<PAGE>
                                                                    EXHIBIT 10.4


                             ELECTRO-TEC CORPORATION
                        EMPLOYEE RETIREMENT BENEFIT PLAN

                                  (As Amended)


<PAGE>

                                TABLE OF CONTENTS

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

II       Definitions.....................................................................  3
         2.1      Account Balance........................................................  3
         2.2      Active Participant.....................................................  3
         2.3      Affiliated Employer....................................................  3
         2.4      Allocation Date........................................................  3
         2.5      Break in Service.......................................................  4
         2.6      Compensation............................................................ 5
         2.7      Employee................................................................ 6
         2.8      Highly Compensated Employees...........................................  7
         2.9      Hour of Service......................................................... 8
         2.10     Limitation Year........................................................ 11
         2.11     Matching Contribution.................................................. 11
         2.12     Normal Retirement Age.................................................. 11
         2.13     Plan Year.............................................................. 12
         2.14     Qualified Order........................................................ 12
         2.15     Qualifying Spouse...................................................... 13
         2.16     Stock.................................................................. 13
         2.17     Top Heavy.............................................................. 13
         2.18     Year of Service........................................................ 16

III      Eligibility and Participation................................................... 18
         3.1      Eligibility Requirements............................................... 18
         3.2      Participation.......................................................... 19
         3.3      Re-Participation....................................................... 19
         3.4      Transferred Employees.................................................. 20

IV       Employer Contributions.......................................................... 23
         4.1      Employer Contributions................................................. 23
         4.2      Make-Up Contributions Under USERRA..................................... 25
         4.3      Maximum Deductible Amount.............................................. 27
         4.4      Maximum Annual Additions............................................... 27
         4.5      Excess Addition........................................................ 31
         4.6      Erroneous Contribution................................................. 32
         4.7      Investment of Contributions in Stock....................................32

V        Participant Contributions....................................................... 33
         5.1      Participant Contributions.............................................. 33
         5.2      Method................................................................. 35
         5.3      Matching and Voluntary Contribution Limits............................. 36
         5.4      Actual Contribution Percentage......................................... 36
         5.5      Correction of Excess Aggregate Contribution............................ 37
</TABLE>


<PAGE>

<TABLE>
<S>      <C>                                                                           <C>
         5.6      Salary Deferred Contribution Limit..................................... 38
         5.7      Actual Deferral Percentage............................................. 39
         5.8      Elective Deferral Limit................................................ 40
         5.9      Correction of Excess Deferral and Excess Contribution.................. 41
         5.10     Additional 401(k) and 401(m) Rules..................................... 43

VI       Accounts.........................................................................49
         6.1      Accounts................................................................49
         6.2      Allocation of Employer Contributions....................................50
         6.3      Allocation of Forfeitures...............................................52
         6.4      Allocation of Expenses, Earnings, Losses and Adjustments in Value.......52
         6.5      Vesting.................................................................53
         6.6      Vested Accounts.........................................................55
         6.7      Investment of Employer and Participant Contributions....................56
         6.8      ERISA Section 404(c)....................................................57

VII      Distribution.....................................................................60
         7.1      Distributive Event......................................................60
         7.2      Hardship................................................................61
         7.3      General Method of Payment...............................................63
         7.4      Small Balance Exception.................................................65
         7.5      Special Method of Payment...............................................65
         7.6      Information Provided....................................................67
         7.7      Application for Distribution............................................68
         7.8      Timing of Payment.......................................................69
         7.9      Amount of Payment.......................................................83
         7.10     Special Spousal Survivor Annuity Rules..................................74
         7.11     Special Participant Account Distribution Rules..........................75
         7.12     Designation of Beneficiary..............................................75
         7.13     Claims Procedure........................................................77
         7.14     Facility of Payment.....................................................78
         7.15     Qualified Order.........................................................78
         7.16     Direct Rollover Rules...................................................79

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
         9.1      Fiduciary Responsibilities..............................................83
         9.2      Employer................................................................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.....................................................86
         9.10     Limitation of Liability and Legal Action................................86
         9.11     Electronic Administration...............................................87
</TABLE>


<PAGE>
<TABLE>
<S>      <C>                                                                           <C>
X        Amendment and Termination of Plan................................................88
         10.1     Amendment...............................................................88
         10.2     Vesting schedule Amendment..............................................88
         10.3     Termination.............................................................89
         10.4     Partial Termination.....................................................89
         10.5     Full Vesting............................................................89
         10.6     Merger or Consolidation of Plan.........................................89

XI       Miscellaneous....................................................................91
         11.1     Nonassignability........................................................91
         11.2     Employment Rights Not Enlarged..........................................91
         11.3     Participants' Rights Limited............................................91
         11.4     Interpretation and Construction.........................................91
         11.5     Counterparts............................................................91
         11.6     Governing Law...........................................................92
</TABLE>


Appendix A - Section 1.1 - Special Effective Dates

Appendix B - Section 2.6 - Explanation of Definition of Compensation

Appendix C - Section 2.7(d)(ii) - Top Heavy Actuarial Assumptions

Appendix D - Section 6.7(a)(i) - List of Investment funds Available Under the
Plan

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

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

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

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


<PAGE>

                             ELECTRO-TEC CORPORATION
                    EMPLOYEE STOCK OWNERSHIP AND THRIFT PLAN

         On this 19th day of February, 2002, Electro-Tec Corp. (the Employer)
amends and restates the Electro-Tec Corporation Employee Retirement Benefit 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. Certain
provisions are effective as specified in Appendix A or as otherwise provided in
the Plan, as required by GUST.

         1.2 QUALIFICATION INTENT. The Plan is intended to qualify as a 401(k)
profit sharing and stock bonus plan under Sections 401(a), 401(k) 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).

         1.3 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

                                       -1-


<PAGE>

         (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 QUALIFYING EMPLOYER SECURITIES AND SPECIAL RULE. Effective July 1,
1992, 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.

                                       -2-


<PAGE>
                                   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, 1994, 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
Date was December 31, except that the Allocation Date for Salary Deferred
Contributions was the last day of each month. At all times, earnings, losses and
other adjustments in value were credited to participants' Accounts to the date
Stock in the Account was sold or

                                       -3-


<PAGE>
another investment liquidated for purposes of distribution. The Allocation Date
for Employer Contributions and forfeitures is December 31. The Committee may
designate one or more interim Allocation Dates.

         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 due
to a termination of employment. 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.

                                       -4-


<PAGE>
         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 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. For the Plan Year ending December
31, 1989 only, Compensation excludes non-base compensation.

         (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).

                                       -5-


<PAGE>
         2.7 EMPLOYEE. An Employee is any person employed by the 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 the Employer which constitutes United States source income (as
defined in Code Section 861(a)(3)) and persons included in a collective
bargaining unit which has not adopted the Plan. 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) LEASED EMPLOYEE. Employee includes a Leased Employee.

             (i)  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.

                  (A) 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 a full-time basis for at least a
             one-year period.

                  (B) 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.

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

                  (A) 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

                  (B) 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)

                                       -6-


<PAGE>
             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. Plan Years beginning after December
31, 1996:

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

             (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

                                       -7-


<PAGE>
                  (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 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.

                                       -8-


<PAGE>
         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 rule does not limit the crediting of
Hours of Service for paid non-duty vacation, holiday, bereavement, jury duty, or
short-term military service time.

         (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

                                       -9-


<PAGE>
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 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).

                                      -10-


<PAGE>

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

         2.12     NORMAL RETIREMENT AGE.  Normal Retirement Age is 65.



                                      -11-


<PAGE>
         2.13 PLAN YEAR. The Plan Year is an annual accounting period ending
each December 31.

         2.14 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

               (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.

                                      -12-


<PAGE>
         2.15 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.

         2.16 STOCK. Stock is common stock of Kaydon Corporation.

         2.17 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
nondiscrimination and participation requirements of Code Sections



                                      -13-


<PAGE>

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.

                                      -14-


<PAGE>
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 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. 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).

                                      -15-


<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
                  from service, death, or disability. In addition effective
                  January 1, 202, 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.

         2.18 YEAR OF SERVICE. A Year of Service is:

         (a)  GENERAL RULE. A Period in which at least one thousand (1,000)
Hours of Service are completed. The Period is:

             (i)  ELIGIBILITY. For eligibility purposes, the 12 consecutive
         month period beginning on the date on which an Employee first performs
         an Hour of Service for the Employer on or after the Effective Date, and
         Plan Years beginning on or after that date; and

             (ii) VESTING AND BREAK IN SERVICE. For vesting and Break in Service
         purposes, each Plan Year beginning on or after the Effective Date.

         (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. All Years of Participating Service credited
prior to August


                                      -16-


<PAGE>
1, 1989 under the KDI Corporation Employee Retirement Benefit Plan.
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.

                                      -17-


<PAGE>

                                   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, 1998, for individuals hired after
December 31, 1997:

             (i)   AGE. Attains age 21; and

             (ii)  SERVICE. Completes one thousand (1000) 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, 1998:

             (i)   AGE. Attains age 21;

             (ii)  EMPLOYMENT. Completes six months of employment with the
         Employer or an 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).

         3.2 PARTICIPATION. Every Active Participant in the Plan on the
Effective Date remains an


                                      -18-


<PAGE>

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 Rule, 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. Prior to January 1, 1992, except as provided by the
Special Rule, each Employee was an Active Participant on the first January 1 or
July 1 coincident with or after the Employee satisfied the Eligibility
Requirements.

         (b) SPECIAL RULE. Notwithstanding the current and prior Participation
rules, every Employee who was a participant in the KDI Corporation Employee
Retirement Benefit Plan on July 1, 1989 became an Active Participant in this
Plan on that date.

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

         (a) FORMER VESTED ACTIVE PARTICIPANT. An Employee who had a vested
interest in an Employer Account at the beginning of a Break in Service is an
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
completes one (1) Year of Service.

         (b) FORMER NONVESTED ACTIVE PARTICIPANT. An Employee who was previously
an Active Participant in the Plan but did not have a vested interest in an
Employer Account at the beginning of a Break in Service is an 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 completes one (1) Year
of Service and the Employee's consecutive Breaks in Service do not exceed the
greater of five (5) or the pre-Break Years of Service.

                                      -19-


<PAGE>
         3.4 TRANSFERRED EMPLOYEES. Plan benefits of employees who transfer
employment among Employers, among classifications within the Employers, or among
the 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 the Employer and An Affiliated Employer are
         credited for vesting and participation purposes under this Plan and all
         plans to which, or from 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 the 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 the 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

                                      -20-


<PAGE>
         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 the 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 the
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.

             (i)  TRANSFER FROM A DEFINED BENEFIT PLAN. If the employee
         participated in a defined benefit plan maintained by the 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 Employer 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

                                      -21-


<PAGE>
         another defined contribution plan maintained by the 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.

              (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.

                                      -22-


<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 Electro-Tec Corp. 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:

               (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 Electro-Tec Corp. in its discretion, subject to the maximum
limitations of this Plan.

         (d) MATCHING. Will contribute a Matching Contribution which is the sum
of:


                                      -23-


<PAGE>
               (i) 100%. 100% of each eligible Participant's Salary Deferred
         Contributions, not to exceed 3% of the Participant's Compensation; and

              (ii) 75%. 75% of each eligible Participant's Salary Deferred
         Contributions in excess of the Salary Deferred Contributions matched
         under subparagraph (i) above, not to exceed an additional 4% of the
         Participant's Compensation.

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

         (e) TOP HEAVY MINIMUM. Must, if applicable, 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-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
         and Matching 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

                                      -24-


<PAGE>
         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%).

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

         (f) 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.

         The Employer Contribution for a Leased Employee Participant is reduced
by any contributions made by the leasing organization for the Employee to, and
the actuarial equivalent of benefits earned by the Employee under, a qualified
retirement plan maintained by the leasing organization which are attributable to
services performed for the Employer (or Affiliated Employer).

         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

                                      -25-


<PAGE>
         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 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


                                      -26-


<PAGE>
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.

         4.4 MAXIMUM ANNUAL ADDITIONS. 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

                                      -27-


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

             (vii) EXCESS ANNUAL ADDITION APPLIED. An excess Annual Addition
         from the preceding Plan Year applied to reduce the Employer
         Contributions for the current Plan Year.

         (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.

                                      -28-
<PAGE>
         (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).

             (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:


                                      -29-
<PAGE>
             (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 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

                                      -30-


<PAGE>
             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 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, 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.

                                      -31-


<PAGE>
         (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.

         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.



                                      -32-


<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:

             (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) VOLUNTARY. Voluntary Contributions which do not exceed the lesser
of:

             (i)   TEN PERCENT. When added to all previous Voluntary
         Contributions under the Plan and any other qualified plan of the
         Employer, ten percent (10%) of the Compensation received from the
         Employer during the entire period of participation; and

             (ii)  CONTRIBUTION PERCENTAGE LIMIT. The Voluntary Contribution
         Limit.

         (c) 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


                                      -33-


<PAGE>
             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.

             (ii)  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.

             (iii) 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.

         (d) 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.

                                      -34-


<PAGE>
         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.

         (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

                                      -35-


<PAGE>
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 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 the preceding Plan Year 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.

         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


                                      -36-


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

                  (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.


                                      -37-


<PAGE>
         (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 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:

                                      -38-


<PAGE>

         (a) 125% LIMIT. 125% of the ADP for all Participants who were 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.

         Effective January 1, 1993, the collectively bargained portions of the
Plan must be separately tested. In applying the Salary Deferred Contribution
Limit, the restructuring rules of the regulations under Code Section 401(a)(4)
may be used for Plan Years beginning before January 1, 1992.

         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.

         (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


                                      -39-


<PAGE>
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.

         (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.

                                      -40-


<PAGE>
         (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.

             (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.

                                      -41-


<PAGE>
             (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:



                                      -42-


<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

                                      -43-


<PAGE>
         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
         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

                                      -44-


<PAGE>
         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 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

                                      -45-


<PAGE>
         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 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

                                      -46-


<PAGE>
         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 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

                                      -47-


<PAGE>
         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 MATCHING CONTRIBUTIONS ACCOUNT. The Accounts to
         which any Employer Matching Contributions are credited;

             (iii) SALARY DEFERRED CONTRIBUTIONS ACCOUNT. The Accounts to which
         amounts from the KDI Plan Employee Pre-Tax Account were, and Active
         Participant Salary Deferred and Catch-Up Contributions to this Plan
         are, credited;

             (iv)  EMPLOYER QUALIFYING CONTRIBUTIONS ACCOUNT. The Accounts to
         which any Employer Qualifying Contributions are credited;

             (v)   PARTICIPANT CONTRIBUTIONS ACCOUNT. The Accounts to which
         amounts from the KDI Plan Employee Post-Tax Matched and Employee
         Post-Tax Voluntary Accounts were, and Participant Voluntary
         Contributions to this Plan are, credited;

             (vi)  KDI TRANSFER ACCOUNT. The Accounts to which amounts from the
         KDI Plan Employer Pre-Tax Matching and Employer Post-Tax Matching
         Accounts 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.

         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.

                                      -49-


<PAGE>
         (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 complete one thousand (1,000)
Hours of Service during the Plan Year and 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).

         (c) MATCHING. Matching Contributions are allocated to the Matching
Account of each Active Participant based on each Active Participant's Salary
Deferred Contributions for the month which are eligible for a Matching
Contribution as provided under Article IV.

                                      -50-


<PAGE>
             (i)  PROVISIONAL ALLOCATION. Each allocation of Matching
         Contributions to a Highly Compensated Participant is provisional until
         the Actual Contribution Percentage, the Actual Deferral Percentage, the
         Multiple Use and the Elective Deferral Limitations for the applicable
         year have been satisfied.

             (ii) EFFECT. Matching Contributions provisionally allocated based
         on Salary Deferred Contributions which are forfeited, recharacterized,
         or distributed to the Participant are forfeited and must be removed
         from the allocation and reallocated to other Participants, if
         appropriate, for the Plan Year, or held in an Excess Contribution
         Account under Article IV.

         (d) 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.

         (e) 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.

         (f) LEASED EMPLOYEE OFFSET. Contributions are not allocated to a Leased
Employee to the extent the Leased Employee accrues contributions or benefits
under a plan maintained by the leasing organization which are attributable to
services performed for the Employer (or Affiliated Employer).

         (g) 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

                                      -51-


<PAGE>
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 of Regular Profit
Sharing Contributions are allocated to reduce, and in the same manner as,
Employer Matching and Regular Profit Sharing Contributions to the Plan, in that
order.

         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 the 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

                                      -52-


<PAGE>
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.

         6.5 VESTING. The Account Balance in each Account other than the
Employer Regular Profit Sharing and Matching Accounts, if any, is fully vested
and nonforfeitable at all times. The Account Balance in each Employer Regular
Profit Sharing and Matching Account is fully vested and nonforfeitable upon the
Participant's attainment of Normal Retirement Age, attainment of age 55 and
completion of ten (10) years of employment with the Employer, 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

                                      -53-


<PAGE>
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:

<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 1 year                                              None
                  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>

         (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

                                      -54-


<PAGE>
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.

         (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 first
day of the Plan Year following the later 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, or December 31, 1993. 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 later of the date the
participant terminates employment with the Employer and December 31, 1993.

         (d) EMPLOYER ACCOUNT RESTORED. If a terminated participant is
reemployed by the

                                      -55-


<PAGE>
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 participant's Account shall be invested in accordance
with the options provided for, and properly elected by, participants from time
to time. Prior to January 1, 1994, Deferred Vested, retiree, and other
non-Active Participants and Alternate Payees could not direct investments.

         (a) OPTIONS. The options available are:

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

             (ii) STOCK. Effective July 1, 1992, 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, 1995, 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.

                                      -56-


<PAGE>
         (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.

         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 E or provided under DOL Reg.
2550.404c-1 for that purpose.

                                      -57-


<PAGE>
         (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.

         (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

                                      -58-


<PAGE>
         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.

                                      -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. A participant's attainment of Normal Retirement
Age and termination of employment with the Employer;

         (b) EARLY RETIREMENT. A participant's attainment of age 55, completion
of ten (10) years of employment with the Employer and termination of employment
with the Employer (and Affiliated Employers);

         (c) DEATH. A participant's Death;

         (d) DISABILITY. A participant's Total and Permanent Disability which is
the Participant's inability to perform the individual's usual duties for the
Employer due to injury, disease, or mental disorder determined by a physician or
other evidence selected by the Committee.

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

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

         (g) 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


                                      -60-


<PAGE>
         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.

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

         (i) AGE 59 1/2. From a Salary Deferred and Qualifying Contributions
Accounts after the participant has exhausted all withdrawals from the Voluntary
Contributions Account, and from the KDI Transfer Account, a participant's
attainment of 59 1/2.

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

         (k) 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.

         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

                                      -61-


<PAGE>
         the participant (excluding mortgage payments);

             (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 G 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.

                                      -62-


<PAGE>
             (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:

                  (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 GENERAL METHOD OF PAYMENT. Payments from a participant's Accounts
at or after a Distributive Event may be made by:

         (a) LUMP SUM. A single payment within one (1) taxable year of the
recipient;

         (b) INSTALLMENTS. Prior to August 1, 2001, monthly, quarterly,
semiannual or annual installments at least equal to the minimum amount
determined by dividing the Account Balance by the applicable life expectancy.
The amount of each Installment may be recomputed not more than

                                      -63-


<PAGE>
annually based upon the participant's then life expectancy or the then joint
life expectancy of the participant and the participant's spouse. A recipient
other than the participant or spouse may have life expectancy determined only
once at the time distributions begin;

         (c) 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, at least fifty percent (50%) of the amount continued for that spouse's
life;

         (d) SPOUSAL SURVIVOR. In the case of the death of the participant, the
purchase for a Qualifying Spouse of a fully subsidized nontransferable annuity
from an insurance company with a benefit having a value which is actuarially
equivalent to the participant's Vested Account Balance (including for this
purpose Participant Accounts as of the date of the participant's death);

         (e) JOINT AND SURVIVOR. Prior to August 1, 2001, 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
spouse or Beneficiary, at least fifty percent (50%) but not more than one
hundred percent (100%) of that amount continued for that spouse's or
Beneficiary's life;

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

         (g) OTHER ANNUITY. Prior to August 1, 2001, the purchase of any other
purchasable, nontransferable annuity from an insurance company;

         (h) TRANSFER. Transfer of the balance directly to the Trustee of
another qualified plan or an Individual Retirement Account; or

         (i) COMBINATION. Except at Plan termination, by any combination of the
above methods. 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. Each
optional form and time of payment of benefits is available only to the extent
its existence and exercise by a participant does not cause disqualification of
the Plan.

                                      -64-


<PAGE>
         7.4 SMALL BALANCE EXCEPTION. The Participant's consent is not required
             with respect to the following distributions.

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

             (i)   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).

             (ii)  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.

             (iii) 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.

         (b) 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.

         7.5 SPECIAL METHOD OF PAYMENT. The following special rules apply to
payments from a participant's Accounts.


                                      -65-


<PAGE>
         (a) 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).

         (b) STOCK. Except as otherwise provided, effective July 1, 1992, 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 or an annuity contract, as required by the form
of distribution. 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) 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, 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.

                                      -66-


<PAGE>
         7.6 INFORMATION PROVIDED. The Committee must provide to each
participant:

         (a) 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;

         (b) 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 must be
provided within the last to end of:

             (i)  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

             (ii) 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) WITHHOLDING, DISTRIBUTION INFORMATION. With the Application for
Distribution:

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

             (ii) 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 of a qualifying rollover under the
         Code.

         (d) WAIVER OF NOTICE PERIOD. A distribution may commence less than 30
days after the


                                      -67-


<PAGE>
notice required under (a) 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.

         7.7 APPLICATION FOR DISTRIBUTION. To begin distribution after a
Distributive Event, the participant (or a Designated Beneficiary) 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 Section 401(a)(9), 411(b), or 415; is
a distribution of the Joint and Spousal Survivor benefit (or the Annuity Form if
the participant is not married to a Qualifying Spouse) or the Spousal Survivor
Annuity 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) 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, 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

                                      -68-


<PAGE>
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.

             (i)  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.

             (ii) 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).

         (d) MODIFICATION. A participant's election may be made, modified, or
revoked 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.

         (e) 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.

         (f) 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.

         7.8 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 Period
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

                                      -69-


<PAGE>
             (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.

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 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.

             (i)  NO PAYMENTS. If a participant dies before the participant's
         Required Beginning Date and irrevocable annuity distributions have not
         begun:

                  (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, 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.

                                      -70-


<PAGE>
         (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 321, 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.

             (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

                                      -71-


<PAGE>
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 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

             (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.

         7.9 AMOUNT OF PAYMENT. The amount of 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.

                                      -72-


<PAGE>
         The Minimum Distribution that must be distributed for each calendar
year beginning with the calendar year immediately preceding the calendar year
that contains the Participant's Required Beginning Date shall 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.

         (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.

                                      -73-


<PAGE>
             (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.

         7.10 SPECIAL SPOUSAL SURVIVOR ANNUITY RULES. A participant, with the
consent of any Qualifying Spouse, may elect to waive the Spousal Survivor
Annuity 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 after the
death of the participant.

         (a) 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).

         (b) 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.

         (c) IRREVOCABLE. Spousal consent is irrevocable.




                                      -74-


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

         (a) VOLUNTARY. A participant's Voluntary Account is distributable upon
notice from the participant of a desire to begin distribution of all or part of
the Voluntary Account Balance.

         (b) 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.

         (c) 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 - 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

             (ii) 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.

         7.12 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

                                      -75-


<PAGE>
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 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

                                      -76-


<PAGE>
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.

         7.13 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 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.

                                      -77-


<PAGE>
         7.14 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.

         (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.

         7.15 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

                                      -78-


<PAGE>
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.

         7.16 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 distribution 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

                                      -79-


<PAGE>
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, 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.

                                      -80-


<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

                                      -81-


<PAGE>

              (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 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.

                                      -82-


<PAGE>
                                   ARTICLE IX
                                 ADMINISTRATION

         9.1 FIDUCIARY RESPONSIBILITIES. The responsibilities of the Employer
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 EMPLOYER. The Employer has sole responsibility for:

         (a) CONTRIBUTIONS. Determining and making Employer Contributions;

         (b) FIDUCIARY APPOINTMENT. Appointing and removing the Trustee, the
Contract Administrator, the Investment Manager and the Committee;

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

         (d) EXPENSES. Paying the expenses of administering the Plan and the
Trust which may not be paid with Plan assets or which otherwise are not paid by
the Trustee out of Plan assets.

         9.3 EMPLOYER ACTION. Action by the Employer 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 Virginia. An Investment Manager must file its written
acceptance with the Employer acknowledging status as a named fiduciary. Upon
acceptance, the Employer 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, the Employer has the responsibilities of the
Committee designated by the Plan.

                                      -83-


<PAGE>
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, 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. 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.

                                      -84-


<PAGE>
         (c) PROCEDURE. The Committee must 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;

         (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. The 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 Employer may purchase insurance to
indemnify a member for that liability.

                                      -85-
<PAGE>
         9.9 PAYMENT OF EXPENSES. The Employer may elect to pay all or a portion
of the administrative expenses of the Plan. If the Employer 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 or the remaining portion of those
expenses (to the extent not precluded by ERISA) 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 the Employer, the Committee, the Contract 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 the 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.

                                      -86-


<PAGE>
         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.

                                      -87-


<PAGE>
                                    ARTICLE X
                        AMENDMENT AND TERMINATION OF PLAN

         10.1 AMENDMENT. The Board of Directors of Electro-Tec Corp. or any
three officers of Electro-Tec Corp. 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 the 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.

                                      -88-


<PAGE>
         10.3 TERMINATION. The Board of Directors of Electro-Tec Corp. or any
three officers of Electro-Tec Corp. 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, Electro-Tec Corp. 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 the Employer; the adjudication of the Employer as a bankrupt; or a
general assignment by the Employer to or for the benefit of its creditors.

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

         (c) DISCONTINUANCE OF CONTRIBUTIONS. A complete discontinuance of
contributions within the meaning of Code Section 411(d)(3), which occurs at the
end of the Plan Year following the Plan Year for which the last substantial
contribution was made.

         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;

                                      -89-


<PAGE>
         (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.

                                      -90-


<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.


                                      -91-


<PAGE>
         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 Virginia.

                                      -92-


<PAGE>
                                        ELECTRO-TEC CORPORATION



                                        By___________________________________
                                            Brian P. Campbell
                                            Its Chairman, and CEO

                                        And__________________________________
                                            John F. Brocci
                                            Its Vice President and Secretary

                                      -93-


<PAGE>
                                   APPENDIX A
                      SECTION 1.1 - SPECIAL EFFECTIVE DATES

<TABLE>
<CAPTION>
Section                    Rule                                                         Effective Date
-------                    ----                                                         --------------
<S>                        <C>                                                         <C>
5.2(d), 7.6(f)             Irrevocable six-month elections.                             September 1, 1992

6.7                        Identification of Investment Options.                        January 1, 1992

6.7                        Investment direction authority by non-Active                 January 1, 1994
                           Participants.

6.8, App. D and E          ERISA Section 404(c) rules.                                  January 1, 1994

7.1(j)                     Early commencement of payment to Alternate                   January 1, 1994
                           Payees.

7.15                       Direct Rollovers.                                            January 1, 1993
</TABLE>


<PAGE>
                                   APPENDIX B
             SECTION 2.6 - EXPLANATION OF DEFINITION OF COMPENSATION

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
                  Section 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 2.7(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 6.7(A)(I) - LIST OF INVESTMENT FUNDS AVAILABLE UNDER THE PLAN

D.1      The following investment Funds are presently available under the Plan.

         1.       AIM Value Fund
         2.       Artisan Partners Mid Cap Growth Fund
         3.       CIGNA Actively Managed Fixed Fund
         4.       CIGNA Balanced fund
         5.       CIGNA Charter Large Gap Growth Fund
         6.       CIGNA Guaranteed Short Term Account
         7.       Fidelity Advisor Growth Opportunities Fund
         8.       Invesco Dynamics Account
         9.       Invesco Technology Account Investor Class
         10.      Invesco Total Return Fund
         11.      Janus Advisor Balanced Account
         12.      Janus Worldwise Fund
         13.      John A. Levin Large Cap Value Fund
         14.      Kaydon Stock (the "Stock Account")
         15.      Lazard Small Cap Fund
         16.      Putnam Large Cap Growth Fund
         17.      Russell 3000 Index Fund
         18.      TCW Small Cap Value Fund
         19.      Templeton Foreign Fund
         20.      Times Square Small Cap Growth Fund
         21.      Warburg Pincus Emerging 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.

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

Individuals eligible to direct investments under the Plan shall receive:

E.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 expense 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 E 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.

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

F.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. Electro-Tec Corp. 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.

F.2      Policy, and Procedure to Provide For Confidentiality of Information
         Regarding Stock. Electro-Tec. Corp. 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
         Administrators 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 F 2

         Resources department of the Plan Sponsor, ft 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 lo 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 describe in this Policy, that such
         procedures are being followed, and that an independent fiduciary is
         appointed t carry out activities relating to Kaydon stock in those
         situations which the Benefits Committee determine 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.       First of America Bank - West Michigan 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 G
      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 or 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 H

          SECTION 9.1 - PARTIES RESPONSIBLE FOR CERTAIN PLAN FUNCTIONS

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

H.2      Trustee.  CG Trust Company

H.3      Administrative Committee or Committee.

         As provided by resolution.