PRAEGITZER INDUSTRIES, INC.

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

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 6, 1998

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TO THE SHAREHOLDERS OF
PRAEGITZER INDUSTRIES, INC.:

The Annual Meeting of the Shareholders of Praegitzer Industries, Inc., an
Oregon corporation, will be held at 2:00 p.m., Pacific Time, on November 6,
1998, at The Governor Hotel, 611 S.W. Tenth Avenue, Portland, Oregon 97205, for
the following purposes:

1. Electing directors to serve for the following year and until their
successors are elected; and

2. Amending the Company's 1995 Stock Incentive Plan (the "Plan") (i) to
increase the total number of shares of the Company's Common Stock (the
"Shares") reserved for issuance under the Plan from 1,500,000 Shares to
2,700,000 Shares, and (ii) to eliminate certain restrictions in the Plan
that are no longer necessary or appropriate based on recent changes to
the rules under Section 16 of the Securities Exchange Act of 1934; and

3. Transacting any other business that properly comes before the meeting.

Only shareholders of record at the close of business on September 10, 1998
will be entitled to vote at the annual meeting.

YOU ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. You may attend the meeting
in person even if you send in your proxy; retention of the proxy is not
necessary for admission to or identification at the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

Robert L. Praegitzer
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD

Dallas, Oregon
October 7, 1998

PRAEGITZER INDUSTRIES, INC.

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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS

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

The mailing address of the principal executive offices of the Company is
1270 S.E. Monmouth Cut Off, Dallas, Oregon 97338. The approximate date this
proxy statement and the accompanying proxy form are first being sent to
shareholders is October 7, 1998.

UPON WRITTEN REQUEST TO GINA O'NEILL, INVESTOR RELATIONS, ANY PERSON WHOSE
PROXY IS SOLICITED BY THIS PROXY STATEMENT WILL BE PROVIDED, WITHOUT CHARGE, A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K.

SOLICITATION AND REVOCABILITY OF PROXY

The enclosed proxy is solicited on behalf of the Board of Directors of
Praegitzer Industries, Inc., an Oregon corporation, for use at the Annual
Meeting of Shareholders to be held on November 6, 1998 and at any adjournment
thereof. The Company will bear the cost of preparing and mailing the proxy,
proxy statement, and any other material furnished to shareholders by the Company
in connection with the Annual Meeting. Proxies will be solicited by use of the
mails, and officers and employees of the Company may also solicit proxies by
telephone or personal contact. Copies of solicitation materials will be
furnished to fiduciaries, custodians, and brokerage houses for forwarding to
beneficial owners of the stock held in their names.

Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with the Secretary of the Company an instrument of revocation or a
duly executed proxy bearing a later date. The proxy may also be revoked by
voting in person at the meeting. A shareholder who attends the meeting, however,
is not required to revoke the proxy and vote in person. All valid, unrevoked
proxies will be voted at the annual meeting in accordance with the instructions
given.

VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS

The Common Stock is the only outstanding authorized voting security of the
Company. The record date for determining holders of Common Stock entitled to
vote at the annual meeting is September 10, 1998. On that date there were
12,807,442 shares of Common Stock outstanding, entitled to one vote per share.
The Common Stock does not have cumulative voting rights.

The following table sets forth certain information regarding the beneficial
ownership as of September 10, 1998 of the Common Stock by (i) each person known
by the Company to own beneficially more than 5 percent of the Common Stock, (ii)
each director and each director nominee of the Company, (iii) each executive
officer of the Company named in the Summary Compensation Table and (iv) all

executive officers and directors as a group. Except as otherwise noted, the
persons listed below have sole investment and voting power with respect to the
Common Stock owned by them.

NUMBER OF SHARES
BENEFICIALLY OWNED PERCENTAGE
BENEFICIAL OWNER (1) OF SHARES
- ------------------------------------------------------------------------------- -------------------- -------------

Robert L. Praegitzer .......................................................... 8,181,875(2) 63.9%
1270 S.E. Monmouth Cut Off Road
Dallas, Oregon 97338
Matthew J. Bergeron............................................................ 51,049(3) *
Robert J. Versiackas........................................................... 176,941(4) 1.4%
Gregory L. Lucas............................................................... 12,500(5) *
Daniel J. Barnett.............................................................. 142,370 1.1%
Merrill A. McPeak.............................................................. 8,666(6) *
Theodore L. Stebbins........................................................... 13,333(7) *
Gordon B. Kuenster............................................................. 0 *
All directors and executive officers as a group (11 persons)................... 8,623,401(8) 67.3%

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

* Less than 1%

(1) Shares that the person has the right to acquire within 60 days after
September 10, 1998 are deemed to be outstanding in calculating the
percentage ownership of the person or group but are not deemed to be
outstanding as to any other person or group.

(2) Includes options to purchase 62,500 shares of Common Stock that are
exercisable within 60 days after September 10, 1998 and excludes options to
purchase 62,500 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

(3) Includes options to purchase 43,750 shares of Common Stock that are
exercisable within 60 days after September 10, 1998 and excludes options to
purchase 56,250 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

(4) Includes options to purchase 16,510 shares of Common Stock that are
exercisable within 60 days after September 10, 1998 and excludes options to
purchase 58,490 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

(5) Includes options to purchase 12,500 shares of Common Stock that are
exercisable within 60 days after September 10, 1998 and excludes options to
purchase 62,500 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

(6) Includes options to purchase 6,666 shares of Common Stock that are
exercisable within 60 days after September 10, 1998 and excludes options to
purchase 13,334 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

(7) Includes options to purchase 13,333 shares of Common Stock that are
exercisable within 60 days after September 10, 1998 and excludes options to
purchase 6,667 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

(8) Includes options to purchase 175,509 shares of Common Stock that are
exercisable within 60 days after September 10, 1998. Excludes options to
purchase 419,491 shares of Common Stock not exercisable within 60 days after
September 10, 1998.

PROPOSAL 1: ELECTION OF DIRECTORS

The directors of the Company are elected at the Annual Meeting to serve
until their successors are elected and qualified. Each nominee is now serving as
a director of the Company. If a quorum of shareholders is present at the Annual
Meeting, the six nominees for election as directors who receive the

greatest number of votes cast at the meeting will be elected directors.
Abstentions and broker non-votes will have no effect on the results of the vote.
Unless otherwise instructed, proxy holders will vote the proxies they receive
for the nominees named below. If any of the nominees for director at the Annual
Meeting becomes unavailable for election for any reason, the proxy holders will
have discretionary authority to vote pursuant to the proxy for a substitute or
substitutes. The following table briefly describes the Company's nominees for
directors.

NAME, PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS AGE SINCE
- ---------------------------------------------------------------------------------------------------- --- ---------

ROBERT L. PRAEGITZER founded the Company in 1981 and has been its Chief Executive Officer and
Chairman of the Board since that time and served as President from the founding until January
1998.............................................................................................. 67 1981

MATTHEW J. BERGERON joined the Company in 1990 as Chief Financial Officer. He became Senior Vice
President in 1993, a director in November 1995, Executive Vice President and Chief Operating
Officer in April 1997 and President in January 1998. Prior to joining the Company, Mr. Bergeron
was an accountant at Johnson & Shute, P.S., a public accounting firm.............................. 35 1995

DANIEL J. BARNETT joined the Company as a director in August 1996 in connection with the merger of
Trend Circuits, Inc. ("Trend") into the Company. He served as Vice President of Sales of the
Company from August 1996 to May 1998. Prior to the merger, Mr. Barnett had been the president of
Trend since 1992.................................................................................. 42 1996

THEODORE L. STEBBINS has been the Managing Director of Adams, Harkness & Hill, an investment banking
firm, for more than five years and was elected to the Board of Directors of the Company in May
1996.............................................................................................. 57 1996

MERRILL A. MCPEAK joined the Company as a director in April 1997. He is a retired General of the
United States Air Force. General McPeak served as Chief of Staff of the U.S. Air Force from
October 1990 until October 1994. General McPeak serves as a director of four other publicly held
companies: ECC International, Tektronix Inc., Thrustmaster Incorporated and Trans World Airlines.
General McPeak is a distinguished advisor for Russia Special Purpose Corporation and is President
of McPeak and Associates.......................................................................... 62 1997

GORDON B. KUENSTER joined the Company as a director in November 1997. He is the Chief Executive
Officer of Seattle Sight Systems, Inc., a manufacturer of application-specific, high resolution
computer displays founded by Mr. Kuenster in 1996. He was founder and Chief Executive Officer of
Virtual Vision, Inc. from 1991 to 1994 and Virtual Image Displays, Inc. from 1994 to 1996......... 65 1997

BOARD MEETINGS AND COMMITTEES

The Board of Directors met four times in the fiscal year ended June 30, 1998
("fiscal 1998"). No director attended fewer than 75 percent of the aggregate of
all meetings of the Board of Directors and the committees of which the director
was a member during fiscal 1998. The standing committees of the Board of
Directors are the Audit Committee and the Compensation Committee. The Company
does not have a Nominating Committee.

The Audit Committee makes recommendations concerning the engagement of the
independent public accountants, reviews with the independent public accountants
the plans and results of audits, approves professional services provided by the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and nonaudit fees, and reviews
the adequacy of the Company's internal accounting controls. The Audit Committee
consists of General McPeak,

Mr. Stebbins and Mr. Kuenster and met four times in fiscal 1998. The
Compensation Committee determines compensation for the Company's executive
officers, and administers the Company's 1995 Stock Incentive Plan and the
Company's Employee Stock Purchase Plan. The Compensation Committee consists of
Mr. Kuenster, General McPeak and Mr. Stebbins and met four times in fiscal 1998.

COMPENSATION OF DIRECTORS

Directors who are not officers of the Company are reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings. In addition, each
individual who becomes a nonemployee director of the Company receives a
non-statutory option to purchase 10,000 shares of Common Stock when the
individual becomes a director, and each nonemployee director of the Company is
automatically granted an annual non-statutory option to purchase 5,000 shares of
Common Stock upon re-election.

PROPOSAL 2: AMENDMENT TO THE 1995 STOCK INCENTIVE PLAN

The Company maintains the 1995 Stock Incentive Plan (the "Plan") for the
benefit of its employees and others who provide services to the Company. The
Board of Directors believes the availability of stock incentives is an important
factor in the Company's ability to attract and retain experienced and competent
employees and to provide an incentive for them to exert their best efforts on
behalf of the Company. As of June 30, 1998, out of a total of 1,500,000 shares
reserved for issuance under the Plan, only 257,981 shares remained available for
grant. The Board of Directors believes additional shares will be needed under
the Plan to provide appropriate incentives to key employees and others.
Accordingly, on September 15, 1998, the Board of Directors approved an amendment
to the Plan, subject to shareholder approval, to reserve an additional 1,200,000
shares for the Plan, thereby increasing the total number of shares reserved for
issuance under the Plan from 1,500,000 to 2,700,000 shares. The Board of
Directors also approved and submitted to the shareholders for approval changes
relating to the elimination of certain restrictions in the Plan that are no
longer necessary or appropriate based on recent changes to the rules under
Section 16 of the Securities Exchange Act of 1934. Shareholder approval of this
Proposal 2 will constitute a reapproval of the performance goals contained in
the per-employee limits on grants of options and stock appreciation rights under
the Plan of 200,000 shares for new hires and 50,000 shares annually otherwise.
This reapproval is required every five years for continued compliance with
regulations under Section 162(m) of the Internal Revenue Code of 1986. See "Tax
Consequences."

Certain provisions of the Plan are described below. The complete text of the
Plan, marked to show the proposed amendments, is attached to this proxy
statement as Appendix A.

DESCRIPTION OF THE PLAN

ELIGIBILITY. All employees, officers and directors of the Company and its
subsidiaries are eligible to participate in the Plan. Also eligible are
non-employee agents, consultants, advisors, persons involved in the sale or
distribution of the Company's products and independent contractors of the
Company or any subsidiary.

ADMINISTRATION. Authority to administer the Plan is placed in the Board of
Directors, which may promulgate rules and regulations for the operation of the
Plan and generally supervise the administration of the Plan. The Board of
Directors has delegated authority to administer the Plan to the Compensation
Committee. Only the Board of Directors, however, may amend, modify or terminate
the Plan.

TERM OF PLAN. The Plan will continue until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time.

STOCK OPTIONS. The Board of Directors or an appropriate committee
determines the persons to whom options are granted, the option price, the number
of shares to be covered by each option, the period of

each option, the times at which options may be exercised and whether the option
is an incentive stock option ("ISO") or a nonqualified stock option ("NSO"). If
the option is an ISO, the option price cannot be less than the fair market value
of the Common Stock on the date of grant. If an optionee with respect to an ISO
at the time of grant owns stock possessing more than ten percent of the combined
voting power of the Company, the option price may not be less than 110 percent
of the fair market value of the Common Stock on the date of grant. No employee
may be granted options or stock appreciation rights under the Plan for more than
an aggregate of 200,000 shares in connection with the hiring of the employee or
50,000 shares in any calendar year otherwise. In addition, the amount of ISOs
that may become exercisable under the Plan in any year is limited to $100,000
per optionee (based on the fair market value of the stock on the date of grant).
No monetary consideration is paid to the Company upon the granting of options.

Options granted under the Plan generally continue in effect for the period
fixed by the Board of Directors or appropriate committee or officer, except that
ISOs are not exercisable after the expiration of 10 years from the date of grant
and ISOs granted to an individual possessing more than ten percent of the total
combined voting power of the Company are not exercisable after the expiration of
five years from the date of grant. Options are exercisable in accordance with
the terms of an option agreement entered into at the time of grant and are
nontransferable except on death of a holder. Options may be exercised only while
an optionee is employed by the Company or a subsidiary or within 12 months
following termination of employment by reason of death or disability or 30 days
following termination for any other reason. The Plan provides that the Board of
Directors or appropriate committee or officer may extend the exercise period for
any period up to the expiration date of the option and may increase the number
of shares for which the option may be exercised up to the total number
underlying the option. The purchase price for each share purchased pursuant to
exercise of options must be paid in cash, including cash that may be the
proceeds of a loan from the Company, in shares of Common Stock valued at fair
market value, in restricted stock, in performance units or other contingent
awards denominated in either stock or cash, in deferred compensation credits or
in other forms of consideration, as determined by the Board of Directors or
appropriate committee or officer. Upon the exercise of an option, the number of
shares subject to the option and the number of shares available under the Plan
for future option grants are reduced by the number of shares with respect to
which the option is exercised.

STOCK OPTION GRANTS TO NON-EMPLOYEE DIRECTORS. Pursuant to the terms of the
Plan, each individual who becomes a non-employee director receives a
non-statutory option to purchase 10,000 shares of Common Stock when the
individual becomes a director. In addition, and pursuant to the terms of the
Plan as it is proposed to be amended, each non-employee director of the Company
will be automatically granted an annual non-discretionary, non-statutory option
to purchase 5,000 shares of Common Stock.

STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SARs") may be
granted under the Plan. SARs may, but need not, be granted in connection with an
option grant or an outstanding option previously granted under the Plan. A SAR
gives the holder the right to payment from the Company of an amount equal in
value to the excess of the fair market value of a share of Common Stock on the
date of exercise over its fair market value on the date of grant or, if granted
in connection with an option or an outstanding option previously granted under
the Plan, the option price per share under the option to which the SAR relates.

A SAR is exercisable only at the time or times established by the Board of
Directors. If a SAR is granted in connection with an option, it is exercisable
only to the extent and on the same conditions that the related option is
exercisable. Payment by the Company upon exercise of a SAR may be made in Common
Stock valued at its fair market value, in cash, or partly in stock and partly in
cash, as determined by the Board of Directors. The Board of Directors may
withdraw any SAR granted under the Plan at any time and may impose any condition
upon the exercise of a SAR or adopt rules and regulations from time to time
affecting the rights of holders of SARs. No SARs have been granted under the
Plan.

The existence of SARs, as well as certain bonus rights described below,
would require charges to income over the life of the right based upon the amount
of appreciation, if any, in the market value of the common stock of the Company
over the exercise price of shares subject to exercisable SARs or bonus rights.

STOCK BONUS AWARDS. The Board of Directors may award Common Stock as a
stock bonus under the Plan. The Board of Directors may determine the persons to
receive awards, the number of shares to be awarded and the time of the award.
Stock received as a stock bonus is subject to the terms, conditions and
restrictions determined by the Board of Directors at the time the stock is
awarded.

RESTRICTED STOCK. The Plan provides that the Company may issue restricted
stock in such amounts, for such consideration, subject to such restrictions and
on such terms as the Board of Directors may determine.

CASH BONUS RIGHTS. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii) SARs
granted or previously granted, (iii) stock bonuses awarded or previously awarded
and (iv) shares sold or previously sold under the Plan. Bonus rights may be used
to provide cash to employees for the payment of taxes in connection with awards
under the Plan. No bonus rights have been granted under the Plan.

PERFORMANCE UNITS. The Board of Directors may grant performance units
consisting of monetary units that may be earned in whole or in part if the
Company achieves goals established by the Board of Directors over a designated
period of time, but in any event not more than 10 years. Payment of an award
earned may be in cash or stock or both and may be made when earned, or vested
and deferred, as the Board of Directors determines. No performance units have
been granted under the Plan.

FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to eligible
persons residing in foreign jurisdictions. The Board of Directors may adopt
supplements to the Plan necessary to comply with the applicable laws of foreign
jurisdictions and to afford participants favorable treatment under those laws,
but no award may be granted under any supplement with terms that are more
beneficial to the participants than the terms permitted by the Plan.

CHANGES IN CAPITAL STRUCTURE. The Plan provides that if the outstanding
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any recapitalization, stock split or certain
other transactions, appropriate adjustment will be made by the Board of
Directors in the number and kind of shares available for awards under the Plan.
In the event of a merger, consolidation or plan of exchange to which the Company
is a party or a sale of all or substantially all of the Company's assets (each a
"Transaction"), the Board of Directors will, in its sole discretion and to the
extent possible under the structure of the Transaction, select one of the
following alternatives for treating outstanding options under the Plan: (i)
outstanding options will remain in effect in accordance with their terms; (ii)
outstanding options shall be converted into options to purchase stock in the
corporation that is the surviving or acquiring corporation in the Transaction;
or (iii) the Board of Directors will provide a 30-day period prior to the
consummation of the Transaction during which outstanding options shall be
exercisable to the extent exercisable and upon the expiration of such 30-day
period, all unexercised options shall immediately terminate. The Board of
Directors may, in its sole discretion, accelerate the exercisability of options
so that they are exercisable in full during such 30-day period. In the event of
the dissolution of the Company, options shall be treated in accordance with
clause (iii) above.

TAX CONSEQUENCES

Certain options authorized to be granted under the Plan are intended to
qualify as ISOs for federal income tax purposes. Under federal income tax law
currently in effect, the optionee will recognize no income upon grant or upon a
proper exercise of the ISO. If an employee exercises an ISO and does not dispose
of any of the option shares within two years following the date of grant and
within one year following the date of exercise, any gain realized on subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset. If an employee disposes of shares acquired upon exercise of an
ISO before the expiration of either the one-year holding period or the two-year
waiting period, any amount realized will be taxable as ordinary compensation
income in the year of such disqualifying disposition to the extent that the
lesser of the fair market value of the shares on the exercise date or the fair
market value of the shares on the date of disposition exceeds the exercise
price. The Company will not be allowed any deduction for federal income tax
purposes at either the time of the grant or exercise of an ISO. Upon any
disqualifying disposition by an employee, the Company will generally be entitled
to a deduction to the extent the employee realized ordinary income.

Certain options authorized to be granted under the Plan will be treated as
NSOs for federal income tax purposes. Under federal income tax law currently in
effect, no income is realized by the grantee of an NSO until the option is
exercised. At the time of exercise of an NSO, the optionee will realize ordinary
compensation income, and the Company will generally be entitled to a deduction,
in the amount by which the market value of the shares subject to the option at
the time of exercise exceeds the exercise price. The Company is required to
withhold on the income amount. Upon the sale of shares acquired upon exercise of
an NSO, the excess of the amount realized from the sale over the market value of
the shares on the date of exercise will be taxable.

An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are substantially nonvested for purposes of section 83 of the Internal
Revenue Code of 1986, as amended, and no section 83(b) election is made. If the
shares are not vested at the time of receipt, the employee will realize taxable
income in each year in which a portion of the shares substantially vest, unless
the employee elects under section 83(b) within 30 days after the original
transfer. The Company will generally be entitled to a tax deduction in the
amount includable as income by the employee at the same time or times as the
employee recognizes income with respect to the shares. The Company is required
to withhold on the income amount. A participant who receives a cash bonus right
under the Plan will generally recognize income equal to the amount of the cash
bonus paid at the time of receipt, and the Company will generally be entitled to
a deduction equal to the income recognized by the participant.

Section 162(m) of the Internal Revenue Code of 1986 limits to $1,000,000 per
person the amount that the Company may deduct for compensation paid to any of
its most highly compensated officers in any year. Under IRS regulations,
compensation received through the exercise of an option or a SAR is not subject
to the $1,000,000 limit if the option or SAR and the Plan meet certain
requirements. One requirement is shareholder approval at least once every five
years of per-employee limits on the number of shares as to which options and
SARs may be granted. Other requirements are that the option or SAR be granted by
a committee of at least two outside directors and that the exercise price of the
option or SAR be not less than fair market of the Common Stock on the date of
grant.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation paid by the Company with
respect to the last three fiscal years to the Chief Executive Officer and the
four other most highly compensated executive officers whose annual compensation
exceeded $100,000 for the last fiscal year.

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- ------------
FISCAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED COMPENSATION (1)
- -------------------------------------------------- ------ -------- ----- ------------ ----------------

Robert L. Praegitzer ............................. 1998 $300,000 $ 0 0 $ 9,640
Chief Executive Officer 1997 $274,999 0 125,000 9,640
1996 $195,972 0 0 29,684

Matthew J. Bergeron .............................. 1998 $199,423 0 25,000 4,983
President and Chief Operating Officer 1997 $149,999 0 25,000 4,983
1998 $134,084 0 50,000 0

Robert J. Versiackas ............................. 1998 $199,892 0 58,957 0
Senior Vice President of Operations 1997 $141,731 0 16,043 0
1996 -- -- -- --

Daniel J. Barnett (2) ............................ 1998 $189,904 0 0 0
Senior Vice President of Sales 1997 $162,500 0 50,000 0
1996 -- -- -- --

Gregory L. Lucas ................................. 1998 $181,442 0 25,000 0
Senior Vice President of Technology 1997 $ 7,115(3) 0 50,000 0
1996 -- -- -- --

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

(1) Consists of car allowances.

(2) Mr. Barnett terminated his employment with the Company on May 29, 1998. Mr.
Barnett continues to serve as a director of the Company.

(3) Mr. Lucas commenced employment with the Company on June 16, 1997.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information regarding stock options granted in
fiscal 1998 to the executive officers named in the Summary Compensation Table.

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENTAGE STOCK PRICE
SHARES OF OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ------------------------------------- ----------- ----------------- ------------- ----------- --------- ---------

Robert L. Praegitzer................. 0 -- -- -- -- --
Matthew J. Bergeron.................. 25,000(2) 6.5% $ 13.00 7/18/07 204,388 517,964
Robert J. Versiackas................. 33,957(3) 8.9% $ 13.00 7/18/07 277,618 703,541
25,000(4) 6.5% $ 9.38 4/01/08 147,396 373,532
Daniel J. Barnett (5)................ 0 -- -- -- -- --
Gregory L. Lucas..................... 25,000(4) 6.5% $ 9.38 4/01/08 147,396 373,532

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

(1) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "option spreads" that would exist for
the respective options based on assumed compounded rates of annual stock
price appreciation of 5 percent and 10 percent from the date the options
were granted over the option term.

(2) 6,250 of these options became exercisable July 18, 1998.

(3) 8,489 of these options became exercisable on July 18, 1998.

(4) 6,250 of these options become exercisable April 1, 1999.

(5) Mr. Barnett terminated his employment with the Company on May 29, 1998. Mr.
Barnett continues to serve as a director of the Company.

OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table indicates for all executive officers named in the
Summary Compensation Table (i) stock options exercised during fiscal 1998,
including the value realized on the date of exercise, (ii) the number of shares
subject to exercisable (vested) and unexercisable (unvested) stock options as of
June 30, 1998, and (iii) the value of "in-the-money" options, which represents
the positive spread between the exercise price of existing stock options and the
year-end price of the Common Stock.

NUMBER OF SHARES SUBJECT VALUE OF UNEXERCISED IN-THE-
TO UNEXERCISED OPTIONS AT MONEY OPTIONS AT FISCAL
NUMBER OF SHARES FISCAL YEAR-END YEAR-END (1)
ACQUIRED ON VALUE -------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------------- ----------- ----------- ------------- ------------- ---------------

Robert L. Praegitzer........... -- -- 31,250 93,750 $ 0 $ 0
Matthew J. Bergeron............ -- -- 31,249 68,751 $ 0 $ 0
Robert J. Versiackas........... -- -- 4,010 70,990 $ 0 $ 0
Daniel J. Barnett.............. -- -- 0 0 -- --
Gregory L. Lucas............... -- -- 12,500 62,500 $ 0 $ 0

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

(1) Based on last sale price of $5.75 per share of the Common Stock of the
Company on June 30, 1998.

EMPLOYMENT ARRANGEMENTS

In November 1995 the Company entered into an employment agreement with
Robert L. Praegitzer, providing an annual base salary of $250,000 with increases
over time, and eligibility for bonuses and other Company benefits. Mr.
Praegitzer's employment agreement is of an indefinite duration.

In August 1996 the Company entered into employment agreement with Robert J.
Versiackas providing for annual base salary of $130,000 with eligibility for
bonuses and other Company benefits. If at the end of each quarter during the
first two years of this Agreement the total salary and bonus paid to Mr.
Versiackas is less than an annualized rate of $165,000, the Company is required
to pay Mr. Versiackas an amount equal to the difference. The agreement may be
terminated at any time by the Company for cause, or by Mr. Versiackas upon a
material breach by the Company. Upon termination, Mr. Versiackas is entitled to
all payments customary under Company policies. Upon termination by the Company
without cause, or termination by Mr. Versiackas for cause, Mr. Versiackas, is
also entitled to his base compensation for the lesser of (i) one year, and (ii)
the time remaining until the expiration of two years after the date of the
agreement. After an initial term ending August 26, 1998, the agreement with Mr.
Versiackas may be terminated by either party with or without cause upon thirty
(30) days written notice (or, in the case of termination by the Company, with
payment of sixty (60) days of base compensation in lieu of thirty (30) days
notice).

Mr. Versiackas has also entered into an agreement with the Company
restricting his ability to compete with the Company until two years after
termination of his employment and prohibiting disclosure of confidential
information and solicitation of the Company's customers or employees.

In March 1998 the Company entered into an agreement with James M. Buchanan,
the Company's Senior Vice President of Sales and Marketing, providing for an
annual base salary of $185,000 with eligibility for bonuses and other Company
benefits. The agreement provides that Mr. Buchanan's stock options will become
fully exercisable upon a change of control of the Company. In addition, if Mr.
Buchanan's employment is terminated other than for cause within 18 months of a
change of control, he will be entitled to receive his full base salary,
insurance coverage and car allowance for 18 months following termination. If Mr.
Buchanan is terminated other than for causes related to criminal activity or
ethical misconduct during his first 12 months of employment, he will be entitled
to receive his base salary for two years following termination.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its Dallas warehouse facility from Robert L. Praegitzer,
with the lease payments totaling $95,150 for the year ended June 30, 1998. The
lease rates for the warehouse facility were determined by Mr. Praegitzer, who
was the sole shareholder of the Company at the time of determination. The Board
of Directors of the Company unanimously concluded that these rates were
comparable to rates that could have been obtained from an independent party.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION (1)

The Compensation Committee consists of three directors and, pursuant to
authority delegated by the Board of Directors, determines and administers the
compensation of the Company's executive officers. In setting the compensation
for the executive officers other than the Chief Executive Officer, the
Compensation Committee works closely with the Chief Executive Officer, who makes
specific recommendations to the committee concerning compensation for each of
the other executive officers. Although the Board of

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(1) This Section is not "soliciting material," is not deemed "filed" with the
Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933, or
the Securities Exchange Act of 1934, regardless of date or any general
incorporation language in such filing.

Directors has granted the Compensation Committee full authority to set executive
compensation, in practice the decisions of the Compensation Committee are
usually reported as recommendations to the full Board of Directors, which has in
the past generally approved the recommendations.

Internal Revenue Code Section 162(m), as adopted in 1993, limits to
$1,000,000 per person the amount that the Company may deduct for compensation
paid to any of its most highly compensated officers in any year after 1993.
Generally the levels of salary and bonus paid by the Company do not exceed this
limit. However, upon the exercise of nonstatutory incentive stock options, the
excess of the current market price over the option price (option spread) is
treated as compensation and, therefore, it may be possible for option exercises
by an officer in any year to cause the officer's total compensation to exceed
$1,000,000. Under certain regulations, option spread compensation from options
that meet certain requirements will not be subject to the $1,000,000 cap on
deductibility, and it is the Company's current policy generally to grant options
that meet those requirements.

COMPENSATION PRINCIPLES

Executive compensation is based on several general principles, which are
summarized below:

- Provide competitive total compensation that enables the Company to attract
and retain key executives.

- Link corporate and individual performance to compensation.

- Encourage long-term success and align shareholder interests with
management interests by giving executives the opportunity to acquire stock
in the Company.

- Reward initiative.

COMPENSATION COMPONENTS

The primary components of the Company's executive officer compensation
program are base salary, annual incentive arrangements and long-term incentive
compensation in the form of stock options.

BASE SALARY. Executive officer base salaries for fiscal 1998 were
established by the Compensation Committee to provide salary levels appropriate
for the responsibilities of the executive officers of the Company. In
determining salaries, the Compensation Committee took into account individual
experience, job responsibility and individual performance. No specific weight
was attached to these factors in establishing base salaries. For fiscal 1999 and
future years, the Company will continue to establish base salary levels for the
Company's executive officers that are competitive with those established by
companies of similar size in the electronics industry. When determining
salaries, the Compensation Committee will also take into account individual
experience levels, job responsibility and individual performance. Each executive
officer's salary will be reviewed annually, and increases to base salary will be
made to reflect competitive market increases and the individual factors
described above.

STOCK OPTIONS. The Plan is intended as a long-term incentive plan for
executive officers, managers and other key employees of the Company. The
objectives of the Plan are to align employee and shareholder long-term interests
by creating a direct link between compensation and shareholder value. The
Compensation Committee administers the Plan and recommends to the full Board of
Directors awards of stock options to executive officers and other employees of
the Company. Options granted under the Plan generally have been granted at an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Fair market value is established by the Board of Directors, upon
recommendation of the Compensation Committee, as the closing price as reported
on the Nasdaq National Market on the date of grant. Options generally become
exercisable over a four-year period with 25% of the options exercisable at the
end of each year from date of grant. Stock options generally have a ten-year
term, but terminate earlier

if employment is terminated. Initial option grants to executive officers depend
upon the level of responsibility and position, and subsequent grants are made
based on the Compensation Committee's subjective assessment of performance,
among other factors. In fiscal 1998 the Board of Directors, upon recommendation
of the Compensation Committee, made the following option grants of Company
Common Stock under the Plan to executive officers of the Company: Matt
Bergeron--25,000 shares, Robert J. Versiackas--58,957 shares, Gregory L.
Lucas--25,000 shares, and James M. Buchanan--125,000. The Compensation Committee
expects that in the future, if additional grants are made, consideration will be
given to the number of options granted in the past and the exercise price of
such grants.

COMPENSATION OF CHIEF EXECUTIVE OFFICER

The Compensation Committee and the Board of Directors set Mr. Praegitzer's
compensation for fiscal 1998. They employed the same criteria that the
Compensation Committee used to set compensation for the other executive
officers. The Compensation Committee and the Board of Directors reviewed the
data within the electronics industry and similar size firms. They based Mr.
Praegitzer's salary on their findings of other executives with his level of
experience, and recognized Mr. Praegitzer's individual performance and important
contributions to the Company's increased revenue and earnings growth.

COMPENSATION COMMITTEE MEMBERS

Gordon B. Kuenster
Theodore L. Stebbins
Merrill A. McPeak

PERFORMANCE GRAPH (1)

Set forth below is a graph that compares the cumulative total stockholder
return on the Company's Common Stock with the cumulative total return on the
Nasdaq Composite U.S. Index and a peer group of companies in the Company's
industry (SIC 3672) over the period indicated (assuming the investment of $100
in the Company's Common Stock on April 4, 1996, the date of the Company's
initial public offering, and reinvestment of any dividends). In accordance with
guidelines of the SEC, the stockholder return for each entity in the peer group
index have been weighted on the basis of market capitalization as of each
monthly measurement date set forth on the graph.

COMPARISON OF 27 MONTH CUMULATIVE TOTAL RETURN*
AMONG PRAEGITZER INDUSTRIES, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

PRAEGITZER INDUSTRIES, INC. PEER GROUP NASDAQ STOCK MARKET (U.S.)

4/4/96 100.00 100.00 100.00
6/96 113.16 89.08 106.47
6/97 117.11 169.78 129.45
6/98 60.53 159.75 170.87

*$100 INVESTED ON 4/04/96 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.

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INDEPENDENT ACCOUNTANTS

Representatives of Deloitte & Touche LLP will be at the Annual Meeting and
will be available to respond to appropriate questions. They do not plan to make
any statement but will have the opportunity to make a statement if they wish.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than 10 percent of the
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors, and
beneficial owners of more than 10 percent of the Common Stock are required by
the SEC regulation to furnish the Company with copies of all section 16(a)
reports they file. Based solely on a review of such reports received by the
Company and on written representations from certain reporting persons that they
have complied with the relevant filing requirements, the Company believes that
all section 16(a) filing requirements applicable to its executive officers and
directors have been complied with, except a Form 5 was not timely filed by
Daniel J. Barnett and Forms 3 were not timely filed by Scott D. Gilbert, Angela
R. Gibson, Gordon B. Kuenster and Gregory L. Lucas.

DISCRETIONARY AUTHORITY

Although the Notice of Annual Meeting of Shareholders provides for
transaction of any other business that properly comes before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than the matters described in this proxy statement. The enclosed
proxy, however, gives discretionary authority to the proxy holders to vote in
accordance with their judgment if any other matters are presented.

SHAREHOLDER PROPOSALS

Any shareholder proposals to be considered for inclusion in proxy material
for the Company's 1999 annual meeting must be received at the principal
executive office of the Company no later than June 9, 1999. In accordance with
amendments adopted on May 21, 1998 to Rule 14a-4 under the Securities and
Exchange Act of 1934, if notice of a shareholder proposal to be raised at the
annual meeting of shareholders is received at the principal executive offices of
the Company after August 23, 1999 (45 days prior to the month and date in 1999
corresponding to the date on which the Company mailed its proxy materials for
the 1998 annual meeting), proxy voting on that proposal when and if raised at
the 1999 annual meeting will be subject to the discretionary voting authority of
the designated proxy holders.

BY ORDER OF THE BOARD OF DIRECTORS

Robert L. Praegitzer
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD

Dallas, Oregon
October 7, 1998

APPENDIX A
1995 STOCK INCENTIVE PLAN, AS AMENDED

PRAEGITZER INDUSTRIES, INC.
1995 STOCK INCENTIVE PLAN
AS AMENDED NOVEMBER 6, 1998

1. PURPOSE. The purpose of this Stock Incentive Plan (the "Plan") is to
enable Praegitzer Industries, Inc. (the "Company") to attract and retain the
services of (1) selected employees, officers and directors of the Company or of
any subsidiary of the Company and (2) selected nonemployee agents, consultants,
advisors, persons involved in the sale or distribution of the Company's products
and independent contractors of the Company or any subsidiary.

2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided below and
in paragraph 13, the shares to be offered under the Plan shall consist of Common
Stock of the Company, and the total number of shares of Common Stock that may be
issued under the Plan shall not exceed <#>1,500,000</#> <*>2,700,000</*> shares.
The shares issued under the Plan may be authorized and unissued shares or
reacquired shares. If an option, stock appreciation right or performance unit
granted under the Plan expires, terminates or is cancelled, the unissued shares
subject to such option, stock appreciation right or performance unit shall again
be available under the Plan. If shares sold or awarded as a bonus under the Plan
are forfeited to the Company or repurchased by the Company, the number of shares
forfeited or repurchased shall again be available under the Plan.

3. EFFECTIVE DATE AND DURATION OF PLAN.

(a) EFFECTIVE DATE. The Plan shall become effective as of December 19,
1995. No option, stock appreciation right or performance unit granted under
the Plan <#> to an officer who is subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended (an "Officer") or a director, and no
incentive stock option,</#> shall become exercisable, however, until the
Plan is approved by the affirmative vote of the holders of a majority of the
shares of Common Stock represented at a shareholders meeting at which a
quorum is present and any such awards under the Plan prior to such approval
shall be conditioned on and subject to such approval. Subject to this
limitation, options, stock appreciation rights and performance units may be
granted and shares may be awarded as bonuses or sold under the Plan at any
time after the effective date and before termination of the Plan.

(b) DURATION. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions
on such shares have lapsed. The Board of Directors may suspend or terminate
the Plan at any time except with respect to options, performance units and
shares subject to restrictions then outstanding under the Plan. Termination
shall not affect any outstanding options, any right of the Company to
repurchase shares or the forfeitability of shares issued under the Plan.

4. ADMINISTRATION.

(a) BOARD OF DIRECTORS. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to
time the individuals to whom awards shall be made, the amount of the awards
and the other terms and conditions of the awards. Subject to the provisions
of the Plan, the Board of Directors may from time to time adopt and amend
rules and regulations relating to administration of the Plan, advance the
lapse of any waiting period, accelerate any exercise date, waive or modify
any restriction applicable to shares (except those restrictions imposed by
law) and make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The
interpretation and construction of the provisions of the Plan and related
agreements by the Board of Directors shall be final and conclusive. The
Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.

(b) COMMITTEE. The Board of Directors may delegate to a committee of
the Board of Directors or specified officers of the Company, or both (the
"Committee") any or all authority for administration of the Plan. If
authority is delegated to a Committee, all references to the Board of
Directors in the Plan shall mean and relate to the Committee except (i) as
otherwise provided by the Board of Directors and (ii) that only the Board of
Directors may amend or terminate the Plan as provided in paragraphs 3 and
15. <#>If awards are to be made under the Plan to Officers or directors,
authority for selection of Officers and directors for participation and
decisions concerning the timing, pricing and amount of a grant or award, if
not determined under a formula meeting the requirements of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, shall be delegated to a
committee consisting of two or more disinterested directors.</#>

5. TYPES OF AWARDS; ELIGIBILITY. The Board of Directors may, from time to
time, take the following actions, separately or in combination, under the Plan:
(i) grant Incentive Stock Options, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as provided in paragraphs 6(a)
and 6(b); (ii) grant options other than Incentive Stock Options ("Non-Statutory
Stock Options") as provided in paragraphs 6(a) and 6(c); (iii) award stock
bonuses as provided in paragraph 7; (iv) sell shares subject to restrictions as
provided in paragraph 8; (v) grant stock appreciation rights as provided in
paragraph 9; (vi) grant cash bonus rights as provided in paragraph 10; (vii)
grant performance units as provided in paragraph 11 and (viii) grant foreign
qualified awards as provided in paragraph 12. Any such awards may be made to
employees, including employees who are officers or directors, and to other
individuals described in paragraph 1 who the Board of Directors believes have
made or will make an important contribution to the Company or any subsidiary of
the Company; provided, however, that only employees of the Company shall be
eligible to receive Incentive Stock Options under the Plan. The Board of
Directors shall select the individuals to whom awards shall be made and shall
specify the action taken with respect to each individual to whom an award is
made. At the discretion of the Board of Directors, an individual may be given an
election to surrender an award in exchange for the grant of a new award. No
employee may be granted options or stock appreciation rights under the Plan for
more than an aggregate of 200,000 shares of Common Stock in connection with the
hiring of the employee or 50,000 shares of Common Stock in any calendar year
otherwise.

6. OPTION GRANTS.

(a) GENERAL RULES RELATING TO OPTIONS.

(i) Terms of Grant. The Board of Directors may grant options under
the Plan. With respect to each option grant, the Board of Directors shall
determine the number of shares subject to the option, the option price,
the period of the option, the time or times at which the option may be
exercised and whether the option is an Incentive Stock Option or a
Non-Statutory Stock Option. At the time of the grant of an option or at
any time thereafter, the Board of Directors may provide that an optionee
who exercised an option with Common Stock of the Company shall
automatically receive a new option to purchase additional shares equal to
the number of shares surrendered and may specify the terms and conditions
of such new options.

(ii) Exercise of Options. Except as provided in paragraph 6(a)(iv)
or as determined by the Board of Directors, no option granted under the
Plan may be exercised unless at the time of such exercise the optionee is
employed by or in the service of the Company or any subsidiary of the
Company and shall have been so employed or provided such service
continuously since the date such option was granted. Absence on leave or
on account of illness or disability under rules established by the Board
of Directors shall not, however, be deemed an interruption of employment
or service for this purpose. Unless otherwise determined by the Board of
Directors, vesting of options shall not continue during an absence on
leave (including an extended illness) or on account of disability. Except
as provided in paragraphs 6(a)(iv) and 13, options granted under the Plan
may be exercised from time to time over the period stated in each option
in such amounts and at such times as shall be prescribed by the Board of
Directors, provided that options shall not

be exercised for fractional shares. Unless otherwise determined by the
Board of Directors, if the optionee does not exercise an option in any
one year with respect to the full number of shares to which the optionee
is entitled in that year, the optionee's rights shall be cumulative and
the optionee may purchase those shares in any subsequent year during the
term of the option. <#>Unless otherwise determined by the Board of
Directors, if an Officer or a director exercises an option within six
months of the grant of the option, the shares acquired upon exercise of
the option may not be sold until six months after the date of grant of
the option.</#>

(iii) Nontransferability. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors <#>with respect to an
option granted to a person who is neither an Officer nor a director of
the Company,</#> each other option granted under the Plan by its terms
shall be nonassignable and nontransferable by the optionee, either
voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the optionee's
domicile at the time of death.

(iv) Termination of Employment or Service.

(A) General Rule. Unless otherwise determined by the Board of
Directors, in the event the employment or service of the optionee
with the Company or a subsidiary terminates for any reason other than
because of physical disability or death as provided in subparagraphs
6(a)(iv)(B) and (C), the option may be exercised at any time prior to
the expiration date of the option or the expiration of 30 days after
the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.

(B) Termination Because of Total Disability. Unless otherwise
determined by the Board of Directors, in the event of the termination
of employment or service because of total disability, the option may
be exercised at any time prior to the expiration date of the option
or the expiration of 12 months after the date of such termination,
whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such
termination. The term "total disability" means a medically
determinable mental or physical impairment which is expected to
result in death or which has lasted or is expected to last for a
continuous period of 12 months or more and which causes the optionee
to be unable, in the opinion of the Company and two independent
physicians, to perform his or her duties as an employee, director,
officer or consultant of 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 Company.

(C) Termination Because of Death. Unless otherwise determined by
the Board of Directors, in the event of the death of an optionee
while employed by or providing service to the Company or a
subsidiary, the option may be exercised at any time prior to the
expiration date of the option or the expiration of 12 months after
the date of death, whichever is the shorter period, but only if and
to the extent the optionee was entitled to exercise the option at the
date of death and only by the person or persons to whom such
optionee's rights under the option shall pass by the optionee's will
or by the laws of descent and distribution of the state or country of
domicile at the time of death.

(D) Amendment of Exercise Period Applicable to Termination. The
Board of Directors, at the time of grant or, with respect to an
option that is not an Incentive Stock Option, at any time thereafter,
may extend the 30-day and 12-month exercise periods any length of
time not longer than the original expiration date of the option, and
may increase the portion of an option that is exercisable, subject to
such terms and conditions as the Board of Directors may determine.

(E) Failure to Exercise Option. To the extent that the option of
any deceased optionee or of any optionee whose employment or service
terminates is not exercised within the applicable period, all further
rights to purchase shares pursuant to such option shall cease and
terminate.

(v) Purchase of Shares. Unless the Board of Directors determines
otherwise, shares may be acquired pursuant to an option granted under the
Plan only upon receipt by the Company of notice in writing from the
optionee of the optionee's intention to exercise, specifying the number
of shares as to which the optionee desires to exercise the option and the
date on which the optionee desires to complete the transaction, and if
required in order to comply with the Securities Act of 1933, as amended,
containing a representation that it is the optionee's present intention
to acquire the shares for investment and not with a view to distribution.
Unless the Board of Directors determines otherwise, on or before the date
specified for completion of the purchase of shares pursuant to an option,
the optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Board of Directors,
cash that may be the proceeds of a loan from the Company (provided that,
with respect to an Incentive Stock Option, such loan is approved at the
time of option grant)) or, with the consent of the Board of Directors, in
whole or in part, in Common Stock of the Company valued at fair market
value, restricted stock, performance units or other contingent awards
denominated in either stock or cash, promissory notes and other forms of
consideration. The fair market value of Common Stock provided in payment
of the purchase price shall be determined by the Board of Directors. If
the Common Stock of the Company is not publicly traded on the date the
option is exercised, the Board of Directors may consider any valuation
methods it deems appropriate and may, but is not required to, obtain one
or more independent appraisals of the Company. If the Common Stock of the
Company is publicly traded on the date the option is exercised, the fair
market value of Common Stock provided in payment of the purchase price
shall be the closing price of the Common Stock as reported in THE WALL
STREET JOURNAL on the last trading day preceding the date the option is
exercised, or such other reported value of the Common Stock as shall be
specified by the Board of Directors. No shares shall be issued until full
payment for the shares has been made. With the consent of the Board of
Directors (which, in the case of an Incentive Stock Option, shall be
given only at the time of option grant), an optionee may request the
Company to apply automatically the shares to be received upon the
exercise of a portion of a stock option (even though stock certificates
have not yet been issued) to satisfy the purchase price for additional
portions of the option. Each optionee who has exercised an option shall
immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal,
state and local tax withholding requirements. If additional withholding
is or becomes required beyond any amount deposited before delivery of the
certificates, the optionee shall pay such amount to the Company on
demand. If the optionee fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the
optionee, including salary, subject to applicable law. With the consent
of the Board of Directors an optionee may satisfy this obligation, in
whole or in part, by having the Company withhold from the shares to be
issued upon the exercise that number of shares that would satisfy the
withholding amount due or by delivering to the Company Common Stock to
satisfy the withholding amount. Upon the exercise of an option, the
number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued upon exercise of the option.

(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be subject
to the following additional terms and conditions:

(i) Limitation on Amount of Grants. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair market
value, on the date of grant, of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by that

employee during any calendar year under the Plan and under all incentive
stock option plans (within the meaning of Section 422 of the Code) of the
Company or any parent or subsidiary of the Company exceeds $100,000.

(ii) Limitations on Grants to 10 Percent Shareholders. An Incentive
Stock Option may be granted under the Plan to an employee possessing more
than 10 percent of the total combined voting power of all classes of
stock of the Company or of any parent or subsidiary of the Company only
if the option price is at least 110 percent of the fair market value, as
described in paragraph 6(b)(iv), of the Common Stock subject to the
option on the date it is granted and the option by its terms is not
exercisable after the expiration of five years from the date it is
granted.

(iii) Duration of Options. Subject to paragraphs 6(a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue
in effect for the period fixed by the Board of Directors, except that no
Incentive Stock Option shall be exercisable after the expiration of 10
years from the date it is granted.

(iv) Option Price. The option price per share shall be determined
by the Board of Directors at the time of grant. Except as provided in
paragraph 6(b)(ii), the option price shall not be less than 100 percent
of the fair market value of the Common Stock covered by the Incentive
Stock Option at the date the option is granted. The fair market value
shall be determined by the Board of Directors. If the Common Stock of the
Company is not publicly traded on the date the option is granted, the
Board of Directors may consider any valuation methods it deems
appropriate and may, but is not required to, obtain one or more
independent appraisals of the Company. If the Common Stock of the Company
is publicly traded on the date the option is exercised, the fair market
value shall be deemed to be the closing price of the Common Stock as
reported in The Wall Street Journal on the day preceding the date the
option is granted, or, if there has been no sale on that date, on the
last preceding date on which a sale occurred or such other value of the
Common Stock as shall be specified by the Board of Directors.

(v) Limitation on Time of Grant. No Incentive Stock Option shall be
granted on or after the tenth anniversary of the effective date of the
Plan.

(vi) Conversion of Incentive Stock Options. The Board of Directors
may at any time without the consent of the optionee convert an Incentive
Stock Option to a Non-Statutory Stock Option.

(c) NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options shall be
subject to the following terms and conditions in addition to those set forth
in Section 6(a) above:

(i) Option Price. The option price for Non-Statutory Stock Options
shall be determined by the Board of Directors at the time of grant and
may be any amount determined by the Board of Directors.

(ii) Duration of Options. Non-Statutory Stock Options granted under
the Plan shall continue in effect for the period fixed by the Board of
Directors.

7. STOCK BONUSES. The Board of Directors may award shares under the Plan
as stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with such other restrictions as may be
determined by the Board of Directors. If shares are subject to forfeiture, all
dividends or other distributions paid by the Company with respect to the shares
shall be retained by the Company until the shares are no longer subject to
forfeiture, at which time all accumulated amounts shall be paid to the
recipient. The Board of Directors may require the recipient to sign an agreement
as a condition of the award, but may not require the recipient to pay any
monetary consideration other than amounts necessary to satisfy tax withholding
requirements. The agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Board of

Directors. The certificates representing the shares awarded shall bear any
legends required by the Board of Directors. <#>Unless otherwise determined by
the Board of Directors, shares awarded as a stock bonus to an Officer or a
director may not be sold until six months after the date of the award.</#> The
Company may require any recipient of a stock bonus to pay to the Company in cash
upon demand amounts necessary to satisfy any applicable federal, state or local
tax withholding requirements. If the recipient fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the Company
to the recipient, including salary or fees for services, subject to applicable
law. With the consent of the Board of Directors, a recipient may deliver Common
Stock to the Company to satisfy this withholding obligation. Upon the issuance
of a stock bonus, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued.

8. RESTRICTED STOCK. The Board of Directors may issue shares under the
Plan for such consideration (including promissory notes and services) as
determined by the Board of Directors. Shares issued under the Plan shall be
subject to the terms, conditions and restrictions determined by the Board of
Directors. The restrictions may include restrictions concerning transferability,
repurchase by the Company and forfeiture of the shares issued, together with
such other restrictions as may be determined by the Board of Directors. If
shares are subject to forfeiture or repurchase by the Company, all dividends or
other distributions paid by the Company with respect to the shares shall be
retained by the Company until the shares are no longer subject to forfeiture or
repurchase, at which time all accumulated amounts shall be paid to the
recipient. All Common Stock issued pursuant to this paragraph 8 shall be subject
to a purchase agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase agreement may contain
any terms, conditions, restrictions, representations and warranties required by
the Board of Directors. The certificates representing the shares shall bear any
legends required by the Board of Directors. <#>Unless otherwise determined by
the Board of Directors, shares issued under this paragraph 8 to an Officer or a
director may not be sold until six months after the shares are issued.</#> The
Company may require any purchaser of restricted stock to pay to the Company in
cash upon demand amounts necessary to satisfy any applicable federal, state or
local tax withholding requirements. If the purchaser fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable by the
Company to the purchaser, including salary, subject to applicable law. With the
consent of the Board of Directors, a purchaser may deliver Common Stock to the
Company to satisfy this withholding obligation. Upon the issuance of restricted
stock, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued.

9. STOCK APPRECIATION RIGHTS.

(a) GRANT. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms, and conditions as the
Board of Directors prescribes.

(b) EXERCISE.

(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount
equal in value to the excess of the fair market value on the date of
exercise of one share of Common Stock of the Company over its fair market
value on the date of grant (or, in the case of a stock appreciation right
granted in connection with an option, the excess of the fair market value
of one share of Common Stock of the Company over the option price per
share under the option to which the stock appreciation right relates),
multiplied by the number of shares covered by the stock appreciation
right or the option, or portion thereof, that is surrendered. No stock
appreciation right shall be exercisable at a time that the amount
determined under this subparagraph is negative. Payment by the Company
upon exercise of a stock appreciation right may be made in Common Stock
valued at fair market value, in cash, or partly in Common Stock and
partly in cash, all as determined by the Board of Directors.

(ii) A stock appreciation right shall be exercisable only at the
time or times established by the Board of Directors. If a stock
appreciation right is granted in connection with an option, the following
rules shall apply: (1) the stock appreciation right shall be exercisable
only to the extent and on the same conditions that the related option
could be exercised; (2) the stock appreciation rights shall be
exercisable only when the fair market value of the stock exceeds the
option price of the related option; (3) the stock appreciation right
shall be for no more than 100 percent of the excess of the fair market
value of the stock at the time of exercise over the option price; (4)
upon exercise of the stock appreciation right, the option or portion
thereof to which the stock appreciation right relates terminates; and (5)
upon exercise of the option, the related stock appreciation right or
portion thereof terminates. <#>Unless otherwise determined by the Board
of Directors, no stock appreciation right granted to an Officer or
director may be exercised during the first six months following the date
it is granted.</#>

(iii) The Board of Directors may withdraw any stock appreciation
right granted under the Plan at any time and may impose any conditions
upon the exercise of a stock appreciation right or adopt rules and
regulations from time to time affecting the rights of holders of stock
appreciation rights. Such rules and regulations may govern the right to
exercise stock appreciation rights granted prior to adoption or amendment
of such rules and regulations as well as stock appreciation rights
granted thereafter.

(iv) For purposes of this paragraph 9, the fair market value of the
Common Stock shall be determined as of the date the stock appreciation
right is exercised, under the methods set forth in paragraph 6(b)(iv).

(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal
to the value of the fraction or, if the Board of Directors shall
determine, the number of shares may be rounded downward to the next whole
share.

(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors <#>with respect to a stock appreciation right granted to a
person who is neither an Officer nor a director of the Company</#>, each
other stock appreciation right granted under the Plan by its terms shall
be nonassignable and nontransferable by the holder, either voluntarily or
by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the time
of death, and each stock appreciation right by its terms shall be
exercisable during the holder's lifetime only by the holder.

(vii) Each participant who has exercised a stock appreciation right
shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant including salary, subject to applicable
law. With the consent of the Board of Directors a participant may satisfy
this obligation, in whole or in part, by having the Company withhold from
any shares to be issued upon the exercise that number of shares that
would satisfy the withholding amount due or by delivering Common Stock to
the Company to satisfy the withholding amount.

(viii) Upon the exercise of a stock appreciation right for shares, the
number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued. Cash payments of stock appreciation rights
shall not reduce the number of shares of Common Stock reserved for
issuance under the Plan.

10. CASH BONUS RIGHTS.

(a) GRANT. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii)
stock appreciation rights granted or previously granted, (iii) stock bonuses
awarded or previously awarded and (iv) shares sold or previously sold under
the Plan. Cash bonus rights will be subject to rules, terms and conditions
as the Board of Directors may prescribe. Unless otherwise determined by the
Board of Directors <#>with respect to a cash bonus right granted to a person
who is neither an Officer nor a director of the Company</#>, each cash bonus
right granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the holder's domicile at the time of death. The payment of a cash
bonus shall not reduce the number of shares of Common Stock reserved for
issuance under the Plan.

(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash bonus right
granted in connection with an option will entitle an optionee to a cash
bonus when the related option is exercised (or terminates in connection with
the exercise of a stock appreciation right related to the option) in whole
or in part if, in the sole discretion of the Board of Directors, the bonus
right will result in a tax deduction that the Company has sufficient taxable
income to use. If an optionee purchases shares upon exercise of an option
and does not exercise a related stock appreciation right, the amount of the
bonus, if any, shall be determined by multiplying the excess of the total
fair market value of the shares to be acquired upon the exercise over the
total option price for the shares by the applicable bonus percentage. If the
optionee exercises a related stock appreciation right in connection with the
termination of an option, the amount of the bonus, if any, shall be
determined by multiplying the total fair market value of the shares and cash
received pursuant to the exercise of the stock appreciation right by the
applicable bonus percentage. The bonus percentage applicable to a bonus
right, including a previously granted bonus right, may be changed from time
to time at the sole discretion of the Board of Directors but shall in no
event exceed 75 percent.

(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUS. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to
a cash bonus payable when the stock bonus is awarded or restrictions, if
any, to which the stock is subject lapse. If bonus stock awarded is subject
to restrictions and is repurchased by the Company or forfeited by the
holder, the cash bonus right granted in connection with the stock bonus
shall terminate and may not be exercised. The amount and timing of payment
of a cash bonus shall be determined by the Board of Directors.

(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES. A cash bonus
right granted in connection with the purchase of stock pursuant to paragraph
8 will entitle the recipient to a cash bonus when the shares are purchased
or restrictions, if any, to which the stock is subject lapse. Any cash bonus
right granted in connection with shares purchased pursuant to paragraph 8
shall terminate and may not be exercised in the event the shares are
repurchased by the Company or forfeited by the holder pursuant to applicable
restrictions. The amount of any cash bonus to be awarded and timing of
payment of a cash bonus shall be determined by the Board of Directors.

(e) TAXES. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.

11. PERFORMANCE UNITS. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders' equity, return on invested capital, and such other goals as may be
established by the Board of Directors. In the event that the minimum performance
goal established by the Board of Directors is not achieved at the conclusion of
a period, no payment shall be made to the participants. In the event the maximum
corporate

goal is achieved, 100 percent of the monetary value of the performance units
shall be paid to or vested in the participants. Partial achievement of the
maximum goal may result in a payment or vesting corresponding to the degree of
achievement as determined by the Board of Directors. Payment of an award earned
may be in cash or in Common Stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined by the
Board of Directors. Unless otherwise determined by the Board of Directors
<#>with respect to a performance unit granted to a person who is neither an
Officer nor a director of the Company</#>, each performance unit granted under
the Plan by its terms shall be nonassignable and nontransferable by the holder,
either voluntarily or by operation of law, except by will or by the laws of
descent and distribution of the state or country of the holder's domicile at the
time of death. Each participant who has been awarded a performance unit shall,
upon notification of the amount due, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
requirements. If the participant fails to pay the amount demanded, the Company
may withhold that amount from other amounts payable by the Company to the
participant, including salary or fees for services, subject to applicable law.
With the consent of the Board of Directors a participant may satisfy this
obligation, in whole or in part, by having the Company withhold from any shares
to be issued that number of shares that would satisfy the withholding amount due
or by delivering Common Stock to the Company to satisfy the withholding amount.
The payment of a performance unit in cash shall not reduce the number of shares
of Common Stock reserved for issuance under the Plan. The number of shares
reserved for issuance under the Plan shall be reduced by the number of shares
issued upon payment of an award.

12. FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to such
officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the Board
of Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.

13. CHANGES IN CAPITAL STRUCTURE.

(a) STOCK SPLITS; STOCK DIVIDENDS. If the outstanding Common Stock of
the Company is hereafter increased or decreased or changed into or exchanged
for a different number or kind of shares or other securities of the Company
by reason of any stock split, combination of shares or dividend payable in
shares, recapitalization or reclassification appropriate adjustment shall be
made by the Board of Directors in the number and kind of shares available
for grants under the Plan. In addition, the Board of Directors shall make
appropriate adjustment in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be
exercisable, so that the optionee's proportionate interest before and after
the occurrence of the event is maintained. Notwithstanding the foregoing,
the Board of Directors shall have no obligation to effect any adjustment
that would or might result in the issuance of fractional shares, and any
fractional shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors. Any such
adjustments made by the Board of Directors shall be conclusive.

(b) MERGERS, REORGANIZATIONS, ETC. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock,
separation, reorganization or liquidation to which the Company or a
subsidiary is a party or a sale of all or substantially all of the Company's
assets (each, a "Transaction"), the Board of Directors shall, in its sole
discretion and to the extent possible under the structure of the
Transaction, select one of the following alternatives for treating
outstanding options under the Plan:

(i) Outstanding options shall remain in effect in accordance with
their terms.

(ii) Outstanding options shall be converted into options to purchase
stock in the corporation that is the surviving or acquiring corporation
in the Transaction. The amount, type of

securities subject thereto and exercise price of the converted options
shall be determined by the Board of Directors of the Company, taking into
account the relative values of the companies involved in the Transaction
and the exchange rate, if any, used in determining shares of the
surviving corporation to be issued to holders of shares of the Company.
Unless otherwise determined by the Board of Directors, the converted
options shall be vested only to the extent that the vesting requirements
relating to options granted hereunder have been satisfied.

(iii) The Board of Directors shall provide a 30-day period prior to
the consummation of the Transaction during which outstanding options may
be exercised to the extent then exercisable, and upon the expiration of
such 30-day period, all unexercised options shall immediately terminate.
The Board of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during
such 30-day period.

(c) DISSOLUTION OF THE COMPANY. In the event of the dissolution of the
Company, options shall be treated in accordance with paragraph 13(b)(iii).

(d) RIGHTS ISSUED BY ANOTHER CORPORATION. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock
bonuses and cash bonuses and issue restricted stock under the Plan having
terms, conditions and provisions that vary from those specified in this Plan
provided that any such awards are granted in substitution for, or in
connection with the assumption of, existing options, stock appreciation
rights, stock bonuses, cash bonuses, restricted stock and performance units
granted, awarded or issued by another corporation and assumed or otherwise
agreed to be provided for by the Company pursuant to or by reason of a
Transaction.

14. AMENDMENT OF PLAN. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 6(a)(iv), 9, 10 and 13, however,
no change in an award already granted shall be made without the written consent
of the holder of such award.

15. APPROVALS. The obligations of the Company under the Plan are subject
to the approval of state and federal authorities or agencies with jurisdiction
in the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Company's shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to issue
or deliver Common Stock under the Plan if such issuance or delivery would
violate applicable state or federal securities laws.

16. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary by whom such employee is
employed to terminate such employee's employment at any time, for any reason,
with or without cause, or to decrease such employee's compensation or benefits,
or (ii) confer upon any person engaged by the Company any right to be retained
or employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.

17. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Common Stock until the
date of issue to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.

18. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.

(a) INITIAL BOARD GRANTS. Each person who is a Non-Employee Director
when the Plan is adopted or who becomes a Non-Employee Director thereafter
shall be automatically granted an option to purchase 20,000 shares of Common
Stock on the date the Plan is approved by the

shareholders of the Company or when he or she becomes a Non-Employee
Director. A "Non-Employee Director" is a director who is not an employee of
the Company or any of its subsidiaries.

(b) ADDITIONAL GRANTS. Each Non-Employee Director shall be
automatically granted an option to purchase additional shares of Common
Stock in each calendar year subsequent to the year in which such
Non-Employee Director was granted an option pursuant to paragraph 18(a),
such option to be granted as of the date of the Company's annual meeting of
shareholders held in such calendar year, provided that the Non-Employee
Director continues to serve in such capacity as of such date. The number of
shares subject to each additional grant shall be 5,000 shares for each
Non-Employee Director.

(c) EXERCISE PRICE. The exercise price of options for 20,000 shares
granted pursuant to paragraph 18(a) as of the date the Plan is approved by
the Shareholders of the Company shall be equal to the price per share to the
public in the Company's initial public offering, unless otherwise determined
by the Board. The exercise price of all other options granted pursuant to
this paragraph 19 shall be equal to 100 percent of the fair market value of
the Common Stock determined pursuant to paragraph 6(b)(iv).

(d) TERM OF OPTION. The term of each option granted pursuant to this
paragraph 18 shall be 10 years from the date of grant.

(e) EXERCISABILITY. Until an option expires or is terminated and
except as provided in paragraphs 18(f) and 13, an option granted under this
paragraph 18 shall be exercisable according to the following schedule: 33
1/3% for each complete year of continuous service after the date of grant,
rounded up to the next full share, until fully vested.

For purposes of this paragraph 18(e), a complete year shall be deemed to
be the period which starts on the day of grant and ends on the same day of
the following calendar year, so that each successive "complete year" ends on
the same day of each successive calendar year.

(f) TERMINATION AS A DIRECTOR. If an optionee ceases to be a director
of the Company for any reason, including death, the option may be exercised
at any time prior to the expiration date of the option or the expiration of
30 days (or 12 months in the event of death) after the last day the optionee
served as a director, whichever is the shorter period, but only if and to
the extent the optionee was entitled to exercise the option as of the last
day the optionee served as a director.

(g) NONTRANSFERABILITY. Each option by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the optionee's domicile at the time of death, and
each option by its terms shall be exercisable during the optionee's lifetime
only by the optionee.

(h) EXERCISE OF OPTIONS. Options may be exercised upon payment of cash
or shares of Common Stock of the Company in accordance with paragraph
6(a)(v).

Adopted: December 19, 1995

AMENDED: NOVEMBER 6, 1998

Please mark
your votes as
indicated in
this example X

PROXY

PRAEGITZER INDUSTRIES, INC.
ANNUAL MEETING, NOVEMBER 6, 1998

PROXY SOLICITED BY BOARD OF DIRECTORS

PLEASE SIGN AND RETURN THIS PROXY

The undersigned hereby appoints Robert L. Praegitzer and Matthew J. Bergeron,
and each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares that the undersigned may be entitled to vote at the
annual meeting of shareholders of Praegitzer Industries, Inc. (the "Company")
on November 6, 1998 and any adjournments thereof, with all powers that the
undersigned would possess if personally present, with respect to the
following:

1. Election of Directors: / / FOR ALL NOMINEES / / WITHHOLD AUTHORITY
EXCEPT AS MARKED TO TO VOTE FOR ALL
THE CONTRARY BELOW. NOMINEES LISTED BELOW.

(INSTRUCTION: To withhold authority to vote for any individual, strike a line
through the nominee's name below.)
Robert L. Praegitzer, Matthew J. Bergeron, Daniel J. Barnett,
Theodore L. Stebbins, Merrill A. McPeak, Gordon B. Kuenster

2. Amendment of the Company's 1995 Stock Incentive Plan to increase the total
number of shares reserved under the plan from 1,500,000 to 2,700,000 shares
and to make other changes described in the Company's Proxy Statement for the
1998 Annual Meeting of Shareholders.

/ / FOR / / AGAINST / / ABSTAIN

3. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the
meeting may exercise all the powers granted hereby.

(Continued and to be signed on the other side)

FOLD AND DETACH HERE

The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be voted for
the election of directors and for the amendments to the Plan. THE PROXIES MAY
VOTE IN THEIR DISCRETION AS TO OTHER MATTERS THAT MAY COME BEFORE THIS
MEETING.

P Date: , 1998
R ----------------------
O
X ---------------------------------
Y Signature or Signatures

Please date and sign as name is
imprinted hereon, including
designation as executor, trustee,
etc., if applicable. A corporation
must sign its name by the president or
other authorized officer.

The Annual Meeting of Shareholders of
Praegitzer Industries, Inc. will be
held on November 6, 1998 at 2:00 p.m.,
Pacific Time, at The Governor Hotel,
611 SW Tenth, Portland, Oregon.

PLEASE NOTE: ANY SHARES OF STOCK OF THE COMPANY HELD IN THE NAME OF
FIDUCIARIES, CUSTODIANS OR BROKERAGE HOUSES FOR THE BENEFIT OF THEIR CLIENTS
MAY ONLY BE VOTED BY THE FIDUCIARY, CUSTODIAN OR BROKERAGE HOUSE ITSELF; THE
BENEFICIAL OWNER MAY NOT DIRECTLY VOTE OR APPOINT A PROXY TO VOTE THE SHARES
AND MUST INSTRUCT THE PERSON OR ENTITY IN WHOSE NAME THE SHARES ARE HELD HOW
TO VOTE THE SHARES HELD FOR THE BENEFICIAL OWNER. THEREFORE, IF ANY SHARES
OF STOCK OF THE COMPANY ARE HELD IN "STREET NAME" BY A BROKERAGE HOUSE, ONLY
THE BROKERAGE HOUSE, AT THE INSTRUCTIONS OF ITS CLIENT, MAY VOTE OR APPOINT A
PROXY TO VOTE THE SHARES.

FOLD AND DETACH HERE