<PAGE>
                                                                    EXHIBIT 10.3

                               KAYDON CORPORATION
                    EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN

                                  (AS AMENDED)


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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE                                                                                                        PAGE
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<S>      <C>                                                                                                   <C>
I        Establishment..........................................................................................  1
         1.1      Effective Date................................................................................  1
         1.2      Qualification Intent..........................................................................  1
         1.3      Incorporation of Trust........................................................................  2
         1.4      No Prior Application..........................................................................  2
         1.5      Plan History..................................................................................  2
         1.6      Qualifying Employer Securities and Special Rule...............................................  3

II       Definitions............................................................................................  4
         2.1      Account Balance...............................................................................  4
         2.2      Active Participant............................................................................  4
         2.3      Affiliated Employer...........................................................................  4
         2.4      Allocation Date...............................................................................  4
         2.5      Break in Service..............................................................................  5
         2.6      Compensation..................................................................................  6
         2.7      Employee....................................................................................... 7
         2.8      Highly Compensated Employees................................................................... 8
         2.9      Hour of Service............................................................................... 10
         2.10     Limitation Year............................................................................... 12
         2.11     Normal Retirement Age......................................................................... 12
         2.12     Plan Year..................................................................................... 12
         2.13     Qualified Order............................................................................... 13
         2.14     Qualifying Spouse............................................................................. 14
         2.15     Stock......................................................................................... 14
         2.16     Top Heavy..................................................................................... 14
         2.17     Year of Service............................................................................... 17

III      Eligibility and Participation.......................................................................... 19
         3.1      Eligibility Requirements...................................................................... 19
         3.2      Participation................................................................................. 20
         3.3      Re-Participation.............................................................................. 21
         3.4      Transferred Employees......................................................................... 21

IV       Employer Contributions................................................................................. 25
         4.1      Employer Contributions........................................................................ 25
         4.2      Make-Up Contributions Under USERRA............................................................ 27
         4.3      Maximum Deductible Amount..................................................................... 28
         4.4      Maximum Annual Additions...................................................................... 29
         4.5      Excess Addition............................................................................... 32
         4.6      Erroneous Contribution........................................................................ 33
         4.7      Investment of Contributions in Stock...........................................................34

</TABLE>


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<TABLE>
<CAPTION>
ARTICLE                                                                                                        PAGE
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<S>      <C>                                                                                                   <C>
V        Participant Contributions.............................................................................. 35
         5.1      Participant Contributions..................................................................... 35
         5.2      Method........................................................................................ 36
         5.3      Matching and Voluntary Contribution Limits.................................................... 37
         5.4      Actual Contribution Percentage................................................................ 38
         5.5      Correction of Excess Aggregate Contribution................................................... 39
         5.6      Salary Deferred Contribution Limit............................................................ 40
         5.7      Actual Deferral Percentage.................................................................... 40
         5.8      Excess Deferral Limit......................................................................... 42
         5.9      Correction of Excess Deferral and Excess Contribution......................................... 42
         5.10     Additional 401(k) and 401(m) Rules............................................................ 44

VI       Accounts................................................................................................50
         6.1      Accounts.......................................................................................50
         6.2      Allocation of Employer Contributions...........................................................51
         6.3      Allocation of Forfeitures......................................................................52
         6.4      Allocation of expenses, Earnings, Losses and Adjustments in Value..............................53
         6.5      Vesting........................................................................................54
         6.6      Vested Accounts................................................................................55
         6.7      Investment of Employer and Participant Contributions...........................................57
         6.8      ERISA Section 404(c)...........................................................................58
         6.9      Special Investment Direction...................................................................60

VII      Distribution............................................................................................61
         7.1      Distributive Event.............................................................................61
         7.2      Hardship.......................................................................................62
         7.3      Method of Payment..............................................................................64
         7.4      Information Provided...........................................................................66
         7.5      Application for Distribution...................................................................66
         7.6      Timing of Payment..............................................................................67
         7.7      Amount of Payment..............................................................................70
         7.8      Special Participant Account Distribution Rules.................................................71
         7.9      Additional Distribution Provisions.............................................................72
         7.10     Designation of Beneficiary.....................................................................75
         7.11     Claims Procedure...............................................................................76
         7.12     Facility of Payment............................................................................77
         7.13     Qualified Order................................................................................78
         7.14     Direct Rollover Rules..........................................................................78

VIII     Insurance or Annuities..................................................................................81
         8.1      Types of Policies and Contracts................................................................81
         8.2      Premiums - Dividends...........................................................................81
         8.3      Active Participant Life Insurance..............................................................81

IX       Administration..........................................................................................83
</TABLE>


<PAGE>


<TABLE>
<S>      <C>                                                                                                   <C>
         9.1      Fiduciary Responsibilities.....................................................................83
         9.2      Kaydon Corporation.............................................................................83
         9.3      Employer Action................................................................................83
         9.4      Investment Manager Appointment.................................................................83
         9.5      Committee......................................................................................83
         9.6      Fiduciary Standards............................................................................85
         9.7      Inter-Relationship of Fiduciaries..............................................................85
         9.8      Indemnification................................................................................85
         9.9      Payment of Expenses............................................................................85
         9.10     Limitation of Liability and Legal Action.......................................................86
         9.11     Electronic Administration......................................................................86

X        Amendment and Termination of Plan.......................................................................87
         10.1     Amendment......................................................................................87
         10.2     Vesting Schedule Amendment.....................................................................87
         10.3     Termination....................................................................................87
         10.4     Partial Termination............................................................................88
         10.5     Full Vesting...................................................................................88
         10.6     Merger or Consolidation of Plan................................................................88

XI       Miscellaneous...........................................................................................89
         11.1     Nonassignability...............................................................................89
         11.2     Employment Rights Not Enlarged.................................................................89
         11.3     Participants' Rights Limited...................................................................89
         11.4     Interpretation and Construction................................................................89
         11.5     Conterparts....................................................................................89
         11.6     Governing Law..................................................................................89
</TABLE>

Appendix of Participating Employers

Appendix A - Section 1.1(a) - Special Effective Dates

Appendix B - Section 2.6 - Explanation of Definition of Compensation

Appendix C - Section 2.16(d)(ii) - Top Heavy Actuarial Assumptions

Appendix D - Section 6.1(a)(vi) - Special Rules Applicable to Amounts
Transferred from the Cooper Bearing Company Employees' 401(k) Deferred
Compensation Plan and Trust

Appendix E - Section 6.7(a)(i) - List of Investment Funds Available Under the
Plan

Appendix F - Section 6.8 - Information Provided to Comply With Section 404(c) of
ERISA


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Appendix G - Section 6.8 - Policies and Procedures Re: Compliance with Section
404(c) of ERISA

Appendix H - Section 7.2(a)(v) - Additional Rules Regarding Hardship Withdrawals

Appendix I - Section 9.1 - Parties Responsible for Certain Plan Functions

Appendix J - Canfield Technologies, Inc., Tridan International, Inc. and Indiana
Precision, Inc.

Appendix K - Loan Terms and Conditions


<PAGE>
                               KAYDON CORPORATION
                    EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN

         On this 19th day of February, 2002, Kaydon Corporation and the
Affiliated Employers approved by the Board of Directors of Kaydon Corporation as
Participating Employers identified in the Appendix of Participating Employers
(the Employer), amend and restate the Kaydon Corporation Employee Stock
Ownership and Thrift Plan (the Plan).

                                   ARTICLE I

                                 ESTABLISHMENT

         1.1 EFFECTIVE DATE. This amendment and restatement is generally
effective on the first day of the 1997 Plan Year, January 1, 1997. Whether or
not explicitly stated, certain provisions are effective on other dates as
required by GUST.

         (a) SPECIAL EFFECTIVE DATES. Certain provisions are effective as
specified in Appendix A.

         (b) ORIGINAL EFFECTIVE DATE. The Plan was originally effective January
1, 1983.

         (c) RING & SEAL. The Plan was adopted by Kaydon Ring & Seal, Inc.
effective January 1, 1987.

         (d) SPIROLOX. The Plan was adopted by the Spirolox Division of Kaydon
Corporation effective January 1, 1988.

         (e) COOPER BEARING. The Plan was adopted by The Cooper Split Roller
Bearing Corp. effective July 1, 1992.

         (f) ITI. The Plan was adopted by Industrial Tectonics Inc effective
April 1, 1994.

         1.2 QUALIFICATION INTENT. The Plan is intended to qualify as a 401(k)
profit sharing and stock bonus plan and, with respect to certain of the
accounts, as a PAYSOP or TRASOP under Sections 401(a), 401(k), 409 and 501(a) of
the Internal Revenue Code of 1986, as amended (the Code), and as an employee
pension benefit plan under the Employee Retirement Income Security Act of 1974,
as amended (ERISA).

                                       -1-


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         1.3 INCORPORATION OF TRUST. The Employer has adopted a Trust which is
incorporated in this Plan by reference.

         1.4 NO PRIOR APPLICATION. The Plan and each amendment to the Plan do
not apply to any participant who is not an Active Participant on or after the
effective date of the Plan or the respective amendment, as the case may be,
except that:

         (a) EXPLICIT APPLICATION. The Plan, an amendment, or portions of the
Plan or an amendment applies to the extent explicitly designated as applicable
to other participants; and

         (b) ARTICLE VII. The provisions of Article VII through XI and the
Appendices, as amended from time to time, apply to all participants.

         1.5 PLAN HISTORY. Kaydon Corporation established the Employee Stock
Ownership and Thrift Plan effective January 1, 1983: to make contributions
pursuant to certain tax credit provisions of the Code and have those
contributions invested in the common stock of Kaydon Corporation; to which the
account balances of its employees who previously participated in the Bairnco
Corporation Employee Stock Ownership Plan were transferred and, to the extent
that the transfer was not in common stock of Kaydon Corporation, to convert the
assets into such stock; and to permit elective contributions to the Plan
pursuant to Section 401(k) of the Code effective September 1, 1984 and to have
the employees elect to have such contributions invested in the common stock of
Kaydon Corporation or in other permitted investments.

         (a) ORIGINAL STRUCTURE. The Plan initially incorporated a
profit-sharing employee stock ownership plan intended to meet the requirements
of Section 409A of the Code and a profit-sharing plan for purposes of the
elective contributions intended to meet all of the requirements of the Code
required for the plan to be considered a profit-sharing plan.

         (b) SUBSEQUENT CHANGES. Effective January 1, 1987, Kaydon Corporation
ceased making tax-credit contributions to the Plan due to the expiration of the
tax credit provisions of the Code. Effective November 30, 1991, Kaydon
Corporation recognized the cessation of accruals and allocations under the
profit sharing employee stock ownership plan which was intended to meet the
requirements of Section 409A of the Code and

                                       -2-


<PAGE>
expanded the available investments and the scope of participant investment
direction with respect to the 401(k) profit sharing and stock bonus portion of
the Plan.

         1.6 QUALIFYING EMPLOYER SECURITIES AND SPECIAL RULE. The Plan is
intended to allow up to 100% of the Plan assets to be invested in qualifying
employer securities within the meaning of Section 407 of ERISA. The maximum
number of shares which may be allocated to Participants under this Plan is
determined by the Form S-8 Registration Statement for the Plan, as amended from
time to time.

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                                   ARTICLE II
                                   DEFINITIONS

         2.1 ACCOUNT BALANCE. The Account Balance is the sum of:

         (a) SINGLE PARTICIPANT INVESTMENT. The value of a participant's Single
Participant Investment from time to time; and

         (b) OTHER. The value of a participant's accounts other than a Single
Participant Investment from time to time, including all allocations as of the
coincident or immediately preceding Allocation Date and the appropriate portion
of the earnings, losses and adjustments in value from that Allocation Date to
the date of any distribution.

         2.2 ACTIVE PARTICIPANT. An Active Participant is an Employee who has
met the Eligibility Requirements of Section 3.1 who begins to participate in the
Plan under Section 3.2. An Employee who becomes an Active Participant remains an
Active Participant until the Employee is no longer employed as an Employee and
remains a participant until death or the participant's entire vested Account
Balance is distributed.

         2.3 AFFILIATED EMPLOYER. An Affiliated Employer is an employer included
within a controlled group of corporations, a group of trades or businesses under
common control, or an affiliated service group (as defined in Code Sections
414(b), (c), (m), or (o)) with the Employer.

         2.4 ALLOCATION DATE. Effective January 1, 1992, each business day is an
Allocation Date for Participant Contributions, earnings, losses and other
adjustments in value (except that earnings on the CIGNA Cash Transaction Account
are allocated as of December 31 of each year). Prior to that, the Allocation
Dates were March 31, June 30, September 30 and December 31, although earnings,
losses and other adjustments in value were credited to participants' Accounts to
the date Stock in the Account was sold or another investment liquidated for
purposes of distribution. Effective November 30, 1989 through November 30, 1991,
November 30 was also an Allocation Date. The Allocation Date for Employer
Contributions and forfeitures is December 31. The Committee may designate one or
more interim Allocation Dates.

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         2.5 BREAK IN SERVICE. A Break in Service is a Plan Year in which an
individual has not completed more than five hundred (500) Hours of Service. An
unpaid leave of absence under the Family and Medical Leave Act of 1993 shall not
be treated as or counted toward a Break in Service.

         (a) DATE OF BREAK. A Break in Service occurs on the first day of the
applicable Plan Year.

         (b) M/PATERNITY LEAVE. To determine whether an individual has incurred
a Break in Service, the individual is credited with up to five hundred one (501)
Hours of Service during a M/Paternity Leave.

               (i) DEFINED. M/Paternity Leave is an absence from employment due
         to the individual's pregnancy, the birth of the individual's child, the
         individual's adoption of a child or the individual's care of a new born
         or recently adopted child. The individual must certify that the absence
         is due to M/Paternity Leave, specify the exact period of the absence,
         and provide either medical certification of the birth or legal
         certification of the adoption.

              (ii) CREDITING. An individual shall, during the M/Paternity Leave,
         be credited with the individual's regularly scheduled work hours. If
         the individual is not regularly scheduled, the individual shall be
         credited with eight (8) Hours of Service for each normally scheduled
         work day during the Leave. The Hours shall be credited to the Plan Year
         in which the absence occurs, or to the next Plan Year, as necessary, to
         prevent a Break in Service.

         (c) OTHER SPECIAL RULES. To determine whether an individual has
incurred a Break in Service, the individual is credited with Hours of Service
for any period of time during which the individual is:

               (i) LAY-OFF. Laid off if the individual re-enters the employ of
         an Employer within twelve (12) months following the date of layoff;

              (ii) ILLNESS. Absent for a period of illness not in excess of
         twelve (12) months;

             (iii) LEAVE OF ABSENCE. On leave of absence authorized by an
         Employer for a period not in excess of two (2) years. A leave of
         absence may be granted for pregnancy, disability, sickness, death, or
         any other family obligation or status; for personal or family hardship
         or special business circumstances; for educational purposes; or for
         civic, charitable or governmental services. All Employees under similar
         circumstances shall be treated in a similar manner; or

                                       -5-


<PAGE>
             (iv) TRANSFER. Employed by a business entity other than an Employer
         to which the individual transferred at the request of an Employer.

         Hours of Service for these periods are credited based on the Hours of
Service which would have accumulated had the individual worked during the
regularly scheduled work weeks during the absence.

         (d) FIRST SHORT PLAN YEAR. An individual will not incur a Break in
Service for the First Short Plan Year (January 1, 1989 - November 30, 1989)
unless the individual failed to both:

             (i)  PRO RATA ALLOCATION. Complete 458.33 or more Hours of Service
         for the Short Plan Year; and

             (ii) PERIOD. Complete 500 or more Hours of Service for the period
         beginning January 1, 1989 and ending December 31, 1989.

         (e) SECOND SHORT PLAN YEAR. An individual will not incur a Break in
Service for the Second Short Plan Year (December 1, 1991 - December 31, 1991)
unless the individual failed to both:

             (i)  PRO RATA ALLOCATION. Complete 41.67 or more Hours of Service
         for the Short Plan Year; and

             (ii) PERIOD. Complete 500 or more Hours of Service for the period
         beginning December 1, 1991 and ending November 30, 1992.

         2.6 COMPENSATION. Except as otherwise provided, Compensation is wages,
salaries, fees for professional services, and other amounts received (without
regard to whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer (or Affiliated
Employer) to the extent that the amounts are includible in gross income
(including, but not limited to, overtime and shift premiums, commissions paid
salesman, compensation for services on the basis of a percentage of profits and
bonuses (except as excluded below)) (reduced simplified general Section 415
Compensation as provided in Reg. Sections 1.415-2(d)(10) and 1.414(s)-1(c)(3)
and salary continuation payments, plus any salary reduction contribution made
by the Employer and excluded from gross income as a cafeteria plan contribution
under Code Section 125, a 401(k) profit sharing or simplified employee pension
(SEP) plan contribution, or a Code Section

                                       -6-


<PAGE>
403(b) tax deferred annuity contribution, any compensation deferred under an
eligible Code Section 457(b) deferred compensation plan and any Code Section
414(h)(2) pick-up contributions.

         (a) DETAIL. A listing of the types of remuneration not included in this
definition of Compensation is provided in Appendix B. (This definition of
Compensation is intended to reflect the definition prior to amendment and
restatement. In the case of any difference, the prior definition shall control
for the periods involved.)

         (b) EMPLOYER RELATED. Compensation includes only those items relating
to the participant's employment with the Employer (or Affiliated Employer).

         (c) EXCLUSION. For purposes of determining and allocating Employer
Contributions under Article VI (other than Minimum Top Heavy Contributions) and
ACP and ADP testing, Compensation excludes compensation earned before becoming
and after ceasing to be an Active Participant.

         (d) DOLLAR LIMIT. Compensation for any Plan Year may not exceed the
Annual Compensation Limit. The Annual Compensation Limit is $150,000 ($200,000,
effective January 1, 2002), as adjusted under Code Section 401(a)(17)(B).

         2.7 EMPLOYEE. An Employee is any person employed by an Employer who
receives compensation for personal services rendered to the Employer which is
subject to withholding for federal income tax purposes, except nonresident
aliens who do not receive any earned income (as defined in Code Section
911(d)(2)) from an Employer which constitutes United States source income (as
defined in Code Section 861(a)(3)) and Leased Employees. Employee also excludes
any person who is classified by the Employer as other than an Employee even if
it is later determined that the classification is not correct.

         (a) DEFINITION. Leased Employee means an individual described in and
required to be treated as employed by the recipient under Code Sections 414(n)
and 414(o) and Regulations. For this definition, the term recipient includes the
Employer and any Related Employer for whom the individual performs services.

             (i) CODE SECTION 414(N). A Leased Employee under Code Section
         414(n) is an individual who is not an Employee but who performs
         services for the recipient under the primary direction or control of
         the recipient, pursuant to an agreement between the recipient and a
         leasing organization, on

                                       -7-


<PAGE>
         a full-time basis for at least a one-year period.

             (ii) CODE SECTION 414(O). A Leased Employee includes a leased owner
         or a leased manager determined to be a Leased Employee under Code
         Section 414(o) and the Regulations.

         (b) EXCEPTIONS. An individual is not a Leased Employee if:

             (i)  LESS THAN 20%. Leased Employees determined under (a) above do
         not constitute more than 20% of the recipient's non-highly compensated
         work force, and

             (ii) COVERED BY PLAN DESCRIBED IN CODE SECTION 414(N). The
         individual is covered by a money purchase pension plan described in
         Code Section 414(n) maintained by the leasing organization with a
         nonintegrated employer contribution rate of at least 10% of Section 415
         Compensation, immediate participation for all employees of the leasing
         organization, and full and immediate vesting. Immediate participation
         shall not be required for employees who received less than $1,000 in
         compensation from the leasing organization in each Plan Year during the
         four-year period ending with the current Plan Year.

         2.8 HIGHLY COMPENSATED EMPLOYEE. For Plan Years beginning after
December 31, 1996:

         (a) DEFINITION. Highly Compensated Employee for a Plan Year means any
Employee who:



                                       -8-


<PAGE>
             (i)   5% OWNER. Was a 5% Owner at any time during the current Plan
         Year or the 12-month period immediately preceding the current Plan
         Year; or

             (ii)  COMPENSATION. Received Section 415 Compensation during the
         Look-Back Year in excess of $80,000 (as adjusted under Code Section
         415(d)).

         (b) DETERMINATION RULES. The determination of who is a Highly
Compensated Employee for a Plan Year shall be made under Code Section 414(q) and
Regulations, including the following rules:

             (i)   LOOK-BACK YEAR. "Look-Back Year" means the 12-month period
         immediately preceding the current Plan Year.

             (ii)  TOP-PAID 20%. The following Employees are excluded before
         determining the top-paid 20% of Employees:

                   (A) AGE AND SERVICE. Employees who have not attained age 21
             or completed six months of service by the last day of the Look-Back
             Year;

                   (B) PART-TIME/SEASONAL. Employees who normally work less than
             17 1/2 hours per week or normally work six months or less in any
             Plan Year;

                   (C) NONRESIDENT ALIENS. Employees who are nonresident aliens
             receiving no earned income from sources within the United States;
             and

                   (D) COLLECTIVE BARGAINING EMPLOYEES. Employees covered by a
             collective bargaining agreement if more than 90% of all Employees
             are covered by a collective bargaining agreement and this plan
             excludes them.

             (iii) COMPENSATION. For Plan Years beginning before January 1,
         1998, for purposes of determining compensation under (a) above,
         compensation means Section 415 Compensation plus elective contributions
         that are excluded from gross income by Code Sections 125, 402(e)(3),
         402(h)(1)(B), or 403(b).

             (iv)  FORMER EMPLOYEES. A former Employee who was a Highly
         Compensated Employee at termination of employment or at any time after
         attaining age 55 shall be a Highly Compensated Employee at all times
         thereafter.

             (v)   CONSISTENCY. For Plan Years beginning on or after January 1,
         1998, the determination

                                       -9-


<PAGE>
         of Highly Compensated Employees shall be applied consistently to the
         determination years of all qualified retirement plans maintained by the
         Employer (and any Related Employer) that begin with or within the same
         calendar year. For Plan Years beginning on or after January 1, 2000,
         the consistency requirement applies to all qualified retirement and
         non-retirement plans. For purposes of this provision, determination
         year means the plan year for which the determination of Highly
         Compensated Employees is being made.

         2.9 HOUR OF SERVICE. An Hour of Service is an hour for which an
employee is paid or entitled to be paid by the Employer (or Affiliated Employer,
except for hours before the affected Employers become affiliated): for the
performance of duties for the Employer (or Affiliated Employer) during the
applicable period; for a period of time during which no duties are performed
(whether or not employment has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, Military Service, leave of
absence, or other similar reasons, related to the Employer (or Affiliated
Employer); or for back pay, irrespective of mitigation of damages, based on a
settlement or award involving the Employer (or Affiliated Employer).

         (a) EXCLUDED HOURS. Hours of Service are not credited for periods for
which payments are received under applicable worker's compensation, unemployment
compensation or disability laws or for payments which reimburse an Employee for
medical or medically related expenses.

         (b) MAXIMUM CREDIT. For periods during which no duties are performed or
back pay is awarded, an employee is not credited with greater than five hundred
one (501) Hours of Service during any single, continuous period during which no
services are performed for the Employer (or Affiliated Employer). An employee is
not credited with Hours of Service under this subsection in excess of regularly
scheduled hours for the performance of duties during the period. Credit is not
given twice for any Hour of Service. This rules does not limit the crediting of
Hours of Service for paid non-duty vacation, holiday, bereavement, jury duty, or
short-term military service time.

                                      -10-


<PAGE>
         (c) UNIT OF TIME PAYMENT. If non-duty or back-pay payments are
determined by units of time, an employee is credited with the number of
regularly scheduled working hours included in the units of time upon which the
payment is calculated. If the employee does not have a regularly scheduled
workweek, hours are calculated on a reasonable basis which reflects the average
hours worked by the employee.

         (d) OTHER METHOD OF PAYMENT. If non-duty or back-pay payments are not
determined on the basis of time, an employee is credited with Hours of Service
determined by dividing the amount of the payment by the employee's most recent
rate of hourly compensation. If an employee is not paid on an hourly basis, the
hourly rate is determined by dividing the most recent compensation for the
period of payment by the number of hours regularly scheduled for the period, or
if not regularly scheduled, by the average number of hours worked during the
period. If an employee's compensation is not determined on the basis of a fixed
rate for specified periods, the employee's hourly rate is the lowest hourly
rate paid to employees in the same job classification. If no employees in the
same job classification have an hourly rate, the rate is the minimum wage under
Section 7(a)(1) of the Fair Labor Standards Act of 1938, as amended.

         (e) CREDITING. Hours of Service for which duties are performed are
credited to the Plan Year in which the duties are performed. Hours of Service
for which no duties are performed or for back pay are credited to the Plan Year
to which the payment relates. Hours, other than back pay, not calculated on
units of time, shall not extend beyond the first two (2) Plan Years.

         (f) QUALIFIED MILITARY SERVICE. If employment terminates due to
Qualified Military Service, the Employee shall be credited with Hours of Service
for the hours the Employee would have been scheduled to work during the period
of Qualified Military Service.

             (i) DEFINITION OF QUALIFIED MILITARY SERVICE. "Qualified Military
         Service" means the performance of duty, on a voluntary or involuntary
         basis, in a uniformed service under competent authority and includes
         active duty, active duty for training, initial active duty for
         training, inactive duty training, full-time National Guard duty, and a
         period for which a person is absent from a position of employment for
         the purpose of an examination to determine the fitness of the person to
         perform any such duty. For purposes of this definition, a uniformed
         service means the Armed Forces, the Army National Guard and the Air
         National Guard when engaged in active duty for training, inactive duty
         training, or

                                      -11-


<PAGE>
         full-time National Guard duty, the commissioned corps of the Public
         Health Service, or any other category of persons designated by the
         President in time of war or national emergency.

             (ii) QUALIFICATION/REEMPLOYMENT. To qualify for this credit, the
         Employee must return to employment with the Employer in accordance with
         and within the time limits established by the Uniformed Services
         Employment and Reemployment Rights Act of 1994 ("USERRA") (Chapter 43
         of Title 38 of the United States Code).

         (g) SPECIAL RULE FOR PRIOR SERVICE. An employee is also credited with
an Hour of Service with respect to each hour of employment with any predecessor
business entity of an Employer or with a business entity the business or assets
of which were acquired by an Employer prior to the date the Employer adopted the
Plan.

         (h) SPECIAL RULE FOR DUTY HOURS. If an Employer does not maintain
hourly records with respect to any employee, the employee is credited with
forty-five (45) Hours of Service for each week in which the employee is entitled
to be credited with a duty Hour of Service.

         (i) LEASED EMPLOYEE. Hours of Service shall be credited for any period
for which an individual is a Leased Employee or would have been a Leased
Employee but for the requirement that the individual perform services as
described in Section 2.7(a)(i)(A) on a full-time basis for at least a one-year
period.

         2.10 LIMITATION YEAR. The Limitation Year is the Plan Year.

         2.11 NORMAL RETIREMENT AGE. Normal Retirement Age is 65.

         2.12 PLAN YEAR. The Plan Year is an annual accounting period ending
each December 31.


                                      -12-


<PAGE>
         (a) FIRST CHANGE. Effective December 1, 1989 through November 30, 1991,
the Plan Year was a period of twelve months beginning December 1 and ending
November 30. A First Short Plan Year began January 1, 1989 and ended November
30, 1989.

         (b) SECOND CHANGE. Effective January 1, 1992, the Plan year returned to
a period of twelve months beginning January 1 and ending December 31. A Second
Short Plan Year began December 1, 1991 and ended December 31, 1991.

         2.13 QUALIFIED ORDER. A Qualified Order is an order issued by a
competent State Court with jurisdiction under its domestic relations law which
meets the following conditions.

         (a)   REQUIREMENTS. The order must:

               (i) RECIPIENT. Identify the recipient who must be the then or
         former spouse, child or dependent of the participant;

              (ii) SUBJECT. Provide for payment in connection with alimony,
         child support or a division of marital property; and

             (iii) CONTENTS. Contain the name and address of the participant and
         the recipient, the amount or percentage of the payment and the duration
         of the payment.

         (b)   RESTRICTIONS. The order must not require:

               (i) INCREASE. The Plan to pay more to the participant and all
         recipients than the participant's Vested Account Balance;

              (ii) METHOD, DURATION. A method or duration of payment not
         permitted under the Plan;

             (iii) PAYMENT. Payment to begin before the earliest of: a
         Distributive Event or the later of the date the participant attains age
         50 or could begin receiving benefits upon separation from service;

              (iv) CANCEL. Cancellation of the prior right of another recipient;
         or



                                      -13-


<PAGE>
             (v) BENEFICIARY. A greater right to designate a beneficiary for a
         recipient's benefit amount than the participant's right, or application
         of the Joint and Spousal Survivor benefit or the Spousal Survivor
         Annuity to the spouse of the recipient.

         2.14 QUALIFYING SPOUSE. A Qualifying Spouse is an individual to whom
the participant has been legally married for at least one (1) year before the
earlier of the first day of the first period for which benefits are paid or the
date of the participant's death and to whom the participant remains married at
that time.

         (a) SPECIAL RULES. A Qualifying Spouse includes: to the extent of the
interest provided under a Qualified Order, an individual who is a former spouse
who was married to the participant for at least one year who is required to be
treated as a Qualifying Spouse under the Order and, for provisions relating to
the Joint and Spousal Survivor form, an individual whom a participant legally
married within one (1) year before the first day of the first period for which
benefits were paid and to whom the participant has been legally married for at
least one (1) year before the date of the participant's death and to whom the
participant remains married at that time.

         (b) QDRO SPOUSE. A Qualifying Spouse does not include a spouse or
former spouse to the extent benefits are payable to or with respect to a prior
spouse who is treated as a Qualifying Spouse under a Qualified Order.

         2.15 STOCK. Stock is common stock of Kaydon Corporation.

         2.16 TOP HEAVY. The Plan is Top Heavy for any Plan Year in which the
present value of Accrued Benefits for Key Employees is more than sixty percent
(60%) of the present value of Accrued Benefits for all Participants excluding
former Key Employees. The Plan is Super Top Heavy for any Plan Year in which the
present value of Accrued Benefits for Key Employees is more than ninety percent
(90%) of the present value of Accrued Benefits for all Participants excluding
former Key Employees.

         (a) REQUIRED AGGREGATION. A Required Group includes each plan of the
Employer (or Affiliated Employer) in which a Key Employee participates or
participated at any time during the five year period ending on the Determination
Date (whether or not terminated) or which enables any such plan to meet the

                                      -14-


<PAGE>
nondiscrimination and participation requirements of Code Sections 401(a)(4) or
410. If the Group is Top Heavy, all plans in the Group are Top Heavy. If the
Group is not Top Heavy, all plans in the Group are not Top Heavy.

         (b) PERMISSIVE AGGREGATION. A Permissive Group may include any other
plan of the Employer (or Affiliated Employer) or to which the Employer
contributes which, when considered with any Required Group, satisfies the
nondiscrimination and participation requirements of Code Sections 401(a)(4) and
410 and provides comparable contributions or benefits. If the Permissive Group
is Top Heavy, only the plans in the Required Group are Top Heavy. If the
Permissive Group is not Top Heavy, all plans in the Permissive Group are not Top
Heavy.

         (c) KEY EMPLOYEES. A Key Employee is an Employee or former Employee
(including any deceased Employee or the Beneficiary of any deceased Employee)
who, under Code Section 416(i), is or was, during the determination period (the
Plan Year containing the Determination Date and the four preceding Plan Years),
one of the following:

             (i)   OFFICER. An officer of an Employer or Related Employer if the
         officer's Section 415 Compensation exceeds 50% of the defined benefit
         dollar limit under Code Section 415(b)(1)(A) (as adjusted under Code
         Section 415(d)) for the Plan Year (effective January 1, 2002, $130,000,
         as adjusted under code Section 416(i)(1) for Plan Years beginning after
         December 31, 2002);

             (ii)  TOP 10 OWNERS. Through December 31, 2001, one of the 10
         Employees owning the largest interests, exceeding 1/2%, in an Employer
         or Related Employer if the Employee's Section 415 Compensation exceeds
         $30,000 (or the Defined Contribution Dollar Limit, if greater);

             (iii) 5% OWNER. A 5% Owner; or

             (iv)  1% OWNER; $150,000 COMPENSATION. A 1% owner, determined under
         the definition of 5% Owner but replacing "5%" with "1%," whose Section
         415 Compensation exceeds $150,000.

Ownership under (ii) above, as well as under (iii) and (iv) pursuant to the
definition of 5% Owner, shall be determined separately for each Employer and
Related Employer. Compensation for (i), (ii), and (iv) above for a Plan Year is
determined without regard to the Annual Compensation Limit. For Plan Years
beginning before January 1, 1998, for purposes of determining compensation under
(i), (ii), and (iv) above, compensation means

                                      -15-


<PAGE>
Section 415 Compensation plus elective contributions that are excluded from
gross income by Code Sections 125, 402(e)(3), 402(h)(1)(B), or 403(b).

         (d) DETERMINATION. Top Heavy status and Account Balances are determined
under Code Section 416(g) on the last day of the preceding Plan Year, or, for
the initial Plan Year, the last day of that Plan Year (Determination Date).

             (i)   PERSONS INCLUDED. Key Employees include individuals who had
         that status during the Plan Year or any of the four (4) preceding Plan
         Years or who are their beneficiaries. For purposes of this section,
         Participants include individuals who were Employees during the Plan
         Year or any of the four (4) preceding Plan Years, without regard to
         whether the individual actually receives compensation for the personal
         services rendered to the Employer.

             (ii)  ACTUARIAL ASSUMPTIONS. The actuarial assumptions for this
         determination, if any, are set forth in Appendix C.

             (iii) ACCRUED BENEFITS. The Accrued Benefit under the Plan and any
         other defined contribution plan is the Participant's Account Balance.
         The Accrued Benefit under a defined benefit plan is the Participant's
         annualized normal retirement benefit under the basic form determined
         under that plan's accrual method. Effective on the first day of the
         1987 Plan Year, January 1, 1987, for Participants other than Key
         Employees, if there is no specified uniform accrual method, the Accrued
         Benefit is determined as if the benefit accrued not more rapidly than
         the slowest accrual rate permitted under Code Section 411(b)(1)(C).

                                      -16-


<PAGE>
                  (A) DISTRIBUTIONS. Accrued Benefits include distributions made
             during the Plan Year and the four (4) preceding Plan Years, other
             than benefits already included, and contributions due and unpaid in
             the first year of the Plan or to a money purchase, target benefit
             or defined benefit pension plan.

                  (B) EXCEPTION. Effective January 1, 2002, the four preceding
             Plan Years shall not be considered for this purpose unless the
             distribution was made other than upon separation for service,
             death, or disability. In addition, effective January 1, 2002, the
             accounts of any individual who has not performed services for the
             Employer or an Affiliated Employer during the one-year period
             ending on the Determination Date shall not be taken into account.

             (iv) OWNERSHIP. Ownership is determined under Code Section 318
         modified by Code Section 416(i)(1)(B)(iii) without regard to the
         aggregation rules under Code Sections 414(b), (c), (m) and (o).

             (v)  OTHER PLANS. For other plans of an Employer, values shall be
         determined on the Determination Date ending on or within the same
         calendar year.

         2.17 YEAR OF SERVICE. A Year of Service is:

         (a) GENERAL RULE. A Plan Year in which at least one thousand (1,000)
Hours of Service are completed.

         (b) PRE-AMENDMENT AND RESTATEMENT. All Years of Service credited under
the Plan before amendment and restatement in accordance with the prior plan
document.

         (c) PREDECESSOR EMPLOYER. Years of Service credited prior to July 1,
1992 with The Cooper Split Roller Bearing Corp. and, for purposes of eligibility
to participate only, a Year of Service as otherwise defined by this Plan but
including Hours of Service credit for the individual's period of employment
prior to April 1, 1994 with Industrial Tectonics, Inc.

         (d) FIRST SHORT PLAN YEAR. For the First Short Plan Year, completion
of:



                                      -17-


<PAGE>
             (i)  PRO RATA ALLOCATION. 916.66 or more Hours of Service for the
         Short Plan Year; or

             (ii) PERIOD. 1,000 or more Hours of Service for the period
         beginning January 1, 1989 and ending December 31, 1989.

         (e) SECOND SHORT PLAN YEAR. For the Second Short Plan Year, completion
of:

             (i)  PRO RATA ALLOCATION. 83.33 or more Hours of Service for the
         Short Plan Year; or

             (ii) PERIOD. 1,000 or more Hours of Service for the period
         beginning December 1, 1991 and ending November 30, 1992.

Years of Service credited prior to a Break in Service are disregarded for all
purposes under the Plan upon a return to employment until the Employee again
completes one-thousand (1,000) Hours of Service for the performance of duties
during the twelve (12) month period following the date on which the Employee
completes an Hour of Service after the Break in Service or during any calendar
year beginning on or following that date. Years of Service credited prior to a
distribution of a participant's entire vested Account Balance after termination
of employment are disregarded (with respect to previous allocations) upon a
return to employment unless the individual repays the distribution in accordance
with the limits of Article VI.

                                      -18-


<PAGE>
                                                                 Third Amendment

                                   ARTICLE III
                          ELIGIBILITY AND PARTICIPATION

         3.1 ELIGIBILITY REQUIREMENTS. An Employee is eligible to become an
Active Participant when the Employee:

         (a) GENERAL. Effective January 1, 1997, for individuals hired after
December 31, 1996:

             (i)  AGE. Attains age 21; and

             (ii) SERVICE. Completes one thousand (1,000) or more Hours of
         Service during the one year period beginning with the individual's
         first Hour of Service or during a Plan Year beginning during that
         period or thereafter. The Service requirement is satisfied upon
         completion of the 1,000th Hour of Service where that occurs prior to
         the end of the one year or the Plan Year measuring period.

         (b) PRIOR RULE. Effective January 1, 1992, for individuals hired before
January 1, 1997:

               (i) AGE. Attains age 21;

              (ii) EMPLOYMENT. Completes six months of employment with an
         Employer or Affiliated Employer; and

             (iii) SERVICE. Completes five-hundred (500) or more Hours of
         Service prior to the end of the six (6) month period immediately
         subsequent to the date on which the Employee completes the Employee's
         first Hour of Service.

             If the Employee does not complete five-hundred (500) or more Hours
         of Service within that period, Hours of Service are calculated over a
         rolling six month period.

         (c) SPECIAL RULE. Notwithstanding the Prior eligibility rule, the 500
Hour of Service requirement shall not operate to delay the participation of an
individual who completes 1000 Hours of Service during the one year period
beginning with the individual's first Hour of Service or a Plan Year beginning
during that period or thereafter. An individual who completes 1000 Hours of
Service during that period or a Plan Year who is not already an Active
Participant under the 500 Hour of Service rule is, upon attaining 21, eligible
to become an Active Participant on the next entry date (or that date, if it is
an entry date).

                                      -19-


<PAGE>
      3.2 PARTICIPATION. Every Active Participant in the Plan on the
Effective Date remains an Active Participant. Each Employee who satisfies the
Eligibility Requirements on the Effective Date is an Active Participant on the
Effective Date. Effective January 1, 1992, except as provided by the Special
Rules, each other Employee is an Active Participant on the first January 1,
April 1, July 1, or October 1 coincident with or after the Employee satisfies
the Eligibility Requirements.

         (a) PRIOR RULES. Effective January 1, 1989, except as provided by the
Special Rules, each other Employee was an Active Participant on the first
January 1 or July 1 coincident with or after the Employee satisfied the
Eligibility Requirements. Effective December 1, 1989 through December 1, 1991,
except as provided by the Special Rules, each other Employee was an Active
Participant on the first December 1 or June 1 coincident with or after the
Employee satisfied the Eligibility Requirements.

         (b) SPECIAL RULES. Notwithstanding the current and prior Participation
rules,

               (i) KOPPERS. Each Employee who was a participant in the
         Retirement Plan of Koppers Company, Inc. and Subsidiaries for Salaried
         Employees or the Koppers Company, Inc. Retirement Benefit Plan For
         Hourly Paid Employees on June 30, 1986 who was employed by an Employer
         on January 1, 1987 became an Active Participant in this Plan on January
         1, 1987;

              (ii) TRW/RAMSEY. Each Employee who was a participant in the TRW
         Salaried Pension Plan or the Ramsey Corporation Hourly Retirement
         Income Plan on July 14, 1987 who was employed by an Employer on January
         1, 1988 became a Participant in this Plan on January 1, 1988;

             (iii) COOPER BEARING. Each Employee who was a participant in the
         Cooper Bearing Company Employees' 401(k) Deferred Compensation Plan on
         June 30, 1992 who was employed by an Employer on July 1, 1992 became an
         Active Participant in this Plan on July 1, 1992; and

              (iv) ITI. Each Employee who was a participant in the Industrial
         Tectonics, Inc. 401(k) Plan on January 30, 1994 who was employed by an
         Employer or Industrial Tectonics Inc on January 31 1994 shall be a
         Participant in this Plan on April 1, 1994.

                                      -20-


<PAGE>
         (c) CHANGE OF PLAN YEAR. No change of Plan Year may postpone the date
of Participation of any Employee who would have become a Participant on January
1, 1990, July 1, 1990, June 1, 1992, or December 1, 1992 in the absence of the
change of Plan Year.

         3.3 RE-PARTICIPATION. An Employee who is reemployed by the Employer
following a Break in Service becomes an Active Participant:

         (a) PRIOR ACTIVE PARTICIPANT. On the first day on which the Employee
again completes an Hour of Service for the performance of duties as an Employee
if the Employee was an Active Participant at the beginning of the Break in
Service or if the Participant returns to the employ of an Employer within thirty
(30) days after cessation of Disability.

         (b) OTHER. As a new Employee if the Employee was not an Active
Participant at the beginning of the Break in Service.

         3.4 TRANSFERRED EMPLOYEES. Plan benefits of employees who transfer
employment among Employers, among classifications within the Employers, or among
an Employer and an Affiliated Employer which has not adopted the Plan are
coordinated as follows.

         (a) IN GENERAL. A Transfer is a change in job responsibilities in which
the employee is employed by an Employer or an Affiliated Employer both before
and after the change, the employee is an eligible Active Participant in this
Plan either before or after the change, and the employee first performs an Hour
of Service in the new job (the End of Transfer) before the fifth anniversary of
the date on which the employee last performed an Hour of Service in the old
responsibilities (the Beginning of the Transfer).

             (i)  DIRECTION. The coordination depends upon whether the employee
         is Transferring into or out of this Plan and upon whether the other
         plan involved in the Transfer is a defined benefit plan or a defined
         contribution plan.

             (ii) VESTING AND PARTICIPATION. In all transfers, the employee's
         employment year service and Years of Service for vesting and
         participation purposes with an Employer and an Affiliated Employer
         credited for vesting and participation purposes under this Plan and all
         plans to which, or from

                                      -21-


<PAGE>
         which, the employee transfers. An employee is entitled to a benefit
         from a plan only if the employee's aggregate service for vesting
         purposes entitles the employee to a benefit under that plan's vesting
         schedule.

         (b) TRANSFERS OUT. An employee who Transfers from employment covered by
this Plan to employment with an Employer or an Affiliated Employer not covered
by this Plan receives an amount under this Plan based on accruals under this
Plan for the portion of the plan year of Transfer prior to the Beginning of the
Transfer to the extent the employee is eligible under the terms of this Plan.
The employee's Accounts in this Plan will continue to share in investment gains
or losses under the terms of this Plan, and will continue to be subject to
participant investment direction under this Plan from and after the Beginning of
the Transfer.

             (i)  TRANSFER TO A DEFINED BENEFIT PLAN. If the employee
         participates in a defined benefit plan maintained by an Employer or an
         Affiliated Employer, to the extent provided in that plan, the employee
         will receive a benefit from the defined benefit plan to which the
         employee Transferred based only upon the employee's service and
         compensation with the Employer or Affiliated Employer (except as
         limited by that plan) subsequent to the End of the Transfer.

             (ii) TRANSFER TO A DEFINED CONTRIBUTION PLAN. If the employee
         participates in a defined contribution plan maintained by an Employer
         or an Affiliated Employer, the employee will receive an amount under
         the defined contribution plan to which the employee Transferred based
         on accruals under that plan for the portion of the plan year of
         Transfer and later plan years subsequent to the End of the Transfer to
         the extent the employee is eligible under the terms of that plan. In
         addition, to the extent the employee is fully vested, the plans so
         provide, the employee requests, the plans' qualified status is
         unaffected and no plan amendments or plan operational changes are
         necessary to carry out the transfer, the employee's account balance in
         this Plan will be transferred in a trustee to trustee transfer to the
         other defined contribution plan as soon as administratively practicable
         after the End of the Transfer.

         (c) TRANSFERS IN. An employee who Transfers from employment with an
Employer or an Affiliated Employer not covered by this Plan to employment
covered by this Plan receives an amount under this Plan based on accruals under
this Plan for the portion of the plan year of Transfer and later plan years
subsequent to the End of the Transfer to the extent the employee is eligible
under the terms of this Plan.

                                      -22-


<PAGE>
              (i) TRANSFER FROM A DEFINED BENEFIT PLAN. If the employee
         participated in a defined benefit plan maintained by an Employer or an
         Affiliated Employer, the employee will receive no additional service
         for benefit accrual purposes under that defined benefit plan from and
         after the Beginning of the Transfer. The employee's Average Monthly
         Compensation under that plan is fixed as of the Beginning of the
         Transfer and the employee's benefit at or after ultimate termination of
         employment with the Employer and Affiliated Employers is determined
         under that plan's benefit formula or benefit multiplier in effect at
         the Beginning of the Transfer.

             (ii) TRANSFER FROM A DEFINED CONTRIBUTION PLAN. If the employee
         participated in another defined contribution plan maintained by an
         Employer or an Affiliated Employer, the employee will receive an amount
         under the defined contribution plan from which the employee Transferred
         based on accruals under that plan for the portion of the plan year of
         Transfer prior to the Beginning of the Transfer to the extent the
         employee is eligible under the terms of that plan. The employee's
         account in that plan will continue to share in investment gains or
         losses under the terms of that plan as long as the account remains part
         of that plan. In addition, to the extent the employee is fully vested,
         the plans so provide, employee requests, the plans' qualified status is
         unaffected and no plan amendments or plan operational changes are
         necessary to carry out the transfer, the employee's account balance in
         that plan will be transferred in a trustee to trustee transfer to this
         Plan as soon as administratively practicable after the End of the
         Transfer.

         (d) SPECIAL RULE. All Transfers are subject to the following special
rules.


                                      -23-


<PAGE>
             (i)  NON-RESIDENT ALIENS. These Transfer rules do not apply to
         transfers in which the employee was or becomes a non-resident alien or
         in which a plan not subject to ERISA is involved.

             (ii) DETERMINATION OF SERVICE. Unless otherwise provided, Years of
         Service are determined under the plan under which the service was
         earned.

                                      -24-


<PAGE>
                                   ARTICLE IV
                             EMPLOYER CONTRIBUTIONS

         4.1 EMPLOYER CONTRIBUTIONS. For each Plan Year, the Employer:

         (a) SALARY DEFERRED. Must contribute the sum of Active Participant
Salary Deferred Contributions.

         (b) REGULAR PROFIT SHARING. May contribute a Regular Profit Sharing
Contribution. The amount of the contribution, if any, is determined by the
Committee or the Board of Directors of Kaydon Corporation in its discretion,
subject to the maximum limitations of this Plan. A Regular Profit Sharing
Contribution is allocated under Article VI and is subject to the applicable
Vesting Schedule.

         (c) QUALIFYING. May contribute a Qualifying Contribution which is,
effective on the first day of the 1987 Plan Year, January 1, 1987:

             (i)   NON-DISCRIMINATORY. Part or all of an Employer Contribution
         which is non-discriminatory under Code Section 401(a)(4) determined
         with and without the Qualifying Contribution;

             (ii)  NOT USED. Not taken into account in determining whether any
         other contributions or benefits are non-discriminatory under Code
         Sections 401(a)(4); or under Code Sections 401(k)(3) or 401(m) except
         to the extent designated by the Employer for that purpose under this
         Plan;

             (iii) ALLOCATED. Allocated to the Active Participant as of a date
         within the Plan Year; and

             (iv)  INCREASE. Not effective to increase the difference between
         the Actual Contribution Percentages (ACP) or Actual Deferral
         Percentages (ADP) for the Highly Compensated and Non-Highly Compensated
         groups.

The amount of the contribution, if any, is determined by the Board of Directors
of Kaydon Corporation in its discretion, subject to the maximum limitations of
this Plan.

                                      -25-


<PAGE>
         (d) TOP HEAVY MINIMUM. Must, if applicable, with respect to the
non-collectively bargained employees, contribute the Minimum Top Heavy
Contribution. The Minimum Top Heavy Contribution for each Plan Year in which the
Plan is Top Heavy is:

               (i) SINGLE PLAN. If the Employer does not maintain another
         qualified retirement plan, or for Active Participants in just this
         Plan, the lesser of three percent (3%) of the Section 415 Compensation
         of each non-collectively bargained Non-Key Employee Active Participant
         employed by the Employer (or Affiliated Employer) on the last day of
         the Plan Year or the highest percentage of Section 415 Compensation
         allocated to a Key Employee multiplied by the Section 415 Compensation
         of those Participants (the Regular Minimum). For this purpose, Salary
         Deferred Contributions allocated to Key Employees are treated as an
         Employer Contribution allocated to a Key Employee. The Amount is
         determined without regard to the integration of contributions with
         Social Security or an Active Participant's failure to make a Mandatory
         Contribution.

              (ii) ANOTHER DEFINED CONTRIBUTION PLAN. If the Employer maintains
         another qualified defined contribution plan in which an Active
         Participant also participates, the Regular Minimum contribution of the
         Plan which comes first in the following priority order: a target
         benefit plan, a money purchase pension plan, a leveraged employee stock
         ownership plan, a stock bonus plan, or a tax credit employee stock
         ownership plan.

             (iii) ANOTHER DEFINED BENEFIT PLAN. If the Employer maintains a
         defined benefit plan in which an Active Participant also participates,
         a contribution to the defined benefit plan which will fund the Minimum
         Benefit under the defined benefit plan, offset by the benefits provided
         under this and any other defined contribution plan of the Employer. If
         the Employer maintains a defined benefit plan, the Plan is not Super
         Top Heavy and the Employer elects to utilize the greater multiplier for
         dollar limitations in the denominator of the defined benefit and
         defined contribution fractions, the Minimum Benefit Multiplier is three
         percent (3%) rather than two percent (2%).

                                      -26-


<PAGE>
The Minimum Contribution may be satisfied by Regular Profit Sharing, Qualifying
and, effective January 1, 2002, Matching Contributions.

         (e) FORFEITURE RESTORATION. Shall contribute for a reemployed Active
Participant the amount of the forfeited Nonvested Account required to be
restored under Article VI, unadjusted for earnings, losses or adjustments in
value, less the allocable portion of forfeitures under Article VI.

         4.2 MAKE-UP CONTRIBUTIONS UNDER USERRA. Effective December 12, 1994, a
Participant who returns from Qualified Military Service to employment with the
Employer within the time limits established by USERRA is entitled to make up
contributions the Participant could have made and to receive an allocation of
Employer Contributions the Participant would have received if the Participant
had been employed by the Employer during the period of Qualified Military
Service.

         (a) MAKE-UP CONTRIBUTIONS. Make-up contributions required by USERRA are
treated as having been made in the Plan Year for which they are made and shall
not be subject to the applicable plan contribution and deduction limits for the
Plan Year in which the contributions are actually made. The make-up
contributions, or the right to make such contributions, shall not cause this
plan to fail to meet the coverage, nondiscrimination, and top-heavy requirements
of the Code.

             (i)  ELECTIVE CONTRIBUTIONS. A Participant may elect to have
         additional Elective Contributions made in accordance with Section 4.2
         beginning on the date of the Participant's reemployment and extending
         five years or, if less, three times the period of the Participant's
         Qualified Military Service. Additional Elective Contributions shall not
         exceed the amount that would have been permitted under this plan if the
         Participant had continued to be employed by the Employer during the
         period of Qualified Military Service minus the Participant's Elective
         Contributions actually made during such period, if any.

             (ii) DISCRETIONARY EMPLOYER CONTRIBUTIONS. As soon as
         administratively feasible after the Participant's reemployment, the
         Employer shall contribute to this plan, and allocate to the
         Participant's accounts, the Employer Contributions (other than Elective
         Contributions, Matching Contributions, and Qualified Matching
         Contributions) that the Participant would have received but for the
         period of Qualified Military Service. The Employer shall make any
         Matching Contributions or Qualified

                                      -27-


<PAGE>
         Matching Contributions based on the Participant's additional Elective
         Contributions under (i) above in the amount the Participant would have
         received had the Elective Contributions been made during the period of
         Qualified Military Service. The Employer shall not be required to make
         up the allocation of any forfeiture that occurred during the period of
         Qualified Military Service.

         (b) COMPENSATION. For purposes of determining the amount of make-up
contributions under (a) above, the Participant shall be treated as receiving
compensation from the Employer at the rate of pay the Participant would have
received during the period of Qualified Military Service. If the Participant's
compensation during the period of Qualified Military Service cannot be
determined with reasonable certainty, the Participant's compensation shall equal
the Participant's average compensation from the Employer for the 12-month period
immediately preceding the Qualified Military Service (or, if shorter than 12
months, the period of employment immediately preceding the Qualified Military
Service).

         (c) NO INVESTMENT EXPERIENCE. No investment experience shall be
credited on make-up contributions for any period prior to the date the
contributions are actually made.

         4.3 MAXIMUM DEDUCTIBLE AMOUNT. All contributions to this Plan are
conditioned on the deductibility of the contribution under Code Section 404.
Employer Contributions must be determined and made within the time required to
qualify the contributions for a deduction under Code Section 404. An Employer
Contribution which exceeds the amount which is deductible by the Employer is
subject to a non-deductible contribution excise tax in the year contributed and
subsequent years until deducted or returned to the Employer within the period
provided in Code Section 4972(c). A nondeductible contribution shall, if
requested by the Employer, be returned to the Employer within one (1) year of
disallowance of the deduction.

                                      -28-


<PAGE>
         4.4 MAXIMUM ANNUAL ADDITIONS. Effective on the first day of the 1987
Plan Year, January 1, 1987, the maximum Annual Additions to a Participant's
Accounts under the Plan shall not exceed the Maximum Amount established by this
section and Code Section 415, which is incorporated here by reference.

         (a) MAXIMUM AMOUNT. The Maximum Amount is the lesser of:

             (i)   PERCENTAGE. Twenty-five percent (25%) (one hundred percent
         (100%) effective January 1, 2002) of the Active Participant's Section
         415 Compensation for the year; or

             (ii)  DOLLAR LIMIT. $30,000 ($40,000 effective January 1, 2002), as
         adjusted under Code Section 415(d). For the First Short Plan Year, the
         Dollar Limit is 11/12 of $30,000 or $27,500, and for the Second Short
         Plan Year, the Dollar Limit is 1/12 of $30,000 or $2,500.

         (b) ANNUAL ADDITIONS. Annual Additions are the sum of the following
amounts for the applicable Plan Year:

             (i)   EMPLOYER CONTRIBUTIONS AND FORFEITURES. The Participant's
         share of the Employer's contributions (including allocations under a
         simplified employee pension) and forfeitures;

             (ii)  AFTER-TAX EMPLOYEE CONTRIBUTIONS. The Participant's after-tax
         employee contributions;

             (iii) POST-RETIREMENT MEDICAL BENEFITS ACCOUNT. For purposes of the
         Defined Contribution Dollar Limit and for Plan Years beginning after
         December 31, 1985, amounts allocated to the separate post-retirement
         medical benefits account of a Key Employee, as defined in Code Section
         419A(d)(3), under a welfare benefit fund, as defined in Code Section
         419(e);

             (iv)  INDIVIDUAL MEDICAL BENEFIT ACCOUNT. For purposes of the
         Defined Contribution Dollar Limit, contributions allocated for Plan
         Years beginning after March 31, 1984, to an individual medical benefit
         account in a pension or annuity plan, as defined in Code Section
         415(l)(2);

             (v)   EXCESS DEFERRALS. For the Plan Years during which these
         amounts were contributed, Excess Deferrals that are not distributed to
         a Participant by the first April 15th following the end of the
         Participant's taxable year;

             (vi)  EXCESS CONTRIBUTIONS AND EXCESS AGGREGATE CONTRIBUTIONS. For
         the Plan Years during which these amounts were contributed, Excess
         Contributions and Excess Aggregate

                                      -29-


<PAGE>
         Contributions whether or not distributed to a Participant; and

         (c) DEFINED CONTRIBUTION AGGREGATION. If a participant is also a
participant in any other qualified defined contribution plan maintained by the
Employer, the Annual Additions to the participant's accounts shall not exceed
the limitations above and shall be reduced in the plans in the following order
of priority: a tax credit employee stock ownership plan; a stock bonus plan; a
profit sharing plan; this plan; a money purchase pension plan; a target benefit
plan; or a defined benefit pension plan.

         (d) DEFINED BENEFIT PLAN. If a participant is also a participant in any
qualified defined benefit plan maintained by the Employer, the Annual Additions
to the participant's accounts shall be reduced in the order of priority for
Defined Contribution Aggregation so that the sum of the Defined Benefit Fraction
and the Defined Contribution Fraction does not exceed 1.0 for any year.

             (i)  DEFINED BENEFIT FRACTION. The numerator of the Defined Benefit
         Fraction is the sum of the projected annual benefit of the participant
         under all defined benefit plans maintained by the Employer (or
         Affiliated Employer), whether or not terminated, determined as of the
         close of the Limitation Year. The denominator is the lesser of the
         following, adjusted under Code Section 415.

                  (A) 1.25. 1.25 multiplied by the defined benefit dollar
             limitation or, if greater for a participant who entered the Plan
             before January 1, 1983, the participant's accrued benefit at the
             end of the last Limitation Year ending before December 31, 1983; or

                  (B) 1.4. 1.4 multiplied by the highest average compensation,
             including any adjustments, under Code Section 415(b).


                                      -30-


<PAGE>
             (ii) DEFINED CONTRIBUTION FRACTION. The numerator of the Defined
         Contribution Fraction is the sum of annual additions to the
         participant's account under all defined contribution plans maintained
         by the Employer (or Affiliated Employer), whether or not terminated, as
         of the end of the Plan Year. The denominator is the lesser of the
         following, adjusted under Code Section 415.

                  (A) 1.25. 1.25 multiplied by $30,000.00 (as adjusted by the
             Secretary of the Treasury); or

                  (B) 35%. 35% of the participant's Compensation determined for
             each Limitation Year.

         (e) TOP HEAVY ADJUSTMENT. If the Plan is Top Heavy and the Employer has
not elected to provide the Additional Minimum Contribution or if the Plan is
Super Top Heavy:

             (i)  MULTIPLIER REDUCTION. The multiplier of the defined benefit
         dollar limitation, the defined benefit denominator adjustment and the
         defined contribution dollar amount is reduced to 1.0; and

             (ii) TRANSITION FRACTION. The pre-TEFRA transition fraction
         numerator amount is reduced to $41,500.00.

         (f) AFFILIATED EMPLOYER. For purposes of applying the limitations
contained in this section, plans maintained by the Employer include all plans
maintained by an Affiliated Employer as modified by Code Section 415(h).

         (g) SECTION 415 COMPENSATION. Section 415 Compensation is a
Participant's wages, salaries, and fees for professional services and other
amounts received (whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the Employer
(including, but not limited to, commissions paid to salesmen, compensation for
services based on a percentage of profits, commissions on insurance premiums,
tips, bonuses, fringe benefits, and reimbursements or other expense allowances
under a nonaccountable plan (as described in Regulations Section 1.62-2(c))
actually paid (or accrued for Plan Years beginning before January 1, 1992) and
includable in gross income for the Plan Year. For Plan

                                      -31-


<PAGE>
Years beginning after December 31, 1997, Section 415 Compensation shall include
elective contributions that are excluded from gross income by Code Sections 125,
132(f)(4), 402(g)(3), or 457.

             (i)  EXCLUSIONS. Section 415 Compensation excludes:

                  (A) CONTRIBUTIONS. Contributions to a plan of deferred
             compensation that are not includable in the Employee's gross income
             for the taxable year in which contributed, or contributions under a
             simplified employee pension plan to the extent the contributions
             are deductible by the Employee, or any distributions from a plan of
             deferred compensation;

                  (B) NONQUALIFIED STOCK OPTION. Amounts realized from the
             exercise of a nonqualified stock option, or when restricted stock
             (or property) held by the Employee either becomes freely
             transferable or is no longer subject to substantial risk of
             forfeiture;

                  (C) QUALIFIED STOCK OPTION. Amounts realized from the sale,
             exchange, or other disposition of stock acquired under a qualified
             stock option;

                  (D) OTHER AMOUNTS. Other amounts that received special tax
             benefits or contributions made by the Employer (other than under a
             salary reduction agreement) toward the purchase of an annuity
             described in Code Section 403(b) (whether or not the amounts are
             actually excludable from the gross income of the Employee); and

                  (E) ADJUSTED ANNUAL COMPENSATION LIMIT. Amounts in excess of
             the Annual Compensation Limit.

             (ii) ESTIMATION. Until Section 415 Compensation is actually
         determinable, the Employer may use a reasonable estimate of Section 415
         Compensation. As soon as administratively feasible, actual Section 415
         Compensation shall be determined.

         4.5 EXCESS ADDITION. If, despite the restrictions contained in this
Article and Code Section 415, an excess Annual Addition occurs, and the excess
is due to a reasonable error in estimating compensation, allocation of
forfeitures or other facts and circumstances as determined by the Commissioner
justifying the excess, to the extent the excess cannot be cured by the
distribution of Elective Deferrals or other Participant Contributions, the
excess:

                  (a) REDUCED VOLUNTARY CONTRIBUTION. First reduces the
             participant's Voluntary Contribution to the

                                      -32-


<PAGE>
maximum annual addition permitted.

         (b) REDUCED CONTRIBUTION. If the Active Participant has made no
Voluntary Contribution or an excess remains despite the reduction of a Voluntary
Contribution and the excess is due to a reasonable error in estimating
compensation, allocation of forfeitures or other facts and circumstances as
determined by the Commissioner justifying the excess, shall be retained by the
Trustee in an Unallocated Suspense Account. The excess reduces the Employer's
contribution for the next succeeding Plan Year and is allocated to the
applicable Participant's Account on the next Allocation Date before any
additional contributions may be made to the Plan. If the participant's
participation is terminated before the next Allocation Date, the excess is
allocated and reallocated among the Active Participants on that date.

         (c) UNALLOCATED SUSPENSE ACCOUNT. Held in an Unallocated Suspense
Account shall not share in the earnings, losses and adjustments in value of the
Fund.

         To the extent the excess can be cured by the distribution of Salary
Deferred Contributions or other Participant Contributions, such Contributions
and the gains on these amounts shall be distributed, to the extent that the
distribution reduces the excess amounts in the participant's Account. Amounts
distributed in that manner are disregarded for purposes of Code Section 402(g),
the Actual Deferral Percentage test and the Actual Contribution Percentage test.

         4.6 ERRONEOUS CONTRIBUTION. An erroneous contribution resulting from a
mistake of fact shall, if requested by the Employer, be returned to the Employer
within one (1) year of payment. Contributions made prior to an initial
determination of nonqualified status shall, if requested by the Employer, be
returned to the Employer within one year of the denial of qualified status, if
the request for initial determination of qualified status was made in a timely
manner. In all other circumstances, the corpus or income of the Trust may not be
diverted to or used for other than the exclusive benefit of the participants or
their beneficiaries.

                                      -33-


<PAGE>
         4.7 INVESTMENT OF CONTRIBUTIONS IN STOCK. To the extent Participants
have elected to invest contributions in Stock, the Trustee shall purchase the
number of whole shares of Stock which may be purchased with each contribution.
Purchases shall be made as soon as practicable. If any balance of a contribution
which a Participant has elected to be invested in Stock or cash dividends remain
after the Trustee has purchased the number of shares of Stock which may be
purchased, the additional amounts shall be maintained in the Trust, aggregated
with the next contribution to be invested in Stock or cash dividends on Stock
paid to the Plan and applied to purchase the number of shares of Stock which may
then be purchased.

                                      -34-


<PAGE>
                                    ARTICLE V
                            PARTICIPANT CONTRIBUTIONS

         5.1 PARTICIPANT CONTRIBUTIONS. For each Plan Year, an Active
Participant may make:

         (a) SALARY DEFERRED. Salary Deferred Contributions of Compensation
which the Active Participant may elect to defer or receive in cash which, except
for the Multiple Use Limit, effective on the first day of the 1987 Plan Year,
January 1, 1987:

             (i)   NOT AVAILABLE. Are not made out of Compensation which is
         currently available to the Active Participant at the date of the
         election, the date of adoption of the Plan and the Effective Date;

             (ii)  TIMING. Are reflected in an election made within thirty (30)
         days after the close of the Plan Year;

             (iii) IMPERMISSIBLE USE. Are not taken into account in determining
         whether any other contributions under any plan satisfy Code Section
         401(a) other than Code Section 410(b)(2)(A)(ii), including but not
         limited to Code Section 416; and

             (iv)  LIMITS. Do not exceed the Elective Contribution Limit, the
         Elective Deferral Limit, the Multiple Use Limit, or 15% of
         Compensation.

         (b) TRANSFER OR ROLLOVER. Contributions which consist of an amount that
is either a rollover or a direct transfer from another qualified retirement plan
for a Participant.

             (i)   PERMITTED TRANSFER. The transfer must be either:

                  (A) PLAN-TO-PLAN TRANSFER. A direct plan-to-plan transfer of
             funds held under another qualified retirement plan or trust that is
             not a qualifying rollover, or

                  (B) QUALIFYING ROLLOVER. A rollover amount within the meaning
             of Code Sections 402(c)(5) and 408(d)(3) or an eligible rollover
             distribution within the meaning of Code Section 402(c)(4),
             including a direct rollover under Code Section 401(a)(31), that the
             Administrator reasonably concludes is a qualifying rollover,
             excluding after tax employee contributions.

                                      -35-


<PAGE>
             (i)  RETURN OF IMPROPER ROLLOVER. If a rollover amount is
         determined not to be a qualifying rollover or constitutes a prohibited
         transfer, the amount, plus any earnings and minus any losses, shall be
         distributed to the Participant immediately.

             (ii) PROHIBITED TRANSFERS. Unless the Participant's spouse consents
         to the transfer and the Participant waives the qualified joint and
         survivor annuity, this plan shall not accept a transfer of assets from:

                  (A) DEFINED BENEFIT. A defined benefit plan,

                  (B) MONEY PURCHASE/TARGET BENEFIT. A money purchase pension
             plan or a target benefit pension plan, or

                  (C) OTHER. Any other defined contribution plan subject to the
             qualified joint and survivor and qualified preretirement survivor
             annuity requirements of Code Sections 401(a)(11) and 417.

         (c) CATCH-UP CONTRIBUTIONS. Effective January 1, 2002, if the
participant has attained age 50 before the close of the Plan Year, Catch-Up
Contributions in accordance with, and subject to the limitations of, Code
Section 414(v).

             (i)  LIMITS. Catch-Up Contributions shall not be taken into account
         for purposes of the provisions of the Plan implementing the required
         limitations of sections 402(g) and 415 of the Code.

             (ii) NO FAILURE. The Plan shall not be treated as failing to
         satisfy the provisions of the Plan implementing the requirements of
         section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code,
         as applicable, by reason of the making of such Catch-Up Contributions.

A participant may not make a deductible employee contribution for any taxable
year beginning after December 31, 1986.

         5.2 METHOD. Participant Contributions may be made by payroll deduction
or by any methods and at any intervals under rules established by the Employer.
All Participant Contributions must be made to the Trust through the Employer.
The Trustee is not required to receive contributions directly from Participants.

                                      -36-


<PAGE>
         (a) ELECTIONS. Elections to make, discontinue or resume Participant
Contributions must be in accordance with the following rules.

             (i)   TIMING. Effective July 1, 1993, an Election is effective not
         later than the first day of the first payroll period beginning after
         the Election is filed with the Committee, the Trustee, or the Plan
         Administrator, unless a later date is specified by the Participant or
         additional time is required for administrative processing.

             (ii)  DISCONTINUANCE. A discontinuance remains in effect until at
         least the first day of the first payroll period beginning after the end
         of the calendar quarter in which an Election to again make
         contributions is made.

             (iii) AUTOMATIC. A Participant's Election is automatically
         suspended for twelve (12) months after receipt of a hardship
         distribution from a plan of the Employer (or Affiliated Employer) if
         the hardship distribution is based on a deemed financial need or if the
         hardship distribution is made from this Plan, and until the first day
         of the calendar quarter coincident with or next following thirty (30)
         days from an Age 59 1/2 distribution.

         (b) TIME LIMIT. Participant Contributions must be transmitted to the
Trustee as soon as administratively feasible, but not later than the 15th
business day of the month following the month in which the amounts are withheld
from the Participant's Compensation or such other time prescribed by
Regulations.

         (c) SPECIAL RULE. Any Participant Contribution Election otherwise
permitted by this Article may, at the Participant's election, also be made
pursuant to an irrevocable election made by the Participant six months or more
in advance of the effective date of the election.

         5.3 MATCHING AND VOLUNTARY CONTRIBUTION LIMITS. Matching and Voluntary
Contributions (excluding Qualifying Contributions used to meet the Code Section
401(k) tests and including, to the extent designated by the Employer, other
Qualifying or Salary Deferred Contributions) to this Plan, and any plan
aggregated with this Plan for purposes of Code Sections 401(a)(4) and 410(b),
must satisfy the ACP Limit. For Plan Years beginning after December 31, 1996,
ACP Limit means the maximum ACP for Highly

                                      -37-


<PAGE>
Compensated Employees determined under the current year testing method. The ACP
for Participants who are Highly Compensated Employees shall not exceed the
greater of:

         (a) 125% LIMIT. 125% of the ACP for all Participants who are not Highly
Compensated Employees, or

         (B) 200%/2% LIMIT. Subject to the multiple use limitation in Section
5.10(a), 200% of the ACP for all Participants who are not Highly Compensated
Employees or, if less, the ACP for all Participants who are not Highly
Compensated Employees plus two percentage points. The collectively bargained
portions of this Plan must be separately tested.

         5.4 ACTUAL CONTRIBUTION PERCENTAGE. ACP means the average of the
Contribution Percentages determined by dividing the sum of all Contribution
Percentages of all eligible Participants in the applicable group by the number
of eligible Participants in the group. An eligible Participant is a Participant
who is directly or indirectly eligible to make or receive an allocation of an
ACP Contribution. Effective for Plan Years beginning after December 31, 1998,
the Employer may elect to disregard eligible Participants (other than Highly
Compensated Employees) who have not met the minimum age and service requirements
of Code Section 410(a)(1)(a) provided the plan separately satisfies Code Section
410(b) taking into account only those Participants.

         (a) CONTRIBUTION PERCENTAGE. Contribution Percentage means the
percentage determined by dividing the Participant's ACP Contributions for the
applicable Plan Year by the Participant's ADP Compensation. If ACP Contributions
are not made for the Participant, the Participant's Contribution Percentage is
zero.

         (b) ACP CONTRIBUTIONS. ACP Contributions means the sum of the following
for the applicable Plan Year:

             (i)  MATCHING CONTRIBUTIONS. Matching Contributions; and

             (ii) OTHER CONTRIBUTIONS TREATED AS MATCHING. Contributions treated
         as Matching Contributions under the following:


                                      -38-


<PAGE>
                  (A) ELECTIVE CONTRIBUTIONS. If the ADP Limit is not exceeded,
             all Elective Contributions or, to the extent not required for
             compliance with the ADP Limit, only the Elective Contributions made
             for Participants who are not Highly Compensated Employees, may be
             treated as Matching Contributions.

                  (B) QUALIFIED MATCHING AND NONELECTIVE CONTRIBUTIONS. To the
             extent not necessary for compliance with the ADP Limit, Qualified
             Matching Contributions and Nonelective Contributions may be treated
             as Matching Contributions for determining compliance with the ACP
             Limit. Qualified Matching Contributions and Nonelective
             Contributions that are treated as Elective Contributions shall not
             be treated as Matching Contributions.

         (c) AGGREGATION WITH OTHER PLANS. This plan and any plan aggregated
with this plan under the plan aggregation rules of Section 5.10 shall be treated
as a single plan for testing compliance with the ACP Limit.

         (d) ADDITIONAL RULES. In determining compliance with the ACP Limit, the
testing coordination, plan aggregation, correction, and other rules in Section
5.10 apply. If the Administrator determines that the ACP Limit may be exceeded,
the Administrator may reduce or suspend the Matching Contributions for
individual Highly Compensated Employees as necessary.

         5.5 CORRECTION OF EXCESS AGGREGATE CONTRIBUTION. An Excess Aggregate
Contribution, plus any attributable income or loss, shall be deducted from the
Participant's Matching Contributions account and accounts for Elective
Contributions, Nonelective Contributions, and Qualified Matching Contributions,
to the extent that these contributions are treated as Matching Contributions.

         (a) DEFINITION. Excess Aggregate Contribution means the ACP
Contributions of Highly Compensated Employees that cause the ACP to exceed the
ACP Limit.

         (b) METHOD. Correction of the Excess Aggregate Contribution first shall
be made by deducting proportionately the Participant's Matching Contributions,
and Elective Contributions and Qualified Matching Contributions treated as
Matching Contributions, in determining the Participant's Contribution Percentage
for the Plan Year. Finally, if necessary because the Participant's Matching
Contributions, and Elective Contributions and Qualified Matching Contributions
treated as Matching Contributions, have been exhausted, any remaining Excess
Aggregate

                                      -39-


<PAGE>
Contribution shall be deducted from the Participant's Nonelective Contributions
treated as Matching Contributions for the Plan Year.

Elective Contributions, Nonelective Contributions, and Qualified Matching
Contributions deducted to correct an Excess Aggregate Contribution shall be
distributed to the Participant. Matching Contributions deducted to correct an
Excess Aggregate Contribution shall be multiplied by the Participant's vested
percentage to determine the vested amount. The vested amount shall be
distributed, and the nonvested portion shall be treated as a forfeiture as of
the date of deduction.

         5.6 SALARY DEFERRED CONTRIBUTION LIMIT. Salary Deferred Contributions
(excluding Salary Deferred and Qualifying Contributions used to meet the Code
Section 401(m) tests and including, to the extent designated by the Employer,
other Qualifying Contributions) to this Plan, and any plan aggregated with this
Plan for purposes of Code Sections 401(a)(4) and 410(b), must satisfy the ADP
Limit. For Plan Years beginning after December 31, 1996, the ADP Limit means the
maximum ADP for Highly Compensated Employees determined under the current year
testing method. The ADP for Highly Compensated Employees for each Plan Year may
not exceed the greater of:

         (a) 125% LIMIT. 125% of the ADP for all Participants who are not Highly
Compensated Employees, or

         (b) 200%/2% LIMIT. Subject to the Multiple Use Limitation in Section
5.10(a), 200% of the ADP for all Participants who are not Highly Compensated
Employees or, if less, the ADP for all Participants who are not Highly
Compensated Employees plus two percentage points. The collectively bargained
portions of the Plan must be separately tested.

         5.7 ACTUAL DEFERRAL PERCENTAGE. ADP means the average of the Deferral
Percentages determined by dividing the sum of all Deferral Percentages of all
eligible Participants in the applicable group by the number of eligible
Participants in that group. An eligible Participant is a Participant who is
directly or indirectly eligible to make or receive an allocation of an ADP
Contribution. Effective for Plan Years beginning after December 31, 1998, the
Employer may elect to disregard eligible Participants (other than Highly
Compensated Employees) who have not met the minimum age and service requirements
of Code Section 410(a)(1)(a) provided the plan separately satisfies Code Section
410(b) taking into account only those Participants.

                                      -40-


<PAGE>
         (a) DEFERRAL PERCENTAGE. Deferral Percentage means a percentage
determined by dividing the Participant's ADP Contributions for the applicable
Plan Year by the Participant's ADP Compensation. If ADP Contributions are not
made for the Participant, the Participant's Deferral Percentage is zero.

         (b) ADP CONTRIBUTIONS. ADP Contributions means the sum of the following
for the applicable Plan Year:

             (i)  ELECTIVE CONTRIBUTIONS. Elective Contributions made for the
         Participant; and

             (ii) OTHER CONTRIBUTIONS TREATED AS ELECTIVE CONTRIBUTIONS.
         Qualifying Contributions treated as Elective Contributions for a Plan
         Year to the extent permitted under Regulations Section
         1.401(k)-1(b)(5).

         (c) ADP COMPENSATION. ADP Compensation means the Employee's
compensation as defined in Code Section 414(s) and Regulations for the
applicable Plan Year. In accordance with the Regulations, the Employer may elect
to determine ADP Compensation for a Plan Year based on the calendar year ending
within that Plan Year. ADP Compensation is determined only for the portion of
the Plan Year that the Employee is a Participant employed in Covered Employment.
ADP Compensation shall not exceed the Annual Compensation Limit.

         (d) AGGREGATION WITH OTHER PLANS. This plan and any plan aggregated
with this plan under the plan aggregation rules of Section 5.10 shall be treated
as a single plan for testing compliance with the ADP Limit.

         (e) ADDITIONAL RULES. In determining compliance with the ADP Limit, the
testing coordination, plan aggregation, correction, and other rules in Section
5.10 apply. If the Administrator determines that the Elective Deferral Limit or
the ADP Limit may be exceeded, the Administrator may reduce or suspend Elective
Contributions for individual Highly Compensated Employees as necessary.

         5.8 ELECTIVE DEFERRAL LIMIT. Elective Deferrals under this Plan and all
other plans, contracts, or arrangements of the Employer (and any Affiliated
Employer) may not exceed the limitation in effect under Code Section 402(g)(1)
for the taxable year beginning in the calendar year. Elective Deferrals which
exceed the limit are included in the individual's gross income.

         (a) GENERAL RULE. Except for Elective Deferrals of amounts attributable
to service performed in 1986 described in Section 1105(c)(5) of the Tax Reform
Act of 1986, the limitation is $7,000.00, as adjusted by the Secretary of the
Treasury.

                                      -41-


<PAGE>
         (b) INCREASE. The limitation is increased (but not to an amount in
excess of $9,500) by the amount of any employer contributions to purchase a
403(b) annuity contract under a salary reduction agreement.

         (c) DECREASE. The limitation is decreased in the taxable year following
the taxable year the participant receives a hardship distribution which is based
on a deemed financial need by the amount of the Elective Deferral in the taxable
year of the hardship distribution.

         (d) ELECTIVE DEFERRALS. Elective Deferrals are the Elective
Contributions made for the Participant and any other portion of the
Participant's income deferred and excluded from current taxation under Code
Sections 401(k) (a qualified cash or deferred arrangement); 408(k)(6) (a
simplified employee pension plan); 403(b) (a tax-sheltered annuity);
408(p)(2)(A)(ii) (a SIMPLE retirement plan); 457 (a deferred compensation plan
of governments and tax- exempts); or 501(c)(18) (a pre-June 25, 1959, employee
contributions only plan). In applying the limit, all of the Participant's
Elective Deferrals for the calendar year shall be aggregated.

5.9 CORRECTION OF EXCESS DEFERRAL AND EXCESS CONTRIBUTION.

         (a) EXCESS DEFERRAL. Upon written notification, an Excess Deferral,
plus attributable income or loss, shall be distributed to the Participant.

             (i)  DEFINITION. Excess Deferral means a Participant's Elective
         Deferrals that exceed the Elective Deferral Limit.

             (ii) WRITTEN NOTIFICATION. If the Excess Deferral for a Participant
         occurs within one or more plans of the Employer and any Related
         Employer, the Employer must notify the Trustee of the amount of the
         Excess Deferral to be distributed from this plan. If the Excess
         Deferral for a Participant occurs under this plan and one or more plans
         of unrelated employers, the Participant must notify the Administrator
         of the amount of the Excess Deferral to be distributed from this plan.
         The notification should be given no later than February 15 following
         the calendar year for which the Excess Deferral was contributed. The
         notification must specify the amount of Excess Deferral to be
         distributed and contain an acknowledgment that the amount to be
         distributed exceeds the Elective Deferral Limit.

                                      -42-


<PAGE>
             (iii) TIME OF DISTRIBUTION. If the written notification is timely,
         the distribution shall be made by April 15 following receipt of the
         request. If not, any Excess Deferral shall be retained in this plan and
         distributed under Article 7.

             (iv)  APPLICATION TO ADP LIMIT. An amount distributed to a Highly
         Compensated Employee to correct an Excess Deferral (whether it occurs
         under plans of unrelated employers or under a plan or plans of the
         Employer and any Related Employer) shall be included in determining
         compliance with the ADP Limit as if not distributed. An amount
         distributed to a Participant who is not a Highly Compensated Employee
         to correct an Excess Deferral that occurs within one or more plans of
         the Employer and any Related Employer shall not be included in
         determining compliance with the ADP Limit.

         (b) EXCESS CONTRIBUTION. An Excess Contribution, plus any attributable
income or loss, shall be deducted from each affected Participant's Elective
Contributions account, Qualified Matching Contributions account, and Nonelective
Contributions account.

             (i)  DEFINITION. Excess Contribution means the ADP Contributions of
         Highly Compensated Employees that cause the ADP to exceed the ADP
         Limit, reduced by the amount of any Excess Deferral distributed under
         (a) above.

             (ii) METHOD. Correction of the Excess Contribution first shall be
         made by deducting the Participant's Elective Contributions that are not
         eligible to be matched. If further deduction is necessary, it shall be
         applied proportionately to the Participant's remaining Elective
         Contributions and Qualified Matching Contributions treated as Elective
         Contributions in determining the Participant's Deferral Percentage for
         the Plan Year. Finally, if necessary because the Participant's Elective
         Contributions and Qualified Matching Contributions treated as Elective
         Contributions have been exhausted, any remaining Excess Contribution
         shall be deducted from the Participant's Nonelective Contributions
         treated as Elective Contributions for the Plan Year.

Elective Contributions and Nonelective Contributions deducted to correct an
Excess Contribution shall be distributed to the Participant. Qualified Matching
Contributions deducted to correct an Excess Contribution shall be treated as a
forfeiture as of the date of deduction.

         5.10 ADDITIONAL 401(K) AND 401(M) RULES. The following additional rules
apply to the contributions subject to the Elective Deferral, ADP and ACP Limits:

                                      -43-


<PAGE>
         (a) MULTIPLE USE LIMITATION. Through December 31, 2001, the ADP and ACP
Limits under Sections 5.3 and 5.6 may be used only to the extent permitted by
Code Section 401(m) and Regulations Section 1.401(m)-2. If multiple use of the
alternative limitation occurs, first the ACP excess shall be eliminated by
correcting Excess Aggregate Contributions and then, if necessary, the ADP excess
by correcting Excess Contributions.

         (b) DEADLINE FOR INCLUSION IN TESTS. To be included for testing
compliance with the ADP Limit or the ACP Limit for a Plan Year, contributions
must be allocated to the Participant's accounts as of a date during the Plan
Year and must be paid to the trust by the end of the 12-month period following
the end of the Plan Year to which the contribution relates. Employer
Contributions must be made no later than the date specified under Regulations
Section 1.415- 6(b)(7)(ii) to be included as Annual Additions for a Limitation
Year.

         (c) PLAN AGGREGATION RULES.

             (i)   HCE REQUIRED AGGREGATION. Unless prohibited by the
         Regulations, if the same Highly Compensated Employee is eligible to
         participate in two or more plans of the Employer or a Related Employer,
         the plans shall be treated as a single plan for determining the Highly
         Compensated Employee's Deferral Percentage and Contribution Percentage.
         If the plans have different plan years, they shall be treated as a
         single plan with respect to the plan years ending within the same
         calendar year.

             (ii)  REQUIRED AGGREGATION. If this plan and any other qualified
         retirement plan of the Employer or a Related Employer are required to
         be treated as a single plan for compliance with Code Section 410(b)
         (other than Code Section 410(b)(2)(A)(ii)), compliance with the ADP and
         ACP Limits shall be determined as if the plans were a single plan.

             (iii) PERMISSIVE AGGREGATION. If this plan and any other qualified
         retirement plan of the Employer or a Related Employer are treated as a
         single plan when permitted but not required by Code Section 410(b) and
         Regulations, the aggregated plans must comply with the ADP and ACP
         Limits and must also meet the requirements of Code Sections 401(a)(4)
         and 410(b) as if the plans were a single plan. Plans may be aggregated
         permissively only if they have the same plan year and use the same
         testing method to determine compliance with the ADP and ACP Limits.

             (iv)  PROHIBITED AGGREGATION. Plans that may be aggregated under
         Code Section 410(b) but are not actually aggregated for a Plan Year for
         purposes of Code Section 410(b) (other than Code Section

                                      -44-


<PAGE>
         410(b)(2)(A)(ii)) may not be aggregated for purposes of compliance with
         the ADP and ACP Limits.

             (v) MANDATORY DISAGGREGATION. If this plan must be treated as being
         comprised of two or more separate plans under Regulation Section
         1.410(b)-7(c), each separate plan must meet the requirements of Code
         Sections 410(b) and 401(a)(4).

         (d) PLAN COVERAGE CHANGES. If the ADP Limit or ACP Limit is determined
under the prior year testing method and a plan coverage change occurs during a
Plan Year, then the ADP and ACP for all Participants who were not Highly
Compensated Employees for the preceding Plan Year is the weighted average of the
ADPs and ACPs for all subgroups in the preceding Plan Year.

             (i)   DEFINITION. A plan coverage change means a change in the
         group or groups of eligible Employees under this plan on account of the
         establishment or amendment of a plan, a merger, consolidation, or
         spinoff under Code Section 414(l), a change in the way plans, within
         the meaning of Code Section 414(l), are permissively aggregated or
         mandatorily disaggregated, or a combination of any of the above.

             (ii)  SUBGROUP. A subgroup means all non-Highly Compensated
         Employees who were Participants in the preceding Plan Year plus those
         Employees who would have been eligible to participate had the plan
         coverage change occurred in the preceding Plan Year.

             (iii) WEIGHTED AVERAGE. The weighted average of the ADPs and ACPs
         is the sum of the adjusted ADPs and ACPs for all subgroups in the
         preceding Plan Year. The adjusted ADP or ACP for a subgroup is the
         non-Highly Compensated Employee's ADP or ACP for the preceding Plan
         Year multiplied by a fraction. The numerator of the fraction is the
         number of non-Highly Compensated Employees in the subgroup and the
         denominator is the total number of non-Highly Compensated Employees in
         all subgroups.

             (iv)  OPTIONAL RULE FOR MINOR PLAN COVERAGE CHANGES. If a plan
         coverage change occurs, and at least 90% of the total number of
         non-Highly Compensated Employees in all subgroups are from a single
         subgroup, then the Employer may elect to use the non-Highly Compensated
         Employee's ADP and ACP for the preceding Plan Year instead of the
         weighted average.

         (e) CORRECTION OF EXCESS CONTRIBUTIONS AND EXCESS AGGREGATE
CONTRIBUTIONS.

             (i)   DETERMINATION OF AMOUNT. The amount of Excess Contributions
         and Excess Aggregate Contributions shall be determined by reducing the
         Deferral Percentages or Contribution Percentages of Highly

                                      -45-


<PAGE>
         Compensated Employees, beginning with those at the highest Deferral
         Percentage or Contribution Percentage, to the next lower Deferral
         Percentage or Contribution Percentage level for Highly Compensated
         Employees or, if greater, a percentage that results in compliance with
         the ADP Limit or ACP Limit. If further reduction is required to satisfy
         the ADP Limit or ACP Limit, the amount of correction shall be
         determined by continuing the process until the ADP Limit or ACP Limit
         is not exceeded. The amount by which the Deferral Percentage or
         Contribution Percentage is reduced for each affected Highly Compensated
         Employee shall be expressed as a dollar amount and combined to
         determine the total amount of Excess Contributions and Excess Aggregate
         Contributions for the Plan Year.

             (ii) ORDER OF CORRECTION. Excess Contributions and Excess Aggregate
         Contributions shall be corrected by allocating the excess amounts
         determined under (i) above to the Highly Compensated Employees on the
         basis of the amount of ADP or ACP Contributions taken into account in
         determining the Deferral Percentages or Contribution Percentages of the
         Highly Compensated Employees for the Plan Year. The ADP or ACP
         Contributions of the Highly Compensated Employee with the highest
         dollar amount of ADP or ACP Contributions shall be reduced until the
         amount of the Highly Compensated Employee's ADP or ACP Contributions
         equals the ADP or ACP Contributions of the Highly Compensated Employee
         with the next highest dollar amount of ADP or ACP Contributions or, if
         greater, until the total amount of the excess has been allocated. The
         process shall be continued until the total Excess Contributions or
         Excess Aggregate Contributions have been allocated. The amount by which
         the ADP or ACP Contributions are reduced shall be deducted from each
         affected Highly Compensated Employee as specified in Sections 4.2(d)
         and 4.5(e). After the deductions have been made, the ADP Limit or ACP
         Limit is treated as being satisfied regardless of whether the ADP Limit
         or ACP Limit is actually satisfied, if recalculated.

         (f) ATTRIBUTABLE INCOME OR LOSS. Any deduction from a Participant's
account to correct or in conjunction with correction of an Excess Deferral,
Excess Contribution, or Excess Aggregate Contribution shall include the
attributable income or loss for the applicable period and for the period between
the last day of the applicable period and the date of distribution. The
applicable period for an Excess Deferral is the calendar year. The applicable
period for an Excess Contribution or Excess Aggregate Contribution is the Plan
Year.

             (i)  METHOD OF DETERMINATION. The Employer may determine the
         attributable income or loss for the applicable period and for the
         period between the last day of the applicable period and the date of
         distribution

                                      -46-


<PAGE>
         using any reasonable method that does not result in discrimination
         under Code Section 401(a)(4). The method must be used consistently for
         all Participants and for all corrective distributions for the Plan Year
         and must be the method used for allocating earnings or losses to the
         Participants' accounts for that year.

             (ii) ALTERNATIVE METHOD OF DETERMINATION. If the attributable
         income or loss is not determined under (i) above, the income or loss
         shall be determined by multiplying the income or loss attributable to
         the account from which the correcting deduction is made for the
         applicable period for which the excess is determined by a fraction. The
         numerator of the fraction is the excess amount. The denominator is the
         balance in the account as of the first day of the applicable period,
         plus contributions allocated as of the last day of the period.

In addition, income credited for the period between the last day of the
applicable period and the date of distribution shall be equal to 10% of the
income determined under the preceding paragraph multiplied by the number of full
months between the last day of the applicable period and the date of
distribution. A month shall be considered a full month if the payment is made
after the 15th day of that month.

         (g) ORDERING OF EXCESS AMOUNTS. Excess Deferrals shall be determined
and corrected before Excess Contributions, and Excess Contributions shall be
determined and corrected before Excess Aggregate Contributions.

         (h) ALLOCATION OF CORRECTION AMONG MULTIPLE PLANS. If the Employer
maintains another plan that must be aggregated with this plan for testing
compliance with the ADP or ACP Limits, the Employer shall specify the plan from
which corrections are to be made.

         (i) DEADLINE FOR CORRECTION. To correct an Excess Contribution or
Excess Aggregate Contribution, a distribution or forfeiture shall be made not
later than the last day of the Plan Year after the Plan Year for which the
excess was contributed.

         (j) TAXATION OF DISTRIBUTION.

             (i)  EXCESS DEFERRAL. The Excess Deferral is included in the
         Participant's income for the calendar year for which contributed. The
         attributable income or loss is included for the calendar year of
         distribution.

             (ii) EXCESS CONTRIBUTIONS/EXCESS AGGREGATE CONTRIBUTIONS. If made
         within the two-and-one-half-month period after the end of the Plan
         Year for which the excess was contributed, an amount distributed to
         correct an Excess Contribution or Excess Aggregate Contribution shall
         be included in the Participant's income

                                      -47-


<PAGE>
         on the earliest dates any Elective Deferrals by the Participant during
         the Plan Year would have been received by the Participant had the
         Participant originally elected to receive the amounts in cash. A later
         distribution to correct an Excess Contribution or Excess Aggregate
         Contribution shall be included in the Participant's income for the
         calendar year in which it is distributed.

         (k) PENALTIES. Distribution of an Excess Deferral, an Excess
Contribution, or an Excess Aggregate Contribution does not subject the
Participant to the 10% penalty on an early withdrawal under Code Section 72(t).
The Employer shall be liable for a 10% excise tax under Code Section 4979 on the
Excess Contributions or Excess Aggregate Contributions distributed or forfeited
after the two-and-one-half-month period following the end of the Plan Year for
which they were contributed.

         (l) CALENDAR YEAR/TAXABLE YEAR. The term calendar year with reference
to an individual means the taxable year for any individual whose taxable year is
not the calendar year.

                                      -48-


<PAGE>
                                   ARTICLE VI
                                    ACCOUNTS

         6.1 ACCOUNTS. The Committee shall establish for each participant a
separate Employer Account for each type of Employer Contribution and a separate
Participant Account for each type of Participant Contribution.

         (a) IDENTIFICATION. The specific accounts created are, as necessary:

             (i)   EMPLOYER REGULAR PROFIT SHARING ACCOUNT. The Accounts to
         which any Employer Regular Profit Sharing Contributions are credited;

             (ii)  EMPLOYER PAYSOP/TRASOP CONTRIBUTIONS ACCOUNT. The Accounts to
         which amounts allocated under the PAYSOP or TRASOP rules were credited;

             (iii) SALARY DEFERRED CONTRIBUTIONS ACCOUNT. The Accounts to which
         Active Participant Salary Deferred and Catch-Up Contributions are
         credited;

             (iv)  EMPLOYER PRIOR CONTRIBUTIONS ACCOUNT. The Accounts to which
         Employer contributions made in accordance with the Keene Corporation
         Tax Credit Employee Stock Ownership Plans and the Bairnco Employee
         Stock Ownership Plan and transferred to this Plan at its original
         effective date were credited;

             (v)   PARTICIPANT CONTRIBUTIONS ACCOUNT. The Accounts to which
         contributions of Participants made in accordance with the Keene
         Corporation Tax Credit Employee Stock Ownership Plans and the Bairnco
         Employee Stock Ownership Plan and transferred to this Plan at its
         original effective date were credited;

             (vi)  COOPER BEARING TRANSFER ACCOUNT. The Accounts to which
         amounts transferred in the transfer of plan assets and liabilities from
         the Cooper Bearing Company Employees' 401(k) Deferred Compensation Plan
         and Trust were credited;

             (vii) TRANSFER OR ROLLOVER ACCOUNT. The Accounts to which amounts
         transferred or rolled-over to this Plan (other than Cooper Bearing
         Transfer Account amounts) are credited.


                                      -49-


<PAGE>
Each Account consists of a number of sub-Accounts. One sub-Account includes the
portion of the Account which is invested in Stock of Kaydon Corporation. The
other sub-Accounts include the portions of the Accounts which are otherwise
invested pursuant to each option provided under the Plan.

         (b) CREDITING. On each Allocation Date:

              (i) EMPLOYER ACCOUNTS. Each Employer Account is credited with the
         designated Employer Contributions, forfeitures and a share of the
         expenses, earnings, losses and adjustments in value of the applicable
         portion or portions of the Trust; and

             (ii) PARTICIPANT ACCOUNTS. Each Participant Account is credited
         with the Active Participant's Contributions to that Account and a share
         of the expenses, earnings, losses and adjustments in value of the
         applicable portion or portions of the Trust.

         6.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS. Employer Regular Profit
Sharing Contributions for the Plan Year are allocated to the Employer Regular
Profit Sharing Accounts of Active Participants who are Employees on the last day
of that Plan Year in the proportion which each Active Participant's Compensation
for the Plan Year bears to the aggregate of Active Participants' Compensation
for the Plan Year, subject to the Testing Adjustment.

         (a) SALARY DEFERRED. Salary Deferred Contributions are allocated to the
account of the electing Active Participant.

         (b) QUALIFYING. Employer Qualifying Contributions are allocated as
directed by the Employer. That direction may include allocation in the same
manner as Employer Regular Profit Sharing Contributions, in any other
non-discriminatory manner, or a combination, and may be limited to Non-Highly
Compensated Employees or one or more classifications of Non-Highly Compensated
Employees. The method of allocation must be specified by the Employer within
thirty (30) days of the end of the Plan Year to avoid discrimination under Code
Sections 401(k) and 401(m).

                                      -50-


<PAGE>
         (c) SPECIAL CONTRIBUTIONS. Forfeiture Restoration Contributions are
allocated to the account of the affected Active Participant. Minimum Top Heavy
Contributions are allocated to the account of the affected Non-Key Employee
Active Participants who are employed by the Employer (or Affiliated Employer) on
the last day of the Plan Year.

         (d) STOCK CONTRIBUTIONS. Employer Contributions may be made in Stock or
in cash, or in any combination of Stock and cash (as determined by each
Employer) except that Elective Contributions may be made in Stock only to the
extent Participants have elected to have those contributions invested in Stock.
Stock contributed by an Employer is valued at the average of its closing prices
as reported on any national securities exchange or as quoted on any system
sponsored by a national securities association for the twenty (20) consecutive
trading days immediately prior to the date on which the Stock is contributed to
the Plan.

         (e) TESTING ADJUSTMENT. All allocations for Highly Compensated
Employees are subject to limitation based on, and may be reduced as necessary to
comply with, the participation, coverage and non-discrimination tests applicable
to the Plan under Code Sections 401(a)(26), 410(b) and 401(a)(4). All
allocations to Highly Compensated Employees are provisional until the earlier of
the date the Employer certifies the allocations as non-provisional and the due
date of the Employer's tax return for the year including the Allocation Date.

The method of allocation cannot be changed more frequently than once every six
months, other than to comport with changes in the Code, ERISA, or the applicable
rules or regulations.

         6.3 ALLOCATION OF FORFEITURES. Forfeitures from the Non-Vested Accounts
of participants who have incurred five (5) consecutive Breaks in Service,
received a distribution of their entire Vested Account Balance, or died after
terminating employment during the Plan Year are first allocated to reduce any
Forfeiture Restoration Contribution. Any remaining forfeitures are allocated in
the same manner as Employer Regular Profit Sharing Contributions.

                                      -51-


<PAGE>
         6.4 ALLOCATION OF EXPENSES, EARNINGS, LOSSES AND ADJUSTMENTS IN VALUE.
The assets of the Trust will be valued at fair market value as of each
Allocation Date. Participants share in the earnings, losses and adjustments in
value of the fund and in the expenses not paid by an Employer in the following
manner:

         (a) COMMON FUND. If invested in a qualified common or pooled fund, each
participant has a proportionate undivided interest in the assets of the fund
and, except as otherwise provided, has allocated to the account the expenses,
earnings, losses and adjustments in value of the fund under the rules of the
fund.

         (b) MULTIPLE PARTICIPANT INVESTMENTS. If an amount from an account of a
participant is invested in assets other than a Common Fund and the investment is
commingled in another investment with amounts from the accounts of other
participants, each participant has a proportionate interest in the asset and,
except as otherwise provided, has allocated to the participant's account
expenses, earnings, losses and adjustments in value of the asset in the ratio
that the stated value in the asset bears to the total stated value of all
participants in the assets. The stated value of a participant's account is the
value of the participant's interest as of the beginning of each Allocation
Period less any distribution, forfeiture, or other debit to the account plus any
Participant Contributions during the period.

         (c) SINGLE ACTIVE PARTICIPANT INVESTMENTS. If an amount from the
account of a participant is invested in assets other than the Common Fund and
the account is not commingled in another investment with the amounts from
accounts of other participants, each participant is entitled to the entire
interest in the asset and, except as otherwise provided, the expenses, earnings,
losses and adjustments in value of the asset are allocated to the participant's
account.

         (d) EXPENSES. In general, expenses paid by the Trustee and charged
against the Trust Fund are allocated to participants' Accounts as earnings,
losses and other adjustments in value. Fees for recordkeeping services are
allocated as a flat fee per participant and are spread across all of each
participants' Accounts. Any investment management fee applicable to Stock is
allocated only to Accounts invested in Stock in the ratio of the Stock holdings.
Distribution fees are allocated to the Account being distributed prior to
distribution.

         (e) CASH BASIS AND DAILY VALUATION. Alternatively, and notwithstanding
other allocation dates and requirements for other purposes in this plan, all
amounts may be credited for the purpose of allocating investment experience, and
investment experience may be determined and allocated, pursuant to any
consistent, nondiscriminatory cash basis accounting procedure or daily valuation
system (with cash basis accounting) approved by the Administrator.

                                      -52-


<PAGE>
         6.5 VESTING. The Account Balance in each Account other than the
Employer Regular Profit Sharing Account, if any, is fully vested and
nonforfeitable at all times. The Account Balance in each Employer Regular Profit
Sharing Account is fully vested and nonforfeitable upon the Participant's
attainment of Normal Retirement Age, Death, or Disability while an employee of
the Employer (or Affiliated Employer) and under one or a combination of the
following Vesting Schedules:

         (a) NON-TOP HEAVY. The Non-Top Heavy Schedule applies if the Plan never
becomes Top Heavy or for Plan Years after it has ceased to be Top Heavy (subject
to the restrictions on Vesting Schedule amendments in Article X). This schedule
also applies to a participant who does not complete an Hour of Service in a Plan
Year in which the Plan is Top Heavy. Except as provided in subsection (b), the
Non-Top Heavy schedule is:

<TABLE>
<CAPTION>
         Years of Service for Vesting Purposes                         Percentage
         To Date Employment Terminated                                 Vested
         -----------------------------                                 ------
         <S>                                                           <C>
                  Less than 1 year                                       0%
                  1 year but less than 2 years                          10%
                  2 years but less than 3 years                         20%
                  3 years but less than 4 years                         30%
                  4 years but less than 5 years                         40%
                  5 years but less than 6 years                         60%
                  6 years but less than 7 years                         80%
                  7 years or more                                      100%
</TABLE>

         (b) MATCHING. Effective for Matching Contributions attributable to Plan
Year beginning on and after January 1, 2002, the schedule applicable to Employer
Matching contributions is:

                                      -53-


<PAGE>
<TABLE>
<CAPTION>
         Years of Service for Vesting Purposes                         Percentage
         To Date Employment Terminated                                 Vested
         -----------------------------                                 ------
         <S>                                                           <C>
                  Less than 1 year                                       0%
                  1 year but less than 2 years                          10%
                  2 years but less than 3 years                         20%
                  3 years but less than 4 years                         40%
                  4 years but less than 5 years                         60%
                  5 years but less than 6 years                         80%
                  6 years or more                                      100%
</TABLE>

         (c) TOP HEAVY. Unless the Non-Top Heavy Schedule is more favorable, the
Top Heavy Schedule applies for Plan Years in which the Plan is Top Heavy and for
amounts allocated in Plan Years before the Plan became Top Heavy. The Top Heavy
Schedule is:

<TABLE>
<CAPTION>
         Years of Service for Vesting Purposes                         Percentage
         To Date Employment Terminated                                 Vested
         -----------------------------                                 ------
         <S>                                                           <C>
                  Less than 2 years                                    None
                  2 years but less than 3 years                        20%
                  3 years but less than 4 years                        40%
                  4 years but less than 5 years                        60%
                  5 years but less than 6 years                        80%
                  6 years or more                                      100%
</TABLE>

         (d) EFFECT OF RE-PARTICIPATION. Years of Service prior to a Break in
Service are Years of Service for purposes of determining the vested interest in
the Employer Accounts of an Employee who is reemployed by the Employer following
a Break in Service and for all purposes under the Plan on the first day on which
the Employee becomes an Active Participant unless the Employee re-participates
as a new Employee.

         (e) CHANGE. A change in the applicable Vesting Schedule is a vesting
amendment under Article X.

         6.6 VESTED ACCOUNTS. The vested portion of the Accounts of a
participant is a Vested Account and the nonvested portion is a Nonvested
Account. Vested and Nonvested Accounts are solely for accounting purposes, and
do not require segregation of the assets of the Trust. Distribution of benefits
may be made to a participant or a beneficiary only from the Vested Accounts.

                                      -54-


<PAGE>
         (a) RE-PARTICIPATION. Separate Vested Accounts are maintained for
participants whose prior service is disregarded following reemployment.

         (b) PARTIAL DISTRIBUTION. In the event of a distribution of less than
the entire Vested Account Balance of a participant whose Employer Account is not
fully vested and nonforfeitable at the time of the distribution, a Separate
Account is established at the time of distribution. The vested portion of the
participant's Separate Account equals P(AB + (R x D)) - (R x D) where P is the
vested percentage, AB is the Account Balance from time to time, D is the amount
of the distribution and R is the ratio of the Account Balance from time to time
to the Separate Account Balance after distribution.

         (c) FORFEITURE. All Nonvested Accounts are forfeited as of the end of
the Plan Year during which a participant incurs five (5) consecutive Breaks in
Service, receives a distribution of the entire Vested Account Balance, or dies
after terminating employment. A participant who is not vested in any portion of
an Employer Account is deemed to receive a distribution of the participant's
entire vested Account Balance in that Account on the date the participant
terminates employment with the Employer. For participants affected by the
retroactive effective date of this subsection who were not previously treated as
having received a deemed distribution, the deemed distribution shall occur on
the last day of the Plan Year in which this amendment and restatement is
actually adopted.

         (d) EMPLOYER ACCOUNT RESTORED. If a terminated participant is
reemployed by the Employer before incurring five (5) consecutive Breaks in
Service, the forfeited Nonvested Account must be restored to the Employer
Account if:

             (i)  NO DISTRIBUTION. No distribution was received from the Vested
         Account; or

             (ii) REPAYMENT. The entire distribution received from the Vested
         Account is repaid not later than the date the participant incurs five
         (5) consecutive Breaks in Service. A participant who is deemed to have
         received a distribution of the entire Vested Account Balance is deemed
         to have repaid that amount on the first day on which the Employee again
         completes an Hour of Service for the performance of duties.

The participant must be reinstated in all optional forms of benefits and
subsidies relating to the benefits applicable to the restored amount prior to
the distribution.

         6.7 INVESTMENT OF EMPLOYER AND PARTICIPANT CONTRIBUTIONS. Except as
otherwise provided, each

                                      -55-


<PAGE>
participant's Accounts shall be invested in accordance with the option provided
for, and properly elected by, participants from time to time.

         (a) OPTIONS. The options available are:

             (i)  INVESTMENT FUNDS. The Investment Funds available from time to
         time identified in an Appendix E to this Plan.

             (ii) STOCK. Stock of Kaydon Corporation.

         (b) PROCEDURE. A participant may designate the investment of the
participant's Accounts in the available options in increments of 1%, subject to
a minimum allocation to any option, prior to January 1, 1994, of 10%. A
participant may change the designated investment options as frequently as
allowed by the administrative processing abilities of the Contract Administrator
and the Trustee, but no less frequently than once within each three month
period. All investment directions must be communicated to the Contract
Administrator in writing on the Appropriate Form or in accordance with an
alternative administrative procedure approved in advance the by Committee and
the Contract Administrator. Any such alternative procedure which is not in
writing must provide the participant with an opportunity to obtain written
confirmation of the instructions.

         (c) EFFECTIVE DATE. Except as provided, the Contract Administrator or
Trustee must effect any appropriate direction within a reasonable period of time
and as soon as practicable after the direction is properly communicated (or, in
the case of a sale of Stock, after the end of the stated month), unless
circumstances beyond the control of the Contract Administrator or Trustee
preclude reasonable completion of the direction. Participant investment
directions to change the investment of all or a portion of an existing Account
from Stock to another investment are effective on the last day of the month in
which the investment direction was filed if the election was filed by the 20th
of that month or, in other cases, on the last day of the following month.

         (d) NO DIRECTION. Amounts which a participant may direct but which are
not effectively directed by the participant will be invested in accordance with
the default investment rules. Unless required, such amounts will not be invested
in Stock.

         (e) MULTIPLE. If a number of purchases or sales are to be made at any
one time, the net purchase or sales price of all shares of Stock purchased or
sold at that time will be averaged to determine the amount to be allocated to
each participant.

                                      -56-


<PAGE>
         6.8 ERISA SECTION 404(C). Except with respect to the portion of the
Plan required to be invested in Kaydon Stock, the Plan is intended to comply
with ERISA Section 404(c). The Committee or other party designated by Plan
policy, rule, or contract shall provide each participant eligible to direct
investments the information identified in Appendix F or provided under DOL Reg.
2550.404c-1 for that purpose.

         (a) CONFIDENTIALITY. Information relating to the purchase, holding and
sale of stock and to the exercise of voting, tender and similar rights with
respect to Stock shall be subject to procedures established to provide for and
safeguard the confidentiality of that information (except to the extent
necessary to comply with Federal laws or state laws not pre-empted by ERISA. The
Committee is responsible for ensuring that the procedures are sufficient to
safeguard the confidentiality of the information, the procedures are being
followed and that an independent fiduciary is appointed to carry out activities
relating to any situations which the Committee determines involve a potential
for undue employer influence on participants with regard to the direct or
indirect exercise of shareholder rights.

         (b) STOCK RIGHTS. With respect to Stock:

             (i)  INFORMATION. Information provided to shareholders of such
         securities shall be provided to participants or beneficiaries with
         Accounts holding Stock; and

             (ii) VOTING. Voting, tender and similar rights with respect to such
         securities shall be passed through to participants and beneficiaries
         with Accounts holding Stock.

         If a participant or beneficiary does not direct the Trustee to vote the
Stock in a particular manner, the Trustee may not vote the Stock.

         (c) EXPENSES. The Plan may charge participants' accounts for the
reasonable expenses of carrying out the participant's instructions pursuant to a
procedure established under the Plan to periodically inform participants of the
actual expenses incurred with respect to their respective individual Accounts.

                                      -57-


<PAGE>
         (d) SECTION 16B RULE. Any available participant election may, at the
participant's election, also be made pursuant to:

               (i) SIX MONTH ADVANCE. An irrevocable election made by the
         participant six months or more in advance of the effective date of the
         election; or

              (ii) QUARTERLY DATE. An election made by the participant on a
         Quarterly Date at least six months after the date of the previous
         intraplan transfer election relating to the Stock Fund. The Quarterly
         Date begins on the third business day following the release of Kaydon
         Corporation's quarterly financial data and ends on the twelfth business
         day following that date.

         (e) GENERAL. Participant instructions will not be implemented if the
instructions:

               (i) PLAN. Are not in accordance with the documents and
         instruments governing the Plan insofar as such documents and
         instruments are consistent with the provisions of Title I of ERISA;

              (ii) UNITED STATES. Would cause a fiduciary to maintain the
         indicia of ownership of any assets of the plan outside the jurisdiction
         of the district courts of the United States other than as permitted by
         section 404(b) of ERISA;

             (iii) QUALIFICATION. Would jeopardize the Plan's tax qualified
         status under the Internal Revenue Code;

              (iv) PROHIBITED TRANSACTION. Would result in a prohibited
         transaction described in ERISA section 406 or section 4975 of the
         Internal Revenue Code;

               (v) LOSS. Could result in a loss in excess of that participant's
         account balance; or

              (vi) INCOME. Would generate income that would be taxable to the
         Plan.

         (f) PAYSOP AND TRASOP LIMITATIONS. Notwithstanding the general rule of
this Section, a participant may not direct the investment of any portion of the
participant's Employer Prior Contributions Account, Participant Contributions
Account and Employer Contributions Account to the extent the portion of the
Account would not be distributable under the Code because the portion of the
Account remains subject to the limitation requiring that distributions not occur
prior to the end of the eighty-fourth (84th) month beginning with the month
following the allocation of Stock to the participant's Account. Those Accounts
shall remain invested in Stock until no longer subject to that limitation.

                                      -58-


<PAGE>
         6.9 SPECIAL INVESTMENT DIRECTION. Notwithstanding any other provision
of this Plan, within 90 days after the end of each Plan Year within the Election
Period, a participant who has completed at least 10 years of participation in
the Plan and has attained age 55 may direct the Contract Administrator and the
Trustee as to the diversification of the investment of 25% (50% with respect to
the Plan Year for which the participant may make the last such election) of the
total number of shares of Stock or other employer securities acquired by or
contributed to the portion of the Plan consisting of the participant's Employer
Contribution Account, Employer Prior Contributions Account and Participant
Contribution Account after December 31, 1986 and on or before the most recent
Plan Allocation Date (to the extent that number of shares exceeds the number of
shares to which a prior election under this Section applies).

         (a) ELECTION PERIOD. The Election Period is the period of five Plan
Years commencing with the Plan Year after the Plan Year in which the participant
has both attained age 55 and completed 10 years of participation in the Plan.

         (b) DIVERSIFICATION. A participant may elect to diversify investment of
the applicable amount from among the Investment Funds established under the
Plan. Any diversification election by a participant must be implemented no later
than ninety (90) days after the last day of the period during which the election
may be made.

         (c) DETERMINATION. The maximum percentage of a participant's Accounts
that is subject to diversification is applied to the value of the participant's
Accounts as of the last day of the preceding Plan Year.

         (d) LIMITATION. This special investment direction shall not apply,
however, to the extent the fair market value (determined at the Plan Allocation
Date immediately preceding the first day on which a qualified participant is
eligible to make a diversification election) of the employer securities acquired
by or contributed to the Plan after December 31, 1986 and allocated to the
Employer Contribution Account, Employer Prior Contributions Account or the
Participant Contribution Account in total is $500.00 or less.

                                      -59-


<PAGE>
                                   ARTICLE VII
                                  DISTRIBUTION

         7.1 DISTRIBUTIVE EVENT. A participant's Account is distributable upon
the occurrence of a Distributive Event. A Distributive Event is:

         (a) NORMAL RETIREMENT AGE. A participant's attainment of Normal
Retirement Age;

         (b) DEATH. A participant's Death;

         (c) DISABILITY. A participant's Total and Permanent Disability which is
any physical or mental condition that may reasonably be expected to be permanent
and which renders the participant incapable of continuing as an Employee.

         (d) EMPLOYMENT TERMINATION. A participant's Termination of Employment
with the Employer (and all Affiliated Employers);

         (e) PLAN TERMINATION. For other than a Qualifying Account or a Salary
Deferred Contributions Account, the termination of the Plan;

         (f) SALARY DEFERRED AND QUALIFYING. From a Salary Deferred
Contributions Account or a Qualifying Account:

              (i) PLAN TERMINATION. The termination of the Plan without
         establishment or maintenance of another defined contribution plan
         (other than a plan defined in Code Sections 4975(e)(7) or 409, a
         simplified employee pension as defined in Code Section 408(k), or a
         SIMPLE IRA plan as defined in Code Section 408(p)) to the extent the
         participant receives a lump sum distribution within Code Section
         401(k)(10) by reason of the termination; or

             (ii) DISPOSITION. To the extent the participant receives a lump sum
         distribution within Code Section 401(k)(10) by reason of the
         disposition, and if the Employer continues to maintain this Plan after
         the disposition, the disposition by the Employer to an unrelated
         employer of:

                  (A) ASSETS. Substantially all of the assets used by the
             Employer in a trade or business with respect to an employee who
             continues employment with the acquiring corporation; and

                  (B) STOCK. The Employer's interest in a subsidiary with
             respect to an employee who continues employment with the
             subsidiary.

                                      -60-


<PAGE>
         (g) HARDSHIP. For Salary Deferred Contributions and earnings of the
Salary Deferred Contributions Account through December 31, 1988 only, Hardship
as provided in this Article.

         (h) AGE 59 1/2. From a Salary Deferred Contributions Account once each
Plan Year, a participant's attainment of 59 1/2.

         (i) MINIMUM REQUIRED. A participant's attainment of the participant's
Required Beginning Date.

         (j) ALTERNATE PAYEE. For an Alternate Payee under a Qualified Domestic
Relations Order, the request of the Alternate Payee at the time set forth in or
allowed under the Order even if that time is prior to the date the participant
attains the earliest retirement age as defined in Section 414(p)(4) of the Code,
to the extent authorized under Section 414(p)(10) of the Code.

         Notwithstanding the prior provisions, in no event may any distribution
from an Employer Prior Contributions Account, a Participant Contributions
Account or an Employer Contributions Account be made prior to the end of the
eighty-fourth (84th) month beginning with the month following the allocation of
the Stock to the Account, unless the distribution is on account of the
Participant's retirement, death, disability, or other termination of employment,
termination of this Plan in its entirety, or the minimum distribution
requirements of Code Section 401(a)(9).

         7.2 HARDSHIP. Hardship requires an immediate and heavy financial need.
A Hardship distribution is limited to the amount necessary to satisfy the
financial need.

         (a) IMMEDIATE AND HEAVY FINANCIAL NEED. An immediate and heavy
financial need includes only:

             (i)  MEDICAL EXPENSES. Expenses for medical care described in Code
         Section 213(d) previously incurred by the participant, or the spouse or
         dependents of the participant, or necessary for those individuals to
         obtain such medical care;

             (ii) RESIDENCE. Costs directly related to the purchase of a
         principal residence for the participant (excluding mortgage payments);


                                      -61-


<PAGE>
             (iii) TUITION. Payment of tuition and related educational fees for
         the next twelve months of post-secondary education for the participant,
         or the spouse, children, or dependents of the participant;

             (iv)  EVICTION. Payments necessary to prevent the eviction of the
         participant from the participant's principal residence or foreclosure
         on the mortgage on that residence; and

             (v)   OTHER. Other similar matters approved by the Committee in a
         uniform and non-discriminatory manner and memorialized in rules and
         regulations of Plan administration in Appendix H to this Plan.

         (b) FINANCIAL NEED. An immediate and heavy financial need does not
exist to the extent the amount of the distribution exceeds the amount required
to relieve the financial need or to the extent the need may be satisfied from
other resources reasonably available to the participant.

             (i)   PARTICIPANT REPRESENTATION. In determining the availability
         of other resources, the Committee may reasonably rely on the
         representation of the participant that the need cannot be relieved:

                   (A) INSURANCE. Through reimbursement or compensation by
             insurance or otherwise;

                   (B) LIQUIDATION. By reasonable liquidation of the
             participant's assets, to the extent liquidation would not itself
             cause an immediate and heavy financial need;

                   (C) CONTRIBUTIONS. By cessation of Salary Deferred or
             Voluntary Contributions under the Plan; or

                   (D) LOANS. By other distributions or loans from plans, or by
             borrowing from commercial sources on reasonable commercial terms.

             (ii)  DEEMED FINANCIAL NEED. If the representation is not made or
         the Committee cannot reasonably rely upon it, a distribution is deemed
         necessary to satisfy an immediate and heavy financial need only if:

                                      -62-


<PAGE>
                  (A) AMOUNT. The distribution does not exceed the immediate and
             heavy financial need of the participant (including amounts
             necessary to pay any federal, state, or local income taxes or
             penalties reasonably expected to result from the distribution);

                  (B) DISTRIBUTION AND LOANS. The participant has obtained all
             distributions (other than for hardship) and all nontaxable loans
             currently available under all plans maintained by the Employer (or
             Affiliated Employer);

                  (C) SUSPENSION. The participant's Participant Contributions to
             this Plan and all other qualified and nonqualified plans of
             deferred compensation (other than health or welfare benefit plans)
             maintained by the Employer (or Affiliated Employer) are required to
             be suspended for twelve (12) months (six (6) months, effective
             January 1, 2002) after receipt of the Hardship distribution; and

                  (D) REDUCED ELECTIVE. Under all plans maintained by the
             Employer (or Affiliated Employer), the participant may not make
             Salary Deferred Contributions for the taxable year immediately
             following the taxable year of the hardship distribution in excess
             of the applicable limit under Code Section 402(g) for that next
             taxable year less the amount of the participant's Salary Deferred
             Contributions for the taxable year of the hardship distribution.

         7.3 METHOD OF PAYMENT. Effective on the first day of the 1987 Plan
Year, January 1, 1987, except as provided, payments from a participant's
Accounts at or after a Distributive Event shall be made by a single payment
within one (1) taxable year of the recipient.

         (a) CASH-OUT. The Participant's consent is not required with respect to
the following distributions.

             (i)  ON OR AFTER AUGUST 6, 1997. For Plan Years beginning on or
         after August 6, 1997:

                  (A) ON OR AFTER OCTOBER 17, 2000. A distribution made on or
             after October 17, 2000, when the participant's Vested Account
             Balance is $5,000 (or such larger amount as may be specified in
             Code Section 411(a)(11)(A)) or less. Effective January 1, 2002, the
             value of a participant's Vested Account Balance shall be determined
             without regard to that portion of the Account Balance that is
             attributable to rollover contributions (and allocable earnings)
             within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8),
             408(d)(3)(A)(ii) and 457(e)(16).

                                      -63-


<PAGE>
                   (B) MARCH 22, 1999, THROUGH OCTOBER 17, 2000. A distribution
             made on or after March 22, 1999, and before October 17, 2000, when
             the participant's Vested Account Balance is $5,000 or less unless
             the distribution is one of a series of scheduled periodic payments
             and the participant's consent was required at the time the initial
             payment was made.

                   (C) BEFORE MARCH 22, 1999. A distribution made before March
             22, 1999, when the participant's Vested Account Balance, including
             any earlier distribution, is $5,000 or less.

             (ii)  BEFORE AUGUST 6, 1997. For Plan Years beginning before August
         6, 1997, a distribution when the participant's Vested Account Balance,
         including any earlier distribution, is $3,500 or less.

         (b) TERMINATION. On recognition by the Employer of termination of the
Plan, Salary Deferred Contributions and Qualifying Accounts must be transferred
to any other defined contribution plan maintained by the Employer or a member of
a controlled group including the Employer (other than a Code Section 4975(e)(7)
employee stock ownership plan).

         (c) STOCK. Except as otherwise provided, all distributions shall be in
whole shares of Stock if and to the extent the distribution is from an Account
invested in whole or in part in Stock. All other distributions shall be in cash.
Any fractional share of Stock otherwise distributable shall also be distributed
in cash.

               (i) ELECTION AGAINST STOCK. Any participant or other payee may
         elect on the appropriate form to receive in cash all or part of the
         portion of a distribution which would otherwise be made in Stock.

              (ii) ELECTION OF STOCK. In addition, any participant or other
         payee may elect on the appropriate form to receive in Stock all or any
         portion of a distribution which would otherwise be made in cash or
         assets other than Stock to the extent that the distribution includes
         cash or assets which were previously invested in Stock as part of the
         participant's Employer Contributions Account, Employer Prior
         Contributions Account and Participant Contributions Account, other than
         amounts diversified under Section 6.9. The participant or other payee
         shall be advised in writing of the right to demand Stock prior to any
         distribution in cash or other assets.

             (iii) PROCEDURE. The Trustee shall, to the extent necessary,
         purchase or sell the number of shares of Stock to be distributed, and
         the participant or other payee shall receive in cash or Stock, as the
         case may be,

                                      -64-


<PAGE>
         the net amount (after adjustments for any expenses directly related to
         the purchase, such as brokerage fees or commissions) of that purchase
         or sale.

                  (A) MULTIPLE. If a number of purchases or sales are to be made
             by the Trustee at any one time, the net purchase or sales price of
             all shares of Stock purchased or sold at that time shall be
             averaged to determine the amount to be distributed to each
             participant or other payee.

                  (B) VALUATION. Fractional shares of Stock shall be valued on
             the basis of the closing price of the Stock as reported on any
             national securities exchange or as quoted on any system sponsored
             by a national securities association on the trading day on which
             the Stock is sold.

         7.4 INFORMATION PROVIDED. The Committee must provide to each
participant, with the Application for Distribution:

         (a) WITHHOLDING. Where applicable, a form permitting rejection of
federal income tax withholding from the distribution; and

         (b) FAVORABLE TAX TREATMENT. A form providing notification of the
requirements for and the effects of lump sum five (5) and ten (10) year
averaging, a Direct Rollover and a qualifying rollover under the Code.

         7.5 APPLICATION FOR DISTRIBUTION. To begin distribution after a
Distributive Event, the participant or other payee must file a written, valid
Application for Distribution after receiving the information described in this
Article executed within 90 days before the first day of the first period for
which benefits are paid.

         (a) NO APPLICATION. An Application is not required if the distribution:
is a Cash Out; is required to satisfy Code Sections 401(a)(9), 411(b), or 415;
or is made after the date the participant has (or would have, if not dead)
attained the later of Normal Retirement Age or age 62.

         (b) GENERAL REQUIREMENTS. To be a valid Application, the participant or
other payee must consent to or request the distribution and designate the
desired type of benefit, the form of payment, the beginning date for payment,
whether federal income tax will be withheld (where not mandatory), and whether
the participant is married.

         (c) LATER ACCRUAL. The provisions of this Section apply separately to
additional accruals after a benefit start date that occurs before the
participant attains Normal Retirement Age.

                                      -65-


<PAGE>
         (d) ELECTIONS. Any election otherwise permitted by this Article may, at
the participant's election, also be made pursuant to an irrevocable election
made by the participant six months or more in advance of the effective date of
the election.

         7.6 TIMING OF PAYMENT. Except for Age 59 1/2 or Hardship Distributions,
payments from a participant's Accounts may begin on the first day of a month
following a Distributive Event and, except where unnecessary, filing of an
appropriate Application.

         (a) REQUIRED BEGINNING DATE - PARTICIPANT. Payments to a participant of
the appropriate Minimum Amount must begin not later than April 1 following the
calendar year in which the participant attains age 70 1/2 unless the
participant:

              (i) ELECTION. Made an election under Section 242(b) of the Tax
         Equity and Fiscal Responsibility Act of 1982 (TEFRA Election); or

             (ii) NON-FIVE PERCENT OWNER. Is not a Five Percent Owner. In that
         case, payments of the appropriate Minimum Amount must begin not later
         than the April 1 following the calendar year in which the participant
         attains age 70 1/2, or, if later, following the calendar year in which
         the participant's employment terminates.

Five Percent for purposes of this definition, a participant is treated as a Five
Percent Owner if the participant is a Five Percent Owner during the Plan Year in
which the participant attains age 66 1/2 or any later Plan Year. Once
distribution begins to a Five Percent Owner, it must not continue even if the
participant ceases to be a Five Percent Owner.

         (b) REQUIRED BEGINNING DATE - BENEFICIARY. Payments to a beneficiary or
other recipient must begin by the earliest applicable date in this subsection.


                                      -66-


<PAGE>
             (i)  NO PAYMENTS. If a participant dies before the participant's
         Required Beginning Date (and if irrevocable annuity distributions have
         not begun with respect to Restricted Transfer amounts):

                  (A) LUMP SUM. Payment must be made by December 31 of the fifth
             calendar year after the calendar year of the death of the
             participant (or the participant's spouse, if the spouse was the
             Designated Beneficiary at the participant's death and dies before
             the spouse's required beginning date); or

                  (B) LIFE OR LIFE EXPECTANCY. If elected by a Designated
             Beneficiary (determined as of the date of death), payments must
             begin by December 31 of the year after the year of the
             participant's (or spouse's) death in a method which will result in
             the Account Balance being payable during the Beneficiary's life or
             life expectancy or, if elected by the participant's spouse,
             payments must begin in the same manner by the December 31 after the
             later of the end of the calendar year in which the participant died
             and the date on which the participant would have attained age 70
             1/2.

             (ii) PAYMENTS. If the participant dies on or after the
         participant's Required Beginning Date (or irrevocable annuity
         distributions have begun with respect to Restricted Transfer Amounts),
         the Account Balance must be payable at least as rapidly as under the
         method of payment elected by the participant. Any Designated
         Beneficiary whose life or life expectancy was used to determine the
         period for that method of payment must be the beneficiary of the
         remaining portion.

         (c) CONTINUING PAYMENT DATES. The Minimum Distribution for all
distribution calendar years other than the distribution due by the Required
Beginning Date, including the Minimum Distribution for the distribution calendar
year in which the Required Beginning Date occurs, must be made on or before
December 31 of that distribution calendar year. Notwithstanding that general
rule:

             (i)  DEFERRAL. An Employee (other than a Five Percent Owner) who
         attained age 70 1/2 after December 31, 1997, may elect by April 1
         following the calendar year in which the Employee attained age 70 1/2
         to defer distributions required under the terms of this plan in effect
         prior to the Effective date until the participant's Required Beginning
         date specified above. If no election is made, payment shall be made by
         April 1 following the calendar year in which the Employee attained age
         70 1/2 (or by December 31, 1997, in the case of an Employee who
         attained age 70 1/2 during 1996) in accordance with the terms of this
         plan in effect prior to the Effective Date.

                                      -67-


<PAGE>
             (ii) SUSPENSION. An Employee (other than a Five Percent Owner) who
         attained age 70 1/2 before January 1, 1997, may elect in writing to
         stop receiving payments required under the terms of this plan in effect
         prior to the Effective date. If payments are suspended, payments shall
         recommence by the participant's Required Beginning Date. The date
         payment is made after termination of employment will be a new Annuity
         Starting Date for the participant.

         (d) GENERAL LIMITATION. Payments to all participants must begin, unless
postponed, not later than sixty (60) days after the end of the latest Plan Year
in which the participant: attains the earlier of age 65 or Normal Retirement
Age; reaches the tenth anniversary of participation; or terminates employment.
Payments to the surviving spouse of a deceased participant must be available
within a reasonable time after the participant's death. Unless special
circumstances require an extension of time, the reasonable time may not exceed
90 days after the participant's death.

         (e) OVERRIDE. Payments for each distribution calendar year must be made
in accordance with the regulations under Code Section 401(a)(9), which override
any distribution options in the Plan or elections inconsistent with Code Section
401(a)(9). Notwithstanding any other provision of the Plan, the Plan must begin
distribution in a manner that satisfies: Code Section 401(a)(9) even though the
participant (or spouse, where applicable) fails to consent to the distribution
if the plan has made reasonable efforts to obtain consent and if the
distribution otherwise meets the applicable requirements of Code Section 417;
Code Section 411(b) and Code Section 415.

         (f) EXCISE TAX. Payments before a participant attains age 59 1/2 are
subject to an excise tax under the Code unless the payments are made:

              (i) DEATH OR DISABILITY. On account of death or disability within
         the meaning of Code Section 72(m)(7);

             (ii) ANNUITY. As part of a series of substantially equal periodic
         payments, not less frequently than annually, made for the life or
         life expectancy of the participant or the joint lives or joint life
         expectancies of the participant and the Designated Beneficiary; or

                                      -68-

<PAGE>
             (iii) SEPARATION. To a participant after separation from service
         after attainment of age 55.

         (g) AGE 59 1/2 OR HARDSHIP. Age 59 1/2 or Hardship distributions shall
be made not later than thirty (30) days following the valuation of the
Participant's Account as of the end of the calendar quarter with respect to
which the withdrawal is to be made.

         7.7 AMOUNT OF PAYMENT. The amount each payment must satisfy these
Minimum Distribution requirements. The time and method of payment of benefits
selected by a participant must be adjusted as necessary to comply with Section
401(a)(9) and the Minimum Distribution rules.

The Minimum Distribution that must be distributed for each calendar year
beginning with the calendar year immediately

                                      -69-


<PAGE>
preceding the calendar year that contains the Participant's Required Beginning
Date must be at least equal to the quotient obtained by dividing the
Participant's Vested Account Balance by the applicable divisor.

         (a) VESTED ACCOUNT BALANCE. The value of the Vested Account Balance
shall be determined as of the last Valuation Date within the calendar year
preceding the calendar year for which the distribution is made and shall be
increased by any amounts allocated to the Participant's accounts as of any later
date during such preceding calendar year and reduced by any amounts charged
against such accounts as of any later date during such preceding calendar year.

         (b) APPLICABLE DIVISOR.

             (i)  SPOUSE BENEFICIARY. If the Participant's Spouse is the
         designated Beneficiary, the applicable divisor shall be the life
         expectancy determined under (c) below.

             (ii) OTHER BENEFICIARY. If the designated Beneficiary is a Person
         other than the Participant's Spouse, the applicable divisor shall be
         the lesser of:

                  (A) LIFE EXPECTANCY. The life expectancy determined under (c)
             below; or

                  (B) INCIDENTAL BENEFIT FACTOR. The applicable divisor, under
             Regulations Section 1.401(a)(9)-2,A-4(a)(2), based on the
             Participant's age at the birthday during the calendar year for
             which the distribution is made.

                                      -70-


<PAGE>
         (c) LIFE EXPECTANCY.

             (i)  DETERMINATION. Life expectancy shall be based on the
         Participant's (and/or designated Beneficiary's) age at the birthday in
         the calendar year immediately preceding the calendar year that contains
         the Participant's Required Beginning Date. Life expectancy shall be
         determined from life expectancy Tables V and VI in Regulations 1.72-9.
         Election of the applicable life expectancy shall be irrevocable when
         distribution begins. If a life expectancy or shorter installment period
         is not elected, the Participant's life expectancy shall apply.

             (ii) REDETERMINATION. If a Participant (or Spouse, if the
         Participant is deceased, but not any other Beneficiary) so elects, life
         expectancy of the Participant or Spouse or the joint life expectancy of
         the Participant and Spouse may be redetermined annually under Code
         Section 401(a)(9) and Regulations. The election must be irrevocable
         when made and must be made not later than the Required Beginning Date.
         If no election is made, the applicable life expectancy for each
         calendar year after the calendar year for which installments begin
         shall be the life expectancy or joint life expectancy for the first
         calendar year reduced by one year for each subsequent calendar year.

         7.8 SPECIAL PARTICIPANT ACCOUNT DISTRIBUTION RULES. A participant's
Participant Accounts are also subject to the following special rules:

         (a) ROLLOVER. A participant's Rollover Account established by a
rollover qualified under Code Sections 402(a) or 408(d) is distributable upon
notice from the participant of a desire to begin distribution of all or part of
the Rollover Account balance. Payments must be made over a period not exceeding
the applicable life expectancies used by the distributing plan to determine the
minimum distribution with respect to the amount rolled over.

         (b) TRANSFER. A participant's Rollover Account established by a
transfer directly from the trustee, custodian or insurer of a plan or related
trust qualified under Code Section 401(a) (Transferor Plan):

             (i)  RESTRICTED - SURVIVING SPOUSE REQUIREMENTS. Is subject to the
         Additional Distribution Provisions of this Article if the Transferor
         Plan was subject to the surviving spouse annuity requirements of Code
         Sections 401(a)(11) and 417 at the time of the transfer (Restricted
         Account);

                                      -71-


<PAGE>
             (ii)  RESTRICTED - CODE SECTION 401(K). Is subject to the
         distribution restrictions of Code Sections 401(k)(2) and (10) to the
         extent the amount transferred consists of elective contributions (or
         amounts treated as elective contributions) under a plan with a Code
         Section 401(k) arrangement; and

             (iii) DISTRIBUTION TIMING. Which is transferred after the Required
         Beginning Date under Both the Transferor Plan and this Plan must begin
         to be distributed in the calendar year following the calendar year in
         which the amount was transferred if the Designated Beneficiary under
         this Plan has a life expectancy that is longer than the life expectancy
         of the designated beneficiary under the Transferor Plan. This
         distribution must be made over a period not exceeding the applicable
         life expectancies used by the Transferor Plan to determine the
         participant's minimum distribution with respect to the amount
         transferred.

         7.9 ADDITIONAL DISTRIBUTION PROVISIONS. These additional distribution
provisions apply to a Restricted Transfer Account.

         (a) METHOD OF PAYMENT. Payment from a participant's Restricted Account
may also be made by:

             (i)   JOINT AND SPOUSAL SURVIVOR. The purchase of an immediate,
         nontransferable annuity from an insurance company, with an amount
         payable for the participant's life and, if the participant is survived
         by a Qualifying Spouse to whom the participant is married at the date
         of death or who is treated as a Qualifying Spouse under a Qualified
         Order, at least fifty percent (50%) of the amount continued for that
         spouse's life;

             (ii)  SPOUSAL SURVIVOR. In the case of the death of the
         participant, the purchase for the Qualifying Spouse of a fully
         subsidized nontransferable annuity from an insurance company with a
         benefit having a value which is actuarially equivalent to fifty percent
         (50%) of the participant's Vested Restricted Transfer Account Balance
         as of the date of the participant's death; and

             (iii) ANNUITY. The purchase of a nontransferable annuity from an
         insurance company for the life of the participant.

                                      -72-


<PAGE>
         The normal form of payment to a married participant with a Qualifying
Spouse is the Joint and Spousal Survivor form and to other participants is the
Annuity form. The normal form of payment after the death of a participant with a
Qualifying Spouse is the Spousal Survivor Annuity.

         (b) INFORMATION PROVIDED. The Committee must also provide to each
participant who has a Restricted Account:

             (i)  JOINT AND SPOUSAL SURVIVOR NOTICE. With respect to the Joint
         and Spousal Survivor form, no less than 30 days and no more than 90
         days before the first day of the first period for which benefits are
         paid, a written explanation of: the Joint and Spousal Survivor Annuity;
         the participant's right to make, and the effect of, an election not to
         receive payments in that form; the requirement that the Qualifying
         Spouse consent; the participant's right to revoke an election and the
         effect of revocation; the material features and the relative values of
         the optional forms of benefit available under the Plan; and the right
         to defer receipt of the distribution; and

             (ii) SPOUSAL SURVIVOR ANNUITY NOTICE. With respect to the Spousal
         Survivor Annuity, a written explanation of: the Spousal Survivor
         Annuity; the participant's right to make, and effect of, an election to
         waive the benefit; the requirement that the Qualifying Spouse consent;
         and the participant's right to revoke an election and the effect of
         revocation. The explanation shall provide within the last to end of:

                  (A) THREE YEAR PERIOD. The three (3) year period beginning
             with the first day of the Plan Year in which the participant
             attains age 32; or

                  (B) TWO YEAR PERIOD. The two year period beginning one year
             before: the individual becomes an Active Participant, a benefit
             subsidy (as defined in Section 417 of the Code) ceases, the
             survivor benefit requirements first apply to the participant, or
             the separation from service of a participant who has not attained
             age 35.

         The explanation must be provided to a participant who separates from
service before age 32 within one year after termination of employment; and

         (c) APPLICATION FOR DISTRIBUTION. In addition to the other applicable
requirements for a valid Application, to be a valid Application with respect to
a Restricted Account:

             (i)  ELECTION AGAINST JOINT AND SPOUSAL SURVIVOR. If the
         participant elects during the applicable period or receives after the
         date the participant has attained the later of Normal Retirement Age or
         age 62, with

                                      -73-


<PAGE>
         respect to the Restricted Account, a form of payment other than the
         Joint and Spousal Survivor (or the Annuity form if the participant is
         not married to a Qualifying Spouse), the participant must specify the
         particular optional form of benefit and, if applicable, the Application
         must be executed by the participant's Qualifying Spouse and witnessed
         by a Plan representative or a notary public.

                  (A) SPOUSAL CONSENT. Spousal Consent must specify the
             particular optional form of benefit; except as provided in a
             Qualified Order, is necessary within ninety (90) days before the
             first day of the first period for which benefits are paid; and is
             irrevocable.

                  (B) NO SPOUSE. Spousal consent is not required if it is
             established to the satisfaction of a Plan Representative that there
             is no Qualifying Spouse or that the Qualifying Spouse cannot be
             located; if the spouse is legally incompetent and the spouse's
             legal guardian gives consent; or if the participant is legally
             separated or has been abandoned as determined by court order
             (unless a Qualified Order provides otherwise).

             (ii) MODIFICATION. A participant's election may be modified or
         revoked after the spouse's death or divorce, except as provided in a
         Qualified Order, and at any time during the ninety (90) days
         immediately before the first day of the first period for which benefits
         are paid to return to the Joint and Spousal Survivor form or, with
         appropriate Spousal consent, to another optional form of benefit.

         (d) SPECIAL SPOUSAL SURVIVOR ANNUITY RULES. A participant, with the
consent of any Qualifying Spouse, may elect to waive the Spousal Survivor
Annuity with respect to the Restricted Account during the period beginning on
the expiration of the time for provision of the Spousal Survivor Annuity Notice
and ending at the participant's death. A Qualifying Spouse may elect to waive
the Spousal Survivor Annuity with respect to the Restricted Account after the
death of the participant.

             (i)  NO SPOUSE. Spousal consent is not required if it is
         established to the satisfaction of a Plan Representative that there is
         no Qualifying Spouse or that the Qualifying Spouse cannot be located;
         if the spouse is legally incompetent and the spouse's legal guardian
         gives consent; or if the participant is legally separated or been
         abandoned as determined by court order (unless a Qualified Order
         provides otherwise).

             (ii) NOT NECESSARY. Spousal consent is not necessary for a
         distribution of the Spousal Survivor Annuity after the date the
         participant attains (or would have attained if not dead) the later of
         Normal Retirement Age or age 62.

                                      -74-


<PAGE>
             (iii) IRREVOCABLE. Spousal consent is irrevocable.

         (e) WAIVER OF NOTICE PERIOD. A distribution may commence less than 30
days after the notice required under (b) above is given, provided:

             (i)   RIGHT TO 30-DAY PERIOD. The Administrator clearly informs the
         Participant that the Participant has a right to a period of at least 30
         days after receiving the notice to consider the decision of whether or
         not to elect a distribution (and, if applicable, a particular
         distribution option); and

             (ii)  ELECTION. The Participant, after receiving the notice,
         affirmatively elects a distribution.

         7.10 DESIGNATION OF BENEFICIARY. A participant or a Designated
Beneficiary may designate the beneficiary or contingent beneficiary to receive
amounts payable under the Plan (other than the Spousal Survivor Annuity) in the
event of the participant's or Designated Beneficiary's death. The Designated
Beneficiary may not change a designation by the participant.

         (a) MARRIED ACTIVE PARTICIPANT. Except as provided in a Qualified
Order, a married participant's beneficiary is the participant's legal spouse
unless the spouse consents otherwise.

             (i)   SPOUSAL CONSENT REQUIRED. Except as provided in a Qualified
         Order, spousal consent is necessary for a beneficiary designation of
         another and a change of beneficiary designation.

             (ii)  SPOUSAL CONSENT NOT REQUIRED. Spousal Consent is not required
         to the extent a prior Qualified Order provides for payment of any
         portion of a Participant's Account Balance to an alternate payee under
         the Qualified Order or if it is established to the satisfaction of a
         Plan Representative that there is no spouse or that the spouse cannot
         be located; if the spouse is legally incompetent and the spouse's legal
         guardian gives consent; or if the participant is legally separated or
         has been abandoned as determined by court order (unless a Qualified
         Order provides otherwise).

             (iii) IRREVOCABLE. Spousal consent is irrevocable.

         (b) METHOD. The designation, revocation, or alteration must be made in
writing on forms provided by the Committee. Any designation by a participant and
any spousal consent must state the specific nonspouse beneficiary (including any
class of beneficiaries or any contingent beneficiaries) who will receive the
benefit. If the Designated Beneficiary is a trust, the spouse need only consent
to the designation of the trust and need not consent to the designation

                                      -75-


<PAGE>
of trust beneficiaries or any changes of trust beneficiaries. A designation may
be altered or revoked at any time before the participant's entire Account
Balance has been distributed, with appropriate spousal consent if another
beneficiary is designated.

         (c) DESIGNATED BENEFICIARY. A beneficiary other than an individual or
eligible trust will be recognized as a beneficiary but may not be a Designated
Beneficiary for purposes of this Article and Code Section 401(a)(9). All
identifiable beneficiaries of an eligible trust are treated as Designated
Beneficiaries for those purposes with respect to the trust's interest in the
Plan. An eligible trust is a trust which, as of the later of the date on which
the trust in named as beneficiary or the participant's Required Beginning Date
(and for all subsequent periods during which the trust is a beneficiary) is
valid and irrevocable and which is provided to the Plan.

         (d) FAILURE TO DESIGNATE. In the absence of an effective designation,
any benefit payable upon death is paid in the following priority order: (1) the
participant's surviving spouse, (2) the participant's surviving issue, per
stirpes, or (3) to those who would receive the personal property of the
participant under Michigan law of intestate succession.

         7.11 CLAIMS PROCEDURE. A participant or beneficiary and the Committee
must observe the following procedures for claims to benefits:

         (a) INITIAL CLAIM. A participant, beneficiary or legal representative
must file an Application for Distribution with the Committee. The Committee must
grant or deny the request within ninety (90) days after receipt unless special
circumstances require an extension of time. The extension must not exceed an
additional ninety (90) days. The Committee must notify the applicant in writing
of the extension and the reasons for the extension.

         (b) DENIAL OF CLAIM. If a claim is denied, the Committee must provide
to the applicant a written notice containing the reason for the denial,
reference to Plan provisions upon which the denial is based, a description of
additional information necessary to permit granting the claim and an explanation
of the Plan's claim review procedure. If notice of a denial of claim or an
extension of time has not been received by the applicant within ninety (90)
days, the claim is deemed denied.

         (c) EMPLOYER REVIEW. Within sixty (60) days after a denial is received,
the applicant may request a full and fair review upon written application to the
Committee. The applicant may review pertinent documents and submit issues and
comments in writing to the Committee. The Committee must make a decision on
review and notify the applicant of the decision within sixty (60) days of
receipt of the application unless special circumstances require an

                                      -76-


<PAGE>
extension of time. The extension may not exceed an additional sixty (60) days.
The Committee must notify the applicant in writing of the extension and the
reasons for the extension. The decision upon review must meet the requirements
for denial of a claim.

         7.12 FACILITY OF PAYMENT. A payment made under this section fully
discharges the Employer, the Committee and the Trustee from all future liability
with respect to the payment.

         (a) INCAPACITY. If a person entitled to payment is legally, physically
or mentally incapable of receiving or acknowledging payment, the Committee may
direct payment: directly to the person; to the person's legal representative; to
the spouse, child or relative by blood or marriage of the person; to the person
with whom the person resides; or by expending the payment directly for the
benefit of the person. A payment made other than to the person is intended to be
used for the person's exclusive benefit.

         (b) LEGAL REPRESENTATIVE. The Committee shall not be required to
commence probate proceedings or to secure the appointment of a legal
representative.

         (c) DETERMINATIONS. The Committee may act upon affidavits in making any
determination. The Committee, in relying upon affidavits or having made a
reasonable effort to locate any person entitled to payment, is authorized to
direct payment to a successor beneficiary or another person. A person omitted
from payment has no rights on account of payments so made.

                                      -77-


<PAGE>
         (d) ANTI-ESCHEAT. If the Committee cannot locate a person entitled to
payment, the amount is a forfeiture. The forfeiture is reinstated if a claim is
made within the applicable limitations period by a person entitled to payment.

         7.13 QUALIFIED ORDER. Distribution to the recipient under a Qualified
Order must be made in accordance with Code Section 401(a)(9) and this Article
applied by substituting the recipient for the participant, except that the
distribution to the recipient need not satisfy the minimum distribution
incidental benefit rule.

         (a) DESIGNATION OF BENEFICIARY. A recipient may designate a beneficiary
under the Plan but may not elect any form of payment which requires distribution
over the joint lives or life expectancy of the recipient and the designated
beneficiary.

         (b) LIMITATION. Where, because of a Qualified Order, more than one
individual is treated as a Qualifying Spouse or Designated Beneficiary with
respect to a participant, the total amount payable as a Spousal Survivor
Annuity, as the survivor portion of the Joint and Spousal Survivor benefit or
otherwise may not exceed the amount payable if there were only one Qualifying
Spouse or Designated Beneficiary. Where a Qualified Order allocates a portion of
the participant's accrued benefit to or with respect to a former spouse or
alternate payee, the Joint and Spousal Survivor benefit, the Spousal Survivor
Annuity and any other amounts payable to a Qualifying Spouse or Designated
Beneficiary are based on the vested accrued benefit less the amount payable to
or with respect to the former spouse or alternate payee.

         7.14 DIRECT ROLLOVER RULES. 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 Article,
a Distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover.

         (a) ELIGIBLE ROLLOVER DISTRIBUTION. An Eligible Rollover Distribution
is an 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 ten years or more; any distribution to the extent such

                                      -78-


<PAGE>
distribution is required under section 401(a)(9) of the Code; is required under
section 401(a)(9) of the Code; any hardship distribution described in Code
Section 401(k)(B)(i)(iv) received on or after May 1, 1999; the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities); and any other distribution that is reasonably expected to total
less than $200 during a year.

         (b) ELIGIBLE RETIREMENT PLAN. An Eligible Retirement Plan is 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, and, effective January 1, 2002, an
annuity contract described in section 403(b) of the Code and an eligible plan
under section 457(b) of the Code which is maintained by a state, political
subdivision of a state, or any agency or instrumentality of a state or political
subdivision of a state and which agrees to separately account for amounts
transferred into such plan from this plan, that accepts the Distributee's
eligible rollover distribution.

             (i)  LIMITATION. However, prior to January 1, 2002, 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.

             (ii) AFTER-TAX. Further, effective January 1, 2002, a portion of a
         distribution shall not fail to be an eligible rollover distribution
         merely because the portion consists of after-tax employee contributions
         which are not includible in gross income. However, such portion may be
         transferred only to an individual retirement account or annuity
         described in section 408(a) or (b) of the Code, or to a qualified
         defined contribution plan described in section 401(a) or 403(a) of the
         Code that agrees to separately account for amounts so transferred,
         including separately accounting for the portion of such distribution
         which is includible in gross income and the portion of such
         distribution which is not so includible.

         (c) DISTRIBUTEE. A Distributee includes an employee or former employee.
In addition, the employee's or former employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.

         (d) DIRECT ROLLOVER. A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.

                                      -79-


<PAGE>
                                  ARTICLE VIII
                             INSURANCE OR ANNUITIES

         8.1 TYPES OF POLICIES AND CONTRACTS. The Committee may direct the
purchase of an annuity contract or permanent or term life insurance policy
(Policy) which satisfies the requirements of this Article.

         (a) ADDITIONAL RIGHTS. A Policy must be convertible to cash or periodic
income. A Policy may provide for disability waiver of premium or for conversion
to a larger policy.

         (b) OWNERSHIP. A Policy must be owned by the Trustee.

         8.2 PREMIUMS - DIVIDENDS. Premiums on each Policy must be paid on the
premium due dates. Dividends may be applied to: reduce premiums; increase the
value of the Policy subject to the limits in this Article; or increase the
allocation to the participant's account.

         8.3 ACTIVE PARTICIPANT LIFE INSURANCE. An Active Participant may elect
to invest a portion of any account in a Policy covering the Participant.

         (a) INCIDENTAL PREMIUM LIMITATION. The aggregate premiums paid from a
participant's Employer Account(s) must not equal or exceed the greater of:

             (i)   PERMANENT LIFE. If for a permanent life Policy (with a level
         death benefit and premium), fifty percent (50%) of the contributions
         and forfeitures allocated to the Participant's Account(s);

             (ii)  TERM LIFE. If for other than a permanent life Policy (or a
         combination of permanent and other life policies), twenty-five percent
         (25%) of the contributions and forfeitures allocated to the
         Participant's Account(s);

             (iii) ONE HUNDRED TIMES. More than the amount necessary to provide
         a Policy with a face value of one hundred times (100x) the actuarially
         determined anticipated monthly benefit; or

             (iv)  TWO YEAR ACCUMULATION. If paid only from funds accumulated
         for at least two (2) years, more than the amount of the accumulation.

         (b) INABILITY TO PAY PREMIUM. If payment of a premium would exceed the
Incidental Premium Limitations, the premium may be:

             (i)   BORROW. Paid by borrowing against the cash value of the
         Policy. Borrowing against the

                                      -80-


<PAGE>
         account of more than one Participant must occur in the ratio that the
         cash value of the Policies in the account bears to the total cash
         values of Policies in all accounts;

              (ii) REDUCE. Reduced by partial conversion of the Policy to paid
         up insurance or by partial conversion to cash; or

             (iii) DIVIDENDS. Paid by using accumulated Policy dividends.

         (c) DISTRIBUTION. Upon beginning distribution, no further premiums may
be paid. The Policy must be: converted into cash; converted to a nontransferable
paid up annuity allowing distribution only under methods permitted under Section
7.3; sold to the participant; or distributed as a part of the Vested Account.

         (d) VESTING. The value of each Policy or annuity contract is vested
under the vesting provisions applicable to the account in which it is held.

         (e) NONDISCRIMINATION. All participants must be treated equally to the
extent possible in view of their desire for life insurance protection, their
insurability and the ratings and regulations of the insurance company.

         (f) ACCOUNTING. An accounting record of the premiums paid on, and the
cash value of, each Policy must be made on each Allocation Date. The cash value
of a Policy is not a part of the balance of any account for purposes of
allocating the earnings, losses and adjustments in value of the Trust.

                                      -81-


<PAGE>
                                   ARTICLE IX
                                 ADMINISTRATION

         9.1 FIDUCIARY RESPONSIBILITIES. The responsibilities of Kaydon
Corporation and the Committee are set forth in the Plan. The responsibilities of
the Trustee and Investment Manager are set forth in the Trust. This division of
responsibility is an allocation of fiduciary responsibility under Section
405(c)(1) of ERISA.

         9.2 KAYDON CORPORATION. Kaydon Corporation has sole responsibility for:

         (a) FIDUCIARY APPOINTMENT. Appointing and removing the Trustee, the
Investment Manager and the Committee; and

         (b) AMENDMENT, TERMINATION. Amending or terminating the Plan and the
Trust.

         9.3 EMPLOYER ACTION. Action by Kaydon Corporation must be taken by
resolution of its Board of Directors or by a written instrument executed by
three or more officers.

         9.4 INVESTMENT MANAGER APPOINTMENT. Any Investment Manager must be an
investment advisor registered under the Investment Advisors Act of 1940 or an
insurance company qualified to perform investment management services under the
laws of the State of Delaware. An Investment Manager must file its written
acceptance with Kaydon Corporation acknowledging status as a named fiduciary.
Upon acceptance, Kaydon Corporation must notify the Trustee of the appointment.

         9.5 COMMITTEE. The Committee has responsibility for general
administration of the Plan.

         (a) APPOINTMENT. The Committee may consist of one or more persons. In
the absence of a Committee, Kaydon Corporation has the responsibilities of the
Committee designated by the Plan. Any members of the Committee who are employees
must not receive compensation for their services to the Committee.

         (b) AUTHORITY. The Committee has the duty and power to:

             (i)  CONSTRUCTION. Exercise discretionary authority to construe and
         interpret the Plan and decide all questions of eligibility for
         participation and benefits;

             (ii) PROCEDURES. Prescribe procedures and forms for applications
         for benefits, benefit elections,



                                      -82-


<PAGE>
         loans, if provided, and designation of beneficiaries;

             (iii)  DISCLOSE. Disclose to participants, as required by law, a
         summary of the Plan, a summary of annual reports to the government,
         benefit accruals, entitlement to the benefits and notices of
         application for determination;

             (iv)   REPORTING. Make governmental reports required by law
         including annual and periodic reports to the United States Internal
         Revenue Service and the Department of Labor;

             (v)    INFORMATION. Receive from and transmit to the Employer, the
         Trustee, the Investment Manager and the participants such information
         as shall be necessary for the proper administration of the Plan;

             (vi)   FINANCIAL REPORTS. Receive and retain reports of the
         financial condition of the Trust Fund from the Trustee and the
         Investment Manager;

             (vii)  BENEFIT AUTHORIZATION. Effective on the first day of the
         1987 Plan Year, January 1, 1987, determine entitlement to, and the
         amount of, benefits and loans and authorize benefit payments and loans,
         if provided;

             (viii) AGENTS. Appoint or employ individuals to assist in the
         administration of the Plan and other agents it deems advisable,
         including legal counsel;

             (ix)   RULES. Promulgate rules and decisions to be uniformly and
         consistently applied under similar circumstances;

             (x)    BONDING. Assure that all fiduciaries are bonded as required
         by ERISA; and

             (xi)   RECOVER. Recover Plan benefits improperly paid, through
         offset and reduction of subsequent benefit payments or otherwise.

         (c) PROCEDURE. The Committee may elect one of its members as
chairperson and may designate a secretary. The Committee must keep a record of
all meetings and forward all necessary communications to the Trustee. Any
delegation of duties by the Committee must state the scope of the delegation
with reasonable specificity. The Committee acts by a majority of its members,
either by vote at a meeting or by signature to a writing. Action by the
Committee must be evidenced by a written and duly executed instrument.

         9.6 FIDUCIARY STANDARDS. Each fiduciary must act solely in the interest
of participants and beneficiaries:

         (a) PRUDENTLY. With the care, skill and diligence of a prudent person;


                                      -83-


<PAGE>
         (b) EXCLUSIVE PURPOSE. For the exclusive purpose of providing benefits
and paying expenses of administration; and

         (c) PROHIBITED TRANSACTION. To avoid engaging in a prohibited
transaction under the Code or ERISA unless an exemption is obtained.

         9.7 INTER-RELATIONSHIP OF FIDUCIARIES. Each fiduciary warrants that any
of its actions are in accordance with the Plan and Trust. Each fiduciary may
rely upon the action of another fiduciary and is not required to inquire into
the propriety of any action. Each fiduciary is responsible for the proper
exercise of its responsibilities.

         9.8 INDEMNIFICATION. Except to the extent required by ERISA, as
amended, no member of the Committee or any sub-committee shall be liable for any
act, omission, determination, construction or communication made by the member,
the Committee or any other member. Each Employer hereby agrees to indemnify and
save harmless each person now or hereafter acting as a member of the Committee
from all loss or damage that may or might result from acts as a member, except
to the extent that any liability is imposed as a result of the member's gross
negligence or willful misconduct. The Employers may purchase insurance to
indemnify a member for that liability.

         9.9 PAYMENT OF EXPENSES. Kaydon Corporation may elect to pay all or a
portion of the administrative expenses of the Plan. If Kaydon Corporation does
not elect to pay all of the administrative expenses of the Plan which may be
paid out of Plan assets, the Trustee shall pay those expenses (to the extent not
precluded by ERISA) or the remaining portion of those expenses and charge the
payment against the Plan assets. Notwithstanding that general rule, with respect
to the expenses relating to the portion of the Plan assets attributable to
amounts contributed pursuant to the PAYSOP or TRASOP provisions of the Code
under this or a predecessor plan, only the lesser of one-hundred thousand
dollars ($100,000.00) or ten percent (10%) of dividends not in excess of
one-hundred thousand dollars ($100,000.00) received on Stock during the Plan
Year plus five percent (5%) of dividends in excess of one-hundred thousand
dollars ($100,000.00) received during the Plan Year may be paid by the Trustee
out of Plan assets.

         9.10 LIMITATION OF LIABILITY AND LEGAL ACTION. Except as otherwise
provided in ERISA, as amended, as a condition of participation in the Plan, each
participant agrees that each Employer, the Committee, the Contract

                                      -84-


<PAGE>
Administrator and the Trustee shall not in any way be subject to suit,
litigation, or any legal liability in connection with the Plan and Trust or
their operation, except for its or their own negligence or willful misconduct.
Except as otherwise provided in ERISA, as amended, each participant hereby
releases each Employer, its officers and agents, the Committee, the Contract
Administrator and the Trustee from any and all such liability or obligation.

         (a) PARTIES. Except as otherwise provided in ERISA, as amended, in any
action or proceeding involving all or any portion of the Plan, the Trust, or its
administration, each Employer, the Committee and the Trustee shall be the only
necessary parties. No person in the employ of (or formerly employed by) an
Employer, or any beneficiary or other person having or claiming to have an
interest in the Trust Fund or under the Plan, shall be entitled to any notice of
process; nor shall such persons be entitled to participate in any such action or
proceedings.

         (b) BINDING RESULT. Any final judgment entered in any such action or
proceeding which is not appealed or appealable shall be binding and conclusive
on the parties and all persons having or claiming to have an interest in the
Trust Fund or under the Plan.

         9.11 ELECTRONIC ADMINISTRATION. Notwithstanding the requirement set
forth in this plan that certain transactions, notices, elections, consents and
disclosures be evidenced in the form of written documentation, documentation for
such transactions, notices, elections, consents or disclosures may be provided
or obtained through electronic media as prescribed in, and in accordance with
the timing requirements of, the Regulations and any other guidance issued by the
Secretary of Treasury pursuant to its duties under Section 1510 of the Taxpayer
Relief Act of 1997.

                                      -85-


<PAGE>
                                    ARTICLE X
                        AMENDMENT AND TERMINATION OF PLAN

         10.1 AMENDMENT. The Board of Directors of Kaydon Corporation or any
three officers of Kaydon Corporation may amend the Plan. An amendment must not:

         (a) DECREASE BENEFITS. Retroactively decrease a participant's account
balance or eliminate an optional form of distribution unless required or
permitted by law;

         (b) DIVERSION. Divert or use the Trust other than for the exclusive
benefit of participants and their beneficiaries; or

         (c) COMPANY INTEREST. Give an Employer any interest in the Trust until
all liabilities are satisfied.

         (d) PROTECTED BENEFITS. Reduce or eliminate Code Section 411(d)(6)
protected benefits, to the extent accrued, unless required or permitted by law.

         10.2 VESTING SCHEDULE AMENDMENT. A participant's current vested status
may not be decreased by amendment at any time. A participant with at least three
(3) years of service (five (5) years of service if the participant does not have
one or more Hours of Service in any Plan Year beginning after December 31, 1988)
whose vested interest would be decreased by an amendment may irrevocably elect
to remain under the former vesting rule.

         (a) ELECTION PERIOD. The period for election begins no later than the
date the amendment is adopted and ends sixty (60) days after the latest of the
date that: the amendment is adopted; the amendment is effective; or the
participant is notified of the amendment.

         (b) FAILURE. A participant who does not make an election is subject to
the amended vesting schedule for allocations made after the later of the date
the amendment is adopted or effective.

         10.3 TERMINATION. The Board of Directors of Kaydon Corporation or any
three officers of Kaydon Corporation may terminate the Plan. If a favorable
determination cannot be received from the Internal Revenue Service upon initial
qualification or an amendment to the Plan, Kaydon Corporation may terminate the
Plan as of the applicable effective date. The Plan automatically terminates
upon:

         (a) LIQUIDATION, BANKRUPTCY. The liquidation or discontinuance of the
business of all of the Employers; the adjudication of all of the Employers as a
bankrupt; or a general assignment by all of the Employers to or for the

                                      -86-


<PAGE>
benefit of their creditors.

         (b) MERGER, CONSOLIDATION. Unless continued, the merger or
consolidation of the Employers into another entity which is the survivor, the
consolidation or other reorganization of the Employers, or the sale of
substantially all of each of the Employers' assets.

         10.4 PARTIAL TERMINATION. If the Plan terminates with respect to less
than all participants the proportionate interest of the affected participants
shall be determined. The Committee must declare an interim Allocation Date on
the date of partial termination.

         10.5 FULL VESTING. The Account Balance of each affected Active
Participant becomes fully vested and nonforfeitable upon termination (or partial
termination) of the Plan or upon a complete discontinuance of contributions
within Code Section 411(d)(3). For this purpose, the Account Balance is the
Account Balance which is funded as of the date of termination (or partial
termination).

         10.6 MERGER OR CONSOLIDATION OF PLAN. A merger, consolidation, or
transfer of Plan assets or liabilities may occur if:

         (a) AUTHORIZATION. The other plan is qualified and authorizes the
merger, consolidation or transfer;

         (b) EQUAL BENEFIT. Each participant's benefit will be at least equal to
the participant's benefit if the Plan was terminated immediately before the
merger, consolidation or transfer; and

         (c) PROTECTED BENEFITS. Code Section 411(d)(6) protected benefits, to
the extent accrued, are not reduced or eliminated unless required or permitted
by law.

                                      -87-


<PAGE>
                                   ARTICLE XI
                                  MISCELLANEOUS

         11.1 NONASSIGNABILITY. Except for a Qualified Order, benefits are not
subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy (Assignment), before actual
receipt. Any Assignment which violates this section is void. The right to
receive a benefit is not an asset for insolvency or bankruptcy.

         11.2 EMPLOYMENT RIGHTS NOT ENLARGED. The Plan does not create any
employment rights or restrict the Employer's right to discharge an employee.

         11.3 PARTICIPANTS' RIGHTS LIMITED. The Plan does not give any
participant: any interest in the Employer's assets, business or affairs; the
right to question any Employer action or policy; or the right to examine
Employer books and records. The rights of all participants are limited to the
right to receive payment of benefits when due.

         11.4 INTERPRETATION AND CONSTRUCTION. The use of the singular includes
the plural where applicable, and vice versa. The headings in the Plan do not
limit or extend the provisions of the Plan. Capitalized terms, except where
capitalized solely for grammar, have the meanings as provided in the Plan.

         (a) QUALIFICATION. Provisions must be interpreted and construed to
maintain the qualification of the Plan.

         (b) SEVERABILITY. If a provision is unenforceable in a legal
proceeding, the provision is severed only for that proceeding.

         11.5 COUNTERPARTS. The Plan may be executed in any number of
counterparts, each of which is considered an original.

         11.6 GOVERNING LAW. The Plan is governed by the applicable laws of the
United States of America (including the Code, ERISA, securities law, labor law,
age discrimination law, and civil rights law) and, to the extent not preempted,
by the laws of Florida.

KAYDON CORPORATION                                       THE COOPER SPLIT ROLLER


                                      -88-
<PAGE>
                                                    BEARING CORP.


By _________________________                        By ________________________
Brian P. Campbell
     Its Chairman, CEO, President                      Its
     and CFO


                                                    And _______________________


                                                       Its

And_________________________
     John F. Brocci
     Its Vice President and Secretary

KAYDON RING & SEAL, INC.                            INDUSTRIAL TECTONICS INC


By __________________________                       By ________________________

     Its                                               Its


And _________________________                       And _______________________
     John F. Brocci
     Its Vice President and Secretary                  Its

                                      -89-


<PAGE>
                       APPENDIX OF PARTICIPATING EMPLOYERS

Kaydon Ring & Seal, Inc.

The Cooper Split Roller Bearing Corp.

Industrial Tectonics Inc

                                      -90-


<PAGE>
CANFIELD TECHNOLOGIES, INC.                      TRIDAN INTERNATIONAL, INC.



By ___________________________                   By ________________________

     Its ________________________                     Its _____________________



INDIANA PRECISION, INC.



By __________________________

     Its ________________________


                                      -91-


<PAGE>
                       APPENDIX OF PARTICIPATING EMPLOYERS

Kaydon Ring & Seal, Inc.
The Cooper Split Roller Bearing Corp.
Industrial Tectonics Inc
Canfield Technologies, Inc.
Tridan International, Inc.
Indiana Precision, Inc.


<PAGE>
                                   APPENDIX A

                    SECTION 1.1(A) - SPECIAL EFFECTIVE DATES

<TABLE>
<CAPTION>
Section                             Rule                                                         Effective Date
-------                             ----                                                         --------------
<S>                                 <C>                                                          <C>
2.17(c)                             Hours of Service credit for ITI employees.                   April 1, 1994
3.2(c)(iii)                         Participation by Cooper Bearing employees.                   July 1, 1992
3.2(c)(iv)                          Participant by ITI employees.                                April 1, 1994
4.1(b), 6.1(a)(i)                   Reference to Employer Regular Profit Sharing                 January 1, 1992
                                    Contributions/Account.
5.2(d), 7.5(d)                      Irrevocable six-month elections.                             September 1, 1992
6.1(a)(vi)                          Cooper Bearing Transfer Account.                             January 1, 1993
6.5(a), (b)                         Vesting Schedule for Employer Regular Profit                 January 1, 1992
                                    Sharing Contributions.
6.7                                 Identification of Investment Options.                        January 1, 1992, except as
                                                                                                 to prior Bairnco, PAYSOP
                                                                                                 and TRASOP funds held in
                                                                                                 the Employer Contributions
                                                                                                 Accounts, Employer Prior
                                                                                                 Contributions accounts and
                                                                                                 Participant Contributions
                                                                                                 Accounts.  Section 6.7 (a)(i)
                                                                                                 is effective with respect to
                                                                                                 that portion of those
                                                                                                 Accounts as soon as
                                                                                                 administratively practicable
                                                                                                 after approval by the
                                                                                                 Internal Revenue Service of
                                                                                                 the Fifth Amendment to the
                                                                                                 Plan.
6.7                          Investment direction authority by non-active                        January 1, 1994
                             Participants.
6.8, App. E and F            ERISA Section 404(c) rules.                                         January 1, 1994
6.9                          Investment diversification.                                         January 1, 1992
7.1(j)                       Early commencement of payment to Alternate                          January 1, 1994
                             Payees.
7.15                         Direct Rollovers.                                                   January 1, 1993
</TABLE>


                                   APPENDIX B

             SECTION 2.6 - EXPLANATION OF DEFINITION OF COMPENSATION


<PAGE>
Compensation as provided in Section 2.6 of this Plan excludes all other forms of
remuneration, such as but not limited to:

         -        EXPENSE PAYMENTS. Reimbursements or other expense allowances
                  whether under an accountable or a nonaccountable plan;

         -        WELFARE PLANS. Employer contributions to or benefits paid from
                  any statutory or non-statutory unemployment or other welfare
                  plan (other than elective salary deferral contributions to the
                  Kaydon Corporation Flexible Benefits Plan treated as Employer
                  Contributions) whether or not such plan is funded with
                  insurance; and disability payments (amounts described in Code
                  Sections 104(a)(3), 105(a), and 105(h), whether or not
                  includible in the gross income of the Employee) other than
                  salary continuation payments;

         -        MOVING EXPENSES. Amounts paid or reimbursed by the Employer
                  (or Affiliated Employer) for moving expenses incurred by the
                  Employee;

         -        STOCK OPTION PLANS. The value of a non-qualified stock option
                  granted to the Employee by the Employer (or Affiliated
                  Employer) and amounts realized from the exercise of a
                  non-qualified stock option, amounts realized from the sale,
                  exchange or other disposition of stock acquired under a
                  qualified stock option, or when restricted stock (or property)
                  held by the Employee either becomes freely transferable or is
                  no longer subject to a substantial risk of forfeiture;

         -        SECTION 83(B). The amount includible in the gross income of
                  the Employee as a result of a Code Section 83(b) election;

         -        DEFERRED COMPENSATION CONTRIBUTIONS. Contributions made by the
                  Employer (or Affiliated Employer) to a plan of deferred
                  compensation or to a simplified employee pension described in
                  Code Section 408(k) (other than elective salary deferral
                  contributions to the Employer's (or Affiliated Employer's)
                  401(k) plans treated as Employer Contributions);

         -        DEFERRED COMPENSATION DISTRIBUTIONS. Any distributions from a
                  plan of deferred compensation;

         -        MEALS AND LODGING. Meals and lodging (whether or not
                  includible in the gross income of the employee);

         -        EDUCATIONAL ASSISTANCE. Educational assistance benefits;

         -        DEPENDENT CARE. Dependent Care benefits;




<PAGE>
Appendix B 2

         -        SEVERANCE PAY. Severance pay; and

         -        OTHER. All other fringe benefits (cash and non-cash) and all
                  other amounts which receive special tax benefits.


<PAGE>
                                   APPENDIX C

              SECTION 2.16(D)(II) - TOP HEAVY ACTUARIAL ASSUMPTIONS

C.1      TOP HEAVY DETERMINATION.

         (a)      INTEREST RATE.  5%.

         (b)      MORTALITY.  1971 Group Annuity Table.



<PAGE>
                                   APPENDIX D

    SECTION 6.1(A)(VI) - SPECIAL RULES APPLICABLE TO AMOUNTS TRANSFERRED FROM
       THE COOPER BEARING COMPANY EMPLOYEES' 401(K) DEFERRED COMPENSATION
                                 PLAN AND TRUST

Notwithstanding any other provision of the Plan, the following special rules
shall apply to amounts transferred in the transfer of the plan assets and
liabilities form the Cooper Bearing Company Employees' 401(k) Deferred
Compensation Plan and Trust to this Plan.

         D.1      "Normal Retirement Date" means the first day of the month
                  coinciding with or next following the Participant's Normal
                  Retirement Age (60th birthday). A Participant shall become
                  fully Vested in his Account upon attaining his Normal
                  Retirement Age.

         D.2      Distribution of the funds due to a Terminated Participant
                  shall be made on the occurrence of an event which would result
                  in the distribution had the Terminated Participant remained in
                  the employ of the Employer (upon the Participant's death,
                  Total and Permanent Disability or Normal Retirement). However,
                  at the election of the Participant, the Administrator shall
                  direct the Trustee to cause the entire Vested portion of the
                  Terminated Participant's Elective Account to be payable to
                  such Terminated Participant. If the value of a Terminated
                  Participant's Vested benefit derived from Employer and
                  Employee contributions does not exceed $3,500 and has never
                  exceeded $3,500 at the time of any prior distribution, the
                  Administrator shall direct the Trustee to cause the entire
                  Vested benefit to be paid to such Participant in a single lump
                  sum.

         D.3      Except as provided in the following paragraph, payments of
                  those amounts may be made:

                      (1)    Over a period certain in monthly, quarterly,
                             semi-annual, or annual cash installments. In order
                             to provide such installment payments, the
                             Administrator may (A) segregate the aggregate
                             amount thereof in a separate, federally insured
                             savings account, certificate of deposit in a bank
                             or savings and loan association,


<PAGE>
Appendix D 2

                             money market certificate or other liquid short-term
                             security or (B) purchase a nontransferable annuity
                             contract for a term certain (with no life
                             contingencies) providing for such payment. The
                             period over which such payment is to be made shall
                             not extend beyond the Participant's life expectancy
                             (or the life expectancy of the Participant and his
                             designated Beneficiary); or

                      (2)    By transfer directly to the Trustee of another
                             qualified plan. This shall be the only method
                             available with respect to a Participant's Elective
                             Contribution and Qualified Non-Elective
                             Contribution Accounts if the Plan is terminated
                             under circumstances precluding distribution of such
                             amounts to Participants due to the establishment or
                             maintenance of another defined contribution plan by
                             an Affiliated Employer. In that case, the transfer
                             shall occur to the Trustee of the Plan.


<PAGE>
                                   APPENDIX E

      SECTION 6.7(A)(I) - LIST OF INVESTMENT FUNDS AVAILABLE UNDER THE PLAN

E.1      The following Investment Funds are presently available under the Plan
         with respect to the Accounts noted.

         Deferrals, the Cooper Bearing Transfer Accounts, any Transfer or
         Rollover Accounts, the portion of the Employer Contributions, Employer
         Prior Contributions, and Participant Contributions Accounts eligible
         for the "age 55" rule and, when approved, all other Accounts (or the
         full amount of the other Accounts) may be invested in the following
         (except that any Transfer or Rollover Accounts and Cooper Bearing
         Transfer Accounts may not presently be invested in Kaydon stock):

         1.       Artisan Partners Mid Cap Growth Fund

         2.       CIGNA Actively Managed (core) Bond

         3.       CIGNA Balanced fund

         4.       CIGNA Guaranteed Short Term Account

         5.       Invesco Dynamics Account

         6.       Invesco Technology Account Investor Class

         7.       Janus Advisor Balanced Account

         8.       Janus Worldwise Fund

         9.       John A. Levin Large Cap Value Fund

         10.      Kaydon Stock (the "Stock Account")

         11.      Putnam Large Cap Growth Fund

         12.      Russell 3000 Index Fund

         13.      TCW Small Cap Value Fund

         14.      Templeton Foreign Account

         15.      Times Square Small Cap Growth Fund

         Notwithstanding any other provision of the Plan, no funds may be
         transferred from any other Fund into the CIGNA Guaranteed Short Term
         Account and no funds may be transferred from to CIGNA Guaranteed Short
         Term Account into the CIGNA Actively Managed Fixed Fund without first
         having been transferred into one or more other Funds for at least
         ninety (90) days.


<PAGE>
Appendix E 2

E.2      The Parkstone Intermediate Government Obligations Fund (the "Government
         Obligations Fund") was previously available, but was not available for
         additional allocations after December 31, 1993. That Investment Fund
         was available for additional allocations until December 31, 1993 and
         continued to be available for existing allocations to the Option on
         December 31, 1993 until March 31, 1994.


<PAGE>
                                   APPENDIX F

    SECTION 6.8 - INFORMATION PROVIDED TO COMPLY WITH SECTION 404(C) OF ERISA

Individuals eligible to direct investments under the Plan shall receive:

F.1      Automatically:

         -        An explanation to participants that the Plan is intended to
                  constitute a plan described in Section 404(c) of ERISA and
                  that the fiduciaries of the Plan may be relieved of liability
                  for any losses which are the direct and necessary result of
                  investment instructions given by such participant;

         -        A description of the investment alternatives available under
                  the Plan and, with respect to each designated investment
                  alternative, a general description of the investment
                  objectives and risk and return characteristics of each such
                  alternative, including information relating to the type and
                  diversification of assets comprising the portfolio of the
                  designated investment alternative;

         -        Information identifying any designated investment manager;

         -        An explanation of the circumstances under which participants
                  may give investment instructions and an explanation of any
                  specified limitations on those instructions under the terms of
                  the Plan, including any restrictions on transfers to or from a
                  designated investment alternative, and any restrictions on the
                  exercise of voting, tender and similar rights appurtenant to a
                  participant's investment in an investment alternative;

         -        A description of any transaction fees and expenses which
                  affect the participant's account balance in connection with
                  purchases or sales of interests in investment alternatives
                  (for example, commissions, sales loads, deferred sales
                  charges, redemption, or exchange fees) and periodic
                  information regarding the actual expenses charged against
                  participants' accounts for the expenses of carrying out
                  investment instructions and in general.

         -        Information regarding the name, address and phone number of
                  the plan fiduciary (and, if applicable, the person or persons
                  designated by the plan fiduciary to act on its behalf)
                  responsible for providing the information described below upon
                  request of a participant and a description of the information
                  described below which may be obtained on request;


<PAGE>
Appendix F 2

         -        A description of the procedures established to provide for the
                  confidentiality of information relating to the purchase,
                  holding and sale of Kaydon stock, and the exercise of voting,
                  tender and similar rights, by participants, and the name,
                  address and phone number for the plan fiduciary responsible
                  for monitoring compliance with those procedures; and

         -        In the case of each investment alternative which is subject to
                  the Securities Act of 1933, and in which the participant has
                  no assets invested, immediately following the participant's
                  initial investment, a copy of the most recent prospectus
                  provided to the Plan (or a copy of such most recent prospectus
                  immediately prior to the participant's initial investment in
                  that alternative); subsequent to an investment in an
                  investment alternative, any materials provided to the Plan
                  relating to the exercise of voting, tender or similar rights
                  which are incidental to the holding in the account of the
                  participant of an ownership interest in that alternative to
                  the extent that the rights are passed through to participants
                  under the Plan, as well as a description of or reference to
                  plan provisions relating to the exercise of voting, tender or
                  similar rights.

F.2      On Request:

         -        A description of the annual operating expenses of each
                  designated investment alternative (for example, investment
                  management fees, administrative fees, transaction costs) which
                  reduce the rate of return to participants, and the aggregate
                  amount of those expenses expressed as a percentage of average
                  not assets of the designated investment alternative;

         -        Copies of any prospectuses, financial statements and reports,
                  and of any other materials relating to the investment
                  alternatives available under the Plan, to the extent that
                  information is provided to the Plan;

         -        A list of the assets comprising the portfolio of each
                  designated investment alternative which constitutes plan
                  assets, the value of each such asset (or the proportion of the
                  investment alternative which it comprises), and, with respect
                  to each asset which is a fixed rate investment contract issued
                  by a bank, savings and loan association or insurance company,
                  the name of the


<PAGE>
Appendix F 3

                  issuer of the contract, the term of the contract and the rate
                  of return on the contract;

         -        Information concerning the value of shares or units in
                  designated investment alternatives available to participants
                  under the Plan, as well as the past and current investment
                  performance of the alternatives determined, net of expenses,
                  on a reasonable and consistent basis; and

         -        Information concerning the value of shares or units in
                  designated investment alternatives held in the account of the
                  participant.


<PAGE>
                                   APPENDIX G

    SECTION 6.8 - POLICIES AND PROCEDURES RE: COMPLIANCE WITH SECTION 404(C)
                                    OF ERISA

G.1      Policy and Procedure To Inform Participants of Actual Expenses Charged
         Against Accounts.

         Participants will be periodically informed of the actual expenses
         incurred with respect to their respective individual accounts,
         including but not limited to a description of any transaction fees and
         expenses which affect the participant's account balance in connection
         with purchases or sales of interests in investment alternatives (for
         example, commissions, sales loads, deferred sales charges, redemption,
         or exchange fees) and periodic information regarding the actual
         expenses charged against participants' accounts for the expenses of
         carrying out investment instructions and in general. Kaydon Corporation
         will contract with a contract administrator who will be obligated to
         provide information at least quarterly to participants regarding those
         actual expenses. The contract administrator will also respond to
         participants' reasonable requests for information about actual expenses
         on a basis more frequently than quarterly, and will also make available
         a procedure for participants to obtain advance information regarding
         expenses to be charged in certain circumstances.

G-2      Policy, and Procedure to Provide For Confidentiality of Information
         Regarding Stock. Kaydon Corporation intends that information relating
         to the purchase, holding and sale of Kaydon stock and, the exercise of
         voting, tender and similar rights by participants be maintained on a
         confidential basis. Kaydon Corporation will follow the following
         procedure to maintain that confidentiality, except to the extent
         necessary to comply with Federal laws or state laws not preempted by
         ERISA.

A.       Participant directions to purchase or sell Kaydon stock are
         communicated to the local Human Resources representative who then
         communicates the direction to the Contract Administrator or the
         Trustee. Alternatively, the participant may use the Contract
         Administrator's telephone response system to bypass the local Human
         Resources representative. In either case, the information regarding
         purchases, sales or holding of Kaydon stock acquired by the Human


<PAGE>
Appendix G 2

         Resources department of the Plan Sponsor, the Contractor Administrator,
         or the Trustee (or any other involved party) shall not be provided to
         any individual employed by the Plan Sponsor or to any department of the
         Plan Sponsor except as provided above or as necessary to allow the Plan
         Sponsor to provide information about Kaydon stock to participants.

B.       Participants are provided information for the exercise of, and actually
         exercise, voting, tender and similar rights relating to Kaydon stock
         through the Contract Administrator, the Trustee and the third-party
         proxy voting service. Information regarding the exercise of voting,
         tender and similar rights relating to Kaydon stock shall not be
         provided to any individual employed by the Plan Sponsor or to any
         department of the Plan Sponsor except as provided above.

C.       The Benefits Committee is responsible for determining from time to time
         that the procedures to provide for the confidentiality of information
         regarding the purchase, holding and sale of Kaydon stock and the
         exercise of voting, tender and similar rights with respect to such
         stock are sufficient to safeguard the confidentiality of the
         information in the circumstances described in this Policy, that such
         procedures are being followed, and that an independent fiduciary is
         appointed to carry out activities relating to Kaydon stock in those
         situations which the Benefits Committee determines involve a potential
         for undue employer influence upon participants with regard to the
         direct or indirect exercise of shareholder rights.

D.       The Committee is also responsible for determining when there are
         circumstances involving a potential for undue employer influence upon
         participants with regard to the direct or indirect exercise of
         shareholder rights and making referral to the independent fiduciary in
         those circumstances.

E.       Smith-Barney Fiduciary Services, Inc. is the independent fiduciary
         responsible for carrying out activities relating to Kaydon stock in any
         situations in which the Committee determines involve a potential for
         undue employer influence upon participants with regard to the direct or
         indirect exercise of shareholder rights.


<PAGE>
                                   APPENDIX H

      SECTION 7.2(A)(V) - ADDITIONAL RULES REGARDING HARDSHIP WITHDRAWALS

An immediate and heavy financial need also includes:

-        Living Expenses. Living expenses for the basic necessities of food,
         shelter, clothing and similar items where the participant establishes
         that the life or health of the participant or a family member dependent
         on the participant is o will be threatened if the assistance is not
         provided.

-        Debts. Accumulated debts of the participant which the participant
         establishes were incurred for items which would otherwise constitute an
         immediate and heavy financial need under the terms of the Plan.

-        Automobile. The reasonable cost of an automobile which the participant
         establishes is necessary for the participant to remain gainfully
         employed.

-        Adoption. The reasonable costs of adoption of a child by the
         participant.

<PAGE>
                                   APPENDIX I

          SECTION 9.1 - PARTIES RESPONSIBLE FOR CERTAIN PLAN FUNCTIONS

I.1      Contract Administrator.  CIGNA Retirement Plan Services, Inc.

I.2      Trustee.  CG Trust Company

I.3      Administrative Committee or Committee.

         As provided by resolution.


<PAGE>
                                   APPENDIX J

                           CANFIELD TECHNOLOGIES, INC.

                         TRIDAN INTERNATIONAL, INC. AND

                             INDIANA PRECISION, INC.

The following sections of the Plan are added or modified as follows:

         Section 1.1 to add the following sentence:

                           "Employees of Canfield Technologies, Inc., Tridan
                  International, Inc. and Indiana Precision, Inc. are added to
                  the Plan effective October 1, 2000.

         Section 2.7 to add the following sentence:

                           "Employee also excludes persons included in a
                  collective bargaining unit at Canfield Technologies, Inc.

         New Section 2.7A is added as follows:

                           2.7A Employee Group. The Employee Groups are:

                           (a)  Canfield. Employees of Canfield Technologies,
                  Inc. not included in a collective bargaining unit.

                           (b)  Tridan. Employees of Tridan International, Inc.

                           (c)  Indiana Precision. Employees of Indiana
                  Precision, Inc.

                           (d)  Other Non-Bargaining Unit. Employees of all
                  other Employers not included in a collective bargaining unit.

                           (e)  Other Bargaining Unit. Employees of all other
                  Employers included in a participating collective bargaining
                  unit.

         New Section 2.10A is added as follows:

                           2.10A Matching Contribution. A Matching Contribution
                  is any Employer Contribution made to the Plan on behalf of an
                  Active Participant on account of an Elective Contribution made
                  by the Active Participant for the Plan Year or any forfeiture
                  allocated on the basis of Matching or Elective Contributions,
                  excluding any contribution or allocation used to meet the top


<PAGE>
                  heavy minimum contribution or benefit requirement of Code
                  Section 416 and any Matching Contribution to the extent
                  considered for purposes of Code Section 401 (k) testing.

         Section 2.17(c) to add the following sentence:

                           "A Year of Service also includes Years of Service
                  credited prior to October 1, 2000 with Canfield Technologies,
                  Inc., Tridan International, Inc., or Indiana Precision, Inc.

         New Subsections 3.2(b)(v), (vi) and (vii) are added as follows:

                           (v) Canfield. Each Employee who was a participant in
                  the Canfield Technologies, Inc. Simple IRA on 2117 A4 2000 who
                  was employed by an Employer on October 1, 2000 became an
                  Active Participant in this Plan on October 1, 2000;

                           (vi) Tridan. Each Employee who was a participant in
                  the Tridan International, Inc. 401(k) Profit Sharing Plan on
                  27 August, 2000 who was employed by an Employer on October 1,
                  2000 became an Active Participant in this Plan on October 1,
                  2000; and

                           (vii) Indiana Precision. Each Employee who was a
                  participant in the Indiana Precision, Inc. 401 (k) Profit
                  Sharing Plan 27 August, 2000 who was employed by an Employer
                  on October 1, 2000 became an Active Participant in this Plan
                  on October 1, 2000.

         Section 4.1 (b) is deleted and replaced with new Section 4.1 (b) as
follows:

                           (b) Regular Profit Sharing. May contribute a Regular
                  Profit Sharing Contribution. The amount of the contribution,
                  if any, is determined by the Board of Directors of each
                  Employer for its Employee Group or Groups in its discretion
                  (or as required by the applicable collective bargaining
                  agreements), subject to the maximum limitations of this Plan.
                  The tentative contribution is reduced by the amount of
                  forfeitures to be reallocated to Employer Accounts on the
                  Allocation Date after the allocation of forfeitures as
                  Matching Contribution. A Regular Profit Sharing Contribution
                  is allocated under Article VI and is subject to the applicable
                  Vesting Schedule.

         New Section 4.1(f) is added as follows:


<PAGE>

                           (f) Matching. For Canfield Technologies, Inc., Tridan
                  International, Inc. and Indiana Precision, Inc. only,
                  contribute a Matching Contribution which is the sum of $0.25
                  for each dollar of each eligible Participant's Salary Deferred
                  Contributions which do not exceed the appropriate limits.

                           The tentative contribution is reduced by the amount
                  of forfeitures to be reallocated to Employer Accounts on the
                  Allocation Date. The Matching Contribution is allocated under
                  Article VI and is subject to the applicable Vesting Schedule.

         Section 6.1(a)(i) to add the following sentence:

                           "This Account also includes prior plan profit-sharing
                  amounts rolled-over into this Plan."

         New Subsection 6.1 (a)(viii) is added as follows:

                           (viii) Employer Matching Contributions Account. The
                  Accounts to which any Employer Matching Contributions and
                  amounts rolled-over to this Plan are credited;

         The preface of Section 6.2 is deleted and replaced with a new preface
as follows:

                           6.2 Allocation-of Employer Contributions. Employer
                  Regular Profit Sharing Contributions for the Plan Year are
                  allocated to the Employer Regular Profit Sharing Accounts of
                  Active Participants who complete one thousand (1,000) Hours of
                  Service during the Plan Year and are Employees in the
                  designated Employee Group of the Employer making the
                  contribution on the last day of that Plan Year, or who are
                  Employees in that Employee Group during the Plan Year but who
                  retire, die, or become Disabled during the Plan Year, first,
                  to each Employee Group as provided in a resolution of the
                  Employer and, second, within each Employee Group in the
                  proportion which the Compensation of each Active Participant
                  within that Employee Group for- the Plan Year bears to the
                  aggregate of the Compensation of the Active Participants
                  within that Employee group for the Plan Year (or as otherwise
                  required by an applicable collective bargaining agreement),
                  subject to the Testing Adjustment.

         New Subsection 6.2(f) is added as follows:


<PAGE>
                           (f) Matching. Matching Contributions are allocated to
                  the Matching Account of each Active Participant employed by
                  Canfield Technologies, Inc., Tridan International, Inc. or
                  Indiana Precision, Inc. eligible for an allocation of Employer
                  Regular Profit Sharing Contributions for the Plan Year based
                  on each eligible Active Participant's Salary Deferred
                  Contributions for the year which are eligible for a Matching
                  Contribution as provided under Article IV. The amount
                  allocated is $0.25 for each dollar of the Participant's Salary
                  Deferral Contributions up to the maximum Salary Deferral
                  Contribution allowed the Participant for the year. Section 6.3
                  is deleted and replaced with new Section 6.3 as follows:

                           6.3 Allocation of Forfeitures. Forfeitures from the
                  Non-Vested Accounts of participants who have incurred five (5)
                  consecutive Breaks in Service, received a distribution of
                  their entire Vested Account Balance, or died after terminating
                  employment during the Plan Year are first allocated to reduce
                  any Forfeiture Restoration Contribution. Any remaining
                  forfeitures are allocated first in the same manner as Matching
                  Contributions and next in the same manner as Employer Regular
                  Profit Sharing Contributions. Forfeitures allocated as
                  Contributions reduce the contribution of the Employer for the
                  year.

         The preface of Section 6.5 is deleted and replaced with a new preface
as follows:

                           6.5 Vesting. The Account Balance in each Account
                  other than the Employer Regular Profit Sharing and the
                  Employer Matching Contributions Account, if any, is fully
                  vested and nonforfeitable at all times. The Account Balance in
                  each Employer Regular Profit Sharing Account and each Employer
                  Matching Contributions Account is fully vested and
                  nonforfeitable upon the Participant's attainment of Normal
                  Retirement Age, Death, or Disability while an employee of the
                  Employer (or Affiliated Employer) and under one or a
                  combination of the following Vesting Schedules:

         New Section 7.16 is added as follows:

                           7.16 Loans. An Active Participant, a participant who
                  is a party in interest under ERISA with respect to the Plan,
                  or a beneficiary of a deceased participant who was a party in
                  interest (other than an Owner-Employee or
                  Shareholder-Employee) may



<PAGE>
                  maintain a loan rolled-over to this Plan from a plan
                  maintained by Canfield Technologies, Inc., Tridan
                  International, Inc. or Indiana Precision, Inc. which was
                  qualified under Section 401 (a) of the Code in which the
                  participant was not an owner-employee or a shareholder-
                  employee. The Committee may authorize continuation of the loan
                  on the terms and conditions prescribed in this Section and in
                  Appendix J.

                  (a) Maximum Amount. A loan (from other than the principal
         portion of a Voluntary Contribution Account) is limited to the lesser
         of:

                      (i)   Maximum Dollar Amount. $50,000.00, reduced by the
                  excess of:

                            (A) Prior Balance. The highest outstanding balance
                      of loans from the Plan during the 1 -year period ending on
                      the day before the date on which the loan is made, over

                            (B) Outstanding Balance. The outstanding balance of
                      loans from the Plan on the date on which the loan is made;

                      (ii)  One-Half Vested Account. One half (1/2) of the
                  participant's Vested Account Balance; or

                      (iii) Aggregation. The amount tentatively determined in
                  (i) or (ii) above reduced by the aggregate outstanding
                  principal balance o all loans from any qualified plans
                  maintained by the Employer (or Affiliated Employer).

                  (b) Spousal Consent. The Committee may accept the loan only if
         spousal consent of any Qualifying Spouse was obtained within ninety
         (90) days before the loan or the Committee determines that spousal
         consent was not required.

                  (c) Conditions. Loans: constitute an investment of the
         participant's Account; must be evidenced by a promissory note bearing a
         reasonable rate of interest, providing for level amortization and
         having a definite maturity date o repayment schedule with payments not
         less frequently than quarterly- and must be secured by a mortgage,
         pledge, guarantee or other adequate collateral. The participant must
         demonstrate a realistic plan and intention for repayment of any loan.


<PAGE>
                  (d) Term. The term for repayment of the note must not exceed
         five (5) years unless the participant or beneficiary certified that the
         proceeds of the loan would be used for the acquisition or construction
         of a structure which was used, within a reasonable time determined at
         the time the loan was made, as the principal residence of the
         participant.

                  (e) Set Off. If a participant or beneficiary dies, retires, is
         totally and permanently disabled, terminates employment, revokes a
         payroll deduction payment authorization, requests a distribution which
         would cause the remaining Account Balance to fail to be adequate
         security under ERISA, or defaults under the terms of the loan or any
         agreement securing the loan, or if the Plan is terminated, with all or
         a portion of the not (including principal and interest) outstanding,
         the balance in the Account and all benefits payable under the Plan are
         reduced by the outstanding amount at the earliest time which will not
         cause disqualification of the Plan.

                  (f) Accounting. For purposes of allocating earnings, losses
         and adjustments in value of the Trust, the participant's Account is
         reduced by the principal amount of any loan outstanding. Interest paid
         on the loan is credited directly to the participant's Account.

                  (g) Suspension of Loan Payments. If permitted by the
         administrator, loan payments shall be suspended for a period that a
         Participant is on a leave of absence either without compensation or at
         a level of compensation that is less than the amount of the installment
         payments required under the terms of the loan.

                      (i)   Length of Suspension/Due Date

                            (A) Military Leave of Absence. If a Participant is
                      performing service in the uniformed services (as defined
                      in Chapter 43 of Title 38 of the United States Code),
                      whether or not Qualified military Service, loan payments
                      shall be suspended until the end of the leave o absence.
                      The loan, including accrued interest, must be repaid by
                      the end of the period that equals the original term of the
                      loan plus the period of military service.

                            (B) General Leave of Absence. For all other leaves
                      of absences, loan payments shall be suspended for the
                      period of the leave of absence, but not longer than one
                      year. The


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                      loan, including accrued interest, must be repaid by the
                      latest date permitted under (c)(ii) above.

                      (ii) Payments on Resumption. The installment payments due
                      at the end of the suspension must be at least equal to,
                      and as frequent as, those required under the original
                      terms of the loan. If installment payments are not
                      increased on resumption of payment, the Participant must
                      repay the entire remaining balance of the loan on the due
                      date specified in (i) above.

Section 9.9 to add the following sentence:

                  "Expenses not paid by Kaydon Corporation shall be charged
         against participants' accounts in a reasonable manner."


<PAGE>
                                   APPENDIX K

                            LOAN TERMS AND CONDITIONS

A.1      Administration. The Committee administers the participant and
         beneficiary roll-over loan program.

A.2.     Procedure. Continuation of a prior plan loan must be requested on an
         Application for Continuation provided by the Committee. An application
         is processed as an application for distribution subject to the Claims
         Procedure of the Plan.

A.3      Approval. Continuation of a loan must be approved unless:

         1. The Application is insufficient, inaccurate or incomplete or the
         participant or beneficiary fails to timely provide additional
         information reasonably requested by the Committee.

         2. The loan does not comply with the limitations of the Plan.

         3. The Committee determines that the participant or beneficiary does
         not have a bona fide intent to repay the loan or that the loan may
         constitute a prohibited transaction or a violation of the Plan, ERISA
         or other law.

A.4      Limitations. Except for lump sum payments of the entire outstanding
         loan balance, loans must be repaid through payroll deduction. Partial
         prepayments may not be made. Loans must be secured by the vested
         Account Balance.

A.5      Source/Allocation. Loan payments will be allocated to the individual's
         Roll-Over Account.