AVONDALE INDUSTRIES, INC.

                                     401(k)

                                  SAVINGS PLAN

                           (Effective January 1, 1998)



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                            AVONDALE INDUSTRIES, INC.
                                     401(k)
                                  SAVINGS PLAN

                                TABLE OF CONTENTS



ARTICLE I - DEFINITIONS
         1.1       Accounts..............................................   I-2
         1.2       Active Participant....................................   I-2
         1.3       Affiliated Company....................................   I-2
         1.4       Beneficiary...........................................   I-2
         1.5       Board of Directors....................................   I-2
         1.6       Code    ..............................................   I-2
         1.7       Committee.............................................   I-3
         1.8       Company ..............................................   I-3
         1.9       Compensation..........................................   I-3
         1.10      Disability............................................   I-4
         1.11      Disability Retirement Date............................   I-4
         1.12      Eligible Employee.....................................   I-4
         1.13      Employee..............................................   I-4
         1.14      Employee-Deferral or Employee-Deferral Contribution...   I-4
         1.15      Employee-Deferral Account.............................   I-4
         1.16      Employee-Deferral Agreement...........................   I-4
         1.17      Employer..............................................   I-4
         1.18      Employer Contribution.................................   I-5
         1.19      Employer Contribution Account.........................   I-5
         1.20      Employer Discretionary Contribution...................   I-5
         1.21      Employment Year.......................................   I-5
         1.22      Entry Date............................................   I-5
         1.23      ERISA   ..............................................   I-5
         1.24      Highly Compensated Employee...........................   I-5
         1.25      Hour of Service.......................................   I-5
         1.26      Leased Employee.......................................   I-7
         1.27      Matching Contribution.................................   I-7
         1.28      Non-Highly Compensated Employee.......................   I-7
         1.29      Non-Participating Employer............................   I-8
         1.30      Normal Retirement Date................................   I-8
         1.31      One Year Break in Service or Break in Service.........   I-8
         1.32      Parental Absence......................................   I-8
         1.33      Participant...........................................   I-8
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         1.34      Participating Employer................................   I-8
         1.35      Plan    ..............................................   I-9
         1.36      Plan Year.............................................   I-9
         1.37      Rollover Contribution Account.........................   I-9
         1.38      Service Termination Date..............................   I-9
         1.39      Trust or Trust Agreement..............................   I-9
         1.40      Trustee ..............................................   I-9
         1.41      Trust Fund............................................   I-9
         1.42      Valuation Date........................................   I-9
         1.43      Vested Interest.......................................   I-10
         1.44      Year of Service.......................................   I-10

ARTICLE II - PARTICIPATION
         2.1       Commencement of Participation.........................   II-1
         2.2       Termination of Participation..........................   II-1
         2.3       Reemployment of an Eligible Employee
                     or Former Participant...............................   II-1
         2.4       Rights of Returning Veteran...........................   II-3

ARTICLE III - EMPLOYEE-DEFERRALS
         3.1       Employee-Deferrals....................................  III-1
         3.2       Delivery of Employee-Deferral Contributions...........  III-1
         3.3       Changes in and Discontinuance of Employee-Deferrals...  III-1
         3.4       Dollar Limitation.....................................  III-1
         3.5       Return of Excess Deferral Amounts.....................  III-1
         3.6       Non-Discrimination Rules for Employee-Deferrals.......  III-2
         3.7       Rollover Contributions................................  III-6

ARTICLE IV - MATCHING CONTRIBUTIONS
         4.1       Matching Contributions................................   IV-1
         4.2       Forfeitures...........................................   IV-1
         4.3       Delivery of Contributions.............................   IV-1
         4.4       Adjustments if Employee-Deferral Contributions
                     Adjusted............................................   IV-1
         4.5       Non-Discrimination Rules for Matching Contributions...   IV-1
         4.6       Qualified Matching Contributions, Qualified
                     Nonelective Contributions...........................   IV-7

ARTICLE V - EMPLOYER DISCRETIONARY CONTRIBUTIONS
         5.1       Employer Discretionary Contributions..................    V-1
         5.2       Allocation of Employer Discretionary Contributions....    V-1
         5.3       Top-Heavy Contributions...............................    V-1
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ARTICLE VI - VESTING
         6.1       Employee-Deferral Account.............................   VI-1
         6.2       Rollover Contribution Account.........................   VI-1
         6.3       Employer Contribution Account.........................   VI-1
         6.4       Forfeitures...........................................   VI-1
         6.5       Reemployment..........................................   VI-1

ARTICLE VII - ALLOCATIONS
         7.1       Allocation of Contributions...........................  VII-1
         7.2       Definitions...........................................  VII-1
         7.3       Annual Additions......................................  VII-2
         7.4       Limitation for Other Defined Contribution Plans.......  VII-2
         7.5       Limitation for Defined Benefit Plan...................  VII-3

ARTICLE VIII - TRUST FUND
         8.1       Plan Assets........................................... VIII-1
         8.2       Separate Accounts..................................... VIII-1
         8.3       Valuation............................................. VIII-1
         8.4       Investment Funds...................................... VIII-1
         8.5       Investment of Contributions........................... VIII-2
         8.6       Transfer of Amounts Among Investment Funds............ VIII-2
         8.7       Liability for Investment Decisions.................... VIII-3
         8.8       Accounting Procedures................................. VIII-4

ARTICLE IX - BENEFITS
         9.1       Normal Retirement Date................................   IX-1
         9.2       Disability Retirement Date............................   IX-1
         9.3       Nonalienation of Benefits.............................   IX-1
         9.4       Qualified Domestic Relations Order....................   IX-1

ARTICLE X - PAYMENT OF BENEFITS
         10.1      Time of Payment.......................................    X-1
         10.2      Required Beginning Date...............................    X-1
         10.3      Death Benefit.........................................    X-2
         10.4      Form of Distribution..................................    X-2
         10.5      Temporary Non-Payment of Benefits.....................    X-2
         10.6      Direct Rollover Rules.................................    X-2
         10.7      Notice  ..............................................    X-3

ARTICLE XI - IN-SERVICE DISTRIBUTION AND LOANS
         11.1      Distribution after Attaining Age 59 1/2...............   XI-1
         11.2      Financial Hardship....................................   XI-1
         11.3      Loans to Participant..................................   XI-2
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ARTICLE XII - ADMINISTRATION
         12.1      Board of Directors...................................   XII-1
         12.2      401(k) Administrative Committee......................   XII-1
         12.3      Committee's Duties and Responsibilities..............   XII-1
         12.4      Committee's Powers...................................   XII-2
         12.5      Chairman of the Committee............................   XII-3
         12.6      Claims Review Procedure..............................   XII-3
         12.7      Information from Participants, Beneficiaries and
                     Alternate Payees...................................   XII-4
         12.8      Actions .............................................   XII-4
         12.9      Bond    .............................................   XII-4
         12.10     Indemnification......................................   XII-4

ARTICLE XIII - AMENDMENT OF THE PLAN
         13.1      Right to Amend or Suspend Contributions..............  XIII-1
         13.2      Amendment by Committee...............................  XIII-1
         13.3      Restriction on Amendment.............................  XIII-1
         13.4      Retroactivity........................................  XIII-2
         13.5      Merger  .............................................  XIII-2

ARTICLE XIV - TERMINATION OF THE PLAN
         14.1      Events Constituting Termination......................   XIV-1
         14.2      Partial Termination..................................   XIV-1
         14.3      Disposition of Accounts After a Termination..........   XIV-1
         14.4      Internal Revenue Service Approval for Distribution...   XIV-2

ARTICLE XV - STAND-BY TOP-HEAVY PROVISIONS
         15.1      Top Heavy Plan.......................................    XV-1
         15.2      Definitions..........................................    XV-1
         15.3      Vesting .............................................    XV-2
         15.4      Minimum Contribution.................................    XV-2
         15.5      Limitations on Contributions.........................    XV-3
         15.6      Other Plans..........................................    XV-3

ARTICLE XVI - GENERAL PROVISIONS
         16.1      Plan Voluntary.......................................   XVI-1
         16.2      Payments to Minors and Incompetents..................   XVI-1
         16.3      Missing Payee........................................   XVI-1
         16.4      Required Information.................................   XVI-1
         16.5      Subject to Trust Agreement...........................   XVI-1
         16.6      Communications to Committee..........................   XVI-1
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         16.7      Communications from Employer or Committee............   XVI-2
         16.8      Action  .............................................   XVI-2
         16.9      Liability for Benefits...............................   XVI-2
         16.10     Named Fiduciary......................................   XVI-2
         16.11     Gender  .............................................   XVI-2
         16.12     Captions.............................................   XVI-2
         16.13     Applicable Law.......................................   XVI-2
         16.14     Reversion of Employer Contributions..................   XVI-2
         16.15     Expenses.............................................   XVI-3
                                       v
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                                   PREAMBLE


         Avondale   Industries,   Inc.   originally   established  the  Avondale
Industries,  Inc. 401(k) Savings Plan (the "Plan") effective January 1, 1996 and
such Plan has been amended from time to time thereafter. The Plan was amended to
change Year of Service  from an "elapsed  time " method to an "Hours of Service"
method for participation,  break in service and vesting purposes. The provisions
relating to the "elapsed time" method, under the terms of the Plan prior to this
restatement,   continue  to  be  in  effect  for  each  Participant   until  the
Participant's  Employment  Year  beginning in Plan Year 1997.  Other  amendments
included adding provisions relating to the Family and Medical Leave Act of 1993,
the Uniformed Services  Employment and Reemployment  Rights Act of 1994, and the
Small Business Job Protection Act of 1996, the Taxpayer  Relief Act of 1997, and
making other administrative changes. The Plan is restated,  effective January 1,
1998, unless stated otherwise, to incorporate prior amendments and to make other
clarifications and revisions.

         The purpose of this Plan is to  encourage  Employees to save and invest
systematically  a portion of their current  compensation  in order that they may
have an additional  source of income upon their  retirement or  disability.  The
benefits  provided by the Plan are paid from the Trust Fund  established  by the
Employer and are in addition to the benefits  Employees  are entitled to receive
under any other  programs of the Employer and the United States Social  Security
Administration.

         The  Plan  and  its  related   Trust  are  intended  to  qualify  as  a
profit-sharing  plan and a  cash-or-deferred  arrangement under Sections 401(a),
501(a),  401(k) and 401(m) of the Internal Revenue Code of 1986, as amended. Any
ambiguity shall be resolved by giving effect to these  intentions.  The Plan and
the Trust forming a part hereof are maintained for the exclusive  benefit of the
Participants and their Beneficiaries.
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                                    ARTICLE I
                                   DEFINITIONS

         All  capitalized  terms used in this Plan shall  have the  meaning  set
forth in this Article I, unless a different  meaning is plainly  required by the
context:

         1.1  Accounts  shall  mean  each of a  Participant's  Employee-Deferral
Account,   Employer  Contribution  Account  and  Rollover  Contribution  Account
(including  subaccounts  established  from time to time under each such Account)
established  and maintained to record the interest of a Participant in the Trust
Fund as more fully described in Sections 1.15, 1.19 and 1.37.

         1.2 Active  Participant shall mean an Eligible Employee who is employed
by a  Participating  Employer  through the last payroll period ending within the
Plan Year.

         1.3  Affiliated  Company  means  the  Company  and all  other  entities
required to be aggregated  with the Company under Sections  414(b),  (c), (m) or
(o) of the Code.

         1.4  Beneficiary  shall  mean the  person or  persons  designated  by a
Participant to receive the amount,  if any,  payable under the Plan in the event
of a Participant's  death.  Each  Beneficiary  designation  shall be in the form
prescribed by the Committee.

         If the  Participant  is married and  designates  someone other than his
legal spouse,  his Beneficiary  designation  must include the written consent of
his  spouse at the time the  designation  is made.  Such  written  consent  must
approve  the   Beneficiary   designated  and  acknowledge  the  effect  of  such
designation  and must be notarized by a notary  public.  If it is established to
the satisfaction of the Committee that the Participant has no spouse or that the
spouse's  consent  cannot be obtained  because the spouse cannot be located,  or
because of such other  circumstances as may be prescribed in regulations  issued
pursuant to Section 417 of the Code, such written consent shall not be required.

         If no valid  Beneficiary  designation  is in  effect at the time of the
Participant's death, then, to the extent, if any, benefits are payable under the
Plan after such death, Beneficiary shall mean the Participant's legal spouse, if
he is married at the time of his death, otherwise the Participant's estate.

         1.5 Board of  Directors  shall mean the Board of  Directors of Avondale
Industries, Inc.

         1.6 Code shall mean the Internal  Revenue Code of 1986, as amended from
time to time.  Reference to any Section of the Code shall  include any successor
provision thereto.
                                      I-2
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         1.7 Committee shall mean the 401(k) Administrative Committee designated
by the Company to  administer  the Plan in  accordance  with  Section  12.2 or a
person or entity designated by the 401(k) Administrative Committee.

         1.8       Company shall mean Avondale Industries, Inc. and any
successor company that may continue the Plan.

         1.9  Compensation.  The term  "Compensation" as modified below, has the
following meaning for each respective purpose under the Plan:

                   (a)     Plan   Compensation.   For  purposes  of  determining
                           contributions  to  the Plan,  Plan Compensation means
                           base  pay  plus  overtime,   bonuses  and  short-term
                           Disability  payments,   if any,   and  shall  exclude
                           permanent  Disability  payments  and  any other extra
                           compensation in any form paid to the  Employee by the
                           Employer  during the Plan  Year.   Plan  Compensation
                           will include Employee-Deferrals made on behalf of the
                           Participant  under  this  Plan   and   any   elective
                           contributions made on behalf of the Participant to  a
                           Section  125   cafeteria  plan  maintained   by   the
                           Employer.

                   (b)     Section 415 Compensation. For the purpose of applying
                           individual account  limitations of Section 415 of the
                           Code,  Section 415 Compensation means Compensation as
                           reported on the Employee's W-2.  Effective January 1,
                           1998, Section 415 Compensation is Total
                           Compensation.

                   (c)     Total Compensation  means W-2 Compensation,  plus the
                           Elective-Deferrals  made on behalf of the Participant
                           under this Plan and any elective  contributions  made
                           on  behalf  of  the  Participant  to  a  Section  125
                           cafeteria plan maintained by the Employer.

                           A  Participant's  Total  Compensation  for the entire
                           Plan  Year   shall  be   counted   even   though  the
                           Participant may participate in the Plan for less than
                           the  entire   Plan  Year   (e.g.,   even  though  the
                           Participant  enters the Plan on a monthly  entry date
                           occurring during the Plan Year).

         The amount of a  Participant's  annual  Compensation  that can be taken
into account  under any of  Subparagraphs  (a) - (c) for any Plan Year shall not
exceed  $150,000,  as  adjusted  from time to time in  accordance  with  Section
401(a)(17) of the Code. This limitation for 1998 is $160,000.
                                      I-3
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         1.10  Disability  of a  Participant  shall mean the total and permanent
incapacity of a Participant to engage in any substantial gainful employment,  as
determined by the Committee and which qualifies him for commencement of benefits
for permanent and total disability under Federal Old Age and Survivor Insurance.

         1.11  Disability  Retirement  Date shall have the  meaning set forth in
Section 9.2.

         1.12 An Eligible  Employee  shall mean any Employee of a  Participating
Employer;  provided,  however,  that an Eligible Employee shall not include: (a)
any  Employee  who is included in a unit of  employees  covered by a  negotiated
collective  bargaining agreement which does not provide for his participation in
this Plan;  (b) any Employee who is  providing  services  pursuant to an oral or
written contract or leasing  arrangement with an unrelated  employer,  including
any Employee who under a Participating  Employer's standard personnel practices,
is deemed a subcontractor or a leased employee; (c) any Employee who is a Leased
Employee;  (d) any  Employee  who,  under a  Participating  Employer's  standard
personnel practices, is deemed an independent contractor (without regard to such
person's  status for  Federal  income tax  purposes  and  without  regard to any
subsequent  determination that such person is a common law employee) and (e) any
Employee who, under a Participating  Employer's standard personnel practices, is
deemed a contractor,  jobber, or a consultant.  All determinations shall be made
in  the  sole   discretion   of  the   Participating   Employer   in  a  uniform
non-discriminatory manner.

         1.13 Employee shall mean any person who is employed by a  Participating
Employer  or  Non-Participating  Employer  as a common  law  employee  receiving
remuneration  subject to  withholding  for  purposes  of the  Federal  Insurance
Contribution Act (except that Leased Employees as described in Section 414(n)(2)
of the Code shall be  considered  Employees  solely for purposes of  determining
whether the  requirements  of Section  414(n)(3) of the Code are  satisfied).  A
director of the Company is not eligible for  participation in the Plan unless he
is also an Employee.

         1.14 Employee-Deferral or Employee-Deferral Contribution shall mean the
amount contributed by the Employer on behalf of a Participant in accordance with
Article III.

         1.15 Employee-Deferral  Account shall mean the Account maintained for a
Participant  to  record  the  Employee-Deferrals  under  Article  III,  and  any
contributions   under  Section  4.6,   contributed   by  the  Employer  on  such
Participant's behalf.

         1.16 Employee-Deferral  Agreement shall mean the agreement described in
Article III.

         1.17   Employer   shall   mean   a   Participating    Employer   or   a
Non-Participating Employer. Appendix A lists each Participating Employer.
                                      I-4
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         1.18 Employer  Contribution means any (a) Matching  Contributions,  (b)
Employer  Discretionary  Contributions and (c) contributions required on account
of a Top-Heavy Plan Year.

         1.19 Employer  Contribution  Account shall mean the account established
for a Participant which is funded by Employer Contributions.

         1.20 Employer  Discretionary  Contribution shall mean a contribution by
an Employer to the Trust Fund as described in Article V.

         1.21  Employment  Year shall mean the twelve month period of employment
commencing  on the date the Employee  first  performs an Hour of Service for the
Employer and each  anniversary  thereof.  The  Employment  Year for a reemployed
Eligible Employee is determined in Section 2.3.

         1.22 Entry Date shall mean  February  1, 1996 and the first day of each
month  thereafter  and any other  date  during  the Plan Year  specified  by the
Committee.

         1.23 ERISA shall mean the Employee  Retirement  Income  Security Act of
1974,  as amended from time to time.  References to any Section of ERISA include
any successor provision thereto.

         1.24 Highly Compensated Employee, as determined for any Plan Year after
the Plan Year ending  December  31,  1996,  means any  Employee who (a) was a 5%
owner (as defined at Section 416(i)(1)(B)(i) of the Code) at any time during the
current year or the  previous  year or (b)  received  Compensation  in excess of
$80,000 (as adjusted  after 1997 under Code Section  414(q)(1)) in the preceding
Plan Year and was one of the highest-paid 20% of Employees.

         1.25      Hour of Service shall mean:

                   (a)     Each  hour  for  which an  Employee  is  directly  or
                           indirectly   paid  or   entitled   to  payment  by  a
                           Participating Employer or Non-Participating  Employer
                           for the performance of duties,  including  periods of
                           vacation and holidays;

                   (b)     Each  hour  for  which an  Employee  is  directly  or
                           indirectly   paid  or   entitled   to  payment  by  a
                           Participating Employer or Non-Participating  Employer
                           (including  payments made or due from a trust fund or
                           insurer  to  which  the  Participating   Employer  or
                           Non-Participating   Employer   contributes   or  pays
                           premiums) on account of a period of time during which
                           no duties are performed  (irrespective of whether the
                           employment
                                      I-5
<PAGE>
                           relationship   has   terminated)   due  to  vacation,
                           holiday, illness,  incapacity (including disability),
                           layoff,  jury  duty,  or leave of  absence,  provided
                           that:

                           (i)      no more than 501 Hours of  Service  shall be
                                    credited  under  this  paragraph  (b)  to an
                                    Employee on account of any single continuous
                                    period during which the Employee performs no
                                    duties; and

                           (ii)     Hours of Service shall not be credited under
                                    this  paragraph  (b)  to an  Employee  for a
                                    payment which solely reimburses the Employee
                                    for  medically-related  expenses incurred by
                                    the Employee or which is made or due under a
                                    plan  maintained  solely for the  purpose of
                                    complying    with    applicable     worker's
                                    compensation,  unemployment  compensation or
                                    disability insurance laws;

                   (c)     Each hour not  already  included  under this  Section
                           1.25  above  for  which  back  pay,  irrespective  of
                           mitigation of damages, is either awarded or agreed to
                           by such Employer, provided that crediting of Hours of
                           Service  under  this  Section  1.25 with  respect  to
                           periods described in this Section 1.25 above shall be
                           subject to the limitation therein set forth; and

                   (d)     If  an  Employee is absent from his or her employment
                           with the  Employer  for any paid period on account of
                           (i)  Parental Absence,  or  (ii)  any period of leave
                           recognized  under the Family and Medical Leave Act of
                           1993 such  Employee shall be credited with sufficient
                           Hours  of  Service  (not in excess of 501 in any Plan
                           Year)  so  that  a Break in Service does not occur in
                           either  the  Employment  Year  in  which such absence
                           begins (if credit is required to preclude  a Break in
                           Service in such year) or in the immediately following
                           Employment  Year  (if  no  credit  was awarded in the
                           preceding year).  For purposes of computing  Hours of
                           Service   credited  under  this  paragraph  (d),   an
                           Employee shall be credited with (i) Hours of  Service
                           which  would  otherwise be credited to such  Employee
                           without  regard to  the  absence,  or (ii) 8 Hours of
                           Service for each day of the absence.   The Committee,
                           in its sole discretion, may require (i) evidence that
                           the absence is  on account of a reason  enumerated in
                           this  paragraph  (d),  and  (ii)  evidence  as to the
                           duration of the absence.

         The number of Hours of Service to be credited  under this  Section 1.25
above on account of a period  during which an Employee  performs no duties,  and
the  Plan Years to which  Hours of Service shall be credited  under this Section
                                      I-6
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1.25  above  shall  be  determined by the Committee in accordance with  Sections
2530.200b-2(b)  and (c) of the Regulations of the U.S. Department of Labor.

         1.26 A Leased Employee shall mean any person (excluding a person who is
a  common  law  employee  of the  Participating  Employer  or  Non-Participating
Employer) who, pursuant to an agreement between a Participating  Employer (or an
Affiliated Company) and any other person ("leasing  organization") has performed
services for the Participating  Employer (or an Affiliated  Company) and related
persons  determined  in  accordance  with Section  414(n)(6)  of the Code,  on a
"substantially  full-time basis" for a period of at least one year and: for Plan
Years after 1996,  such  services are performed  under the primary  direction or
control of a Participating Employer (or an Affiliated Employer);  for Plan Years
prior to 1997,  such  services are of the type  historically  performed,  in the
business  field of the  Participating  Employer (or an  Affiliated  Employer) by
employees.

         A person is considered to have performed  services on a  "substantially
full-time  basis"  for a  period  of at  least  one  year  if:  (a)  during  any
consecutive  12-month  period such person has  performed at least 1,500 Hours of
Service for the  Employer  or (b) during any  consecutive  12-month  period such
person  performed  services for the Employer for a number of Hours of Service at
least equal to 75% of the average number of hours that are customarily performed
by an employee of the Employer in the particular position.

         Such a person  will  not be a  Leased  Employee  if the  person  (a) is
covered by a money purchase pension plan providing (i) a nonintegrated  employer
contribution  rate of at least 10% of such  person's W-2 wages,  (ii)  immediate
participation,  and (iii) full and  immediate  vesting,  and (b)  provided,  the
Leased  Employee,  determined  without  regard  to  whether  such  person  is  a
participant in the above  described  money purchase plan, do not constitute more
than 20 percent of the recipient's nonhighly compensated workforce.

         In the event that any Leased Employee  subsequently becomes an Eligible
Employee,  then unless the Plan is  otherwise  excluded by  applicable  Treasury
Regulations from the requirements of Code Section 414(n),  the total period that
such former Leased  Employee  provided  services to the  Participating  Employer
shall be treated  under the Plan,  for  participation  eligibility  and  vesting
purposes  as though he had been an  Employee  of the  Participating  Employer or
Non-Participating Employer.

         1.27 Matching  Contribution shall mean a contribution by an Employer to
the Trust Fund as described in Article IV.

         1.28 Non-Highly  Compensated Employee shall mean an Employee who is not
a Highly Compensated Employee.
                                      I-7
<PAGE>
         1.29 Non-Participating  Employer shall mean an Affiliated Company which
is not a Participating Employer.

         1.30 Normal Retirement Date shall have the meaning set forth in Section
9.1. Normal Retirement Age means the Participant's sixty-fifth (65th) birthday.

         1.31 One Year  Break in  Service  or  Break in  Service  shall  mean an
Employment Year in which a Participant has 500 or less Hours of Service.

         1.32 Parental  Absence  shall mean an Employee's  absence from work for
any of the following reasons: (i) the pregnancy of the Employee,  (ii) the birth
of the Employee's child, (iii) the adoption of a child by the Employee,  or (iv)
the need to care for the  Employee's  child  immediately  following its birth or
adoption;  provided,  however, that the Committee,  in its sole discretion,  may
require  evidence that any absence is on account of a reason  enumerated  herein
and evidence as to the duration of such absence.

         1.33 Participant shall mean (a) any Eligible Employee who satisfies the
participation  requirements set forth in Article II, and (b) any former Employee
on whose behalf an Account  continues to be  maintained  in the Plan pursuant to
Article  II. An Eligible  Employee  remains a  Participant  as long as he has an
Account balance, as provided in Section 2.2.

         In the  event  the  Plan  fails to pass the  coverage  requirements  of
Section  410(b) of the Code for a Plan  Year,  certain  Employees  will be given
"Eligible  Employee"  status  in a number  necessary  to  satisfy  the  coverage
requirements of Section 410(b) of the Code.  "Eligible  Employee" status will be
given to  certain  Employees  beginning  first  with the  Employee  who has both
satisfied the  participation  requirements of Article II and has the most recent
original  employment date and continuing in descending  original employment date
order, to the extent necessary for the Plan to pass the coverage requirements of
Section  410(b)  of the  Code.  If two or  more  Employees  have  satisfied  the
participation  requirements of Article II and have the same original  employment
date,   Employees  will  be  given  "Eligible  Employee"  status  determined  in
alphabetical order of the Employees' last names until the coverage  requirements
are met. Coverage under this paragraph only applies to the year in question.

         1.34 Participating  Employer shall mean the Company,  Avondale Services
Corporation,  and any  Affiliated  Company  that  adopts  this Plan  pursuant to
authorization  by the  Board  of  Directors  of the  Company  and the  board  of
directors of the newly-adopting entity.

         By  authorizing  the adoption of this Plan,  the governing  body of any
Participating Employer expressly recognizes and delegates to the Company and its
Board of  Directors  the right to  exercise  on the behalf of the  Participating
                                      I-8
<PAGE>
Employer  all  power and authority  conferred by the  Plan to the Company or its
Board of Directors.

         1.35 Plan shall mean the Avondale Industries, Inc. 401(k) Savings Plan,
as set forth in this document and as amended from time to time.

         1.36 Plan Year shall mean the calendar year.

         1.37 Rollover  Contribution  Account shall mean the Account  maintained
for a Participant to record his rollover  contribution  made pursuant to Section
3.7.

         1.38 Service Termination Date shall mean the earliest of the following:

                   (a)     the date on which an Employee resigns, is discharged,
                           retires or dies;

                   (b)     the  first  anniversary  of  the  date  on  which  an
                           Employee is laid off,  starts an authorized  leave of
                           absence,  or is absent from work for any other reason
                           (other than those instances  covered under paragraphs
                           (a) and (c)),  including  holidays,  paid  vacations,
                           sick leaves and absence on account of disability;

                   (c)     the  second  anniversary  of the  date  on  which  an
                           Employee  commenced  a  Parental  Absence,   if  such
                           Employee   has  not  yet  returned  to  work  with  a
                           Participating or Non-Participating Employer.

         1.39 Trust or Trust  Agreement shall mean the agreement and any and all
amendments  and  supplements  thereto  entered  into between the Company and the
Trustee.  The Trust  Agreement shall be deemed to be part of this Plan as if all
the terms and provisions were fully set forth herein.

         1.40 Trustee shall mean the person or persons appointed by the Board of
Directors to be Trustee under the Trust Agreement.

         1.41 Trust Fund shall mean all assets held by the Trustee in accordance
with the Trust Agreement.

         1.42  Valuation Date shall mean the last day of each quarter during the
Plan Year or any other  date or dates  during  the Plan  Year  specified  by the
Committee  upon which the assets of the Trust  Fund are valued as  described  in
Article  VIII.  The  Annual  Valuation  Date shall mean the last day of the Plan
Year.
                                      I-9
<PAGE>
         1.43 Vested Interest shall mean the portion of a Participant's Accounts
which has become vested and nonforfeitable, under Section 6.3.

         1.44 Year of Service  shall mean any  Employment  Year  beginning on or
after January 1, 1997 in which an Employee  completes 1000 Hours of Service with
the Employer.  An Employee's Years of Service include all periods counted as the
Employee's  Years of Service earned prior to 1997 under Plan  provisions then in
effect.

         All the  Employee's  Years of Service with the Employer  shall be taken
into  account  including  service  prior  to the  year the  Employee  meets  the
definition  of  Eligible  Employee,   for  purposes  of  satisfying  the  Plan's
eligibility  requirements and for calculating a Participant's Vested Interest in
his Employer Contribution Account unless such periods of service are disregarded
pursuant to Section 2.3 of the Plan.
                                      I-10
<PAGE>
                                   ARTICLE II
                                  PARTICIPATION

         2.1  Commencement  of  Participation.  Each  person who is an  Eligible
Employee  shall become a Participant  on the Entry Date which  coincides with or
immediately  follows the date (a) which such Eligible  Employee  attained age 21
and (b) on which such Eligible Employee completed one Year of Service,  provided
he is employed by a Participating Employer on such date.

         2.2 Termination of  Participation.  An Eligible Employee or Participant
who either (i) terminates employment with the Employer, or (ii) becomes employed
in a position that is not eligible for benefits  under this Plan as explained in
Section 1.12 including when an Employee becomes a member of a group of employees
covered by a negotiated  collective  bargaining agreement which does not provide
for   participation   in  the  Plan  or  (iii)   becomes   an   Employee   of  a
Non-Participating  Employer  shall no longer be an Eligible  Employee  but shall
continue as a  Participant  in the Plan  entitled to share in the  earnings  and
losses of the Trust Fund and to exercise the rights of a  Participant  hereunder
until his Vested Interest has been distributed and the non-vested portion of his
Accounts, if any, has been forfeited pursuant to Section 6.4.

         The  participation  of any  Participant  shall end when (i) no  further
benefits  are  payable  to him or his  Beneficiary  under  the  Plan and (ii) no
further amounts are credited to his Accounts.

         2.3 Reemployment  of  an  Eligible  Employee or Former Participant. The
following reemployment rules apply:

                   (a)     Resetting  the   Employment   Year.  If  an  Eligible
                           Employee is reemployed his  Employment  Year is reset
                           based  on his  reemployment  date  if  the  following
                           conditions are met:

                           (i)      the  Eligible  Employee  is  not  reemployed
                                    until after the end of the Employment Year
                                    of his Service Termination Date, and

                           (ii)     the  Eligible  Employee has a One Year Break
                                    in Service in the  Employment  Year prior to
                                    the Employment Year of his reemployment
                                    date.

                   (b)     Reemployment  of  a  Former  Participant.  Except  as
                           provided in Section 2.3(d), a "Former Participant" is
                           an Employee who terminated employment after the Entry
                           Date   following   the  date  on  which  he  met  the
                           requirements of Section 2.1. A Former Participant who
                           is  reemployed  shall be treated as if his employment
                                      II-1
<PAGE>
                           was  not   broken.  Such  Employee,  if  an  Eligible
                           Employee,  shall   be   allowed    to  make Employee-
                           Deferrals pursuant to Section 3.1.  His past Years of
                           Service for purposes of  vesting will be added to any
                           Years of  Service earned after reemployment.

                   (c)     Reemployment of a Non-Participant.

                           (i)      If an Eligible Employee who had not become a
                                    Participant is reemployed and his Employment
                                    Year is not reset,  he becomes a Participant
                                    on the first  Entry  Date after he meets the
                                    requirements of Sections 1.12 and 2.1.

                           (ii)     If an Eligible Employee who had not become a
                                    Participant is reemployed and his Employment
                                    Year is reset,  he becomes a Participant  on
                                    the  first  Entry  Date  after he meets  the
                                    requirements of Sections 1.12 and 2.1. Hours
                                    of  Service  prior to  reemployment  are not
                                    considered   for  purposes  of   determining
                                    eligibility to participate.

                           (iii)    If an Eligible  Employee  who had previously
                                    met the  requirements of Sections  1.12  and
                                    2.1  but  had  not  yet become a Participant
                                    because he was not employed on an Entry Date
                                    is reemployed and his Employment Year is not
                                    reset,  he  shall become a Participant as of
                                    the first Entry Date following reemployment.
                                    If such Eligible Employee is reemployed  and
                                    his  Employment  Year  is  reset,  he  shall
                                    become  a  Participant  on  the  first Entry
                                    Date following the completion of one Year of
                                    Service.

                   (d)     Reemployment   of   Non-Vested   Participant.   If  a
                           Participant who was not fully vested in his  Employer
                           Contribution Account terminates  employment   and  is
                           reemployed after incurring  the  greater of (i)  five
                           consecutive  One Year Breaks  in  Service or (ii) the
                           aggregate   number  of  Years  of  Service  prior  to
                           termination,  he  shall  be treated as a new employee
                           for  purposes  of  vesting and any  Years of  Service
                           accumulated  by  him  prior to  termination  shall be
                           disregarded.   For  purposes  of  participation,  see
                           Section 2.3(b).

                   (e)     Reemployment of Vested Participant.  If a Participant
                           who was  fully  vested in his  Employer  Contribution
                           Account terminates employment and is reemployed after
                           any number of One Year Breaks in Service, he shall be
                           reinstated  as a  Participant,  if he is an  Eligible
                           Employee, as of the date he first performs an Hour of
                                      II-2
<PAGE>
                           Service   following   reemployment.    However,   his
                           Employment  Year  may  be reset for vesting  purposes
                           based on the rules stated in Section 2.3(a).

         2.4 Rights of  Returning  Veteran.  This  Section  applies to Returning
Veterans who apply for reemployment on or after December 12, 1994.

                   (a)     Definitions.

                           (i)      Returning   Veteran   means   a   reemployed
                                    Employee who gave notice to the Employer  of
                                    his  impending   Service  in  the  Uniformed
                                    Services, (unless such notice was  precluded
                                    by   military  necessity  or  was  otherwise
                                    impossible  or unreasonable),   and  resumes
                                    employment with an Employer during such time
                                    as such Employee  has  reemployment   rights
                                    under Chapter 43 of Title 38  of  the United
                                    States  Code,    popularly   known   as  the
                                    Uniformed      Services    Employment    and
                                    Reemployment Rights Act.

                           (ii)     Service in the Uniformed Services means  the
                                    performance  of  duty   on  a  voluntary  or
                                    involuntary  basis in a "Uniformed  Service"
                                    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.   The  "Uniformed
                                    Services"   include  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;  and any other  category of persons
                                    designated  by the  President  of the United
                                    States in time of war or emergency.

                           (iii)    Compensation of the Returning  Veteran.  The
                                    allowable contributions will be based on the
                                    Compensation   that  the  Returning  Veteran
                                    would have  received  for that period if not
                                    in the Uniformed  Services  (including  wage
                                    increases and bonuses),  or, if that can not
                                    be  determined  with  reasonable  certainty,
                                    based  on the  Returning  Veteran's  average
                                    earnings during the 12 months  preceding the
                                    leave.

                           (iv)     Employee-Deferrals     Limitations.      For
                                    purposes of the limitations under Articles
                                    III and  VII,  Employee-Deferrals  shall  be
                                      II-3
<PAGE>

                                    deemed to be made in the Plan Years to which
                                    the contributions apply,  not  the  year  in
                                    which they are made.  No earnings  shall  be
                                    included  in  the  Employee-Deferrals,  even
                                    though  the  Returning   Veteran's   account
                                    balance  would  have  been  greater  if  the
                                    contributions  had been made in the years to
                                    which the Employee-Deferrals apply.

                   (b)     Make-Up  Employee-Deferrals.  A Returning  Veteran is
                           allowed  to make the  Employee-Deferral  Contribution
                           that he or she  could  have made if  employed  by the
                           Employer   during   the  period  of  service  in  the
                           Uniformed Services.

                           The Employee-Deferral Contribution can be made over a
                           period of years  equal to three  times the  period of
                           Uniformed  Service,  not to exceed  five  years.  The
                           Employee-Deferral  Contribution  shall be  deemed  to
                           apply  first to the  earliest  period of the  Service
                           with the Uniformed Services.

                   (c)     Make-Up  Matching   Contributions.   If  a  Returning
                           Veteran makes an Employee-Deferral  Contribution, the
                           Employer will make the Matching Contribution, if any,
                           that  would  have  been  made to the  account  of the
                           Returning   Veteran   if  he  or  she  had  made  the
                           Employee-Deferral  Contribution in the years to which
                           they apply.

                   (d)     Make-Up  Discretionary  Contributions.   A  Returning
                           Veteran  shall  receive  the  Employer  Discretionary
                           Contributions,  if any,  (exclusive  of  forfeitures)
                           that  he  would  have  received  if  employed  by  an
                           Employer   during   the  period  of  service  in  the
                           Uniformed Services.

                   (e)     Hours of Service.  An Hour of Service means each hour
                           the Returning Veteran would have been paid,  directly
                           or  indirectly,  or entitled to payment under Section
                           1.25 assuming  that but for such military  service he
                           would have been regularly  engaged in the performance
                           of his  duties.  Such hours  shall be credited to the
                           Year of Service in which he would have been regularly
                           engaged in the performance of his duties but for such
                           military service.

                   (f)     Severance  Date.  A  Returning  Veteran who is absent
                           from   employment   on  account  of  Service  in  the
                           Uniformed Services shall incur a Service  Termination
                           Date under this subsection only if he fails to return
                           to active  employment  with the  Employer  within the
                           period  provided  by law  for the  protection  of his
                           re-employment rights.
                                      II-4
<PAGE>
                   (g)     Loan Repayment.  Any loan repayment  suspension for a
                           Participant  will  not  be  taken  into  account  for
                           purposes of Code Sections taxing unpaid loans for any
                           part of any period during which such  Participant  is
                           in the Service in the Uniformed Services and will not
                           be considered in testing for discriminatory  benefits
                           or treated as a "prohibited  transaction" between the
                           Plan and Participant.
                                      II-5
<PAGE>
                                   ARTICLE III
                               EMPLOYEE-DEFERRALS

         3.1  Employee-Deferrals.   An  Eligible  Employee  may  enter  into  an
Employee-Deferral  Agreement  with  his  Employer  on such  form or forms as the
Committee  shall  prescribe  or  through  a voice  response  system  after  such
Participant   has   entered  his   personal   identification   number.   In  the
Employee-Deferral  Agreement  the  Eligible  Employee  shall  agree to  accept a
deferral of his Plan  Compensation  expressed as a whole percentage no less than
1% and no more than 13%. The Employee-Deferral  Agreement shall remain in effect
until changed or discontinued as provided in Section 3.3. An Employee's election
under  this  Section  3.1 can be made  when the  Employee  becomes  an  Eligible
Employee  effective as of the next payroll period  provided the  Participant has
given the Committee  advance  notice of such change in such form and within such
time period  preceding  the  effective  date of the change as the  Committee may
prescribe.

         No Employee-Deferral  may be paid to the Plan by the Employer on behalf
of a  Participant  after he ceases to be an  Employee  or during any period when
such Participant is not receiving Plan Compensation from the Employer.

         3.2 Delivery of Employee-Deferral Contributions. All Employee-Deferrals
shall be transmitted to the Trustee by the Employer as soon as practicable  (but
in no event later than the 15th business day of the month following the month in
which  the   Employee-Deferrals   would  have  otherwise  been  payable  to  the
Participant in cash).

         3.3 Changes in and Discontinuance of Employee-Deferrals.  A Participant
may change the rate of Employee-Deferrals or discontinue Employee-Deferrals paid
by his  Employer  to the Plan on his  behalf  effective  as of the next  payroll
period provided the  Participant has given the Committee  advance notice of such
change in such form and within such time period  preceding the effective date of
the change as the Committee may prescribe.

         3.4   Dollar   Limitation.   In  no   event   shall   a   Participant's
Employee-Deferral  Contributions for a Participant's taxable year exceed $9,500,
or such larger amount as allowed under Code Section 402(g) to reflect  increases
in the cost of living. The dollar limit for 1998 is $10,000.

         3.5   Return   of  Excess   Deferral   Amounts.   If  a   Participant's
Employee-Deferral   Contributions  under  the  Plan  should  exceed  the  dollar
limitation under Section 3.4 for a Plan Year, the excess amount and the earnings
thereon  shall be  distributed  to the  Participant  no later  than the April 15
following the calendar year of the excess  deferral.  If a Participant  notifies
the  Committee in writing no later than March 1 following  the calendar  year of
the excess  deferral  that he was also a  participant  in a plan of an unrelated
employer  governed by the Code Section  402(g)  dollar  limitation  described in
Section 3.4,  that the total  deferrals  under  the plans  exceeded  the  dollar
                                     III-1
<PAGE>
limitation  described  in  Section 3.4, and that he has allocated some or all of
the excess deferrals to this Plan,  then the  excess allocated to this Plan (and
the earnings thereon) shall be distributed to  the Participant no later than the
following  April  15.  Excess  deferrals  that  are  distributed  are not Annual
Additions.

         Any  returned  excess  deferrals  must  include  income or loss for the
calendar year of the excess  deferral,  and must include  income or loss for the
"gap period" between the end of that year and the date of distribution. The gain
or loss allocable to the excess deferral amount for the preceding  calendar year
shall be determined by any reasonable method, provided that such method does not
violate Section 401(a)(4) of the Code, is consistently  applied, and is used for
allocating income to Participants' Accounts.

         Any Matching Contributions attributable to returned  Employee-Deferrals
shall be forfeited.  The amount of excess  deferrals to be distributed  shall be
reduced by Excess  Contributions  previously  distributed  for the taxable  year
ending in the same Plan Year, as provided in Section 3.6(e).

         3.6       Non-Discrimination Rules for Employee-Deferrals

                   (a)     Definition.

                           (i)      The   term  "Actual   Deferral   Percentage"
                                    (hereinafter "ADP") as used in this  Section
                                    3.6 shall mean, for each specified group  of
                                    Eligible Participants for a  Plan Year,  the
                                    average   of   the    ratios     (calculated
                                    separately for each Eligible Participant  in
                                    such group) of (1) the  amount of  Employee-
                                    Deferrals  actually delivered to the Trustee
                                    for   the  Eligible   Participant  for   the
                                    applicable Plan Year to (2)   the   Eligible
                                    Participant's   Total Compensation  for  the
                                    portion  of such Plan Year  (during   which)
                                    the  Employee  was an Eligible  Participant.
                                    The  ADP shall be calculated separately  for
                                    the group consisting of Highly   Compensated
                                    Participants  and the  group  consisting  of
                                    Non-Highly Compensated Participants.

                           (ii)     The  term "Eligible  Participant"  means  an
                                    individual  who  performs  services  for  an
                                    Employer  as  a common law employee, or as a
                                    leased  employee (not  excluded  under  Code
                                    Section  414(n)(5))who  is   treated  as  an
                                    employee  of  the employer-recipient   under
                                    Code  section 414(n)(2) or 414(o)(2) if such
                                    individual  is  an  Eligible  Employee under
                                    Section 1.12 and has met  the  participation
                                    requirements  of Section  2.1.  An  Eligible
                                    Participant  who  fails  to  make  Employee-
                                    Deferrals  shall be included  in the testing
                                    with a ratio of zero.
                                     III-2
<PAGE>
                           (iii)    "Highly  Compensated  Participant" means any
                                    Eligible   Participant   who  is  a   Highly
                                    Compensated Employee for the applicable Plan
                                    Year.

                           (iv)     "Non-Highly  Compensated  Participant" means
                                    any eligible Participant who is not a Highly
                                    Compensated Employee for the applicable Plan
                                    Year.

                   (b)     The  Tests.  In each Plan Year the Plan must  satisfy
                           one of the following tests:

                           (i)      The ADP for  Eligible  Participants  who are
                                    Highly  Compensated  for the Plan Year shall
                                    not exceed the ADP for Eligible Participants
                                    who are Non-Highly Compensated  Participants
                                    for the applicable  Plan Year  multiplied by
                                    1.25; or

                           (ii)     The  ADP for  Eligible Participants  who are
                                    Highly Compensated Participants for the Plan
                                    Year shall not exceed the ADP  for  Eligible
                                    Participants who  are Non-Highly Compensated
                                    Participants  for  the  applicable Plan Year
                                    multiplied by 2.0, provided that the ADP for
                                    Eligible   Participants   who   are   Highly
                                    Compensated Participants does not exceed the
                                    ADP for  Eligible  Employees  who  are  Non-
                                    Highly Compensated Participants by more than
                                    two (2) percentage points.

                   (c)     Under transition  relief provided by Internal Revenue
                           Service   Notice   97-2,   the  Company  may elect to
                           determine the  ADP  for  the  Non-Highly  Compensated
                           Participants for each Plan Year after 1996 based upon
                           either the prior plan year or current plan year data.
                           For the 1996 and 1997 Plan Year, the ADP for the Non-
                           Highly  Compensated  Participant  may  be  calculated
                           using prior plan year or current plan year data.  For
                           Plan Years after 1997, the Company has elected to use
                           the  prior  plan  year testing method.  However,  the
                           Company may elect to change to the current plan  year
                           method  as  provided for  in Internal Revenue Service
                           Notice 98-1 or its subsequent modification.

                   (d) Special Rules in Connection with ADP Testing:

                           (i)      The ADP for any Eligible  Participant who is
                                    a  Highly  Compensated  Participant  for the
                                    Plan  Year  and  who  is  eligible  to  have
                                    Employee-Deferrals allocated to his accounts
                                    under two or more arrangements  described in
                                    Code Section 401(k),  that are maintained by
                                     III-3
<PAGE>
                                    one or more Employers, shall  be  determined
                                    as if such  contributions were  made under a
                                    single arrangement. If a Highly  Compensated
                                    Participant participates in two or more cash
                                    or deferred arrangements that have different
                                    plan    years,    all   cash   or   deferred
                                    arrangements ending with or within  the same
                                    calendar year shall be  treated as a  single
                                    arrangement.

                           (ii)     In the event  that this Plan  satisfies  the
                                    requirements   of  Code   Sections   401(k),
                                    401(a)(4), or 410(b) only if aggregated with
                                    one or more other  plans,  or if one or more
                                    other plans satisfy the requirements of such
                                    Code Sections  only if aggregated  with this
                                    Plan, then this Section 3.6 shall be applied
                                    by   determining   the   ADP   of   Eligible
                                    Participants  as if all  such  plans  were a
                                    single plan.

                           (iii)    For  purposes  of  determining the ADP test,
                                    Employee-Deferrals   shall   be   taken into
                                    account  only if:  paid  to the Trust before
                                    the last day of the twelve (12) month period
                                    immediately following the Plan Year to which
                                    the  contributions  relate; and which relate
                                    to Total Compensation which would have  been
                                    received by the  Eligible Participant in the
                                    Plan Year (but for the deferral election) or
                                    which is  attributable to services performed
                                    by the Eligible Participant in the Plan Year
                                    and would have been received by the Eligible
                                    Participant  within  2 1/2  months after the
                                    close of the Plan Year (but for the deferral
                                    election).

                           (iv)     The  determination  and treatment of the ADP
                                    amounts of any  Eligible  Participant  shall
                                    satisfy  such other  requirements  as may be
                                    prescribed by the Secretary of the Treasury.

                           (v)      In  the  event  that  the ADP  of the Highly
                                    Compensated  Participants  for the Plan Year
                                    determined as  a date prior to the last  day
                                    of the Plan Year indicates that the Plan for
                                    the  year  will  not  otherwise  comply with
                                    either  ADP  test,  the  Committee  has  the
                                    authority  to  reduce  the Employee-Deferral
                                    rate for the remainder of the Plan  Year for
                                    all or  a portion of the Highly  Compensated
                                    Participants  in  an   equitable  manner  to
                                    increase the likelihood that one of  the ADP
                                    tests will be satisfied.

                   (e)     Excess  Contributions.  If the ADP  Test  limits  are
                           exceeded  for a Plan  Year,  excess  amounts  (called
                           Excess  Contributions)  must  be  corrected.  "Excess
                           Contributions" means for any plan year, the excess of
                           (i) the aggregate  amount of Elective Deferrals  (and
                                     III-4
<PAGE>
                           any Qualified Nonelective Contributions and Qualified
                           Matching   Contributions   taken   into   account  in
                           determining   the   participant's   Actual   Deferral
                           Percentage)  actually  paid to the Trust on behalf of
                           Highly  Compensated  Participants for such Plan Year,
                           over (ii) the  maximum  amount of such  contributions
                           permitted under the ADP test  (determined by reducing
                           contributions  made on behalf  of Highly  Compensated
                           Participants beginning with the highest percentages).
                           If the Plan  fails to  satisfy  the ADP Test,  Excess
                           Contributions  (the excess of  Employee-Deferrals  on
                           behalf of Highly Compensated  Participants for a Plan
                           Year over the  maximum  amount of such  contributions
                           permitted  under the ADP  Test),  and  income or loss
                           allocable  thereto for the Plan Year in which the ADP
                           Test is failed, shall be treated as follows:

                           (i)      Determination  of Income or Loss. The income
                                    or loss  allocable  to Excess  Contributions
                                    shall be determined pursuant to Section 8.3.
                                    Earnings must include income or loss for the
                                    "gap period"  between the end of the taxable
                                    year and the date of distribution.

                           (ii)     Distribution   of    Excess   Contributions.
                                    Notwithstanding any other provision of  this
                                    Plan, Excess  Contributions, plus any income
                                    and minus any loss allocable thereto,  shall
                                    be  distributed  preferably  no  later  than
                                    March  15  (in  order to avoid a 10% penalty
                                    tax otherwise imposed on the  Employer under
                                    Section 4979 of the Code) following  the end
                                    of the  applicable Plan Year but in no event
                                    later  than the last  day of the  Plan  Year
                                    following  the  applicable  Plan  Year,  the
                                    Excess     Contributions     (and      other
                                    contributions  so treated),  plus any income
                                    and minus any loss allocable thereto, of the
                                    Highly Compensated Participants   shall   be
                                    distributed in accordance with  IRS   Notice
                                    97-2   or   subsequent   modifications.  The
                                    Excess Contributions  are  attributed  first
                                    to the Highly  Compensated Participants with
                                    the greatest Employee-Deferrals.

                           (iii)    Excess  Contributions  shall be  treated  as
                                    Annual  Additions under the Plan. The amount
                                    of Excess  Contributions  to be  distributed
                                    shall  be   reduced   by  excess   deferrals
                                    previously  distributed  for the  same  year
                                    pursuant  to  Section  3.5 and any  Matching
                                    Contributions    with    respect   to   such
                                    distributed  Excess  Contributions  (and the
                                    earnings thereon) shall be forfeited.
                                     III-5
<PAGE>
                           (iv)     Additional Contribution Alternative. In lieu
                                    of, or in conjunction  with, the application
                                    of  the  Excess  Contribution   distribution
                                    provisions of this Section, the Employer may
                                    make additional Contributions,  described in
                                    Section 4.6 to satisfy the ADP test.

         3.7  Rollover  Contributions.  A  Participant  who has entered  into an
Employee-Deferral  Agreement may  contribute to the Plan any amount  distributed
from the Participant's  individual  retirement  account,  individual  retirement
annuity,  or qualified plan which qualifies under either of Code Sections 402(c)
or  408(d)(3)(A)(ii),  which is transferred  within the required time, and which
meets all other  requirements  of law for a rollover to the Plan.  The Employer,
the Committee,  and the Trustee shall accept rollover  contributions  only if it
can "reasonably conclude" that the plan making the distribution is qualified. If
the  distributing  plan  provides a statement  that it has  received a favorable
determination letter from the Internal Revenue Service, the Employer, Committee,
and  Trustee  may  conclude  that the  distributing  plan is  qualified.  Such a
contribution shall be held in a separate Rollover  Contribution  Account for the
Participant.  If the  Committee  should learn that the rollover did not meet all
the aforesaid requirements, the value of the Participant's Rollover Contribution
Account as of the  preceding  Valuation  Date (or the date of the  rollover,  if
later) shall be returned to him.
                                     III-6
<PAGE>

                                   ARTICLE IV
                             MATCHING CONTRIBUTIONS

         4.1  Matching  Contributions.  The Board of  Directors  shall  annually
determine the amount of a Matching  Contribution,  if any, to be contributed for
the Plan  Year.  The  Matching  Contribution  shall be  allocated  to all Active
Participants who make  Employee-Deferrals  for the applicable year. For purposes
of this  allocation,  Participant  Employee-Deferrals  in  excess  of 6% of each
Participant's Plan Compensation shall be disregarded.

         4.2  Forfeitures.  After a forfeiture  occurs,  the forfeiture shall be
applied to reduce Matching  Contributions,  determined by the Board of Directors
pursuant to Section 4.1,  until the  forfeitures  are used up. Until  applied in
this way, the  forfeitures  are held in the Trust and will  continue to share in
the allocation of earnings.

         4.3 Delivery of  Contributions.  An Employer's  Matching  Contributions
shall be delivered to the Trustee at such time as the Employer  determines,  but
in no event  shall  any  contribution  for a Plan  Year be made  later  than the
deadline,  including extensions,  for the filing of the Company's tax return for
that year.

         4.4 Adjustments if Employee-Deferral  Contributions  Adjusted. If under
Section 3.5 or Section 3.7 a Participant's  Employee-Deferral  Contributions are
returned to him, and as a result the net Employee-Deferral Contributions for the
Plan Year are a smaller  percentage of Plan  Compensation  than the amount taken
into  account  in making  Matching  Contributions,  the  amount of the  Matching
Contributions  shall be  reduced  accordingly.  The  reduction  in the  Matching
Contribution  (and any earnings  attributable to the reduction) shall be treated
as a Forfeiture under the provisions of Section 4.2.

         4.5       Non-Discrimination Rules for Matching Contributions.

                   (a)     Definitions:

                           (i)      "Average  Contribution  Percentage" or "ACP"
                                    shall mean the  average of the  Contribution
                                    Percentages of the Eligible  Participants in
                                    a group.

                           (ii)     "Contribution  Percentage"  shall  mean  the
                                    ratio  (expressed  as a  percentage)  of  an
                                    Eligible     Participant's      Contribution
                                    Percentage    Amounts   to   the    Eligible
                                    Participant's  Total  Compensation  for  the
                                    portion  of the  Plan  Year in  which he was
                                    eligible to make Employee-Deferrals.
                                      IV-1
<PAGE>
                           (iii)    "Contribution Percentage Amounts" shall mean
                                    the Matching Contributions under the Plan on
                                    behalf of the Eligible  Participant  for the
                                    Plan  Year.  The  Employer  may elect to use
                                    Employee-Deferrals   in   the   Contribution
                                    Percentage  Amounts  so long as the ADP test
                                    is met  before  the  Employee-Deferrals  are
                                    used in the ACP test and continues to be met
                                    following    the    exclusion    of    those
                                    Employee-Deferrals that are used to meet the
                                    ACP test.

                           (iv)     "Eligible Participants" -  See definition at
                                    Section 3.6(a)(ii)

                           (v)      "Highly   Compensated   Participant"  -  See
                                    definition at Section 3.6(a)(iii).

                           (vi)     "Non-Highly  Compensated  Participant" - See
                                    definition at Section 3.6(a)(iv).

                   (b)     If  an   Eligible   Participant   makes  no  Employee
                           Deferrals and receives no Matching Contributions, the
                           contribution   ratio  that  is  to  be   included  in
                           determining the ACP is zero.

                   (c)     The  Tests.  In each Plan Year the Plan must  satisfy
                           one of the following tests:

                           (i)      The ACP for  Eligible  Participants  who are
                                    Highly Compensated Participants for the Plan
                                    Year shall not  exceed the ACP for  Eligible
                                    Participants who are Non-Highly  Compensated
                                    Participants  for the  applicable  Plan Year
                                    multiplied by 1.25; or

                           (ii)     The  ACP  for  Eligible Participants who are
                                    Highly Compensated Participants for the Plan
                                    Year  shall  not exceed the ACP for Eligible
                                    Participants who are  Non-Highly Compensated
                                    Participants  for  the  applicable Plan Year
                                    multiplied by two (2), provided that the ACP
                                    for  Eligible  Participants  who  are Highly
                                    Compensated  Participants  for the Plan Year
                                    does   not  exceed   the   ACP  for Eligible
                                    Participants who are Non-Highly  Compensated
                                    Participants for the applicable Plan Year by
                                    more than two (2) percentage points.

                   (d)              Under transition relief provided by Internal
                                    Revenue Service Notice 97-2, the Company may
                                    elect to determine  the actual  contribution
                                    percentage    (ACP)   for   the   Non-Highly
                                    Compensated  Participants for each Plan Year
                                    after 1996 based upon either the prior  plan
                                      IV-2
<PAGE>
                                    year  or  current  plan  year data.  For the
                                    1996  and  1997  Plan Year,  the ADP for the
                                    Non-Highly  Compensated  Participant  may be
                                    calculated using prior plan year or  current
                                    plan year data.  For Plan Years after  1997,
                                    the  Company  has elected  to  use the prior
                                    plan  year  testing  method.   However,  the
                                    Company  may  elect to change to the current
                                    plan year method as provided for in Internal
                                    Revenue   Service   Notice   98-1   or   its
                                    subsequent modification.

                   (e)     Excess  Aggregate  Contributions.  If  the  ACP  Test
                           limits are exceeded for  a  Plan Year, excess  mounts
                           (called   Excess  Aggregate  Contributions)  must  be
                           corrected.   "Excess  Aggregate  Contributions" means
                           for any plan year, the excess of  (i)  the  aggregate
                           amount  of  Matching  Contributions   and   Employee-
                           Deferrals    (and     any    Qualified    Nonelective
                           Contributions   taken  into account in computing  the
                           ACP   test)   actually  made  on  behalf   of  Highly
                           Compensated Participants  for the PlanYear over  (ii)
                           the  maximum  amount  of  the  contributions  allowed
                           under  the  ACP  Test,    determined    by   reducing
                           contributions  made on behalf of Highly   Compensated
                           Participants   in   order   of   their   contribution
                           percentages   beginning  with  the  highest   of  the
                           percentages.    In   determining   Excess   Aggregate
                           Contributions  for a Plan  Year,  Qualified  Matching
                           Contributions  treated as elective  contributions for
                           the ADP test are  disregarded.  If the Plan  fails to
                           satisfy the ACP Test, Excess Aggregate  Contributions
                           (the  excess  of the  aggregate  amount  of  Matching
                           Contributions  actually  made  on  behalf  of  Highly
                           Compensated  Participants for such Plan Year over the
                           maximum amount of such contributions  permitted under
                           the limitations of Section 401(m)(2)(A) of the Code),
                           and  income or loss  allocable  thereto  for the Plan
                           Year in  which  the  ACP  Test is  failed,  shall  be
                           treated as follows:

                           (i)      Disposition     of       Excess    Aggregate
                                    Contributions.  Notwithstanding   any  other
                                    provision    of    this    Plan,      Excess
                                    Aggregate Contributions, plus any income and
                                    minus any loss allocable  thereto,  shall be
                                    distributed,  no later  than the last day of
                                    each  Plan  Year,   to  Highly   Compensated
                                    Participants  or forfeited,  where otherwise
                                    appropriate,    from   the    accounts    of
                                    Participants in which such Excess  Aggregate
                                    Contributions   were   allocated   for   the
                                    preceding Plan Year.

                           (ii)     Distributions     of    Excess     Aggregate
                                    Contributions   shall   be   made   in   the
                                    accordance  with  Internal  Revenue  Service
                                    Notice 97-2 and any subsequent modification.
                                    Any  distribution  of the  Excess  Aggregate
                                      IV-3
<PAGE>
                                    Contributions    for    any    Plan     Year
                                    shall   be   made  to   Highly   Compensated
                                    Participants  on the basis of the  amount of
                                    contributions on behalf of, or by, each such
                                    Participants  in  accordance  with  Internal
                                    Revenue    Service   97-2   or    subsequent
                                    modifications.    The    Excess    Aggregate
                                    Contributions  are  attributed  first to the
                                    Highly  Compensated   Participant  with  the
                                    greatest    dollar    amount   of   Matching
                                    Contributions.    Forfeitures    of   Excess
                                    Aggregate Contributions may not be allocated
                                    to  Participants  whose   contributions  are
                                    reduced under this paragraph.

                           (iii)    Nonforfeitable  Matching Contributions which
                                    exceed  the  maximum  amount permitted under
                                    the ACP Test, plus any income and minus  any
                                    loss allocable thereto, shall be distributed
                                    preferably by March 15  (in order to avoid a
                                    10%  penalty  tax  imposed  on  the Employer
                                    under  Section  4979  of the Code) following
                                    the end of  the  applicable Plan Year but in
                                    no  event  later  than the close of the Plan
                                    Year following the applicable Plan Year.

                           (iv)     Excess  Aggregate   Contributions  shall  be
                                    treated as Annual  Additions  under the Plan
                                    even if  such  contributions  are  corrected
                                    through distributions or recharacterization.

                           (v)      Determination  of  Income  or  Loss.  Excess
                                    Aggregate  Contributions  shall be  adjusted
                                    for any income or loss attributable  thereto
                                    in the year in which  the  contribution  was
                                    made. The income or loss allocable to Excess
                                    Aggregate  Contributions shall be determined
                                    pursuant to Section 8.3.

                           (vi)     Accounting     for     Excess      Aggregate
                                    Contributions.        Excess       Aggregate
                                    Contributions  shall  be  distributed  on  a
                                    pro-rata   basis   from  the   Participant's
                                    Employer   Contribution   Account  (and,  if
                                    applicable,         the        Participant's
                                    Employee-Deferral Account).

                   (f)     Multiple Use Aggregate Limit

                           (i)      The ADP and ACP limitations set forth in 3.6
                                    and  4.5 may be  subject  to  further  limit
                                    under the  Aggregate  Limit  rules set forth
                                    below.  Multiple  use does not occur if both
                                    the ADP and  ACP of the  Highly  Compensated
                                    Participants    does   not    exceed    1.25
                                      IV-4
<PAGE>
                                    multiplied   by  the ADP and ACP of the Non-
                                    Highly Compensated Participants.

                           (ii)     The sum of the  ADP  and  ACP of the  Highly
                                    Compensated  Participants  for a  Plan  Year
                                    must not exceed  the  Aggregate  Limit.  The
                                    "Aggregate Limit" shall mean the greater of
                                    (1) or (2) below:

                                     (1) The sum of

                                         a) one   hundred   twenty-five  percent
                                            (125%) of the greater of the  ADP or
                                            the    ACP    of    the   Non-Highly
                                            Compensated    Participants  in  the
                                            applicable Plan Year, plus

                                         b) Two  (2)  percentage points plus the
                                            lesser   of   such   ADP   or ACP of
                                            Non-Highly Compensated  Participants
                                            in   the   applicable   Plan   Year,
                                            provided, however, that in no  event
                                            shall this amount exceed two hundred
                                            percent (200%)  of the lesser of the
                                            ADP   or   the   ACP   of Non-Highly
                                            Compensated   Participants   in  the
                                            applicable     Plan     Year,     or

                                     (2) The sum of

                                         a) one   hundred   twenty-five  percent
                                            (125%)  of  the lesser of the ADP or
                                            the    ACP    of    the   Non-Highly
                                            Compensated   Participants   in  the
                                            applicable Plan Year, plus

                                         b) Two  (2)  percentage points plus the
                                            greater  of  the  ADP or the ACP  of
                                            Non-Highly Compensated  Participants
                                            in   the   applicable   Plan   Year,
                                            provided, however, that in no  event
                                            shall this amount exceed two hundred
                                            percent (200%) of the greater of the
                                            ADP or the ACP of Non-Highly
                                            Compensated Participants.

                           (iii)    Correction  of  Multiple  Use: If the sum of
                                    the ADP and  ACP of the  Highly  Compensated
                                    Participants  exceeds  the  Aggregate Limit,
                                      IV-5
<PAGE>
                                    then  the  ADP  or  the  ACP  (as elected by
                                    the  Committee)  of the  Highly  Compensated
                                    Participants will be reduced on the basis of
                                    the amount of contributions on behalf of, or
                                    by each such participant  in accordance with
                                    Internal Revenue Service  97-2 or subsequent
                                    modification,  so  that  the  limit  is  not
                                    exceeded.  If the Employer  elects to reduce
                                    the   ACP   of   the   Highly    Compensated
                                    Participant, the required reduction shall be
                                    treated as an Excess Aggregate  Contribution
                                    described  above.  The  ADP  and  ACP of the
                                    Highly Compensated  Employees are determined
                                    after any  corrections  required to meet the
                                    ADP  and  ACP  tests.  For  purposes  of the
                                    multiple  use  test,  if a  distribution  of
                                    Excess  Contributions has been made, the ADP
                                    for  Highly   Compensated   Participants  is
                                    deemed to be the  largest  amount  permitted
                                    under Code Section 401(k)(3).  Similarly, if
                                    a   corrective    distribution   of   Excess
                                    Aggregate  Contributions  has been made, the
                                    ACP for Highly  Compensated  Participants is
                                    deemed to be the  largest  amount  permitted
                                    under Code Section 401(m)(2).

                   (g)     Special Rules

                           (i)      For   purposes   of   this   Section,    the
                                    Contribution  Percentage  for  any  Eligible
                                    Participant  who  is  a  Highly  Compensated
                                    Participant  and  who  is  eligible  to have
                                    Contribution Percentage Amounts allocated to
                                    his  account  under  two  (2)  or more plans
                                    described  in  Code  Section   401(a),    or
                                    arrangements   described   in   Code Section
                                    401(k)   that are  maintained by one or more
                                    Employers,  shall  be  determined  as if the
                                    total  of   such   Contribution   Percentage
                                    Amounts was made  under  each  plan.   If  a
                                    Highly Compensated Participant  participates
                                    in  two  (2)  or  more  cash   or   deferred
                                    arrangements   under   Code   Section 401(k)
                                    ("CODA"),  that  have  different plan years,
                                    all  CODAs  ending with  or  within the same
                                    calendar  year  shall be treated as a single
                                    arrangement.

                           (ii)     In the event  that this Plan  satisfies  the
                                    requirements   of  Code   Sections   401(m),
                                    401(a)(4) or 410(b) only if aggregated  with
                                    one or more other  plans,  or if one or more
                                    other plans satisfy the requirements of such
                                    Code Sections  only if aggregated  with this
                                    Plan,  then this Section shall be applied by
                                    determining the Contribution  Percentages of
                                    Eligible Employees as if all such plans were
                                    a single plan.
                                      IV-6
<PAGE>
                           (iii)    For  purposes  of  determining  the  Average
                                    Contributions   Percentage  test,   Employer
                                    Matching  Contributions  will be  considered
                                    made for a Plan Year only if (i) paid to the
                                    trust  no later  than the end of the  twelve
                                    (12) month period beginning on the day after
                                    the  close of the Plan Year and (ii) made on
                                    account of the Employee's  Employee-Deferral
                                    for the Plan Year.

         4.6   Qualified   Matching    Contributions,    Qualified   Nonelective
Contributions.  The  Company  may,  in its sole  discretion,  use the  following
contributions to enable the Plan to satisfy the  nondiscrimination  requirements
of Section 3.6 and/or Section 4.5:

                   (a)     Qualified   Matching   Contributions.   A   Qualified
                           Matching Contribution may be made by the Employers on
                           the basis of either a  specified  dollar  amount or a
                           specified  percentage  of  Plan  Compensation  of the
                           Participant  who is  eligible  for such  contribution
                           under the  nondiscrimination  tests.  Such  Qualified
                           Matching  Contributions  shall be nonforfeitable when
                           made and shall be subject to the same restrictions on
                           distribution that apply to Employee-Deferrals.

                   (b)     Qualified  Nonelective  Contributions.   A  Qualified
                           Nonelective  Contribution may be made by the Employer
                           on the basis of either a specified dollar amount or a
                           specified  percentage  of  Plan  Compensation  of the
                           Participant  who is  eligible  for such  contribution
                           under the  nondiscrimination  tests.  Such  Qualified
                           Nonelective Contributions shall be nonforfeitable and
                           shall  be  subject  to  the  same   restrictions   on
                           distribution that apply to Employee-Deferrals.

                   (c)     Qualified  Matching  Contributions  and/or  Qualified
                           Nonelective   Contributions   may   be   treated   as
                           Employee-Deferrals  only if the conditions  described
                           in Section 1.401(k)-1(b)(5) are satisfied.  Qualified
                           Nonelective  Contributions may be treated as Matching
                           Contributions if the conditions  described in Section
                           1.401(m)-1(b)(5) of the regulations are satisfied.

                   (d)     The Employer  will  maintain  records  sufficient  to
                           demonstrate  compliance with this Section,  including
                           the   extent   to   which    Qualified    Nonelective
                           Contributions  and Qualified  Matching  Contributions
                           are taken into account to satisfy the ADP and ACP
                           tests.

                   (e)     The use of contributions  described above shall be as
                           provided  in  regulations  under  Section  401(k) and
                           Section 401(m) of the Code.
                                      IV-7
<PAGE>
                   (f)     In  order to be taken into account in the calculation
                           of the ADP or ACP for a  year  under  the  prior plan
                           year testing or current plan year testing  method, a
                           Qualified  Nonelective  Contribution  and   Qualified
                           Matching Contributions must be allocated as of a date
                           within  the  year  and  must  actually be paid to the
                           trust  no later  than the  end of  the  twelve  month
                           period  following  the  end  of the year to which the
                           contribution relates.  For example, if the prior year
                           testing method is used for  the  1998  testing  year,
                           Qualified   Nonelective   Contributions    that   are
                           allocated   to   the   accounts   of   the Non-Highly
                           Compensated Participants for the 1997 Plan Year (i.e.
                           the prior year) must be  contributed  to  the Plan by
                           the end of the 1998 Plan Year in order  to be treated
                           as  Employee-Deferrals  for  purposes of the ADP test
                           for the 1998 testing year.
                                      IV-8
<PAGE>
                                    ARTICLE V
                      EMPLOYER DISCRETIONARY CONTRIBUTIONS

         5.1 Employer Discretionary Contributions.  The Board of Directors shall
annually determine the amount of Employer Discretionary  Contributions,  if any,
to be  contributed  for the Plan Year. The Company may contribute all or part of
the  entire  amount  due on behalf of one or more  Participating  Employers  and
charge the amount thereof to the Participating Employers responsible therefor.

         In  no  event  shall  the   contribution,   when  added  to  the  other
contributions  under the Plan, exceed the maximum amount which may be claimed as
a deduction by the Company for federal  income tax  purposes  under Code Section
404(a)(3).

         The   contribution,   if  any,  shall  be  delivered  in  one  or  more
installments to the Trustee no later than the due date (including extensions) of
the  Company's  federal  income tax return for its fiscal  year  ending  with or
during the Plan Year for which the contribution is made.

         5.2  Allocation  of Employer  Discretionary  Contributions.  As of each
Annual Valuation Date, the Employer Discretionary Contribution, if any, shall be
allocated to the Employer  Contribution  Accounts of all Active  Participants in
the proportion that each such Active  Participant's  Total Compensation bears to
the Total Compensation for all Active Participants for such year.

         5.3  Top-Heavy  Contributions.  As of the end of any Plan Year in which
the  Plan  is  Top-Heavy,   the  Employer  shall   contribute  to  the  Employer
Contribution  Account of each  Participant who is a Non-Key  Employee the amount
required under Article XV.
                                      V-1
<PAGE>
                                   ARTICLE VI
                                     VESTING

         6.1  Employee-Deferral  Account.  The interest of a Participant  in his
Employee-Deferral Account shall be fully vested and nonforfeitable at all times.

         6.2       Rollover Contribution Account.  The interest of a Participant
in his Rollover Contribution Account shall be fully vested and nonforfeitable at
all times.

         6.3 Employer Contribution Account. The interest of a Participant in his
Employer Contribution Account shall be fully vested and nonforfeitable upon such
Participant's death prior to termination of employment, attainment of the Normal
Retirement Age while still  employed,  or termination of employment by reason of
Disability.  When a Participant's employment is terminated for any other reason,
the vested and  nonforfeitable  interest of such Participant shall be determined
in accordance with the following schedule:

                                Years of Service

Less than 5 years
5 years or more
                                    Vested %

                                        0
                                       100
         6.4  Forfeitures.  The non-vested  portion of a Participant's  Accounts
shall be forfeited at the end of the Plan Year in which he incurs 5  consecutive
One Year Breaks in Service and shall be applied in accordance with Section 4.2.

         6.5  Reemployment.  Years  of  Service  prior  to  reemployment  may be
considered, but only under the circumstances described in Section 2.3.
                                      VI-1
<PAGE>
                                   ARTICLE VII
                                   ALLOCATIONS

         7.1  Allocation of  Contributions.  Contributions  to the Plan shall be
allocated in the following manner:

                   (a)     Employee-Deferral Contributions shall be allocated to
                           the Employee-Deferral  Account of each Participant in
                           accordance with the provisions of Article III.

                   (b)     Employer   Discretionary   Contributions   shall   be
                           allocated  to the  Employer  Contribution  Account of
                           each Participant in accordance with the provisions of
                           Article V.

                   (c)     Matching  Contributions  shall  be  allocated  to the
                           Employer  Contribution Account of each Participant in
                           accordance with the provisions of Article IV.

                   (d)     Qualified   Matching   Contributions   and  Qualified
                           Nonelective  Contributions  shall be allocated to the
                           Employee-Deferral  Account  of  each  Participant  in
                           accordance with the provisions of Section 4.6.

         7.2  Definitions.  For purposes of this Article VII, the term  Accounts
shall mean a Participant's  Employee-Deferral  Account and Employer Contribution
Account.

         The term Annual  Addition shall mean, for any Limitation  Year, the sum
of (a) Matching Contributions, (b) Employee-Deferral Contributions, (c) Employer
Discretionary  Contributions,  (d)  Qualified  Matching  Contributions,  and (e)
Qualified Non-elective Contributions.

         The term Defined  Benefit  Plan  Fraction  shall mean,  for any year, a
fraction  (a) the  numerator  of which is the  projected  annual  benefit of the
Participant   under  any  defined   benefit  plan  maintained  by  the  Employer
(determined as of the close of the Plan Year),  and (b) the denominator of which
is the  lesser of (i) the  product  of 1.25  multiplied  by the  maximum  dollar
limitation in effect under Code Section  415(b)(1)(A) for such year, or (ii) the
product of 1.4  multiplied  by the amount which may be taken into account  under
Code Section 415(b)(1)(B) for such year.

         The term Defined Contribution Plan Fraction shall mean, for any year, a
fraction (a) the  numerator  of which is the sum of the Annual  Additions to the
Participant's Accounts as of the close of the Plan Year, and (b) the denominator
of which is the sum of the lesser of the following  amounts  determined for such
year and each prior year of service with a Employer:   (i) the product  of  1.25
                                     VII-1
<PAGE>
multiplied by the dollar  limitation in effect under  Code  Section 415(c)(1)(A)
for such year (determined without regard to Code Section 415(c)(6)), or (ii) the
product of 1.4  multiplied by the amount which may  be taken into account  under
Code Section 415(c)(1)(B) for such year.

         The term  Employer  includes  the  group of  Employers,  if any,  which
constitute a controlled group of corporations, trades or businesses under common
control  (within the meaning of Code  Sections  1563(a) or 414(b) as modified by
415(h) and 414(c)),  or an affiliated  service group (within the meaning of Code
Sections  414(m) and 318) with an Employer.  All such Employers shall be treated
as a single Employer for purposes of applying the Code Section 415 limitations.

         The  term  Limitation  Year  shall  mean  the  Plan  Year or any  other
twelve-month period designated by the Board of Directors.

         7.3 Annual Additions.  No contribution or forfeiture shall be allocated
to the  Accounts of an  Employee  for a  Limitation  Year in excess of an amount
which,  when expressed as an Annual  Addition to such  Employee's  Accounts,  is
equal to the lesser of (a)  $30,000 or such  larger  amount  equal to 1/4 of the
defined  benefit  dollar  limitation  as adjusted for  cost-of-living  increases
pursuant to Code Sections 415(c)(1), 415(d)(1) and 415(d)(3), or (b) twenty-five
percent of such Employee's Section 415 Compensation for such limitation.

         7.4 Limitation for Other Defined  Contribution Plans. In the event that
the Annual  Addition  which would  otherwise be made to an  Employee's  accounts
under  all  defined  contribution  plans  maintained  by the  Employer  for  any
Limitation  Year  exceeds the  limitations  set forth in this  Article  VII, the
excess Annual  Addition shall be attributed  first to the Plan, and the Employer
shall treat such excess as follows:

                   (a)     First, the Employee-Deferral  Contributions in excess
                           of six percent of Plan Compensation shall be returned
                           to the Employee to the extent necessary.

                   (b)     Second,  the  portion  of the  excess  consisting  of
                           Matching   Contributions   shall  be  allocated   and
                           reallocated to the Employer  Contribution Accounts of
                           other  Participants in accordance with Section 4.1 to
                           the extent such  allocations  would not cause  Annual
                           Additions  to each  Participant's  Accounts to exceed
                           the limitations of this Section 7.4

                   (c)     Third,  the  portion  of  the  excess  consisting  of
                           Employer   Discretionary   Contributions   shall   be
                           allocated   and    reallocated    to   the   Employer
                           Contribution   Accounts  of  other   Participants  in
                           accordance  with  Section  5.2  to  the  extent  such
                                     VII-2
<PAGE>
                           allocations  would not cause Annual Additions to each
                           Participant's  Accounts to exceed the  limitation  of
                           this Section 7.4.

                   (d)     If  treated  in  accordance  with  subparagraphs  (a)
                           through (c) above,  the excess amounts shall  not  be
                           deemed Annual Additions  in that limitation  year  if
                           the excess  amounts are a result of the allocation of
                           forfeitures,   a  reasonable  error  in  estimating a
                           Participant's annual Plan Compensation, a  reasonable
                           error in determining the amount of elective deferrals
                           (within the meaning of Section 402(g)(3)) that may be
                           made with respect to any individual  under the limits
                           of  Section  415  or  under  other  limited facts and
                           circumstances that the Commissioner finds justify the
                           availability of the rules set forth in this
                           subparagraph.

                   (e)     To the extent excess Annual Additions exist after the
                           distributions described in subparagraphs  (a) through
                           (c),  such  excess  amounts  shall  be allocated to a
                           Section  415  Suspense  Account.  All  amounts in the
                           Section 415 Suspense Account must  be  used to reduce
                           Matching  Contributions,  contributions  required  on
                           account  of  a  Top-Heavy  Plan  Year,  or   Employer
                           Discretionary  Contributions in succeeding Limitation
                           Years.  In the event of termination of the Plan,  the
                           balance of the  Section 415  Suspense  Account  shall
                           revert to the Company to the extent it may  not  then
                           be allocated to any Participants' Accounts.

         7.5  Limitation  for  Defined  Benefit  Plan.  If an Employee is also a
Participant in one or more defined benefit plans  maintained by the Employer (or
an Employee was a Participant in any defined benefit plan previously  maintained
by an Employer),  the sum of such  Employee's  Defined Benefit Plan Fraction and
Defined  Contribution  Plan  Fraction  (as  determined  pursuant to Code Section
415(e)) for any Limitation Year may not exceed 1.0.

         In the event that the sum of an Employee's  Defined  Contribution  Plan
and Defined Benefit Plan Fractions would otherwise exceed 1.0 for any Limitation
Year,  the benefit  accrual which would  otherwise be made under all  applicable
defined benefit plans for such Employee shall be considered not to have accrued,
to the extent necessary,  so that the sum of such fractions does not exceed 1.0.
If after all such  adjustments  the sum of the fractions would still exceed 1.0,
then the annual  addition  which would  otherwise  be made with  respect to such
Employee shall be reduced in this Plan pursuant to Section 7.4 and finally under
any applicable defined contribution plan to the extent necessary so that the sum
does not exceed 1.0.

         This Section 7.5 shall not apply for  Limitation  Years after  December
31, 1999.
                                     VII-3
<PAGE>
                                  ARTICLE VIII
                                   TRUST FUND

         8.1 Plan Assets. Avondale Industries, Inc. and the Trustee have entered
into a Trust  Agreement,  which agreement  provides for the  establishment  of a
single  Trust  for  the  purpose  of  holding  and   administering  all  amounts
contributed to Accounts under the Plan. All  contributions,  and the earnings on
such  amounts,  shall be  delivered  to the  Trustee  and held and  administered
pursuant to the provisions of the Plan and the Trust Agreement.

         8.2 Separate Accounts. A separate  Employee-Deferral  Account, Employer
Contribution  Account and Rollover  Contribution  Account shall be maintained by
the Trustee or a  recordkeeping  agent appointed by the Plan  Administrator  for
each Participant.

         8.3 Valuation. The fair market value of the assets comprising the Trust
shall  be  determined   as  of  each   Valuation   Date,   in  accordance   with
generally-accepted valuation methods and accounting practices.

         As of each Valuation  Date, the value of each Account shall be adjusted
to  reflect  the effect on each  sub-account  of any change in the value of each
Investment Fund since the preceding Valuation Date, as well as the effect of any
deposits, withdrawals,  distributions, or other transactions occurring since the
last  Valuation  Date.  The  Committee   shall  provide  to  each   Participant,
Beneficiary  and  Alternate  Payee  as of the end of  each  calendar  quarter  a
statement of the value of each Account in which such person has an interest.

         8.4       Investment Funds.

                   (a)     The Committee shall  determine what investment  funds
                           to offer  under the Plan and may,  from time to time,
                           change the investment funds offered hereunder.  As of
                           the Effective Date of this Plan, the investment funds
                           are  Merrill  Lynch  Retirement  Preservation  Trust,
                           Merrill Lynch Capital Fund,  Merrill Lynch  Corporate
                           Bond Fund Investment Grade, AIM  Constellation  Fund,
                           AIM Value Fund, and Templeton Growth Fund.

                   (b)     As of each Valuation Date, the Trustee shall  perform
                           a  valuation  of  each  Investment  Fund  in order to
                           determine the value of each  Investment Fund  and  to
                           reconcile  the  Investment  Funds  from   the   prior
                           Valuation Date.  Such valuation  shall  recognize any
                           appreciation or depreciation in the fair market value
                           of all securities  or  other property  held  by  each
                           respective  Investment  Fund,   any  cash and accrued
                           earnings  and  shall  take  into  account any accrued
                           expenses and proper charges against  the   Investment
                           Fund as of such Valuation Date.
                                     VIII-1
<PAGE>
         8.5       Investment of Contributions.

                   (a)     A  Participant  may direct that his Employee-Deferral
                           Contributions,  Employer  Contributions and  Rollover
                           Contributions, if any, be allocated to one or more of
                           the  Investment Funds then available, in multiples of
                           one percent (1%),  by  providing  voice consent after
                           such Participant has accessed a voice response system
                           by entering his  personal  identification   number in
                           accordance  with limitations reasonably determined by
                           the Committee, or in writing on a form acceptable  to
                           the  Committee.   The  total  of all such allocations
                           shall equal one hundred percent of the  Participant's
                           interest in his Accounts. The Committee will provide,
                           upon Participant's request, a written confirmation of
                           his written investment instructions.

                   (b)     If no investment  direction exists the  Participant's
                           affected interest shall  automatically be invested in
                           a short term income fund until adequate  instructions
                           are received  through a voice  response  system or in
                           writing on an  acceptable  form;  provided  that such
                           investment will not result in violation of ERISA.

                   (c)     Each  Participant  must consent to the  allocation of
                           his  contributions  among the Investment  Funds. Such
                           direction shall continue in effect until such time as
                           the Participant  consents to a different  allocation.
                           The investment of future contributions may be changed
                           daily,  provided  such  change  is  received  by  the
                           Committee  within  such  time  period  preceding  the
                           effective   date  as  shall  be   prescribed  by  the
                           Committee.

         8.6       Transfer of Amounts Among Investment Funds

                   (a)     A Participant may elect to transfer amounts from  one
                           Investment   Fund  to  another  in  increments of one
                           percent (1%).  Any such change shall be by  providing
                           voice  consent  after  the Participant has accessed a
                           voice  response  system  by  entering  his   personal
                           identification  number,  or  in  writing  on  a  form
                           acceptable to the Committee.  Such election shall  be
                           effective on the business day transacted if requested
                           via the voice response system before  3 p.m.  Eastern
                           Standard Time or as soon as administratively feasible
                           if requested on a written form.  Transfers out  of an
                           investment fund can be processed in terms of dollars,
                           shares, or percentages.  Dollar and percent transfers
                           will be converted into shares, traded  based  on  the
                           previous  night's  price,  and processed based on the
                           current night's price.
                                     VIII-2
<PAGE>
                   (b)     In the event an  acceptable  form is not  received by
                           the   Committee   for  all  or  any   portion   of  a
                           Participant's   Accounts,   the  current   investment
                           direction  shall  continue in effect  until  adequate
                           instructions  are received  through a voice  response
                           system or in writing on an acceptable form.

                   (c)     The  timing  and   frequency   of   transfers   among
                           investment  options may be further restricted if such
                           restrictions are required by the institution handling
                           or providing the investment fund.

         8.7  Liability  for  Investment  Decisions.  This Plan is  intended  to
constitute a plan described in Section 404(c) of ERISA, and Title 29 of the Code
of  Federal  Regulations  Section  2550.404c-1.  Fiduciaries  of the Plan may be
relieved of liability for any losses which are the direct and  necessary  result
of investment instructions given by each Participant or Beneficiary. Neither the
Employer,  the Trustee nor the Committee shall be responsible for any loss which
may result from a  Participant's  exercise of control over the investment of his
Accounts.

         Each Participant  shall have exclusive  responsibility  for and control
over the investment of amounts allocated to his Accounts. Neither the Employers,
the Trustee nor the Committee  shall have any duty,  responsibility  or right to
question a Participant's  investment  directions or to advise a Participant with
respect to the investment of his accounts.

         The Committee will be obligated to follow the Participant's  investment
directions except when the instructions:

                   (a)     are not in  accordance  with this Plan  document  and
                           instruments  governing  this  Plan  insofar  as  such
                           documents and  instruments  are  consistent  with the
                           provisions of Title I of ERISA;

                   (b)     would result in a prohibited transaction described in
                           ERISA  Section 406 or Code  Section  4975 that is not
                           otherwise exempted by statute or regulation;

                   (c)     would generate income that would be taxable  to  this
                           Plan;

                   (d)     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 and related regulations;

                   (e)     would  jeopardize  the  Plan's  tax  qualified status
                           under the Code; or

                   (f)     could  result  in  a  loss  in  excess of the Account
                           balance.
                                     VIII-3
<PAGE>
         8.8 Accounting Procedures. The Committee shall establish such equitable
accounting  procedures  as  may  be  required  to  make  (a)  allocations,   (b)
valuations, and (c) adjustments to Participants' accounts in accordance with the
provisions  of the  Plan.  The Plan  Administrator  may  modify  its  accounting
procedures,  from time to time,  for the  purpose  of  achieving  equitable  and
nondiscriminatory allocations.
                                     VIII-4
<PAGE>
                                   ARTICLE IX
                                    BENEFITS

         9.1 Normal  Retirement  Date. The Normal  Retirement  Date shall be the
later of (a) the Participant's Normal Retirement Age or (b) the first day of the
month  coincident with or next following a Participant's  fourth  anniversary of
commencement  of  participation  in the Plan.  Any  Participant  who  remains an
Employee  beyond Normal  Retirement  Date,  or becomes a Participant  after such
date,  shall  participate in the  contributions  and benefits of the Plan in the
same manner as any other Participant.

         9.2  Disability  Retirement  Date. Any  Participant  who has incurred a
Disability,  as  determined  by  the  Committee,  may  retire  on  a  Disability
Retirement  Date by making  written  application  to the Committee  specifying a
Disability  Retirement  Date  which is the first day of a month not more than 90
days following the date of the filing of the application. Former Employees shall
not be eligible for Disability  Retirement  unless the Disability was determined
to have occurred during the course of such former Employee's employment with the
Employer.  Subject to Section  12.6 the  determination  of the  Committee  as to
whether a Participant has a Disability and the date of such Disability  shall be
final, binding and conclusive.

         9.3  Nonalienation  of Benefits.  Except with respect to federal income
tax withholding and federal tax levies,  benefits  payable under this Plan shall
not be  subject  in any  manner to  anticipation,  alienation,  sale,  transfer,
assignment, pledge, encumbrance,  charge, garnishment,  execution or levy of any
kind, either voluntary or involuntary, including any such liability which is for
alimony or other  payments  for the support of a spouse or former  spouse or for
any other  relative of the  Employee,  prior to actually  being  received by the
person  entitled to the benefit under the terms of the Plan;  and any attempt to
anticipate,  alienate,  sell,  transfer,  assign,  pledge,  encumber,  charge or
otherwise dispose of any right to benefits payable hereunder, shall be void. The
Trust  Fund  shall not in any manner be liable  for,  or subject  to, the debts,
contracts, liabilities,  engagements or torts of any person entitled to benefits
hereunder.

         Notwithstanding  the above,  the Committee  shall direct the Trustee to
comply with a qualified domestic relations order described in Section 9.4.

         9.4 Qualified Domestic Relations Order.  Benefits shall be paid only to
a  Participant,  or after  his  death  to his  Beneficiary,  unless a  qualified
domestic  relations  order  ("QDRO"),  as defined in Code Section 414(p) directs
that payment be made to an Alternate  Payee.  An Alternate  Payee is any spouse,
former spouse,  child or other dependent of a Participant who is recognized by a
QDRO as having a right to receive all or a portion of the benefits payable under
the Plan with respect to the Participant.
                                      IX-1
<PAGE>
         The  Committee  shall  establish  reasonable  rules  concerning  how it
determines  whether a purported  QDRO that it receives is indeed a QDRO, and how
it administers  amounts due to Alternate  Payees.  Payment to an Alternate Payee
pursuant  to a QDRO  shall be made at such time as  determined  pursuant  to the
QDRO,  and even while the  Participant  is  employed,  if the QDRO  requires  or
permits  such  distribution.  The  payment  shall be  based on the  value of the
Alternate  Payee's  interest in the accounts as of the Valuation Date coincident
with or  immediately  preceding  the date the payment is made.  No payment to an
Alternate Payee can be made later than when the Participant's benefit is paid to
him as a result of his termination of employment.  If the Participant has a loan
as  an  investment  of  his  account,  such  Participant  will  continue  to  be
responsible  for the  entire  loan.  The Plan  Administrator  is  authorized  to
establish any  additional  rules  necessary to determine the rights of Alternate
Payees under qualified domestic relations orders.

         Pursuant to the  provisions of Section 414(p) of the Code, a QDRO shall
mean a judgment,  decree or order (including  approval of a property  settlement
agreement)  made  pursuant  to a  state  domestic  relations  law  (including  a
community property law) that relates to the provision of child support,  alimony
payments,  or marital property rights to a spouse, former spouse, child or other
dependent of a Participant ("alternate payee") and which:

                   (a)     creates or  recognizes  the existence of an alternate
                           payee's  right to, or assigns to an  Alternate  Payee
                           the  right  to,  receive  all  or a  portion  of  the
                           benefits  payable to a  Participant  under this Plan;
                           and

                   (b)     specifies (i) the name and last known mailing address
                           (if any) of the  Participant and each Alternate Payee
                           covered by the order,  (ii) the amount or  percentage
                           of the  Participant's  benefits  under the Plan to be
                           paid to each such Alternate  Payee,  or the manner in
                           which such amount or  percentage  is to be determined
                           and,  (iii) the number of  payments  or the period to
                           which the order applies; and

                   (c)     does not require this Plan to:

                           (i)      provide any type or form of benefit,  or any
                                    option, not otherwise provided hereunder;

                           (ii)     pay  any  benefits  to  any  alternate payee
                                    prior to the earlier of:

                                    a)      the  earliest  date   benefits   are
                                            payable hereunder to a Participant,
                                            or

                                    b)      the    later   of   the   date   the
                                            Participant  attains  age  50 or the
                                            earliest    date   on   which    the
                                            Participant    could    obtain     a
                                      IX-2
<PAGE>
                                            distribution  under  the Plan if the
                                            Participant terminated employment;

                           (iii)    pay any  benefits which are not vested under
                                    the Plan;

                           (iv)     provide increased benefits; or

                           (v)      pay benefits to an Alternate Payee which are
                                    required  to be  paid to  another  Alternate
                                    Payee under a prior qualified domestic
                                    relations order.

         Upon receipt of any judgment,  decree or order (including approval of a
property settlement  agreement) relating to the provision of payment by the Plan
to an alternate payee pursuant to a state domestic  relations law, the Committee
shall promptly notify the affected  Participant and any person identified in the
document as an Alternate Payee of the receipt of such judgment, decree order and
shall notify the affected Participant and any such designated Alternate Payee of
the Committee's procedure for determining whether or not the judgment, decree or
order is a qualified domestic relations order.

         The valid  provisions  of a QDRO  shall,  after it is  received  by the
Committee,  take precedence over the provisions of the Plan relating to payments
to Participants and their  Beneficiaries.  If the Committee receives two or more
QDROs with respect to a Participant,  the earlier shall take precedence over the
later.
                                      IX-3
<PAGE>
                                    ARTICLE X
                               PAYMENT OF BENEFITS

         10.1 Time of  Payment.  A  Participant  shall be  eligible to receive a
distribution  of his  Vested  Interest  when  he has  terminated  employment.  A
distribution is based upon the value of the Participant's  Vested Interest as of
the  Valuation  Date  coincident  with  or  immediately  preceding  the  date of
distribution.

                   (a)     If the value of a  Participant's  Vested  Interest is
                           $5,000 or less ($3,500 prior to January 1, 1998), the
                           Vested Interest will be distributed 30 days following
                           his   date   of    termination    or   as   soon   as
                           administratively  practicable thereafter but no later
                           than the 60th day  after  the  latest of the close of
                           the Plan  Year in which (a) the  Participant  attains
                           age  65,  or  (b)  terminates   employment  with  all
                           Participating Employers;

                   (b)     If the value of a  Participant's  Vested  Interest is
                           greater  than  $5,000  ($3,500  prior to  January  1,
                           1998),   the   Participant   must   consent   to  the
                           distribution.  Such a  Participant's  Vested Interest
                           cannot be made sooner than 30 days following his date
                           of  termination  and no later than the  Participant's
                           Required Beginning Date.

         A distribution  may occur while a Participant  remains in the employ of
an  Employer,  in the event of a withdrawal  by reason of Financial  Hardship or
after age 59 1/2, as described in Sections 11.1 and 11.2, below.

         The distribution rules that apply to an "alternate payee" pursuant to a
"qualified domestic relations order" are stated in Section 9.4 herein.

         10.2  Required  Beginning  Date shall mean,  for anyone who attains age
70-1/2 after  December  31,  1998,  other than a 5% owner (as defined at Section
416(i)(1)(B)(i) of the Code), April 1st of the calendar year following the later
of (a) the calendar  year in which the Employee  attains age 70-1/2,  or (b) the
calendar year in which the Employee terminates employment with the Participating
Employer.

         A Participant  (other than a 5% owner) who attains the age of 70-1/2 in
1997 or 1998 and remains  employed with a Participating  Employer,  may elect to
delay receipt until April 1 following the calendar year in which the Participant
retires from employment with a Participating Employer.

         For Plan Years beginning prior to January 1, 1997,  Required  Beginning
Date was defined as April 1st of the calendar  year  following the calendar year
in which a Participant attained age 70-1/2.
                                      X-1
<PAGE>
         10.3  Death  Benefit.  If a  Participant  dies  with a  balance  in his
Accounts,  the  interest  of  such  Participant  shall  be  distributed  to  the
Participant's  Beneficiary in a single-sum  payment as soon as  administratively
practicable after 90 days from the Participant's death.

         10.4  Form of Distribution.  Distributions shall be made in  a  single-
               sum payment.

         10.5  Temporary Non-Payment of Benefits.

                   (a)     Unless the Participant  elects  otherwise in writing,
                           the payment of his Vested  Interest shall commence no
                           later than the sixtieth (60th) day after the close of
                           the  Plan  Year in which  the  last of the  following
                           occurs:

                           (i)      the  Participant achieves  Normal Retirement
                                    Age, or

                           (ii)     the Participant  terminates his service with
                                    the Employer, whichever is the latest.

                   (b)     If a  Participant  or  Beneficiary  fails to  furnish
                           information  reasonably  requested  by the  Committee
                           which  is  necessary   to   determine   whether  such
                           Participant   or   Beneficiary   has   satisfied  all
                           requirements  for payment of benefits,  the Committee
                           shall delay  payment of benefits  until the requested
                           information  is furnished  and shall make  reasonable
                           efforts to obtain such information.

         10.6 Direct Rollover Rules.  Notwithstanding  any provision of the Plan
to the contrary that would otherwise  limit a Distributee's  election under this
Article,  the Distributee may elect, at the time and in the manner prescribed by
the Committee,  to have any portion of an Eligible  Rollover  Distribution  paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover. Definitions are as follows:

                   (a)     The  term  Eligible  Rollover  Distribution means any
                           distribution of all or any portion of the balance  to
                           the  credit  of  the  Distributee,   except  that  an
                           Eligible Rollover Distribution does not include:  any
                           distribution that is one of a series of substantially
                           equal  periodic payments  (not less  frequently  than
                           annually) made for the life (or life  expectancy)  of
                           the  Distributee or  the joint lives (or  joint  life
                           expectancies)    of    the    Distributee   and   the
                           Distributee's    designated  beneficiary,  or  for  a
                           specified   period  of  ten  years  or   more;    any
                           distribution  to  the  extent  such  distribution  is
                           required  under  Section  401(a)(9) of  the Code; and
                           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).
                                      X-2
<PAGE>
                   (b)     An  Eligible  Retirement  Plan includes an individual
                           retirement account described in Section 408(a) of the
                           Code,   an individual  retirement  annuity  described
                           in  Section  408(b)  of  the Code,  an  annuity  plan
                           described   in  Section   403(a)  of the  Code,  or a
                           qualified  trust described in Section 401(a)  of  the
                           Code,   that  accepts  the   Distributee's   Eligible
                           Rollover  Distribution.  However,   in  the  case  of
                           an  Eligible Rollover Distribution  to the  surviving
                           spouse,  an eligible retirement plan is an individual
                           retirement account or individual retirement annuity.

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

                   (d)     The term Direct  Rollover means a payment by the plan
                           to the  eligible  retirement  plan  specified  by the
                           Distributee.

         10.7  Notice.  The notice  required  by Section  1.411(a)-11(c)  of the
Income Tax  Regulations  must be provided to a Participant  no less than 30 days
and no more than 90 days before the date of distribution.  The notice explains a
Participant's  right to defer receipt of a distribution  if his Vested  Interest
exceeds  $5,000  ($3,500  prior to January 1,  1998).  A  Participant  will also
receive an explanation of his  distribution  options no less than 30 days and no
more than 90 days before the date of distribution. The distribution may commence
no less than 30 days after the notice required under Section  1.411(a)-11(c)  of
the Income Tax Regulations is given, provided that:

                   (a)     the Committee  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

                   (b)     the   Participant,   after   receiving   the  notice,
                           affirmatively elects a distribution.
                                      X-3
<PAGE>
                                   ARTICLE XI
                        IN-SERVICE DISTRIBUTION AND LOANS

         11.1  Distribution  after  Attaining Age 59 1/2. A  Participant  who is
still  an  Employee  and has  attained  age 59 1/2  shall  be  entitled  to make
withdrawal(s)  from his  Employee-Deferral  Account,  Rollover  Account  and the
vested portion of the Participant's  Employer  Contribution Account by notifying
the Committee.

         11.2  Financial  Hardship.  Prior  to a  Participant's  termination  of
employment or age 59 1/2 he may apply to the Committee for a withdrawal of funds
held in his  Rollover  Contribution  Account  and  Employee-Deferral  Account on
account  of  a  Financial  Hardship.  The  total  of  such  withdrawals  from  a
Participant's  Employee-Deferral  Account  shall  not  exceed  the  total of his
Employee-Deferral  Contributions.  The  withdrawal  shall be made only under the
following conditions:

                   (a)     The  withdrawal  may  be made only to meet one of the
                           following needs:

                           (i)      Medical  expenses  described in Code Section
                                    213(d),  incurred  by the  Participant,  the
                                    Participant's  spouse,  or any dependent (as
                                    defined in Code Section 152) of the
                                    Participant;

                           (ii)     Purchase (excluding mortgage payments) of  a
                                    principal residence for the Participant;

                           (iii)    Payment  for all or a  portion  of the  next
                                    twelve   (12)   months   of   post-secondary
                                    education for the  Participant,  his spouse,
                                    children, or dependents;

                           (iv)     To prevent the  eviction of the  Participant
                                    from his principal  residence or foreclosure
                                    on  the   mortgage   of  the   Participant's
                                    principal residence; or

                           (v)      Any other need permitted  under Code Section
                                    401(k) and the regulations issued thereunder
                                    and authorized by the Committee.

                   (b)     The  Participant  provides to the  Committee a letter
                           containing the following:

                           (i)      A  statement  of  the  amount needed and the
                                    purpose for which it is needed;
                                      XI-1
<PAGE>
                           (ii)     A  representation  that the expense will not
                                    be paid for by  insurance  or  other  source
                                    specific   to   the   expense,    that   the
                                    Participant   and  his   spouse   (and   the
                                    Participant's minor child, if the expense is
                                    for the child's  benefit)  have no assets he
                                    can liquidate to pay for the expense without
                                    creating a new  hardship,  and that  ceasing
                                    Employee   Deferrals  will  not  suffice  to
                                    satisfy the needs;

                           (iii)    A  representation  that the  Participant has
                                    not  been  able to  borrow  from  commercial
                                    sources on reasonable commercial terms in an
                                    amount sufficient to satisfy the need; and

                           (iv)     A promise  that the funds  will be used only
                                    for the specified purpose.

                   (c)     The withdrawal  cannot exceed the amount necessary to
                           satisfy the need described at paragraph (a), plus any
                           amounts  necessary  to pay  federal  or state  income
                           taxes or penalties  reasonably  anticipated to result
                           from the distribution.

                   (d)     The Participant has obtained all distributions, other
                           than  hardship  distributions,  and  all  non-taxable
                           loans  currently  available  under  all  "plans"  (as
                           contemplated  by  U.S.  Treasury  Regulation  Section
                           1.401(k)-1(d)(2)(iii)), maintained by the Employer.

                   (e)     The   Participant   shall  not  be  allowed  to  make
                           Employee-Deferral  Contributions until the Entry Date
                           next following the 12-month anniversary of the
                           withdrawal.

                   (f)     The   Participant's   limit   on    Employee-Deferral
                           Contributions in the year  immediately  following the
                           year  of the  withdrawal  shall  be the  limit  under
                           Section  3.4 for that  year,  less the  amount of the
                           Participant's Employee-Deferral Contributions made in
                           the year of the hardship withdrawal.

         11.3 Loans to Participant.  A Participant who is an Employee may make a
loan from the Plan, subject to the following rules and limitations:

                   (a)     The total amount of a  Participant's  loan when added
                           to the outstanding  balance of all the  Participant's
                           prior  loans from the Plan during the one year period
                           ending  the day  before  the loan is made  shall  not
                           exceed  $50,000,  nor shall  the total  amount of the
                           loan when  added  to the outstanding balance  of  the
                                      XI-2
<PAGE>
                           Participant's loans under the Plan  exceed   one-half
                           the  Participant's  Vested Interest  under  the Plan.
                           Amounts  set aside for an alternate  payee shall  not
                           be  included.  The  Plan Administrator can  establish
                           uniform nondiscriminatory policies   further limiting
                           the amount or frequency of Employee loans.

                   (b)     Each  loan  shall  be  deemed  an  investment  of the
                           account of the  Participant  receiving the loan. Loan
                           disbursements shall be pro rated across all funds.

                   (c)     Each loan shall bear a reasonable rate of interest as
                           determined by the Trustee.

                   (d)     A  Participant  can have no more  than two (2)  loans
                           outstanding at anytime if a Participant makes a final
                           payment on one of two  outstanding  loans, a new loan
                           can be obtained  after a 30-day delay  following that
                           final payment.

                   (e) Each loan may not be less than $1,000.

                   (f)     The  Plan  Administrator   shall  provide  each  loan
                           applicant with a clear  statement of the charges with
                           respect  to each  loan  transaction.  Such  statement
                           shall include the dollar  amount and annual  interest
                           rate or the finance charge.

                   (g)     The  term  of a  loan  shall  be  determined  by  the
                           Participant  but  shall not be less than 12 months or
                           exceed five years.

                   (h)     A loan  made  pursuant  to this  Article  XI shall be
                           repaid in accordance  with a schedule  established by
                           the Committee  which schedule shall call for payments
                           of interest and amortized  payments of principal over
                           the term of the loan.

                   (i)     Each loan  shall be  evidenced  by the  Participant's
                           promissory note for the amount of the loan, including
                           interest, payable to the order of the Trust, and each
                           loan shall be secured by  collateral.  The collateral
                           shall consist of the assignment of the  Participant's
                           right, title and interest in the Participant's Vested
                           Interest in the Trust.

                   (j)     During paid  employment  each loan shall be repaid by
                           withholding   from  the   Participant's   pay.   Upon
                           termination of  employment,  the  Participant  has 90
                           days to pay  the  loan in  full.  If the  Participant
                           terminates employment and receives an immediate  lump
                                      XI-3
<PAGE>
                           sum  distribution,  any  promissory  note held by the
                           Plan for his account shall be distributed to him.

                   (k)     Leave of Absence.  Notwithstanding anything contained
                           herein to the contrary, the Committee is permitted to
                           provide  that  loan  repayments  are  suspended  if a
                           Participant  is on an excused leave of absence either
                           without  pay  from the  Employer  or at a rate of pay
                           from the Employer  (after income and  employment  tax
                           withholding)  that is less  than  the  amount  of the
                           repayments  required  under  the  terms of the  loan;
                           provided,  however, that the following conditions are
                           met:

                           (i)      The  permitted  suspension  period shall end
                                    upon  the  Participant's  return  to  active
                                    employment  with the  Employer at the end of
                                    the leave of absence. In no event,  however,
                                    may the suspension period last longer than
                                    one year.

                           (ii)     Upon  the  Participant's  return  to  active
                                    employment, the loan repayments shall resume
                                    and,  as soon as  administratively  feasible
                                    thereafter,  the  remaining  loan  repayment
                                    installments     shall    be    recalculated
                                    (increased)   in  order  to   amortize   the
                                    repayment of the  suspended  payment  amount
                                    over the remaining term of the loan.

                           (iii)    In any event,  the loan repayment term shall
                                    not be lengthened or otherwise  altered as a
                                    result of the  suspension  period.  The loan
                                    will be  required  to be paid in full by the
                                    date its  final  installment  payment  would
                                    otherwise  be due  under  the  terms  of the
                                    original  note,   even  if  the  Participant
                                    remains on leave of absence as of such date.

                   (l)     Repayments  shall be  credited  to the  Participant's
                           accounts  out  of  which  the  loan  was  made,   and
                           allocated among the Investment  Funds pursuant to the
                           Participant's most recent allocation election.

                   (m)     Default.    Unless    stated    otherwise    in   IRS
                           promulgations,  in the event of default,  foreclosure
                           on the note and attachment of security shall not take
                           place until the occurrence of a  distributable  event
                           under the Plan. No distribution  shall be made to any
                           Participant  or to a Beneficiary  of any amount until
                           all outstanding loans to such Participant,  including
                           interest accrued thereon, have been liquidated.
                                      XI-4
<PAGE>
                                   ARTICLE XII
                                 ADMINISTRATION

         12.1  Board  of  Directors.  The  Board  of  Directors  shall  have the
following duties and  responsibilities  in connection with the administration of
the Plan:

                   (a)     making decisions with respect to contributions to the
                           Plan;

                   (b)     making  decisions   with  respect  to   amending   or
                           terminating the Plan;

                   (c)     making  decisions  with  respect  to  the  selection,
                           retention  and removal of the Trustee and the members
                           of the Committee;

                   (d)     periodically reviewing the performance of the Trustee
                           and the members of the Committee; and

                   (e)     performing such  additional duties  as are imposed by
                           law.

         The Board of Directors will have all powers and authority  necessary or
appropriate  to carry out its duties and  responsibilities  with  respect to the
administration  of the Plan.  The Board of Directors  may by written  resolution
allocate  its  duties  and  responsibilities  to one or more of its  members  or
delegate  such  duties  and  responsibilities  to any other  persons,  provided,
however,  that any such  allocation or delegation  shall be terminable upon such
notice  as the  Board of  Directors  deems  reasonable  and  prudent  under  the
circumstances.

         12.2  401(k)  Administrative   Committee.   The  401(k)  Administrative
Committee (the  "Committee")  shall administer the Plan and is designated as the
"administrator"  within the  meaning of Section  3(16) of ERISA.  The  Committee
shall  have not less  than  three  nor more  than  five  members,  who  shall be
appointed  by the  Board of  Directors  and who may be  removed  by the Board of
Directors at any time with or without  cause.  A Committee  member may resign at
any time by filing his written resignation with the Board of Directors.

         All members of the Committee  are  designated as agents of the Plan for
the service of legal process.

         The  Company  will  notify the  Trustee  in  writing of each  Committee
member's  appointment,  and the Trustee may assume such appointment continues in
effect until written notice to the contrary is given by the Company.

         12.3 Committee's Duties and Responsibilities.  The Committee shall have
the following duties and  responsibilities in connection with the administration
of the Plan:
                                     XII-1
<PAGE>
                   (a)     interpreting  and  construing the provisions  of  the
                           Plan;

                   (b)     determining   all   questions   of   eligibility   to
                           participate, eligibility for benefits, the allocation
                           of  contributions,  and  the  status  and  rights  of
                           Participants, Beneficiaries and alternate payees;

                   (c)     complying   with   the   reporting   and   disclosure
                           requirements established by ERISA;

                   (d)     determining  and deciding any dispute  arising  under
                           the  Plan  and   administering   the  Plan's   claims
                           procedures;

                   (e)     directing the Trustee  concerning  all payments to be
                           made  out  of  the  Trust  in  accordance   with  the
                           provisions of the Plan;

                   (f)     establishing  procedures  for  withholding of federal
                           income tax from distributions;

                   (g)     establishing  procedures  to  prevent  the Plan  from
                           engaging in transactions  described in Section 406 of
                           ERISA and  transactions  described in Section 4975(c)
                           of the Code;

                   (h)     establishing   equitable   accounting   methods   and
                           designating additional Valuation Dates;

                   (i)     communicating  with Participants,  Beneficiaries  and
                           alternate payee;

                   (j)     reviewing the investment performance of the Trustee;

                   (k)     reviewing  the  performance of any advisors appointed
                           by the Committee;

                   (l)     selecting and reviewing selected investment funds;

                   (m)     making recommendations to the Board of Directors with
                           respect to the amendment or  termination of the Plan;
                           and

                   (n)     keeping minutes to record its  proceedings,  acts and
                           decisions  pertaining  to the  administration  of the
                           Plan.

         12.4  Committee's  Powers.  The  Committee  will  have all  powers  and
authority necessary or appropriate to carry out its duties and  responsibilities
with respect to the operation and administration of the Plan. It shall interpret
and  apply  all provisions  of the Plan and may supply any omission or reconcile
                                     XII-2
<PAGE>
any  inconsistency  or  ambiguity  in  such  manner   as  it  deems   advisable,
including  the  adoption  of interpretative memoranda.  All  determinations  and
any actions of the  Committee  will  be conclusive and binding upon all persons,
except as otherwise provided herein or by  law;  provided,   however,  that  the
Committee  may  revoke  or  modify  a determination  or action  previously  made
in error. The Committee shall exercise all powers and authority given to it in a
nondiscriminatory manner, and will apply uniform administrative rules of general
application   in  order  to  assure  similar  treatment  to  persons  in similar
circumstances.

         The  Committee may delegate to any such agent or any  sub-committee  or
member of the  Committee  its  authority  to perform any duty or  responsibility
specified in Section 12.3,  including  those  matters  involving the exercise of
discretion,  provided that such delegation shall be subject to revocation at any
time at the  discretion  of the  Committee.  Any  member of the  Committee,  any
sub-committee  or agent to whom the Committee  delegates any authority,  and any
other person or group of persons,  may serve in more than one fiduciary capacity
(including  service as both  Committee  member and Trustee)  with respect to the
Plan.

         Any action or  decision  concurred  in by a majority  of the  Committee
members, either at a meeting or in writing without a meeting, will constitute an
action or  decision of the  Committee.  The  Committee  may adopt and amend such
rules for the conduct of its business and administration of the Plan as it deems
advisable.

         12.5 Chairman of the Committee. The Committee shall elect any Committee
member to serve as Chairman,  and may remove him at any time. The Chairman, or a
majority of the  Committee  members then in office,  will have the  authority to
execute all  instruments or memoranda  necessary or appropriate to carry out the
actions  and  decisions  of the  Committee;  and any  person  may rely  upon any
instrument  or  memoranda so executed as evidence of the  Committee's  action or
decision indicated thereby.

         12.6  Claims  Review  Procedure.  If  a  Participant   (Beneficiary  or
alternate  payee)  believes a benefit or  distribution is due under the Plan, he
may request the distribution of such benefit, in writing, on forms acceptable to
the Committee.  At such time, the Participant (or Beneficiary) will be given the
information and materials necessary to complete any request for the distribution
of a benefit.

         If the request for  distribution  is disputed or denied,  the following
action shall be taken:

                   (a)     First,  the  Participant  (or  Beneficiary)  will  be
                           notified,  in  writing,  of the  dispute or denial as
                           soon as  possible  (but no later than 90 days)  after
                           receipt of the request for a distribution. The notice
                           will set forth the  specific  reasons for the denial,
                           including any relevant provisions of the  Plan.   The
                                     XII-3
<PAGE>
                           notice will also explain the claims review  procedure
                           of the Plan.

                   (b)     Second,  the  Participant  (or  Beneficiary) shall be
                           entitled  to  a  full  review  of  his request  for a
                           distribution.    A  Participant    (or   Beneficiary)
                           desiring a review  of  the  dispute  or  denial  must
                           request such a review, in writing,  no later than  60
                           days  after  notification of the dispute or denial is
                           received.  During  the  review,  the  Participant (or
                           Beneficiary)  may  be  represented  and will have the
                           right  to  inspect  all  documents  pertaining to the
                           dispute  or  denial.   Any  such review may include a
                           hearing  for  the   Participant  or  his   designated
                           representative.

                   (c)     The  Committee  shall  render  its decision within 60
                           days after receipt of the request for the review.  In
                           the event special circumstances require an  extension
                           of  time,  the Committee shall notify the Participant
                           (or Beneficiary),  and the decision will  be rendered
                           no  later  than  120  days  after  the receipt of the
                           request.  The  decision  of the Committee shall be in
                           writing.  The decision shall include specific reasons
                           for the action taken and specific references  to  the
                           Plan provisions on which the decision is based.

         12.7 Information from Participants, Beneficiaries and Alternate Payees.
Each  Participant,  Beneficiary and alternate payee shall be required to furnish
to the Committee,  in the form prescribed by it, such personal data, affidavits,
authorization to obtain information,  and other information as the Committee may
deem appropriate for the proper administration of the Plan.

         12.8 Actions.  Any action taken by the Plan  Administrator or Committee
on matters within its  discretion  shall be final and binding on the parties and
on all  Participants,  Beneficiaries  or other  persons  claiming  any  right or
benefit under the Plan, in the Trust, or in the administration of the Plan.

         All decisions of the Plan  Administrator  or Committee shall be uniform
and made in a nondiscriminatory manner.

         12.9 Bond. The Company shall purchase a bond for the Plan Administrator
or  Committee  and any  other  fiduciaries  of the Plan in  accordance  with the
requirements of the Code and ERISA.

         12.10  Indemnification.  The Company  shall defend and indemnify to the
full extent  permitted by law (including  ERISA),  which  indemnification  shall
include,  but not be limited to, attorney's fees and any tax imposed as a result
of a claim asserted by any person, persons or entity (including  a  governmental
                                     XII-4
<PAGE>
entity), any individual serving as a member of the Committee made or  threatened
to be made a part to any action,  suit or proceeding,  whether criminal,  civil,
administrative or investigative,  by reason of the fact that such individual  is
or was a member of the Committee.
                                     XII-5
<PAGE>
                                  ARTICLE XIII
                              AMENDMENT OF THE PLAN

         13.1 Right to Amend or Suspend Contributions. Subject to the provisions
of Section 13.3, the Board of Directors  reserves the right to amend the Plan or
Trust or suspend contributions to the Plan, in whole or in part, at any time and
for any reason without the consent of any Participating  Employer,  Participant,
Beneficiary, or alternate payee. Each amendment of the Plan shall be in writing,
executed by order of the Board of  Directors  and shall be effective on the date
specified  therein.  Notice of any  amendment,  modification  or  suspension  of
contributions  to the  Plan  shall be given  by the  Board of  Directors  to the
Committee, the Trustee, and to all Participating Employers.

         13.2 Amendment by Committee. Notwithstanding Section 13.1 the Committee
may adopt any amendment  which may be necessary or appropriate to facilitate the
administration, management and interpretation of the Plan or to conform the Plan
thereto,  or to  qualify  or  maintain  the Plan and  Trust as a plan and  trust
meeting the  requirements of Sections 401(a),  501(a),  401(k) and 401(m) of the
Code  or  any  other  applicable  Section  of law  and  the  Regulations  issued
thereunder,  provided said  amendment  does not have any material  effect on the
currently  estimated cost to the Employer  maintaining  the Plan. Such amendment
shall be in writing,  executed by a majority of the Committee  members and shall
be  effective  on the date  specified  therein.  Notice of any  amendment by the
Committee  shall be given to the  Board of  Directors,  the  Trustee  and to all
Participating Employers within a reasonable time.

         13.3      Restriction on Amendment.   No  amendment under Sections 13.1
                   or 13.2 shall:

                   (a)     authorize  or  permit  any  part of the  Plan  assets
                           (other than such part as is required to pay taxes, if
                           any,  and  administrative  expenses  as  provided  in
                           Section 16.15) to be used for or diverted to purposes
                           other   than  for  the   exclusive   benefit  of  the
                           Participants  and that  Beneficiaries  and  alternate
                           payees  under the Plan prior to the  satisfaction  of
                           all liabilities of the Plan; and

                   (b)     deprive a Participant of his nonforfeitable right  to
                           benefits accrued as of the  date of  such  amendment.
                           If  the  vesting  schedule  of the Plan is amended in
                           such  a  way  that an Employee might in any Plan Year
                           have less vesting  credit under the new schedule than
                           under  the  schedule  prior  to the  amendment,  each
                           Employee with at  least three Years  of  Service  may
                           elect to have his nonforfeitable percentage  computed
                           without regard to such amendment.  The  period during
                           which such election may be made shall  commence  with
                                     XIII-1
<PAGE>
                           the date the amendment  is adopted and shall  end  on
                           the   later   of   (i)    sixty   days   after    the
                           amendment  is  adopted,  (ii)  sixty  days  after the
                           amendment  becomes  effective,  or (iii)  sixty  days
                           after the Employee or  Participant  is provided  with
                           written notice of the amendment.

         13.4 Retroactivity.  Any amendment or modification of any provisions of
the Plan may be made  retroactively  if necessary or  appropriate  to qualify or
maintain the Plan or the Trust as a plan and trust meeting the  requirements  of
Section 401(a),  501(a),  401(k),  or 401(m) of the Code or any other applicable
Section of law (including ERISA) and the Regulations issued thereunder.

         13.5 Merger. The Plan may be merged or consolidated with, or its assets
and  liabilities may be transferred to any other plan only if the benefits which
would be received by a  Participant  in the event of a  termination  of the Plan
immediately  after such transfer,  merger or consolidation are at least equal to
the benefit  such  Participant  would have  received if the Plan had  terminated
immediately prior to the transfer, merger or consolidation.
                                     XIII-2
<PAGE>
                                   ARTICLE XIV
                             TERMINATION OF THE PLAN

         14.1 Events  Constituting  Termination.  It is expressly declared to be
the desire and intention of each Participating  Employer to continue the Plan in
existence  for an  indefinite  period of time.  However,  circumstances  not now
anticipated  or  foreseeable  may  arise in the  future,  as a result of which a
Participating  Employer may deem it  impractical  or unwise to continue the Plan
established  hereunder,  and each Participating  Employer therefore reserves the
right to terminate the Plan at any time insofar as it affects its Employees. Any
Participating  Employer may terminate its participation in the Plan by action of
its board of directors.  Such termination shall be evidenced by an instrument of
termination  executed by an officer of the  Participating  Employer  pursuant to
authorization  by its board of directors  and shall be delivered to the Board of
Directors,  the  Committee  and to each  other  Participating  Employer.  To the
maximum  extent  permitted  by  ERISA,  the  termination  of the  Plan as to any
Participating  Employer  shall not in any way  affect  any  other  Participating
Employer's participation in the Plan.

         With respect to any Participating  Employer which has adopted the Plan,
its  adjudication  of  bankruptcy  or  insolvency  by  any  court  of  competent
jurisdiction,  its making of a general  assignment for the benefit of creditors,
its dissolution,  merger, consolidation,  other reorganization or discontinuance
of business,  unless coverage for its Employees under the Plan is continued by a
successor  company,  or its  complete  discontinuance  of  contributions,  shall
operate to terminate the Plan with respect to such Participating Employer.

         The Committee may require any  Participating  Employer to withdraw from
the Plan for failure of the Participating  Employer to make proper contributions
or to comply with any other provision of the Plan.

         14.2  Partial   Termination.   Upon  the  withdrawal  of  one  or  more
Participating  Employers or upon the  termination of active  participation  of a
group of Employees, the Committee shall determine, upon the advice of counsel to
the Plan and under  applicable law,  whether a partial  termination has occurred
with respect to a group of Participants.

         14.3  Disposition of Accounts After a Termination.  Upon termination or
partial   termination   of  the  Plan  or  upon   complete   discontinuance   of
contributions,  the  Accounts of all  affected  Participants  shall become fully
vested and  nonforfeitable.  Upon the termination or partial termination or upon
complete  discontinuance  of  contributions,  the  Committee  shall  continue to
administer  the Plan,  the Trustee shall  continue to administer the Trust Fund,
and  all  payments  to  Participants  shall  continue  in  accordance  with  the
provisions  of  Article  X;  provided,  however,  that in the event of a partial
termination  the  Committee  may direct  the  Trustee  to  segregate  the assets
attributable  to the  Accounts  of the  affected  Participants  and  apply  such
segregated assets for the benefit of such Participants.
                                     XIV-1
<PAGE>
         After a Plan  termination,  the assets of the Plan shall be distributed
to the Participants (and others for whose benefits accounts are then maintained)
at such  time as the  Committee  determines.  No  distribution  shall be made of
Employee-Deferral  Account  balances  as a result of a  termination  of the Plan
unless the Plan is  terminated  without  the  establishment  or  maintenance  of
another   defined    contribution   plan,   as   provided   in   Code   Sections
401(k)(2)(B)(i)(II) and 401(k)(10)(A)(i).

         Notwithstanding the foregoing paragraph,  upon or after the termination
of the Plan, the Board of Directors shall have the power to terminate the Trust.

         14.4 Internal Revenue Service Approval for  Distribution.  In the event
that the Committee  applies to the Internal  Revenue Service for a determination
that the  termination  of the Plan does not  disqualify it, no person shall have
any right or claim to any assets of the Trust Fund before the  Internal  Revenue
Service  shall  determine  that  the  Plan is  qualified  through  the  proposed
distribution of assets under this Article XIV.
                                     XIV-2
<PAGE>
                                   ARTICLE XV
                          STAND-BY TOP-HEAVY PROVISIONS

         15.1 Top Heavy Plan.  The Plan will be  considered a Top Heavy Plan for
any Plan Year if it is  determined  to be a Top Heavy Plan as of the last day of
the preceding Plan Year.  Notwithstanding  any other provisions in the Plan, the
provisions of this Article XV shall apply and supersede all other  provisions in
the Plan with respect to a Plan Year for which the Plan is a Top Heavy Plan.

         15.2 Definitions. For purposes of this Article XV and as otherwise used
in this Plan, the following terms shall have the meanings set forth below:

                   (a)     "Aggregation Group" shall mean the group composed  of
                           each qualified  retirement  plan of  a  Participating
                           Employer  or  an  Affiliated Company in which  a  Key
                           Employee  is  a  Participant and each other qualified
                           retirement  plan  of  a  Participating Employer or an
                           Affiliated   Company   which  enables  a  plan  of  a
                           Participating  Employer  or an Affiliated Company  in
                           which  a  Key  Employee  is  a Participant to satisfy
                           Sections 401(a)(4) or 410 of the Code.   In addition,
                           the Company may choose to treat  any  other qualified
                           retirement plan as a member of the Aggregation  Group
                           if  such  Aggregation  Group will continue to satisfy
                           Sections 401(a)(4) and 410 of the Code with such plan
                           being taken into account.

                   (b)     "Key Employee" shall mean a "Key Employee" as defined
                           in  Section   416(i)(1)   and  (5)  of  the  Code  or
                           Regulations.   For  purposes  of  determining   which
                           employee is a Key Employee,  compensation  shall mean
                           "compensation"  as defined in Section  1.415-2(d)  of
                           the Regulations but including employer  contributions
                           made pursuant to a salary reduction arrangement.

                   (c)     This Plan  shall be a "Top  Heavy  Plan" for any Plan
                           Year if, as of the Determination  Date (as defined in
                           paragraph  (d) below),  the aggregate of the Accounts
                           under the Plan for Participants who are Key Employees
                           (as defined in paragraph  (b),  above) exceeds 60% of
                           the aggregate of the Accounts of all  Participants or
                           if this  Plan  is  required  to be in an  Aggregation
                           Group (as defined in paragraph (a),  above) which for

                           such Plan Year is a top-heavy group.

                   (d)     "Determination Date" means for any Plan Year the last
                           day of the immediately preceding Plan Year.
                                      XV-1
<PAGE>
         15.3 Vesting.  If the Plan is a Top Heavy Plan with respect to any Plan
Year,  the Vested  Interest of each  Participant  who has  performed one Hour of
Service on or after the date the Plan becomes a Top Heavy Plan shall not be less
than  the  percentage  determined  in  accordance  with  the  following  vesting
schedule:

                                Years of Service

Less  than 2 years 2 years  but less  than 3 3 years but less than 4 4 years but
less than 5 5 years but less than 6 6 years or more
                                 Vested Interest

                                       0%
                                       20%
                                       40%
                                       60%
                                       80%
                                      100%

                   The following additional rules shall apply:

                   (a)     The  Top-Heavy  vesting  schedule  set  forth in this
                           Section  shall  apply to the  entire  balance of such
                           accounts, including benefits which accrued before the
                           Plan became Top-Heavy.

                   (b)     In the event the Plan  ceases  to be  Top-Heavy,  the
                           vested   and   nonforfeitable   percentage   of  each
                           Participant's Employer Contribution Account shall not
                           be reduced by a change in the Plan's vesting
                           schedule.

                   (c)     The Top-Heavy  vesting schedule set forth above shall
                           not apply to the Employer Contribution Account of any
                           Participant  who  does  not  have an Hour of  Service
                           after  the  Plan  initially  becomes  Top-Heavy.  The
                           vested  interest  of such  Participant  in his or her
                           Employer  Contribution  Account  shall be  determined
                           without regard to this Section.

                   (d)     If the  Plan  ceases  to be  Top-Heavy,  the  vesting
                           schedule set forth in this Section shall apply to all
                           Employer  Contributions  attributable  to Plan  Years
                           after the Plan ceases to be Top-Heavy. Such change in
                           the vesting schedule shall be treated as an amendment
                           and the provisions of Section 13.3 shall apply.

         15.4  Minimum  Contribution.  For each Plan Year that the Plan is a Top
Heavy Plan,  the Employer  Contribution  (including  forfeitures  but  excluding
rollovers pursuant to Section 3.8) allocable to the Accounts of each Participant
who has  performed an Hour of Service at the end of the Plan Year and who is not
a Key  Employee,  shall  not  be  less  than  the  lesser  of  (i)  3%  of  such
Participant's compensation,  within the meaning of Section 415 of the  Code,  or
                                      XV-2
<PAGE>
(ii) the percentage  at  which  contributions  and  forfeitures  for  such  Plan
Year  are  made  and   allocated  on behalf  of the Key  Employee  for whom such
percentage is the highest.  Such allocation  shall be made for each  Participant
who is not a Key Employee  and who is employed by the Employer  through the last
payroll period ending within the Plan Year.  For the purpose of determining  the
appropriate percentage under clause (i), all defined contribution plans required
to be included in an Aggregation Group shall be treated as one plan. Clause (ii)
shall not be applicable if the Plan is required to be included in an Aggregation
Group which enables a defined  benefit plan also required to be included in said
Aggregation   Group  to  satisfy   Sections   401(a)(4)  or  410  of  the  Code.
Compensation, for purposes of determining a minimum contribution, is Section 415
Compensation.

         15.5 Limitations on Contributions.  For each Plan Year that the Plan is
a Top Heavy Plan, 1.0 shall be substituted  for 1.25 as the  multiplicand of the
dollar  limitation in determining  the  denominator of the defined  benefit plan
fraction and of the defined  contribution  plan fraction for purposes of Section
415(e) of the Code. If, after  substituting  90 percent for 60 percent  wherever
the latter  appears in Section 416(g) of the Code, the Plan is not determined to
be a Top Heavy Plan, the provisions of this Section 15.5 shall not be applicable
if the minimum Employer Contribution  (including  forfeitures)  allocable to the
Accounts  of  any  Participant  who  is  not a Key  Employee  is  determined  by
substituting  "4" for "3". If the Participant is a participant in both a defined
contribution  plan and a defined  benefit  plan,  the  benefit  from the defined
contribution  plan  minimum  shall be  comparable  to a 3% defined  benefit plan
benefit.

         15.6 Other Plans.  The Committee  shall, to the extent permitted by the
Code and in  accordance  with the  Regulations,  apply  the  provisions  of this
Article XV by taking into  account the  benefits  payable and the  contributions
made under any other plans maintained by a Participating  Employer or Affiliated
Company  which  are  qualified  under  Section  401(a)  of the  Code to  prevent
inappropriate   omissions  or  required   duplication  of  minimum  benefits  or
contributions  by making a  comparability  analysis  to prove  that the  defined
contribution  plan is providing a benefit at least equal to the minimum  benefit
under the defined benefit plan.
                                      XV-3
<PAGE>
                                   ARTICLE XVI
                               GENERAL PROVISIONS

         16.1 Plan  Voluntary.  Although it is  intended  that the Plan shall be
continued  indefinitely,  this  Plan is  entirely  voluntary  on the part of the
Participating  Employers  and the  continuance  of this Plan and the  payment of
contributions hereunder are not to be regarded as contractual obligations of the
Participating  Employers.  The Plan shall not be deemed to constitute a contract
between a Participating  Employer and any Employee or to be a consideration for,
or an  inducement  for, the  employment  of an Employee by an Employer.  Nothing
contained  in the Plan  shall be  deemed  to give any  Employee  the right to be
retained  in the service of an  Employer  or to  interfere  with the right of an
Employer to discharge  or to  terminate  the service of any Employee at any time
without  regard to the effects  such  discharge or  termination  may have on any
rights under the Plan.

         16.2 Payments to Minors and Incompetents. If a Participant, Beneficiary
or alternate  payee entitled to receive any benefits  hereunder is a minor or is
deemed by the Committee, or is adjudged, to be legally incapable of giving valid
receipt and  discharge  for such  benefits,  such  benefits will be paid to such
person or  institution  as the Committee may designate or to the duly  appointed
guardian. Such payment shall, to the extent made, be deemed a complete discharge
of any liability for such payment under the Plan.

         16.3  Missing  Payee.  The  Committee  shall retain the address of each
Participant, Beneficiary or alternate payee. Any notice sent to the last address
filed  with  the Plan  Administrator  or for the last  address  indicated  on an
Employer's records will be binding upon a Participant or Beneficiary.

         16.4  Required  Information.  Each  Participant  shall  file  with  the
Committee  such pertinent  information  concerning  himself,  his spouse and his
Beneficiary as the Committee may specify, and no Participant, or Beneficiary, or
other person shall have any rights or be entitled to any benefits under the Plan
unless and until such information is filed by or with respect to him.

         16.5  Subject  to  Trust  Agreement.  Any and all  rights  or  benefits
accruing  to any  persons  under the Plan  shall be  subject to the terms of the
Trust Agreement.

         16.6   Communications  to  Committee.   All  elections,   designations,
requests,  notices,  instructions,  and other communications from an Employee, a
Participant,  Beneficiary,  or  alternate  payee to the  Committee  required  or
permitted under the Plan (i) shall be in such form as is prescribed from time to
time by the Committee,  (ii) shall be mailed by first-class mail or delivered to
such location as shall be specified by the Committee,  and (iii) shall be deemed
to have been  given  and  delivered  only upon  actual  receipt  thereof  by the
Committee at such location.
                                     XVI-1
<PAGE>
         16.7   Communications   from  Employer  or   Committee.   All  notices,
statements,  reports and other  communications from an Employer or the Committee
to any Employee, Participant,  Beneficiary or alternate payee shall be deemed to
have been duly given when  delivered  to, or when  mailed by  first-class  mail,
postage  prepaid and addressed to, such  Employee,  Participant,  Beneficiary or
alternate payee at his address last appearing on the records of the Committee or
Company, or when posted by the Company or the Committee as permitted by law.

         16.8 Action.  Except as may be specifically provided herein, any action
required or  permitted  to be taken by an Employer may be taken on behalf of the
Employer by any authorized officer of the Employer.

         16.9 Liability for Benefits.  Neither the Trustee,  the Employers,  the
Committee  nor  the  Plan  Administrator   guarantee  the  Trust  from  loss  or
depreciation,  nor do they guarantee any payment to any person. The liability of
the Trustee, the Employers, the Committee and the Plan Administrator to make any
payment is limited to the available assets of the Trust.

         16.10 Named Fiduciary.  The "named  fiduciaries" of the Plan within the
meaning  of  ERISA  Section  403  shall  be  (a)  the  Employer,  (b)  the  Plan
Administrator, (c) the Trustee, and (d) the Committee.

         16.11 Gender.  Whenever used in the Plan the masculine  gender includes
the feminine.

         16.12  Captions.  The captions  preceding the Sections of the Plan have
been inserted  solely as a matter of  convenience  and in no way define or limit
the scope or intent of any provisions of the Plan.

         16.13  Applicable  Law.  The Plan and all  rights  thereunder  shall be
governed by and construed in accordance  with ERISA and the laws of the State of
Louisiana.

         16.14 Reversion of Employer Contributions. In no event shall the assets
of the Plan revert to the benefit of the Employer. Notwithstanding any provision
of the  Plan to the  contrary,  however,  all  contributions  by  Employers  are
conditioned upon the deductibility of such contribution  under Code Section 404.
To the extent that a deduction is disallowed for an Employer's contribution, the
Trustee shall return the principal amount of such  contribution  upon the demand
of the  Employee.  Any such demand shall be made within one year  following  the
final determination of the disallowance.

         Further, notwithstanding any provision of the Plan to the contrary, any
contribution which is made by the Employer on account of a good faith mistake of
fact may be returned to the Employer.  The Employer shall notify the Trustee, in
writing, of such mistake within one year of the contribution.  The Trustee shall
                                     XVI-2
<PAGE>
return the principal amount  of  the Employer  Contribution as soon as possible,
but in any event within 60 days after written notification by the Employer.

         The maximum amount that may be returned to an Employer in the case of a
mistake  of fact or the  disallowance  of a  deduction  is the excess of (a) the
amount  contributed,  over, as relevant,  (b)(i) the amount that would have been
contributed had no mistake of fact occurred,  or (ii) the amount that would have
been  contributed  had the  contribution  been  limited  to the  amount  that is
deductible  after any  disallowance by the Internal  Revenue  Service.  Earnings
attributable to the excess contribution may not be returned to the Employer, but
losses  attributable   thereto  must  reduce  the  amount  to  be  so  returned.
Furthermore,  if the  withdrawal of the amount  attributable  to the mistaken or
nondeductible  contribution would cause the balance of the individual account of
any  Participant to be reduced to less than the balance which would have been in
the account had the mistaken or nondeductible amount not been contributed,  then
the amount to be  returned to the  Employer  must be limited so as to avoid such
reduction.

         16.15 Expenses.  All expenses of administration  shall be paid from the
Trust unless paid directly by the Employer. The Employer may reimburse the Trust
for any administrative  expense paid by the Trust; such reimbursement  shall not
be treated as an Employer Contribution under the terms of the Plan.
                                     XVI-3
<PAGE>
         EXECUTED in multiple originals in New Orleans, Louisiana,  effective as
of the 30th day of December, 1998.

WITNESSES:                                 AVONDALE INDUSTRIES, INC.

/S/ GEORGE E. WHITE, JR.                   BY:  /S/ THOMAS M. KITCHEN
------------------------                        ------------------------

/S/ RONALD E. BAILEY
------------------------
                                     XVI-4
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF LOUISIANA

PARISH OF ORLEANS

         BEFORE ME, the undersigned Notary Public,  personally came and appeared
Thomas M. Kitchen,  who being by me sworn did  depose  and state that he  signed
the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free  act  and
deed on behalf of Avondale Industries, Inc. for the  purposes therein set forth.


                                           BY:   /S/ THOMAS M. KITCHEN
                                                 ------------------------
                                           Print Name:  THOMAS M. KITCHEN
                                                        -----------------
                                           Title: VP & CFO
                                                 ------------------------

SWORN TO AND SUBSCRIBED
BEFORE ME THIS 30TH DAY
OF DECEMBER, 1998.

/S/ A. BLOMKALNS
-----------------------
    NOTARY PUBLIC
<PAGE>
                                  Appendix "A"
                             Participating Employers


         The following  Participating  Employers have entered under this Plan as
of the following dates:


     Participating Employer                     Date of Participation
     ----------------------                     ---------------------
Avondale Gulfport Marine Inc.                      January 1, 1996
Avondale Industries of New York, Inc.              January 1, 1996
Avondale Services Corp.                            January 1, 1996
Avondale Shipyards of Texas, Inc.                  January 1, 1996
Avondale Transportation Company, Inc.              January 1, 1996
Avondale Enterprises, Inc.                         January 1, 1996
Avondale Construction Management, Inc.             January 1, 1996