<PAGE>   1
                                                                    Exhibit 10-L




                                BETZDEARBORN INC.
                    EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN

               (As Amended and Restated Effective January 1, 1998)
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  Page
                                                                                                                  ----
<S>             <C>                                                                                               <C>
SECTION 1       DEFINITIONS......................................................................................  2

   1.1          ACCOUNTS.........................................................................................  2
   1.2          ACCRUED BENEFIT..................................................................................  2
   1.3          AFFILIATE........................................................................................  2
   1.4          APPROPRIATE FORM.................................................................................  2
   1.5          BOARD OF DIRECTORS...............................................................................  2
   1.6          CODE.............................................................................................  2
   1.7          COMMITTEE........................................................................................  2
   1.8          COMMON STOCK.....................................................................................  2
   1.9          COMPANY..........................................................................................  2
   1.10         COMPANY STOCK....................................................................................  2
   1.11         COMPANY STOCK ACCOUNT............................................................................  2
   1.12         COMPENSATION.....................................................................................  2
   1.13         COMPENSATION DEFERRAL CONTRIBUTION...............................................................  3
   1.14         COMPENSATION DEFERRAL PERCENTAGE.................................................................  3
   1.15         DIVERSIFICATION ACCOUNT..........................................................................  3
   1.16         EFFECTIVE DATE...................................................................................  3
   1.17         ELIGIBLE EMPLOYEE................................................................................  3
   1.18         EMPLOYEE.........................................................................................  3
   1.20         EXEMPT LOAN......................................................................................  3
   1.21         401(K) ACCOUNT...................................................................................  3
   1.22         INVESTMENT FUND..................................................................................  4
   1.23         INVESTMENT VEHICLE...............................................................................  4
   1.24         LEASED EMPLOYEE..................................................................................  4
   1.25         MATCHING ACCOUNT.................................................................................  4
   1.26         MATCHING CONTRIBUTIONS...........................................................................  4
   1.27         MATCHING PERCENTAGE..............................................................................  4
   1.28         MAXIMUM COMPENSATION DEFERRAL MATCHING PERCENTAGE................................................  4
   1.29         NORMAL RETIREMENT AGE............................................................................  4
   1.30         NORMAL RETIREMENT DATE...........................................................................  4
   1.31         OTHER INVESTMENTS ACCOUNT........................................................................  4
   1.32         PARTICIPANT......................................................................................  4
   1.33         PAYSOP ACCOUNT...................................................................................  4
   1.34         PLAN.............................................................................................  4
   1.35         PLAN ADMINISTRATOR...............................................................................  4
   1.36         PREFERRED STOCK..................................................................................  5
   1.37         QUALIFIED ELECTION PERIOD........................................................................  5
   1.38         QUALIFIED PARTICIPANT............................................................................  5
   1.39         ROLLOVER ACCOUNT.................................................................................  5
   1.40         STOCK BONUS ACCOUNT..............................................................................  5
   1.41         STOCK BONUS PLAN.................................................................................  5
   1.42         SUSPENSE SUBFUND.................................................................................  5
   1.43         TRUST............................................................................................  5
   1.44         TRUST AGREEMENT..................................................................................  5
   1.45         TRUST FUND.......................................................................................  5
</TABLE>

                                         i
<PAGE>   3
<TABLE>
<CAPTION>
<S>             <C>
   1.46         TRUSTEE.........................................................................................  5
   1.47         VALUATION DATE..................................................................................  5
   1.48         VOLUNTARY ACCOUNT...............................................................................  5

SECTION 2       SERVICE.........................................................................................  6

   2.1          HOUR OF SERVICE.................................................................................  6
   2.2          ELIGIBILITY COMPUTATION PERIOD..................................................................  8
   2.3          YEAR OF ELIGIBILITY SERVICE.....................................................................  8
   2.4          YEAR OF VESTING SERVICE.........................................................................  8
   2.5          ONE-YEAR BREAK IN SERVICE.......................................................................  8
   2.6          NO PARITY BREAK.................................................................................  8
   2.7          SERVICE WITH A FOREIGN AFFILIATE................................................................  8

SECTION 3       PARTICIPATION...................................................................................  9

   3.1          CONTINUED PARTICIPATION OF PARTICIPANTS AS OF DECEMBER 31, 1997.................................  9
   3.2          ELIGIBILITY AND PARTICIPATION...................................................................  9
   3.3          PARTICIPATION AFTER BREAK IN SERVICE............................................................  9
   3.4          LEASED EMPLOYEES................................................................................  9

SECTION 4       COMPANY CONTRIBUTIONS...........................................................................  9

   4.1          COMPANY CONTRIBUTIONS...........................................................................  9
   4.2          TIME OF PAYMENT.................................................................................  9
   4.3          CONTRIBUTIONS IRREVOCABLE....................................................................... 10

SECTION 5       PARTICIPANTS' ACCOUNTS AND INVESTMENT THEREOF; EXEMPT LOANS..................................... 10

   5.1          ACCOUNTS........................................................................................ 10
   5.2          INVESTMENT OF TRUST FUND........................................................................ 10
   5.3          EXEMPT LOAN..................................................................................... 10
   5.4          DIVERSIFICATION OF INVESTMENTS.................................................................. 11

SECTION 6       ALLOCATION OF CONTRIBUTIONS..................................................................... 12

   6.1          PARTICIPANTS ENTITLED TO ALLOCATION............................................................. 12
   6.2          ALLOCATION OF COMPANY STOCK CONTRIBUTIONS....................................................... 12
   6.3          ALLOCATION OF OTHER CONTRIBUTIONS............................................................... 12
   6.4          ALLOCATION OF COMPANY STOCK ACQUIRED WITH EXEMPT LOAN........................................... 12
   6.5          RELEASE FROM SUSPENSE SUBFUND................................................................... 13
   6.6          ALLOCATION OF SHARES RELEASED FROM SUSPENSE SUBFUND............................................. 14
   6.7          ALLOCATION OF FORFEITURES....................................................................... 14

SECTION 7       VALUATION....................................................................................... 14

   7.1          VALUATION....................................................................................... 14
   7.2          ALLOCATION OF GAINS AND LOSSES.................................................................. 15
   7.3          DIVIDENDS ON COMPANY STOCK...................................................................... 15

SECTION 8       401(K) PLAN..................................................................................... 16

   8.1          DEFINITIONS..................................................................................... 16
   8.2          PARTICIPANT COMPENSATION DEFERRALS.............................................................. 17
   8.3          COMPANY MATCHING CONTRIBUTIONS.................................................................. 17
   8.4          DESIGNATION OF ACCOUNT.......................................................................... 18
   8.5          CHANGING RATES OF CONTRIBUTION.................................................................. 18
</TABLE>

                                       ii
<PAGE>   4
<TABLE>
<CAPTION>
<S>             <C>
   8.6          WITHDRAWALS OF COMPENSATION DEFERRAL CONTRIBUTIONS.............................................. 18
   8.7          RESTRICTIONS.................................................................................... 19
   8.8          PERIODS OF ABSENCE.............................................................................. 19
   8.9          TERMINATION OF CONTRIBUTIONS.................................................................... 19
   8.10         LIMITATION ON COMPENSATION DEFERRAL CONTRIBUTIONS............................................... 19
   8.11         LIMITATIONS ON MATCHING CONTRIBUTIONS........................................................... 20
   8.12         ELECTION TO USE CURRENT PLAN YEAR............................................................... 21
   8.13         DISTRIBUTION OF EXCESS DEFERRALS................................................................ 22
   8.14         DISTRIBUTION OF EXCESS CONTRIBUTIONS............................................................ 22
   8.15         DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.................................................. 23
   8.16         DESIGNATION AS PROFIT-SHARING PLAN.............................................................. 24
   8.17         PARTICIPANT ROLLOVER CONTRIBUTION............................................................... 24
   8.18         LOANS........................................................................................... 24

SECTION 9       BENEFITS AND DISTRIBUTIONS...................................................................... 26

   9.1          VESTING......................................................................................... 26
   9.2          AMOUNT, METHOD, FORM OF BENEFIT PAYMENTS........................................................ 26
   9.3          NORMAL AND LATE RETIREMENT...................................................................... 27
   9.4          VESTED DEFERRED BENEFITS........................................................................ 27
   9.5          DISABILITY RETIREMENT........................................................................... 28
   9.6          DEATH........................................................................................... 28
   9.7          DESIGNATION OF BENEFICIARY AND FORM OF PAYMENT OF DEATH BENEFIT;
                SPOUSE'S CONSENT TO NON-SPOUSE BENEFICIARY...................................................... 28
   9.8          SPECIAL PROVISION AS TO TIMING OF DISTRIBUTIONS................................................. 29
   9.9          REQUIREMENTS CONCERNING DISTRIBUTIONS........................................................... 29
   9.10         PUT OPTIONS ON DISTRIBUTED SHARES OF CERTAIN COMPANY STOCK...................................... 30
   9.11         DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS MADE FROM THIS PLAN......................... 31
   9.12         PARTICIPANT'S CONSENT TO DISTRIBUTION OF BENEFITS............................................... 31

SECTION 10      LIMITATIONS ON CONTRIBUTIONS.................................................................... 32

   10.1         DEFINITIONS FOR LIMITATIONS ON CONTRIBUTIONS.................................................... 32
   10.2         BASIC LIMITATION................................................................................ 33
   10.3         COMBINED LIMIT WITH PENSION PLAN................................................................ 34
   10.4         COMBINING AND AGGREGATING PLANS................................................................. 34

SECTION 11      TOP-HEAVY PROVISIONS............................................................................ 34

   11.1         TOP-HEAVY PREEMPTION............................................................................ 34
   11.2         TOP-HEAVY DEFINITIONS........................................................................... 34
   11.3         TOP-HEAVY RULES................................................................................. 36
   11.4         IMPACT ON MAXIMUM BENEFITS...................................................................... 37
   11.5         CHANGE IN TOP-HEAVY STATUS...................................................................... 37
   11.6         DUPLICATION OF MINIMUM CONTRIBUTIONS NOT REQUIRED............................................... 37
   11.7         REPEAL OF LIMITATION............................................................................ 37

SECTION 12      NONALIENATION OF BENEFITS....................................................................... 37

   12.1         NONALIENATION RULE.............................................................................. 37

SECTION 13      FIDUCIARY RESPONSIBILITY........................................................................ 38

   13.1         FIDUCIARY DUTIES................................................................................ 38
   13.2         ALLOCATION OF RESPONSIBILITY.................................................................... 38
   13.3         NO JOINT RESPONSIBILITY......................................................................... 39
</TABLE>

                                      iii
<PAGE>   5
<TABLE>
<CAPTION>
<S>             <C>
   13.4         NO CO-FIDUCIARY LIABILITY.......................................................................39
   13.5         ACT IN INTEREST OF PARTICIPANTS.................................................................39
   13.6         EMPLOYMENT OF ADVISORS..........................................................................39
   13.7         TRANSFER OR MAINTENANCE OF INDICIA OF OWNERSHIP OF PLAN ASSETS
                OUTSIDE UNITED STATES PROHIBITED................................................................40
   13.8         PROHIBITED TRANSACTIONS.........................................................................40

SECTION 14      ADMINISTRATION OF PLAN 00 STOCK BONUS PROFIT SHARING/RETIREMENT
                COMMITTEE AND PLAN ADMINISTRATOR................................................................42

   14.1         MEMBERS OF COMMITTEE............................................................................42
   14.2         OFFICERS AND EMPLOYEES OF THE COMMITTEE.........................................................42
   14.3         ACTION OF COMMITTEE.............................................................................42
   14.4         DISQUALIFICATION OF COMMITTEE MEMBER............................................................43
   14.5         EXPENSES OF COMMITTEE...........................................................................43
   14.6         POWERS OF THE COMMITTEE.........................................................................43
   14.7         ALLOCATION OF FIDUCIARY RESPONSIBILITY..........................................................43
   14.8         PLAN ADMINISTRATOR AND HIS GENERAL POWERS.......................................................43
   14.9         GENERAL DUTIES OF THE PLAN ADMINISTRATOR........................................................43
   14.10        INFORMATION TO BE SUBMITTED BY COMPANY TO THE PLAN ADMINISTRATOR................................44
   14.11        CLAIM PROCEDURE.................................................................................44
   14.12        SERVICE OF LEGAL PROCESS........................................................................46
   14.13        DISCRETIONARY AUTHORITY.........................................................................46

SECTION 15      THE TRUSTEE AND TRUST...........................................................................46

   15.1         THE TRUST.......................................................................................46
   15.2         ACTIONS AND RESPONSIBILITY OF TRUSTEE...........................................................46
   15.3         PAYMENTS........................................................................................46
   15.4         RESIGNATION AND REMOVAL OF TRUSTEE..............................................................46
   15.5         VOTING RIGHTS AND TENDER OFFERS.................................................................46

SECTION 16      PLAN AMENDMENT, MERGER OR CONSOLIDATION.........................................................48

   16.1         AMENDMENT.......................................................................................48

SECTION 17      PLAN TERMINATION................................................................................49

   17.1         DISCONTINUANCE OF CONTRIBUTIONS OR TERMINATION..................................................49

SECTION 18      TRANSFERS OF 401(K) ACCOUNTS, MATCHING, STOCK BONUS, VOLUNTARY, AND DIVERSIFICATION ACCOUNTS
                FROM THE STOCK BONUS PLAN.......................................................................49

   18.1         TRANSFERS OF 401(K), MATCHING, STOCK BONUS, VOLUNTARY, AND DIVERSIFICATION
                 ACCOUNTS FROM THE STOCK BONUS PLAN.............................................................49
   18.2         DISTRIBUTIONS AND WITHDRAWALS OF AMOUNTS ATTRIBUTABLE TO AMOUNTS TRANSFERRED....................50
   18.3         TRANSFER TO DIVERSIFICATION ACCOUNT.............................................................51
   18.4         PROTECTED FORMS OF DISTRIBUTION.................................................................51

SECTION 19      TRANSFERS OF PAYSOP ACCOUNTS FROM THE STOCK BONUS PLAN..........................................51

   19.1         TRANSFERS OF PAYSOP ACCOUNTS FROM THE STOCK BONUS PLAN..........................................51
   19.2         INCOME ON PAYSOP ACCOUNTS.......................................................................51
   19.3         NONFORFEITABLE RIGHT TO ALLOCATED COMMON STOCK..................................................52
   19.4         ADMINISTRATIVE EXPENSES.........................................................................52
   19.5         DIVERSIFICATION WITHDRAWALS.....................................................................52
</TABLE>

                                       iv
<PAGE>   6
<TABLE>
<CAPTION>
<S>             <C>
   19.6         DISTRIBUTIONS OF PAYSOP ACCOUNTS................................................................53

SECTION 20      MISCELLANEOUS...................................................................................53

   20.1         PARTICIPATION BY AFFILIATES WITH CONSENT OF BETZDEARBORN INC....................................53
   20.2         APPLICATION OF PLAN.............................................................................53
   20.3         NO EMPLOYMENT RIGHTS CREATED....................................................................53
   20.4         INCAPACITATED PARTICIPANT OR BENEFICIARY........................................................54
   20.5         PAYMENT OF PLAN EXPENSES........................................................................54
   20.6         UNCLAIMED BENEFITS..............................................................................54
   20.7         TREATMENT OF LEASED EMPLOYEES...................................................................54
   20.8         CONSTRUCTION....................................................................................54

SECTION 21      SPECIAL PROVISIONS CONCERNING CERTAIN FORMER EMPLOYEES
                OF THE GRACE GROUP..............................................................................54

   21.1         DEFINITIONS.....................................................................................54
   21.2         PARTICIPATION BY CERTAIN EMPLOYEES OF THE DEARBORN BUSINESS.....................................55
   21.3         YEARS OF VESTING SERVICE........................................................................55
   21.4         ALLOCATION OF COMPANY STOCK CONTRIBUTION FOR 1996...............................................55
</TABLE>

                                       v
<PAGE>   7
                                BETZDEARBORN INC.
                    EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

                    (As Amended and Restated January 1, 1998)


                  WHEREAS, BETZDEARBORN INC. (the "Company") (formerly named
"Betz Laboratories, Inc."), a Pennsylvania corporation, established the
BetzDearborn Inc. Employee Stock Ownership and 401(k) Plan (the "Plan")
(formerly named the "Betz Laboratories, Inc. Employee Stock Ownership and 401(k)
Plan"), effective as of January 1, 1989, for the purpose of providing the
employees eligible to participate in the Plan the opportunity to share in the
success of the Company through stock ownership;


                  WHEREAS, the Plan was most recently amended and restated
effective January 1, 1995 and has been amended on three occasions thereafter;


                  WHEREAS, in Section 16.1 of the Plan, the Company has reserved
the right to amend the Plan, with certain inapplicable limitations;


                  WHEREAS, the Company desires to amend and restate the Plan to
consolidate such three amendments and to make certain other changes;


                  WHEREAS, the ESOP will continue to be maintained for the
exclusive benefit of eligible employees and their beneficiaries (within the
meaning of section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code")), and is intended to continue to qualify as an "employee stock ownership
plan," as defined in section 4975(e)(7) of the Code and as a stock bonus plan
under section 401(a) of the Code with a cash or deferred arrangement under
section 401(k) of the Code;


                  NOW, THEREFORE, effective January 1, 1998, the BetzDearborn
Inc. Employee Stock Ownership and 401(k) Plan is hereby amended and restated;

                                       1
<PAGE>   8
                                    SECTION 1
                                   DEFINITIONS

         The following words and phrases, as used herein, shall have the
following meanings, unless the context clearly indicates otherwise:

         1.1 "Accounts" shall mean a Participant's Company Stock Account, 401(k)
Account, Matching Account, Rollover Account and Other Investments Account.
"Accounts" shall also include a Participant's 401(k), Matching, PAYSOP, Stock
Bonus, Voluntary, and Diversification Account, if any, transferred from the
Stock Bonus Plan.

         1.2 "Accrued Benefit" shall mean the sum of the amounts credited to a
Participant's Accounts.

         1.3 "Affiliate" shall mean any corporation which is a member of a
controlled group of corporations, as defined in section 414(b) of the Code, of
which the Company is a member; any other trade or business which is under common
control, as defined in section 414(c) of the Code, with the Company; any trade
or business which is a member of an affiliated service group, as defined in
section 414(m) of the Code, of which the Company is a member; and any entity
required to be aggregated with the Company pursuant to section 414(o) of the
Code. For purposes of applying sections 414(b) and 414(c) of the Code to the
limitations on contributions set forth in Section X, the phrase "more than 50
percent" shall be substituted for the phrase "at least 80 percent" each place it
appears in section 1563(a)(1) of the Code.

         1.4 "Appropriate Form" shall mean the form provided or prescribed by
the Plan Administrator for the particular purpose.

         1.5 "Board of Directors" shall mean the Board of Directors of
BetzDearborn Inc., as such Board may be constituted from time to time.

         1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended.

         1.7 "Committee" shall mean the Stock Bonus Profit Sharing/ Retirement
Plan Committee appointed by the Board to establish the guidelines for
administration and operation of the Plan and to perform such other duties as are
prescribed in Section XIV.

         1.8 "Common Stock" shall mean voting common shares issued by
BetzDearborn Inc. (formerly named "Betz Laboratories, Inc."), its being intended
that such Common Stock constitute "qualifying employer securities" within the
meaning of section 4975(e)(8) of the Code.

         1.9 "Company" shall mean BetzDearborn Inc. (formerly named "Betz
Laboratories, Inc.") and any other corporation which adopts this Plan in
accordance with the provisions of Section 20.1.

         1.10 "Company Stock" shall mean Preferred Stock and/or Common Stock.

         1.11 "Company Stock Account" shall mean the account established by the
Plan Administrator for each Participant to which Company Stock allocated to the
Participant under Section 6.2, 6.6(a), or 6.6(b) is credited.

         1.12 "Compensation" shall mean an Eligible Employee's base salary or
wages, including any shift premium pay, overtime pay, incentive compensation,
commissions and bonuses paid pursuant to any

                                       2
<PAGE>   9
established plan, but excluding any special bonuses, deferred compensation or
compensation earned pursuant to the Company's Employee Stock Incentive Plan,
except that Compensation shall include the amount includable in the taxable
gross income of an employee making an election described in section 83 of the
Code. Compensation shall include an Eligible Employee's Compensation Deferral
Contribution, if any. Compensation shall include Compensation paid by an
Affiliate which is a controlled foreign corporation pursuant to section 957 of
the Code. The Plan Administrator may establish rules for translating foreign
compensation into U.S. dollars.

         The annual Compensation of each Participant taken into account under
the Plan shall not exceed $160,000, as adjusted by the Commissioner of Internal
Revenue for increases in the cost of living in accordance with section
401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a
calendar year shall apply to any period, not exceeding 12 months, beginning in
such calendar year over which Compensation is determined (the "determination
period"). If a determination period consists of fewer than 12 months, the
applicable limit (as adjusted) shall be multiplied by a fraction, the numerator
of which is the number of months in the determination period, and the
denominator of which is 12.

         1.13 "Compensation Deferral Contribution" shall mean the amount of the
deferred compensation contributed to the Plan in accordance with Section 8.2.

         1.14 "Compensation Deferral Percentage" shall mean any whole percentage
number by which a Participant may elect to have the Company reduce his
Compensation and make Compensation Deferral Contributions to the Plan.

         1.15 "Diversification Account" shall mean the account established in
the Investment Fund by the Plan Administrator for each applicable Participant to
which such Participant's Diversification Account under the Stock Bonus Plan is
transferred, as provided under Section 18.1, and to which diversifications under
Section 18.3 are credited.

         1.16 "Effective Date" shall mean January 1, 1989.

         1.17 "Eligible Employee" shall mean any person employed by the Company
other than (i) a nonresident alien who receives no earned income (as defined in
section 911(b) of the Code) which constitutes United States source income (as
defined in section 861(a)(3) of the Code), or (ii) a person who receives all or
a portion of his Compensation from a Foreign Affiliate (as described in Section
2.7 of the Plan). The term "Eligible Employee" shall not include any person who
is classified as an independent contractor or a Leased Employee by the Company,
regardless of how such individual is classified by the Internal Revenue Service,
by any other governmental agency or government, or by any court.

         1.18 "Employee" shall mean any individual employed by the Company or an
Affiliate.

         1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

         1.20 "Exempt Loan" shall mean any loan to the Trust not prohibited by
section 4975(c) of the Code, including a loan which meets the requirements set
forth in section 4975(d)(3) of the Code and the regulations promulgated
thereunder, the proceeds of which are used to finance the acquisition of Company
Stock or to refinance such a loan.

         1.21 "401(k) Account" shall mean the account established by the Plan
Administrator for each Participant to which Compensation Deferral Contributions
allocated to the Participant are credited.

                                       3
<PAGE>   10
         1.22 "Investment Fund" shall mean, in the aggregate, all of the 401(k)
Accounts, Other Investments Accounts, Rollover Accounts, Voluntary Accounts, and
Diversification Accounts established by the Plan Administrator.

         1.23 "Investment Vehicle" shall mean any separate options available for
the investment of amounts credited to accounts in the Investment Fund.

         1.24 "Leased Employee" shall mean a leased employee of the Company or
an Affiliate within the meaning of section 414(n)(2) of the Code.
Notwithstanding the foregoing, if all such leased employees constitute less than
twenty percent (20%) of the nonhighly compensated work force (within the meaning
of section 414(n)(5)(C)(ii) of the Code) of the Company and the Affiliates, the
term "Leased Employee" shall not include any leased employee covered by a plan
described in section 414(n)(5) of the Code.

         1.25 "Matching Account" shall mean the account established by the Plan
Administrator for each Participant to which Matching Contributions allocated to
the Participant are credited.

         1.26 "Matching Contributions" shall mean all amounts allocated to a
Participant's Matching Account.

         1.27 "Matching Percentage" shall mean the rate at which the Company
matches each Participant's Compensation Deferral Percentage.

         1.28 "Maximum Compensation Deferral Matching Percentage" shall mean the
greatest Compensation Deferral Percentage to be multiplied by the Matching
Percentage in the calculation of Matching Contributions.

         1.29 "Normal Retirement Age" shall mean age 65.

         1.30 "Normal Retirement Date" shall mean the first day of the month
following the month in which a Participant attains Normal Retirement Age.

         1.31 "Other Investments Account" shall mean the account established by
the Plan Administrator for each Participant to which assets allocated to the
Participant other than Company Stock and Compensation Deferral Contributions are
credited.

         1.32 "Participant" shall mean any Eligible Employee who meets or who
has met the eligibility requirements of Section 3 and who has commenced to
participate in the Plan pursuant to Section 3.2.

         1.33 "PAYSOP Account" shall mean the account established by the Plan
Administrator for each applicable Participant to which such Participant's PAYSOP
Account under the Stock Bonus Plan is transferred, as provided under Section
19.1.

         1.34 "Plan" shall mean the BetzDearborn Inc. Employee Stock Ownership
and 401(k) Plan (formerly named the "Betz Laboratories, Inc. Employee Stock
Ownership and 401(k) Plan"), as set forth in this document and as it may be
amended from time to time.

         1.35 "Plan Administrator" shall mean the person designated by the Board
of Directors to execute the administrative functions required by the Board of
Directors, the Committee, the Plan and the Trust Agreement.

                                       4
<PAGE>   11
         1.36 "Preferred Stock" shall mean Series A ESOP Convertible Preferred
Stock issued by BetzDearborn Inc., (formerly named "Betz Laboratories, Inc.")
which is convertible into Common Stock, its being intended that such Preferred
Stock constitute "qualifying employer securities" within the meaning of section
4975(e)(8) of the Code.

         1.37 "Qualified Election Period" shall mean the six-Plan-Year period
beginning with the first Plan Year in which the Participant becomes a Qualified
Participant.

         1.38 "Qualified Participant" shall mean a Participant who has attained
age 55 and who has completed at least 10 years of participation in the Plan.

         1.39 "Rollover Account" shall mean the account established by the Plan
Administrator for each applicable Participant to which assets rolled over to the
Plan by the Participant (including a direct rollover) to the Plan are credited.
A Participant's Rollover Account shall include a separate subaccount consisting
of the Participant's Matching Account, if any, transferred from the Stock Bonus
Plan.

         1.40 "Stock Bonus Account" shall mean the account established by the
Plan Administrator for each applicable Participant to which such Participant's
Stock Bonus Account under the Stock Bonus Plan was transferred, as provided
under Section 18.1.

         1.41 "Stock Bonus Plan" shall mean the Betz Laboratories, Inc. Stock
Bonus Profit Sharing and 401(k) Plan.

         1.42 "Suspense Subfund" shall mean the subfund established pursuant to
Section 6.4 as part of the Trust Fund to hold Company Stock purchased with the
proceeds of an Exempt Loan pending the allocation of such Company Stock to
Participants' Company Stock Accounts.

         1.43 "Trust" shall mean the BetzDearborn Inc. Employee Stock Ownership
and 401(k) Trust, created by the Trust Agreement.

         1.44 "Trust Agreement" shall mean the agreement by and between the
Company and the Trustee, as it may be amended from time to time.

         1.45 "Trust Fund" shall mean all cash and securities and all other
assets deposited with or acquired by the Trustee in its capacity as such
hereunder, together with accumulated income.

         1.46 "Trustee" shall mean Putnam Fiduciary Trust Company, or its duly
appointed successor.

         1.47 "Valuation Date" shall mean the date as of which the Investment
Vehicles are valued and Account balances are able to be determined under Section
5, which shall be each business day.

         1.48 "Voluntary Account" shall mean the account established by the Plan
Administrator for each applicable Participant to which such Participant's
Voluntary Account under the Stock Bonus Plan is transferred, as provided under
Section 18.1. (Contributions to the Voluntary Account under the Stock Bonus Plan
were employee after-tax contributions.)

                                       5
<PAGE>   12
                                   SECTION 2
                                     SERVICE

         2.1 "Hour of Service" shall mean each hour during the applicable
service computation period for which:

                  (a) an Employee is paid, or entitled to be paid, for the
performance of duties for the Company or an Affiliate;

                  (b) an Employee is paid, or is entitled to be paid, by the
Company or an Affiliate, on account of a period of time during which no duties
were performed (whether or not the employment relationship has terminated) due
to vacation, holiday, illness, incapacity (including disability, layoff, jury
duty, military duty or leave of absence); or

                  (c) back pay, determined without regard to mitigation of
damages, is either awarded, or agreed to be awarded, to an Employee by the
Company or an Affiliate, provided that no Hour of Service shall be credited
under this subsection (c) if such Hour of Service has been credited under either
subsection (a) or subsection (b).

         Notwithstanding subsection (b),

                  (1) no more than 501 Hours of Service shall be credited under
         subsection (b) to an Employee on account of any single continuous
         period during which the Employee performs no duties (whether or not
         such period occurs in a single computation period) except that during
         any period not to exceed six months during which the Employee is
         temporarily absent with the Company's or an Affiliate's authorization
         for reasons such as sickness, short-term disability, maternity leave,
         leave of absence, jury duty or layoff, such Employee shall be credited
         with the number of Hours of Service during such period of absence equal
         to those he would have received had he not been absent based on his
         customary period of work;

                  (2) no Hour of Service shall be credited under subsection (b)
         to an Employee indirectly paid, or entitled on account of a period
         during which no duties are performed if such payment is made or due
         under a plan maintained solely for the purposes of complying with any
         applicable worker's compensation, unemployment compensation or
         disability insurance laws;

                  (3) no Hour of Service shall be credited under subsection (b)
         to an Employee for any payment which solely reimburses him for medical
         or medically related expenses he has incurred; and

                  (4) no Hour of Service shall be credited under subsection (b)
         to an Employee for any payments made or due to him under this Plan or
         any other employee pension benefit plan maintained by the Company or an
         Affiliate.

                  For purposes of subsection (b), a payment shall be deemed to
be made by, or due from, the Company or an Affiliate regardless of whether such
payment is made by, or due from, the Company or an Affiliate directly, or
indirectly through, among others, a trust fund, insurer, or other entity to
which the Company or an Affiliate contributes or pays premiums and regardless or
whether contributions made or due to the trust fund, insurer or other entity are
for the benefit of particular Employees or are on behalf of a group of Employees
in the aggregate.

                                       6
<PAGE>   13
                  An authorized leave of absence for service in active duty in
the Armed Forces of the United States shall not constitute a One-Year Break in
Service and an Employee shall receive, upon his return, in addition to the
credit for Hours of Service to which he is entitled under the provisions of this
section, such other credit for such military service as may be prescribed by
Federal laws relating to military service and veteran's reemployment rights.

                  In the case of a payment which is made, or due, on account of
a period during which an Employee performs no duties, and which results in the
crediting of Hours of Service under subsection (b), or in the case of an award
or agreement for back pay, to the extent that such award or agreement is made
with respect to a period described in subsection (b) the number of Hours of
Service to be credited shall be determined in accordance with the applicable
regulations prescribed by the Secretary of Labor and set forth in 29 CFR
Section 2530.200b-2(b).

                  Hours of Service described in subsection (a), (b) and (c)
shall be credited to service computation periods in accordance with the
applicable regulations prescribed by the Secretary of Labor and set forth in 29
CFR Section 2530.200b-2(c).

                  The number of Hours of Service to be credited to an Employee
in a service computation period shall be determined in the following manner:

                  (a) In the case of an Employee for whom the Company or the
Affiliate maintains records of his hours worked and hours for which payment is
made or due, the number of Hours of Service to be credited to such Employee in a
service computation period shall be determined from such records.

                  (b) In the case of an Employee for whom the Company or the
Affiliate does not maintain records of his hours worked and hours for which
payment is made or due, the number of Hours of Service to be credited to such
Employee in a service computation period shall be determined on the basis of
periods of employment which shall be the payroll periods of the Company or the
Affiliate applicable to such Employee. An Employee shall be credited with a
number of Hours of Service, determined in accordance with the following table,
for each of his payroll periods in which he actually has at least one Hour of
Service;

                    PAYROLL PERIOD HOURS OF SERVICE CREDITED

<TABLE>
<CAPTION>
<S>                                                                       <C>
                     weekly                                               45
                     bi-weekly                                            90
</TABLE>

                  The nature and extent of credit for Hours of Service
recognized under this subsection shall be determined in accordance with any
applicable law or regulation.

                  (c) Solely for the purpose of determining whether a
Participant has incurred a One-Year Break in Service, an "Hour of Service" is
also, with respect to any Employee who is absent from work for maternity or
paternity reasons, each hour which would otherwise have been credited to such
Employee but for such absence, or, in any case in which such hours cannot be
determined, eight hours per day of such absence. An absence from work for
maternity or paternity reasons means a continuous absence:

                  (1) by reason of the pregnancy of the Employee;

                  (2) by reason of the birth of a child of the Employee;

                                       7
<PAGE>   14
                  (3) by reason of the placement of a child with the Employee in
         connection with the adoption of such child by such Employee; or

                  (4) for purposes of caring for such child for a period
         beginning immediately following such birth or placement. The Hours of
         Service credited under this subsection (c) shall be credited in the
         service computation period in which the absence begins if the crediting
         is necessary to prevent a One-Year Break in Service in that service
         computation period, or, in all other cases, in the following service
         computation period.

         2.2 "Eligibility Computation Period" shall mean any of the following
12-consecutive-month periods:

                  (a) the 12-consecutive-month period beginning on the date on
which an Employee first completes an Hour of Service (his "date of employment")
or the date on which an Employee first completes an Hour of Service following a
One-Year Break in Service (his "date of reemployment");

                  (b) any Plan Year beginning after an Employee's date of
employment or date of reemployment.

         2.3 "Year of Eligibility Service" shall mean an Eligibility Computation
Period during which an Employee completes 1,000 or more Hours of Service.

         2.4 Year of Vesting Service. An individual shall complete a Year of
Vesting Service in any Plan Year in which he completes 1,000 or more Hours of
Service, whether or not he is in the employ of the Company or an Affiliate at
the end of such Plan Year. In addition to Years of Vesting Service completed
pursuant to the preceding sentence, any individual who was a participant in the
BetzDearborn Inc. Employees' Retirement Plan (formerly named the "Betz
Laboratories, Inc. Retirement Plan") on December 31, 1988, shall be credited
with the number of Years of Vesting Service under this Plan with which he was
credited under such Retirement Plan on that date for purposes of vesting.

         2.5 One-Year Break in Service. An Employee shall be considered to have
incurred a "One-Year Break in Service" in any Plan Year beginning on or after
January 1, 1989 in which he does not have at least 501 Hours of Service.

         2.6 No Parity Break. All of a Participant's Years of Eligibility
Service and Years of Vesting Service shall be taken into account without regard
to how many One-Year Breaks in Service a Participant incurs.

         2.7 Service with a Foreign Affiliate. An Employee's service with a
Foreign Affiliate shall be counted for purposes of eligibility to participate in
the Plan and for determination of Years of Vesting Service. An Employee who is
21 and who has completed a Year of Eligibility Service by reason of employment
with a Foreign Affiliate shall commence participation upon his first Hour of
Service with the Company. "Foreign Affiliate" shall mean (i) any corporation
more than eighty percent (80%) owned by the Company which is incorporated in a
country other than the United States, and (ii) any Affiliate incorporated in the
United States to the extent it does business (and the Employee performs
services) in a country other than the United States.

                                       8
<PAGE>   15
                                    SECTION 3
                                  PARTICIPATION

         3.1 Continued Participation of Participants as of December 31, 1997.
Any Employee who was a Participant as of December 31, 1997, shall continue to
participate in the Plan, provided he is an Eligible Employee on that date.

         3.2 Eligibility and Participation. An Eligible Employee, other than an
indificual who is hired on a temporary basis (i.e., for a period expected to be
less than one year), shall become a Participant in the Plan on the later of (i)
the date he first completes an Hour of Service for the Company, or (ii) the date
he attains age 21, provided he is an Eligible Employee on such date. An Eligible
Employee who is hired on a temporary basis shall become a Participant in the
Plan on the January 1 or July 1 coincident with or immediately following the
later of (i) the date he completes one Year of Eligibility Service, or (ii) the
date he attains age 21, provided he is an Eligible Employee on such date. An
Employee who becomes an Eligible Employee after satisfying the foregoing
eligibility requirements shall become a Participant on the date on which he
becomes an Eligible Employee.

         3.3 Participation After Break in Service. If a Participant separates
from service and is thereafter reemployed by the Company, he shall resume
participation in the Plan immediately upon his return to the service of the
Company.

         3.4 Leased Employees. A Leased Employee shall not be eligible to
participate in the Plan.


                                    SECTION 4
                              COMPANY CONTRIBUTIONS

         4.1 Company Contributions

                  (a) For each of its fiscal years, the Company shall make a
contribution to the Trust in cash sufficient to pay any currently maturing
obligations under an Exempt Loan (to the extent such obligations will not be
paid by dividends on Company Stock under Section 7.3).

                  (b) In addition, for each of its fiscal years, the Company may
make a contribution to the Trust, in cash or in kind (including Company Stock).
The amount of such contribution (if any) for any year shall be determined by
appropriate action by the Board of Directors.

                  (c) All or any part of the cash contributions made pursuant to
subsection (a) or (b) may be applied to repay any outstanding Exempt Loan. The
Plan Administrator, subject to any pledge or similar agreement, shall direct the
Trustee as to the portion of such contributions to be applied to repay each such
Exempt Loan.

                  (d) The Company shall also contribute to the Trust in cash
each Participant's Compensation Deferral Contributions under Section 8.

         4.2 Time of Payment. The Company shall make payment of those cash
contributions to the Trust necessary to pay any currently maturing obligations
under an Exempt Loan in sufficient time to enable the Trustee to make timely
payment of the obligation to the lender under the Exempt Loan. The Company shall
make payment of a Participant's Compensation Deferral Contribution as soon as
practicable after the applicable deferral date. The Company shall make payment
of any other contributions to the Trust for any fiscal year for which it makes
other contributions within the time

                                       9
<PAGE>   16
prescribed by law, including extensions of time, for the filing of its Federal
income tax return for such year.

         4.3 Contributions Irrevocable

                  (a) General Rule. Except as provided in subsection (b), all
Company contributions to the Trust shall be irrevocable. Neither such
contributions nor any income therefrom shall be used for any purpose other than
the exclusive benefit of Participants or their beneficiaries under the Plan.

                  (b) Circumstances of Return of Company Contributions.

                  (1) In the case of a Company contribution made by a mistake of
         fact, such contribution may be returned to the Company within one year
         after the payment of the contribution.

                  (2) Company contributions are conditioned on their
         deductibility under section 404 of the Code, and, to the extent a
         deduction is disallowed, the affected contribution (to the extent
         disallowed) may be returned to the Company within one year after the
         disallowance of the deduction.


                                    SECTION 5
                      PARTICIPANTS' ACCOUNTS AND INVESTMENT
                              THEREOF; EXEMPT LOANS

         5.1 Accounts. A Participant's interest in the Trust Fund shall be
reflected in his Accounts. The Plan Administrator shall establish Account
records for each Participant. Notwithstanding the foregoing, the Trust Fund
shall be treated as a single trust for purposes of investment and
administration, and nothing contained herein shall require a physical
segregation of assets for any such Account.

         5.2 Investment of Trust Fund. Subject to Section 5.4, the Trust Fund
shall be invested primarily in Company Stock. Among other investments, cash or
cash equivalents may be held in the Trust Fund for the purposes of, inter alia,
making distributions to Participants, acquiring shares of Company Stock from
shareholders of BetzDearborn Inc. or directly from BetzDearborn Inc. or enabling
the Plan to repay an Exempt Loan. Neither the Company nor the Committee nor the
Plan Administrator nor the Trustee shall have any responsibility or duty to time
any transaction involving Company Stock in order to anticipate market conditions
or changes in stock value, nor shall any such person have any responsibility or
duty to sell Company Stock held in the Trust Fund (or otherwise to provide
investment management for Company Stock held in the Trust Fund) in order to
maximize return or minimize loss.

         5.3 Exempt Loan. The Board of Directors may direct the Trustee to have
the Plan enter into one or more Exempt Loans to finance the acquisition of
Company Stock. Notwithstanding any other provision of the Plan, all proceeds of
an Exempt Loan shall be used, within a reasonable time after receipt by the
Trustee, for the following purposes only:

                  (a) to acquire Company Stock;

                  (b) to repay the same Exempt Loan; or

                  (c) to repay any previous Exempt Loan.

                                       10
<PAGE>   17
                  An Exempt Loan shall be repaid only from amounts loaned to the
Trust, from Company cash contributions to the Trust and earnings attributable
thereto, from any collateral given for the Exempt Loan and from dividends paid
on Company Stock acquired with proceeds of an Exempt Loan.

                  An Exempt Loan shall be for a specific term, shall bear a
reasonable rate of interest and shall not be payable on demand except in the
event of default. An Exempt Loan may be secured by a pledge of the Company Stock
acquired with its proceeds (or acquired with the proceeds of a prior Exempt Loan
which is being refinanced). No other assets of the Trust Fund may be pledged as
collateral for an Exempt Loan, and no lender shall have recourse against assets
of the Trust Fund other than any Company Stock remaining subject to pledge.

                  Except as otherwise permitted by section 409(l) of the Code
and any regulations issued thereunder, no Company Stock acquired with the
proceeds of an Exempt Loan may be subject to a put, call or other option, or
buy-sell or similar arrangement while held in or when distributed from the Trust
Fund, whether or not the Plan continues to be an employee stock ownership plan
within the meaning of section 4975(e)(7) of the Code and whether or not the
Exempt Loan has been repaid. A Participant's protections in the preceding
sentence shall be nonterminable, within the meaning of Treas. Reg.
Section 4975-11(a)(3)(ii).

         5.4 Diversification of Investments.

                  (a) Election by Qualified Participant. Subject to subsection
(d), each Qualified Participant shall be permitted to direct the Plan, within 90
days after the last day of each Plan Year during the Participant's Qualified
Election Period, as to the investment of (i) twenty-five percent (25%) of the
total number of shares of Company Stock that have ever been allocated to the
Qualified Participant's Company Stock Account and Matching Account on or before
the most recent allocation date immediately preceding the applicable 90-day
period, less (ii) the number of shares of Company Stock previously directed
pursuant to a prior diversification election under this subsection (a). The
number of shares of Company Stock subject to direction shall be rounded to the
nearest whole integer. With respect to a Qualified Participant's diversification
election for the last Plan Year in his Qualified Election Period, "fifty percent
(50%)" shall be substituted for "twenty-five percent (25%)" where it appears in
this subsection (a).

                  Any such diversification election that requires a disposition
of Preferred Stock by the Trustee shall be effected by the Trustee only by the
tender of such Preferred Stock to the Company in exchange for shares of Common
Stock with a fair market value on the date of tender (net after commissions and
cost of sale) equal to the cash redemption price of such Preferred Shares. The
Company is obligated to make such exchange pursuant to Section 6 of the Trust
Agreement. For purposes of this subsection (a), "fair market value" shall have
the same meaning as in Section 6 of the Trust Agreement.

                  (b) Method of Directing Investment. The Participant's
direction shall be provided to the Plan Administrator in writing or in any other
manner acceptable to the Plan Administrator; shall be implemented no later than
180 days after the close of the Plan Year to which the direction applies; and
shall specify which, if any, of the options set forth in subsection (c) the
Participant selects.

                  (c) Investment Options.

                           (1) A fund invested principally in equity securities
         offering unusual opportunities for growth and capital appreciation, but
         which may also be invested in preferred stocks and other securities
         convertible into such equity securities.

                                       11
<PAGE>   18
                           (2) A fund invested principally in fixed income
         securities and other property which produces a fixed return.

                           (3) A fund invested principally in fixed income
         securities maturing in not over two years.

                  (d) De Minimis Rule. If the fair market value (determined on
the Valuation Date immediately preceding the applicable 90-day direction period)
of the Company Stock allocated to a Qualified Participant's Company Stock
Account and Matching Account is $500 or less, the Qualified Participant may not
direct the investment of any portion of his Company Stock Account and Matching
Account balance pursuant to this Section for the Plan Year ending on the
Valuation Date.


                                    SECTION 6
                           ALLOCATION OF CONTRIBUTIONS

         6.1 Participants Entitled to Allocation. Except as provided in Section
8, each contribution to the Trust Fund for a Plan Year (except for a
contribution to be used to amortize an Exempt Loan) and Company Stock released
from the Suspense Subfund pursuant to Section 6.5 for a Plan Year shall be
allocated by the Plan Administrator to and among each Participant (i) who in
such Plan Year completed 1,000 or more Hours of Service for the Company, and
(ii) who was an Eligible Employee on the last day of such Plan Year.
Notwithstanding the preceding clause (ii), a Participant or his beneficiary, as
the case may be, shall be entitled to an allocation for the Plan Year in which
the Participant's employment terminates, regardless of whether the Participant
was an Eligible Employee on the last day of such Plan Year, if the Participant
meets one or both of the following:

                  (a) the Participant's termination of employment occurs on or
after his Normal Retirement Date; or

                  (b) the Participant's termination of employment occurs by
reason of his death or by reason of his total and permanent disability (as
defined in Section 9.5(b)).

                  (c) the Participant elects Early Retirement under the
BetzDearborn Inc. Employees' Retirement Plan upon his termination of employment.

         6.2 Allocation of Company Stock Contributions. The Plan Administrator
shall, as of December 31 of each Plan Year for which the Company makes a Company
Stock contribution, allocate such contribution (including fractional shares to
1/1000 of a share) to the Company Stock Account of each Participant entitled to
an allocation for the Plan Year in the same proportion that such Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants entitled to an allocation for the Plan Year.

         6.3 Allocation of Other Contributions. The Plan Administrator shall, as
of December 31 of each Plan Year for which the Company makes a contribution in a
form other than Company Stock (except for a contribution to be used to amortize
an Exempt Loan or a contribution under Section 8), allocate such contribution to
the Other Investments Account of each Participant entitled to an allocation for
the Plan Year in the same proportion that such Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants entitled to an
allocation for the Plan Year.

         6.4 Allocation of Company Stock Acquired with Exempt Loan. Company
Stock acquired by the Trust with the proceeds of an Exempt Loan shall be added
to and maintained in the Suspense Subfund

                                       12
<PAGE>   19
established within the Trust Fund and shall thereafter be released from the
Suspense Subfund as provided in Section 6.5 and allocated to the Company Stock
Accounts of Participants as provided in Section 6.6.

         6.5 Release from Suspense Subfund. Company Stock acquired by the Trust
with the proceeds of an Exempt Loan shall be released from the Suspense Subfund
as the Exempt Loan is repaid, in one of the alternative methods set forth in
subsection (a) and subsection (b) as elected by the Committee in its sole
discretion.

                  (a) First Alternative. The first alternative method is, for
each Plan Year until the Exempt Loan is fully repaid, to release a number of
shares of Company Stock from the Suspense Subfund (including fractional shares
to 1/1000 of a share) equal to the number of unreleased shares of Company Stock
in the Suspense Subfund immediately before such release multiplied by a
fraction. The numerator of the fraction is the amount of principal and interest
paid on the Exempt Loan for the Plan Year, and the denominator of the fraction
is the sum of the numerator plus the principal and interest to be paid on the
Exempt Loan for all future Plan Years during the term of the Exempt Loan
(determined without reference to any possible extensions or renewals thereof).
For purposes of computing the denominator of the fraction, if the interest rate
on the Exempt Loan is variable, the interest to be paid in future Plan Years
shall be calculated by assuming that the interest rate in effect as of the end
of the applicable Plan Year will be the interest rate in effect for the
remainder of the term of the Exempt Loan. Notwithstanding the foregoing, if the
Exempt Loan is repaid with the proceeds of a subsequent Exempt Loan, such
repayment shall not operate to release all the Company Stock in the Suspense
Subfund; rather, such release shall be effected pursuant to the foregoing
provisions of this section on the basis of payments of principal and interest on
such substitute loan.

                  (b) Second Alternative. The second alternative method is, for
each Plan Year until the Exempt Loan is fully repaid, to determine the number of
shares of Company Stock released from the Suspense Subfund as provided in
subsection (a) but basing such release upon only the amount of principal paid on
the Exempt Loan for the Plan Year (without regard to interest payments). This
method may be used only if the following three conditions are met:

                  (1) the Exempt Loan provides for annual payments of principal
         and interest at a cumulative rate that is not less rapid at any time
         than level annual payments of such amounts for 10 years;

                  (2) the interest portion of any payment is disregarded for
         purposes of determining the number of shares released only to the
         extent it would be treated as interest under standard loan amortization
         tables; and

                  (3) if the Exempt Loan is renewed, extended or refinanced, the
         sum of the expired duration of the Exempt Loan and the renewal period,
         the extension period or the duration of a new Exempt Loan does not
         exceed 10 years.

                  (c) More Than One Exempt Loan. If at any time there is more
than one Exempt Loan outstanding, separate accounts shall be established under
the Suspense Subfund for each Exempt Loan. Each Exempt Loan for which a separate
account is maintained shall be treated separately for purposes of subsections
(a) and (b) governing the release of shares from the Suspense Subfund.

                  (d) Treasury Regulations. It is intended that the provisions
of this section be applied and construed in a manner consistent with the
requirements and provisions of Treas. Reg. Section54.4975-7(b)(8), and any
successor regulation thereto.

                                       13
<PAGE>   20
         6.6 Allocation of Shares Released from Suspense Subfund.

                  (a) Company Stock released from the Suspense Subfund under
Section 6.5 shall first be allocated under this subsection (a). The number of
shares of Company Stock released from the Suspense Subfund as a result of the
cash dividends described in Section 7.3(a)(2) shall be determined. There shall
then be allocated to each Participant's Company Stock Account a sufficient
number of such shares (including fractional shares to 1/1000 of a share) such
that the fair market value of the shares allocated to the Participant's Company
Stock Account equals the amount of such dividends which would have been
allocated to the Participant's Other Investments Account but for the requirement
in Section 7.3(a)(2) that such dividends be used to repay an Exempt Loan. If the
foregoing rule is not met, the Plan Administrator shall notify the Company and
additional contributions to the Plan shall be made by the Company and used by
the Trustee to repay the Exempt Loan to the extent necessary to release
additional shares of Company Stock from the Suspense Subfund to meet the
foregoing rule.

                  (b) Allocations to Match Participants' Compensation Deferral
Contributions. After the allocations described in subsection (a) are made,
shares of Company Stock released from the Suspense Subfund for a Plan Year under
Section 6.5 (including fractional shares of 1/1000 of a share) shall be
allocated to Participants' Matching Accounts as described in Section 8.3(a).

                  (c) Allocation of Remainder. After the allocations described
in subsections (a) and (b) are made, any remaining shares of Company Stock
released from the Suspense Subfund for a Plan Year pursuant to Section 6.5
(including fractional shares to 1/1000 of a share) shall be allocated by the
Plan Administrator as of December 31 of the Plan Year to the Company Stock
Accounts of each Participant entitled to an allocation for the Plan Year in the
same proportion that such Participant's Compensation for the Plan Year bears to
the total Compensation for the Plan Year of all Participants entitled to an
allocation for the Plan Year.

         6.7 Allocation of Forfeitures. All forfeitures occurring under Section
9.4 shall be allocated in the manner described in Section 6.2 or Section 6.3 (as
applicable) as of December 31 of the Plan Year in which the event causing the
forfeiture occurs.


                                    SECTION 7
                                    VALUATION

         7.1 Valuation.

                  (a) The "Company Stock Subfund" established within the Trust
Fund consists of all of the Company Stock Accounts, Matching Accounts, Stock
Bonus Accounts, and PAYSOP Accounts of Participants. The "Other Investments
Subfund" established within the Trust Fund consists of the Investment Fund. As
of each Valuation Date, each such Subfund and the Suspense Subfund shall be
valued separately by the Trustee (or, if required by applicable law, the Trustee
shall cause the Subfund to be valued by an independent appraiser, as described
in the following paragraph), and any net increase or decrease in the fair market
value of the applicable Subfund, including earnings or losses realized or
sustained during the Plan Year or part of the Plan Year then ending, shall be
computed. For the purpose of determining such net increase or decrease, the
value of the applicable Subfund on the immediately preceding Valuation Date
shall be reduced by amounts paid out or due as benefits from such Subfund during
the Plan Year or part of the Plan Year then ending.

                  For purposes of the valuation described above, the fair market
value of shares of Company Stock held by the Trustee shall be determined as of
the Valuation Date coincident with the last

                                       14
<PAGE>   21
day of the Plan Year, and as of such other Valuation Dates as the Plan
Administrator so directs, and, in the case of Preferred Stock, by a recognized
independent firm of security analysts or appraisers meeting requirements similar
to those contained in Treasury regulations under section 170(a)(1) of the Code
(if any).

                  (b) Notwithstanding any other provision of the Plan, to the
extent that Participants' Accounts are invested in Investment Vehicles, the
value of which is priced daily ("Daily Pricing Media"), all amounts contributed
to the Trust Fund will be invested at the time of the actual receipt by the
Investment Vehicle, and the value of each Account shall reflect the results of
such daily pricing from the time of actual receipt until the time of
distribution. Investment elections and changes shall be effective upon receipt
of authorized transaction instructions. References elsewhere in the Plan to the
investment of contributions "as of" a date other than that described in this
Section shall apply only to the extent, if any, that assets of the Trust Fund
are not invested in Daily Pricing Media.

         7.2 Allocation of Gains and Losses. As of each Valuation Date, the net
increase or decrease in the market value of the Company Stock Subfund and of the
Other Investments Subfund, as calculated under Section 7.1, shall be separately
allocated (i) with respect to the Company Stock Subfund, among the Company Stock
Accounts, Matching Accounts, Stock Bonus Accounts, and PAYSOP Accounts of the
Participants in the proportion that each such Account bears to the total of all
such Accounts immediately prior to the valuation and before the allocations for
the current Plan Year pursuant to Section 6 and (ii) with respect to the Other
Investments Subfund, among the separate Accounts in the Investment Vehicles in
the proportion that an amount in each Account in the Investment Vehicle bears to
the total of all Accounts in the Investment Vehicle prior to the valuation and
before the allocations for the current Plan Year pursuant to Section 6.

         7.3 Dividends on Company Stock.

                  (a) Cash Dividends.

                  (1) Any cash dividends received which are attributable to
         shares of Company Stock held in Participants' Accounts which were not
         acquired with the proceeds of an Exempt Loan shall be credited to such
         Accounts as of the record date of the dividend.

                  (2) Any cash dividends received which are attributable to
         shares of Company Stock (i) acquired with the proceeds of an Exempt
         Loan and (ii) previously allocated to Participants' Company Stock
         Accounts or Matching Accounts shall be used by the Trustee to repay an
         Exempt Loan. Upon such repayment, shares of Company Stock shall be (i)
         released from the Suspense Subfund in accordance with Section 6.5(a) or
         Section 6.5(b) (as applicable) and (ii) allocated to Participants'
         Company Stock Accounts and Matching Accounts in accordance with Section
         6.6.

                  (3) Any cash dividends received which are attributable to
         shares of Company Stock (i) acquired with the proceeds of an Exempt
         Loan and (ii) held in the Suspense Subfund shall be used by the Trustee
         to repay an Exempt Loan. Upon such repayment, shares of Company Stock
         shall be (i) released from the Suspense Subfund in accordance with
         Section 6.5(a) or Section 6.5(b) (as applicable) and (ii) allocated to
         Participants' Company Stock Accounts and/or Matching Accounts in
         accordance with Section 6.6.

                  (b) Stock Dividends. Stock dividends paid (and stock received
by the Trustee as a result of a stock split, stock conversion or reorganization
or recapitalization of the Company) with respect to shares of Company Stock held
in the Trust Fund shall be credited (i) to the Accounts to which such Company
Stock was previously allocated or is otherwise held or (ii) in the case of
Company Stock still

                                       15
<PAGE>   22
maintained in the Suspense Subfund pursuant to Section 6 or otherwise
unallocated, to the Suspense Subfund or to the otherwise unallocated Company
Stock.


                                    SECTION 8
                                   401(k) PLAN

         8.1 Definitions. The following definitions shall apply for purposes of
this Section:

                  (a) "Actual Deferral Percentage" shall mean the ratio
(expressed as a percent) of Compensation Deferral Contributions on behalf of an
Eligible Participant for the relevant Plan Year to such Eligible Participant's
Statutory Compensation for such Plan Year. Actual Deferral Percentages shall be
calculated to the nearest 1/100th of one percent.

                  (b) "Average Actual Deferral Percentage" shall mean the
average (expressed as a percentage) of the Actual Deferral Percentages of the
Eligible Participants in a group. Average Actual Deferral Percentages shall be
calculated to the nearest 1/100 of one percent.

                  (c) "Average Contribution Percentage" shall mean the average
(expressed as a percentage) of the Contribution Percentages of the Eligible
Participants in a group. Average contribution Percentage shall be calculated to
the nearest 1/100 of one percent.

                  (d) "Contribution Percentage" shall mean the ratio (expressed
as a percent) of the Matching Contributions on behalf of an Eligible Participant
for the relevant Plan Year to such Eligible Participant's Statutory Compensation
for such Plan Year. Contribution Percentages shall be calculated to the nearest
1/100th of one percent.

                  (e) "Determination Year" shall mean the Plan Year for which a
determination of which Employees are Highly Compensated Employees is being made.

                  (f) "Eligible Participant" shall mean an Employee who is
authorized under the terms of the Plan to have Compensation Deferral
Contributions made to the Plan on his behalf for the relevant Plan Year.

                  (g) "Excess Aggregate Contributions" shall mean the amount
described in section 401(m)(6)(B) of the Code.

                  (h) "Excess Contributions" shall mean the amount described in
section 401(k)(8)(B) of the Code.

                  (i) "Excess Deferral Amount" shall mean the Amount of
Compensation Deferral Contributions for a calendar year which the Participant
allocates to this Plan pursuant to the claims procedure set forth in Section
8.13(b).

                  (j) "Highly Compensated Employee" shall mean, for Plan Years
beginning after December 31, 1996, an Employee described in either paragraph (1)
or paragraph (2). The determination of who is a Highly Compensated Employee
shall be made in accordance with section 414(q) of the Code and Treasury
regulations thereunder.

                                       16
<PAGE>   23
                  (1) An Employee is a Highly Compensated Employee for a Plan
         Year if he is a five percent (5%) owner (as defined in section
         416(i)(1)(B) of the Code) of the Company or an Affiliate at any time
         during the Determination Year or the Look-Back Year.

                  (2) An Employee is a Highly Compensated Employee for a Plan
         Year if he received "compensation" (as defined in section 414(q)(4) of
         the Code) from the Company and Affiliates in excess of $80,000 (as
         adjusted by the Secretary of the Treasury in accordance with section
         414(q)(1) of the Code) during the Look-Back Year, and (if the Committee
         so elects for any Determination Year) was in the Top-Paid Group for the
         Look-Back Year.

                  (k) "Non-Highly Compensated Employee" shall mean, for Plan
Years beginning after December 31, 1996, an Employee who is not a Highly
Compensated Employee.

                  (l) "Statutory Compensation" shall mean all compensation as
defined in Treas. Reg. Sections 1.415-2(d)(2) and (3) paid to or on behalf of an
Eligible Participant during the portion of the relEvant Plan Year during which
he is eligible to participate in the Plan, plus all amounts that are not
currently includable in the Eligible Participant's gross income during such
period by reason of the application of section 125, 402(e)(3) or 402(h)(1)(B) of
the Code. The annual Statutory Compensation of each Eligible Participant taken
into account under the Plan shall not exceed $150,000, as adjusted by the
Commissioner of Internal Revenue for increases in the cost of living in
accordance with section 401(a)(17)(B) of the Code.

                  (m) "Top-Paid Group" shall mean the top twenty percent (20%)
of the Employees when ranked on the basis of Compensation from the Company and
Affiliates. Employees described in section 414(q)(5) of the Code shall be
excluded for purposes of determining the number of employees in the Top-Paid
Group.

         8.2 Participant Compensation Deferrals.

                  (a) Deferral Percentages. Each Participant may direct the
Company to reduce his Compensation by 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14
or fifteen percent (15%). Compensation shall be reduced by means of payroll
deductions.

                  (b) Determination of Maximum Compensation Deferral Percentage.
Notwithstanding subsection (a), prior to the beginning of each Plan Year, for
the purpose of meeting the nondiscrimination requirements and limitations of
Sections 8.10 and 8.11, the Plan Administrator may establish a maximum
limitation of less than fifteen percent (15%) on the elective deferrals that may
be elected by Highly Compensated Employees.

         8.3 Company Matching Contributions.

                  (a) Matching Contributions. Shares of Company Stock that have
been released from the Suspense Subfund under Section 6.5 and that have not and
will not be transferred to the Company Stock Account of Participants under
Section 6.6(a) shall be allocated to a Participant's Matching Account. The
shares so allocated shall have a fair market value as of the immediately
preceding Valuation Date equal to the Matching Rate, multiplied by the lesser of
(i) the Participant's Compensation Deferral Percentage or (ii) the Maximum
Compensation Deferral Matching Percentage, multiplied by the Participant's
Compensation.

                  (b) Matching Rate. The Matching Rate shall be twenty-five
(25%). The Maximum Compensation Deferral Matching Percentage shall be four
percent (4%).

                                       17
<PAGE>   24
         8.4 Designation of Account. A Participant may designate in which
Investment Vehicles his Compensation Deferral Contributions (including
Compensation Deferral Contributions which were made under the Stock Bonus Plan
and are transferred to the Participant's 401(k) Account in this Plan) and his
Rollover Account (if any) shall be invested. Each Participant shall submit
instructions designating in multiples of five percent (5%) the Investment
Vehicles in which his Account balances in the Investment Fund shall be invested.
Allocations to the Accounts of the Participant in the Investment Fund shall
continue to be invested in the manner selected by the Participant until the
receipt of instructions changing the Participant's investment selection. The
Plan Administrator shall establish rules and procedures for the selection of
Investment Vehicles including rules for the designation of an investment
selection in the event any Participant fails to make a designation. The Plan
Administrator may limit the number of times per year that Participants may
change their investment selection.

                  A Participant's selection of his investment option shall be
effective as of any Valuation Date. The Participant's Account balances shall be
adjusted as of each Valuation Date, in accordance with Section 7.2, based on the
performance of the Investment Vehicles selected by the Participant. Each Account
shall be valued separately.

         8.5 Changing Rates of Contribution. A Participant shall establish,
suspend, increase or decrease his Compensation Deferral Percentage by filing an
Appropriate Form with the Plan Administrator or his designee, or in any other
manner acceptable to the Plan Administrator, which shall be made effective
within 30 days from day of receipt or other notification. A Participant's
Compensation Deferral Percentage shall continue in effect, notwithstanding any
change in Compensation, until the Participant elects to change it. The Plan
Administrator may limit the number of times per year each Participant may change
his Compensation Deferral Percentage.

         8.6 Withdrawals of Compensation Deferral Contributions. A Participant
may not withdraw any Matching Contributions (including Matching Contributions
which were made under the Stock Bonus Plan and are transferred to the
Participant's Rollover Account in this Plan) or earnings on his 401(k) Account.
A Participant may withdraw Compensation Deferral Contributions (including
Compensation Deferral Contributions which were made under the Stock Bonus Plan
and are transferred to the Participant's 401(k) Account in this Plan) in
accordance with subsections (a) and (b).

                  (a) The Plan Administrator may grant consent to a requested
withdrawal only to the extent of an immediate and heavy financial need of the
Participant for which funds are not reasonably available from other resources of
the Participant. The amount of an immediate and heavy financial need may include
any amounts necessary to pay any Federal, state, or local income taxes or
penalties reasonably anticipated to result from the withdrawal.

                  The circumstances which may warrant approval of a
Participant's application for a hardship withdrawal are:

                  (1) payment of tuition and related educational expenses for
         the next 12 months of post-secondary education for the Participant, his
         dependents, spouse or children;

                  (2) expenses for medical care described in section 213(d) of
         the Code previously incurred by the Participant, his spouse, or his
         dependents, or necessary for those persons to obtain medical care
         described in section 213(d) of the Code;

                  (3) costs directly related to the purchase of a principal
         residence for the Participant (excluding mortgage payments);

                                       18
<PAGE>   25
                  (4) the need to prevent the eviction of the Participant from
         his principal residence or foreclosure on the mortgage of the
         Participant's principal residence; or

                  (5) such other circumstances as may be deemed hardships
         pursuant to Treas. Reg. Section 1.401(k)-1(d)(2)(ii)(B).

                  A Participant may apply to withdraw from his 401(k) Account at
any time by submitting an Appropriate Form to the Plan Administrator specifying
the reason for the withdrawal and the amount of the withdrawal, or in any other
manner acceptable to the Plan Administrator.

                  The Plan Administrator shall review all requests for
withdrawal within 30 days. If approved by the Plan Administrator, withdrawals
shall equal the lesser of (i) the amount required to meet the need created by
the hardship, or (ii) the amount to the credit of the Participant's 401(k)
Account. The Plan Administrator must make the determination of the existence of
financial hardship in a uniform and nondiscriminating manner.

                  If the Plan Administrator consents to a request for a
withdrawal, then the sum approved to be withdrawn shall be paid to the
Participant as soon as administratively practicable after approval of the
request.

                  (b) A Participant may withdraw his Compensation Deferral
Contributions or any portion thereof without the consent of the Plan
Administrator at any time after he has attained age 59-1/2.

         8.7 Restrictions. A Participant may make one or more withdrawals, in
accordance with Section 8.6, in a Plan Year. All withdrawals will be based on
the value of the Participant's 401(k) Account as of the Valuation Date
immediately preceding the distribution. The Plan Administrator shall establish
guidelines for determining from which Investment Vehicles the withdrawal shall
be taken. In the event of a withdrawal of all or any part of his 401(k) Account
prior to the date he attains age 59-1/2, the Participant's Compensation Deferral
Contributions shall thereupon cease and the Participant shall not be eligible to
resume Compensation Deferral Contributions or elective contributions to any
other plan maintained by the Company or any Affiliate which is qualified under
section 401(a) of the Code, until the first payroll period following the
12-month period after the Participant's receipt of the hardship withdrawal. The
suspension described in the preceding sentence shall not apply if the withdrawal
occurs after the Participant attains age 59-1/2.

         8.8 Periods of Absence. A Participant who is on a leave of absence with
the consent of the Company may continue to have contributions made under the
Plan by salary reduction and payroll deductions when Compensation is being
continued by the Company.

         8.9 Termination of Contributions. Compensation Deferral Contributions
shall terminate coincident with the date the Participant terminates employment
for any reason, including retirement or death.

         8.10 Limitation on Compensation Deferral Contributions.

                  (a) Maximum Amount of Compensation Deferral Contributions. No
Participant shall be permitted to have Compensation Deferral Contributions made
under this Plan during any calendar year in excess of $10,000 as adjusted by the
Secretary of the Treasury for increases in the cost of living in accordance with
section 402(g)(5) of the Code.

                                       19
<PAGE>   26
                  (b) Average Actual Deferral Percentage. For Plan Years
beginning after December 31, 1996, Compensation Deferral Contributions for
Eligible Participants who are Highly Compensated Employees shall meet at least
one of the following two tests:

                  (1) The Average Actual Deferral Percentage for Eligible
         Participants who are Highly Compensated Employees for the Plan Year
         shall not exceed the Average Actual Deferral Percentage for the
         preceding Plan Year, for those Eligible Participants in such preceding
         Plan Year who were Non-Highly Compensated Employees for such preceding
         Plan Year, multiplied by 1.25.

                  (2) The Average Actual Deferral Percentage for Eligible
         Participants who are Highly Compensated Employees for the Plan Year
         shall not exceed the Average Actual Deferral Percentage for the
         preceding Plan Year, for those Eligible Participants in such preceding
         Plan Year who were Non-Highly Compensated Employees for such preceding
         Plan Year, multiplied by two; provided that the Average Actual Deferral
         Percentage for those Eligible Participants who are Highly Compensated
         Employees for the Plan Year does not exceed the Average Actual Deferral
         Percentage for Eligible Participants who were Non-Highly Compensated
         Employees for the preceding Plan Year by more than two percentage
         points.

                  (c) Special Rules.

                  (1) For purposes of this Section, the Actual Deferral
         Percentage for any Eligible Participant who is a Highly Compensated
         Employee for the Plan Year and who is eligible to have elective
         deferrals allocated to his account under two or more plans or
         arrangements described in section 401(k) of the Code that are
         maintained by the Company or an Affiliate shall be determined as if all
         such elective deferrals were made under a single arrangement.

                  (2) A Compensation Deferral Contribution shall be taken into
         account under subsection (b) for a Plan Year only if it relates to
         Compensation that would have been received by the Eligible Participant
         in the Plan Year, but for the Eligible Participant's election to defer
         a portion of his Compensation under Section 8.2.

                  (3) A Compensation Deferral Contribution shall be taken into
         account under subsection (b) for a Plan Year only if it is allocated to
         the Eligible Participant's 401(k) Account as of a date within that Plan
         Year. For this purpose, a Compensation Deferral Contribution shall be
         considered allocated as of a date within the Plan Year if the
         allocation is not contingent on participation in the Plan or the
         performance of services after the date and the Compensation Deferral
         Contribution is actually paid to the Trust Fund no later than 12 months
         after the end of the Plan Year to which the Compensation Deferral
         Contribution relates.

                  (4) The determination and treatment of the Compensation
         Deferral Contributions and Actual Deferral Percentage of any Eligible
         Participant shall satisfy such other requirements as may be prescribed
         by the Secretary of the Treasury.

         8.11 Limitations on Matching Contributions.

                  (a) Contribution Percentages. For Plan Years beginning after
December 31, 1996, the Matching Contributions for Eligible Participants who are
Highly Compensated Employees shall meet at least one of the following two tests:

                                       20
<PAGE>   27
                  (1) The Average Contribution Percentage for Eligible
         Participants who are Highly Compensated Employees for the Plan Year
         shall not exceed the Average Contribution Percentage for the preceding
         Plan Year, for those Eligible Participants in such preceding Plan Year
         who were Non-Highly Compensated Employees for such preceding Plan Year,
         multiplied by 1.25.

                  (2) The Average Contribution Percentage for Eligible
         Participants who are Highly Compensated Employees for the Plan Year
         shall not exceed the Average Contribution Percentage for the preceding
         Plan Year, for those Eligible Participants in such preceding Plan Year
         who were Non-Highly Compensated Employees for such preceding Plan Year,
         multiplied by two; provided that the Average Contribution Percentage
         for Eligible Participants who are Highly Compensated Employees for the
         Plan Year does not exceed the Average Contribution Percentage for
         Eligible Participants who were Non- Highly Compensated Employees for
         the preceding Plan Year by more than two percentage points, subject to
         Treas. Reg. Section 1.401(m)-2 (modified as necessary to reflect the
         Small Business Job Protection Act of 1996). If it is necessary to
         reduce the Average Contribution Percentage for Eligible Participants
         who are Highly Compensated Employees for the Plan Year to prevent the
         multiple use of the alternative limitation, the Contribution Percentage
         of all Highly Compensated Employees shall be subject to reduction to
         the extent necessary under Section 8.15.

                  (b) Special Rules.

                  (1) For purposes of this Section, the Contribution Percentage
         for any Eligible Participant who is a Highly Compensated Employee for
         the Plan Year and who is eligible to make after-tax contributions, or
         to have employer matching contributions allocated to his account, under
         two or more plans described in section 401(a) of the Code or
         arrangements described in section 401(k) of the Code that are
         maintained by the Company or an Affiliate shall be determined as if all
         such after-tax and employer matching contributions were made under a
         single plan.

                  (2) In the event that this Plan satisfies the requirements of
         section 410(b) of the Code only if aggregated with one or more other
         plans, or if one or more other plans satisfy the requirements of
         section 410(b) of the Code only if aggregated with this Plan, then this
         Section shall be applied by determining the Contribution Percentages of
         Eligible Participants as if all such plans were a single plan.

                  (3) A Matching Contribution shall be taken into account under
         subsection (a) for a Plan Year only if it is (i) made on account of the
         Eligible Participant's Compensation Deferral Contributions for the Plan
         Year, (ii) allocated to the Eligible Participant's Company Stock
         Account during the Plan Year, and (iii) paid to the Trust Fund on or
         before the last day of the 12th month following the end of the Plan
         Year.

                  (4) The determination and treatment of the Contribution
         Percentage of any Participant shall satisfy such other requirements as
         may be prescribed by the Secretary of the Treasury.

         8.12 Election to Use Current Plan Year. The Company may elect to apply
Section 8.10(b) and (c) and Section 8.11 by using the Plan Year rather than the
preceding Plan Year, as permitted under section 401(k)(3)(A) of the Code,
provided that if such an election is made, it may not be changed except as
provided by the Secretary of the Treasury.

                                       21
<PAGE>   28
         8.13 Distribution of Excess Deferrals.

                  (a) In General. Notwithstanding any other provision of the
Plan, Excess Deferral Amounts plus any income and minus any loss allocable
thereto shall be distributed no later than each April 15 to Participants who
claim allocable Excess Deferral Amounts for the preceding calendar year.

                  (b) Claims. A Participant's claim shall be in writing; shall
be submitted to the Plan Administrator no later than March 1; shall specify the
Participant's Excess Deferral Amount for the preceding calendar year; and shall
be accompanied by the Participant's written statement that if the Excess
Deferral Amount is not distributed, it, when added to amounts deferred under
other plans or arrangements described in section 401(k), 408(k) or 403(b) of the
Code, exceeds the limit imposed on the Participant by section 402(g) of the Code
for the year in which the deferral occurred.

                  (c) Determination of Income or Loss. A Participant's Excess
Deferral Amount shall be adjusted for income or loss up to December 31 of the
taxable year for which the Excess Deferral Amount was deferred or to the extent
that such Excess Deferral Amount is invested in Investment Vehicles the value of
which is priced daily, up to the date of distribution in accordance with Section
7.1(b). The income or loss allocable to a Participant's Excess Deferral Amount
shall be determined in accordance with Section 7.2.

                  (d) Accounting for Excess Deferral Amounts. Excess Deferral
Amounts distributed under this Section shall be distributed from the
Participant's 401(k) Account.

         8.14 Distribution of Excess Contributions.

                  (a) In General. Notwithstanding any other provision of the
Plan, Excess Contributions plus any income and minus any loss allocable thereto
shall be distributed within the 12-month period beginning on the earlier of the
last day of the Plan Year for which such Excess Contributions were made, or the
date of the complete termination of the Plan, to Participants on whose behalf
the Excess Contributions were made for such Plan Year. (If the Excess
Contributions are distributed after the first March 15, after the last day of
the Plan Year in which the Excess Contributions arose, the Company will be
subject to a ten percent (10%) excise tax under section 4979 of the Code with
respect to the Excess Contributions.)

                  (b) Determination and Distribution of Excess Contributions.
The amount of Excess Contributions for Plan Years beginning on or after January
1, 1997 shall be determined in the following manner. First, the Actual Deferral
Percentage for the ("ADP") of the Highly Compensated Employee(s) with the
highest ADP shall be reduced to the extent necessary to satisfy Section 8.10(b)
or to cause such ADP to equal the ADP of the Highly Compensated Employee(s) with
the next highest ADP. Second, this process shall be repeated until Section
8.10(b) is satisfied. The amount of Excess Contributions equals the total amount
of reductions in Compensation Deferral Contributions that would be required to
achieve the ADPs determined in the preceding sentences.

                  Then, the Compensation Deferral Contributions of the Highly
Compensated Employee(s) with the highest Compensation Deferral Contribution
amount for the Plan Year shall be reduced and distributed to such Employee(s) to
the extent necessary to equal the amount of Excess Contributions determined in
the preceding paragraph, or to cause the amount of such Compensation Deferral
Contributions to equal the amount of Compensation Deferral Contributions of the
Highly Compensated Employee(s) with the next highest amount for the Plan Year.
This process shall be repeated until an amount equal to the total Excess
Contributions determined in the preceding paragraph is distributed. The Average
Actual Deferral Percentage tests in Section 8.10(b) shall not be re-run.

                                       22
<PAGE>   29
                  (c) Determination of Income or Loss. The Excess Contributions
shall be adjusted for income or loss up to the last day of the Plan Year for
which such Excess Contributions were made, or, to the extent that such Excess
Contributions are invested in Investment Vehicles the value of which is priced
daily, up to the date of distribution in accordance with Section 7.1(b). The
income or loss allocable to a Participant's Excess Contributions shall be
determined in accordance with Section 7.2.

                  (d) Accounting for Excess Contributions. Excess Contributions
shall be distributed from the Participant's 401(k) Account in proportion to the
Participant's Compensation Deferral Contributions for the Plan Year.

                  (e) Reduction for Excess Deferrals Distributed. The Excess
Contributions which would otherwise be distributed under this Section shall be
reduced, in accordance with regulations issued under section 401(k) of the Code,
by the amount of Excess Deferrals distributed to the Participant under Section
8.13.

         8.15 Distribution of Excess Aggregate Contributions.

                  (a) In General. Excess Aggregate Contributions, plus any
income and minus any loss allocable thereto, shall be distributed within the
12-month period beginning on the earlier of the last day of the Plan Year for
which such Excess Aggregate Contributions were made or the date of the complete
termination of the Plan, to Participants on whose behalf the Excess Aggregate
Contributions were allocated for such Plan Year. (If the Excess Aggregate
Contributions are distributed after the first March 15 after the last day of the
Plan Year in which the Excess Aggregate Contributions arose, the Company will be
subject to a ten percent (10%) excise tax under section 4979 of the Code with
respect to the Excess Aggregate Contributions.)

                  (b) Determination of Excess Aggregate Contributions. The
amount of Excess Aggregate Contributions for a Highly Compensated Employee for
Plan Years beginning on or after January 1, 1997 shall be determined in the
following manner. First, the Average Contribution Percentage ("ACP") of the
Highly Compensated Employee(s) with the highest ACP shall be reduced to the
extent necessary to satisfy Section 8.11(a) or to cause such ACP to equal the
ACP of the Highly Compensated Employee(s) with the next highest ACP. Second,
this process shall be repeated until Section 8.11(a) is satisfied. The amount of
Excess Aggregate Contributions equals the total amount of reductions in Matching
Contributions that would be required to achieve the ACPs determined in the
preceding sentences.

                  Then, the Matching Contributions of the Highly Compensated
Employee(s) with the highest Matching Contribution amount for the Plan Year
shall be reduced and distributed to such Employee(s) to the extent necessary to
equal the amount of Excess Aggregate Contributions determined in the preceding
paragraph, or to cause the amount of such Matching Contributions to equal the
amount of Matching Contributions of the Highly Compensated Employee(s) with the
next highest amount for the Plan Year. This process shall be repeated until an
amount equal to the total Excess Aggregate Contributions determined in the
preceding paragraph is distributed. The Average Contribution Percentage tests in
Section 8.11(a) shall not be re-run.

                  (c) Determination of Income or Loss. The Excess Aggregate
Contributions shall be adjusted for income or loss up to the last day of the
Plan Year for which such Excess Aggregate Contributions were made, or, to the
extent that such Excess Aggregate Contributions are invested in Investment
Vehicles the value of which is priced daily, up to the date of distribution in
accordance with

                                       23
<PAGE>   30
Section 7.1(b). The income or loss allocable to a Participant's Excess Aggregate
Contributions shall be determined in accordance with Section 7.2.

         8.16 Designation as Profit-Sharing Plan. This Section, in conjunction
with the remainder of the Plan, constitutes a profit-sharing plan, within the
meaning of section 401(a)(27) of the Code.

         8.17 Participant Rollover Contribution.

                  (a) Rollovers. With the approval of the Committee, a
Participant may make a contribution to the Plan of any portion of an amount that
qualifies as an eligible rollover distribution under section 402(c)(4) or
403(a)(4) of the Code, or as a rollover contribution under section
408(d)(3)(A)(ii) of the Code. Any rollover contribution so authorized shall be
placed in the Participant's Rollover Account.

         8.18 Loans.

                  (a) General Rule. Upon receipt of a request for a loan, the
Plan Administrator shall direct the Trustee to make a loan to a Participant who
is an active employee (or to any terminated Participant or beneficiary who is a
"party in interest" to the Plan within the meaning of section 3(14) of ERISA),
provided such loan meets the requirements of this Section and the requirements
of such procedures and guidelines as may be adopted by the Plan Administrator
which are consistent with this Section. For purposes of this Section, the term
"Participant" shall be deemed to include any terminated Participant or
beneficiary to whom Plan loans are available, except where the context otherwise
requires. A Participant's loan request shall be made by means of a completed
application on a form supplied by the Plan Administrator, or in any other manner
acceptable to the Plan Administrator.

                  (b) Terms of Loan. Each loan granted or renewed under this
Section shall bear a rate of interest which is two percentage points greater
than the prime lending rate, as announced in The Wall Street Journal, on the
business day coincident with or first following the fifteenth calendar day of
the month in which the loan is made or such other rate as may be determined by
the Plan Administrator to be required by law. The interest rate and other
conditions for the repayment of the loan shall be fixed at the time the loan is
made. All loans shall be repayable by their terms within five years.

                  (c) Limitations. The amount of a loan to a Participant shall
not exceed the lesser of:

                  (1) one-half of the amount of the sum of the Participant's
         Rollover and 401(k) Accounts as of such date; or

                  (2) $50,000, reduced by the highest outstanding balance of the
         Participant's loans from the Plan during the one-year period ending on
         the day before such loan is made.

                  The minimum amount of any loan under this Section shall be
$1,000.

                  A Participant may not have more than one loan outstanding at
any time.

                  (d) Repayment Terms. Except as may be provided in regulations
issued by the Secretary of the Treasury, each loan shall require substantially
level amortization, with payments not less frequently than quarterly over the
term of the loan. A Participant shall be required to repay any loans through
payroll deduction, except that he may elect to prepay the entire outstanding
balance of the loan in a single lump sum.

                                       24
<PAGE>   31
                  Each loan shall be evidenced by a promissory note and shall be
secured by the vested balance of the Participant's Accounts; provided that,
immediately after the origination of such loan, not more than fifty percent
(50%) of the vested balance of the Participant's Accounts shall be used as
security for the loan. Each loan shall also be secured by such other collateral,
if any, as may be required by the Plan Administrator. If the Participant ceases
to be actively employed and receiving Compensation before absence or disability
leave, the Plan Administrator may permit the Participant to continue to make
loan repayments or may, in the Plan Administrator's discretion accelerate such
loan. If the Participant separates from service, and if, following such
separation, the Participant is no longer a party in interest to the Plan, the
loan shall be accelerated, and the unpaid balance of the loan, and accrued
interest thereon, shall be deducted from the amount of any benefits which become
payable to or on behalf of the Participant under the Plan.

                  (e) General Requirements. All loans shall (i) be available to
all eligible Participants on a reasonably equivalent basis, (ii) not be made
available to Highly Compensated Employees (as defined in Section 8.1(j) in an
amount (when calculated as a percentage of the borrower's Accrued Benefit under
the Plan) greater than the amount (similarly calculated) made available to other
Participants, and (iii) be made in accordance with this Section.

                  (f) Accounts Available for Loans.

                  (1) Order of Accounts. Any loan made to a Participant under
         this Section shall be considered an earmarked investment of such
         Participant's Accounts. Each loan shall be made from, and repayments
         shall be credited to, the Participant's Accounts in the order listed
         below:

                           (A) first, from the Participant's Rollover Account;
         and

                           (B) second, from the Participant's 401(k) Account.

                  (2) Investment of Participant's Accounts. Until a loan to a
         Participant is repaid, the outstanding balance of the loan shall be
         treated as an investment by such Participant for his Account(s) only,
         and the interest paid by such Participant shall be credited to his
         Account(s) only. The Participant's Account(s) shall not share in any
         other earnings of the Plan with respect to the amount of the loan.

                  (3) Loan Date. Each loan shall be made as soon as practicable
         following approval of the Participant's loan application by the Plan
         Administrator. To the extent any loan is made from a particular Account
         of a Participant which is invested partially in different investment
         media, such loan shall be made pro-rata from the investments of such
         Account in each such investment medium (other than Preferred Stock),
         valued as of the most recent Valuation Date or, to the extent that such
         loan is made from amounts invested in Investment Vehicles the value of
         which is priced daily, as of the date of the loan.

                  (4) Investment of Loan Repayments. Loan repayments which are
         credited to a Participant's Account(s) shall be reinvested in
         accordance with Sections 5.2, 5.4, or 8.4, as applicable.

                                       25
<PAGE>   32
                                    SECTION 9
                           BENEFITS AND DISTRIBUTIONS

         9.1 Vesting. A Participant shall at all times have a nonforfeitable
(vested) right to all amounts allocated to his 401(k) and Rollover Accounts. A
Participant shall have a nonforfeitable (vested) right to his entire Accrued
Benefit when he attains Normal Retirement Age. Before his Normal Retirement Age,
a Participant shall have a nonforfeitable (vested) right to the percentage of
his Company Stock, Matching, and Other Investments Accounts determined under the
following table:

<TABLE>
<CAPTION>
                        Years                                          Nonforfeitable
                  of Vesting Service                                     Percentage
                  ------------------                                     ----------
<S>                                                                   <C>
                    less than 5                                               0%
                    5 or more                                               100%
</TABLE>

         There shall be no divestment of a Participant's Accrued Benefit for
cause.

         9.2 Amount, Method, Form of Benefit Payments.

                  (a) Amount. The amount of any benefits payable under this
Section shall be the Participant's vested Accrued Benefit and based on the
Valuation Date immediately preceding distribution.

                  (b) Method. Except as otherwise required by Sections 9.8 and
9.9, benefits shall be paid as follows:

                  (1) with respect to any Participant who dies while in the
         service of the Company or an Affiliate, or any Participant whose
         Accrued Benefit does not exceed (and has not at the time of any prior
         distribution exceeded) $5,000, one lump sum payment paid as soon as
         practicable following the Participant's death or other event which
         requires the benefit payment, as applicable;

                  (2) with respect to any Participant whose vested Accrued
         Benefit exceeds (or at the time of any prior distribution exceeded)
         $5,000, one lump sum payment paid as soon as practicable after the
         event occurs which requires the benefit payment, provided any consent
         required by Section 9.4(b) is given.

                  (c) Form. Benefits from the Participant's Company Stock,
Matching, and Other Investments Accounts shall be paid in whole shares of
Company Stock. To the extent the Participant's Company Stock and Matching
Accounts hold Preferred Stock, benefits shall be paid in shares of Common Stock
derived from the sale to the Company or conversion of the Preferred Stock, plus
cash for any fractional shares. If the fair market value of Common Stock
(closing price) is equal to or greater than the value of the Preferred Stock,
both as determined under subsection (a), then shares of Common Stock derived
from the sale or conversion of the Preferred Stock to Common Stock shall be
distributed to the Participant. If the fair market value of Common Stock
(closing price), determined as of the date of distribution, is less than the
value of the Preferred Stock, determined under subsection (a), then, in addition
to the shares of Common Stock derived from the sale or conversion of the
Preferred Stock, there shall be contributed to the Plan by the Company and
distributed to the Participant additional whole shares of Common Stock with a
value as of the date of distribution as close as possible to equaling (but not
exceeding) the shortfall, with any remaining shortfall distributed to the
Participant in cash. Benefits from the Participant's 401(k) and Rollover
Accounts shall be paid in cash, except that, to the extent the Investment
Vehicle in which the Accounts are invested consists of Company Stock, such
benefits shall be paid in Company Stock.

                                       26
<PAGE>   33
                  Notwithstanding the foregoing, a Participant may elect to
receive all benefits from his Other Investments, 401(k) and Rollover Accounts in
cash.

         9.3 Normal and Late Retirement.

                  (a) A Participant may retire at any time on or after his
Normal Retirement Date.

                  (b) If a Participant continues in the service of the Company
after his Normal Retirement Date, he shall continue to participate in the Plan
until he actually retires. The benefits of a Participant who retires on or after
his Normal Retirement Date shall be paid in accordance with Section 9.2, but not
later than the time specified in Sections 9.8 and 9.9.

         9.4 Vested Deferred Benefits.

                  (a) If a Participant with a vested Accrued Benefit separates
from service before attaining Normal Retirement Age for any reason other than
death, benefits shall be paid to him in accordance with Section 9.2, but not
later than the time specified in Sections 9.8 and 9.9.

                  (b) In the case of any Participant whose vested Accrued
Benefit exceeds (or at the time of any prior distribution exceeded) $5,000, the
Plan Administrator shall not direct that all or any part of such vested Accrued
Benefit be distributed, or commence to be distributed, before the Participant
attains Normal Retirement Age, unless the Participant consents in writing to
such distribution, or unless the benefit becomes distributable under Section 9.6
upon the death of the Participant.

                  (c) If a Participant without a vested right to his Accrued
Benefit (other than his 401(k) and Rollover Accounts) separates from service,
his Accrued Benefit (other than his 401(k) and Rollover Accounts) shall be
immediately forfeited and allocated as provided in Section 6.7.

                  (d) If the terminated Participant returns to service with the
Company prior to incurring five consecutive One-Year Breaks in Service, any
amount forfeited under subsection (c) shall be restored to the Participant's
Company Stock, Matching and Other Investments Accounts as of the last day of the
month in which the terminated Participant returns to service. For this purpose,
unallocated forfeitures shall be utilized first. If not sufficient, the Company
shall contribute additional amounts to restore the specified Accounts.

                  (e) The following events shall constitute a separation from
service for purposes of this Section:

                           (1) the sale or other disposition by the Company to
                  an unrelated entity of substantially all of the assets (within
                  the meaning of section 409(d)(2) of the Code) used by the
                  Company in a trade or business of the Company with respect to
                  a Participant who continues employment with the entity
                  acquiring such assets; or

                           (2) the sale or other disposition by the Company to
                  an unrelated entity of the Company's interest in a subsidiary
                  (within the meaning of section 409(d)(3) of the Code) with
                  respect to a Participant who continues employment with the
                  subsidiary.

                  Notwithstanding the foregoing, an event shall not be treated
as described in this subsection unless (i) the Participant receives a "lump-sum
distribution" (as defined in section 401(k)(10)(B)(ii) of the Code) by reason of
the event, (ii) the Company continues to maintain the Plan

                                       27
<PAGE>   34
after the sale or other disposition and the purchaser does not maintain the Plan
after the sale or other disposition, within the meaning of Treas. Reg.
Section 1.401(k)-1(d)(4)(i), and (iii) the distribution is made in connection
with the disposition of assets or a subsidiary, within the meaning of Treas.
Reg. Section 1.401(k)-1(d)(4)(iii).

         9.5 Disability Retirement.

                  (a) If, before attaining Normal Retirement Age, a Participant
in the service of the Company suffers a total and permanent disability (as
defined in subsection (b)), such Participant shall then retire, he shall become
one hundred percent (100%) vested in his Accrued Benefit and his Accrued Benefit
shall be paid to him pursuant to Section 9.4(a).

                  (b) "Total and Permanent Disability" shall mean the total and
permanent incapacity of a Participant to perform the duties of such
Participant's employment with the Company, such incapacity to be deemed to exist
when so determined by the Company's long term disability carrier under the
Company's long term disability policy.

         9.6 Death. If a Participant dies while in the service of the Company,
his Accrued Benefit shall be paid to his designated beneficiary or beneficiaries
in accordance with Section 9.7. If a Participant with a vested Accrued Benefit
dies after separating from service and before receiving all of the benefit
payments to which he was entitled, the remainder of his vested Accrued Benefit
shall be paid to his designated beneficiary or beneficiaries in accordance with
Section 9.7.

         9.7 Designation of Beneficiary and Form of Payment of Death Benefit;
Spouse's Consent to Non-Spouse Beneficiary.

                  (a) Designation of Beneficiary and Form of Payment. In the
event a Participant has a surviving spouse at his death, such surviving spouse
shall be the Participant's beneficiary, unless the spouse has consented in the
manner described in subsection (b) to the payment of the Participant's Accrued
Benefit to a beneficiary other than the spouse. In the event the Participant has
no surviving spouse at his death, the beneficiary shall be the beneficiary
designated by the Participant. Any designation by the Participant and/or consent
by the Participant's spouse shall be made by a written form delivered to the
Plan Administrator. Except as otherwise provided with respect to a surviving
spouse, a Participant may, at any time prior to his death, change his
beneficiary designation by completing a new written form, but a beneficiary
designation shall remain in effect until such new form is received by the Plan
Administrator.

                  The death benefit shall be paid in one lump sum payment, to be
made as soon as practicable following receipt of all information and documents
necessary to make the distribution.

                  If a Participant dies without effectively designating a
surviving beneficiary and without a surviving spouse, then the beneficiary shall
be legal representative of the Participant.

                  (b) Requirements for Spouse's Consent. To be effective, a
consent by a spouse to a Participant's designation of a nonspouse beneficiary
must be filed in writing with the Plan Administrator, must be specific with
respect to the particular nonspouse beneficiary consented to, must be
irrevocable and must be witnessed by a Plan representative designated by the
Plan Administrator or by a notary public. In addition, any such spousal consent
shall be limited to the nonspouse beneficiary or beneficiaries specifically
designated by the Participant, which designation may not be changed without a
further spousal consent (unless the initial spousal consent expressly permits
designations by the Participant without any further consent by the spouse).

                                       28
<PAGE>   35

         Notwithstanding the foregoing, if the Participant establishes to the
satisfaction of the Plan Administrator that such written consent may not be
obtained because there is no spouse or the spouse cannot be located, the
Participant's designation of a nonspouse beneficiary will be effective without
the requirement of the spouse's consent. Any consent required under this Section
shall be valid only with respect to the spouse who signs the consent, and any
establishment that the consent of a spouse may not be obtained shall be
effective only with respect to such spouse. Additionally, a revocation of a
prior beneficiary designation may be made by a Participant without the consent
of the spouse at any time. The number of revocations or consents shall not be
limited.

         9.8 Special Provision as to Timing of Distributions. Notwithstanding
any other provision of the Plan, other than such provisions as require the
consent of the Participant to a distribution with a present value in excess of
$3,500, a Participant's Accrued Benefit shall be distributed not later than the
times set forth below:

                  (a) If the Participant separates from service by reason of the
attainment of Normal Retirement Age or disability, the distribution of the
Participant's Accrued Benefit shall be made in a lump sum payment not later than
one year after the end of the Plan Year in which such event occurs.

                  (b) If the Participant separates from service for a reason
other than those enumerated in subsection (a) and other than by reason of his
death and is not reemployed by the Company by the end of the fifth Plan Year
following the Plan Year of such separation from service, distribution of the
Participant's Accrued Benefit shall be made in a lump sum payment not later than
one year after the end of the fifth Plan Year following the Plan Year in which
the Participant separated from service.

                  (c) If the Participant separates from service for a reason
other than those enumerated in subsection (a), and is reemployed by the Company
before the date distribution is required to begin under subsection (b),
distribution to the Participant, prior to any subsequent separation from
service, shall be in accordance with terms of the Plan other than this Section.

         9.9 Requirements Concerning Distributions. All benefit distributions
under this Section shall be subject to the following requirements:

                  (a)      Before Death.

                  (1) Last Date for Commencement of Payments. The payment of
         benefits to a Participant under this Plan shall occur not later than
         the 60th day after the close of the Plan Year in which the latest of
         the following events occurs:

                  (i) the Participant attains Normal Retirement Age; or

                  (ii) the Participant terminates service with the Company.

         Notwithstanding the above, if the amount of payment required otherwise
         to occur on a date determined under this Section or under any other
         Section of the Plan cannot be ascertained by such date, or if the Plan
         Administrator is unable to locate the Participant or beneficiary after
         making reasonable efforts to do so, a payment retroactive to such date
         may be made no later than 60 days after the later of (i) the earliest
         date on which the amount of such payment can be ascertained under the
         Plan, or (ii) the earliest date on which the Participant or beneficiary
         is located.


                                       29
<PAGE>   36
                  (2) Additional Rule for Commencement of Benefit Payments. The
         distribution of benefits to a Participant who attains age 70-1/2 after
         December 31, 1996 shall occur not later than April 1 of the calendar
         year following the calendar year in which the Participant attains age
         70-1/2 or the Participant terminates employment, whichever is later.
         However, if the Participant is a five percent (5%) owner (within the
         meaning of Q&A B-2(d) of Prop. Treas. Reg. Section1.401(a)(9)-1 or any
         successor thereto), then the distribution of benefits shall occur not
         later than April 1 of the calendar year following the calendar year in
         which the Participant attains age 70-1/2, regardless of whether the
         Participant has terminated employment. An active Participant who
         attained age 70-1/2 before January 1, 1997 and, therefore, commenced
         benefit payments under the prior terms of the Plan, and who is not a
         five percent (5%) owner, shall be permitted to cease such benefit
         payments (except for the payment due by April 1, 1997 for a Participant
         who attained age 70-1/2 in 1996) until April 1 of the calendar year
         following the calendar year in which he terminates employment. With
         respect to a Participant (other than a five percent (5%) owner) who
         attains age 70-1/2 prior to January 1, 1999, such Participant may elect
         in the form and manner prescribed by the Plan Administrator to receive
         a distribution of benefits commencing no later than April 1 of the
         calendar year in which the Participant attains age 70-1/2.

                  (b) After Death. If a Participant dies before the date
described in subsection (a)(2), and before his Accrued Benefit is distributed to
him, his entire benefit shall be distributed by December 31 of the year
containing the fifth anniversary of the date of the Participant's death.

                  (c) Regulations Control. Distributions under this Section
shall be made in accordance with section 401(a)(9) of the Code and regulations
issued thereunder. This section and section 401(a)(9) of the Code shall take
precedence over any distribution options in the Plan inconsistent with this
Section or section 401(a)(9) of the Code.

         9.10 Put Options on Distributed Shares of Certain Company Stock. If the
distribution of the benefits under Section 9.2 is made in the form of shares of
Company Stock which are "not readily tradeable on an established market," within
the meaning of section 409(h)(1)(B) of the Code, a Participant or a beneficiary,
or a donee or heir of a Participant or beneficiary, shall be granted at the time
that shares are distributed to him, an option to "put" the shares to the
Company, provided that all such shares are so put; provided, further, that the
Trust shall have the option to assume the rights and obligations of the Company
at the time the put option is exercised. A put option shall provide that, for a
period of 60 days after such shares are distributed to a Participant or
beneficiary, or donee or heir of a Participant or beneficiary, (and, if the put
is not exercised within such 60-day period, for an additional period of 60 days
in the following Plan Year), he would have the right to have the Company
purchase such shares at their fair market value, determined by an independent
appraiser as described in Section 7.1, under a fair valuation formula. The put
option shall be exercised by notifying the Company it writing. The terms of
payment for the purchase of such shares of Company Stock shall be as set forth
in the put and may be either in a lump sum or in up to five equal annual
installments (with interest on the unpaid principal balance at a reasonable rate
of interest), as determined by the Plan Administrator. Payment for the purchase
of such shares must commence within 30 days after the put is exercised. The
period during which the put option is exercisable does not include any time
during which the distributee is unable to exercise it because the party bound by
the put option is prohibited from honoring it by applicable Federal or state
law. If payment is made in installments, adequate security and a reasonable rate
of interest must be provided.

         In the case of a purchase from a "disqualified person" (as defined in
Section 13.8(d)), all purchases of Company Stock shall be made at prices which,
in the judgment of the Plan Administrator, do not exceed the fair market value
of such shares as of the date of the transaction.

                                       30
<PAGE>   37
         A Participant's rights set forth in this Section shall be
nonterminable, within the meaning of Treas. Reg. Section 4975-11(a)(3)(ii).

         9.11     Direct Rollovers of Eligible Rollover Distributions Made from
                  this Plan.

                  (a) Direct Rollovers. This Section applies to distributions
made on or after January 1, 1993. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a Distributee's election under this
Section, a Distributee may elect, at the time and in the manner prescribed by
the Committee, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover.

                  (b)      Definitions.

                  (1) "Eligible Rollover Distribution" shall mean any
         distribution of all or any portion of the balance to the credit of the
         Distributee, except that an Eligible Rollover Distribution does not
         include: any distribution that is one of a series of substantially
         equal periodic payments (not less frequently than annually) made for
         the life (or life expectancy) of the Distributee or the joint lives (or
         joint life expectancies) of the Distributee and the Distributee's
         designated beneficiary, or for a specified period of 10 years or more;
         any distribution to the extent such distributions is required under
         section 401(a)(9) of the Code; and the portion of any distribution that
         is not includable in gross income (determined without regard to the
         exclusion of net unrealized appreciation with respect to employer
         securities).

                  (2) "Eligible Retirement Plan" shall mean an individual
         retirement account described in section 408(a) of the Code, an
         individual retirement annuity described in section 408(b) of the Code,
         an annuity plan described in section 403(a) of the Code, or a qualified
         trust described in section 401(a) of the Code, that accepts the
         Distributee's eligible Rollover Distribution. However, in the case of
         an Eligible Rollover Distribution to the surviving spouse, an Eligible
         Retirement Plan is an individual retirement account or individual
         retirement annuity.

                  (3) "Distributee" includes an Employee or former Employee. In
         addition, the Employee's or former Employee's surviving spouse and the
         Employee's or former Employee's spouse or former spouse who is the
         alternate payee under a qualified domestic relations order (within the
         meaning of section 414(p) of the Code) are Distributees with regard to
         the interest of the spouse or former spouse.

                  (4) "Direct Rollover" shall mean a payment by the Plan to the
         Eligible Retirement Plan specified by the Distributee.

         9.12     Participant's Consent to Distribution of Benefits.

                  (a) Except as provided in paragraphs (b) and (c) below, the
committee shall provide each Participant, not more than 90 days and not fewer
than 30 days prior to the date his Accrued Benefit is paid to him, written
notice of his right to defer receipt of the payment until his Normal Retirement
Date. Payment shall not be made prior to the Participant's Normal Retirement
Date unless the Participant affirmatively elects a distribution in writing, on a
form filed with the Committee.

                  (b) The written notice described in paragraph (a) above shall
not apply to the payment if (i) the Participant receives an involuntary lump sum
payment pursuant to Section 9.2(b)(1), or (ii) the payment is made on or after
the Participant's Normal Retirement Date.

                                       31
<PAGE>   38

                  (c) A payment may be made fewer than 30 days after the notice
described in paragraph (a) above is given to the Participant, provided that:

                  (1) The Committee clearly informs the Participant that he has
         a right to a period of at least 30 days after receiving such notice to
         consider whether or not to elect the distribution; and

                  (2) The Participant, after receiving the notice, affirmatively
         elects the distribution.


                                   SECTION 10
                          LIMITATIONS ON CONTRIBUTIONS

         10.1     Definitions for Limitations on Contributions.

                  (a) "Annual additions" shall mean the sum of the following
amounts credited to a Participant's Company Stock, 401(k), Matching and Other
Investments Accounts for the limitation year:

                  (1) Company contributions (including Compensation Deferral
         Contributions, other than Excess Deferral Amounts distributed in
         accordance with Section 8.13); and

                  (2) forfeitures.

For this purpose, Company contributions credited to a Participant's Company
Stock and Matching Accounts shall include amounts contributed by the Company for
the Plan Year which are used to repay principal and/or interest (except as
provided below) on one or more Exempt Loans, or to purchase shares of Company
Stock, and which are deemed allocated to such Participant's Company Stock and
Matching Accounts for purposes of this subsection (a). The portion of such
Company contribution which is deemed allocated to a Participant's Company Stock
and Matching Accounts for purposes of this subsection (a) shall be an amount
which bears the same ratio to the total contribution made by the Company for
such Plan Year which is used to repay principal and/or interest (except as
provided below) on one or more Exempt Loans, or to purchase shares of Company
Stock, as the number of shares of Company Stock allocated to such Participant's
Company Stock Account for such Plan Year on the Valuation Date coincident with
the last day of such Plan Year bears to the total number of shares of Company
Stock allocated to the Company Stock and Matching Accounts of all Participants
for such Plan Year on such Valuation Date.

                  Notwithstanding the above, (i) allocations of Company Stock
resulting from Company contributions used to pay interest on an Exempt Loan and
(ii) allocations of forfeited Company Stock previously acquired with the
proceeds of an Exempt Loan shall not be annual additions for the limitation
year; provided that the requirements of section 415(c)(6)(C) of the Code are met
for such limitation year.

                  Company contributions and forfeitures allocated to an
Employee's 401(k) and Matching Accounts under the Stock Bonus Plan which are
transferred to this Plan will not constitute annual additions to this Plan.

                  (b) "Defined benefit fraction" shall mean a fraction, the
numerator of which is the Participant's projected annual benefit under the
BetzDearborn Inc. Employees' Retirement Plan, and the denominator of which is
the lesser of 125% of the dollar limitation in effect for the limitation year
under section 415(b)(1)(A) of the Code or 140% of the Participant's highest
average limitation compensation.

                                       32
<PAGE>   39
                  (c) "Defined contribution fraction" shall mean a fraction, the
numerator of which is the sum of the annual additions to the Participant's
Company Stock, 401(k), Matching and Other Investments Accounts under the Plan
for the current and all prior limitation years, and the denominator of which is
the sum of the maximum amounts for the current and all prior years of employment
with the Company. The maximum amount in any limitation year is the lesser of
125% of the dollar limitation in effect under section 415(c)(1)(A) of the Code
or thirty-five percent (35%) of the Participant's limitation compensation for
such year.

                  (d) "Highest average compensation" shall mean the
Participant's average limitation compensation for the three consecutive years of
service that produce the highest average.

                  (e) "Limitation compensation" shall mean a Participant's
wages, salaries and fees for professional services and other amounts received
for personal services actually rendered in the service of the Company or any
Affiliate, and excluding contributions by the Company or any Affiliate to a plan
of deferred compensation which are not includable in the Participant's gross
income for the taxable year in which contributed, or any distributions from a
plan of deferred compensation (except any amounts received by a Participant
pursuant to an unfunded, nonqualified plan in the year such amounts are
includable in his gross income). For purposes of applying the limitations of
this Section, compensation for a limitation year is the compensation actually
paid or includable in gross income during such year. For Limitation Years
beginning after December 31, 1997, the term "Limitation Compensation" shall
include any elective deferral (as defined in section 402(g)(3) of the Code), and
any amount which is contributed or deferred by the Company or an Affiliate at
the election of the Employee and which is not includable in the gross income of
the Employee by reason of section 125 of the Code.

                  (f) "Limitation year" shall mean the calendar year.

                  (g) "Maximum permissible amount" shall mean the lesser of--

                  (1) $30,000 (or, if greater, 1/4 fourth of the defined benefit
         dollar limitation set forth in section 415(b)(1) of the Code as in
         effect for the limitation year); or

                  (2) twenty-five percent (25%) of the Participant's limitation
         compensation for the limitation year.

                  The dollar amount of the maximum permissible amount under
paragraph (1) for a limitation year shall be increased by the lesser of (i) one
hundred percent (100%) of the otherwise applicable dollar amount or (ii) the
amount of Company Stock allocated to the Participant's Company Stock and
Matching Accounts for the limitation year, provided the requirements of section
415(c)(6)(A) of the Code are met for such limitation year.

                  (h) "Projected annual benefit" shall mean the annual
retirement benefit (adjusted to an actuarially equivalent straight life annuity
if such benefit is expressed in a form other than a straight life annuity or
qualified joint and survivor annuity) to which the Participant is entitled under
the terms of the BetzDearborn Inc. Employees' Retirement Plan.

         10.2 Basic Limitation. The amount of annual additions which may be
credited to the Participant's Accounts for any limitation year shall not exceed
the lesser of the maximum permissible amount or any other limitation contained
in this Plan. If, as a result of the allocation of forfeitures, a reasonable
error in estimating a Participant's annual compensation, or a reasonable error
in determining the amount of Compensation Deferral Contributions that may be
made to the Plan with respect to any Participant under the limits of section 415
of the Code, or under other limited facts and under the limits

                                       34
<PAGE>   40
And circumstances as determined by the Commissioner of Internal Revenue, the
annual additions for a Participant for the limitation year would otherwise
exceed the maximum permissible amount, then:

                  (a) Compensation Deferral Contributions for such limitation
year shall be distributed to the Participant, to the extent required to reduce
the annual additions to the maximum permissible amount; and

                  (b) If necessary, other amounts to be contributed by the
Company on behalf of such Participant shall be reduced so that the annual
additions for the limitation year equal the maximum permissible amount.

                  Compensation Deferral Contributions distributed in accordance
with subsection (a) shall be disregarded for purposes of Section 8.10 and
Section 8.11.

         10.3 Combined Limit with Pension Plan. Before January 1, 2000, for any
Participant who also has an accrued benefit under the BetzDearborn Inc.
Employees' Retirement Plan, the sum of the Participant's defined benefit
fraction and defined contribution fraction shall not exceed 1.0 in any
limitation year. If the sum of such fractions with respect to any Participant
for any limitation year would otherwise exceed 1.0, the allocations and benefits
under this Plan and the Retirement Plan shall be adjusted in accordance with
section 415 of the Code and regulations issued thereunder.

         10.4 Combining and Aggregating Plans. For purposes of applying the
limitations set forth in this Section:

                  (a) all qualified defined benefit plans ever maintained by the
Company or any Affiliate shall be treated as one defined benefit plan; and

                  (b) all qualified defined contribution plans ever maintained
by the Company or any Affiliate shall be treated as one defined contribution
plan.


                                   SECTION 11
                              TOP-HEAVY PROVISIONS

     11.1 Top-Heavy Preemption. Notwithstanding any other provision of this
Plan the contrary, during any Plan Year in which this Plan is top-heavy, as
defined in Section 11.2, the Plan shall be governed in accordance with this
Section, which shall control over other provisions hereof.

     11.2     Top-Heavy Definitions.

                  (a) "Determination date" shall mean, with respect to any Plan
Year after the first Plan Year, the last day of the preceding Plan Year and,
with respect to the first Plan Year, the last day of such first Plan Year.

                  (b) "Determination period" shall mean, with respect to any
Plan Year, the Plan Year containing the determination date and the four
preceding Plan Years.

                  (c) "Key Employee" shall mean any Employee or former Employee
(and the beneficiaries of such Employee) who at any time during a Plan Year
included in the determination period was--

                                       34
<PAGE>   41

                  (1) an officer of the Company or any Affiliate having an
         annual limitation compensation greater than 150% of the amount in
         effect under section 415(c)(1)(A) of the Code for such Plan Year;

                  (2) one of the 10 Employees having annual limitation
         compensation from the Company and the Affiliates greater than the
         amount in effect under section 415(c)(1) (A) of the Code and owning (or
         considered as owning within the meaning of section 318 of the Code)
         both more than a one-half percent (1/2 percent) interest and the
         largest interests in the Company or any Affiliate;

                  (3) a five percent (5%) owner of the Company or any Affiliate;
         or

                  (4) a one percent (1%) owner of the Company or any Affiliate
         who has an annual limitation compensation from the Company and the
         Affiliates of more than $150,000.

The determination of who is a key Employee shall be made in Accordance with
section 416(i) of the Code and regulations thereunder.

                  (d) "Limitation compensation" shall mean limitation
compensation as defined in Section 10.1(e).

                  (e) "Non-key Employee" shall mean any Employee who is not a
key Employee.

                  (f) "Permissive aggregation group" shall mean, with respect to
any Plan Year, the required aggregation group plus any other defined
contribution plan or defined benefit plan which the Plan Administrator elects to
include, provided such permissive aggregation group meets the requirements of
sections 401(a)(4) and 410 of the Code with such defined contribution plan or
defined benefit plan being taken into account.

                  (g) "Required aggregation group" shall mean, with respect to
any Plan Year:

                  (1) Each defined contribution plan and each defined benefit
         plan of the Company or any Affiliate in which a key Employee is a
         participant or was a participant at any time during the determination
         period (regardless of whether the plan has been terminated); and

                  (2) Each other defined contribution plan and each other
         defined benefit plan of the Company or any Affiliate which, during the
         determination period, enables any defined benefit plan or defined
         contribution plan described in paragraph (1) to meet the requirements
         of section 401(a)(4) or 410 of the Code.

                  (h) "Top-heavy plan" shall mean, for any Plan Year beginning
on or after January 1, 1989, this Plan if:

                  (1) this Plan is not part of a required or permissive
         aggregation group, and the top-heavy ratio for the Plan exceeds sixty
         percent (60%);

                  (2) this Plan is part of a required aggregation group and not
         part of a permissive aggregation group, and the top-heavy ratio for the
         required aggregation group exceeds sixty percent (60%); or

                                       35
<PAGE>   42

                  (3) this Plan is part of a required aggregation group and part
         of a permissive aggregation group, and the top-heavy ratio for the
         permissive aggregation group exceeds sixty percent (60%).

                  (i) "Top-heavy ratio" shall mean a fraction. The numerator of
the fraction is the sum of the account balances of all key Employees under the
Plan, or, if the Plan is a member of a required or permissive aggregation group,
under all defined contribution plans in such required or permissive aggregation
group (hereinafter the "aggregation group"), plus the sum of the present values
of accrued benefits of all key Employees under all defined benefit plans in the
aggregation group, as of the determination date. The denominator of the fraction
is a similar sum determined for all Employees. For purposes of determining the
fraction, the numerator and denominator shall include any part of any account
balance or accrued benefit distributed in the determination period. With respect
to Plan Years beginning on or after January 1, 1989, if any individual has not
been credited with at least one Hour of Service with the Company or any
Affiliate at any time during the determination period, any account balance or
accrued benefit of, or distribution to, such individual shall not be taken into
account.

                  For purposes of the preceding paragraph, the sum of account
balances and the present values of accrued benefits shall be determined as of
the most recent valuation date that falls within the 12-month period ending on
the determination date. The calculation of the top-heavy ratio shall be made in
accordance with section 416 of the Code and the regulations thereunder.

                  Solely for the purpose of determining if the Plan, or any
other plan included in a required aggregation group of which this Plan is a
part, is top-heavy (within the meaning of section 416(g) of the Code) the
accrued benefit of a non-key Employee shall be determined under (i) the method,
if any, that uniformly applies for accrual purposes under all plans maintained
by the Company and the Affiliates, or (ii) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual rate permitted
under the fractional accrual rate of section 411(b)(1)(C) of the Code.

                  (j) "Valuation date" shall mean, with respect to this Plan,
the first day of the Plan Year.

         11.3 Top-Heavy Rules. Notwithstanding any other provision of the Plan,
the following rules shall apply for any Plan Year in which the Plan is
determined to be a top-heavy plan:

                  (a) Minimum Benefit. The Company contributions and forfeitures
allocated on behalf of any Participant in this Plan who is a non-key Employee
for the Plan Year shall not be less than the lesser of (i) five percent (5%) of
such Participant's limitation compensation or (ii) the largest percentage of the
Company contributions and forfeitures allocated on behalf of any key Employee
under this Plan for such Plan Year (as a percentage of the first $150,000 as
adjusted for increases in the cost of living in accordance with section
401(a)(17)(B) of the Code of the key Employee's limitation compensation). For
purposes of clause (ii) of the preceding sentence, Company contributions made on
behalf of a key Employee, pursuant to the key Employee's salary reduction
agreement, shall be treated as Company contributions allocated on behalf of the
key Employee. This paragraph (a) shall not apply to any Participant who was not
employed by the Company on the last day of the Plan Year.

                  The minimum benefit shall be provided without regard to any
Social Security contribution. The minimum benefit shall be provided even though,
under other Plan provisions, the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation, in the Plan
Year because (i) of the Participant's failure to complete 1,000 Hours of
Service, (ii) of the Participant's failure to make mandatory employee
contributions to the Plan or (iii) the Participant's limitation compensation is
less than a stated amount.

                                       36
<PAGE>   43

                  (b) Minimum Vesting. Notwithstanding the provisions of Section
9.1, for any Plan Year in which this Plan is a top-heavy plan, the following
minimum vesting schedule shall apply to the Participant's Accrued Benefit:
<TABLE>
<CAPTION>

                        Years of                        Nonforfeitable
                  Vesting Service                         Percentage
                  ---------------                       --------------
<S>               <C>                                   <C>
                  less than 2                                0%
                  2 but less than 3                         20%
                  3 but less than 4                         40%
                  4 but less than 5                         60%
                  5 or more                                100%
</TABLE>
This subsection (b) does not apply to the Accrued Benefit of any Participant who
does not have an Hour of Service after the Plan has initially become a top-heavy
plan; such Participant's vested Accrued Benefit shall be determined without
regard to this subsection (b).

         11.4 Impact on Maximum Benefits. For any Plan Year in which the Plan is
a top-heavy plan, Section 10.1 shall be read by substituting the number "100"
for the number "125" wherever it appears therein, except that such substitution
shall not have the effect of reducing any benefit accrued under a defined
benefit plan prior to the first day of the Plan Year in which this provision
becomes applicable.

         11.5 Change in Top-Heavy Status. If the Plan becomes a top-heavy plan
and subsequently ceases to be such, the vesting schedule in Section 11.3(b)
shall continue to apply in determining the nonforfeitable percentage of any
Participant who had at least three years of service as of December 31 of the
last Plan Year of top-heaviness. For other Participants, such schedule shall
apply only to the Participant's Accrued Benefit as of such December 31.

         11.6 Duplication of Minimum Contributions Not Required. The Plan
Administrator shall, to the maximum extent permitted by the Code and regulations
thereunder, apply the provisions of this Section by taking into account the
benefits payable and the contributions made under all other defined contribution
and defined benefit plans maintained by the Company or any Affiliate which are
qualified under section 401(a) of the Code to prevent inappropriate omissions or
duplication of minimum benefits or contributions.

         11.7 Repeal of Limitation. In the event that Congress should provide by
statute, or the Treasury Department should provide by regulation or ruling, that
the limitations provided in this Section are no longer necessary for the Plan to
meet the requirements of section 401 of the Code or other applicable law then in
effect, such limitations shall become void and shall no longer apply, without
the necessity of further amendment to the Plan.


                                   SECTION 12
                            NONALIENATION OF BENEFITS

         12.1 Nonalienation Rule. The right of any Participant or beneficiary to
any benefit payment shall not be subject to any voluntary or involuntary
alienation or assignment. The preceding sentence shall also apply to the
creation, assignment or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order, unless such
order is determined to be a qualified

                                       37
<PAGE>   44
domestic relations order (as defined in section 414(p) of the Code) or a
domestic relations order entered before January 1, 1985.


                                   SECTION 13
                            FIDUCIARY RESPONSIBILITY

         13.1 Fiduciary Duties. A "fiduciary," as defined in section 3(21) of
ERISA, shall discharge its duties with respect to the Plan and Trust in the
interest of the Participants and their beneficiaries:

                  (a)      for the exclusive purpose of:

                           (1)      providing benefits to Participants and their
                                    beneficiaries; and

                           (2)      defraying reasonable expenses of
                                    administering the Plan and Trust;

                  (b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims;

                  (c) by diversifying the investments of the Plan and Trust so
as to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and

                  (d) in accordance with the documents and instruments governing
the Plan and Trust insofar as they are consistent with the provisions of ERISA.

                  Notwithstanding the above, the diversification requirements of
subsection (c) and the prudence requirement (to the extent that it requires
diversification) of subsection (b) are not violated by the acquisition or
holding of Company Stock to the extent permitted under the Plan and Trust
Agreement.

         13.2 Allocation of Responsibility. Authority and responsibility for
management of the Plan and Trust shall be allocated among the following persons:

                  (a) The Board of Directors shall have sole responsibility for
the appointment, removal and replacement of members of the Committee and the
Plan Administrator described in Section 14, and the Trustee described in Section
XV. The Board shall also have sole responsibility for:

                  (1) the design of the Plan and Trust Agreement, including the
         right to amend or terminate the Plan and Trust Agreement (under Section
         16.1 or 17.1, respectively) at any time;

                  (2) qualification of the Plan and Trust Agreement and any
         amendments or documents relating thereto under the Code and ERISA;

                  (3) funding of the Company's contributions to the Plan; and

                  (4) the exercise of all other fiduciary functions assigned to
         it in the Plan or Trust Agreement. To the extent that it is carrying
         out this responsibility, the members of the Board of Directors shall be
         "named fiduciaries" of the Plan for purposes of section 402(a)(1) of
         ERISA.

                                       38
<PAGE>   45

                  (b) The Committee shall have sole responsibility for
establishing the guidelines for the administration and operation of the Plan, as
set forth in Section 14. To the extent it is carrying out these duties, the
members of the Committee shall be "named fiduciaries" with respect to the Plan.

                  (c) The Plan Administrator shall have sole responsibility for
the execution of the administrative duties assigned him by the Board of
Directors, the Committee, and the Plan and Trust Agreement. To the extent he is
carrying out this responsibility, the Plan Administrator shall be a "named
fiduciary" of the Plan.

                  (d) The Trustee shall, subject to any guidelines established
by the Committee, have sole responsibility for investment, management and
control of the assets in the Trust Fund in accordance with the terms of the Plan
and the Trust Agreement. To the extent it is carrying out this responsibility,
the Trustee shall be a "named fiduciary" of the Plan.

         13.3 No Joint Responsibility. It is the purpose of this Plan and Trust
Agreement to allocate to each of the fiduciaries identified in Section 13.2
exclusive responsibility of prudent execution of the functions assigned to him
or it (or to the entity of which he or it is a member) and no responsibility for
execution of functions assigned to others. Whenever one such fiduciary is
required by the Plan and Trust Agreement to follow the directions of another
such fiduciary, the two fiduciaries shall not be deemed to have been assigned a
shared responsibility, but the fiduciary giving the directions shall have sole
responsibility for the functions assigned to him or it, including issuing of
such directions, and the fiduciary receiving the directions shall have sole
responsibility for the functions assigned to him or it, including following such
directions insofar as they are on their face proper under this Plan and Trust
Agreement and under applicable law.

         13.4     No Co-Fiduciary Liability.

                  (a) A fiduciary shall not be liable for a breach of fiduciary
responsibility by another fiduciary to whom other fiduciary responsibilities
have been assigned under the Plan except under the following circumstances:

                  (1) if he or it participates knowingly in, or knowingly
         undertakes to conceal, an act or omission of such other fiduciary,
         knowing such act or omission is a breach;

                  (2) if, by his or its failure properly to discharge his or its
         own fiduciary responsibilities, he or it has enabled such other
         fiduciary to commit a breach; or

                  (3) if he or it has knowledge of a breach by such other
         fiduciary, unless he or it makes reasonable efforts under the
         circumstances to remedy the breach.

                  (b) If the Committee appoints an investment manager or
managers under Section 14.6, then, notwithstanding Section 13.3 and subsections
(a)(2) and (3), the Trustee shall not be liable for the acts and omissions of
such investment manager.

         13.5 Act in Interest of Participants. In carrying out the
responsibilities allocated to him or it under this Plan and Trust Agreement,
each fiduciary shall act solely in the interests of the Plan's Participants and
their beneficiaries.

         13.6 Employment of Advisors. A fiduciary identified in Section 13.2 may
consult with counsel, who may be counsel to the Company, and shall be fully
protected in acting upon the advise of such counsel, with regard to such
fiduciary's responsibilities under the Plan.

                                       39
<PAGE>   46

         13.7 Transfer or Maintenance of Indicia of Ownership of Plan Assets
Outside United States Prohibited. Except as authorized by the Secretary of Labor
by regulation, no fiduciary shall maintain the indicia of ownership of any
assets of the Plan or Trust outside the jurisdiction of the district courts of
the United States.

         13.8     Prohibited Transactions

                  (a) Unless otherwise exempted by ERISA or by the Secretary of
Labor, a fiduciary with respect to the Plan or Trust shall not cause the Plan or
Trust to engage in a transaction if he or it knows, or should know, that such
transaction constitutes a direct or indirect:

                  (1) sale or exchange, or leasing, of any property between the
         Plan or Trust and a party in interest or a disqualified person;

                  (2) lending of money or other extension of credit between the
         Plan or Trust and a party in interest or a disqualified person;

                  (3) furnishing of goods, services, or facilities between the
         Plan or Trust and a party in interest or a disqualified person;

                  (4) transfer to, or use by or for the benefit of, a party in
         interest or a disqualified person, of any assets of the Plan or Trust;
         or

                  (5) an acquisition, on behalf of the Plan or Trust, of any
         securities issued by the Company or an affiliate which are not
         "qualifying employer securities" within the meaning of section
         4975(e)(8) of the Code.

                  (b) Unless otherwise exempted by the Secretary of Labor, a
fiduciary with respect to the Plan or Trust shall not:

                  (1) deal with the assets of the Plan or Trust in his or its
         own interest or for his or its own account;

                  (2) in his or its individual or any other capacity act in any
         transaction involving the Plan or Trust on behalf of a party (or
         represent a party) whose interests are adverse to the interests of the
         Plan or Trust or the interests of the Participants or their
         beneficiaries; or

                  (3) receive any consideration for his or its own personal
         account from any party dealing with the Plan or Trust in connection
         with a transaction involving the assets of the Plan or Trust.

                  (c) Notwithstanding anything to the contrary set forth in this
Section, a fiduciary shall be entitled to:

                  (1) receive any benefit to which the fiduciary may be entitled
         as a Participant or beneficiary in the Plan or Trust, so long as the
         benefit is computed and paid on a basis which is consistent with the
         terms of the Plan and Trust as applied to all Participants and their
         beneficiaries;

                                       40
<PAGE>   47

                  (2) receive any reasonable compensation for services rendered
         except that no person so serving who already receives full-time pay
         from the Company, from an employee organization whose employees are
         Participants in the Plan or from an association of employers whose
         employees are Participants in the Plan shall receive compensation from
         the Plan or Trust, except for reimbursement of expenses properly and
         actually incurred;

                  (3) receive reimbursement of expenses properly and actually
         incurred, in the performance of its duties with the Plan and Trust;

                  (4) serve as a fiduciary in addition to being an officer,
         employee, agent or other representative of a party in interest or
         disqualified person; and

                  (5) acquire or sell qualifying employer securities if (i) such
         acquisition or sale is for adequate consideration, and (ii) no
         commission is charged with respect to such acquisition or sale.

                  (d) For purposes of this Section, the words "party in
interest" or "disqualified person" mean:

                  (1)      any fiduciary, counsel or employee of the Plan or
                           Trust;

                  (2)      a person providing services to the Plan or Trust;

                  (3)      the Company;

                  (4)      an employee organization any of whose members are
                           covered by the Plan;

                  (5)      an owner, direct or indirect of fifty percent (50%)
                           or more of:

                           (A) the combined voting power of all classes of stock
                  entitled to vote or the total value of shares of all classes
                  of stock of a corporation,

                           (B) the capital interest or the profits interest of a
                  partnership, or

                           (C) the beneficial interest of a trust or
                  unincorporated enterprise, which is an employer or employee
                  organization described in subsection (d)(1), (2), (3) or (5)
                  above;

                  (6)      a corporation, partnership, or trust or estate of
                  which (or in which) fifty percent (50%) or more of:

                           (A) the combined voting power of all classes of stock
                  entitled to vote or the total value of shares of all classes
                  of stock of such corporation,

                           (B) the capital interest or profits interest of such
                  partnership, or

                           (C) the beneficial interest of such trust or estate
                  is owned directly or indirectly, or held by persons described
                  in subsection (d)(1), (2), (3), (4) or (5) above;

                  (7) an employee, officer, director (or an individual having
         powers or responsibilities similar to those of officers or directors),
         or a ten percent (10%) or more shareholder directly or indirectly of a
         person described in subsection (d)(2), (3), (4), (5) or (6), or of the
         Plan or Trust; or



                                       41
<PAGE>   48

                  (8) a ten percent (10%) or more (directly or indirectly in
         capital or profits) partner or joint venturer of a person described in
         subsection (d)(2), (3), (4), (5) or (6).

                  (e)      For purposes of this Section, the words "adequate
                           consideration" mean:

                  (1)      in the case of a security for which there is a
                           generally recognized market either,

                           (A) the price of the security prevailing on a
                  national securities exchange registered under section 6 of the
                  Securities Exchange Act of 1934, or which has been listed for
                  more than one month (at the time of such sale or purchase), on
                  an electronic quotation system administered by a national
                  securities association registered under such Act, or

                           (B) if the security is not traded on such a national
                  securities exchange, or so listed on such an electronic
                  quotation system, a price not less favorable to the Plan than
                  the offering price for the security as established by the
                  current bid and asked prices quoted by persons independent of
                  the issuer and of any party in interest or disqualified
                  person; and

                  (2) in the case of an asset other than a security for which
         there is a generally recognized market, the fair market value of the
         asset as determined in good faith by the Trustee or named fiduciary
         pursuant to the terms of the Plan and in accordance with regulations
         prescribed by the Secretary of Labor.


                                   SECTION 14
                            ADMINISTRATION OF PLAN --
                      STOCK BONUS PROFIT SHARING/RETIREMENT
                        COMMITTEE AND PLAN ADMINISTRATOR

         14.1 Members of Committee. The Board shall appoint a Stock Bonus Profit
Sharing/Retirement Plan Committee (the "Committee") to consist of not less than
three members, to hold office, without special compensation for Committee
membership, at the pleasure of the Board of Directors. Members of the Committee
may, but are not required to, be Participants under the Plan or officers,
employees or members of the Board of Directors. Any member may resign by giving
notice, in writing, filed with the Chairman or Secretary of the Board of
Directors. Vacancies shall be filled promptly by the Board of Directors in such
manner that the composition of the Committee shall be as herein prescribed. The
Plan Administrator shall notify the Trustee of the appointment of the Committee
and of any subsequent changes in its membership.

         14.2 Officers and Employees of the Committee. The members of the
Committee shall elect a Chairman who shall be a member of the Committee and a
Secretary who may, but need not be, a member of the Committee. The Secretary
shall keep minutes of the Committee's proceedings and all data, records and
documents pertaining to the Committee's guidelines for administration and
operation of the Plan and the Trust.

         14.3 Action of Committee. A majority of the Committee shall constitute
a quorum for the transaction of business. Resolutions or other actions of the
Committee at any meeting shall be determined by the vote or other affirmative
expression of a majority of its members present at such meeting. Resolutions or
other action may be taken without a meeting upon the written consent of all
members of the Committee. The Chairman or the Secretary may execute any
certificate or other written direction on

                                       42
<PAGE>   49
behalf of the Committee. In the event the Committee members entitled to vote on
any question are unable to determine such question by a majority vote, such
question shall be determined by the Board of Directors.

         14.4 Disqualification of Committee Member. A member of the Committee
who is a Participant or beneficiary shall not vote on any question relating
specifically to himself.

         14.5 Expenses of Committee. All expenses of the Committee properly and
actually incurred in the performance of its duties under the Plan and the Trust
Agreement shall be paid or reimbursed by the Company.

         14.6 Powers of the Committee. The Committee shall have full power to
establish guidelines for the administration and operation of the Plan and to
review any action taken by the Plan Administrator, including the power to
appoint one or more investment managers to manage (including the power to
acquire and dispose of) any designated assets of the Trust.

         14.7 Allocation of Fiduciary Responsibility. The Committee from time to
time may allocate to one of its members, to the Plan Administrator and/or may
delegate to any other persons or organizations any of the rights, powers, duties
and responsibilities of the Committee with respect to the operation and
administration of the Plan and the Trust Agreement. Any such allocation or
delegation shall be reviewed periodically by the Committee and shall be
terminable upon such notice as the Committee, in its discretion, deems
reasonable and proper under the circumstances.

         14.8 Plan Administrator and His General Powers. The Plan Administrator
shall be the Vice President - Human Resources of the Company or any other person
designated by the Board. The Plan Administrator shall serve without
compensation, and at the pleasure of the Board. The Plan Administrator shall be
responsible for the administration and operation of the Plan pursuant to the
guidelines established by the Committee and subject to the review of the
Committee, and for any other duties assigned him by the Board of Directors
and/or the Committee.

         14.9 General Duties of the Plan Administrator. The general duties of
the Plan Administrator shall include the following:

                       (a) determining all questions relating to the eligibility
of Employees to become Participants and the status of Employees as Participants
under the Plan;

                       (b) determining the Accrued Benefit payable to
Participants or beneficiaries and authorizing and directing the Trustee with
respect to the payment of, or provision for, benefits under the Plan;

                       (c) engaging for the Plan any administrative, legal,
medical, accounting, clerical or other services he may deem appropriate to
effectuate the Plan;

                       (d) as provided in Section 14.13, construing and
interpreting the Plan and the Trust Agreement whenever necessary to carry out
their intention and purpose and making and publishing such rules for the
regulation of the Plan and the Trust Agreement as are consistent with the
guidelines established by the Committee and with the terms of the Plan and the
Trust Agreement;

                       (e) compiling and maintaining, in conjunction with the
Company, all records he determines to be necessary, appropriate or convenient in
connection with the administration of the Plan and the Trust Agreement;

                                       43
<PAGE>   50

                  (f) determining, in accordance with the terms of the Plan, the
allocation, disposition and distribution of assets in the Trust Fund in the
event the Plan is terminated;

                  (g) appointing and contracting with such independent public
accountant or accountants as shall be necessary to comply with the reporting and
disclosure requirements of any applicable Federal or state law, including the
preparation and filing of all returns and reports required to be filed by the
Plan with any governmental agency;

                  (h) furnishing of all required forms, statements, information
and reports to Participants (or their beneficiaries);

                  (i) developing a policy for the funding of the Plan consistent
with the guidelines established by the Committee and subject to approval by the
Board of Directors and consistent with the needs of the Plan and the
requirements of ERISA; and

                  (j) processing of all Claims filed under Section 14.11. The
decision of the Plan Administrator, after review by the Committee, except as
otherwise provided in Section 14.7(i), with respect to matters within his
jurisdiction shall be final, binding and conclusive upon the Committee, the
Company and upon each Participant, beneficiary and every other person or party
interested or concerned.

         14.10 Information to be Submitted by Company to the Plan Administrator.
To enable the Plan Administrator to perform his functions, the Company shall
supply full and timely information to him on all matters relating to
Participants, former Participants, and beneficiaries as the Plan Administrator
may require, and shall maintain such other records as the Plan Administrator may
determine are necessary in order to determine the benefits due or which may
become due to the Participants, former Participants and beneficiaries under the
Plan. The Plan Administrator shall advise the Trustee of such of the foregoing
facts as may be pertinent to the Trustee's responsibilities under the Plan and
Trust Agreement.

         14.11    Claim Procedure.

                  (a) Filing Claim for Benefits. If an individual (hereinafter
referred to as the "Applicant," which reference shall include the legal
representative, if any, of the individual) does not receive the timely payment
of the benefits to which the Applicant believes he is entitled to receive under
the terms of the Plan, the Applicant may make a claim ("Claim") for benefits in
the manner hereinafter provided.

                  All Claims for benefits under the Plan shall be made in
writing and shall be signed by the Applicant. Claims shall be submitted to the
Plan Administrator. If the Applicant does not furnish sufficient information
with the Claim for the Plan Administrator to determine the validity of the
Claim, the Plan Administrator shall furnish the Applicant with forms prescribed
by the Plan Administrator within 10 days of receipt of the initial Claim,
indicating any additional information which is necessary for the Plan
Administrator to determine the validity of the Claim.

                  Each Claim hereunder shall be acted on and approved or
disapproved by the Plan Administrator within 60 days following the receipt by
the Plan Administrator of the information necessary to process the Claim.

                  In the event the Plan Administrator denies a Claim for
benefits in whole or in part, the Plan Administrator shall notify the Applicant
in writing of the denial of the Claim and notify such Applicant of his right to
a review of the Plan Administrator's decision by the Committee. Such notice by


                                       44
<PAGE>   51
the Plan Administrator shall also set forth, in a manner calculated to be
understood by the Applicant, the specific reason for such denial, the specific
Plan provisions on which the denial is based, a description of any additional
material or information necessary to perfect the Claim with an explanation of
such material or information where necessary and an explanation of the Plan's
Claim review procedure as set forth in this Section.

                  If no action is taken by the Plan Administrator on an
Applicant's Claim within 60 days after receipt by the Plan Administrator, such
application shall be deemed to be denied for purposes of the following appeals
procedure.

                  (b) Appeals Procedure. Any Applicant whose Claim for benefits
is denied in whole or in part (such Applicant being hereinafter referred to as
the "Claimant" which reference shall include the legal representative, if any,
of the individual) may appeal from such denial to the Committee for a review of
the decision by the Committee. Such appeal must be made within 60 days after the
Claimant has received written notice of the denial as provided above. An appeal
must be submitted in writing within such period and must:

                  (1) request a review by the Committee of the Claim for
benefits under the Plan;

                  (2) set forth all of the grounds upon which the Claimant's
request for review is based and any facts in support thereof; and

                  (3) set forth any issues or comments which the Claimant deems
pertinent to the appeal.

                  The Committee shall act upon each appeal within 60 days after
receipt thereof unless special circumstances require an extension of the time
for processing, in which case a decision shall be rendered by the Committee as
soon as possible but not later than 120 days after the appeal is received by the
Committee.

                  The Committee shall make a full and fair review of each appeal
and any written materials submitted by the Claimant and/or the Company in
connection therewith. The Committee may require the Claimant and/or the Company
to submit such additional facts, documents or other evidence as the Committee in
its discretion deems necessary or advisable in making its review. The Claimant
shall be given the opportunity to review pertinent documents or materials upon
submission of a written request to the Committee, provided the Committee finds
the requested documents or materials are pertinent to the appeal.

                  On the basis of its review, the Committee shall make an
independent determination of the Claimant's eligibility for benefits under the
Plan. The decision of the Committee on any Claim for benefits shall be final and
conclusive upon all parties thereto.

                  In the event the Committee denies an appeal, in whole or in
part, the Committee shall give written notice of the decision to the Claimant,
which notice shall set forth in a manner calculated to be understood by the
Claimant the specific reasons for such denial and which shall make specific
reference to the pertinent Plan provisions on which the Committee decision was
based.

                  (c) Review of Accrued Benefit Statement. If a Participant or
former Participant believes any statement of his Accrued Benefit he receives
pursuant to Section 14.11 is incorrect, such Participant, or former Participant
may submit a written request for correction or verification of such statement to
the Plan Administrator and the Plan Administrator shall respond in writing to
such request in

                                       45
<PAGE>   52
the same manner as provided above for an Applicant. If the Participant, or
former Participant believes the Plan Administrator's response is incorrect, the
Participant, or former Participant may request in writing within 30 days of the
response that the Committee review such statement, and the Committee shall
follow the same procedure with respect to such request as provided above for a
Claimant.

         14.12 Service of Legal Process. The name and address of the person
designated for the service of legal process with respect to the Plan is as
follows:

                                    Plan Administrator
                                    Employee Stock Ownership and 401(k) Plan
                                    BetzDearborn Inc.
                                    4636 Somerton Road
                                    Trevose, Pennsylvania 19053

         14.13 Discretionary Authority. The Plan Administrator shall have sole
discretion to carry out his responsibilities under this Section to construe and
interpret the provisions of the Plan and to determine all questions concerning
benefit entitlements, including the power to construe and determine disputed or
doubtful terms. To the maximum extent permissible under law, the Plan
Administrator's determinations on all such matters shall be final and binding
upon all persons involved.


                                   SECTION 15
                              THE TRUSTEE AND TRUST

         15.1 The Trust. The Trust which is a part of this Plan shall consist of
all amounts contributed to the Plan, and the earnings and appreciation thereon,
less payments made by the Trustee under the Plan and the Trust Agreement entered
into pursuant to the Plan.

         15.2 Actions and Responsibility of Trustee. The Trustee shall have,
subject to the power of the Committee to appoint investment managers,
responsibility to hold, invest, reinvest and administer the Trust assets and, in
so holding and otherwise managing such Trust assets, the Trustee shall act
solely in the interest of the Participants and their beneficiaries.

         15.3 Payments. The Trustee shall make all payments of Accrued Benefits
under the Plan upon the written instructions of the Plan Administrator.

         15.4 Resignation and Removal of Trustee. The Board may remove the
Trustee at any time upon delivery of any written notice called for in the Trust
Agreement; and the Trustee may resign at any time upon delivery of such notice
to the Board. Upon such removal or resignation of the Trustee, the Board shall
appoint a successor Trustee and enter into a successor trust agreement pursuant
to the Plan.

         15.5 Voting Rights and Tender Offers.

                  (a) Voting Rights. The Trustee shall have no discretion or
authority to vote Company Stock held in the Trust on any matter presented for a
vote by the stockholders of the Company except in accordance with timely
directions received by the Trustee from Participants who have Company Stock
allocated to or otherwise held in their Accounts under the Plan. Such directions
shall be given by Participants acting in their capacity as "named fiduciaries"
within the meaning of section 403(a)(1) of ERISA ("Named Fiduciaries") with
respect to both allocated and otherwise held Company Stock and unallocated
Company Stock. Upon timely receipt of such instructions as described in
subsection (c)(1), the Trustee shall vote the Company Stock held in the Trust as
set forth below.

                                       46
<PAGE>   53
                  Each Participant who has Company Stock allocated to or
otherwise held in his Accounts shall, as Named Fiduciary, direct the Trustee
with respect to the vote of Company Stock allocated to or otherwise held in his
Accounts and the Trustee shall follow the directions of those Participants who
provide timely instructions to the Trustee. The direction of a Participant with
respect to Company Stock allocated to or otherwise held in his Accounts shall
also constitute his direction, as Named Fiduciary, to the Trustee with respect
to the vote of a portion of the shares of Company Stock held in the Suspense
Subfund (or otherwise unallocated) or for which no directions were timely
received by the Trustee, whether or not allocated to the Account of any
Participant. Such direction shall be with respect to such number of votes equal
to the total number of votes attributable to Company Stock in the Suspense
Subfund (or otherwise unallocated) or with respect to which no directions were
timely received multiplied by a fraction, the numerator of which is the number
of votes attributable to Company Stock allocated to or otherwise held in the
Participant's Accounts and the denominator of which is the total number of votes
attributable to Company Stock allocated to or otherwise held in the Accounts of
all such Participants who have provided directions to the Trustee under this
subsection (a).

                  (b) Tender Offers for Company Stock. In the event an offer is
received by the Trustee (including but not limited to a tender offer or exchange
offer within the meaning of the Securities Exchange Act of 1934, as from time to
time amended and in effect) to acquire any shares of Company Stock held in the
Trust, or any shares or other securities into which shares of Company Stock held
in the Trust are convertible or for which they are exchangeable; whether or not
allocated or otherwise held in the Account of any Participant (an "Offer"), the
Trustee shall have no discretion or authority to sell, exchange, transfer or
convert any of such shares pursuant to such Offer except to the extent, and only
to the extent, that the Trustee is timely directed to do so in writing with
respect to any Company Stock subject to such Offer and allocated to or otherwise
held in a Participant's Account by the Participant, as Named Fiduciary. In
addition, such direction of a Participant with respect to Company Stock
allocated to or otherwise held in his Accounts shall also constitute his
direction, as Named Fiduciary, to the Trustee with respect to any Company Stock
subject to such Offer held in the Suspense Subfund (or otherwise unallocated),
with respect to an amount of such unallocated Company Stock equal to the total
amount of unallocated Company Stock multiplied by a fraction, the numerator of
which is the amount of Company Stock allocated to or otherwise held in the
Participant's Accounts and the denominator of which is the total amount of
Company Stock allocated to or otherwise held in the Accounts of all
Participants. Upon timely receipt of such directions as described in subsection
(c)(2), the Trustee shall sell, exchange or transfer pursuant to such Offer only
such shares as to which such directions were given.

                  In the event, under the terms of an Offer or otherwise, any
shares of Company Stock tendered for sale, exchange or transfer pursuant to such
Offer may be withdrawn from such Offer, the Trustee shall follow such directions
respecting the withdrawal of such securities from such Offer in the same manner
and the same proportion as shall be timely received by the Trustee from the
Participants as Named Fiduciaries entitled under this subsection (b) to give
directions as to the sale, exchange or transfer of securities pursuant to such
Offer.

                  (c) Voting and Tender Offer Directions. Voting and tender
offer directions shall be given in accordance with the following provisions:

                  (1) Voting Directions. As promptly as possible before each
         annual or special shareholders' meeting of the Company, the Plan
         Administrator shall direct the Trustee to furnish to each Participant a
         copy of any proxy solicitation material, together with a form
         requesting confidential instructions on how the Company Stock allocated
         to or otherwise held in such Participant's Accounts and held in the
         Suspense Subfund (or otherwise unallocated) (including fractional
         shares to 1/1000 of a share) is to be voted. Upon timely receipt of
         such instructions, the

                                       47
<PAGE>   54
         Trustee shall vote the Company Stock as directed, in blocks. The
         instructions received by the Trustee from Participants shall be held by
         the Trustee in strict confidence and shall not be divulged or released
         to any person (except for agents of the Trustee who shall at all times
         be subject to the same restrictions as the Trustee), including officers
         of the Company or Eligible Employees or employees of any other company.
         The Trustee and the Plan Administrator shall not make recommendations
         to Participants on whether to vote or how to vote.

                  (2) Tender Offer Directions. The Trustee shall notify each
         Participant of each tender or exchange offer and shall utilize its best
         efforts to distribute or cause to be distributed to such Participant in
         a timely manner all information distributed to shareholders of the
         Company in connection with any such tender or exchange offer. A
         Participant's instructions to the Trustee as to the manner in which to
         respond to any such tender or exchange offer shall remain in force
         until superseded in writing by the Participant. The Trustee shall
         tender or exchange such shares of Company Stock as described in
         subsection (b). Unless and until shares of Company Stock are tendered
         or exchanged, the individual instructions received by the trustee from
         Participants shall be held by the Trustee in strict confidence and
         shall not be divulged or released to any person, including officers of
         the Company or Eligible Employees, or employees of any other company.


                                   SECTION 16
                     PLAN AMENDMENT, MERGER OR CONSOLIDATION

         16.1 Amendment. The Board of Directors shall have the right to amend
this Plan at any time, by written resolution, subject to the following
limitations:

                  (a) No such amendment shall cause any part of the Trust Fund
to be used for or diverted to any purpose other than the exclusive benefit of
the Participants or their beneficiaries.

                  (b) No such amendment shall cause any reduction in the amount
of any Participant's Accrued Benefit. For purposes of this subsection (b), an
amendment which has the effect of (i) eliminating or reducing an early
retirement benefit or a retirement-type subsidy or (ii) eliminating an optional
form of benefit, with respect to benefits attributable to service before the
amendment, shall be treated as reducing accrued benefits as provided in section
411(d)(6) of the Code and the regulations thereunder.

                  (c) No such amendment shall change any vesting schedule
unless, in the case of an individual who is a Participant on (i) the date the
amendment is adopted or (ii) the date the amendment is effective, if later, the
nonforfeitable percentage of such Participant's right to his Accrued Benefit is
not less than his percentage computed under the Plan without regard to such
amendment. Furthermore, no such amendment shall otherwise change any vesting
schedule unless each Participant having three or more years of service is
permitted to elect, in accordance with regulations under the Code, to have the
nonforfeitable percentage of his Accrued Benefit determined under the Plan
without regard to such amendment; provided that no election shall be given to
any Participant whose nonforfeitable percentage under the Plan as amended cannot
at any time be less than such percentage determined without regard to such
amendment.

         16.2 Merger or Consolidation. This Plan and Trust shall not be merged
or consolidated with, nor shall any assets or liabilities be transferred to, any
other plan and trust, unless the benefits payable to each Participant if the
Plan were terminated immediately after such action would be equal to or greater
than the benefits which would have been payable to each Participant if the Plan
had been terminated immediately before such action.

                                       48
<PAGE>   55
                                   SECTION 17
                                PLAN TERMINATION

         17.1 Discontinuance of Contributions or Termination The Board of
Directors shall have the right to discontinue the Company's contributions
hereunder and to terminate or partially terminate this Plan by delivery of
written notice to the Trustee of such action.

                  Upon complete discontinuance of the Company's contributions,
or termination or partial termination of the Plan, the rights of all affected
Participants to benefits accrued to the date of such discontinuance or
termination shall become nonforfeitable except to the extent that law or
regulations may preclude such vesting in order to prevent discrimination in
favor of highly compensated Employees.

                  Upon final termination of the Plan, the Plan Administrator
shall direct the Trustee to distribute all assets remaining in the Trust, after
payment of any proper expenses, to the Participants in accordance with the
vested Accrued Benefits of such Participants as of the date of such termination.
Such payments shall be made in cash and at such time and in such manner as the
Plan Administrator shall in its discretion determine, subject to Section 9.8 and
Section 9.9. Any shares of Company Stock held in the Suspense Subfund which
cannot be allocated to the Company Stock Accounts of Participants because such
shares have not been released from the Suspense Subfund pursuant to Section 6.5,
shall be delivered to the Company.

                  Notwithstanding the foregoing, amounts credited to a
Participant's 401(k) Account shall not be distributed prior to the Participant's
attainment of age 59 1/2, separation from service (within the meaning of
Section 9.4), total and permanent disability (as defined in Section 9.5(b)),
death, or financial hardship (within the meaning of Section 8.6(a)), except as a
"lump-sum distribution" (as defined in section 401(k)(10)(B)(ii) of the Code) to
a Participant or his beneficiary as soon as administratively feasible after the
termination of the Plan, provided that the Company does not establish or
maintain a successor plan within the meaning of section 401(k)(10)(a)(i) of the
Code and Treas. Reg. Section 1.401(k)-1(d)(3).


                                   SECTION 18
              TRANSFERS OF 401(K) ACCOUNTS, MATCHING, STOCK BONUS,
                     VOLUNTARY, AND DIVERSIFICATION ACCOUNTS
                            FROM THE STOCK BONUS PLAN

         18.1 Transfers of 401(k), Matching, Stock Bonus, Voluntary, and
Diversification Accounts from the Stock Bonus Plan. The Stock Bonus Plan has
been amended, effective September 1, 1990, to provide for the transfer of all
401(k), Matching, Stock Bonus, Voluntary, and Diversification Accounts (and all
liabilities attributable to such Accounts) thereunder to this Plan. The Plan
Administrator of this Plan is directed to accept such transfer. The Plan
Administrator shall deposit the transferred Accounts as follows:

                  (a) an Employee's transferred 401(k) Account, if any, shall be
consolidated with his 401(k) Account in this Plan;

                  (b) an Employee's transferred Matching Account, if any, shall
be deposited in his Rollover Account in this Plan; and

                                       49
<PAGE>   56

                  (c) an Employee's transferred Stock Bonus, Voluntary, and/or
Diversification Accounts, if any, shall be maintained as separate Accounts in
this Plan.

The Plan Administrator shall establish a 401(k) Account and/or Rollover Account
in this Plan for each Employee who did not have such Account(s) prior to the
transfer of his 401(k) Account and/or Matching Account from the Stock Bonus
Plan. Once a Participant's Accounts have been transferred from the Stock Bonus
Plan, no subsequent employer or employee contribution shall be made under the
terms of the Stock Bonus Plan and credited to any Participant's Accounts in this
Plan. Notwithstanding the preceding sentence, Accounts transferred from the
Stock Bonus Plan shall share in allocations of gains and losses under Sections
7.1 and 7.2.

                  18.2 Distributions and Withdrawals of Amounts Attributable to
Amounts Transferred.

                  (a)      Method of Distributions.

                           (1) Distribution Upon Retirement, Disability or
                  Death. Upon the retirement, total and permanent disability (as
                  defined in Section 9.5(b)), or death of a Participant whose
                  401(k), Matching, Stock Bonus, Voluntary, and/or
                  Diversification Accounts were transferred to this Plan from
                  the Stock Bonus Plan, the amounts in his Accounts shall be
                  payable to the Participant or his beneficiary in a lump sum,
                  installment payments, or any other manner permitted under the
                  Stock Bonus Plan (all references in this Section to the Stock
                  Bonus Plan shall be to the Stock Bonus Plan as it was in
                  effect on September 1, 1990). Installment payments, if
                  elected, will be made in equal quarterly, semiannual, or
                  annual installments, over a period certain not extending
                  beyond the life expectancy of the Participant or the joint
                  life expectancies of the Participant and his spouse.

                           If a Participant whose 401(k), Matching, Stock Bonus,
                  Voluntary, and/or Diversification Accounts were transferred to
                  this Plan from the Stock Bonus Plan dies without having made
                  an election as to the form of his benefit distribution, the
                  Participant's entire benefit under this Plan shall be
                  distributed in a lump sum to the beneficiary of the
                  Participant unless the beneficiary is the Participant's
                  spouse. In such event, payment of the amounts in the
                  Participant's Accounts shall be made in one lump sum to the
                  Participant's spouse unless the spouse elects, no later than
                  60 days after the date of death of such Participant, to have
                  the amounts due such spouse paid in installments. If the
                  spouse elects installment payments, such payments will be paid
                  in the manner described in the preceding paragraph.

                           Payment of the amounts in the Participant's Accounts
                  shall be made or commence no later than 60 days after the last
                  day of the Plan Year in which the Participant terminates
                  employment by reason of retirement, disability, or death.

                           (2) Distribution Upon Other Termination of
                  Employment. Upon termination of employment for reasons other
                  than retirement, disability, or death, a Participant whose
                  401(k), Matching, Stock Bonus, Voluntary, and/or
                  Diversification Accounts were transferred to this Plan from
                  the Stock Bonus Plan shall receive payment of his entire
                  Accrued Benefit under this Plan in accordance with Section 9.2
                  of this Plan.

                  (b) In-Service Withdrawals. An Employee whose Voluntary
Account was transferred to this Plan from the Stock Bonus Plan may elect to
withdraw at any time any portion or all of the amount in his Voluntary Account,
in accordance with Section 6.9 of the Stock Bonus Plan. Any

                                       50
<PAGE>   57
withdrawal may not be for less than the lessor of (i) $500, or (ii) the
Employee's entire interest in the Voluntary Account.

                  (c) Form of Distribution or Withdrawal. To the extent
permitted under the Stock Bonus Plan, a lump sum distribution described in this
Section may be paid in cash or securities, including Common Stock, as elected by
the Employee. As provided in Sections 8.4 and 8.5 of the Stock Bonus Plan, an
Employee may receive only cash from his Voluntary Account and/or Diversification
Account.

         18.3     Transfer to Diversification Account.

                  (a) Eligibility to Make Transfers. Any Participant may direct
the Trustee, in accordance with paragraphs (b) or (c) below, to transfer a
portion or all of the vested interest in such Participant's Stock Bonus Account
to the Investment Fund. Amounts diversified from a Stock Bonus Account shall be
allocated to the Participant's Diversification Account. A Participant may not
diversify any stock held in his separate PAYSOP Account.

                  (b) Valuation of Diversification. The transfer of the
Participant's vested interest from his Stock Bonus Account, invested in Common
Stock, to his Diversification Account shall be valued as provided in Section
7.1.

                  (c) How to Make Election. A Participant may elect to diversify
his shares of Common Stock at any time during the Plan Year by filing the
Appropriate Form with the Plan Administrator in respect to each diversification
request, or in any other manner acceptable to the Plan Administrator. No
automatic diversifications upon a regular basis shall be permitted.

         18.4 Protected Forms of Distribution. A Participant whose 401(k),
Matching, Stock Bonus, Voluntary, and/or Diversification Accounts in the Stock
Bonus Plan were transferred to this Plan who was or becomes eligible for a
protected form of distribution (as described in section 411(d)(6) of the Code,
and rules and regulations thereunder), under the terms of the Stock Bonus Plan
as it was in effect on September 1, 1990, and which was not otherwise provided
under this Plan, shall be eligible to elect such form of distribution with
respect to that portion of his total Account which equals the value of the
amount transferred from the Stock Bonus Plan effective September 1, 1990.
Notwithstanding anything in this Plan to the contrary, it is intended that the
forms of distribution provided under the plan comply with section 411(d)(6) of
the Code, and rules and regulations thereunder.


                                   SECTION 19
                      TRANSFERS OF PAYSOP ACCOUNTS FROM THE
                                STOCK BONUS PLAN

         19.1 Transfers of PAYSOP Accounts from the Stock Bonus Plan. The Stock
Bonus Plan has been amended, effective October 1, 1992, to provide for the
transfer of all PAYSOP Accounts (and all liabilities attributable to such
Accounts) thereunder to this Plan. The Plan Administrator of this Plan is
directed to accept such transfer. A Participant's transferred PAYSOP Account
shall be maintained as a separate Account in this Plan.

         19.2 Income on PAYSOP Accounts. Dividends and other income attributable
to the PAYSOP shall be reinvested in Common Stock and allocated to each
Participant's PAYSOP Account according to the number of shares allocated to such
Account within a reasonable time after receipt of such dividends.

                                       51
<PAGE>   58
         19.3 Nonforfeitable Right to Allocated Common Stock. Each Participant
shall have a nonforfeitable right to all Common Stock and income allocated to
his PAYSOP Account. However, no Common Stock may be distributed from a
Participant's PAYSOP Account before the end of the 84th month beginning after
the month in which such Common Stock was allocated. The foregoing rule shall not
apply in the following cases:

                  (a) The Participant's death, total and permanent disability
(as defined in Section 9.5(b) of this Plan), separation from service, or
termination of the PAYSOP Plan;

                  (b) A transfer of the Participant from the service of the
Company to the service of an acquiring employer where:

                  (1) The Company sells to the acquiring employer substantially
         all of the assets used by the Company in a trade or business conducted
         by the Company, or

                  (2) The Company sells to the acquiring employer all of the
         stock of a subsidiary of the Company;

                  (c) Where the Company disposed of its interest in a subsidiary
and the Participant continues to be employed by such subsidiary; or

                  (d) Any distribution required under Section 9.9 or 19.5 of
this Plan.

         19.4 Administrative Expenses. Administrative expenses or costs incurred
by the Trustee and by the Committee in connection with the PAYSOP, including the
fees of their counsel, accountants, salaries (if any), and other items, in the
performance of their duties may be paid by the Company; provided that, as
reimbursement for the expense of administering the PAYSOP, the Company may
direct the Trustee in writing to pay from the Trust Fund so much of the amounts
paid or incurred during a taxable year, as expenses of administering the PAYSOP,
as does not exceed the smaller of (i) the sum of ten percent (10%) of the first
$100,000 and five percent (5%) of any amount in excess of $100,000 of the income
from dividends paid to the PAYSOP during the Plan Year ending with or within the
Company's taxable year, or (ii) $100,000.

         19.5     Diversification Withdrawals.

                  (a) Election. Within 90 days after the last day of each Plan
Year during a Participant's Qualified Election Period, the Qualified Participant
shall be permitted to elect on an Appropriate Form, or in any other manner
acceptable to the Plan Administrator, to withdraw from his PAYSOP Account
twenty-five percent (25%) of the value of his PAYSOP Account balance
attributable to shares of Company Stock which were acquired by the PAYSOP after
December 31, 1986. Within 90 days after the close of the last Plan Year in the
Participant's Qualified Election Period, a Qualified Participant may elect to
withdraw from his PAYSOP Account fifty percent (50%) of the value of such
account balance.

                  (b) Time of Distribution. The Participant's withdrawal shall
be distributed by the Plan Administrator no later than 180 days after the close
of the Plan Year to which the direction applies.

                  (c) Determination of Amount for Diversification Requirements.
The portion of a Participant's Account balance attributable to shares of Company
Stock which were acquired by the Plan after December 31, 1986, shall be
determined by multiplying the number of shares of such securities held in the
account by a fraction, the numerator of which is the number of shares acquired
by the PAYSOP

                                       52
<PAGE>   59
after December 31, 1986 and allocated to Participant's PAYSOP Accounts (not to
exceed the number of shares held by the PAYSOP on the date the individual
becomes a Qualified Participant), and the denominator of which is the total
number of shares held by all PAYSOP Accounts at the date the individual becomes
a Qualified Participant.

         19.6     Distributions of PAYSOP Accounts.

                  (a) Method of Distribution. Distribution of PAYSOP Accounts
shall be made in the same manner as described in Sections 18.2(a) and (b) and
18.4 of this Plan with respect to all other Accounts transferred from the Stock
Bonus Plan, except that all references to the Stock Bonus Plan shall be to the
Stock Bonus Plan as it was in effect on October 1, 1992.

                  (b)      Form of Distribution.

                  (1) Distributions of Common Stock from a Participant's PAYSOP
         Account shall be in full shares of Common Stock, and cash shall be
         distributed in lieu of any fractional shares of Common Stock allocated.
         Fractional shares shall be valued by reference to their fair market
         value, determined in accordance with Section 7.1.

                  (2) Notwithstanding the foregoing, the Committee may determine
         that any or all of the distributions under Section 19.3 or subsection
         (1) above shall be made in cash in lieu of Common Stock, or partially
         in cash and partially in Common Stock; provided, that the Committee
         shall have advised each Participant (or beneficiary) in writing that he
         has a right to demand that his benefits be distributed in the form of
         shares of Common Stock. When a cash distribution is made, the
         Participant's shares of Common Stock shall be valued at their fair
         market value, determined in accordance with Section 7.1.

                  (3) It is intended that the distributions described in
         subsections (1) and (2) above shall be made in accordance with
         regulations which may hereafter be issued by the Department of
         Treasury.


                                   SECTION 20
                                  MISCELLANEOUS

         20.1 Participation by Affiliates with Consent of BetzDearborn Inc. Any
corporation which is an Affiliate, with approval of the Board of Directors, by
resolution of its own board of directors, may adopt the Plan and Trust hereby
created. From and after the effective date when such corporation shall have
become a party to this Plan and the Trust Agreement, it shall for all purposes
of this Plan and the Trust Agreement be included within the meaning of the word
"Company" and shall be an affiliated company for purposes of benefit accrual and
vesting.

         20.2 Application of Plan. This Plan shall not apply to any person who
retired or otherwise separated from the service of the Company before the
Effective Date. The right of any such person to any retirement benefit or
otherwise shall be governed solely by the provisions of the BetzDearborn Inc.
Employees' Retirement Plan or the Plan in effect on the date of such retirement
or other separation from service.

         20.3 No Employment Rights Created. The Plan and Trust do not confer
upon any Participant or other Employee any right to be continued in the employ
of the Company or an Affiliate, and the

                                       53
<PAGE>   60
Company expressly reserves the right to terminate the employment of any Employee
whether or not a Participant, whenever the interest of the Company, in its sole
judgment, may so require.

         20.4 Incapacitated Participant or Beneficiary. If the Plan
Administrator deems any person incapable of receiving any benefit to which he is
entitled by reason of minority, illness, infirmity or other incapacity, the Plan
Administrator may direct the Trustee to make payment to such person's legally
appointed guardian, or, if none has been appointed, to the holder of a legally
valid power of attorney from such person. Such payments shall, to the extent
thereof discharge the liability of the Company, the Committee, the Plan
Administrator, the Trustee and the Trust.

         20.5 Payment of Plan Expenses. Except as otherwise provided in the
Trust Agreement, the Plan shall pay the expenses of administering the Trust
which is part of this Plan (to the extent such expenses are not paid by the
Company), including the compensation of the Trustee, which shall be as mutually
agreed by the Company and the Trustee.

         20.6 Unclaimed Benefits. Any benefits payable to a Participant or
beneficiary not claimed for a period of five years from the date of entitlement
as determined by the Plan Administrator following a diligent effort to locate
such Participant or beneficiary and with the approval of the Plan Administrator,
shall be forfeited and applied in accordance with the terms of Section 6.7;
provided, however, that such forfeited benefits shall be reinstated if a claim
for them is made by the Participant or beneficiary.

         20.7 Treatment of Leased Employees. Notwithstanding any other
provisions of the Plan, for purposes of the pension requirements of section
414(n)(3) of the Code, Employees shall include Leased Employees.

         20.8 Construction. Construction and administration of this Plan and of
the Trust Agreement shall be governed by ERISA and other applicable Federal law
and to the extent not governed by Federal law, by Pennsylvania law.

         20.9 Gender and Number. The masculine pronoun wherever used shall
include the feminine and the singular may include the plural, and vice versa, as
the context may require.


                                   SECTION 21
                      SPECIAL PROVISIONS CONCERNING CERTAIN
                       FORMER EMPLOYEES OF THE GRACE GROUP

         21.1 Definitions. The following words and phrases, as used herein,
shall have the following meanings, unless the context clearly indicates
otherwise:

                  (a) "Buyer Group" shall mean, collectively, Betz Laboratories,
Inc. and any entity of which it owns directly or indirectly fifty percent (50%)
or more of the voting power or other similar interests and, at any time on or
after the Closing Date, the Transferred Companies and Transferred Joint
Ventures.

                  (b) "Closing Date" shall mean the Closing Date under the Sale
Agreement, which is expected to be June 28, 1996.

                  (c) "Continued Employee" shall mean any employee -

                                       54
<PAGE>   61
                  (1) who is an employee of the Grace Group (other than the
         Transferred Companies or Transferred Joint Ventures) who is employed
         exclusively in the Dearborn Business (as defined in the Sale
         Agreement);

                  (2) who is an employee of the Grace Group (other than the
         Transferred Companies or Transferred Joint Ventures) who performs
         substantial services for the Dearborn Business and is designated by
         Grace as an employee who is to be transferred with the Dearborn
         Business; or

                  (3) who replaces any employee described in paragraph (i) or
         (ii) above (excluding any such employee who is on long-term disability
         on the Closing Date) and who accepts an offer of employment made by a
         member of the Buyer Group in accordance with the Sale Agreement.

                  (d)      "Grace" shall mean W.R. Grace & Co.-Conn.

                  (e) "Grace Group" shall mean, collectively, W.R. Grace & Co.
and any entities of which it owns directly or indirectly fifty percent (50%) or
more of the voting power or other similar interests at any time prior to the
closing under the Sale Agreement, the Transferred Companies, and the Transferred
Joint Ventures.

                  (f) "Sale Agreement" shall mean the Grace Dearborn Worldwide
Purchase and Sale Agreement, entered into by W.R. Grace & Co.-Conn. and the
Company, dated March 11, 1996.

                  (g) "Transferred Companies" shall mean Grace Dearborn N.V.;
Alexim N.V.; Finac N.V.; Grace Dearborn, Inc.; Grace Service Chemicals S.A.;
Grace Dearborn B.V.; Dearborn Holdings AB; Grace Dearborn AB; and Dearborn USA,
Limited Partnership.

                  (h) "Transferred Joint Ventures" shall mean Dearborn I.E.I.
(India) Private Ltd. and Nippon Dearborn K.K.

                  (i) "U.S. Employee" shall mean an employee of Dearborn USA,
Limited Partnership, or a Continued Employee.

         21.2 Participation by Certain Employees of the Dearborn Business.
Notwithstanding Section 3.2, each U.S. Employee who participated in the W.R.
Grace & Co. Salaried Employees Savings and Investment Plan immediately prior to
the Closing Date shall become a Participant in the Plan on the date he first
completes an Hour of Service for the Company.

         21.3 Years of Vesting Service. Each U.S. Employee's service with the
Grace Group prior to the Closing Date shall be counted for purposes of
determining Years of Vesting Service under this Plan on and after the Closing
Date.

         21.4 Allocation of Company Stock Contribution for 1996. For purposes of
determining entitlement to allocations of contributions under Section 6 for
1996, a Participant's service in 1996 with the Grace Group prior to the Closing
Date shall be counted for purposes of determining if the Participant completed
1,000 or more Hours of Service under Section 6.1. However, only Compensation
received in 1996 as an Eligible Employee shall be counted for purposes of
determining the amount of a Participant's allocation under Sections 6.2, 6.3,
6.6(c), and 6.7.


                                       55
<PAGE>   62
         IN WITNESS WHEREOF, BETZDEARBORN INC. has caused these presents to be
duly executed as of this ----- day of ----------, ----.

                                                    BETZDEARBORN INC.

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

                                                    By:
                                                      -------------------------
                                                    Title:
                                                       -------------------------
ATTEST:

------------------------------
Title:
------------------------------
         [CORPORATE SEAL]


                                       56
<PAGE>   63

                      FIRST AMENDMENT TO BETZDEARBORN INC.
                    EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN


         THIS FIRST AMENDMENT made on this day of ______________, 1998, by
BETZDEARBORN INC. (the "Corporation"), a corporation organized and existing
under the laws of the State of Pennsylvania;


                              W I T N E S S E T H:


         WHEREAS, the Corporation, as Plan Sponsor, maintains the BetzDearborn
Inc. Employee Stock Ownership and 401(k) (the "Plan"), which was established by
an indenture dated January 1, 1989, and last amended and restated by an
indenture dated January 1, 1998; and

         WHEREAS, the Corporation desires to amend the Plan to make certain
changes related to vesting and to the definitions of "Company Stock" and
"Preferred Stock."

         NOW, THEREFORE, the Corporation does hereby amend the Plan effective as
of the effective time of the merger among the Corporation and Hercules Inc.
("Hercules") and Water Acquisition, Co., a wholly owned subsidiary of Hercules,
as follows:

         1. By deleting existing Plan Section 1.8 in its entirety and replacing
it with the following new Plan Section 1.8:

                  "1.8 `Common Stock' shall mean the common stock of Hercules,
         Inc., it being intended that such Common Stock constitute `qualifying
         employer securities' within the meaning of Section 4975(e)(8) of the
         Code."

         2. By deleting existing Plan Section 1.10 in its entirety and replacing
with the following new Plan Section 1.10:

                  "1.10 `Company Stock' shall mean the common stock of Hercules,
         Inc., it being intended that such Company Stock constitute `qualifying
         employer securities' within the meaning of Section 4975(e)(8) of the
         Code."

         3. By deleting existing Plan Section 1.36 in its entirety and replacing
it with the following new Plan Section 1.36:

            "1.36 [RESERVED]"

         4. By deleting the second paragraph of Plan Section 5.4(a) in its
entirety.

<PAGE>   64

         5. By deleting the second paragraph of existing Plan Section 7.1(a) in
its entirety and replacing it with the following new second paragraph of Plan
Section 7.1(a):

                  "For purposes of the valuation described above, the fair
         market value of shares of Company Stock held by the Trustee shall be
         determined as of the Valuation Date coincident with the last day of the
         Plan Year, and as of such other Valuation Dates as the Plan
         Administrator so directs."

         6. By deleting existing Plan Section 8.18(f)(3) in its entirety and
replacing it with the following new Plan Section 8.18(f)(3):

                  "(3) Loan Date. Each loan shall be made as soon as practicable
         following approval of the Participant's loan application by the Plan
         Administrator. To the extent any loan is made from a particular Account
         of a Participant which is invested partially in different investment
         media, such loan shall be made pro rata from the investments of such
         Account in each such investment medium, valued as of the most recent
         Valuation Date or, to the extent that such loan is made from amounts
         invested in Investment Vehicles the value of which is priced daily, as
         of the date of the loan."

         7. By adding the following sentence to the end of existing Plan Section
9.1:

                  "Notwithstanding any other provision of the Plan, an Employee
         who is a Participant of the Plan as of the effective time of the merger
         among the Corporation and Hercules, Inc. and Water Acquisition Co., a
         wholly owned subsidiary of Hercules, Inc., shall be fully vested in all
         of his Accounts."

         8. By deleting existing Plan Section 9.2(c) in its entirety and
replacing it with the following new Plan Section 9.2(c):

                  "(c) Form. Benefits from the Participant's Company Stock,
         Matching, and Other Investments Accounts shall be paid in whole shares
         of Company Stock. Benefits from the Participant's 401(k) and Rollover
         Accounts shall be paid in cash, except that, to the extent the
         Investment Vehicle in which the Accounts are invested consists of
         Company Stock, such benefits shall be paid in Company Stock.

                  Notwithstanding the foregoing, a Participant may elect to
         receive all benefits from his Other Investments, 401(k) and Rollover
         Accounts in cash."

         9. By adding the following sentence to the end of existing Plan Section
18.4:

                  "Notwithstanding anything contained in Plan Section 18, any
                  distribution which would have been required to be made in the
                  form of "employer securities" (within the meaning of Code
                  Section 409(l)) will be made in the form of Common Stock."

                                       2
<PAGE>   65

         Except as specifically amended hereby, the Plan shall remain in full
force and effect as prior to this First Amendment.

         IN WITNESS WHEREOF, the Corporation has executed this First Amendment
as of the date and the year first above written.

                                                    PLAN SPONSOR:

                                                    BETZDEARBORN INC.

                                                    By:
                                                     ---------------------------
                                                    Title:
                                                     ---------------------------

ATTEST:

---------------------------------
Title:
---------------------------------
         [CORPORATE SEAL]

                                        3

<PAGE>   66
                     SECOND AMENDMENT TO BETZDEARBORN INC.
                    EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

     THIS SECOND AMENDMENT made on this day of ___________, 1998, by
BETZDEARBORN INC. (the "Corporation"), a corporation organized and existing
under the laws of the State of Pennsylvania;


                              W I T N E S S E T H:

     WHEREAS, the Corporation, as Plan Sponsor, maintains the BetzDearborn Inc.
Employee Stock Ownership and 401(k) (the "Plan"), which was established by an
indenture dated January 1, 1989, and last amended and restated by an indenture
dated January 1, 1998; and

     WHEREAS, the Corporation desires to amend the Plan to revise the formula
for 'Company Matching Contributions' and the day on which the interest rate
applicable to loans under the Plan is set.

     NOW, THEREFORE, the Corporation does hereby amend the Plan effective as of
January 1, 1999, as follows:

     1.   By deleting existing Plan Section 8.3(b) in its entirety and replacing
it with the following new Plan Section 8.3(b):

          "(b)  Matching Rate.  The Matching Rate shall be fifty percent (50%).
The Maximum Compensation deferral Percentage shall be six percent (6%)."

     2.   By deleting existing Plan Section 8.18(b) in its entirety and
replacing it with the following new Plan Section 8.18(b):

          "(b)  Terms of Loan.  Each loan granted or renewed under this Section
shall bear a rate of interest which is two percentage points greater than the
prime lending rate, as announced in The Wall Street Journal, on the first
business day of each calendar quarter in which the loan is made or such other
rate as may be determined by the Plan Administrator to be required by law. The
interest rate and other conditions for the repayment of the loan shall be fixed
at the time the loan is made. All loans shall be repayable by their terms within
five years."
<PAGE>   67
     Except as specifically amended hereby, the Plan shall remain in full
force and effect as prior to this Second Amendment.

     IN WITNESS WHEREOF, the Corporation has executed this Second Amendment as
of the date and the year first above written.

                                        PLAN SPONSOR:

                                        BETZDEARBORN INC.

                                        By:
                                           -------------------------------------

                                        Title:
                                              ----------------------------------

ATTEST:

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

Title:
      ------------------------------
             [CORPORATE SEAL]

<PAGE>   68
                      THIRD AMENDMENT TO BETZDEARBORN INC.
                    EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN

         THIS THIRD AMENDMENT made on this --- day of March, 1999, by
BETZDEARBORN INC. (the "Corporation"), a corporation organized and existing
under the laws of the State of Pennsylvania;

                              W I T N E S S E T H:

         WHEREAS, the Corporation, as Plan Sponsor, maintains the BetzDearborn
Inc. Employee Stock Ownership and 401(k) (the "Plan"), which was established by
an indenture dated January 1, 1989, and last amended and restated by an
indenture dated January 1, 1998; and

         WHEREAS, as a condition to receipt of a favorable determination on the
tax-qualified status of the Plan, the Corporation desires to amend the Plan to
reflect the required provisions of the Uniformed Service Employment and
Reemployment Rights Act of 1994; and

         WHEREAS, the officers of the Corporation are authorized to amend the
Plan as required for the continued qualification of the Plan.

         NOW, THEREFORE, the Corporation does hereby amend the Plan effective as
of December 12, 1994, by adding the following new Plan Section 4.4 to the Plan:

                  "4.4 Notwithstanding any provision of the Plan to the
        contrary, contributions, benefits and service credit with respect to
        qualified military service will be provided in accordance with Section
        414(u) of the Code."

         Except as specifically amended hereby, the Plan shall remain in full
force and effect as prior to this Third Amendment.

         IN WITNESS WHEREOF, the Corporation has executed this Third Amendment
as of the date and the year first above written.

                                                BETZDEARBORN INC.

                                                By:
                                                  -----------------------------

                                                Title:
                                                  -----------------------------

ATTEST:

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

Title:
--------------------------------
         [CORPORATE SEAL]