THRUSTMASTER INC
S-8, 1998-06-23
COMPUTER PERIPHERAL EQUIPMENT, NEC
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<PAGE>

     As filed with the Securities and Exchange Commission on June 23, 1998
                                                     REGISTRATION NO. 333-40323
_______________________________________________________________________________

                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                               ______________________
                                          
                                      FORM S-8
                                          
                               REGISTRATION STATEMENT
                                       UNDER
                             THE SECURITIES ACT OF 1933
                               ______________________
                                          
                                          
                                 THRUSTMASTER, INC.
                                          
               (Exact name of Registrant as specified in its charter)
                                          
                                          
          OREGON                                       93-1040330
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)                           
                                          
                         7175 N.W. EVERGREEN PARKWAY, #400
                           HILLSBORO, OREGON  97124-5839
                (Address of principal executive offices) (Zip code)
                                          
                                          
                               1998 STOCK OPTION PLAN
                              (Full title of the plan)
                                          
                                          
                           STEPHEN A. AANDERUD, PRESIDENT
                         7175 N.W. EVERGREEN PARKWAY, #400
                           HILLSBORO, OREGON  97124-5839
                                   (503) 615-3200
             (Name, address and telephone number of agent for service)
                               ______________________
                                          
                                     Copies to:

                                 DAVID S. MATHESON
                                  PERKINS COIE LLP
                         1211 S.W. FIFTH AVENUE, SUITE 1500
                            PORTLAND, OREGON  97204-3715
                               ______________________
                                          
                                          
                          CALCULATION OF REGISTRATION FEE
                                        
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________

   TITLE OF SECURITIES      AMOUNT TO BE        PROPOSED MAXIMUM         PROPOSED MAXIMUM       AMOUNT OF 
     TO BE REGISTERED      REGISTERED (1)      OFFERING PRICE PER       AGGREGATE OFFERING     REGISTRATION
                                                    SHARE(2)                 PRICE(2)              FEE
___________________________________________________________________________________________________________
 <S>                          <C>                    <C>                  <C>                   <C>

 Common Stock, no par
   value                      1,000,000              $ 7.375              $7,375,000.00         $2,175.63
___________________________________________________________________________________________________________
___________________________________________________________________________________________________________

</TABLE>

(1)  Together with an indeterminate number of additional shares that may be 
     necessary to adjust the number of shares reserved for issuance pursuant 
     to the 1998 Stock Option Plan as the result of any future stock split, 
     stock dividend or similar adjustment of the outstanding Common Stock of 
     the Registrant.

(2)  Estimated pursuant to Rule 457 of the Securities Act of 1933, as amended,
     solely for the purpose of calculating the amount of the registration fee. 
     The price per share is estimated to be $7.375, based on the average of 
     the high sales price ($7.625) and low sales price ($7.125) for the 
     Registrant's Common Stock as reported on the Nasdaq National Market on 
     June 16, 1998.



<PAGE>

                                      PART II
                                          
                   INFORMATION REQUIRED IN REGISTRATION STATEMENT

Item 3.  INCORPORATION OF DOCUMENTS BY REFERENCE

     The following documents are hereby incorporated by reference into this
Registration Statement:

          (a)  The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, filed with the Securities and Exchange Commission (the
"Commission") on March 26, 1998;

          (b)  All other reports filed by the Registrant pursuant to Section 
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the 
"Exchange Act"), since the end of the fiscal year covered by the Annual 
Report on Form 10-K referred to in (a) above; and

          (c)  The description of the Registrant's Common Stock contained in 
the Registration Statement on Form 8-A filed with the Commission on February 
8, 1995, under Section 12(g) of the Exchange Act, including any amendments or 
reports filed for the purpose of updating such description.

     Any document filed by the Registrant pursuant to Section 13(a), 13(c), 
14 or 15(d) of the Exchange Act after the date hereof and prior to the filing 
of a post-effective amendment that indicates that the securities offered 
hereby have been sold or that deregisters the securities covered hereby then 
remaining unsold shall also be deemed to be incorporated by reference into 
this Registration Statement and to be a part hereof commencing on the 
respective date on which such document is filed.

Item 6.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     As an Oregon corporation, the Registrant is subject to the Oregon Business
Corporation Act ("OBCA"). Pursuant to Section 60.047(2)(d) of the OBCA,
Article X of the Registrant's Articles of Incorporation, as amended (the
"Articles"), eliminates the liability of the Registrant's directors to the
Registrant or its shareholders, except for any liability related to (i) any
breach of the duty of loyalty to the Registrant or its shareholders; (ii) acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; (iii) any distribution that is unlawful under the
OBCA; or (iv) any transaction from which the director derived an improper
personal benefit. 

     Sections 60.391 and 60.407(2) of the OBCA allow corporations to indemnify
their directors and officers, respectively, against liability where the director
or officer has acted in good faith and with a reasonable belief that actions
taken were in the best interests of the corporation or at least not opposed to
the corporation's best interests and, if in a criminal proceeding, the
individual had no reasonable cause to believe the conduct in question was
unlawful.  Under the OBCA, corporations may not indemnify against liability in
connection with a claim by or in the right of the corporation or for any
improper personal benefit in which the director or officer was adjudged liable
to the corporation. Sections 60.394 and 60.407(1) of the OBCA mandate
indemnification of directors and officers, respectively, for all reasonable
expenses incurred in the successful defense of any claim made or threatened,
whether or not such claim was by or in the right of the corporation.  Finally,
pursuant to the Sections 60.401 and 60.407(1) of the OBCA, a court may order
indemnification in view of all the relevant circumstances, whether or not the
director or officer met the good-faith and reasonable belief standards of
conduct set out in Section 60.391 of the OBCA or was adjudged liable to the
corporation.

     Section 60.414 of the OBCA also provides that the statutory indemnification
provisions are not deemed exclusive of any other rights to which directors or
officers may be entitled under a corporation's articles of incorporation or
bylaws, any agreement, general or specific action of the board of directors,
vote of shareholders or otherwise. 

     The Registrant's Amended and Restated Bylaws require indemnification of
directors and officers of the Registrant to the fullest extent not prohibited by
law.

                                     II-1



<PAGE>

Item 8.  EXHIBITS

<TABLE>
<CAPTION>

    Exhibit
    Number                                Description
- ---------------     ----------------------------------------------------------
    <S>             <C>
     4.1            Form of Stock Certificate (1)

     4.2            Articles of Incorporation (2)

     5.3            Bylaws (3)

     5.1            Opinion of Perkins Coie LLP regarding legality of the 
                    Common Stock being registered

    23.1            Consent of Coopers & Lybrand LLP

    23.2            Consent of Perkins Coie LLP (included in its Opinion filed 
                    as Exhibit 5.1)

    24.1            Power of Attorney (see Signature Page)

    99.1            1998 Stock Option Plan 
</TABLE>

(1)  Incorporated herein by reference to exhibit 4.3 to the Registration
     Statement on SEC Form SB-2 filed with the Securities Exchange Commission 
     on January 5, 1995, as amended on February 7, 1995 and February 24, 1995.

(2)  Incorporated herein by reference to exhibit 3.1 to the Registration
     Statement on SEC Form SB-2 filed with the Securities Exchange Commission 
     on January 5, 1995, as amended on February 7, 1995 and February 24, 1995.

(3)  Incorporated herein by reference to exhibit 3.2 to the Company's 1996
     Annual Report on SEC Form 10-K filed with the Securities Exchange 
     Commission on March 25, 1997.

Item 9.  UNDERTAKINGS

A.   The undersigned Registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

          (i)    To include any prospectus required by Section 10(a)(3) of the
Securities Act;

          (ii)   To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in this Registration
Statement; and

          (iii)  To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement; 

PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement.

     (2)  That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

                                     II-2



<PAGE>

     (3)  To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.

B.   The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

                                     II-3



<PAGE>

C.   Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.  In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

                                     II-4



<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hillsboro, State of Oregon, on June 19, 1998.

                                       THRUSTMASTER, INC.


                                       By  /s/ STEPHEN A. AANDERUD
                                       ----------------------------------------
                                       Stephen A. Aanderud
                                       President and Chief Executive Officer

                                          
                                 POWER OF ATTORNEY

     Each person whose signature appears below constitutes and appoints 
Stephen A. Aanderud and Allen Robison, and each of them, as true and lawful 
attorneys-in-fact and agents with full power of substitution and 
resubstitution, to sign in the name and on behalf of such person, 
individually and in each capacity stated below, any or all amendments 
(including pre-effective and post-effective amendments) to this Registration 
Statement, and to file the same with all exhibits thereto, and other 
documents in connection therewith, with the Securities and Exchange 
Commission.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on June 19, 1998.
     

    /s/ C. NORMAN WINNINGSTAD          Chairman of the Board
   ---------------------------
    C. Norman Winningstad


    /s/ STEPHEN A. AANDERUD            Director, President and Chief Executive
   ---------------------------         Officer (principal executive officer)
    Stephen A. Aanderud


    /s/ ALLEN ROBISON                  Comptroller and Acting Principal 
   ---------------------------         Financial and Accounting Officer
    Allen Robison


    /s/ ROBERT L. CARTER               Director
   --------------------------- 
    Robert L. Carter


    /s/ GRAHAM E. DORLAND              Director
   --------------------------- 
    Graham E. Dorland


    /s/ MERRILL A. McPEAK              Director
   --------------------------- 
    Merrill A. McPeak


    /s/ G. GERALD PRATT                Director
   --------------------------- 
    G. Gerald Pratt


    /s/ MILTON R. SMITH                Director
   ---------------------------
    Milton R. Smith


    /s/ FREDERICK M. STEVENS           Director
   --------------------------- 
    Frederick M. Stevens

                                     II-5



<PAGE>
                                 INDEX TO EXHIBITS
<TABLE>
<CAPTION>

    Exhibit
    Number                                Description
- ---------------     ----------------------------------------------------------
    <S>             <C>
     4.1            Form of Stock Certificate (1)

     4.2            Articles of Incorporation (2)

     5.3            Bylaws (3)

     5.1            Opinion of Perkins Coie LLP regarding legality of the 
                    Common Stock being registered

    23.1            Consent of Coopers & Lybrand LLP

    23.2            Consent of Perkins Coie LLP (included in its Opinion
                    filed as Exhibit 5.1)

    24.1            Power of Attorney (see Signature Page)

    99.1            1998 Stock Option Plan 
</TABLE>

(1)  Incorporated herein by reference to exhibit 4.3 to the Registration
     Statement on SEC Form SB-2 filed with the Securities Exchange Commission 
     on January 5, 1995, as amended on February 7, 1995 and February 24, 1995.

(2)  Incorporated herein by reference to exhibit 3.1 to the Registration
     Statement on SEC Form SB-2 filed with the Securities Exchange Commission 
     on January 5, 1995, as amended on February 7, 1995 and February 24, 1995.

(3)  Incorporated herein by reference to exhibit 3.2 to the Company's 1996 
     Annual Report on SEC Form 10-K filed with the Securities Exchange 
     Commission on March 25, 1997.
     




<PAGE>

                                                                    EXHIBIT 5.1
                                          

                                  PERKINS COIE LLP
               A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
          1211 S.W. FIFTH AVENUE, SUITE 1500, PORTLAND, OREGON  97204-3715
               TELEPHONE:  (503) 727-2000  FACSIMILE:  (503) 727-2222


                                       June 19, 1998


ThrustMaster, Inc.
7175 N.W. Evergreen Parkway, #400
Hillsboro, Oregon  97124-5839

     Re:  Registration Statement on Form S-8 of Shares of Common Stock, No Par
          Value of ThrustMaster, Inc.

Ladies and Gentlemen:

     We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), which you are filing with the
Securities and Exchange Commission with respect to 1,000,000 shares of Common
Stock, no par value (the "Shares"), which may be issued pursuant to the
ThrustMaster, Inc. 1998 Stock Option Plan (the "Plan").  We have examined the
Registration Statement and such documents and records of the Company and other
documents as we have deemed necessary for the purpose of this opinion.  In
giving this opinion, we are assuming the authenticity of all instruments
presented to us as originals, the conformity with originals of all instruments
presented to us as copies and the genuineness of all signatures.

     Based upon and subject to the foregoing, we are of the opinion that any
original issuance Shares that may be issued pursuant to the Plan have been duly
authorized and that, upon the due execution by the Company and the registration
by its registrar of such Shares, issuance thereof by the Company in accordance
with the terms of the Plan, and the receipt of consideration therefor in
accordance with the terms of the Plan, such Shares will be validly issued, fully
paid and nonassessable.

     We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.  In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.

                                       Very truly yours,
                              
                                       /s/ Perkins Coie LLP
                                       ------------------------------
                                       PERKINS COIE LLP




<PAGE>

                                                                  EXHIBIT 23.1


                  CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation by 
reference in this Registration Statement on Form S-8 of our report dated 
January 23, 1998, included in ThrustMaster, Inc.'s Annual Report on Forms 
10-K for the year ended December 31, 1997, and to all references to our firm 
included in this Registration Statement.

                                       /s/ COOPERS & LYBRAND LLP 


Portland, Oregon
June 19, 1998



<PAGE>

                                                           EXHIBIT 99.1


                                 THRUSTMASTER, INC.

                               1998 STOCK OPTION PLAN
                                          
                                          
                          SECTION 1.         PURPOSE

     The purpose of the ThrustMaster, Inc. 1998 Stock Option Plan (the "Plan") 
is to enhance the long-term shareholder value of ThrustMaster, Inc., an 
Oregon corporation (the "Company"), by offering opportunities to employees 
(and persons offered employment), directors, officers, consultants, agents, 
advisors and independent contractors of the Company and its Subsidiaries (as 
defined in Section 2) to participate in the Company's growth and success, and 
to encourage them to remain in the service of the Company and its 
Subsidiaries and to acquire and maintain stock ownership in the Company.  

                        SECTION 2.          DEFINITIONS

     For purposes of the Plan, the following terms shall be defined as set forth
below:

2.1  BOARD

     "Board" means the Board of Directors of the Company.

2.2  CAUSE

     "Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.

2.3  CODE

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

2.4  COMMON STOCK

     "Common Stock" means the common stock of the Company.

2.5  CORPORATE TRANSACTION

     "Corporate Transaction" means any of the following events:

          (a)  Consummation of any merger or consolidation of the Company in
     which the Company is not the continuing or surviving corporation,
     or pursuant to which shares of the Common Stock are converted into cash,
     securities or other property, if following such merger or consolidation the
     holders of the Company's outstanding voting securities 

                                       1


<PAGE>

     immediately prior to such merger or consolidation own less than 66-2/3% 
     of the outstanding voting securities of the surviving corporation;

          (b)  Consummation of any sale, lease, exchange or other transfer in
     one transaction or a series of related transactions of all or substantially
     all of the Company's assets other than a transfer of the Company's assets
     to a majority-owned subsidiary corporation (as the term "subsidiary
     corporation" is defined in Section 8.3) of the Company; or

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

     Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.

2.6  DISABILITY

     "Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.

2.7  EARLY RETIREMENT

     "Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.

2.8  EXCHANGE ACT

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

2.9  FAIR MARKET VALUE

     The "Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the closing per share sales price for the Common Stock as reported by
the Nasdaq National Market for a single trading day or (b) if the Common Stock
is listed on the New York Stock Exchange or the American Stock Exchange, the
closing per share sales price for the Common Stock as such price is officially
quoted in the composite tape of transactions on such exchange for a single
trading day.  If there is no such reported price for the Common Stock for the
date in question, then such price on the last preceding date for which such
price exists shall be determinative of the Fair Market Value.

2.10 GOOD REASON

     "Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice by the Optionee:

                                       2



<PAGE>

          (a)  a change in the Optionee's status, title, position or
responsibilities (including reporting responsibilities) that, in the Optionee's
reasonable judgment, represents a substantial reduction in the status, title,
position or responsibilities as in effect immediately prior thereto; the
assignment to the Optionee of any duties or responsibilities that, in the
Optionee's reasonable judgment, are materially inconsistent with such status,
title, position or responsibilities; or any removal of the Optionee from or
failure to reappoint or reelect the Optionee to any of such positions, except in
connection with the termination of the Optionee's employment for Cause, for
Disability or as a result of his or her death, or by the Optionee other than for
Good Reason;

          (b)  a reduction in the Optionee's annual base salary;

          (c)  the Successor Corporation's requiring the Optionee (without the
Optionee's consent) to be based at any place outside a 35-mile radius of his or
her place of employment prior to a Corporate Transaction, except for reasonably
required travel on the Successor Corporation's business that is not materially
greater than such travel requirements prior to the Corporate Transaction;

          (d)  the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent thereof) in
which the Optionee was participating at the time of a Corporate Transaction,
including, but not limited to, the Plan, or (ii) provide the Optionee with
compensation and benefits substantially equivalent (in terms of benefit levels
and/or reward opportunities) to those provided for under each material employee
benefit plan, program and practice as in effect immediately prior to the
Corporate Transaction;

          (e)  any material breach by the Successor Corporation of its
obligations to the Optionee under the Plan or any substantially equivalent plan
of the Successor Corporation; or

          (f)  any purported termination of the Optionee's employment or
services for Cause by the Successor Corporation that does not comply with the
terms of the Plan or any substantially equivalent plan of the Successor
Corporation.

2.11 GRANT DATE

     "Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Option is to be granted.

2.12 INCENTIVE STOCK OPTION

     "Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.

                                       3


<PAGE>

2.13 NONQUALIFIED STOCK OPTION

     "Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.

2.14 OPTION

     "Option" means the right to purchase Common Stock granted under Section 7.

2.15 OPTIONEE

     "Optionee" means (i) the person to whom an Option is granted; (ii) for an
Optionee who has died, the personal representative of the Optionee's estate, the
person(s) to whom the Optionee's rights under the Option have passed by will or
by the applicable laws of descent and distribution, or the beneficiary
designated in accordance with Section 9; or (iii) person(s) to whom an Option
has been transferred in accordance with Section 9.

2.16 PLAN ADMINISTRATOR

     "Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.

2.17 RETIREMENT

     "Retirement" means retirement as of the individual's normal retirement date
as that term is defined by the Plan Administrator from time to time for purposes
of the Plan.

2.18 SECURITIES ACT

     "Securities Act" means the Securities Act of 1933, as amended.

2.19 SUBSIDIARY

     "Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.

2.20 SUCCESSOR CORPORATION

     "Successor Corporation" has the meaning set forth under Section 10.2.

                          SECTION 3.          ADMINISTRATION

3.1  PLAN ADMINISTRATOR

     The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board.  If 

                                       4



<PAGE>

and so long as the Common Stock is registered under Section 12(b) or 12(g) of 
the Exchange Act, the Board shall consider in selecting the Plan 
Administrator and the membership of any committee acting as Plan 
Administrator, with respect to any persons subject or likely to become 
subject to Section 16 of the Exchange Act, the provisions regarding (a) 
"outside directors" as contemplated by Section 162(m) of the Code and (b) 
"nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act. 
 The Board may delegate the responsibility for administering the Plan with 
respect to designated classes of eligible persons to different committees 
consisting of two or more members of the Board, subject to such limitations 
as the Board deems appropriate.  Committee members shall serve for such term 
as the Board may determine, subject to removal by the Board at any time.  

3.2  ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR

     Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options, the number
of shares of Common Stock subject to an Option, all terms, conditions,
restrictions and limitations, if any, of an Option and the terms of any
instrument that evidences the Option.  The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan's
administration.  The Plan Administrator's interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected.  The Plan Administrator may delegate
administrative duties to such of the Company's officers as it so determines.

                 SECTION 4.          STOCK SUBJECT TO THE PLAN

4.1  AUTHORIZED NUMBER OF SHARES

     (a)  Subject to the following provisions of this subsection 4.1, the 
maximum number of shares of Stock that may be delivered to Participants and 
their beneficiaries under the Plan shall be equal to the sum of: (i) 
1,000,000 shares of Common Stock; (ii) any shares of Common Stock available 
for future awards under the 1994 Stock Option Plan (the "1994 Plan") or the 
Directors' Non-Qualified Stock Option Plan (the "Directors' Plan") as of the 
Effective Date (as defined in Section 14); and (iii) any shares of Common 
Stock that are represented by awards granted under the 1994 Plan or the 
Directors' Plan, which are forfeited, expire or are canceled without delivery 
of shares of Common Stock or which result in the forfeiture of shares of 
Common Stock back to the Company.

     (b)  If the Exercise Price of any stock option granted under the Plan or
the 1994 Plan is satisfied by tendering shares of Common Stock to the Company
(by either actual delivery or by attestation), only the number of shares of
Common Stock issued net of the shares of Common Stock tendered shall be deemed
delivered for purposes of determining the maximum number of shares of Common
Stock available for delivery under the Plan.

                                       5


<PAGE>

     (c)  Shares of Common Stock delivered under the Plan in settlement,
assumption or substitution of outstanding awards (or obligations to grant future
awards) under the plans or arrangements of another entity shall not reduce the
maximum number of shares of Common Stock available for delivery under the Plan,
to the extent that such settlement, assumption or substitution is a result of
the Company or a Subsidiary acquiring another entity (or an interest in another
entity).

     (d)  Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares.

4.2  LIMITATIONS

     Subject to adjustment from time to time as provided in Section 10.1, not
more than 50,000 shares of Common Stock may be made subject to Options under the
Plan to any individual in the aggregate in any one fiscal year of the Company,
except that the Company may make additional one-time grants of up to
100,000 shares to newly hired individuals, such limitation to be applied in a
manner consistent with the requirements of, and only to the extent required for
compliance with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code.

4.3  REUSE OF SHARES

     Any shares of Common Stock that have been made subject to an Option that
cease to be subject to the Option (other than by reason of exercise of the
Option to the extent it is exercised for shares) shall again be available for
issuance in connection with future grants of Options under the Plan; provided,
however, that for purposes of Section 4.2, any such shares shall be counted in
accordance with the requirements of Section 162(m) of the Code.  
                                          
                        SECTION 5.          ELIGIBILITY

     Options may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects.  Options may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.  

                           SECTION 6.          AWARDS

6.1  FORM AND GRANT OF OPTIONS

     The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of awards to be made under the Plan.  Such awards
may consist of Incentive Stock Options and/or Nonqualified Stock Options. 
Options may be granted singly or in combination.

6.2  ACQUIRED COMPANY OPTION AWARDS

     Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for awards issued
under other plans, or assume under the 

                                       6



<PAGE>

Plan awards issued under other plans, if the other plans are or were plans of 
other acquired entities ("Acquired Entities") (or the parent of the Acquired 
Entity) and the new Option is substituted, or the old award is assumed, by 
reason of a merger, consolidation, acquisition of property or of stock, 
reorganization or liquidation (the "Acquisition Transaction").  In the event 
that a written agreement pursuant to which the Acquisition Transaction is 
completed is approved by the Board and said agreement sets forth the terms 
and conditions of the substitution for or assumption of outstanding awards of 
the Acquired Entity, said terms and conditions shall be deemed to be the 
action of the Plan Administrator without any further action by the Plan 
Administrator, except as may be required for compliance with Rule 16b-3 under 
the Exchange Act, and the persons holding such awards shall be deemed to be 
Optionees.
                                          
             SECTION 7.          TERMS AND CONDITIONS OF OPTIONS

7.1  GRANT OF OPTIONS

     The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.

7.2  OPTION EXERCISE PRICE

     The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options.

7.3  TERM OF OPTIONS

     The term of each Option shall be as established by the Plan Administrator
or, if not so established, shall be 10 years from the Grant Date.

7.4  EXERCISE OF OPTIONS

     The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time.  If not so established in the
instrument evidencing the Option, the Option will vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:

<TABLE>
<CAPTION>

Period of Optionee's Continuous Employment or Service 
       With the Company or Its Subsidiaries                        Percent of Total Option 
               From the Grant Date                             That Is Vested and Exercisable
- ------------------------------------------------------         ------------------------------
                 <S>                                                       <C>
                 After 1 year                                               25%

                 After 2 years                                              50%

                 After 3 years                                              75%


                                       7

<PAGE>

                 After 4 years                                             100%
</TABLE>

     To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5.  The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of remaining
shares covered by the Option).

7.5  PAYMENT OF EXERCISE PRICE

     The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased.  Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if any) and
one or both of the following alternative forms:  (a) tendering (either actually
or, if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, by attestation) Common Stock already owned by the
Optionee for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a Fair
Market Value on the day prior to the exercise date equal to the aggregate Option
exercise price or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board.  In addition, the exercise price for shares purchased under an
Option may be paid, either singly or in combination with one or more of the
alternative forms of payment authorized by this Section 7.5, by such other
consideration as the Plan Administrator may permit.  

7.6  POST-TERMINATION EXERCISES

     The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Optionee ceases to be employed
by, or to provide services to, the Company or its Subsidiaries, which provisions
may be waived or modified by the Plan Administrator at any time.  If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time.  

     In case of termination of the Optionee's employment or services other than
by reason of death or Cause, the Option shall be exercisable, to the extent of
the number of shares purchasable 

                                       8



<PAGE>

by the Optionee at the date of such termination, only (a) within one year if 
the termination of the Optionee's employment or services is coincident with 
Retirement, Early Retirement at the Company's request or Disability or (b) 
within three months after the date the Optionee ceases to be an employee, 
director, officer, consultant, agent, advisor or independent contractor of 
the Company or a Subsidiary if termination of the Optionee's employment or 
services is for any reason other than Retirement, Early Retirement at the 
Company's request or Disability, but in no event later than the remaining 
term of the Option.  Any Option exercisable at the time of the Optionee's 
death may be exercised, to the extent of the number of shares purchasable by 
the Optionee at the date of the Optionee's death, by the personal 
representative of the Optionee's estate, the person(s) to whom the Optionee's 
rights under the Option have passed by will or the applicable laws of descent 
and distribution or the beneficiary designated pursuant to Section 9 at any 
time or from time to time within one year after the date of death, but in no 
event later than the remaining term of the Option.  Any portion of an Option 
that is not exercisable on the date of termination of the Optionee's 
employment or services shall terminate on such date, unless the Plan 
Administrator determines otherwise.  In case of termination of the Optionee's 
employment or services for Cause, the Option shall automatically terminate 
upon first notification to the Optionee of such termination, unless the Plan 
Administrator determines otherwise.  If a Optionee's employment or services 
with the Company are suspended pending an investigation of whether the 
Optionee shall be terminated for Cause, all the Optionee's rights under any 
Option likewise shall be suspended during the period of investigation.  

     A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services. 
The effect of a Company-approved leave of absence on the terms and conditions of
an Option shall be determined by the Plan Administrator, in its sole discretion.

            SECTION 8.         INCENTIVE STOCK OPTION LIMITATIONS

     To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:

8.1  DOLLAR LIMITATION

     To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option.  In the
event the Optionee holds two or more such Options that become exercisable for
the first time in the same calendar year, such limitation shall be applied on
the basis of the order in which such Options are granted.  

8.2  10% SHAREHOLDERS

     If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option 

                                       9



<PAGE>

term shall not exceed five years.  The determination of 10% ownership shall 
be made in accordance with Section 422 of the Code.

8.3  ELIGIBLE EMPLOYEES

     Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options.  For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.

8.4  TERM

     The term of an Incentive Stock Option shall not exceed 10 years.

8.5  EXERCISABILITY

     To qualify for Incentive Stock Option tax treatment, an Option designated
as an Incentive Stock Option must be exercised within three months after
termination of employment for reasons other than death, except that, in the case
of termination of employment due to total disability, such Option must be
exercised within one year after such termination.  Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Optionee's reemployment rights are guaranteed by statute or contract.  For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Optionee that is expected to result in death or that has
lasted or is expected to last for a continuous period of 12 months or more and
that causes the Optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity.  Total disability shall be deemed
to have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.

                           SECTION 9.          ASSIGNABILITY

     No Option granted under the Plan may be assigned, pledged or transferred by
the Optionee other than by will or by the applicable laws of descent and
distribution, and, during the Optionee's lifetime, such Option may be exercised
only by the Optionee or a permitted assignee or transferee of the Optionee (as
provided below).  Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Code, the Plan Administrator, in its sole discretion, may
permit such assignment, transfer and exercisability and may permit an Optionee
to designate a beneficiary who may exercise the Option after the Optionee's
death; provided, however, that any Option so assigned or transferred shall be
subject to all the same terms and conditions contained in the instrument
evidencing the Option.

                                      10



<PAGE>

                       SECTION 10.          ADJUSTMENTS

10.1 ADJUSTMENT OF SHARES

     In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1, (ii) the
maximum number and kind of securities that may be made subject to Options to any
individual as set forth in Section 4.2, and (iii) the number and kind of
securities that are subject to any outstanding Option and the per share price of
such securities, without any change in the aggregate price to be paid therefor. 
The determination by the Plan Administrator as to the terms of any of the
foregoing adjustments shall be conclusive and binding.  Notwithstanding the
foregoing, a Corporate Transaction shall not be governed by this Section 10.1
but shall be governed by Section 10.2.

10.2 CORPORATE TRANSACTION

     (a)  Except as otherwise provided in the instrument that evidences the
Option, in the event of any Corporate Transaction, each Option that is at the
time outstanding shall automatically accelerate so that each such Option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested and exercisable.  

     (b)  Such Option shall not so accelerate, however, if and to the extent
that such Option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof (the "Successor
Corporation") or to be replaced with a comparable award for the purchase of
shares of the capital stock of the Successor Corporation.  The determination of
Option comparability shall be made by the Plan Administrator, and its
determination shall be conclusive and binding.  Any such Options granted to an
"executive officer" (as that term is defined for purposes of Section 16 of the
Exchange Act) of the Company that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall be accelerated in
the event that the Optionee's employment or services should subsequently
terminate within two years following such Corporate Transaction, unless such
employment or services are terminated by the Successor Corporation for Cause or
by the Optionee voluntarily without Good Reason.  

     (c)  All such Options shall terminate and cease to remain outstanding
immediately following the consummation of the Corporate Transaction, except to
the extent assumed by the Successor Corporation.  

                                      11


<PAGE>

     (d)  The acceleration will not occur if, in the opinion of the Company's
outside accountants, it would render unavailable "pooling of interest"
accounting for a Corporate Transaction that would otherwise qualify for such
accounting treatment.

10.3 FURTHER ADJUSTMENT OF OPTIONS

     Subject to Section 10.2, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Optionees, with respect to Options.  Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Options so as to provide for earlier, later, extended or additional time for
exercise and other modifications, and the Plan Administrator may take such
actions with respect to all Optionees, to certain categories of Optionees or
only to individual Optionees.  The Plan Administrator may take such action
before or after granting Options to which the action relates and before or after
any public announcement with respect to such sale, merger, consolidation,
reorganization, liquidation or change in control that is the reason for such
action.

10.4 LIMITATIONS

     The grant of Options will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

                       SECTION 11.          WITHHOLDING

     The Company may require the Optionee to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant or exercise of any Option.  Subject to the Plan and applicable law,
the Plan Administrator may, in its sole discretion, permit the Optionee to
satisfy withholding obligations, in whole or in part, by paying cash, by
electing to have the Company withhold shares of Common Stock or by transferring
shares of Common Stock to the Company, in such amounts as are equivalent to the
Fair Market Value of the withholding obligation.  The Company shall have the
right to withhold from any shares of Common Stock issuable pursuant to an Option
or from any cash amounts otherwise due or to become due from the Company to the
Optionee an amount equal to such taxes.  The Company may also deduct from any
Option any other amounts due from the Optionee to the Company or a Subsidiary.
                                          
            SECTION 12.          AMENDMENT AND TERMINATION OF PLAN

12.1 AMENDMENT OF PLAN

     The Plan may be amended only by the Board in such respects as it shall deem
advisable; however, to the extent required for compliance with Section 422 of
the Code or any applicable law or regulation, shareholder approval will be
required for any amendment that will (a) increase 

                                      12



<PAGE>

the total number of shares as to which Options may be granted under the Plan, 
(b) modify the class of persons eligible to receive Options, or (c) otherwise 
require shareholder approval under any applicable law or regulation.

12.2 TERMINATION OF PLAN

     The Board may suspend or terminate the Plan at any time.  The Plan will
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the shareholders.

12.3 CONSENT OF OPTIONEE

     The amendment or termination of the Plan shall not, without the consent 
of the Optionee, impair or diminish any rights or obligations under any 
Option theretofore granted under the Plan. Any change or adjustment to an 
outstanding Incentive Stock Option shall not, without the consent of the 
Optionee, be made in a manner so as to constitute a "modification" that would 
cause such Incentive Stock Option to fail to continue to qualify as an 
Incentive Stock Option. 

                         SECTION 13.         GENERAL

13.1 OPTION AGREEMENTS

     Options granted under the Plan shall be evidenced by a written agreement
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.

13.2 CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN OPTIONS

     None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to be retained in the employ of the Company or limit the Company's right
to terminate the employment or services of any person.

13.3 REGISTRATION

     The Company shall be under no obligation to any Optionee to register for 
offering or resale or to qualify for exemption under the Securities Act, or 
to register or qualify under state securities laws, any shares of Common 
Stock, security or interest in a security paid or issued under, or created 
by, the Plan, or to continue in effect any such registrations or 
qualifications if made. The Company may issue certificates for shares with 
such legends and subject to such restrictions on transfer and stop-transfer 
instructions as counsel for the Company deems necessary or desirable for 
compliance by the Company with federal and state securities laws.

     Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and 

                                      13



<PAGE>

sale of any shares hereunder or the unavailability of an exemption from 
registration for the issuance and sale of any shares hereunder shall relieve 
the Company of any liability in respect of the nonissuance or sale of such 
shares as to which such requisite authority shall not have been obtained.

13.4 NO RIGHTS AS A SHAREHOLDER

     No Option shall entitle the Optionee to any dividend, voting or other right
of a shareholder unless and until the date of issuance under the Plan of the
shares that are the subject of such Option, free of all applicable restrictions.

13.5 COMPLIANCE WITH LAWS AND REGULATIONS

     Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Optionees who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Optionees.  Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of
Section 422 of the Code.

13.6 NO TRUST OR FUND

     The Plan is intended to constitute an "unfunded" plan.  Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Optionee, and no Optionee
shall have any rights that are greater than those of a general unsecured
creditor of the Company.

13.7 SEVERABILITY

     If any provision of the Plan or any Option is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Option under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Option, such provision shall be stricken as to such jurisdiction,
person or Option, and the remainder of the Plan and any such Option shall remain
in full force and effect.
                                          
                      SECTION 14.         EFFECTIVE DATE

     The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.

     ADOPTED BY THE BOARD ON JANUARY 23, 1998 AND APPROVED BY THE COMPANY'S
SHAREHOLDERS ON MAY 21, 1998.

                                      14



<PAGE>
                                          
                      PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS

<TABLE>
<CAPTION>

   Date of 
  Adoption/                            
  Amendment/                                          Date of Shareholder
  Adjustment     Section     Effect of Amendment            Approval
  ----------     -------     -------------------      -------------------
  <S>            <C>         <C>                      <C>

</TABLE>


                                      15




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