exercise of a Nonqualified Stock Option (as defined in
Section 6(a)) or the award or vesting of Restricted Stock or stock grants.

2. STOCK SUBJECT TO THE PLAN

On April 21, 1994, the effective date of the Plan, 600,000 shares of Common
Stock were reserved for issuance upon the exercise of Options and for issuance
of Restricted Stock awards under the Plan. On April 1, 1997 and on April 1 of
each year thereafter until April 1, 2001, the number of shares of Common Stock
that are available for issuance under the Plan shall be increased by an amount
of 3.4% of the outstanding common shares on that date. Any unused portion of the
available shares in any fiscal year, including those available as of April 1,
1997, are carried forward and available for grants and awards in succeeding
fiscal years. Shares reserved for issuance upon the exercise of Options and for
issuance of Restricted Stock may be authorized and unissued shares of Common
Stock or previously outstanding shares of Common Stock then held in the
Corporation's treasury. The maximum number of Incentive Stock Options issuable
under the Plan after May 30, 1997 is 1,300,000. The issuance of shares of
Restricted Stock is limited to 50,000 in any one fiscal year. If any Option
granted under the Plan expires or terminates for any reason (including, without
limitation, because of its cancellation, in whole or in part, under the
provisions of Section 6(c) or otherwise, or the substitution of a new option)
without having been exercised in full, the shares subject to that Option shall
again be available for issuance under the Plan. If shares of Restricted Stock
are forfeited and returned to the Corporation under the provisions of Section 7,
those shares shall again be available for the purposes of issuance under the
Plan to the extent permitted by Rule 16b-3.

3. ADMINISTRATION

The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority and
discretion to determine the individuals to whom, and the times at which,
Restricted Stock shall be awarded and Options shall be granted (including,
without limitation, whether such Options shall be Incentive Stock Options,
Nonqualified Stock Options or both) and the number of shares to be covered by
each such award or grant. In making these determinations, the Committee may take
into account the nature of the services rendered by the respective Participants,
their present and potential contributions to the Corporation's success and any
other factors that the Committee may deem relevant. Subject to the express
provisions of the Plan, the Committee shall have plenary authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to it,
to determine the terms and provisions of Restricted Stock and option agreements
(which need not be identical) and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee's determinations of
the matters referred to in this Section 3 shall be conclusive. The Corporation
intends for the Plan and its administration to comply in all respects with Rule
16b-3, and if any Plan provision is later found not to be in compliance with
Rule 16b-3, the provision shall be void, and in all events the Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Board, at its absolute
discretion, may bifurcate the Plan so as to restrict, limit or condition the use
of any provision of the Plan to persons who are subject to Section 16 of the
Exchange Act without so limiting or conditioning the Plan with respect to other
persons.

27
<PAGE>

4. THE COMMITTEE

The Board shall designate a Committee (or Committees) of members of the Board.
With respect to Options granted and Restricted Stock awarded to officers and
directors who are subject to Section 16 of the Exchange Act, the Committee (or
Committees) shall meet the requirements of Rule 16b-3.

The Committee shall be appointed by the Board, which may from time to time
appoint members of the Committee in substitution for members previously
appointed and may fill vacancies, however caused, in the Committee. The
Committee shall select one of its members as its Chairman and shall hold its
meetings at such times and places as it may determine. A majority of its members
shall constitute a quorum. All determinations of the Committee shall be made by
not less than a majority of its members. Any decision or determination reduced
to writing and signed by all the Committee members shall be fully as effective
as if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary. The Committee shall keep minutes of its
meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.

5. ELIGIBILITY

The Committee may award Restricted Stock and grant Options to employees or
Officers of the Corporation or a Related Corporation. The award of Incentive
Stock Options by the Committee is limited to employees of the Corporation and
any Related Corporation. Any person eligible under the Plan may receive one or
more grants of Options or one or more awards of Restricted Stock, or any
combination of the two, as the Committee shall from time to time determine, and
these determinations may be different for different Participants and may vary
between different awards and grants.

6. OPTION GRANTS

(a) The Committee is authorized, at its discretion, to issue Options as
Incentive Stock Options or as Nonqualified Stock Options, and the Options shall
be designated as Incentive Stock Options or Nonqualified Stock Options in the
applicable option agreement. The Maximum Annual Participant Grant shall be
100,000 shares, subject to adjustment as provided in Section 12; provided,
however, that during the first calendar year of a Participant's employment with
the Corporation, the Maximum Annual Participant Grant shall be 300,000, subject
to adjustment under Section 12. The purchase price of the Common Stock under
each Option granted under the Plan shall be determined by the Committee, but
shall be not less than 100% of the Fair Market Value of the Common Stock at the
time the Option is granted.

(b) The Committee is authorized, at its discretion, to prescribe in the Option
grant the installments, if any, in which an Option granted under the Plan shall
become exercisable. No Option shall be exercisable, however, before the first
anniversary of the date of its grant except as provided in Sections 6(c), (d),
(g), (h) and (j) or except as the Committee otherwise determines. In no case may
an Option be exercised for less than 10 shares at any one time (or the remaining
shares covered by the Option if less than 10) during the term of the Option. The
Committee is also authorized to establish the manner of the exercise of an
Option. The term of each Option shall be not more than 10 years from the date of
its grant.

In general, upon exercise, the Option price is to be paid in full in cash;
however, the Committee can determine at the time the Option is granted for
Incentive Stock Options or at any time before exercise for Nonqualified Stock
Options, that additional forms of payment will be permitted. To the extent
permitted by the Committee and applicable laws and regulations (including, but
not limited to, federal tax and securities laws and regulations and state
corporate law), an Option may be exercised (i) in Common Stock owned by the
Option holder having a Fair Market Value on the date of exercise equal to the
aggregate Option price or in a combination of cash and stock. However, that
payment in stock shall not be made unless the stock shall have been owned by the
Option holder for a period of at least six months before the payment; or (ii) by
delivery of a properly executed exercise notice, together with irrevocable
instructions to a broker designated by the Corporation, all in accordance with
the regulations of the Federal Reserve Board, to deliver promptly to the
Corporation the amount of sale or loan proceeds necessary to pay the exercise
price and any Withholding Tax obligations that may arise in connection with the
exercise. As a condition to the exercise of an Option, the Option holder shall
make such arrangements as the Committee may require for the satisfaction of any
federal, state or local Withholding Tax obligations that may arise in connection
with the exercise.

28
<PAGE>

(c) If a Participant's services for the Corporation or a Related Corporation
shall cease and the termination of the individual's service is for cause, the
Options shall automatically terminate upon first notification to the Option
holder of the termination of services, unless the Committee determines
otherwise, and the Option shall automatically terminate upon the date of the
termination of services for all shares that were not purchasable upon such date.
For purposes of this Section 6(c), "cause" is defined as a determination by the
Committee that the Option holder has (i) committed a felony, (ii) engaged in an
act or acts of deliberate and intentional dishonesty resulting or intended to
result directly or indirectly in improper material gain to or personal
enrichment of the individual at the Corporation's expense, or (iii) willfully
disobeyed the Corporation's appropriate rules, instructions or orders, and that
willful disobedience has continued for a period of 10 days following notice of
the disobedience from the Corporation.

If the services of an Option holder terminate because of Retirement or
disability, the Option holder may (unless the Option has been previously
terminated under the provisions of the preceding paragraph or unless otherwise
provided in his or her Option grant) exercise the Option at any time before 24
months from the date of the termination, (i) in the event of disability or
Retirement, to the extent of the number of shares covered by the Option, whether
or not such shares had become purchasable by the Option holder at the date of
the termination of his or her services, and (ii) in the event of early
retirement not approved by the Committee, to the extent of the number of shares
covered by the Option at such time or times within 24 months from the date of
the termination as the Option becomes purchasable by the Option holder in
accordance with its terms.

If an individual to whom an Option has been granted under the Plan dies while
performing services for the Corporation or a Related Corporation, the Option
previously granted to that individual (unless the Option has been previously
terminated under this Section 6(c) or unless otherwise provided in the Option
grant) may, subject to the limitations described in Section 6(f), be exercised
by that individual's Designated Beneficiary, by the legatee or legatees of the
Option under that individual's last will, or by the individual's personal
representatives or distributees, at any time within a period of 24 months after
the individual's death, but not after the expiration of the Option, to the
extent of the remaining shares covered by the Option, whether or not such shares
had become purchasable by the individual at the date of his or her death. If an
individual dies (i) during the 24-month period following termination of his or
her services or (ii) following termination of his or her services by reason of
Retirement or disability, then the Option (if not previously terminated under
this Section 6(c)) may be exercised during the remainder of that 24-month period
or during the remaining term of the Option, respectively, by the individual's
Designated Beneficiary, by the legatee or legatees under his or her last will,
or by the individual's personal representative or distributee, but only to the
extent of the number of shares purchasable by such individual under Section 6(d)
at the date of termination of his or her services.

If the services of an Option holder are terminated other than by reason of
Retirement, disability or death, the holder may (unless his or her Option has
been previously terminated under this Section 6(c) or unless otherwise provided
in his or her Option grant) exercise such Option at any time within three months
after the termination, but not after the expiration of the Option, to the extent
of the number of shares covered by the Option that were purchasable by him or
her at the date of the termination, and the Option shall automatically terminate
upon the date of the termination of services for all shares that were not
purchasable upon such date.

Although an Option may be exercised after Retirement, disability, death or other
termination under Section 422 of the Code, if the Option has been designated as
an Incentive Stock Option, it must be exercised within three months after the
date of Retirement or other termination or one year after the termination of
employment due to disability in order to qualify for Incentive Stock Option tax
treatment.

(d) Notwithstanding these provisions, the Committee may determine, at its sole
discretion, in the case of any termination of services, that the holder of an
Option may exercise the Option to the extent of some or all of the remaining
shares covered by the Option whether or not such shares had become purchasable
by that individual at the date of the termination of his or her services and may
exercise the Option at any time before the expiration of the original term of
the Option, except that any such extension shall not cause any Incentive Stock
Option to fail to continue to qualify as an Incentive Stock Option without the
consent of the Option holder. Options granted under the Plan shall not be
affected by any change of relationship with the Corporation so long as the
holder continues to be an employee or Officer of the Corporation or of a Related
Corporation; however, a change in a participant's status from an employee to a
nonemployee Officer shall result in the termination of an outstanding Incentive
Stock Option held by that participant in accordance with Section 6(c). The
Committee, at its absolute discretion, may determine all questions of whether
particular leaves of absence constitute a termination of services. With respect
to Incentive Stock Options, however, that determination shall be subject to any
requirements contained in the Code. Nothing in the Plan or in any

29
<PAGE>

Option granted pursuant to the Plan shall confer on any individual any right
to continue in the employ or other service of the Corporation or any other
person or interfere in any way with the right of the Corporation or any other
person to terminate his or her employment or other services at any time.

(e) The date of grant of an Option pursuant to the Plan shall be the date
specified by the Committee at the time it grants the Option, provided that the
date shall not be before the date of the grant by the Committee and that the
price shall be determined in accordance with Section 6(a) on that date. The
Committee shall promptly notify a grantee of an award and a written Option grant
shall promptly be duly executed and delivered by or on behalf of the
Corporation.

(f) If an Option holder is granted Incentive Stock Options that in the
aggregate entitle the Option holder to purchase, in the first year such
Options become exercisable (whether under their original terms or as a result
of the occurrence of an Acceleration Event, as defined below), Common Stock
of the Corporation or a Related Corporation having a Fair Market Value
(determined as of the time such Options are granted) in excess of $100,000,
the portion in excess of $100,000 shall be treated as a Nonqualified Stock
Option. This limitation shall not apply, however, if the Internal Revenue
Service publicly rules, issues a private ruling to the Corporation, any
Option holder of the Corporation or any legatee, personal representative or
distributee of an Option holder or states in proposed, temporary or final
regulations that provisions which allow the full exercise of an Option
holder's Incentive Stock Options upon the occurrence of the relevant
Acceleration Event do not violate Section 422(d) of the Code. An
"Acceleration Event" means (i) a determination of the Committee to allow an
Option holder to exercise his or her Options in full upon termination of his
or her employment or other service as provided in Section 6(c) or (d), (ii)
the death of an Option holder while he or she is employed by the Corporation
or a Related Corporation, (iii) any Change of Control, or (iv) the Option
holder's termination of employment or other service under circumstances that
will allow him or her to exercise Options not otherwise exercisable pursuant
to Section 6(j).

(g) Notwithstanding any contrary waiting period, installment period or other
limitation or restriction in any Option agreement or in the Plan, in the event
of a Change of Control, each Option outstanding under the Plan shall become
exercisable by the Option holder at any time during the remaining term of the
Option, but not after the term of the Option, to the extent of the number of
shares covered by the Option, whether or not such shares had become purchasable
by the Option holder immediately before the Change of Control, subject to the
limitations described in Section 6(f).

(h) Notwithstanding anything in the Plan to the contrary, upon a Change of
Control an Option holder (other than an Option holder who initiated a Change of
Control in a capacity other than as an officer or a director of the Corporation)
who is an officer or a director of the Corporation (within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated under
Section 16) who holds an Option that was granted at least six months before the
date of exercise pursuant to this sentence shall, unless the Committee
determines otherwise at the time of grant, surrender the Option to the
Corporation and receive in cash an amount equal to the amount by which the fair
market value of the Option on the date of exercise (determined as provided in
Section 6(i)) exceeds the purchase price per share under the Option multiplied
by the number of shares of Common Stock granted under the Option.

Any other Option holder who is not an officer or director of the Corporation
(within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated under Section 16) with respect to an Option shall,
unless the Committee shall determine otherwise at the time of grant, have the
right, in lieu of payment of the full purchase price of the shares of Common
Stock being purchased under the Option and by giving written notice to the
Corporation, to elect (within the 90-day period following a Change of Control)
to surrender all or part of the Option to the Corporation and to receive in cash
an amount equal to the amount by which the fair market value of the Option on
the date of exercise (determined as provided in Section 6(i)) exceeds the
purchase price per share under the Option multiplied by the number of shares of
Common Stock granted under the Option. The written notice shall specify the
Option holder's election to purchase shares of Common Stock granted under the
Option or to receive the cash payment.

Notwithstanding the above, this Section 6(h) shall be operative only in the
event of a Change of Control in which the consideration to be paid does not
consist solely of equity securities registered under Section 12 of the Exchange
Act.

(i) For the purpose of determining the amount payable under Section 6(h), the
"fair market value of the Option" will be equal to the higher of (x) the highest
Fair Market Value of the Common Stock on any trading

<PAGE>

day during the 90-calendar-day period ending on the date of exercise and (y)
whichever of the following is applicable:

(i) the highest per-share price paid in any tender or exchange offer that
is in effect at any time during the 90 calendar days preceding the exercise of
the limited right;

(ii) the fixed or formula price for the acquisition of shares of Common
Stock in a merger or similar agreement approved by the Corporation's
stockholders or the Board, if such price is determinable on the date of
exercise; or

(iii) the highest price per share paid to any stockholder of the
Corporation in a transaction or group of transactions giving rise to the
exercisability of the Option. In no event, however, may the holder of an
Incentive Stock Option receive an amount in excess of the maximum amount that
will enable the Option to continue to qualify as an Incentive Stock Option
without the consent of the Participant.

(j) Notwithstanding these provisions, the Option holder's employment or other
contract with the Corporation may provide that upon termination of his or her
employment or other services for other than cause or for "good reason" (as
defined in his or her contract), all Options shall become immediately
exercisable.

7. RESTRICTED STOCK AWARDS

(a) Subsequent to April 1, 1997, the number of shares available for issuance
as Restricted Stock awards is limited to 50,000 in any one fiscal year.

(b) The consideration to be received for shares of Restricted Stock issued
under the Plan out of authorized but unissued shares or out of treasury
shares shall be equal to cash in an amount equal to the par value of the
shares and past services for the Corporation. The recipient of Restricted
Stock shall be recorded as a stockholder of the Corporation, at which time
the Corporation, at its discretion, may either issue a Restricted Stock
certificate or make a book entry credit in the Corporation's stock ledger to
evidence the award of the Restricted Stock, and the Participant shall have,
subject to the provisions of the Plan, all the rights of a stockholder with
respect to those shares and receive all dividends or other distributions made
or paid with respect to those shares. However, the shares themselves and any
new, additional or different shares or securities that the recipient may be
entitled to receive with respect to those shares by virtue of a stock split
or stock dividend or any other change in the corporate or capital structure
of the Corporation shall be subject to the restrictions of the Plan described
below.

(c) Except for 35,000 shares of Restricted Stock granted on or before April 21,
1994, during a period of years following the date of grant, as determined by the
Committee, which shall in no event be less than 12 months (the "Restricted
Period"), the Restricted Stock or any rights thereto may not be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of by the
recipient, except in the event of the recipient's death or the transfer of the
Restricted Stock or any rights thereto to the Corporation under the provisions
of the next paragraph. In the event of the death or Retirement of the recipient
during the Restricted Period, these restrictions shall immediately lapse, and
the recipient or, in the case of the recipient's death, his or her Designated
Beneficiary, the legatee under his or her last will or his or her personal
representative or distributee, shall be free to transfer, encumber or otherwise
dispose of the Restricted Stock. In the event of the early retirement of the
recipient not approved by the Committee during the Restricted Period, however,
these restrictions shall continue until they lapse in accordance with the terms
of the grant.

Except as provided in Section 7(d), if during the Restricted Period the service
of the recipient by the Corporation or a Related Corporation terminates for any
reason (including termination with or without cause by the Corporation or a
Related Corporation or resignation by the recipient), other than termination of
service due to the Retirement or death of the recipient, then the shares of
Restricted Stock held by him or her shall be forfeited to the Corporation and
the recipient shall immediately transfer and return to the Corporation the
certificates, if any have been issued to him or her, representing all the
Restricted Stock. The recipient's rights as a stockholder with respect to the
Restricted Stock shall cease, effective with such termination of service.
Notwithstanding this provision, the recipient's service contract with the
Corporation may provide that upon termination of his or her service for other
than cause or for "good reason" (as defined in his or her contract), all
Restricted Stock shall cease to be subject to these restrictions.

A recipient's rights to Restricted Stock may not be assigned or transferred
except upon death by will, descent or distribution. If the recipient attempts to
sell, exchange, transfer, pledge or otherwise dispose of shares of Restricted
Stock in violation of these provisions, those shares shall be forfeited to the
Corporation.

<PAGE>

(d) Notwithstanding the Restricted Period contained in the grant of Restricted
Stock, in the event of a Change of Control in which the consideration to be paid
does not consist solely of equity securities registered under Section 12 of the
Exchange Act, all restrictions on shares of Restricted Stock shall immediately
lapse and the Restricted Shares shall become immediately transferable and
nonforfeitable.

(e) Notwithstanding anything contained in the Plan to the contrary, the
Committee may determine, at its sole discretion, in the case of any termination
of a recipient's service, that the restrictions on some or all of the shares of
Restricted Stock awarded to a recipient shall immediately lapse and such
Restricted Shares shall become immediately transferable and nonforfeitable.

8. WITHHOLDING TAXES

In connection with the transfer of shares of Common Stock as a result of the
exercise of a Nonqualified Stock Option or the award of Restricted Stock or
stock grants, the Corporation (a) shall not issue a certificate for such shares
until it has received payment from the Participant of any Withholding Tax in
cash or by the retention by the Corporation or acceptance by the Corporation
upon delivery by the Participant of shares of Common Stock sufficient in Fair
Market Value to cover the amount of the Withholding Tax and (b) shall have the
right to retain or sell without notice, or to demand surrender of, shares of
Common Stock in value sufficient to cover any Withholding Tax. The Corporation
shall have the right to withhold from any cash amounts due from the Corporation
to the award recipient pursuant to the Plan an amount equal to the Withholding
Tax. In either case, the Corporation shall make payment (or reimburse itself for
payment made) to the appropriate taxing authority of an amount in cash equal to
the amount of the Withholding Tax, remitting any balance to the Participant. For
purposes of this Section 8, the value of shares of Common Stock so retained or
surrendered shall be equal to the Fair Market Value of the shares on the date
that the amount of the Withholding Tax is to be determined (the "Tax Date"), and
the value of shares of Common Stock so sold shall be the actual net sale price
per share (after deduction of commissions) received by the Corporation.

Notwithstanding these provisions, the Participant may elect, subject to approval
by the Committee, to satisfy the obligation to pay any Withholding Tax, in whole
or in part, by providing the Corporation with funds sufficient to enable the
Corporation to pay the Withholding Tax or by having the Corporation retain or
accept upon delivery by the Participant shares of Common Stock sufficient in
Fair Market Value to cover the amount of the Withholding Tax. Each election by a
Participant to have shares retained or to deliver shares for this purpose must
be in writing and made on or before the Tax Date.

9. TRANSFERABILITY AND OWNERSHIP RIGHTS OF OPTIONS

Options granted under the Plan may be exercised during a Participant's
lifetime only by the Participant, and Options granted under the Plan and the
rights and privileges conferred by the Options shall not be subject to
execution, attachment or similar process and may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law
or otherwise) except to the extent permitted by the Committee, by Section 422
of the Code and by Rule 16b-3.

10. HOLDING PERIODS

(a) If an individual subject to Section 16 of the Exchange Act sells shares of
Common Stock obtained upon the exercise of an Option within six months after the
date the Option was granted, that sale may result in short-swing profit recovery
under Section 16(b) of the Exchange Act.

(b) In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, an Option holder must hold the shares issued upon
the exercise of an Incentive Stock Option for two years after the date of grant
of the Option and one year from the date of exercise. An Option holder may be
subject to the alternative minimum tax at the time of exercise of an Incentive
Stock Option. The Committee may require an Option holder to give the Corporation
prompt notice of any disposition in advance of the required holding period of
shares of Common Stock acquired by exercise of an Incentive Stock Option. Tax
advice should be obtained when exercising any Option and before the disposition
of the shares issued upon the exercise of any Option.

<PAGE>

11. RULE 16b-3 COMPLIANCE AND BIFURCATION OF PLAN

The Corporation intends that, if any of the Corporation's equity securities
are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the
Plan shall comply in all respects with Rule 16b-3 under the Exchange Act. If
any Plan provision is later found not to be in compliance, the provision
shall be void, and in all events the Plan shall be construed in favor of its
meeting the requirements of Rule 16b-3. Notwithstanding anything in the Plan
to the contrary, the Board, at its absolute discretion, may bifurcate the
Plan so as to restrict, limit or condition the use of any provision of the
Plan to Participants who are Officers and directors subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the Plan
with respect to other Participants.

12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

Except as otherwise provided in Section 6(g) and (h), in the event of any
changes in the outstanding stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs, spin-offs,
liquidations or other similar changes in capitalization, or any distribution
to stockholders other than cash dividends, the Committee shall make such
adjustments, if any, in the number and class of shares or rights subject to
Options and the exercise prices of the Options as the Committee in its sole
discretion shall determine to be appropriate. In the event of any such change
in the outstanding Common Stock of the Corporation, the Committee shall
appropriately adjust the aggregate number and class of shares available under
the Plan, the Maximum Annual Participant Grant set forth in Section 6, the
maximum number of shares as to which Options may be granted and the maximum
number of shares of Restricted Stock that may be awarded.

13. AMENDMENT AND TERMINATION

Unless the Plan has previously been terminated as provided below, the Plan shall
terminate on, and no awards of Restricted Stock or Options shall be made after,
April 21, 2004. This termination, however, shall have no effect on awards of
Restricted Stock or Options made prior to that date. The Plan may be terminated,
modified or amended by the stockholders of the Corporation. The Board may also
terminate the Plan, and may modify or amend the Plan in such respects as it
deems advisable in order to conform to any change in any applicable law or
regulation, or in other respects; however, to the extent required for compliance
with Rule 16b-3, Section 422 of the Code or other applicable law or regulation,
stockholder approval will be required for any amendment that will (a) materially
increase the total number of shares as to which Options may be granted or that
may be issued as Restricted Stock, (b) materially change the class of persons
eligible to receive awards of Restricted Stock and grants of Options, (c)
materially increase the benefits accruing to participants under the Plan, or (d)
otherwise require stockholder approval under any applicable law or regulation.
The amendment or termination of the Plan shall not, without the consent of the
recipient of any award under the Plan, alter or impair any rights or obligations
under any award previously granted under the Plan.

14. INDEMNIFICATION

In addition to all other rights of indemnification they may have as directors
of the Corporation or as members of the Committee, members of the Board and
the Committee shall be indemnified by the Corporation for all reasonable
expenses and liabilities of any type and nature, including attorneys' fees,
incurred in connection with any action, suit or proceeding to which they or
any of them are a party by reason of, or in connection with, any Option
granted, Restricted Stock or stock grants awarded under the Plan and against
all amounts paid by them in settlement of any action, suit or proceeding (if
the settlement is approved by independent legal counsel selected by the
Corporation). If the member or members are adjudged liable for willful
misconduct, however, the indemnification provisions of this Section 14 shall
not apply to expenses that relate to matters involving the willful
misconduct. This indemnification shall apply only if the member or members
notify the Corporation in writing of the action, suit or proceeding within 14
days after the action is instituted, so that the Corporation may have the
opportunity to make appropriate arrangements to prosecute or defend the
action.

<PAGE>

15. EFFECTIVENESS OF THE PLAN

The Plan became effective on April 21, 1994. The Committee may at its discretion
authorize the awarding of Restricted Stock and the granting of Options, the
issuance or exercise of which shall be expressly subject to the conditions that
(a) the shares of Common Stock reserved for issuance under the Plan shall have
been duly listed, upon official notice of issuance, upon each stock exchange in
the United States upon which the Common Stock is traded and (b) a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares shall have become effective.

16. DATES OF AMENDMENT

The Plan was amended effective on June 22, 1995, June 27, 1997, November 11,
1998, January 11, 1999 and April 28, 2000.

<PAGE>

PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS OF
UTILX CORPORATION
2000 ANNUAL MEETING OF STOCKHOLDERS - JULY 28, 2000

The undersigned hereby appoints William M. Weisfield and Anne G. Cameron,
and each or any of them, with power of substitution, proxies for the undersigned
and authorizes them to represent and vote, as designated on the reverse side,
all of the shares of Common Stock, $0.01 par value, of UTILX Corporation which
the undersigned may be entitled to vote at the 2000 Annual Meeting of
Stockholders to be held at the corporate headquarters located at 22820 Russell
Road, Kent, Washington 98032 on Friday, July 28, 2000, at 10:30 a.m., Pacific
Time, and at any other adjournment of such meeting, hereby revoking any proxies
heretofore given, for the following purposes and with discretionary authority as
to any other matters that may properly come before the meeting, all in
accordance with and as described in the Notice and accompanying Proxy Statement.

If no direction is given, this proxy will be voted FOR proposals 1, 2,
and 3.

IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE

------------------
SEE REVERSE
SIDE
-------------------

/X/ Please
mark your
votes as
in this
example.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.

FOR WITHHELD
/ / / / NOMINEES: John W. Ellis and
1. Election Robert P. Gannon
of both for three (3) year
Nominees. terms expiring in
2003.

2. To approve, consider and vote upon FOR AGAINST ABSTAIN
a proposal to amend the 1987 / / / / / /
Restated Stock Option Plan for
Nonemployee Directors.

3. To approve, consider and vote upon
a proposal to amend the Amended / / / / / /
and Restated 1994 Option and
Restricted Stock Plan.

INSTRUCTIONS: To withhold authority to
vote for any individual nominee, write that
nominee's name in the space provided below.

___________________________________________

Signature(s)_________________________________ Date ____________________________
Note: Please sign exactly as name appears hereon. Joint owners should each sign
and date. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.