Stock Incentive Plan – Costco Wholesale Corp.

SIXTH RESTATED 2002 STOCK INCENTIVE PLAN

COSTCO WHOLESALE CORPORATION

1.	Purpose of this Plan

The purpose of this Sixth Restated 2002 Stock Incentive Plan of Costco
Wholesale Corporation is to provide a means by which eligible recipients of
Stock Awards may be given an opportunity to benefit from increases in value of
the Common Stock through the granting of the following Stock Awards: Options,
and Stock Units. The Plan has been operated in good faith compliance with Code
section 409A and was amended and restated July 21, 2008, to comply with Section
409A, effective for Awards earned and vested after December 31, 2004.

2.	Definitions and Rules of Interpretation

2.1 Definitions. This Plan uses the following defined terms:

(a) “Administrator” means the Board, the Committee,
or any officer or employee of the Company to whom the Board or the Committee
delegates authority to administer this Plan.

(b) “Affiliate” means, in the case of Incentive
Stock Options, a “parent” or “subsidiary” (as each is defined in Section 424 of
the Code) of the Company and in the case of Stock Awards other than Incentive
Stock Options, all persons with whom the Company would be considered a single
employer under Section 414(b) or Section 414(c) of the Code, except that, for
purposes of determining whether there is a controlled group or common control,
the language “at least 50 percent” is used instead of “at least 80 percent.”

(c) “Applicable Law” means the legal requirements
relating to the administration of equity compensation plans, including under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, other U.S. federal and state laws, the Code, any stock exchange
rules or regulations and the applicable laws, rules and regulations of any other
country or jurisdiction where Awards are granted under the Plan, as such laws,
rules, regulations and requirements shall be in place from time to time.

(d) “Award” means a grant of an Option or an award
of a Stock Unit in accordance with the terms of this Plan.

(e) “Award Shares” means shares of common stock
covered by a Stock Award.

(f) “Board” means the board of directors of the
Company.

(g) “Change of Control” is defined in Section 11.4.

(h) “Code” means the Internal Revenue Code of 1986.

(i) “Committee” means a committee composed of
Company Directors appointed in accordance with the Company153s Articles of
Incorporation and Bylaws and Section 4.

(j) “Company” means Costco Wholesale Corporation, a
Washington corporation.

(k) “Company Director” means a member of the Board.

(l) “Consultant” means an individual who, or an
employee of any entity that, provides bona fide services to the Company or an
Affiliate not in connection with the offer or sale of securities in a
capital-raising transaction, but who is not an Employee.

(m) “Continuous Service” means that the
Participant153s service with the Company or an Affiliate, whether as an Employee,
Director or Consultant, is not interrupted or terminated by a Termination as
defined in Section 2.1(qq).

(n) “Covered Employee” has the meaning as
determined for purposes of Section 162(m) of the Code.

(o) “Disability” means the permanent and total
disability of a person within the meaning of Section 22(e)(3) of the Code.

(p) “Director” means a member of the board of
directors of the Company or an Affiliate.

(q) “Divestiture” means any transaction or event
that the Board specifies as a Divestiture under Section 11.5.

(r) “Employee” means a regular employee of the
Company or an Affiliate, including an officer or Director, who is treated as an
employee in the personnel records of the Company or an Affiliate, but not
individuals who are classified by the Company or an Affiliate as: (i) leased
from or otherwise employed by a third party, (ii) independent contractors, or
(iii) intermittent or temporary workers. The Company153s or an Affiliate153s
classification of an individual as an “Employee” (or as not an “Employee”) for
purposes of this Plan shall not be altered retroactively even if that
classification is changed retroactively for another purpose as a result of an
audit, litigation or otherwise. A Participant shall not cease to be an Employee
due to transfers between locations of the Company, or between the Company and an
Affiliate, or to any successor to the Company or an Affiliate that assumes the
Participant153s Award under Section 11, unless such event results in a Termination
as defined in Section 2.1(qq). Neither service as a Director nor receipt of a
director153s fee shall be sufficient to make a Director an “Employee.”

(s) “Exchange Act” means the Securities Exchange
Act of 1934.

(t) “Executive” means an individual who is subject
to Section 16 of the Exchange Act or who is a “Covered Employee”, in either case
because of the individual153s relationship with the Company or an Affiliate.

(u) “Expiration Date” means, with respect to an
Option, the date stated in the Award Agreement as the expiration date of the
Option or, if no such date is stated in the Award Agreement, then the last day
of the maximum exercise period for the Option, disregarding the effect of a
Participant153s Termination or any other event that would shorten that period.

(v) “Fair Market Value” means the value of Shares
as determined under Section 17.2.

(w) “Fundamental Transaction” means any transaction
or event described in Section 11.3.

(x) “Grant Date” means the date the Administrator
approves the grant of an Award. However, if the Administrator specifies that an
Award153s Grant Date is a future date or the date on which a condition is
satisfied, the Grant Date for such Award is that future date or the date that
the condition is satisfied.

(y) “Incentive Stock Option” means an Option
intended to qualify as an incentive stock option under Section 422 of the Code
and designated as an Incentive Stock Option in the Option Agreement for that
Option.

(z) “Nonstatutory Option” means any Option other
than an Incentive Stock Option.

(aa) “Non-Employee Director” means a Director of
the Company who either (i) is not a current Employee or Officer of the Company
or its parent or a subsidiary, does not receive compensation (directly or
indirectly) from the Company or its parent or a subsidiary for services rendered
as a consultant or in any capacity other than as a Director (except for an
amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)),
does not possess an interest in any other transaction as to which disclosure
would be required under Item 404(a) of Regulation S-K and is not engaged in a
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for
purposes of Rule 16b-3.

(bb) “Objectively Determinable Performance
Condition” shall mean any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit, Affiliate or business
segment, either individually, alternatively or in any combination, and measured
either annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years153 results or to a
designated comparison group, in each case as specified by the Committee in the
Award: (i) cash flow; (ii) earnings (including gross margin, earnings before
interest and taxes, earnings before taxes, and net earnings); (iii) earnings per
share; (iv) growth in earnings or earnings per share; (v) stock price; (vi)
return on equity or average shareowners153 equity; (vii) total shareowner return;
(viii) return on capital; (ix) return on assets or net assets; (x) return on
investment; (xi) revenue; (xii) income or net income; (xiii) operating income or
net operating income; (xiv) operating profit or net operating profit; (xv)
operating margin; (xvi) return on operating revenue; (xvii) market share;
(xviii) sales or revenue growth; (xix) overhead or other expense reduction; (xx)
growth in shareowner value relative to the moving average of the S&P 500
Index or a peer group index; (xxi) credit rating; (xxii) strategic plan
development and implementation; (xxiii) improvement in workforce diversity, and
(xxiv) any other similar criteria. The Committee may appropriately adjust any
evaluation of performance under an Objectively Determinable Performance Criteria
to exclude any of the following events that occurs during a performance period:
(A) asset write-downs; (B) litigation or claim judgments or settlements; (C) the
effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results; (D) accruals for reorganization and
restructuring programs; and (E) any extraordinary non-recurring items as
described in Accounting Principles Board Opinion No. 30 and/or in management153s
discussion and analysis of financial condition and results of operations
appearing in the Company153s annual report to shareowners for the applicable year.

(cc) “Option” means a right to purchase Shares of
the Company granted under this Plan.

(dd) “Option Agreement” means the document
evidencing the grant of an Option.

(ee) “Option Price” means the price payable under
an Option for Shares, not including any amount payable in respect of withholding
or other taxes.

(ff) “Outside Director” means a Company Director
who either (i) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury Regulations promulgated under
Section 162(m) of the Code), is not a former employee of the Company or an
“affiliated corporation” receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an “affiliated corporation” at any time and is not currently receiving direct
or indirect remuneration from the Company or an “affiliated corporation” for
services in any capacity other than as a Director or (ii) is otherwise
considered an “outside director” for purposes of Section 162(m) of the Code.

(gg) “Participant” means a person to whom an Award
is granted pursuant to the Plan or, if applicable, such other person who holds
an outstanding Award.

(hh) “Plan” means this 2002 Stock Incentive Plan of
Costco Wholesale Corporation, as amended and restated from time to time.

(ii) “Qualified Domestic Relations Order” means a
judgment, order, or decree meeting the requirements of Section 414(p)(1)(A) of
the Code.

(jj) “Rule 16b-3” means Rule 16b-3 adopted under
Section 16(b) of the Exchange Act.

(kk) “Securities Act” means the Securities Act of
1933.

(ll) “Share” means a share of the common stock
$.005 par value per share, of the Company or other securities substituted for
the common stock under Section 11.

(mm) “Stock Award” means any right involving Shares
granted under the Plan, including an Option or Stock Unit.

(nn) “Stock Award Agreement” means a written
agreement between the Company and a holder of a Stock Award evidencing the terms
and conditions of an individual Stock Award grant. Each Stock Award Agreement
shall be subject to the terms and conditions of the Plan.

(oo) “Stock Unit” means an award giving the right
to receive Shares granted under Section 9.1 below.

(pp) “Substitute Award” means an Award granted in
substitution for, or upon the conversion of, an option granted by another entity
to purchase equity securities in the granting entity.

(qq) “Termination” means “termination of
employment” or “separation from service” as defined in Section 409A of the Code.
However, with respect to an Employee, Termination will occur at the date
reasonably anticipated by the Company and Employee that a Participant153s level of
service will permanently decrease to 21% or less of the average level of service
provided by the Participant over the immediately preceding 36 months period (or
if providing services for less than 36 months, such lesser period). If a
Participant153s status changes from an Employee to an independent contractor or
from an independent contractor to an Employee, whether there has been a
Termination will be determined in accordance with the regulations under Section
409A of the Code.

2.2 Rules of Interpretation. Any reference to a “Section,”
without more, is to a Section of this Plan. Captions and titles are used for
convenience in this Plan and shall not, by themselves, determine the meaning of
this Plan. Except when otherwise indicated by the context, the singular includes
the plural and vice versa. Any reference to a statute is also a reference to the
applicable rules and regulations adopted under that statute. Any reference to a
statute, rule or regulation, or to a section of a statute, rule or regulation,
is a reference to that statute, rule, regulation, or section as amended from
time to time, both before and after the effective date of this Plan and
including any successor provisions.

3.	Shares Subject to this Plan; Term of this Plan

3.1 Number of Option Shares. Subject to adjustment under
Section 11, the maximum number of Shares that may be granted as awards under the
Plan is 16 million plus any Shares previously authorized for grant under this
Plan or its predecessors that have not been granted as of the date of this
amendment plus any Shares covered by Awards granted under the Plan or its
predecessors prior to the date of this amendment that are subsequently cancelled
or expire unexercised or unvested.

3.2 Limitation on Award of Stock Units. Subject to
adjustment as provided in Section 11 below, the maximum number of Shares that
may be issued shall be reduced by 1.75 Shares for each Share granted in a Stock
Award in which the Participant is issued Shares without tendering to the Company
payment of an amount in connection therewith equal to the Fair Market Value of
such Shares on the date of the Stock Award; provided however that, to the extent
that previously-issued Shares are later forfeited under the terms and conditions
of the Stock Award, then any Shares so forfeited shall not count against the
limit set forth in this section 3.2.

3.3 Source of Shares. Award Shares may be authorized but
unissued Shares. If an Award is terminated, expires, or otherwise becomes
unexercisable without having been exercised in full, the unpurchased Shares that
were subject to the Award shall revert to this Plan and shall again be available
for future issuance under this Plan. The following shares of stock shall not
again be made available for issuance as Awards under this Plan: (i) Shares
actually issued under this Plan in a Stock Option even if repurchased by the
Company; (ii) Shares not issued or delivered as a result of the net settlement
of an outstanding stock appreciation right or Option, or (iii) Shares used to
pay the exercise price or withholding taxes related to an outstanding Award.

3.4 Term of this Plan

(a) This Plan and any amendment shall be effective on the date it has been
adopted by the Board or, to the extent that shareholder approval is required, on
the date it has been approved by the shareholders.

(b) Subject to Section 14, this Plan shall continue in effect for a period of
ten years from the earlier of the date on which the Plan was adopted by the
Board and the date on which the Plan was approved by the Company153s shareholders.

4.	Administration

4.1 General

(a) The Board shall have ultimate responsibility for administering this Plan.
The Board may delegate certain of its responsibilities to a Committee, which
shall consist of at least two members of the Board and solely of Outside
Directors. The Board or the Committee may further delegate its responsibilities
to any Employee of the Company or any Affiliate. Where this Plan specifies that
an action is to be taken or a determination made by the Board, only the Board
may take that action or make that determination. Where this Plan specifies that
an action is to be taken or a determination made by the Committee, only the
Committee may take that action or make that determination. Where this Plan
references the “Administrator,” the action may be taken or determination made by
the Board, the Committee, or other Administrator. However, only the Board or the
Committee may approve Awards to Executives, and an Administrator other than the
Board or the Committee may grant Options only within guidelines established by
the Board or Committee. Moreover, all actions and determinations by any
Administrator are subject to the provisions of this Plan.

(b) So long as the Company has registered and outstanding a class of equity
securities under Section 12 of the Exchange Act, the Committee shall consist of
Company Directors who are “Non-Employee Directors” and who are “Outside
Directors.”

4.2 Authority of Administrator. Subject to the other
provisions of this Plan, the Administrator shall have the authority, in a manner
that complies with Section 409A of the Code:

(a) to make and determine the types of Awards, provided that no Non-Employee
Director may be granted Awards for more than 12,000 shares in any fiscal year
(subject to proportionate increase in the event of any share dividends or stock
splits);

(b) to determine the Fair Market Value of Shares;

(d) to determine Objective Determinable Performance Conditions;

(e) to select the Participants;

(f) to determine the times that Awards are granted;

(g) to determine the number of Shares subject to each Award;

(h) to determine the types of payment that may be used to acquire Award
Shares and the types of payment that may be used to satisfy withholding tax
obligations;

(i) to determine the other terms of each Award, including but not limited to
the time or times at which Options may be exercised, whether and under what
conditions an award is assignable, and whether an Option is a Nonstatutory
Option or an Incentive Stock Option;

(j) to modify or amend any Award, including, without limitation, to extend
the period during which an Option may be exercised, but neither the
Administrator, the Board, nor the Committee shall have the authority to reduce
the Option Price of any outstanding Option without obtaining the approval of the
Company153s shareholders or to make a modification or amendment under this Section
4.2(j) that results in an Award that was exempt from Section 409A of the Code
becoming subject to Section 409A and noncompliant with Section 409A or an Award
that is subject to Section 409A of the Code becoming noncompliant with Section
409A.

(k) to authorize any person to sign any Award Agreement or other document
related to this Plan on behalf of the Company;

(l) to determine the form of any Award Agreement or other document related to
this Plan, and whether that document, including signatures, may be in electronic
form;

(m) to interpret this Plan and any Award Agreement or document related to
this Plan;

(n) to correct any defect, remedy any omission, or reconcile any
inconsistency in this Plan, any Award Agreement or any other document related to
this Plan;

(o) to adopt, amend, and revoke rules and regulations under this Plan,
including rules and regulations relating to sub-plans and Plan addenda;

(p) to adopt, amend, and revoke rules and procedures relating to the
operation and administration of this Plan to accommodate non-U.S. Participants
and the requirements of Applicable Law such as: (i) rules and procedures
regarding the conversion of local currency, withholding procedures and the
handling of stock certificates to comply with local practice and requirements,
and (ii) sub- plans and Plan addenda for non-U.S. Participants; and

(q) to make all other determinations the Administrator deems necessary or
advisable for the administration of this Plan.

4.3 Scope of Discretion. Subject to the last sentence of
this Section 4.3, on all matters for which this Plan confers the authority,
right or power on the Board, the Committee, or other Administrator to make
decisions, that body may make those decisions in its sole and absolute
discretion. Moreover, but again subject to the last sentence of this Section
4.3, in making those decisions the Board, Committee or other Administrator need
not treat all persons eligible to receive Awards, all Participants, all Awards
or all Award Shares the same way. However, the discretion of the Board,
Committee or other Administrator is subject to the specific provisions and
specific limitations of this Plan, as well as all rights conferred on specific
Participants by Award Agreements and other agreements.

5.	Persons Eligible to Receive Awards

5.1 Eligible Individuals. Awards may be granted to, and only
to, Employees, Directors and Consultants, including to prospective Employees,
Directors and Consultants conditioned on the beginning of their service for the
Company or an Affiliate.

5.2 Section 162(m) Limitation.

(a) So long as the Company is a “publicly held corporation” within the
meaning of Section 162(m) of the Code: (a) no Employee or prospective Employee
may be granted one or more Stock Awards within any fiscal year of the Company to
purchase or receive more than 500,000 Shares, subject to adjustment under
Section 11, and (b) Awards may be granted to an Executive only by the Committee
(and, notwithstanding Section 4.1(a), not by the Board).

(b) Any Stock Unit that is intended as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code must vest or
become exercisable contingent on the achievement of one or more Objectively
Determinable Performance Conditions. Subject to the limitations included in
Sections 3.2, the Committee shall have the discretion to determine the time and
manner of compliance with Section 162(m) of the Code. Prior to the payment of
any compensation under an Award intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Committee shall certify the
extent to which any Objectively Determinable Performance Criteria and any other
material terms under such Award have been satisfied (other than in cases where
such relate solely to the increase in the value of the Common Stock).

(c) Notwithstanding satisfaction of any completion of any Objectively
Determinable Performance Criteria, to the extent specified at the time of grant
of an Award to “covered employees” within the meaning of Section 162(m) of the
Code, the number of Shares, Options or other benefits granted, issued,
retainable and/or vested under an Award on account of satisfaction of such
Objectively Determinable Performance Criteria may be reduced by the Committee on
the basis of such further considerations as the Committee in its sole discretion
shall determine.

6.	Terms and Conditions of Options

The following rules apply to all Options:

6.1 Price. No Option may have an Option Price less than 100%
of the Fair Market Value of the Shares on the Grant Date.

6.2 Term. No Option shall be exercisable after its
Expiration Date. No Option may have an Expiration Date that is more than ten
years after its Grant Date.

6.3 Vesting.

(a) Options shall be exercisable in accordance with a schedule related to the
Grant Date, the date the Participant153s directorship, employment or consultancy
begins, or a different date specified in the Option Agreement evidencing such
Option; provided that no Option shall be exercisable until one year from the
Grant Date except as provided below.

(b) For Options granted after October 10, 2003, the Administrator shall have
the authority in its discretion to permit the exercise of an Option prior to the
expiration of one year from the Grant Date based on the Pro Rata Number of
Shares formula in Section 8.4(a) hereof and in an amount not to exceed 20% of
the Option Shares granted on that Grant Date. In the event that the Participant,
whether voluntarily or involuntarily, experiences a change to an employment
status or position in the Company that is not eligible for Option grants or is
eligible for a lesser number of Options, except as otherwise determined by the
Administrator the Option Shares shall cease to vest at the time of such change,
except that the Participant shall be entitled to a vesting of a Pro Rata Number
of Shares computed in accordance with Section 8.4(a) using the next anniversary
of the Grant Date following the change in status.

6.4 Form of Payment.

(a) The Administrator shall determine the acceptable form and method of
payment for exercising an Option.

(b) Acceptable forms of payment for all Option Shares are cash, check or wire
transfer, denominated in U.S. dollars except as specified by the Administrator
for non-U.S. Employees or non-U.S. sub-plans.

(i) other Shares, or the designation of other Shares, which have a Fair
Market Value on the date of surrender equal to the Option Price of the Shares as
to which the Option is being exercised;

(ii) provided that a public market exists for the Shares, through a “same day
sale” commitment from the Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an “ NASD
Dealer”) under which the Participant irrevocably elects to
exercise the Option and the NASD Dealer irrevocably commits to forward an amount
equal to the Option Price, directly to the Company, upon receipt of the Option
Shares (a “Cashless Exercise”);

(iii) any combination of the methods of payment permitted by any paragraph of
this Section 6.4.

(d) The Administrator may also permit any other form or method of payment for
Option Shares permitted by Applicable Law.

6.5 Nonassignability of Awards. Except as determined by the
Administrator, no Award shall be assignable or otherwise transferable by the
Participant except (a) by will or by the laws of descent and distribution, (b)
to a grantor trust or partnership established for estate planning purposes to
the extent permitted by Applicable Laws, or (c) in accordance with a Qualified
Domestic Relations Order.

7.	Incentive Stock Options

The following rules apply only to Incentive Stock Options and only to the
extent these rules are more restrictive than the rules that would otherwise
apply under this Plan. With the consent of the Participant, or where this Plan
provides that an action may be taken notwithstanding any other provision of this
Plan, the Administrator may deviate from the requirements of this Section,
notwithstanding that any Incentive Stock Option modified by the Administrator
will thereafter be treated as a Nonstatutory Option.

7.1 The Expiration Date of an Incentive Stock Option shall not be later than
ten years from its Grant Date, with the result that no Incentive Stock Option
may be exercised after the expiration of ten years from its Grant Date.

7.2 No Incentive Stock Option may be granted more than ten years from the
date this Plan was approved by the Board.

7.3 Options intended to be incentive stock options under Section 422 of the
Code that are granted to any single Participant under all incentive stock option
plans of the Company and its Affiliates, including Incentive Stock Options
granted under this Plan, may not vest at a rate of more than $100,000 in Fair
Market Value of stock (measured on the grant dates of the options) during any
calendar year. For this purpose, an option vests with respect to a given share
of stock the first time its holder may purchase that share, notwithstanding any
right of the Company to repurchase that share. Unless the Administrator
specifies otherwise in the related agreement governing the Option, this vesting
limitation shall be applied by, to the extent necessary to satisfy this $100,000
rule, treating certain stock options that were intended to be incentive stock
options under Section 422 of the Code as Nonstatutory Options. The stock options
or portions of stock options to be reclassified as Nonstatutory Options are
those with the highest Option Prices, whether granted under this Plan or any
other equity compensation plan of the Company or any Affiliate that permits that
treatment. This Section 7.3 shall not cause an Incentive Stock Option to vest
before its original vesting date or cause an Incentive Stock Option that has
already vested to cease to be vested.

7.4 In order for an Incentive Stock Option to be exercised for any form of
payment other than those described in Section 6.4(b), that right must be stated
in the Option Agreement relating to that Incentive Stock Option.

7.5 Any Incentive Stock Option granted to a Ten Percent Shareholder (as
defined below), must have an Expiration Date that is not later than five years
from its Grant Date, with the result that no such Option may be exercised after
the expiration of five years from the Grant Date. A “Ten Percent
Shareholder” is any person who, directly or by attribution under
Section 424(d) of the Code, owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or of any
Affiliate on the Grant Date.

7.6 The Option Price of an Incentive Stock Option shall never be less than
the Fair Market Value of the Shares at the Grant Date. The Option Price for the
Shares covered by an Incentive Stock Option granted to a Ten Percent Shareholder
shall never be less than 110% of the Fair Market Value of the Shares at the
Grant Date.

7.7 Incentive Stock Options may be granted only to Employees. If a
Participant changes status from an Employee to a Consultant, that Participant153s
Incentive Stock Options become Nonstatutory Options if not exercised within the
time period described in Section 7.9.

7.8 No rights under an Incentive Stock Option may be transferred by the
Participant, other than by will or the laws of descent and distribution. During
the life of the Participant, an Incentive Stock Option may be exercised only by
the Participant. The Company153s compliance with a Qualified Domestic Relations
Order, or the exercise of an Incentive Stock Option by a guardian or conservator
appointed to act for the Participant, shall not violate this Section 7.8.

7.9 An Incentive Stock Option shall be treated as a Nonstatutory Option if it
remains exercisable after, but is not exercised within, the three-month period
beginning with the Participant153s Termination for any reason other than the
Participant153s death or Disability. In the case of Termination due to death, an
Incentive Stock Option shall continue to be treated as an Incentive Stock Option
if it remains exercisable after, but is not exercised within, that three-month
period provided it is exercised before the Expiration Date. In the case of
Termination due to Disability, an Incentive Stock Option shall be treated as a
Nonstatutory Option if it remains exercisable after, but is not exercised
within, one year after the Participant153s Termination.

8.	Exercise of Options; Termination

8.1 In General. An Option shall be exercisable in accordance
with this Plan, the Option Agreement under which it is granted, and as
prescribed by the Administrator.

8.2 Time of Exercise. Options shall be considered exercised
when the Company receives: (a) written notice of exercise from the person
entitled to exercise the Option, (b) full payment, or provision for payment, in
a form and method approved by the Administrator, for the Shares for which the
Option is being exercised, and (c) with respect to Nonstatutory Options,
payment, or provision for payment, in a form approved by the Administrator, of
all applicable withholding taxes due upon exercise. An Option may not be
exercised for a fraction of a Share.

8.3 Issuance of Option Shares. The Company shall issue
Option Shares in the name of the person properly exercising an Option. If the
Participant is that person and so requests, the Option Shares shall be issued in
the name of the Participant and the Participant153s spouse. The Company shall
endeavor to issue Option Shares promptly after an Option is exercised. However,
until Option Shares are actually issued, as evidenced by the appropriate entry
on the stock books of the Company or its transfer agent, no right to vote or
receive dividends or other distributions, and no other rights as a shareholder,
shall exist with respect to the Option Shares, even though the Participant has
completed all the steps necessary to exercise the Option. No adjustment shall be
made for any dividend, distribution, or other right for which the record date
precedes the date the Option Shares are issued, except as provided in Section
11.

8.4 Termination

(a) In General. Except as provided by the
Administrator, including in an Award Agreement, after a Participant153s
Termination, except as otherwise provided in Sections 8.4(b), (c), (d) and (e),
the Participant153s Options shall be exercisable to purchase, or Awards shall be
fully vested as to, (A) the number of Shares for which such Awards have vested
on the date of that Termination plus (B) (in the event the Award only
vests in annual increments and such Termination occurs after the one year
anniversary of the Grant Date) the Pro Rata

Number of Shares for which the Award would have become vested on the next
anniversary of the Grant Date following Termination. As used in this Section 8,
the “Pro Rata Number of Shares” shall be equal to (a) the additional number of
Shares that would have become vested on the next anniversary of the Grant Date
following Termination, multiplied by (b) a fraction, the numerator of
which shall be the number of days from the anniversary of the Grant Date
preceding Termination and the denominator of which shall be 365, rounded to the
nearest whole Share. Except as otherwise provided by the Administrator or in the
Award Agreement, such Options shall only be exercisable during the period ending
30 days after the Termination for Options granted prior to July 21, 2005 and the
period ending 120 days after Termination for Options granted after July 21,
2005, but in no event after the Expiration Date. To the extent the
Participant does not exercise an Option within the time specified for exercise,
the Option shall automatically terminate.

(b) Leaves of Absence. Unless otherwise provided in
the Award Agreement, no Option may be exercised more than 90 days after the
beginning of a leave of absence, other than a personal or medical leave approved
by the Administrator with employment guaranteed upon return. Unless otherwise
determined by the Administrator, Options shall not continue to vest during a
leave of absence, other than an approved personal or medical leave with
employment guaranteed upon return.

(c) Death or Disability. In the event of the death
of a Participant who at the date of death either (i) was an officer of the
Company with the title of Assistant Vice President or above or (ii) had been
employed by the Company for ten or more continuous years, all Awards that were
granted to that Participant with vesting provisions tied to continuation of
employment, but are unvested as of the date of the Participant153s death shall
become vested, effective as of the date of death. In the event of the death of a
Participant who at the date of death is an Employee but qualifies under neither
clause (i) or (ii) of the previous sentence, 50% of the Awards that were granted
to that Participant but unvested on the date of the Participant153s death shall
become vested, effective as of the date of death. Unless otherwise provided by
the Administrator, if a Participant153s Termination is due to death or disability
(as determined by the Administrator with respect to Nonstatutory Options and as
defined by Section 22(e) of the Code with respect to Incentive Stock Options),
all Options of that Participant may be exercised for one year after that
Termination, but in no event after the Expiration Date. In the case of
Termination of an Employee due to death, such Options shall be exercisable to
purchase the number of shares for which the Options were vested as of the
Termination Date in accordance with the first two sentences of this Section
8.4(c). In the case of Termination due to disability, such Options shall be
exercisable to purchase (A) the number of Shares for which such Options have
vested as of the Termination Date, plus (B) the Pro Rata Number of Shares (as
defined in Section 8.4(a)) for which the Option would have vested on the next
anniversary of the Grant Date (in the event the Option only vests in annual
increments and such Termination occurs after the one year anniversary of the
Grant Date). In the case of Termination due to death, an Option may be exercised
as provided in Section 16. In the case of Termination due to disability, if a
guardian or conservator has been appointed to act for the Participant and been
granted this authority as part of that appointment, that guardian or conservator
may exercise the Option on behalf of the Participant. Death or disability
occurring after a Participant153s Termination shall not cause the Termination to
be treated as having occurred due to death or disability. To the extent an
Option is not so exercised within the time specified for its exercise, the
Option shall automatically terminate.

(d) Divestiture. If a Participant153s Termination is
due to a Divestiture, the Board may take any one or more of the actions
described in Section 11.3 or 11.4.

(e) Termination for Cause. If a Participant153s
Termination is due to Cause (as defined below), all of the Participant153s Options
shall automatically terminate and cease to be exercisable at the time of
Termination. “ Cause” means dishonesty, fraud,
misconduct, disclosure or misuse of confidential information, conviction of, or
a plea of guilty or no contest to, a felony or similar offense, habitual absence
from work for reasons other than illness, intentional conduct that could cause
significant injury to the Company or an Affiliate, or habitual abuse of alcohol
or a controlled substance, in each case as determined by the Administrator.

9.	Provisions of Stock Units

Each Award Agreement reflecting the issuance of a Stock Unit shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of such agreements may change from time to
time, and the terms and conditions of separate agreements need not be identical,
but each such agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

(a) Consideration. A Stock Unit may be awarded in
consideration for such property or services as is permitted under Applicable
Law, including for past services actually rendered to the Company or an
Affiliate for its benefit.

(b) Vesting; Restrictions. Shares of Common Stock
awarded under the agreement reflecting a Stock Unit award may, but need not, be
subject to a Share repurchase option, forfeiture restriction or other conditions
in favor of the Company in accordance with a vesting or lapse schedule to be
determined by the Board. The Administrator may make provisions for accelerated
vesting, including (without limitation) accelerated vesting based on length of
service.

(c) Accelerated Vesting; Non Executive Directors.
Grants to non-executive directors of Stock Units shall vest upon Termination as
follows:

(1)

after five years of service, at Termination 50% of otherwise unvested Stock
Units shall vest; and

(2)

after ten years of service, at Termination 100% of otherwise unvested Stock
Units shall vest.

(d) Termination of Participant153s Continuous Service.
In the event a Participant153s Continuous Service terminates, the Company
may reacquire any or all of the Shares of Common Stock held by the Participant
which have not vested or which are otherwise subject to forfeiture or other
conditions as of the date of termination under the terms of the agreement.

(e) Transferability. Rights to acquire Shares of
Common Stock under a Stock Unit agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
agreement, as the Board shall determine in its discretion, so long as Common
Stock awarded under the agreement remains subject to the terms of the
agreement .

(f) Payment Terms. Each Award reflecting the
issuance of a Stock Unit shall specify, on the Grant Date, that issuance of
Shares with respect to the Stock Unit will be made at a time and/or upon the
occurrence of events that comply with Section 409A of the Code, including,
without limitation, on a Change In Control event that is defined in Section
409A(a)(2)(A)(v) and shall include, where required in the case of specified
employees, the six-month delay in Section 409A(a)(2)(B).

10.	Consulting or Employment Relationship.

Nothing in this Plan or in any Award Agreement, and no Award shall: (a)
interfere with or limit the right of the Company or any Affiliate to terminate
the employment or consultancy of any Participant at any time, whether with or
without cause or reason, and with or without the payment of severance or any
other compensation or payment, or (b) interfere with the application of any
provision in any of the Company153s or any Affiliate153s charter documents or
Applicable Law relating to the election, appointment, term of office, or removal
of a Director.

11. Certain Transactions and Events

11.1 In General. Except as provided in this Section 11, no
change in the capital structure of the Company, merger, sale or other
disposition of assets or a subsidiary, change of control, issuance by the
Company of shares of any class of securities convertible into shares of any
class, conversion of securities, or other transaction or event shall require or
be the occasion for any adjustments of the type described in this Section 11.

11.2 Changes in Capital Structure. In the event of any stock
split, reverse stock split, recapitalization, combination or reclassification of
stock, stock dividend, spin-off, extraordinary cash dividend or similar change
to the capital structure of the Company (not including a Fundamental Transaction
or Change of Control), the Board shall make appropriate and equitable
adjustments to preserve the value of outstanding and future Awards, including
adjustments to: (a) the number and type of Awards that may be granted under this
Plan, (b) the number and type of Awards that may be granted to any individual
under this Plan, (c) the purchase price of any Stock Award, and (d) the Option
Price and number and class of securities issuable under each outstanding Option.
Subject to the foregoing requirement, the specific form of any such adjustments
shall be determined by the Board. Unless the Board specifies otherwise, any
securities issuable as a result of any such adjustment shall be rounded to the
next lower whole security.

11.3 Fundamental Transactions. If the Company merges with
another entity in a transaction in which the Company is not the surviving entity
or if, as a result of any other transaction or event, other securities are
substituted for the Shares or Shares may no longer be issued (each a
“Fundamental Transaction”), then, notwithstanding any
other provision of this Plan, the Board shall do one or more of the following
contingent on the closing or completion of the Fundamental Transaction: (a)
arrange for the substitution of options or other compensatory awards of equity
securities other than Shares (including, if appropriate, equity securities of an
entity other than the Company) in exchange for Stock Awards, (b) accelerate the
vesting and termination of outstanding Stock Awards so that Stock Awards can be
exercised in full before or otherwise in connection with the closing or
completion of the transaction or event but then terminate or (c) cancel Stock
Awards in exchange for cash payments to Participants. The Board need not adopt
the same rules for each Stock Award or each Participant.

11.4 Changes of Control. In connection with a Change of
Control, notwithstanding any other provision of this Plan (but subject to
section 11.8), the Board may take any one or more of the actions described in
Section 11.3. In addition, the Board may extend the date for the exercise of
Options (but not beyond their original Expiration Date). The Board need not
adopt the same rules for each Option or each Optionee. “Change in
Control” shall mean the occurrence of any of the following events: (i)
at any time during any two consecutive year period, at least a majority of the
Board shall cease to consist of “Continuing Directors” (meaning directors of the
Company who were directors at the beginning of such two-year period, or who
subsequently became directors and whose election, or nomination for election by
the Company153s stockholders, was approved by a majority of the then Continuing
Directors); or (ii) any “person” or “group” (as determined for purposes of
Section 13(d)(3) of the Exchange Act, except any majority-owned subsidiary of
the Company or any employee benefit plan of the Company or any trust thereunder,
shall have acquired “beneficial ownership” (as determined for purposes of
Securities and Exchange Commission (“SEC”) Regulation 13d-3) of Shares having
30% or more of the voting power of all outstanding Shares, unless such
acquisition is approved by a majority of the directors of the Company in office
immediately preceding such acquisition; or (iii) a merger or consolidation
occurs to which the Company is a party, in which outstanding Shares are
converted into shares of another company or other securities (of either the
Company or another company) or cash or other property.

11.5 Divestiture. If the Company or an Affiliate sells or
otherwise transfers equity securities of an Affiliate to a person or entity
other than the Company or an Affiliate, or leases, exchanges or transfers all or
any portion of its assets to such a person or entity, then the Board, in its
sole and absolute discretion, may specify that such transaction or event
constitutes a “Divestiture.”In connection with a Divestiture, notwithstanding
any other provision of this Plan, the Board may take one or more of the actions
described in Section 11.3 or 11.4 with respect to Awards or Award Shares held
by, for example, Employees, Directors or Consultants for whom that transaction
or event results in a Termination. The Board need not adopt the same rules for
each Award or each Participant.

11.6 Dissolution. If the Company adopts a plan of
dissolution, the Board may, in its sole and absolute discretion, cause Awards to
be fully vested and exercisable (but not after their Expiration Date) before the
dissolution is completed but contingent on its completion and may cause the
Company153s repurchase rights on Award Shares to lapse upon completion of the
dissolution. To the extent not exercised before the earlier of the completion of
the dissolution or their Expiration Date, Options shall terminate just before
the dissolution is completed. The Board need not adopt the same rules for each
Option or each Optionee.

11.7 Substitute Awards. The Board may cause the Company to
grant Substitute Awards in connection with the acquisition by the Company or an
Affiliate of equity securities of any entity (including by merger) or all or a
portion of the assets of any entity. Any such substitution shall be effective
when the acquisition closes. Substitute Awards that are Options may be
Nonstatutory Options or Incentive Stock Options. Unless and to the extent
specified otherwise by the Board, Substitute Awards shall have the same terms
and conditions as the options they replace, except that (subject to Section 11)
substitute options shall be Options to purchase Shares rather than equity
securities of the granting entity and shall have an Option Price that, as
determined by the Board in its sole and absolute discretion, properly reflects
the substitution.

11.8 Compliance with Section 409A. The Board shall take no
action pursuant to this Section 11 that would cause an Award that is exempt from
Section 409A of the Code to become subject to Section 409A and noncompliant with
Section 409A, or an Award that is subject to Section 409A to become noncompliant
with Section 409A, unless the Board clearly indicates in writing its intent to
take action under this Section 11 that is noncompliant with Section 409A of the
Code.

11.9 Cut-Back to Preserve Benefits. If the Administrator
determines that the net after-tax amount to be realized by any Participant,
taking into account any accelerated vesting, termination of repurchase rights,
or cash payments to that Participant in connection with any transaction or event
addressed in this Section 11 would be greater if one or more of those steps were
not taken with respect to that Participant153s Awards or Award Shares, then and to
that extent one or more of those steps shall not be taken; provided, however, no
such cutback shall be taken in connection with Awards that are subject to
Section 409A.

12. Withholding and Tax Reporting

12.1 Tax Withholding Alternatives. To the extent provided by
the terms of a Stock Award Agreement, the Participant may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of Shares under a Stock Award by any of the following means (in
addition to the Company153s right to withhold from any compensation paid to the
Participant by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold Shares from the Shares
otherwise issuable to the Participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered Shares.

12.2 Reporting of Dispositions. Any holder of Option Shares
acquired under an Incentive Stock Option shall promptly notify the Administrator
in writing of the sale or other disposition of any of those Option Shares if the
disposition occurs during: (a) the longer of two years after the Grant Date of
the Incentive Stock Option and one year after the date the Incentive Stock
Option was exercised, or (b) such other period as the Administrator has
established.

13. Compliance with Law

The grant of Awards and the issuance and subsequent transfer of Award Shares
shall be subject to compliance with all Applicable Law, including all applicable
securities laws. Options may not be exercised, and Option Shares may not be
transferred, in violation of Applicable Law. Thus, for example, Options may not
be exercised unless: (a) a registration statement under the Securities Act is
then in effect with respect to the related Option Shares, or (b) in the opinion
of legal counsel to the Company, those Option Shares may be issued in accordance
with an applicable exemption from the registration requirements of the
Securities Act and any other applicable securities laws. The failure or
inability of the Company to obtain from any regulatory body the authority
considered by the Company153s legal counsel to be necessary or useful for the
lawful issuance of any Award Shares or their subsequent transfer shall relieve
the Company of any liability for failing to issue those Award Shares or
permitting their transfer. As a condition to the exercise of any Option or the
transfer of any Award Shares, the Company may require the Participant to satisfy
any requirements or qualifications that may be necessary or appropriate to
comply with or evidence compliance with any Applicable Law.

14. Amendment or Termination of this Plan or Outstanding Awards

14.1 Amendment and Termination. The Board may at any time
amend, suspend, or terminate this Plan. On termination of the Plan, the Board
may pay out benefits under the Plan in a manner that does not result in a
violation of Section 409A of the Code.

14.2 Shareholder Approval. The Company shall obtain the
approval of the Company153s shareholders for any amendment to this Plan if
shareholder approval is necessary or desirable to comply with any Applicable
Law, with the requirements applicable to the grant of Options intended to be
Incentive Stock Options or if the amendment would materially enhance the
benefits available to participants under the Plan. The Board may also, but need
not, require that the Company153s shareholders approve any other amendments to
this Plan. Unless a greater vote is required by Applicable Law, any amendment to
the Plan shall be deemed approved if such amendment receives more affirmative
votes than negative votes at a shareholders153 meeting at which a quorum is
present.

14.3 Cancellation and Re-Grant of Options. The Company may
not reprice any outstanding Stock Awards under the Plan, including implement any
program whereby outstanding Stock Awards will be cancelled and replaced with
Stock Awards bearing a lower purchase or exercise price, without first obtaining
the approval of the shareholders of the Company; provided however that this
Section 14.3 shall in no way limit the Company153s ability to adjust Stock Awards
as provided under Section 11 above.

14.4 Effect. No amendment, suspension, or termination of
this Plan, and no modification of any Award even in the absence of an amendment,
suspension, or termination of this Plan, shall impair any existing contractual
rights of any Participant unless the affected Participant consents to the
amendment, suspension, termination, or modification. However, no such consent
shall be required if the Administrator determines in its sole and absolute
discretion that the amendment, suspension, termination, or modification: (a) is
required or advisable in order for the Company, the Plan or the Award to satisfy
Applicable Law, to meet the requirements of any accounting standard or to avoid
any adverse accounting treatment, or (b) in connection with any transaction or
event described in Section 11, is in the best interests of the Company or its
shareholders. The

Administrator may, but need not, take the tax consequences to affected
Participants into consideration in acting under the preceding sentence.
Termination of this Plan shall not affect the Administrator153s ability to
exercise the powers granted to it under this Plan with respect to Awards granted
before the termination, or Award Shares issued under such Awards, even if those
Award Shares are issued after the termination.

15. Reserved Rights

15.1 Nonexclusivity of this Plan. This Plan shall not limit
the power of the Company or any Affiliate to adopt other incentive arrangements
including, for example, the grant or issuance of stock options, stock, or other
equity-based rights under other plans or independently of any plan.

15.2 Unfunded Plan. This Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants, any such
accounts will be used merely as a convenience. The Company shall not be required
to segregate any assets on account of this Plan, the grant of Awards, or the
issuance of Award Shares. The Company and the Administrator shall not be deemed
to be a trustee of stock to be awarded under this Plan. Any obligations of the
Company to any Participant shall be based solely upon contracts entered into
under this Plan, such as Award Agreements. No such obligation shall be deemed to
be secured by any pledge or other encumbrance on any assets of the Company.
Neither the Company nor the Administrator shall be required to give any security
or bond for the performance of any such obligation.

16. Beneficiaries

A Participant may file a written designation of one or more beneficiaries who
are to receive the Participant153s rights under the Participant153s Options after
the Participant153s death. A Participant may change such a designation at any time
by written notice. If a Participant designates a beneficiary, the beneficiary
may exercise the Participant153s Options after the Participant153s death. If a
Participant dies when the Participant has no living beneficiary designated under
this Plan, the Company shall allow the executor or administrator of the
Participant153s estate to exercise the Option or, if there is none, the person
entitled to exercise the Option under the Participant153s will or the laws of
descent and distribution. In any case, no Option may be exercised after its
Expiration Date.

17. Miscellaneous

17.1 Governing Law. This Plan and all determinations made
and actions taken under this Plan shall be governed by the substantive laws, but
not the choice of law rules, of the State of Washington.

17.2 Determination of Value. Fair Market Value shall be
determined as follows:

(a) Listed Stock. If the Shares are traded on any
established stock exchange or quoted on a national market system, Fair Market
Value shall be the closing sales price for the Shares as quoted on that stock
exchange or system for the date the value is to be determined (the
“Value Date”) as reported in The Wall Street
Journal or a similar publication. If no sales are reported as having
occurred on the Value Date, Fair Market Value shall be that closing sales price
for the last preceding trading day on which sales of Shares are reported as
having occurred. If no sales are reported as having occurred during the five
trading days before the Value Date, Fair Market Value shall be the closing bid
for Shares on the Value Date. If Shares are listed on multiple exchanges or
systems, Fair Market Value shall be based on sales or bids on the primary
exchange or system on which Shares are traded or quoted.

(b) Stock Quoted by Securities Dealer. If Shares
are regularly quoted by a recognized securities dealer but selling prices are
not reported on any established stock exchange or quoted on a national market
system, Fair

Market Value shall be the mean between the high bid and low asked prices on
the Value Date. If no prices are quoted for the Value Date, Fair Market Value
shall be the mean between the high bid and low asked prices on the last
preceding trading day on which any bid and asked prices were quoted.

(c) No Established Market. If Shares are not traded
on any established stock exchange or quoted on a national market system and are
not quoted by a recognized securities dealer, the Administrator will determine
Fair Market Value in good faith and consistent with the requirements of Section
409A of the Code to the extent necessary to maintain an exemption from or
compliance with Section 409A. The Administrator will consider the following
factors, and any others it considers significant, in determining Fair Market
Value: (i) the price at which other securities of the Company have been issued
to purchasers other than Employees, Directors, or Consultants, (ii) the
Company153s net worth, prospective earning power, dividend-paying capacity, and
non-operating assets, if any, and (iii) any other relevant factors, including
the economic outlook for the Company and the Company153s industry, the Company153s
position in that industry, the Company153s goodwill and other intellectual
property, and the values of securities of other businesses in the same industry.

17.3 Reservation of Shares. During the term of this Plan,
the Company will at all times reserve and keep available such number of Shares
as are still issuable under this Plan.

17.4 Electronic Communications. Any Award Agreement, notice
of exercise of an Option, or other document required or permitted by this Plan
may be delivered in writing or, to the extent determined by the Administrator,
electronically. Signatures may also be electronic if permitted by the
Administrator.

17.5 Escrow of Shares. To enforce any restriction applicable
to Shares issued under the Plan, the Board or the Committee may require a
Participant or other holder of such Shares to deposit the certificates
representing such Shares, with approved stock powers or other transfer
instruments endorsed in blank, with the Company or an agent of the Company until
the restrictions have lapsed. Such certificates (or other notations representing
the Shares) may bear a legend or legends referencing the applicable
restrictions.

17.6 Notices. Unless the Administrator specifies otherwise,
any notice to the Company under any Award Agreement or with respect to any
Awards or Award Shares shall be in writing (or, if so authorized by Section
17.4, communicated electronically), shall be addressed to the Secretary of the
Company, and shall only be effective when received by the Secretary of the
Company.

17.7 Arbitration. Any dispute arising out of or relating to
the Plan or any Award Agreement, including (without limitation) breach,
termination or the validity thereof, shall be finally resolved by arbitration by
a sole arbitrator in Seattle, Washington in accordance with the CPR Rules of
Non-Administered Arbitration, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof.

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