EMPLOYEE STOCK OWNERSHIP PLAN

                                       OF

                               WAKE FOREST FEDERAL

                           SAVINGS & LOAN ASSOCIATION


















                           Adopted on December 6, 1995
                           Effective on April 3, 1996


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                                TABLE OF CONTENTS

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                                                     ARTICLE I

                                                    DEFINITIONS
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         Section 1.1       Account..............................................................................  1
         Section 1.2       Affiliated Employer..................................................................  1
         Section 1.3       Allocation Compensation..............................................................  1
         Section 1.4       Board................................................................................  2
         Section 1.5       Beneficiary..........................................................................  2
         Section 1.6       Break in Service.....................................................................  2
         Section 1.7       Change in Control....................................................................  2
         Section 1.8       Code.................................................................................  2
         Section 1.9       Committee............................................................................  2
         Section 1.10      Disability...........................................................................  2
         Section 1.11      Domestic Relations Order.............................................................  2
         Section 1.12      Effective Date.......................................................................  3
         Section 1.13      Eligible Employee....................................................................  3
         Section 1.14      Eligible Participant.................................................................  3
         Section 1.15      Employee.............................................................................  3
         Section 1.16      Employer.............................................................................  3
         Section 1.17      Employment Commencement Date.........................................................  3
         Section 1.18      ERISA................................................................................  3
         Section 1.19      ESOP Contribution....................................................................  3
         Section 1.20      Fair Market Value....................................................................  3
         Section 1.21      Family Member........................................................................  4
         Section 1.22      Financed Share.......................................................................  4
         Section 1.23      Five Percent Owner...................................................................  4
         Section 1.24      Forfeitures..........................................................................  4
         Section 1.25      Former Participant...................................................................  4
         Section 1.26      General Investment Account...........................................................  4
         Section 1.27      Highly Compensated Employee..........................................................  4
         Section 1.28      Hour of Service......................................................................  5
         Section 1.29      Investment Account...................................................................  5
         Section 1.30      Investment Fund......................................................................  6
         Section 1.31      Loan Repayment Account...............................................................  6
         Section 1.32      Loan Repayment Contribution..........................................................  6
         Section 1.33      Maternity or Paternity Leave.........................................................  6
         Section 1.34      Military Service.....................................................................  6
         Section 1.35      Named Fiduciary......................................................................  6
         Section 1.36      Officer..............................................................................  6
         Section 1.37      Participant..........................................................................  6
         Section 1.38      Period of Service....................................................................  6
         Section 1.39      Period of Severance..................................................................  6
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                                                      (i)

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         Section 1.40      Plan.................................................................................  7
         Section 1.41      Plan Administrator...................................................................  7
         Section 1.42      Plan Year............................................................................  7
         Section 1.43      Qualified Domestic Relations Order...................................................  7
         Section 1.44      Qualified Participant................................................................  7
         Section 1.45      Retirement...........................................................................  7
         Section 1.46      Share................................................................................  7
         Section 1.47      Share Acquisition Loan...............................................................  8
         Section 1.48      Share Investment Account.............................................................  8
         Section 1.49      Tender Offer.........................................................................  8
         Section 1.50      Total Compensation...................................................................  8
         Section 1.51      Trust................................................................................  9
         Section 1.52      Trust Agreement......................................................................  9
         Section 1.53      Trust Fund...........................................................................  9
         Section 1.54      Trustee..............................................................................  9
         Section 1.55      Valuation Date.......................................................................  9


                                                    ARTICLE II

                                                   PARTICIPATION

         Section 2.1       Eligibility for Participation........................................................  9
         Section 2.2       Commencement of Participation........................................................ 10
         Section 2.3       Termination of Participation......................................................... 10
         Section 2.4       Adjustments to Period of Service..................................................... 10


                                                    ARTICLE III

                                                SPECIAL PROVISIONS

         Section 3.1       Military Service..................................................................... 11
         Section 3.2       Maternity or Paternity Leave......................................................... 11
         Section 3.3       Leave of Absence..................................................................... 12


                                                    ARTICLE IV

                                    CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED

         Section 4.1       Contributions by Participants Not Permitted.......................................... 12
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                                                     ARTICLE V

                                                      (ii)

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                                           CONTRIBUTIONS BY THE EMPLOYER

         Section 5.1       In General........................................................................... 12
         Section 5.2       Loan Repayment Contributions......................................................... 12
         Section 5.3       ESOP Contributions................................................................... 13
         Section 5.4       Time and Manner of Payment........................................................... 13


                                                    ARTICLE VI

                                              SHARE ACQUISITION LOANS

         Section 6.1       In General........................................................................... 14
         Section 6.2       Collateral; Liability for Repayment.................................................. 14
         Section 6.3       Loan Repayment Account............................................................... 15
         Section 6.4       Release of Financed Shares........................................................... 15
         Section 6.5       Restrictions on Financed Shares...................................................... 16


                                                    ARTICLE VII

                                            ALLOCATION OF CONTRIBUTIONS

         Section 7.1       Allocation Among Eligible Participants............................................... 17
         Section 7.2       Allocation of Released Shares or Other Property...................................... 17
         Section 7.3       Allocation of ESOP Contributions..................................................... 17


                                                   ARTICLE VIII

                                            LIMITATIONS ON ALLOCATIONS

         Section 8.1       Optional Limitations on Allocations of ESOP Contributions............................ 17
         Section 8.2       General Limitations on Contributions................................................. 18


                                                    ARTICLE IX

                                                      VESTING

         Section 9.1       Vesting.............................................................................. 22
         Section 9.2       Vesting on Death, Disability, Retirement or Change in Control........................ 22
         Section 9.3       Forfeitures on Termination of Employment............................................. 22
         Section 9.4       Amounts Credited Upon Re-Employment.................................................. 22
         Section 9.5       Allocation of Forfeitures............................................................ 23
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         Section 9.6       Accelerated Vesting Upon Change in Control........................................... 23


                                                     ARTICLE X

                                                  THE TRUST FUND

         Section 10.1      The Trust Fund....................................................................... 25
         Section 10.2      Investments.......................................................................... 25
         Section 10.3      Distributions for Diversification of Investments..................................... 26
         Section 10.4      Use of Commingled Trust Funds........................................................ 27
         Section 10.5      Management and Control of Assets..................................................... 27


                                                    ARTICLE XI

                                     VALUATION OF INTERESTS IN THE TRUST FUND

         Section 11.1      Establishment of Investment Accounts................................................. 27
         Section 11.2      Share Investment Accounts............................................................ 28
         Section 11.3      General Investment Accounts.......................................................... 28
         Section 11.4      Valuation of Investment Accounts..................................................... 28
         Section 11.5      Annual Statements.................................................................... 29


                                                    ARTICLE XII

                                                      SHARES

         Section 12.1      Specific Allocation of Shares........................................................ 29
         Section 12.2      Dividends............................................................................ 29
         Section 12.3      Voting Rights........................................................................ 29
         Section 12.4      Tender Offers........................................................................ 32


                                                   ARTICLE XIII

                                                PAYMENT OF BENEFITS

         Section 13.1      In General........................................................................... 34
         Section 13.2      Designation of Beneficiaries......................................................... 34
         Section 13.3      Distributions to Participants and Former Participants................................ 35
         Section 13.4      Manner of Payment.................................................................... 38
         Section 13.5      Minimum Required Distributions....................................................... 38
         Section 13.6      Direct Rollover of Eligible Rollover Distributions................................... 40
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         Section 13.7      Valuation of Shares Upon Distribution to a Participant............................... 41
         Section 13.8      Put Options.......................................................................... 41
         Section 13.9      Right of First Refusal............................................................... 42


                                                    ARTICLE XIV

                                                  ADMINISTRATION

         Section 14.1      Named Fiduciaries.................................................................... 43
         Section 14.2      Plan Administrator................................................................... 43
         Section 14.3      Committee Responsibilities........................................................... 45
         Section 14.4      Claims Procedure..................................................................... 46
         Section 14.5      Claims Review Procedure.............................................................. 46
         Section 14.8      Allocation of Fiduciary Responsibilities and Employment of
                           Advisors............................................................................. 47
         Section 14.9      Other Administrative Provisions...................................................... 47


                                                    ARTICLE XV

                                   AMENDMENT, TERMINATION AND TAX QUALIFICATION

         Section 15.1      Amendment and Termination by Wake Forest Federal Savings &
                           Loan Association..................................................................... 48
         Section 15.2      Amendment or Termination Other Than by Wake Forest Federal
                           Savings & Loan Association........................................................... 48
         Section 15.3      Conformity to Internal Revenue Code.................................................. 49
         Section 15.4      Contingent Nature of Contributions................................................... 49


                                                    ARTICLE XVI

                                      SPECIAL RULES FOR TOP HEAVY PLAN YEARS

         Section 16.1      In General........................................................................... 50
         Section 16.2      Definition of Top Heavy Plan......................................................... 50
         Section 16.3      Determination Date................................................................... 51
         Section 16.4      Cumulative Accrued Benefits.......................................................... 51
         Section 16.5      Key Employees........................................................................ 51
         Section 16.6      Required Aggregation Group........................................................... 52
         Section 16.7      Permissible Aggregation Group........................................................ 53
         Section 16.8      Special Requirements During Top Heavy Plan Years..................................... 53
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                                                      (v)

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                                                   ARTICLE XVII

                                             MISCELLANEOUS PROVISIONS

         Section 17.1      Governing Law........................................................................ 54
         Section 17.2      No Right to Continued Employment..................................................... 54
         Section 17.3      Construction of Language............................................................. 54
         Section 17.4      Headings............................................................................. 54
         Section 17.5      Merger with Other Plans.............................................................. 54
         Section 17.6      Non-alienation of Benefits........................................................... 55
         Section 17.7      Procedures Involving Domestic Relations Orders....................................... 55
         Section 17.8      Leased Employees..................................................................... 55
         Section 17.9      Status as an Employee Stock Ownership Plan........................................... 56
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                                                      (vi)

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                          EMPLOYEE STOCK OWNERSHIP PLAN

                                       OF

                 WAKE FOREST FEDERAL SAVINGS & LOAN ASSOCIATION




                                    ARTICLE I

                                   DEFINITIONS


         The  following  definitions  shall apply for the  purposes of the Plan,
unless a different meaning is clearly indicated by the context:

         SECTION 1.1 ACCOUNT means an account  established for each  Participant
to which is allocated such  Participant's  share, if any, of all Financed Shares
and  other  property  that  are  released  from the Loan  Repayment  Account  in
accordance  with  section  6.4,  together  with his share,  if any,  of any ESOP
Contributions that may be made by the Employer.

         SECTION 1.2 AFFILIATED EMPLOYER means any corporation which is a member
of a controlled group of corporations (as defined in section 414(b) of the Code)
that includes the Employer;  any trade or business (whether or not incorporated)
that is under common control (as defined in section 414(c) of the Code) with the
Employer;  any organization (whether or not incorporated) that is a member of an
affiliated  service  group (as  defined  in  section  414(m)  of the Code)  that
includes the Employer; any leasing organization (as defined in section 414(n) of
the Code) to the extent  that any of its  employees  are  required  pursuant  to
section  414(n) of the Code to be treated as employees of the Employer;  and any
other entity that is required to be  aggregated  with the  Employer  pursuant to
regulations under section 414(o) of the Code.

         SECTION  1.3  ALLOCATION  COMPENSATION  during  any  period  means  the
compensation  taken into account in  determining  the allocation of benefits and
contributions  among  Participants  and consists of the  aggregate  compensation
received  by an  Employee  from the  Employer  with  respect  to such  period as
reported to the Internal  Revenue  Service as wages for such period  pursuant to
section  6041(a)  of  the  Code,  plus  the  amount  by  which  such  Employee's
compensation  with  respect  to such  period  has  been  reduced  pursuant  to a
compensation  reduction  agreement under the terms of any of the following plans
which may be maintained by the Employer:

                  (a) a qualified  cash or  deferred  arrangement  described  in
         section 401(k) of the Code;

                  (b)  a  salary  reduction  simplified  employee  pension  plan
         described in section 408(k) of the Code;

                  (c) a tax deferred annuity plan described in section 403(b) of
         the Code; or

                  (d) a cafeteria plan described in section 125 of the Code.


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                                       -2-


In no  event,  however,  shall an  Employee's  Allocation  Compensation  for any
calendar  year  include any  compensation  in excess of  $150,000.  The $150,000
limitation  set forth in the preceding  sentence  shall be indexed in accordance
with regulations  prescribed under section  401(a)(17) of the Code. If there are
less than twelve  (12)  months in the Plan Year,  the  $150,000  limitation  (as
adjusted) shall be prorated by multiplying  such  limitation by a fraction,  the
numerator of which is the number of months in the Plan Year and the  denominator
of which is twelve (12).  For purposes of applying the foregoing  limitations to
any  person  who is a Five  Percent  Owner  or  who  is  one of the  ten  Highly
Compensated  Employees with the highest Total Compensation  (determined prior to
the  application  of this  sentence),  any Allocation  Compensation  paid to the
spouse of such  person or to any lineal  descendant  of such  person who has not
attained age 19 on or before the last day of such  calendar year shall be deemed
to have been paid to such person.

         SECTION 1.4 BOARD means the Board of Directors  of Wake Forest  Federal
Savings & Loan Association.

         SECTION 1.5  BENEFICIARY  means the person or persons  designated  by a
Participant or Former  Participant  or other person  entitled to a benefit under
the Plan, or otherwise determined to be entitled to a benefit under the Plan. If
more than one person is  designated,  each shall have an equal share  unless the
person making the designation directed otherwise.  The word "person" includes an
individual, a trust, an estate or any other person that is permitted to be named
as a Beneficiary.

         SECTION 1.6 BREAK IN SERVICE  means a Period of  Severance  of at least
365 consecutive days.

         SECTION  1.7  CHANGE IN  CONTROL  means an event  described  in section
9.6(b).

         SECTION 1.8 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).

         SECTION 1.9 COMMITTEE  means the  Compensation  Committee  described in
section 14.3.

         SECTION 1.10 DISABILITY means a condition of total  incapacity,  mental
or physical,  for further performance of duty with the Employer,  which the Plan
Administrator shall have determined, on the basis of competent medical evidence,
is likely to be permanent.

         SECTION 1.11 DOMESTIC RELATIONS ORDER means a judgment, decree or order
(including  the approval of a property  settlement)  that is made  pursuant to a
state domestic  relations or community property law and relates to the provision
of child support,  alimony  payments,  or marital  property  rights to a spouse,
child or other dependent of a Participant or Former Participant.

         SECTION 1.12 EFFECTIVE DATE means April 3, 1996.

         SECTION 1.13  ELIGIBLE  EMPLOYEE  means an Employee who is eligible for
participation in the Plan in accordance with Article II.

         SECTION 1.14 ELIGIBLE PARTICIPANT means, for any Plan Year, an Employee
who is a Participant during all or any part of such Plan Year.



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                                       -3-


         SECTION 1.15 EMPLOYEE  means any person,  including an officer,  who is
employed by the Employer.

         SECTION  1.16  EMPLOYER  means  Wake  Forest  Federal  Savings  &  Loan
Association,  and any successor thereto and any Affiliated  Employer which, with
the prior  written  approval of the Board of  Directors  of Wake Forest  Federal
Savings & Loan  Association  and subject to such terms and  conditions as may be
imposed  by the  Board  of  Directors  of Wake  Forest  Federal  Savings  & Loan
Association, shall adopt this Plan.

         SECTION  1.17  EMPLOYMENT  COMMENCEMENT  DATE means the date on which a
person first performs an Hour of Service,  except that if an Employee  separates
from  service  with the  Employer,  incurs a Break in Service  and  subsequently
returns to service with the Employer, his Employment  Commencement Date shall be
the date on which he first  performs an Hour of Service  following  the Break in
Service.

         SECTION 1.18 ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time  (including the  corresponding  provisions of
any succeeding law).

         SECTION  1.19  ESOP  CONTRIBUTION  means  Shares  or  amounts  of money
contributed to the Plan by the Employer in accordance with section 5.3.

         SECTION 1.20 FAIR MARKET VALUE on any date means:

                  (a) with respect to a Share:

                           (i)  the  final  quoted  sale  price  on the  date in
                  question  (or, if there is no reported  sale on such date,  on
                  the last  preceding  date on which any reported sale occurred)
                  as reported in the  principal  consolidated  reporting  system
                  with  respect to  securities  listed or admitted to trading on
                  the principal United States securities  exchange on which like
                  Shares are listed or admitted to trading; or

                           (ii) if like  Shares  are not listed or  admitted  to
                  trading on any such  exchange,  the closing bid quotation with
                  respect to a Share on such date on the National Association of
                  Securities Dealers Automated  Quotation System, or, if no such
                  quotation is provided, on another similar system,  selected by
                  the Committee, then in use; or

                           (iii)  if  sections   1.20(a)(i)  and  (ii)  are  not
                  applicable,  the fair market value of a Share as determined by
                  an appraiser  independent of the Employer and  experienced and
                  expert in the field of corporate appraisal.

                  (b) with  respect  to  property  other than  Shares,  the fair
         market value determined in the manner determined by the Trustee.

         SECTION 1.21 FAMILY  MEMBER  means,  with  respect to any person,  such
person's  spouse and lineal  ascendants or  descendants  and the spouses of such
lineal ascendants or descendants.

         SECTION 1.22 FINANCED SHARE means:  (a) a Share that has been purchased
with the proceeds of a Share  Acquisition  Loan,  that has been allocated to the
Loan Repayment Account in accordance with section 6.3 and


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                                       -4-


that has not been released in  accordance  with section 6.4; or (b) a Share that
constitutes  a  dividend  paid with  respect  to a Share  described  in  section
1.22(a),  that has been  allocated to the Loan  Repayment  Account in accordance
with section 6.3 and that has not been released in accordance with section 6.4.

         SECTION 1.23 FIVE PERCENT OWNER means, for any Plan Year, a person who,
during  such Plan  Year,  owned (or was  considered  as owning for  purposes  of
section  318 of the  Code):  (a) more  than 5% of the  value of all  classes  of
outstanding  stock of the Employer;  or (b) stock possessing more than 5% of the
combined voting power of all classes of outstanding stock of the Employer.

         SECTION 1.24  FORFEITURES  means the amounts  forfeited by Participants
and Former  Participants  on  termination  of employment  prior to full vesting,
pursuant  to section  9.3,  less  amounts  credited  because  of  re-employment,
pursuant to section 9.4.

         SECTION 1.25 FORMER PARTICIPANT means a Participant whose participation
in the Plan has ter minated pursuant to section 2.3.

         SECTION 1.26 GENERAL  INVESTMENT  ACCOUNT means an  Investment  Account
established and maintained in accordance with Article XI.

         SECTION 1.27 HIGHLY  COMPENSATED  EMPLOYEE means, for any Plan Year, an
Employee who:

                  (a) at any  time  during  such  Plan  Year or the  immediately
         preceding Plan Year was a Five Percent Owner; or

                  (b) is a member of the group  consisting  of the 100 Employees
         and persons  employed  by any  Affiliated  Employer  who  received  the
         greatest  Total  Compensation  for such Plan Year and during  such Plan
         Year:

                           (i) received Total Compensation for such Plan Year in
                  excess of $75,000 (or such higher  amount as may be  permitted
                  under section 414(q) of the Code); or

                           (ii) received Total  Compensation  for such Plan Year
                  that was in excess of both (A) $50,000 (or such higher  amount
                  as may be permitted  under section 414(q) of the Code) and (B)
                  the Total  Compensation  for such Plan Year of at least 80% of
                  the Employees and persons employed by any Affiliated  Employer
                  for such Plan Year; or

                           (iii)  was  an  Officer  of  the   Employer   or  any
                  Affiliated  Employer and received Total  Compensation for such
                  Plan  Year in excess  of 50% of the  amount  in  effect  under
                  section 415(b)(1)(A) of the Code for such Plan Year; or

                  (c) during the immediately preceding Plan Year:

                           (i) received Total Compensation for such Plan Year in
                  excess of $75,000 (or such higher  amount as may be  permitted
                  under section 414(q) of the Code); or



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                                       -5-


                           (ii) received Total  Compensation  for such Plan Year
                  that was in excess of both (A) $50,000 (or such higher  amount
                  as may be permitted  under section 414(q) of the Code) and (B)
                  the Total  Compensation  for such Plan Year of at least 80% of
                  the Employees and persons  employed by an Affiliated  Employer
                  for such Plan Year; or

                           (iii)  was  an  Officer  of  the   Employer   or  any
                  Affiliated  Employer and received Total  Compensation for such
                  Plan  Year in excess  of 50% of the  amount  in  effect  under
                  section 415(b)(1)(A) of the Code for such Plan Year.

The  determination  of who is a  Highly  Compensated  Employee  will  be made in
accordance with section 414(q) of the Code and the regulations  thereunder.  For
purposes of applying any provisions of the Plan applicable to Highly Compensated
Employees,  any person who is a Family  Member of a Five Percent Owner or one of
the ten Highly  Compensated  Employees with the highest Total Compensation for a
Plan Year shall not be treated as a separate  person for such Plan Year, and any
Total Compensation or Allocation  Compensation paid to such person for such Plan
Year, as well as his share of allocations of  contributions or Shares under this
Plan,  shall be  attributed  to the Five  Percent  Owner or  Highly  Compensated
Employee.

         SECTION  1.28  HOUR OF  SERVICE  means  each hour for which a person is
paid, or entitled to payment,  for the performance of duties for the Employer or
any Affiliated Employer.

         SECTION  1.29  INVESTMENT  ACCOUNT  means  either a General  Investment
Account or a Share Investment Account.

         SECTION 1.30  INVESTMENT  FUND means any one of the three or more funds
as may be established  from time to time by the Committee  which,  together with
any and all Shares and other  investments  held under the Plan,  constitute  the
Trust Fund.

         SECTION 1.31 LOAN REPAYMENT  ACCOUNT means an account  established  and
maintained in accordance with section 6.3.

         SECTION  1.32  LOAN  REPAYMENT  CONTRIBUTION  means  amounts  of  money
contributed to the Plan by the Employer in accordance with section 5.2.

         SECTION 1.33 MATERNITY OR PATERNITY LEAVE means a person's absence from
work  for the  Employer  and all  Affiliated  Employers:  (a) by  reason  of the
pregnancy of such person;  (b) by reason of the birth of a child of such person;
(c) by reason of the placement of a child with the person in connection with the
adoption of such child by such person; or (d) for purposes of caring for a child
of such person immediately  following the birth of the child or the placement of
the child with such person.

         SECTION 1.34 MILITARY  SERVICE means service in the armed forces of the
United  States.  It may also  include,  if and to the  extent  that the Board so
provides and if all Participants and Former  Participants in like  circumstances
are similarly  treated,  special service for the government of the United States
and other public service.

         SECTION 1.35 NAMED FIDUCIARY means any person,  committee,  corporation
or organization as described in section 14.1.



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                                       -6-


         SECTION  1.36  OFFICER  means  an  employee  who  is an  administrative
executive in regular and continued  service with the Employer or any  Affiliated
Employer;  provided,  however, that at no time shall more than the lesser of (a)
50 employees or (b) the greater of: (i) 3 employees or (ii) 10% of all employees
be treated as  Officers.  The  determination  of  whether an  employee  is to be
considered  an Officer shall be made in  accordance  with section  416(i) of the
Code.

         SECTION  1.37  PARTICIPANT  means  any  person  who has  satisfied  the
eligibility  requirements set forth in section 2.1, who has become a Participant
in accordance with section 2.2, and whose participation has not terminated under
section 2.3.

         SECTION  1.38  PERIOD OF  SERVICE  means a period of  consecutive  days
commencing on a person's  Employment  Commencement Date and ending on the date a
Period of Severance  begins,  with any  adjustments  required under section 2.4.
Whenever  used in the Plan, a Period of Service "of year(s)"  means the quotient
of the Period of Service divided by 365, and any fractional part of a year shall
for such purposes be disregarded.

         SECTION 1.39 PERIOD OF  SEVERANCE  means a period of  consecutive  days
commencing with the earlier of:

                  (a) the  date on which a person  terminates  service  with the
         Employer  and  all  Affiliated  Employers  by  reason  of  resignation,
         retirement, discharge or death; or

                  (b)  the  first  anniversary  of the  date on  which a  person
         terminates  service with the Employer and all Affiliated  Employers for
         any other reason including layoff, disability,  leave of absence or any
         other cessation of service not otherwise  included as service under the
         Plan;

and ending on the first date  following  such  separation  from service on which
such person performs an Hour of Service.

         SECTION  1.40 PLAN  means the  Employee  Stock  Ownership  Plan of Wake
Forest Federal Savings & Loan Association and Certain Affiliates as amended from
time to time. The Plan may be referred to as the "Employee  Stock Ownership Plan
of Wake Forest Federal Savings & Loan Association and Certain Affiliates."

         SECTION   1.41  PLAN   ADMINISTRATOR   means  any  person,   committee,
corporation or organization designated in section 14.2, or appointed pursuant to
section 14.2, to perform the responsibilities of that office.

         SECTION  1.42 PLAN YEAR means the period  commencing  on the  Effective
Date and ending on December 31, 1995 and each calendar year thereafter.

         SECTION  1.43  QUALIFIED  DOMESTIC  RELATIONS  ORDER  means a  Domestic
Relations Order that: (a) clearly  specifies (i) the name and last known mailing
address of the Participant or Former Participant and of each person given rights
under such  Domestic  Relations  Order,  (ii) the amount or  percentages  of the
Participant's  or Former  Participant's  benefits  under this Plan to be paid to
each  person  covered  by such  Domestic  Relations  Order,  (iii) the number of
payments or the period to which such Domestic Relations Order applies,  and (iv)
the name of this Plan;  and (b) does not  require  the payment of a benefit in a
form or amount that is (i) not  otherwise  provided for under the Plan,  or (ii)
inconsistent with a previous Qualified Domestic Relations Order.



<PAGE>


                                       -7-


         SECTION 1.44 QUALIFIED PARTICIPANT means a Participant who has attained
age 55 and who has been a Participant in the Plan for at least 10 years.

         SECTION 1.45 RETIREMENT  means: (a) any termination of participation in
the Plan at or  after  attainment  of age 65;  and (b) any  retirement  under an
applicable qualified defined benefit plan of the Employer as in effect from time
to time with entitlement to a normal or early retirement allowance.

         SECTION  1.46 SHARE  means a share of any class of stock  issued by the
Employer or any Affiliated  Employer;  provided that such share is a "qualifying
employer  security"  within the meaning  section  409(l) of the Code and section
407(d)(5) of ERISA.

         SECTION  1.47  SHARE  ACQUISITION  LOAN  means a loan  obtained  by the
Trustee in accordance with Article VI.

         SECTION  1.48 SHARE  INVESTMENT  ACCOUNT  means an  Investment  Account
established and maintained in accordance with Article XI.

         SECTION  1.49 TENDER  OFFER means a tender offer made to holders of any
one or more classes of Shares generally,  or any other offer, made to holders of
any one or more classes of Shares generally,  to purchase,  exchange,  redeem or
otherwise transfer Shares, whether for cash or other consideration.

         SECTION 1.50 TOTAL  COMPENSATION  during any period means an employee's
aggregate total  compensation  paid by the Employer and any Affiliated  Employer
with respect to such period,  including earned income, wages, salaries, fees for
professional  services  actually  rendered in the course of employment  with the
Employer and any Affiliated Employer (including, but not limited to, commissions
paid to salesmen,  compensation  for  services on the basis of a  percentage  of
profits,  commissions on insurance premiums, tips and bonuses) but excluding the
following:

                  (a) contributions by the Employer and any Affiliated  Employer
         (i) under a deferred  compensation  plan to the extent not  included in
         the employee's gross income for the taxable year in which  contributed,
         or  (ii)  under  a  simplified  employee  pension  to  the  extent  the
         contributions  are  excludable  under  section  402(h)  of the Code (in
         calendar years beginning  after December 31, 1986) or deductible  under
         section  219(b)(2)  of the Code (in  calendar  years  beginning  before
         January 1,  1987),  or (iii) for the  purchase  of an annuity  contract
         under  section  403(b) of the Code  (whether or not made under a salary
         reduction agreement or excludable from gross income);

                  (b) distributions  from a deferred  compensation plan, whether
         or not includible in the employee's gross income; and

                  (c) other amounts that qualify for special tax benefits  under
         the Code,  such as premiums for group life  insurance to the extent not
         includible as gross income.

In addition,  solely for purposes of identifying  those employees who are Highly
Compensated  Employees,  each employee's  Total  Compensation  shall include any
amounts  by  which  the  employee's  compensation  paid by the  Employer  or any
Affiliated  Employer  has been  reduced  pursuant  to a  compensation  reduction
agreement  under  the  terms  of any  qualified  cash  or  deferred  arrangement
described  in  section  401(k)  of the Code,  any  salary  reduction  simplified
employee  pension plan described in section 408(k) of the Code, any tax deferred
annuity plan described in section 403(b) of the Code, or


<PAGE>


                                       -8-


any cafeteria plan  described in section 125 of the Code. In no event,  however,
shall an employee's  Total  Compensation  include any  compensation in excess of
$150,000 (or such higher amount as may be permitted under section  401(a)(17) of
the Code). For purposes of applying the foregoing  limitations to any person who
is a Five Percent  Owner or who is one of the ten Highly  Compensated  Employees
with the highest Total Compensation (determined prior to the application of this
sentence),  any Total  Compensation  paid to the spouse of such person or to any
lineal  descendant  of such person who has not  attained age 19 on or before the
last day of such  calendar  year,  shall be  deemed  to have  been  paid to such
person.

         SECTION  1.51 TRUST means the legal  relationship  created by the Trust
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The Trust
may be referred to as the "Employee  Stock  Ownership  Plan Trust of Wake Forest
Federal Savings & Loan Association and Certain Affiliates."

         SECTION 1.52 TRUST  AGREEMENT  means the agreement  between Wake Forest
Federal  Savings  & Loan  Association  and  the  Trustee  therein  named  or its
successors pursuant to which the Trust Fund shall be held in trust.

         SECTION 1.53 TRUST FUND means the corpus  (consisting of  contributions
paid  over  to  the  Trustee,  and  investments  thereof),   and  all  earnings,
appreciations  or additions  thereof and thereto,  held by the Trustee under the
Trust Agreement in accordance with the Plan, less any  depreciation  thereof and
any payments made therefrom pursuant to the Plan.

         SECTION 1.54  TRUSTEE  means the Trustee of the Trust Fund from time to
time in  office.  The  Trustee  shall  serve as  Trustee  until it is removed or
resigns  from  office  and is  replaced  by a  successor  Trustee  appointed  in
accordance with the terms of the Trust Agreement.

         SECTION 1.55 VALUATION DATE means the last business day of March, June,
September and December.



                                   ARTICLE II

                                  PARTICIPATION


         SECTION 2.1 ELIGIBILITY FOR PARTICIPATION.

                  (a) Only Eligible  Employees may be or become  Participants in
         the  Plan.  An  Employee  shall  be  an  Eligible  Employee  if he is a
         common-law  employee of an Employer and is not excluded  under  section
         2.1(b).

                  (b) An Employee is not an Eligible Employee if he:

                           (i) is an  Employee  who  has  waived  any  claim  to
                  participation in the Plan; or

                           (ii) is an Employee or in a unit of Employees covered
                  by a collective  bargaining  agreement with the Employer where
                  retirement benefits were the subject of good faith bargaining,
                  unless such agreement  expressly  provides that Employees such
                  as he be covered under the Plan; or


<PAGE>


                                       -9-


                           (iii) is a "leased  employee"  as  defined in section
                  17.8(a).


         SECTION 2.2 COMMENCEMENT OF PARTICIPATION.

         Every Employee who is an Eligible  Employee on the Effective Date shall
automatically  become a  Participant  on the  Effective  Date.  An Employee  who
becomes an Eligible Employee after the Effective Date shall automatically become
a  Participant  on the first day of the  month  following  the month in which he
becomes an Eligible Employee.


         SECTION 2.3 TERMINATION OF PARTICIPATION.

         Participation in the Plan shall cease, and a Participant shall become a
Former  Participant,  upon  termination of employment with the Employer,  death,
Disability  or  Retirement,  failure to return to work upon the  expiration of a
leave of absence granted by the Employer  pursuant to section 3.3 or becoming an
Employee who is excluded under section 2.1(b).


         SECTION 2.4 ADJUSTMENTS TO PERIOD OF SERVICE.

         (a) The Period of  Service  of an  Employee  shall  include  any period
during which the Employee is separated  from the service of the Employer and all
Affiliated  Employers if such period is less than 365 consecutive  days measured
from the date on which such  Employee  terminates  service  and ending  with the
first date following such termination for which the Employer is credited with an
Hour of Service.

         (b) The Period of Service of an Employee  who returns to the service of
the Employer and all Affiliated  Employers  following a separation  from service
shall commence with the first date following  such  separation  from service for
which the  Employer is credited  with an Hour of Service,  and he shall be given
credit for any Period of Service prior to such  separation,  except that if such
separation includes a Break in Service,  such credit shall not be given until he
completes a Period of Service of one year following such Break in Service. If an
Employee  returns to the  service of the  Employer  or any  Affiliated  Employer
following  a  separation  from  service  from the  Employer  and any  Affiliated
Employer  of greater  than five  consecutive  years,  then such  Employee  shall
forfeit any Period of Service prior to such separation.

         (c) The Period of Service of an Employee  who is absent on Maternity or
Paternity  Leave shall  exclude any period of such absence that occurs after the
first anniversary of the commencement of such absence.

         (d) An  Employee's  Period of  Service  shall also be  adjusted  to the
extent  required  by the  Family  and  Medical  Leave  Act  or  any  regulations
promulgated thereunder.



                                   ARTICLE III

                               SPECIAL PROVISIONS


<PAGE>

                                      -10-

         SECTION 3.1 MILITARY SERVICE.

         In the case of a  termination  of  employment  of any Employee to enter
directly  into  Military  Service,  the entire  period of his  absence  shall be
treated,  for purposes of vesting and  eligibility for  participation  (but not,
except as required by law, for purposes of  eligibility  to share in allocations
of  contributions  in accordance  with Article VII), as if he had worked for the
Employer during the period of his absence.  In the event of the re-employment of
such person by the Employer within a period of not more than six months:

                  (a) after he becomes  entitled to release or discharge,  if he
         has entered into the armed forces; or

                  (b) after such  service  terminates,  if he has  entered  into
         other service defined as Military Service;

such period, also, shall be deemed to be Military Service.


         SECTION 3.2 MATERNITY OR PATERNITY LEAVE.

         (a) Subject to section  3.2(b),  in the event of an Employee's  absence
from work in the service of the  Employer  and all  Affiliated  Employers  for a
period:

                  (i) that commences on or after October 1, 1985;

                  (ii) for which the person is not paid or  entitled  to payment
         by the Employer or any Affiliated Employer;

                  (iii) that constitutes Maternity or Paternity Leave; and

                  (iv) that exceeds one year;

then solely for purposes of determining  when a Break in Service has occurred or
when a Period of  Severance  of five years has  occurred for purposes of section
9.4, the period of such an absence  commencing on the first  anniversary of such
absence and ending on the second anniversary of the commencement of such absence
(or,  if  earlier,  on the last day of such  absence)  shall not be treated as a
Period of Severance.

         (b) Notwithstanding  anything in the Plan to the contrary, this section
3.2 shall not apply unless the person furnishes to the Plan  Administrator  such
information  as the  Plan  Administrator  may  reasonably  require  in  order to
establish: (i) that the person's absence is one described in section 3.2(a); and
(ii) the number of working days during such absence.


         SECTION 3.3 LEAVE OF ABSENCE.



<PAGE>

                                      -11-

         In the  event of  temporary  absence  from work in the  service  of the
Employer and all  Affiliated  Employers  for any period of two years or less for
which a Participant  shall have been granted a leave of absence by the Employer,
the entire  period of his absence  shall be treated for  purposes of vesting and
eligibility for  participation  (but not for purposes of eligibility to share in
the allocation of  contributions  in accordance  with Article VII), as if he had
worked for the Employer during the period of his absence.  Absence from work for
a period  greater than, or failure to return to work upon the expiration of, the
period of leave of absence granted by the Employer shall terminate participation
in the Plan as of the date on which such period  ended.  In  granting  leaves of
absence for purposes of the Plan, all Employees in like  circumstances  shall be
similarly treated.



                                   ARTICLE IV

                   CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED


         SECTION 4.1 CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED.

         Participants  shall not be required,  nor shall they be  permitted,  to
make contributions to the Plan.



                                    ARTICLE V

                          CONTRIBUTIONS BY THE EMPLOYER


         SECTION 5.1 IN GENERAL.

         Subject to the  limitations  of Article VIII,  for each Plan Year,  the
Employer  shall  contribute  to the Plan the amount,  if any,  determined by the
Board,  but in no event less than the amount  described in section  5.2(a).  The
amount  contributed  for any Plan  Year  shall be  treated  as a Loan  Repayment
Contribution, an ESOP Contribution, or a combination thereof, in accordance with
the provisions of this Article V.


         SECTION 5.2 LOAN REPAYMENT CONTRIBUTIONS.

         For each Plan Year, a portion of the Employer's contributions,  if any,
to the Plan for such Plan Year equal to the sum of:

                  (a) the  minimum  amount  required  to be  added  to the  Loan
         Repayment Account in order to provide adequate funds for the payment of
         the  principal  and interest then required to be repaid under the terms
         of any outstanding Share Acquisition Loan obtained by the Trustee; plus



<PAGE>

                                      -12-

                  (b) the additional amount, if any, designated by the Committee
         to be applied to the  prepayment  of  principal  or interest  under the
         terms  of  any  outstanding  Share  Acquisition  Loan  obtained  by the
         Trustee;

shall be treated as a Loan  Repayment  Contribution  for such Plan Year.  A Loan
Repayment  Contribution for a Plan Year shall be allocated to the Loan Repayment
Account  and shall be applied by the  Trustee,  in the  manner  directed  by the
Committee,  to the  payment  of accrued  interest  and to the  reduction  of the
principal  balance of any Share Acquisition Loan obtained by the Trustee that is
outstanding on the date on which the Loan Repayment Contribution is made. To the
extent that a Loan Repayment  Contribution  for a Plan Year results in a release
of  Financed  Shares in  accordance  with  section  6.4,  such  Shares  shall be
allocated  among the  Accounts  of Eligible  Participants  for such Plan Year in
accordance with section 7.2.


         SECTION 5.3 ESOP CONTRIBUTIONS.

         In the event that the  amount of the  Employer's  contributions  to the
Plan for a Plan Year exceeds the amount of the Loan Repayment  Contributions for
such Plan Year, such excess shall be treated as an ESOP  Contribution  and shall
be allocated among the Accounts of the Eligible  Participants for such Plan Year
in accordance with section 7.3.


         SECTION 5.4 TIME AND MANNER OF PAYMENT.

         (a) Payment of  contributions  made pursuant to this Article V shall be
made:

                  (i) in cash, in the case of a Loan Repayment Contribution; and

                  (ii) in  cash,  in  Shares  or in a  combination  of cash  and
         Shares, in the case of an ESOP Contribution.

         (b) Contributions made pursuant to this Article V for a Plan Year shall
be paid to the Trust Fund on or before the due date  (including  any  extensions
thereof) of the Employer's federal income tax return for its taxable year during
which such Plan Year ends.  All such  contributions  shall be  allocated  to the
Accounts of the Eligible Participants,  in the case of an ESOP Contribution,  or
to the Loan Repayment Account, in the case of a Loan Repayment Contribution,  as
soon as is practicable following the payment thereof to the Trust Fund.



                                   ARTICLE VI

                             SHARE ACQUISITION LOANS


         SECTION 6.1 IN GENERAL.

         The  Committee  may, with the prior  approval of the Board,  direct the
Trustee to obtain a Share  Acquisition  Loan on behalf of the Plan, the proceeds
of which shall be applied on the earliest practicable date:


<PAGE>

                                      -13-

                  (a) to purchase Shares; or

                  (b)  to  make   payments  of  principal  or  interest,   or  a
         combination  of  principal  and  interest,  with  respect to such Share
         Acquisition Loan; or

                  (c)  to  make  payments  of  principal  and  interest,   or  a
         combination  of principal  and  interest,  with respect to a previously
         obtained Share Acquisition Loan that is then outstanding.

Any such Share  Acquisition  Loan shall be obtained on such terms and conditions
as the Committee may approve; provided,  however, that such terms and conditions
shall provide for the payment of interest at no more than a reasonable  rate and
shall permit such Share  Acquisition Loan to satisfy the requirements of section
4975(d)(3) of the Code and section 408(b)(3) of ERISA.


         SECTION 6.2 COLLATERAL; LIABILITY FOR REPAYMENT.

         (a) The Committee may direct the Trustee to pledge, at the time a Share
Acquisition Loan is obtained, the following assets of the Plan as collateral for
such Share Acquisition Loan:

                  (i) any  Shares  purchased  with the  proceeds  of such  Share
         Acquisition Loan and any earnings attributable thereto;

                  (ii) any  Financed  Shares then  pledged as  collateral  for a
         prior Share  Acquisition Loan which is repaid with the proceeds of such
         Share Acquisition Loan and any earnings attributable thereto; and

                  (iii) pending the  application  thereof to purchase  Shares or
         repay a prior  Share  Acquisition  Loan,  the  proceeds  of such  Share
         Acquisition Loan and any earnings attributable thereto.

Except as specifically  provided in this section  6.2(a),  no assets of the Plan
shall be pledged as collateral for the repayment of any Share Acquisition Loan.

         (b) No person entitled to payment under a Share  Acquisition Loan shall
have any right to the assets of the Plan except for:

                  (i) Financed  Shares that have been pledged as collateral  for
         such Share Acquisition Loan pursuant to section 6.2(a);

                  (ii) Loan  Repayment  Contributions  made  pursuant to section
         5.2; and

                  (iii) earnings  attributable to Financed  Shares  described in
         section  6.2(b)(i)  and to Loan  Repayment  Contributions  described in
         section 6.2(b)(ii).

Except in the event of a default or a refinancing  pursuant to which an existing
Share  Acquisition  Loan is repaid,  the  aggregate  amount of all  payments  of
principal and interest made by the Trustee with respect to all Share Acquisition
Loans  obtained  on behalf of the Plan  shall at no time  exceed  the  aggregate
amount of all Loan Repayment Contributions.


<PAGE>

                                      -14-

theretofore made plus the aggregate amount of all earnings (other than dividends
paid in the form of Shares)  attributable  to  Financed  Shares and to such Loan
Repayment Contributions.

         (c) Any Share  Acquisition  Loan shall be without  recourse against the
Plan and Trust.


         SECTION 6.3 LOAN REPAYMENT ACCOUNT.

         In the  event  that  one or  more  Share  Acquisition  Loans  shall  be
obtained, a Loan Repayment Account shall be established under the Plan. The Loan
Repayment  Account shall be credited with all Shares  acquired with the proceeds
of a Share Acquisition  Loan, all Loan Repayment  Contributions and all earnings
(including dividends paid in the form of Shares) or appreciation attributable to
such Shares and Loan Repayment  Contributions.  The Loan Repayment Account shall
be charged with all payments of principal  and interest made by the Trustee with
respect to any Share  Acquisition  Loan, all Shares  released in accordance with
section 6.4 and all losses,  depreciation or expenses  attributable to Shares or
to other property credited thereto. The Financed Shares, as well as any earnings
thereon,  shall  be  allocated  to such  Loan  Repayment  Account  and  shall be
accounted for separately from all other amounts contributed under the Plan.


         SECTION 6.4 RELEASE OF FINANCED SHARES.

         As of the last day of each Plan Year during  which a Share  Acquisition
Loan is  outstanding,  a  portion  of the  Financed  Shares  purchased  with the
proceeds of such Share  Acquisition  Loan and  allocated  to the Loan  Repayment
Account shall be released.  The number of Financed  Shares  released in any such
Plan  Year  shall be  equal to the  amount  determined  according  to one of the
following methods:

                  (a) by  computing  the  product of: (i) the number of Financed
         Shares  purchased with the proceeds of such Share  Acquisition Loan and
         allocated to the Loan Repayment Account  immediately before the release
         is effected;  multiplied by (ii) a fraction,  the numerator of which is
         the aggregate amount of the principal and interest payments (other than
         payments  made  upon the  refinancing  of a Share  Acquisition  Loan as
         contemplated  by  section  6.1(c))  made  with  respect  to such  Share
         Acquisition Loan during such Plan Year, and the denominator of which is
         the aggregate amount of all principal and interest remaining to be paid
         with respect to such Share Acquisition Loan as of the first day of such
         Plan Year; or

                  (b) by  computing  the  product of: (i) the number of Financed
         Shares  purchased with the proceeds of such Share  Acquisition Loan and
         allocated to the Loan Repayment Account  immediately before the release
         is effected;  multiplied by (ii) a fraction,  the numerator of which is
         the  aggregate  amount of the principal  payments  (other than payments
         made upon the  refinancing of a Share Acquisi tion Loan as contemplated
         by section  6.1(c))  made with respect to such Share  Acquisition  Loan
         during such Plan Year,  and the  denominator  of which is the aggregate
         amount of all of  principal  remaining  to be paid with respect to such
         Share Acquisition Loan as of the first day of such Plan Year; provided,
         however,  that the method  described in this section 6.4(b) may be used
         only if the  Share  Acquisition  Loan does not  extend  for a period in
         excess of 10 years after the date of origination and only to the extent
         that  principal  payments  on such Share  Acquisition  Loan are made at
         least as rapidly as under a loan of like  principal  amount with a like
         interest rate and term requiring  level  amortization  of principal and
         interest.


<PAGE>

                                      -15-

The method to be used shall be specified in the  documents  governing  the Share
Acquisition Loan or, if not specified therein,  prescribed by the Committee,  in
its  discretion.  In the event that  property  other than,  or in  addition  to,
Financed  Shares  shall be held in the Loan  Repayment  Account  and  pledged as
collateral  for a Share  Acquisition  Loan,  then the  property  to be  released
pursuant  to this  section  6.4 shall be  property  having a Fair  Market  Value
determined  by applying  the method to be used to the Fair  Market  Value of all
property  pledged as  collateral  for such  Share  Acquisition  Loan;  provided,
however,  that no property other than Financed Shares shall be released pursuant
to this section 6.4 unless all Financed Shares have previously been released.


         SECTION 6.5 RESTRICTIONS ON FINANCED SHARES.

         Except  to the  extent  required  under  any  applicable  law,  rule or
regulation,  no Shares  purchased with the proceeds of a Share  Acquisition Loan
shall be subject to a put, call or other  option,  or to any buy-sell or similar
arrangement,  while held by the Trustee or when  distributed  from the Plan. The
provisions  of this  section 6.5 shall  continue to apply in the event that this
Plan shall cease to be an employee stock ownership  plan,  within the meaning of
section 4975(e)(7) of the Code.



                                   ARTICLE VII

                           ALLOCATION OF CONTRIBUTIONS


         SECTION 7.1 ALLOCATION AMONG ELIGIBLE PARTICIPANTS.

         Subject to the  limitations of Article VIII, ESOP  Contributions  for a
Plan Year made in  accordance  with  section 5.3 and  Financed  Shares and other
property  that are released from the Loan  Repayment  Account for a Plan Year in
accordance with section 6.4 shall be allocated  among the Eligible  Participants
for such Plan Year, in the manner provided in this Article VII.


         SECTION 7.2 ALLOCATION OF RELEASED SHARES OR OTHER PROPERTY.

         Subject to the  limitations of Article VIII, in the event that Financed
Shares or other property are released from the Loan Repayment Account for a Plan
Year in  accordance  with section 6.4, such  released  Shares or other  property
shall be allocated among the Accounts of the Eligible  Participants for the Plan
Year  in  the  proportion  that  each  such  Eligible  Participant's  Allocation
Compensation  for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation  Compensation of all Eligible Participants for
the portion of the Plan Year during which they were Participants.


         SECTION 7.3 ALLOCATION OF ESOP CONTRIBUTIONS.

         Subject  to the  limitations  of  Article  VIII,  in the event that the
Employer  makes an ESOP  Contribution  for a Plan Year,  such ESOP  Contribution
shall be allocated among the Accounts of the Eligible Participants for such Plan


<PAGE>

                                      -16-

Year  in  the  proportion  that  each  such  Eligible  Participant's  Allocation
Compensation  for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation  Compensation of all Eligible Participants for
the portion of such Plan Year during which they were Eligible Participants.



                                  ARTICLE VIII

                           LIMITATIONS ON ALLOCATIONS


         SECTION 8.1 OPTIONAL LIMITATIONS ON ALLOCATIONS OF ESOP CONTRIBUTIONS.

         If, for any Plan Year,  the  application  of sections 7.2 and 7.3 would
result in more than  one-third of the number of Shares or of the amount of money
or  property to be  allocated  thereunder  being  allocated  to the  Accounts of
Eligible  Participants  for  such  Plan  Year who are  also  Highly  Compensated
Employees for such Plan Year,  then the Committee may, but shall not be required
to, direct that this section 8.1 shall apply in lieu of sections 7.2 and 7.3. If
the Committee gives such a direction,  then the Committee shall impose a maximum
dollar  limitation  on the amount of Allocation  Compensation  that may be taken
into account for each Eligible Participant. The dollar limitation which shall be
imposed  shall be the  limitation  which  produces the result that the aggregate
Allocation  Compensation  taken into account for Eligible  Participants  who are
Highly  Compensated  Employees,  constitutes  exactly one-third of the aggregate
Allocation  Compensation  taken into account for all Eligible  Participants.  In
determining whether more than one-third of the number of Shares or of the amount
of money or  property  to be  allocated  under the Plan for a Plan Year would be
allocated to the Highly Compensated Employees,  any allocation to be made to the
Account of a Family Member of a Highly Compensated Employee who is either a Five
Percent Owner or one of the ten Highly  Compensated  Employees  with the highest
Total Compensation, shall be treated as an allocation to such Highly Compensated
Employee.


         SECTION 8.2 GENERAL LIMITATIONS ON CONTRIBUTIONS.

         (a) No amount shall be allocated to a Participant's  Account under this
Plan for any Limitation Year, to the extent that such an allocation would result
in an Annual  Addition of an amount  greater  than the lesser of (i) $30,000 (or
such other amount as is permissible  under section  415(c)(1)(A) of the Code, or
(ii) 25% of the Participant's Total Compensation for such Limitation Year.

         (b) In the case of a Participant  who may be entitled to benefits under
any qualified  defined benefit plan (whether or not terminated) now in effect or
ever maintained by the Employer,  such Participant's Annual Additions under this
Plan shall,  in addition to the limitations  provided under section  8.2(a),  be
further limited so that the sum of the Participant's  Defined  Contribution Plan
Fraction  plus his Defined  Benefit  Plan  Fraction  does not exceed 1.0 for any
Limitation Year; provided, however, that for any Limitation Year ending prior to
January 1, 1983,  the sum of his Defined  Contribution  Plan  Fraction  plus his
Defined Benefit Plan Fraction shall not exceed 1.4; and provided  further,  that
this  limitation  shall only apply if and to the extent that the benefits  under
the Employer's Retirement Plan are not limited so that such sum is not exceeded.

         (c) For purposes of this section 8.2, the following special definitions
shall apply:



<PAGE>

                                      -17-

                  (i) Annual  Addition  means the sum of the  following  amounts
         allocated on behalf of a Participant for a Limitation Year:

                           (A)  all  contributions  by the  Employer  (including
                  contributions made under a salary reduction agreement pursuant
                  to  sections  401(k),  408(k) or 403(b) of the Code) under any
                  qualified  defined  contribution  plan  (other than this Plan)
                  maintained  by the  Employer,  as  well  as the  Participant's
                  allocable share, if any, of any forfeitures  under such plans;
                  plus

                           (B) (I) for  Limitation  Years  that  began  prior to
                  January  1, 1987,  the lesser of (1) 50% of the  Participant's
                  voluntary nondeductible contributions to all qualified defined
                  contribution  plans  maintained  by the  Employer,  or (2) the
                  amount  by which  the  Participant's  nondeductible  voluntary
                  contributions   to  such   plans   exceeds  6%  of  his  Total
                  Compensation;  and (II) for Limitation  Years that begin after
                  December  31,  1986,  all  of  the  Participant's  volun  tary
                  nondeductible contributions to such plans; plus

                           (C) all ESOP Contributions under this Plan; plus

                           (D) except as  hereinafter  provided in this  section
                  8.2(c)(i),   a  portion  of  the  Employer's   Loan  Repayment
                  Contributions to the Plan for such Limitation Year which bears
                  the same proportion to the total amount of the Employer's Loan
                  Repayment  Contributions  for the  Limitation  Year  that  the
                  number of Shares (or the Fair Market  Value of property  other
                  than Shares) allocated to the  Participant's  Account pursuant
                  to section 7.2 or 8.1,  whichever is applicable,  bears to the
                  aggregate  number of Shares (or Fair Market  Value of property
                  other than Shares) so allocated to all  Participants  for such
                  Limitation Year.

         Notwithstanding section 8.2(c)(i)(D),  if, for any Limitation Year, the
         aggregate amount of ESOP Contributions allocated to the Accounts of the
         individuals  who are Highly  Compensated  Employees for such Limitation
         Year, when added to such Highly Compensated  Employees' allocable share
         of any Loan Repayment  Contributions for such Limitation Year, does not
         exceed  one-third  of the  total  of all  ESOP  Contributions  and Loan
         Repayment Contributions for such Limitation Year, then that portion, if
         any, of the Loan Repayment  Contributions for such Limitation Year that
         is applied to the payment of interest on a Share Acquisition Loan shall
         not be included as an Annual Addition. In determining whether more than
         one-third of the number of Shares or of the amount of money or property
         to be  allocated  under the Plan for a Plan Year would be  allocated to
         the Highly  Compensated  Employees,  any  allocation  to be made to the
         Account  of a Family  Member of a Highly  Compensated  Employee  who is
         either  a Five  Percent  Owner  or one of the  ten  Highly  Compensated
         Employees with the highest Total  Compensation,  shall be treated as an
         allocation to such Highly Compensated Employee.


                  (ii)  Employer  means  Wake  Forest  Federal  Savings  &  Loan
         Association, and all members of a controlled group of corporations,  as
         defined in section 414(b) of the Code, as modified by section 415(h) of
         the Code, all commonly  controlled trades or businesses,  as defined in
         section  414(c) of the Code, as modified by section 415(h) of the Code,
         all  affiliated  service  groups,  as defined in section  414(m) of the
         Code,  of which Wake Forest  Federal  Savings & Loan  Association  is a
         member,  as well as any  leasing  organization,  as  defined in section
         17.8, that employs any person who is considered an


<PAGE>

                                      -18-

         employee under section 17.8 and any other entity that is required to be
         aggregated  with the Employer  pursuant to  regulations  under  section
         414(o) of the Code.

                  (iii) Defined Benefit Plan Fraction means, for any Participant
         for any  Limitation  Year,  a fraction,  the  numerator of which is the
         Projected  Annual Benefit  (determined as of the end of such Limitation
         Year) of the  Participant  under any  qualified  defined  benefit plans
         (whether or not terminated)  maintained by the Employer for the current
         and all prior  Limitation  Years,  and the  denominator  of which is as
         follows:  (A) for Limitation Years ending prior to January 1, 1983, the
         lesser of (I) the dollar  limitation in effect under section  415(b)(1)
         (A) of the Code for such Limitation  Year, or (II) the amount which may
         be taken  into  account  under  section  415(b)(1)(B)  of the Code with
         respect to such  Participant for such  Limitation  Year; and (B) in all
         other cases,  the lesser of (I) (except as provided in section  16.8(b)
         for a Top Heavy Plan Year) the product of 1.25 multiplied by the dollar
         limitation  in effect under section  415(b)(1)(A)  of the Code for such
         Limitation  Year,  or (II) the product of 1.4  multiplied by the amount
         which may be taken into account under section  415(b)(1)(B) of the Code
         with respect to such Participant for such Limitation Year.

                  (iv)  Defined   Contribution  Plan  Fraction  means,  for  any
         Participant  for any  Limitation  Year, a fraction (A) the numerator of
         which is the sum of such Participant's Annual Additions  (determined as
         of the end of such  Limitation  Year)  under  this  Plan and any  other
         qualified  defined  contribution  plans  (whether  or  not  terminated)
         maintained  by the  Employer  for the current and all prior  Limitation
         Years,  and  (B)  the  denominator  of  which  is as  follows:  (I) for
         Limitation Years ending prior to January 1, 1983, the sum of the lesser
         of the following  amounts for such  Limitation  Year and for each prior
         Limitation  Year  during  which such  Participant  was  employed by the
         Employer:  (1) the Maximum  Permissible Amount for such Limitation Year
         (without  regard to section  415(c)(6) of the Code),  or (2) the amount
         which may be taken into account under section  415(c)(1)(B) of the Code
         with respect to such  Participant for such Limitation Year; and (II) in
         all other  cases,  the sum of the lesser of the  following  amounts for
         such  Limitation Year and for each prior  Limitation  during which such
         Participant  was employed by the  Employer:  (1) (except as provided in
         section  16.8(b)  for a Top  Heavy  Plan  Year)  the  product  of  1.25
         multiplied by the Maximum  Permissible  Amount for such Limitation Year
         (determined  without regard to section  415(c)(6) of the Code),  or (2)
         the  product of 1.4  multiplied  by the amount  which may be taken into
         account under section 415(c)(1)(B) of the Code (or section 415(c)(7) of
         the Code,  if  applicable)  with respect to such  Participant  for such
         Limitation Year; provided, however, that the Plan Administrator may, at
         his election,  adopt the transition rule set forth in section 415(e)(6)
         of the  Code in  making  the  computation  set  forth  in this  section
         8.2(c)(iv). If the sum of a Participant's Defined Benefit Plan Fraction
         and Defined Contribution Plan Fraction exceeded 1.0 as of September 30,
         1983, then such Participant's  Defined Contribution Plan Fraction shall
         be determined  under  regulations  to be prescribed by the Secretary of
         the Treasury so that the sum of the fractions does not exceed 1.0.

                  (v) Limitation  Year means the Plan Year;  provided,  however,
         that if the Employer  changes the  Limitation  Year, the new Limitation
         Year  shall  begin on a date  within the  Limitation  Year in which the
         amendment is made.

                  (vi)  Maximum  Permissible  Amount  means (A) $25,000 (or such
         higher  amount as may be  permitted  under  section  415(d) of the Code
         because of cost of living  increases)  for Limitation  Years  beginning
         prior to January 1, 1983,  and (B) the greater of (I) $30,000,  or (II)
         25% of the dollar


<PAGE>

                                      -19-

         limitation  in  effect  under  section  415(b)(1)(A)  of the  Code  for
         Limitation Years beginning on or after January 1, 1983.

                  (vii) Projected  Annual Benefit means a  Participant's  annual
         retirement benefit (adjusted to the actuarial  equivalent of a straight
         life  annuity if  expressed  in a form  other  than a straight  life or
         qualified  joint and  survivor  annuity)  under any  qualified  defined
         benefit plan  maintained  by the Employer,  whether or not  terminated,
         assuming that the Participant will continue  employment until the later
         of current age or normal  retirement  age under such plan, and that the
         Participant's  Total Compensation for the Limitation Year and all other
         relevant factors used to determine benefits under such plan will remain
         constant for all future Limitation Years.

         (d) When a  Participant's  Annual Addition to this Plan must be reduced
to satisfy the  limitations of section  8.2(a) or (b), such  reduction  shall be
applied  first to ESOP  Contributions;  and  second,  if  necessary,  to  Shares
allocated as a result of a Loan Repayment  Contribution which are included as an
Annual Addition.  The amount by which any Participant's  Annual Addition to this
Plan is reduced  shall be allocated in  accordance  with Articles V and VII as a
contribution by the Employer in the next succeeding Limitation Year.

         (e) Prior to determining a Participant's  actual Total Compensation for
a Limitation Year, the Employer may determine the limitations under this section
8.2  for  a  Participant  on  the  basis  of  a  reasonable  estimation  of  the
Participant's  Total  Compensation  for the  Limitation  Year that is  uniformly
determined for all  Participants  who are similarly  situated.  As soon as it is
administratively  feasible after the end of the Limitation Year, the limitations
of this section 8.2 shall be determined on the basis of the Participant's actual
Total Compensation for the Limitation Year.



                                   ARTICLE IX

                                     VESTING


         SECTION 9.1 VESTING.

         Subject to the provisions of section  9.6(a),  the balance  credited to
each  Employee's  Account shall become  vested in accordance  with the following
schedule:

                           Period of Service                    Vested
                               In Years                       Percentage
                               --------                       ----------
                             less than 3                              0%
                             3 or more                              100%


         SECTION  9.2  VESTING  ON DEATH,  DISABILITY,  RETIREMENT  OR CHANGE IN
                       CONTROL.

         Any  previously  unvested  portion  of the  remainder  of  the  balance
credited  to the  Account  of a  Participant  or of a  person  who  is a  Former
Participant  solely  because he is excluded  from  participation  under  section
2.1(b) shall


<PAGE>

                                      -20-

become  fully  vested  in him  immediately  upon  attainment  of age 65,  or, if
earlier,  upon  the  termination  of  his  participation  by  reason  of  death,
Disability,  Retirement  or upon the  occurrence  of a Change in  Control of the
Employer.

         SECTION 9.3 FORFEITURES ON TERMINATION OF EMPLOYMENT.

         Upon  the   termination  of  employment  of  a  Participant  or  Former
Participant  for any  reason  other than  death,  Disability,  Retirement,  that
portion of the balance  credited to his Account  which is not vested at the date
of such  termination  shall be forfeited as of the last  Valuation  Date for the
Plan Year in which such termination of employment  occurs.  The proceeds of such
forfeitures,   less  amounts,  if  any,  required  to  be  credited  because  of
re-employment pursuant to section 9.4, shall be treated as Forfeitures and shall
be disposed of as provided in section 9.5.


         SECTION 9.4 AMOUNTS CREDITED UPON RE-EMPLOYMENT.

         If an  Employee  forfeited  any amount of the  balance  credited to his
Account upon his termination of employment with the Employer, and is re-employed
prior to the occurrence of a Period of Severance of five years, then:

                  (i) an amount  equal to the Fair  Market  Value of the  Shares
         forfeited, determined as of the date of forfeiture; and

                  (ii) the amount  credited  to his General  Investment  Account
         that was forfeited, determined as of the date of forfeiture;

shall be credited back to his Account from the proceeds of forfeitures which are
redeemed  pursuant  to  section  9.3  during  the  Plan  Year  in  which  he  is
re-employed,  unless such proceeds are insufficient,  in which case the Employer
shall make an additional contribution in the amount of such deficiency.


         SECTION 9.5 ALLOCATION OF FORFEITURES.

         Any  Forfeitures  that occur during a Plan Year shall be used to reduce
the  contributions  required of the Employer under the Plan and shall be treated
as Loan  Repayment  Contributions  and  ESOP  Contributions  in the  proportions
designated by the Committee in accordance with Article V.


         SECTION 9.6 ACCELERATED VESTING UPON CHANGE IN CONTROL

         (a) The balance  credited to each  Participant's  Account  shall become
100% vested upon the occurrence of a Change in Control of the Employer.

         (b) A  Change  in  Control  of the  Employer  shall be  deemed  to have
occurred upon the happening of any of the following events:



<PAGE>

                                      -21-

                  (i)  approval  by the  stockholders  of  Wake  Forest  Federal
         Savings & Loan  Association  of a transaction  that would result in the
         reorganization,  merger or consolidation of Wake Forest Federal Savings
         & Loan  Association  with  one or  more  other  persons,  other  than a
         transaction following which:

                           (A) at least 51% of the equity ownership interests of
                  the entity  resulting from such  transaction are  beneficially
                  owned (within the meaning of Rule 13d-3  promulgated under the
                  Securities   Exchange   Act  of  1934   "Exchange   Act")   in
                  substantially  the same relative  proportions  by persons who,
                  immediately  prior  to such  transaction,  beneficially  owned
                  (within  the  meaning  of Rule  13d-3  promulgated  under  the
                  Exchange Act) at least 51% of the outstanding equity ownership
                  interests in Wake Forest Federal  Savings & Loan  Association;
                  and

                           (B) at least 51% of the  securities  entitled to vote
                  generally in the election of directors of the entity resulting
                  from such  transaction  are  beneficially  owned  (within  the
                  meaning of Rule 13d-3  promulgated  under the Exchange Act) in
                  substantially  the same relative  proportions  by persons who,
                  immediately  prior  to such  transaction,  beneficially  owned
                  (within  the  meaning  of Rule  13d-3  promulgated  under  the
                  Exchange Act) at least 51% of the securities  entitled to vote
                  generally in the election of directors of Wake Forest  Federal
                  Savings & Loan Association

                  (ii) the acquisition of all or substantially all of the assets
         of  Wake  Forest  Federal  Savings  & Loan  Association  or  beneficial
         ownership  (within  the  meaning  of Rule 13d-3  promulgated  under the
         Exchange  Act)  of 20% or more of the  outstanding  securities  of Wake
         Forest Federal Savings & Loan Association entitled to vote generally in
         the  election of  directors  by any person or by any persons  acting in
         concert, or approval by the stockholders of Wake Forest Federal Savings
         & Loan  Association  of any  transaction  which would result in such an
         acquisition;

                  (iii) a complete  liquidation  or  dissolution  of Wake Forest
         Federal Savings & Loan Association,  or approval by its stockholders of
         a plan for such liquidation or dissolution;

                  (iv) the  occurrence  of any event if,  immediately  following
         such  event,  at least 50% of the  members of the Board of Wake  Forest
         Federal  Savings  &  Loan  Association  do  not  belong  to  any of the
         following groups;

                           (A) individuals who were members of the Board of Wake
                  Forest  Federal  Savings & Loan  Association  on the Effective
                  Date of this Plan; or

                           (B) individuals who first became members of the Board
                  of Wake Forest Federal  Savings & Loan  Association  after the
                  Effective Date of this Plan either:

                                    (I) upon  election  to serve as a member  of
                           such Board by affirmative vote of  three-quarters  of
                           the  members  of  such  Board,  or  of  a  nominating
                           committee  thereof,  in  office  at the  time of such
                           first election; or

                                    (II) upon  election by the  stockholders  of
                           Wake Forest  Federal  Savings & Loan  Association  to
                           serve as a member of the Board of Wake Forest Federal


<PAGE>

                                      -22-

                           Savings & Loan Association, but only if nominated for
                           election by affirmative vote of three-quarters of the
                           members of the Board,  or of a  nominating  committee
                           thereof,   in  office  at  the  time  of  such  first
                           nomination;

                  provided,   however,   that  such  individual's   election  or
                  nomination  did  not  result  from  an  actual  or  threatened
                  election  contest  (within  the  meaning  of  Rule  14a-11  of
                  Regulation  14A  promulgated  under the Exchange Act) or other
                  actual or  threatened  solicitation  of  proxies  or  consents
                  (within  the  meaning  of  Rule  14a-11  of   Regulation   14A
                  promulgated under the Exchange Act) other than by or on behalf
                  of  the  Board  of  Wake   Forest   Federal   Savings  &  Loan
                  Association.

In no event, however,  shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of Wake Forest Federal Savings
& Loan Association,  an Affiliated Employer,  or a subsidiary of either of them,
by Wake Forest Federal Savings & Loan Association,  an Affiliated Employer, or a
subsidiary of either of them, or by any employee  benefit plan maintained by any
of them. For purposes of this section  9.6(b),  the term "person" shall have the
meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange Act.



                                    ARTICLE X

                                 THE TRUST FUND


         SECTION 10.1 THE TRUST FUND.

         The Trust Fund  shall be held and  invested  under the Trust  Agreement
with the Trustee.  The provisions of the Trust  Agreement shall vest such powers
in the Trustee as to investment, control and disbursement of the Trust Fund, and
such other provisions not inconsistent  with the Plan,  including  provision for
the  appointment  of one or more  "investment  managers"  within the  meaning of
section 3(38) of ERISA to manage and control (including  acquiring and disposing
of) all or any of the  assets of the Trust  Fund,  as the Board may from time to
time authorize.  Except as required by ERISA, no bond or other security shall be
required of any Trustee at any time in office.


         SECTION 10.2 INVESTMENTS.

         (a) Except to the extent  provided to the contrary in section 10.3, the
Trust Fund shall be invested in:

                  (i) Shares;

                  (ii)  units of  interest  in such  Investment  Funds as may be
         established from time to time by the Committee; and

                  (iii) such other  investments  as may be  permitted  under the
         Trust Agreement;



<PAGE>

                                      -23-

in such  proportions  as shall be determined by the Committee or, if so provided
under the Trust Agreement,  as directed by one or more investment managers or by
the Trustee, in its discretion;  provided,  however, that the investments of the
Trust Fund shall consist  primarily of Shares.  Notwithstanding  the immediately
preceding  sentence,  the  Trustee  may  temporarily  invest  the Trust  Fund in
short-term  obligations of, or guaranteed by, the United States Government or an
agency  thereof,  or may retain  uninvested,  or sell  investments  to  provide,
amounts of cash required for purposes of the Plan.

         (b) Initially,  the value of each unit in each Investment Fund shall be
$1,  and one  unit  in any  such  Investment  Fund  shall  be  credited  to each
Participant or Former Participant,  or the Beneficiary of a deceased Participant
or Former  Participant,  for each $1 applicable to the purchase for him of units
in such Investment Fund. Thereafter,  the Plan Administrator shall determine the
value  of  units  in each  such  Investment  Fund as of each  Valuation  Date by
dividing the fair market value of all property in each such  Investment  Fund as
of such  Valuation  Date (after  deducting  any  expenses or other  amounts then
properly  chargeable  against the particular  Investment  Fund) by the number of
units then  outstanding  in each such  Investment  Fund,  and making  such other
adjustments  as shall be necessary to properly  reflect  transactions  occurring
subsequent to the immediately preceding Valuation Date. For the purposes of this
Article X, fractions of units computed to three decimal places, as well as whole
units,  in any of the  Investment  Funds may be  redeemed or  purchased  for the
credit of Employees, Participants or Former Participants or their Beneficiaries.


         SECTION 10.3 DISTRIBUTIONS FOR DIVERSIFICATION OF INVESTMENTS.

         (a) Notwithstanding section 10.2, each Qualified Participant may:

                  (i)  during  the first 90 days of each of the first  four Plan
         Years  to begin  after  the Plan  Year in  which  he  first  becomes  a
         Qualified  Participant,  elect  that  such  percentage  of the  balance
         credited  to his Account as he may  specify,  but in no event more than
         25% of the  balance  credited to his  Account,  be  distributed  to him
         pursuant to this section; and

                  (ii)  during the first 90 days of the fifth Plan Year to begin
         after the Plan Year in which he first  becomes a Qualified  Participant
         or of any Plan  Year  thereafter,  elect  that such  percentage  of the
         balance credited to his Account as he may specify, but in no event more
         than 50% of the balance credited to his Account,  be distributed to him
         pursuant to this section.

For purposes of an election under this section 10.3,  the balance  credited to a
Participant's Account shall be the balance credited to his Account determined as
of the last Valuation Date to occur in the Plan Year  immediately  preceding the
Plan Year in which such election is made.

         (b) An election made under section 10.3(a) shall be made in writing, in
the form and manner  prescribed  by the Plan  Administrator,  and shall be filed
with the Plan  Administrator  during the  election  period  specified in section
10.3(a). As soon as is practicable, and in no case later than 90 days, following
the end of the  election  period  during which such  election is made,  the Plan
Administrator  shall take such actions as are  necessary to cause the  specified
percentage of the balance  credited to the Account of the Qualified  Participant
making the election to be distributed to such Qualified Participant.

         (c) An election made under section 10.3(a) may be changed or revoked at
any time during the election period described in section 10.3(a) during which it
is initially made. In no event,  however,  shall any election under this section
10.3  result  in more  than 25% of the  balance  credited  to the  Participant's
Account being distributed to


<PAGE>

                                      -24-

the  Participant,  if such  election is made during a Plan Year to which section
10.3(a)(i) applies, or result in more than 50% of the balance distributed to the
Participant,  if such  election  is made  during the Plan Year to which  section
10.3(a)(ii) applies or thereafter.


         SECTION 10.4 USE OF COMMINGLED TRUST FUNDS.

         Subject to the provisions of the Trust  Agreement,  amounts held in the
Trust Fund may be invested in:

                  (a) any  commingled  or group trust fund  described in section
         401(a) of the Code and exempt under section 501(a) of the Code; or

                  (b) any common trust fund exempt under section 584 of the Code
         maintained  exclusively for the collective  investment of the assets of
         trusts that are exempt under section 501(a) of the Code;

provided  that the trustee of such  commingled,  group or common trust fund is a
bank or trust company.


         SECTION 10.5 MANAGEMENT AND CONTROL OF ASSETS.

         All  assets of the Plan  shall be held by the  Trustee in trust for the
exclusive benefit of Participants,  Former Participants and their Beneficiaries.
No part of the corpus or income of the Trust Fund shall be used for, or diverted
to,  purposes  other  than for the  exclusive  benefit of  Participants,  Former
Participants   and   their   Beneficiaries,   and   for   defraying   reasonable
administrative  expenses  of the Plan and Trust Fund.  No person  shall have any
interest  in or right to any part of the  earnings  of the  Trust  Fund,  or any
rights in, to or under the Trust Fund or any part of its  assets,  except to the
extent expressly provided in the Plan.



                                   ARTICLE XI

                    VALUATION OF INTERESTS IN THE TRUST FUND


         SECTION 11.1 ESTABLISHMENT OF INVESTMENT ACCOUNTS.

         The Plan Administrator shall establish, or cause to be established, for
each person for whom an Account is maintained a Share  Investment  Account and a
General  Investment   Account.   Such  Share  Investment  Accounts  and  General
Investment Accounts shall be maintained in accordance with this Article XI.

         SECTION 11.2 SHARE INVESTMENT ACCOUNTS.

         The Share  Investment  Account  established  for a person in accordance
with  section  11.1 shall be credited  with:  (a) all Shares  allocated  to such
person's  Account;  (b) all Shares  purchased  with amounts of money or property
allocated to such person's Account; (c) all dividends paid in the form of Shares
with respect to Shares credited to his


<PAGE>

                                      -25-

Account;  and (d) all Shares  purchased  with amounts  credited to such person's
General Investment Account.  Such Share Investment Account shall be charged with
all Shares that are sold or exchanged to acquire other investments or to provide
cash and with all Shares that are distributed in kind.


         SECTION 11.3 GENERAL INVESTMENT ACCOUNTS.

         The General  Investment  Account  that is  established  for a person in
accordance with section 11.1 shall be credited with: (a) all amounts, other than
Shares,  allocated to such person's  Account;  (b) all dividends  paid in a form
other  than  Shares  with  respect to Shares  credited  to such  person's  Share
Investment  Account;  (c) the  proceeds  of any sale of Shares  credited to such
person's Share Investment Account; and (d) any earnings  attributable to amounts
credited to such person's General  Investment  Account.  Such General Investment
Account shall be charged with all amounts  credited  thereto that are applied to
the  purchase  of Shares,  any losses or  depreciation  attributable  to amounts
credited  thereto,  any  expenses  allocable  thereto and any  distributions  of
amounts credited thereto.


         SECTION 11.4 VALUATION OF INVESTMENT ACCOUNTS.

         (a) The Plan Administrator shall determine,  or cause to be determined,
the  aggregate  value  of each  person's  Share  Investment  Account  as of each
Valuation  Date by  multiplying  the  number of Shares  credited  to such  Share
Investment Account on such Valuation Date by the Fair Market Value of a Share on
such Valuation Date.

         (b) The Plan Administrator shall determine,  or cause to be determined,
the  aggregate  value of each  person's  General  Investment  Account as of each
Valuation Date as follows:

                  (i) To the  extent  that  all or a  portion  of such  person's
         General Investment Account is invested in one or more of the Investment
         Funds,  the Plan  Administrator  shall  multiply the number of units in
         each  Investment  Fund  credited to such  person as of the  immediately
         preceding Valuation Date by the value of a unit in such Investment Fund
         as of the current Valuation Date.

                  (ii) To the  extent  that all or a  portion  of such  person's
         General  Investment  Account is invested in investments  other than the
         Investment  Funds, the Plan  Administrator  shall adjust the balance in
         such manner as it shall deem appropriate to reflect  earnings,  losses,
         expenses,  benefit payments and other transactions  properly chargeable
         to such Account.


         SECTION 11.5 ANNUAL STATEMENTS.

         There shall be furnished,  by mail or otherwise,  at least once in each
Plan Year to each  person who would then be  entitled  to receive all or part of
the  balance  credited  to any  Account  if the Plan  were  then  terminated,  a
statement  of his  interest  in the Plan as of such date as shall be selected by
the Plan Administrator, which statement shall be deemed to have been accepted as
correct and be binding on such  person  unless the Plan  Administrator  receives
written  notice to the contrary  within 30 days after the statement is mailed or
furnished to such person.





<PAGE>

                                      -26-

                                   ARTICLE XII

                                     SHARES


         SECTION 12.1 SPECIFIC ALLOCATION OF SHARES.

         All Shares purchased under the Plan shall be specifically  allocated to
the Share  Investment  Accounts of Participants,  Former  Participants and their
Beneficiaries  in accordance  with section 11.2,  with the exception of Financed
Shares, which shall be allocated to the Loan Repayment Account.


         SECTION 12.2 DIVIDENDS.

         (a) Dividends  paid with respect to Shares held under the Plan shall be
credited to the Loan Repayment Account, if paid with respect to Financed Shares.
Such  dividends  shall be: (i) applied to the payment of  principal  and accrued
interest  with respect to any Share  Acquisition  Loan, if paid in cash; or (ii)
held in the Loan Repayment  Account as Financed Shares for release in accordance
with section 6.4, if paid in the form of Shares.

         (b) Dividends paid with respect to Shares allocated to a person's Share
Investment Account shall be credited to such person's Share Investment  Account.
Cash dividends  credited to a person's General  Investment  Account shall be, at
the direction of the Board,  either: (i) held in such General Investment Account
and  invested  in  accordance  with  sections  10.2 and 11.2;  (ii)  distributed
immediately to such person;  (iii)  distributed to such person within 90 days of
the close of the Plan Year in which such  dividends  were paid;  or (iv) used to
make payments of principal or interest on a Share  Acquisition  Loan;  provided,
however,  that the Fair Market Value of Financed  Shares  released from the Loan
Repayment Account equals or exceeds the amount of the dividend.


         SECTION 12.3 VOTING RIGHTS.

         (a) Each  person  shall  direct the  manner in which all voting  rights
appurtenant  to  Shares  allocated  to his  Share  Investment  Account  will  be
exercised,  provided  that such Shares were  allocated  to his Share  Investment
Account as of the applicable  record date. Such person shall,  for such purpose,
be deemed a "named  fiduciary" within the meaning of section 402(a)(2) of ERISA.
Such a direction  shall be given by completing  and filing with the inspector of
elections,  the  Trustee or such other  person who shall be  independent  of the
Employer as the Committee shall designate, at least 10 days prior to the date of
the meeting of holders of Shares at which such voting  rights will be exercised,
a written  direction in the form and manner  prescribed  by the  Committee.  The
inspector  of  elections,  the Trustee or such other  person  designated  by the
Committee shall tabulate the directions given on a strictly  confidential basis,
and shall provide the Committee  with only the final results of the  tabulation.
The final  results of the  tabulation  shall be  followed  by the  Committee  in
directing  the  Trustee as to the manner in which such  voting  rights  shall be
exercised.  The Plan Administrator shall make a reasonable effort to furnish, or
cause to be  furnished,  to each person for whom a Share  Investment  Account is
maintained all annual reports,  proxy materials and other  information  known by
the Plan Administrator to have been furnished by the issuer of the Shares, or by
any solicitor of proxies, to the holders of Shares.

         (b) To the extent that any person shall fail to give  instructions with
respect to the exercise of voting rights  appurtenant to Shares allocated to his
Share Investment Account:


<PAGE>

                                      -27-

                  (i) the Trustee shall, with respect to each matter to be voted
         upon:  (A) cast a number of  affirmative  votes equal to the product of
         (I) the number of  allocated  Shares for which no written  instructions
         have been given,  multiplied by (II) a fraction, the numerator of which
         is the number of allocated Shares for which  affirmative  votes will be
         cast in  accordance  with  written  instructions  given as  provided in
         section 12.3(a) and the denominator of which is the aggregate number of
         affirmative  and negative  votes which will be cast in accordance  with
         written  instructions  given as  aforesaid,  and (B)  cast a number  of
         negative  votes  equal  to the  excess  (if any) of (I) the  number  of
         allocated Shares for which no written instructions have been given over
         (II) the number of  affirmative  votes being cast with  respect to such
         allocated Shares pursuant to section 12.3(b)(i)(A); or

                  (ii)  if  the  Trustee  shall   determine  that  it  may  not,
         consistent  with its fiduciary  duties,  vote the allocated  Shares for
         which no written  instructions  have been given in the manner described
         in section 12.3(b)(i),  it shall vote such Shares in such manner as it,
         in its  discretion,  may  determine to be in the best  interests of the
         persons  to whose  Share  Investment  Accounts  such  Shares  have been
         allocated.

                  (c) (i) The voting rights appurtenant to Financed Shares shall
be  exercised  as follows  with  respect to each  matter as to which  holders of
Shares may vote:

                           (A) a number of votes equal to the product of (I) the
                  total number of votes appurtenant to Financed Shares allocated
                  to the Loan Repayment  Account on the applicable  record date;
                  multiplied  by (II) a fraction,  the numerator of which is the
                  total number of affirmative votes cast by Participants, Former
                  Participants   and  the   Beneficiaries   of  deceased  Former
                  Participants  with respect to such matter  pursuant to section
                  12.3(a) and the  denominator  of which is the total  number of
                  affirmative  and negative votes cast by  Participants,  Former
                  Participants   and  the   Beneficiaries   of  deceased  Former
                  Participants, shall be cast in the affirmative; and

                           (B) a number of votes  equal to the excess of (I) the
                  total number of votes appurtenant to Financed Shares allocated
                  to the Loan Repayment  Account on the applicable  record date,
                  over (II) the number of  affirmative  votes cast  pursuant  to
                  section 12.3(c)(i)(A) shall be cast in the negative.

         To the extent that the Financed  Shares  consist of more than one class
         of Shares,  this section  12.3(c)(i)  shall be applied  separately with
         respect to each class of Shares.

                  (ii) If voting  rights  are to be  exercised  with  respect to
         Financed Shares as provided in section  12.3(c)(i)(A) and (B) at a time
         when there are no Shares allocated to the Share Investment  Accounts of
         Participants,  Former  Participants  and the  Beneficiaries of deceased
         Former  Participants,  then the voting rights  appurtenant  to Financed
         Shares  shall be exercised as follows with respect to each matter as to
         which holders of Shares may vote:

                           (A)  Each  person  who  is  a   Participant   on  the
                  applicable  record date and who was a Participant  on the last
                  day of the Plan Year  ending on or  immediately  prior to such
                  record  date will be  granted  a number of votes  equal to the
                  quotient,  rounded to the nearest integral number, of (I) such
                  Participant's Allocation Compensation for the Plan Year ending
                  on or  immediately  prior  to  such  record  date  (or for the
                  portion of such Plan Year during which he was a  Participant);
                  divided by (II) $1,000.00; and



<PAGE>

                                      -28-

                           (B) a number of votes equal to the product of (I) the
                  total  number  of  Financed  Shares   allocated  to  the  Loan
                  Repayment Account on the applicable record date; multiplied by
                  (II) a fraction, the numerator of which is the total number of
                  votes that are cast in the  affirmative  with  respect to such
                  matter pursuant to section  12.3(c)(ii)(A) and the denominator
                  of which is the total  number of votes that are cast either in
                  the affirmative or in the negative with respect to such matter
                  pursuant  to  section  12.3(c)(ii)(A),  shall  be  cast in the
                  affirmative; and

                           (C) a number of votes  equal to the excess of (I) the
                  total  number  of  Financed  Shares   allocated  to  the  Loan
                  Repayment Account on the applicable record date, over (II) the
                  number of  affirmative  votes cast with respect to such matter
                  pursuant  to  section  12.3(c)(ii)(B),  shall  be  cast in the
                  negative.

         To the extent that the Financed  Shares  consist of more than one class
         of Shares,  this section  12.3(c)(ii) shall be applied  separately with
         respect to each class of Shares.


         SECTION 12.4 TENDER OFFERS.

         (a) Each person  shall  direct  whether  Shares  allocated to his Share
Investment  Account  will be  delivered  in response to any Tender  Offer.  Such
person shall, for such purpose, be deemed a "named fiduciary" within the meaning
of section 402(a)(2) of ERISA. Such a direction shall be given by completing and
filing with the  Trustee or such other  person who shall be  independent  of the
Employer as the Committee shall designate,  at least 10 days prior to the latest
date for exercising a right to deliver  Shares  pursuant to such Tender Offer, a
written  direction  in the form and  manner  prescribed  by the  Committee.  The
Trustee  or  other  person  designated  by  the  Committee  shall  tabulate  the
directions  given on a  strictly  confidential  basis,  and  shall  provide  the
Committee  with only the final results of the tabula tion.  The final results of
the  tabulation  shall be followed by the  Committee in directing  the number of
Shares to be delivered. The Plan Administrator shall make a reasonable effort to
furnish,  or cause to be furnished,  to each person for whom a Share  Investment
Account is maintained,  all information known by the Plan  Administrator to have
been furnished by the issuer or by or on behalf of any person making such Tender
Offer, to the holders of Shares in connection with such Tender Offer.

         (b) To the extent that any person shall fail to give  instructions with
respect to Shares allocated to his Share Investment Account:

                  (i) the  Trustee  shall  (A)  tender  or  otherwise  offer for
         purchase,  exchange or  redemption a number of such Shares equal to the
         product  of (I) the  number of  allocated  Shares  for which no written
         instructions  have  been  given,  multiplied  by (II) a  fraction,  the
         numerator  of which is the  number  of  allocated  Shares  tendered  or
         otherwise  offered for  purchase,  exchange or redemption in accordance
         with written  instructions given as provided in section 12.4(a) and the
         denominator  of which is the aggregate  number of allocated  Shares for
         which  written  instructions  have  been  given as  aforesaid,  and (B)
         withhold  a number of Shares  equal to the  excess  (if any) of (I) the
         number of allocated Shares for which no written  instructions have been
         given  over (II) the  number  of Shares  being  tendered  or  otherwise
         offered pursuant to section 12.4(b)(i)(A); or

                  (ii)  if  the  Trustee  shall   determine  that  it  may  not,
         consistent  with its  fiduciary  duties,  exercise  the tender or other
         rights   appurtenant   to   allocated   Shares  for  which  no  written
         instructions have


<PAGE>

                                      -29-


         been given in the manner  described  in  section  12.4(b)(i),  it shall
         tender,  or otherwise  offer, or withhold such Shares in such manner as
         it, in its discretion, may determine to be in the best interests of the
         persons  to whose  Share  Investment  Accounts  such  Shares  have been
         allocated.

         (c) In the case of any Tender  Offer,  any Financed  Shares held in the
Loan Repayment Account shall be dealt with as follows:

                  (i) If such  Tender  Offer  occurs at a time when there are no
         Shares  allocated  to the Share  Investment  Accounts of  Participants,
         Former  Participants  and the  Beneficiaries  of  deceased  Former  Par
         ticipants,  then  the  disposition  of the  Financed  Shares  shall  be
         determined as follows:

                           (A)  each  person  who  is  a   Participant   on  the
                  applicable  record date and who was a Participant  on the last
                  day of the Plan Year  ending on or  immediately  prior to such
                  record date will be granted a number of tender rights equal to
                  the quotient,  rounded to the nearest integral number,  of (I)
                  such Participant's  Allocation  Compensation for the Plan Year
                  ending on or immediately prior to such record date (or for the
                  portion of such Plan Year during which he was a  Participant),
                  divided by (II) $1,000.00; and

                           (B)  on  the  last  day  for  delivering   Shares  or
                  otherwise  responding to such Tender Offer, a number of Shares
                  equal to the  product  of (I) the  total  number  of  Financed
                  Shares allocated to the Loan Repayment Account on the last day
                  of the effective  period of such Tender  Offer;  multiplied by
                  (II) a fraction, the numerator of which is the total number of
                  tender rights  exercised in favor of the delivery of Shares in
                  response to the Tender Offer pursuant to section 12.4(c)(i)(A)
                  and the  denominator  of which is the  total  number of tender
                  rights that are  exercisable  in response to the Tender  Offer
                  pursuant  to  section  12.4(c)(i)(A),  shall be  delivered  in
                  response to the Tender Offer; and

                           (C) a number of Shares equal to the excess of (I) the
                  total  number  of  Financed  Shares   allocated  to  the  Loan
                  Repayment  Account on the last day of the effective  period of
                  such  Tender  Offer;  over  (II) the  number  of  Shares to be
                  delivered in response to the Tender Offer  pursuant to section
                  12.4(c)(i)(B), shall be withheld from delivery.

                  (ii) If such  Tender  Offer  occurs at a time when the  voting
         rights  appurtenant  to such  Financed  Shares are to be  exercised  in
         accordance with section 12.3(c)(i), then:

                           (A)  on  the  last  day  for  delivering   Shares  or
                  otherwise  responding  to  such  Tender  Offer,  a  number  of
                  Financed  Shares  equal to the product of (I) the total number
                  of Financed Shares allocated to the Loan Repayment  Account on
                  the last day of the  effective  period of such  Tender  Offer;
                  multiplied  by (II) a fraction,  the numerator of which is the
                  total  number of Shares  delivered  from the Share  Investment
                  Accounts  of   Participants,   Former   Participants  and  the
                  Beneficiaries  of deceased Former  Participants in response to
                  such  Tender  Offer  pursuant  to  section  12.4(a),  and  the
                  denominator  of which is the total number of Shares  allocated
                  to the  Share  Investment  Accounts  of  Participants,  Former
                  Participants and Beneficiaries of deceased Former Participants
                  immediately  prior to the last day for  delivering  Shares  or
                  otherwise responding to such Tender Offer, shall be delivered;
                  and



<PAGE>

                                      -30-

                           (B) a number of Financed  Shares  equal to the excess
                  of (I) the total  number of Financed  Shares  allocated to the
                  Loan Repayment  Account on the last day for delivering  Shares
                  or otherwise  responding to such Tender  Offer;  over (II) the
                  number of Financed Shares to be delivered  pursuant to section
                  12.4(c)(ii)(A), shall be withheld from delivery.

         To the extent that the Financed  Shares  consist of more than one class
         of Shares,  this  section  12.4(c)  shall be applied  sepa  rately with
         respect to each class of Shares.



                                  ARTICLE XIII

                               PAYMENT OF BENEFITS


         SECTION 13.1 IN GENERAL.

         The balance credited to a Participant's or Former Participant's Account
under the Plan shall be paid only at the times, to the extent, in the manner and
to the persons provided in this Article XIII.


         SECTION 13.2 DESIGNATION OF BENEFICIARIES.

         (a) Subject to section 13.2(b),  any person entitled to a benefit under
the Plan may  designate  a  Beneficiary  to  receive  any  amount to which he is
entitled that remains  undistributed on the date of his death. Such person shall
designate his  Beneficiary  (and may change or revoke any such  designation)  in
writing  in the form and  manner  prescribed  by the  Plan  Administrator.  Such
designation,  and any change or revocation  thereof,  shall be effective only if
received by the Plan Administrator prior to such person's death and shall become
irrevocable upon such person's death.

         (b)  A  Participant  or  Former   Participant   who  is  married  shall
automatically  be  deemed to have  designated  his  spouse  as his  Beneficiary,
unless, prior to the time such designation would, under section 13.2(a),  become
irrevocable:

                  (i)  the  Participant  or  Former  Participant  designates  an
         additional or a different  Beneficiary in accordance  with this section
         13.2; and

                  (ii) (A) the spouse of such Participant or Former  Participant
         consents to such designation in a writing that  acknowledges the effect
         of such consent and is witnessed by a Plan  representative  or a notary
         public; or (B) the spouse of such Participant or Former Participant has
         previously consented to such designation by signing a written waiver of
         any right to  consent to any  designation  made by the  Participant  or
         Former  Participant,  and such  waiver  acknowledged  the effect of the
         waiver and was witnessed by a Plan  representative  or a notary public;
         or (C) it is established to the  satisfaction of a Plan  representative
         that the  consent  required  under  section  13.2(b)(ii)(A)  may not be
         obtained  because  such  spouse  cannot be  located or because of other
         circumstances  permitted under  regulations  issued by the Secretary of
         the Treasury.



<PAGE>

                                      -31-

         (c) In the event that a  Beneficiary  entitled  to  payments  hereunder
shall  die  after  the  death of the  person  who  designated  him but  prior to
receiving  payment  of his  entire  interest  in the  Account  of the person who
designated him, then such Beneficiary's  interest in the Account of such person,
or any unpaid balance thereof,  shall be paid as provided in section 13.3 to the
Beneficiary who has been designated by the deceased Beneficiary,  or if there is
none,  to  the  executor  or  administrator  of  the  estate  of  such  deceased
Beneficiary,  or if no such executor or  administrator  is appointed within such
time as the Plan Administrator,  in his sole discretion,  shall deem reasonable,
to such one or more of the spouse and  descendants  and blood  relatives of such
deceased  Beneficiary as the Plan Administrator may select. If a person entitled
to a benefit under the Plan and any of the Beneficiaries designated by him shall
die in such  circumstances  that there shall be substantial doubt as to which of
them shall have been the first to die, for all purposes of the Plan,  the person
who made the  Beneficiary  designation  shall be  deemed to have  survived  such
Beneficiary.

         (d) If no Beneficiary survives the person entitled to the benefit under
the Plan or if no Beneficiary has been  designated by such person,  such benefit
shall be paid to the executor or administrator of the estate of such person,  or
if no such executor or  administrator  is appointed within such time as the Plan
Administrator,  in his sole discretion,  shall deem  reasonable,  to such one or
more of the spouse and  descendants  and blood relatives of such deceased person
as the Plan Administrator may select.


         SECTION 13.3 DISTRIBUTIONS TO PARTICIPANTS AND FORMER PARTICIPANTS.

         (a)(i)  Subject  to the  provisions  of  section  13.5 with  respect to
required minimum distributions,  the vested portion of the balance credited to a
Participant's  or a Former  Participant's  Account shall be  distributed  to him
commencing as of the last  Valuation Date to occur in the Plan Year in which the
Participant or Former  Participant  terminates  employment  with the Employer or
attains age 65, whichever is later; unless the Participant or Former Participant
elects otherwise pursuant to section 13.3(a)(ii), and the payment, or first in a
series of  payments,  is  actually  made  within  three  months  following  such
Valuation Date.

                  (ii) A Participant or Former  Participant may, upon request on
         a form  provided  by the Plan  Administrator  and  filed  with the Plan
         Administrator  not  later  than 15 days  prior to the date on which his
         employment with the Employer terminates, elect that his vested interest
         in his Account be paid  commencing as of any earlier or later Valuation
         Date after his  termination of  employment,  but in no event later than
         the last  Valuation  Date to occur in the  calendar  year in which  the
         Participant or Former Participant attains age 70 1/2, in which case the
         payment,  or first in a series of payments,  shall be made within three
         months following such Valuation Date.

                  (b)(i) Subject to section  13.3(b)(ii),  the vested portion of
the balance credited to the Account of a Participant or Former  Participant will
be paid to him,  commencing as of the Valuation  Date  determined  under section
13.3(a), in substantially equal annual installments over a fixed period equal to
the greater of:

                           (A) five years; or

                           (B) if the vested portion of the balance  credited to
                  the  Account  of  the   Participant  or  Former   Participant,
                  determined as of the Valuation Date  determined  under section
                  13.3(a),  is greater than  $500,000 (or such larger  amount as
                  may be prescribed by the Secretary of the Treasury pursuant to
                  section  409(o) of the  Code),  the sum of five years plus the
                  lesser of (I) five  additional  years,  or (II) one additional
                  year for each  $100,000  (or  fraction  thereof)  by which the
                  vested portion of the balance


<PAGE>

                                      -32-

                  credited to the Participant's or Former Participant's  Account
                  exceeds  $500,000 (or such larger  amount as may be prescribed
                  by the Secretary of the Treasury pursuant to section 409(o) of
                  the Code).

                  (ii) A Participant or Former  Participant may, upon request on
         a form  provided  by the Plan  Administrator  and  filed  with the Plan
         Administrator  not  later  than 15 days  prior to the date on which his
         employment  terminates,  elect that the vested  portion of the  balance
         credited to his Account be paid,  commencing as of the  Valuation  Date
         determined under section 13.3(a):

                           (A) in substantially equal annual installments over a
                  fixed period not to exceed the lesser of (I) 10 years, or (II)
                  the life expectancy of the Participant or Former  Participant,
                  or, if his Beneficiary is a natural person, the joint life and
                  last  survivor   expectancy  of  the   Participant  or  Former
                  Participant and his Beneficiary; or

                           (B) subject to section 13.4, in a lump sum payment.

         (c) If any person  entitled to a benefit under the Plan dies before his
entire  benefit has been  distributed to him, then the remainder of such benefit
shall be paid to the Beneficiary designated by him under section 13.2 either:

                  (i) in a lump sum  distribution  as of the Valuation Date next
         following the date of his death,  and the amount thereof shall be based
         upon the vested  portion of the  balance  credited to his Account as of
         such Valuation Date; or

                  (ii) if,  prior  to the  death of the  Participant  or  Former
         Participant  whose  vested  Account is being  distributed,  an election
         pursuant to section  13.3(b)(ii)(B) is in effect for him, in a lump sum
         distribution  as of the Valuation Date specified in such election,  or,
         if earlier,  as of the latest  Valuation Date that would permit payment
         to be  made  within  five  years  after  the  Participant's  or  Former
         Participant's  death,  and the amount  thereof  shall be based upon the
         vested  portion  of the  balance  credited  to his  Account  as of such
         Valuation Date; or

                  (iii)  if,  prior to the  death of the  Participant  or Former
         Participant  whose  vested  Account is being  distributed,  an election
         pursuant to section 13.3(b)(ii)(A) is in effect for him:

                           (A) over the  period  and at the  times  set forth in
                  such  election,   if  distribution  has  begun  prior  to  the
                  Participant's or Former Participant's death; or

                           (B) commencing at the time set forth in such election
                  and over the period set forth in such  election  (or, if less,
                  over a period equal to the life  expectancy of the Beneficiary
                  of the deceased  Participant  or Former  Participant),  if the
                  deceased  Participant's or Former  Participant's spouse is his
                  Beneficiary  and  distribution  has  not  begun  prior  to the
                  deceased Participant's or Former Participant's death; or

                           (C) commencing on the date specified in such election
                  (or,  if  earlier,  the last  Valuation  Date that will permit
                  payment  to  begin   within   one  year  after  the   deceased
                  Participant's  or  Former  Participant's  death)  and over the
                  period set forth in such election (or, if less,  over a period
                  equal  to  the  life  expectancy  of  the  Beneficiary  of the
                  deceased Participant


<PAGE>

                                      -33-

                  or  Former  Participant),  if the  deceased  Participant's  or
                  Former  Participant's  Beneficiary  is a natural  person other
                  than his spouse and  distribution  has not begun  prior to the
                  deceased Participant's or Former Participant's death;

         and the amount  thereof  shall be based upon the vested  portion of the
         balance  credited to his Account as of the Valuation  Dates as of which
         payments are determined; or

                  (iv) upon written  application of the Beneficiary made in such
         form and manner as the Plan  Administrator  may  prescribe,  at another
         time or in  another  manner  permitted  under  section  13.3(a) or (b),
         subject to the following limitations:

                           (A)(I) If such  Beneficiary is a natural person other
                  than  the  spouse  of  the  deceased   Participant  or  Former
                  Participant  whose  vested  Account  is being  distributed,  a
                  distribution   that  commences  within  one  year  after  such
                  deceased  Participant's or Former Participant's death shall be
                  made  over a fixed  period  that  does  not  exceed  the  life
                  expectancy of such Beneficiary when distribution commences.

                                    (II) If such  Beneficiary  is the  spouse of
                           the deceased  Participant or Former Participant whose
                           vested Account is being  distributed,  a distribution
                           that  commences  no later  than the later of: (1) the
                           date on which  the  deceased  Participant  or  Former
                           Participant  would  have  attained  age 70 1/2 had he
                           lived;  or (2) the first  anniversary of the death of
                           such  deceased  Participant  or  Former  Participant;
                           shall  be made  over a fixed  period  that  does  not
                           exceed the life expectancy of such  Beneficiary  when
                           distribution commences.

                                    (III) In all other cases where the spouse of
                           the deceased  Participant or Former Participant whose
                           vested  Account  is  being  distributed  is  not  the
                           Beneficiary,  payment must be  completed  within five
                           years after the death of such deceased Participant or
                           Former Participant.

                           (B) In cases where  distribution  has commenced prior
                  to the death of the deceased Participant or Former Participant
                  whose vested Account is being  distributed,  distribution must
                  be completed as least as rapidly as under the method in effect
                  prior to such deceased  Participant's or Former  Participant's
                  death.


         SECTION 13.4 MANNER OF PAYMENT.

         (a) Subject to section 13.4(b), payments of distributions made pursuant
to section 13.3 or section 13.5 shall be paid,  in  accordance  with the written
direction of the person requesting the payment,  in whole Shares, in cash, or in
a combination of cash and whole Shares. Such written direction shall be given in
such  form  and  manner  as the Plan  Administrator  may  prescribe.  If no such
direction is given,  then payment  shall be made in the maximum  number of whole
Shares that may be acquired with the amount of the payment,  plus, if necessary,
an amount of money equal to any  remaining  amount of the  payment  that is less
than the Fair Market Value of a whole Share.

         (b) No  distribution of a lump sum payment shall be made in cash to the
extent  that the  making  of such  distribution,  when  combined  with all other
distributions to be made in cash as of the same Valuation Date, would


<PAGE>

                                      -34-

require the sale of Shares  constituting 1% or more of all  outstanding  Shares;
provided, however, that this section 13.4(b) shall not apply to or in respect of
a Participant or Former Participant:

                  (i)  following  such  Participant's  or  Former  Participant's
         termination  of  employment   with  the  Employer  on  account  of  his
         Retirement or Disability; or

                  (ii) following such Participant's or Former Participant's 65th
         birthday; or

                  (iii)  following  the  death  of such  Participant  or  Former
         Participant.


         SECTION 13.5 MINIMUM REQUIRED DISTRIBUTIONS.

         (a)  Required  minimum  distributions  of  a  Participant's  or  Former
Participant's Account shall commence no later than:

                  (i) if the Participant or Former  Participant  attained age 70
         1/2 prior to  January 1, 1988 and was not a Five  Percent  Owner at any
         time  during  the Plan  Year  ending in the  calendar  year in which he
         attained  age 70 1/2,  during any of the four  preceding  Plan Years or
         during any  subsequent  years,  the later of (A) the  calendar  year in
         which he attains or  attained  age 70 1/2 or (B) the  calendar  year in
         which he terminates employment with the Employer; or

                  (ii) if the Participant or Former Participant  attained age 70
         1/2 prior to January 1, 1988 and is or was a Five Percent  Owner at any
         time  during  the Plan  Year  ending in the  calendar  year in which he
         attained age 70 1/2, or during any of the four  preceding Plan Years or
         during any  subsequent  years,  the later of (A) the  calendar  year in
         which he attains age 70 1/2 or (B) the calendar  year in which he first
         becomes a Five Percent Owner; or

                  (iii) in all  other  cases,  the  calendar  year in which  the
         Participant or Former Participant attains age 70 1/2.

                  (b) The required minimum distributions contemplated by section
13.5(a) shall be made as follows:

                  (i) The  minimum  required  distribution  to be  made  for the
         calendar  year for which the first  minimum  distribution  is  required
         shall be no later than April 1st of the immediately  following calendar
         year and shall be equal to the  quotient  obtained by dividing  (A) the
         vested balance credited to the  Participant's  or Former  Participant's
         Account as of the last  Valuation  Date to occur in the  calendar  year
         immediately  preceding  the  calendar  year in which the first  minimum
         distribution is required (adjusted to account for any additions thereto
         or  subtractions  therefrom  after such Valuation Date but on or before
         December  31st of such  calendar  year);  by (B) the  Participant's  or
         Former  Participant's  life  expectancy  (or, if his  Beneficiary  is a
         natural person, the joint life and last survivor  expectancy of him and
         his Beneficiary); and

                  (ii) the  minimum  required  distribution  to be made for each
         calendar  year  following the calendar year for which the first minimum
         distribution  is required  shall be made no later than December 31st of
         the calendar year for which the  distribution  is required and shall be
         equal to the quotient


<PAGE>

                                      -35-

         obtained  by  dividing   (A)  the  vested   balance   credited  to  the
         Participant's or Former Participant's  Account as of the last Valuation
         Date to occur in the calendar year prior to the calendar year for which
         the  distribution  is required  (adjusted to account for any  additions
         thereto or  subtractions  therefrom after such Valuation Date but on or
         before  December  31st of such  calendar  year and,  in the case of the
         distribution for the calendar year  immediately  following the calendar
         year for which the first minimum  distribution is required,  reduced by
         any  distribution  for  the  prior  calendar  year  that is made in the
         current   calendar   year);   by  (B)  the   Participant's   or  Former
         Participant's  life  expectancy  (or, if his  Beneficiary  is a natural
         person,  the joint  life and last  survivor  expectancy  of him and his
         Beneficiary).

For purposes of this section  13.5,  the life  expectancy  of a  Participant  or
Former  Participant  (or the  joint  life  and  last  survivor  expectancy  of a
Participant  or  Former  Participant  and his  designated  Beneficiary)  for the
calendar year in which the Participant or Former Participant  attains age 70 1/2
shall be determined on the basis of Tables V and VI, as  applicable,  of section
1.72-9  of  the  Income  Tax  Regulations  as of  the  Participant's  or  Former
Participant's and  Beneficiary's  birthday in such year. Such life expectancy or
joint life and last survivor  expectancy for any subsequent  year shall be equal
to the  excess  of (1) the  life  expectancy  or joint  life  and last  survivor
expectancy for the year in which the Participant or Former  Participant  attains
age 70 1/2,  over (2) the  number of whole  years  that have  elapsed  since the
Participant or Former Participant attained age 70 1/2.

         (c) Payment of the  distributions  required to be made to a Participant
or Former  Participant  under this section 13.5 shall be made in accordance with
section 13.4.


         SECTION 13.6 DIRECT ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS.

         (a) A Distributee may elect,  at the time and in the manner  prescribed
by the Plan Administer, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible  Retirement  Plan specified by the Distributee in a
Direct Rollover.

         (b) The  following  rules shall apply with respect to Direct  Rollovers
made pursuant to this section 13.6:

                  (i) A Participant  may only elect to make a Direct Rollover of
         an  Eligible   Rollover   Distribution   if  such   Eligible   Rollover
         Distribution (when combined with other Eligible Rollover  Distributions
         made or to be made in the same calendar year) is reasonably expected to
         be at least $200;

                  (ii) If a Participant elects a Direct Rollover of a portion of
         an Eligible  Rollover  Distribution,  that  portion must be equal to at
         least $500; and

                  (iii)  A  Participant  may  not  divide  his or  her  Eligible
         Rollover Distribution into separate  distributions to be transferred to
         two or more Eligible Retirement Plans.

                  (c) For purposes of this section 13.6 and any other applicable
section  of the  Plan,  the  following  definitions  shall  have  the  following
meanings:

                  (i)  "Direct  Rollover"  means a  payment  by the  Plan to the
         Eligible Retirement Plan specified by the Distributee.


<PAGE>

                                      -36-

                  (ii)  "Distributee"  means an Employee or former Employee.  In
         addition,  the Employee's or former Employee's surviving spouse and the
         Employee's  spouse or former spouse who is the alternate  payee under a
         Qualified  Domestic  Relations Order are considered  Distributees  with
         regard to the interest of the spouse or former spouse.

                  (iii)   "Eligible   Retirement   Plan"  means  an   individual
         retirement  account  described  in  section  408(a)  of  the  Code,  an
         individual  retirement annuity described in section 408(b) or 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 current or former spouse who
         is the alternative payee under a Qualified  Domestic Relations Order or
         to a surviving  spouse,  an Eligible  Retirement  Plan is an individual
         retirement account or individual retirement annuity.

                  (iv) "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's  designated  Beneficiary,  or for a
         specified  period of ten (10) 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).


         SECTION 13.7 VALUATION OF SHARES UPON DISTRIBUTION TO A PARTICIPANT.

         Notwithstanding  any contrary  provision in this Article  XIII,  in the
event that all or a portion of a payment of a  distribution  to a Participant is
to be made in cash,  such  Participant  shall only be  entitled  to receive  the
proceeds of the Shares allocated to his Account that are sold in connection with
such distribution and which are valued as of the date of such sale.

         SECTION 13.8 PUT OPTIONS.

         (a)  Subject to section  13.8(c) and except as  provided  otherwise  in
section  13.8(b),  each  Participant  or Former  Participant  to whom Shares are
distributed under the Plan, each Beneficiary of a deceased Participant or Former
Participant,   including  the  estate  of  a  deceased   Participant  or  Former
Participant,  to whom Shares are distributed  under the Plan, and each person to
whom such a Participant,  Former  Participant  or Beneficiary  gives Shares that
have  been  distributed  under the Plan  shall  have the  right to  require  the
Employer to purchase from him all or any portion of such Shares.  A person shall
exercise such right by delivering to the Employer a written notice, in such form
and manner as the  Employer  may by  written  notice to such  person  prescribe,
setting forth the number of Shares to be purchased by the  Employer,  the number
of the stock certificate  evidencing such person's ownership of such Shares, and
the effective date of the purchase.  Such notice shall be given at least 30 days
in advance of the effective date of purchase, and the effective date of purchase
specified  therein  shall be, either within the 60 day period that begins on the
date on which the Shares to be purchased by the Employer were  distributed  from
the Plan or within  the 60 day period  that  begins on the first day of the Plan
Year immediately  following the Plan Year in which the Shares to be purchased by
the Employer are distributed from the Plan. As soon as practicable following its
receipt of such a notice, the Employer shall take such actions as are


<PAGE>

                                      -37-

necessary to purchase  the Shares  specified in such notice at a price per Share
equal to the Fair Market Value of a Share  determined as of the  Valuation  Date
coincident with or immediately preceding the effective date of the purchase.

         (b) The  Employer  shall have no  obligation  to purchase any Share (i)
pursuant  to a notice  that is not  timely  given,  or on an  effective  date of
purchase that is not within the periods  prescribed  in section  13.8(a) or (ii)
following  the  earliest  date  on  which  Shares  are  publicly  traded  on  an
established market.

         (c) This  section  13.8  shall  not  apply so long as the  Employer  is
prohibited by law from redeeming or purchasing its own securities


         SECTION 13.9 RIGHT OF FIRST REFUSAL.

         (a) Subject to section 13.9(d),  for any period during which Shares are
not publicly  traded in any established  market,  no person who owns Shares that
were  distributed  from the Plan,  other than a person to whom such  Shares were
sold in compliance with this section 13.9,  shall sell such Shares to any person
other  than the  Employer  without  first  offering  to sell such  Shares to the
Employer in accordance with this section 13.9.

         (b) In the event that a person to whom this section 13.9 applies  shall
receive and desire to accept from a person  other than the  Employer an offer to
purchase  Shares to which this section  13.9  applies,  he shall  furnish to the
Employer a written notice which shall:

                  (i) include a copy of such offer to purchase;

                  (ii) offer to sell to the Employer the Shares  subject to such
         offer to purchase at a price per Share that is equal to the greater of:

                           (A) the price per Share  specified  in such  offer to
                  purchase; or

                           (B)  the  Fair  Market  Value  of a  Share  as of the
                  Valuation Date  coincident  with or immediately  preceding the
                  date of such notice;

         and otherwise upon the same terms and conditions as those  specified in
         such offer to purchase; and

                  (iii)  include an  indication  of his intention to accept such
         offer to purchase if the Employer does not accept his offer to sell.

Such person shall refrain from  accepting such offer to purchase for a period of
fourteen days following the date on which such notice is given.

         (c) Subject to section  13.9(d),  the Employer  shall have the right to
purchase  the Shares  covered by the offer to sell  contained  in a notice given
pursuant  to section  13.9(b),  on the terms and  conditions  specified  in such
notice,  by written notice given to the party making the offer to sell not later
than the fourteenth day after the notice  described in section 13.9(b) is given.
If the Employer does not give such a notice during the  prescribed  fourteen day
period,  then the person  owning  such  Shares may accept the offer to  purchase
described in the notice.



<PAGE>

                                      -38-

         (d) This  section  13.9  shall  not  apply so long as the  Employer  is
prohibited by law from redeeming or purchasing its own securities



                                   ARTICLE XIV

                                 ADMINISTRATION


         SECTION 14.1 NAMED FIDUCIARIES.

         The term  "Named  Fiduciary"  shall mean (but only to the extent of the
responsibilities  of each of them) the Plan  Administrator,  the Committee,  the
Board and the  Trustee.  This  Article XIV is intended to allocate to each Named
Fiduciary the responsibility for the prudent execution of the functions assigned
to him or it,  and none of such  responsibil  ities or any other  responsibility
shall be shared by two or more of such  Named  Fiduciaries.  Whenever  one Named
Fiduciary is required by the Plan or Trust Agreement to follow the directions of
another Named Fiduciary,  the two Named  Fiduciaries shall not be deemed to have
been assigned a shared responsibility,  but the responsibility of the Named Fidu
ciary giving the  directions  shall be deemed his sole  responsibility,  and the
responsibility  of the Named Fiduciary  receiving those  directions  shall be to
follow  them  insofar  as such  instructions  are on  their  face  proper  under
applicable law.


         SECTION 14.2 PLAN ADMINISTRATOR.

         There  shall be a Plan  Administrator,  who shall be the  Senior  Human
Resources  Officer  of the  Employer,  or such  Employee  or  officer  as may be
designated by the Committee,  as hereinafter provided, and who shall, subject to
the responsibilities of the Committee and the Board, have the responsibility for
the day-to-day  control,  management,  operation and  administration of the Plan
(except  trust  duties).   The  Plan  Administrator  shall  have  the  following
responsibilities:

                  (a) To  maintain  records  necessary  or  appropriate  for the
         administration of the Plan;

                  (b)  To  give  and   receive   such   instructions,   notices,
         information,  materials,  reports and  certifications to the Trustee as
         may be necessary or appropriate in the administration of the Plan;

                  (c)  To  prescribe   forms  and  make  rules  and  regulations
         consistent with the terms of the Plan and with the  interpretations and
         other actions of the Committee;

                  (d) To require such proof of age or evidence of good health of
         an Employee, Participant or Former Participant or the spouse of either,
         or  of a  Beneficiary  as  may  be  necessary  or  appropriate  in  the
         administration of the Plan;

                  (e) To prepare and file,  distribute  or furnish all  reports,
         plan   descriptions,   and  other  information   concerning  the  Plan,
         including, without limitation,  filings with the Secretary of Labor and
         communications   with  Participants,   Former  Participants  and  other
         persons, as shall be required of the Plan Administrator under ERISA;


<PAGE>

                                      -39-

                  (f) To determine any question  arising in connection  with the
         Plan,  and the Plan Ad  ministrator's  decision  or action  in  respect
         thereof  shall be final and  conclusive  and binding upon the Employer,
         the Trustee, Participants,  Former Participants,  Beneficiaries and any
         other person having an interest under the Plan; provided, however, that
         any  question  relating to  inconsistency  or omission in the Plan,  or
         interpretation  of the provisions of the Plan, shall be referred to the
         Committee by the Plan  Administrator  and the decision of the Committee
         in respect thereof shall be final;

                  (g) Subject to the  provisions  of section 14.5, to review and
         dispose of claims under the Plan filed pursuant to section 14.4;

                  (h) If the Plan  Administrator  shall determine that by reason
         of  illness,  senility,  insanity,  or  for  any  other  reason,  it is
         undesirable to make any payment to a Participant,  Former  Participant,
         Beneficiary  or any  other  person  entitled  thereto,  to  direct  the
         application  of any  amount so  payable  to the use or  benefit of such
         person in any  manner  that he may deem  advisable  or to direct in his
         discretion  the  withholding  of any payment  under the Plan due to any
         person  under legal  disability  until a  representative  competent  to
         receive such payment in his behalf shall be appointed pursuant to law;

                  (i) To discharge  such other  responsibilities  or follow such
         directions  as may be assigned or given by the  Committee or the Board;
         and

                  (j) To perform any duty or take any action  which is allocated
         to the Plan Administrator under the Plan.

The  Plan  Administrator  shall  have  the  power  and  authority  necessary  or
appropriate to carry out his responsibilities. The Plan Administrator may resign
only by giving at least 30 days'  prior  written  notice of  resignation  to the
Committee, and such resignation shall be effective on the date specified in such
notice.


         SECTION 14.3 COMMITTEE RESPONSIBILITIES.

         The Committee shall, subject to the responsibilities of the Board, have
the following responsibilities:

                  (a) To review the performance of the Plan Administrator;

                  (b) To  hear  and  decide  appeals,  pursuant  to  the  claims
         procedure  contained  in  section  14.5 of the  Plan,  taken  from  the
         decisions of the Plan Administrator;

                  (c) To hear and decide questions,  including interpretation of
         the  Plan,   as  may  be  referred  to  the   Committee   by  the  Plan
         Administrator;

                  (d)  To  review  the  performance  of  the  Trustee  and  such
         investment  managers  as may be  appointed  in or pursuant to the Trust
         Agreement  in  investing,  managing and  controlling  the assets of the
         Plan;



<PAGE>

                                      -40-

                  (e) To the extent  required by ERISA,  to  establish a funding
         policy and method  consistent  with the  objectives of the Plan and the
         requirements  of ERISA,  and to review  such policy and method at least
         annually;

                  (f) To report and make  recommendations to the Board regarding
         changes in the Plan,  including changes in the operation and management
         of the  Plan  and  removal  and  replacement  of the  Trustee  and such
         investment  managers  as may be  appointed  in or pursuant to the Trust
         Agreement;

                  (g) To designate an Alternate Plan  Administrator  to serve in
         the event that the Plan Ad ministrator is absent or otherwise unable to
         discharge his responsibilities;

                  (h) To remove and replace the Plan Administrator or Alternate,
         or both of them, and to fill a vacancy in either office;

                  (i) To the extent provided under and subject to the provisions
         of the Trust Agreement,  to appoint "investment managers" as defined in
         section 3(38) of ERISA to manage and control  (including  acquiring and
         disposing of) all or any of the assets of the Plan;

                  (j) With the  prior  approval  of the  Board,  to  direct  the
         Trustee to obtain one or more Share Acquisition Loans;

                  (k) To develop and provide  procedures and forms  necessary to
         enable  Participants  to give  voting  and  tendering  directions  on a
         confidential basis;

                  (l) To discharge  such other  responsibilities  or follow such
         directions as may be assigned or given by the Board; and

                  (m) To perform any duty or take any action  which is allocated
         to the Committee under the Plan.

The Committee  shall have the power and authority  necessary or  appropriate  to
carry out its responsibilities.


         SECTION 14.4 CLAIMS PROCEDURE.

         Any claim  relating to benefits  under the Plan shall be filed with the
Plan Administrator on a form prescribed by him. If a claim is denied in whole or
in part, the Plan  Administrator  shall give the claimant written notice of such
denial, which notice shall specifically set forth:

                  (a) The reasons for the denial;

                  (b) The  pertinent  Plan  provisions  on which the  denial was
         based;

                  (c) Any additional  material or information  necessary for the
         claimant to perfect his claim and an  explanation  of why such material
         or information is needed; and



<PAGE>

                                      -41-

                  (d) An explanation  of the Plan's  procedure for review of the
         denial of the claim.

In the event  that the claim is not  granted  and notice of denial of a claim is
not  furnished  by the 30th day after such claim was filed,  the claim  shall be
deemed  to have  been  denied  on that day for the  purpose  of  permitting  the
claimant to request review of the claim.


         SECTION 14.5 CLAIMS REVIEW PROCEDURE.

         Any person  whose claim filed  pursuant to section 14.5 has been denied
in whole or in part by the Plan Administrator may request review of the claim by
the Committee,  upon a form prescribed by the Plan  Administrator.  The claimant
shall file such form  (including a statement of his position) with the Committee
no later than 60 days after the mailing or  delivery  of the  written  notice of
denial provided for in section 14.5, or, if such notice is not provided,  within
60 days after such claim is deemed denied pursuant to section 14.5. The claimant
shall be permitted to review pertinent  documents.  A decision shall be rendered
by the Committee and  communicated  to the claimant not later than 30 days after
receipt of the claimant's written request for review.  However, if the Committee
finds it necessary,  due to special circumstances (for example, the need to hold
a hearing),  to extend this period and so notifies the claimant in writing,  the
decision  shall be rendered as soon as  practicable,  but in no event later than
120 days after the claimant's request for review. The Committee's decision shall
be in writing and shall specifically set forth:

                  (a) The reasons for the decision; and

                  (b) The  pertinent  Plan  provisions  on which the decision is
         based.

Any such  decision of the  Committee  shall be binding upon the claimant and the
Employer,  and the Plan Administrator shall take appropriate action to carry out
such decision.


         SECTION 14.8 ALLOCATION OF FIDUCIARY RESPONSIBILITIES AND EMPLOYMENT OF
                      ADVISORS.

         Any Named Fiduciary may:

                  (a)  Allocate any of his or its  responsibilities  (other than
         trustee  responsibilities)  under  the  Plan to such  other  person  or
         persons as he or it may  designate,  provided that such  allocation and
         designation shall be in writing and filed with the Plan Administrator;

                  (b) Employ one or more  persons to render  advice to him or it
         with regard to any of his or its responsibilities under the Plan; and

                  (c) Consult with counsel, who may be counsel to the Employer.


         SECTION 14.9 OTHER ADMINISTRATIVE PROVISIONS.



<PAGE>

                                      -42-

         (a) Any  person  whose  claim has been  denied in whole or in part must
exhaust the administrative  review procedures  provided in section 14.5 prior to
initiating any claim for judicial review.

         (b) No bond or other  security  shall be  required  of a member  of the
Committee, the Plan Administrator, or any officer or Employee of the Employer to
whom fiduciary  responsibilities  are allocated by a Named Fiduciary,  except as
may be required by ERISA.

         (c)  Subject  to any  limitation  on the  application  of this  section
14.9(c) pursuant to ERISA,  neither the Plan Administrator,  nor a member of the
Committee,  nor any  officer  or  Employee  of the  Employer  to whom  fiduciary
responsibilities are allocated by a Named Fiduciary, shall be liable for any act
of omission or  commission by himself or by another  person,  except for his own
individual willful and intentional malfeasance.

         (d) The Plan Administrator or the Committee may, except with respect to
actions under section 14.5, shorten, extend or waive the time (but not beyond 60
days)  required  by the Plan for  filing  any notice or other form with the Plan
Administrator or the Committee, or taking any other action under the Plan.

         (e) The Plan  Administrator  or the Committee may direct that the costs
of  services  provided  pursuant  to section  14.6,  and such  other  reasonable
expenses as may be incurred in the administration of the Plan, shall be paid out
of the funds of the Plan unless the Employer shall pay them.

         (f)  Any  person,   group  of  persons,   committee,   corporation   or
organization  may serve in more than one fiduciary  capacity with respect to the
Plan.

         (g) Any action  taken or omitted by any  fiduciary  with respect to the
Plan, including any decision, interpretation,  claim denial or review on appeal,
shall be conclusive and binding on all  interested  parties and shall be subject
to judicial  modification  or reversal  only to the extent it is determined by a
court of competent  jurisdiction  that such action or omission was arbitrary and
capricious and contrary to the terms of the Plan.



                                   ARTICLE XV

                  AMENDMENT, TERMINATION AND TAX QUALIFICATION


         SECTION 15.1 AMENDMENT AND TERMINATION BY WAKE FOREST FEDERAL SAVINGS &
                      LOAN ASSOCIATION.

         The   Employer   expects  to  continue  the  Plan   indefinitely,   but
specifically  reserves  the  right,  in its sole  discretion,  at any  time,  by
appropriate  action of the Board,  to amend,  in whole or in part, any or all of
the provisions of the Plan and to terminate the Plan at any time. Subject to the
provisions of section 15.2, no such  amendment or  termination  shall permit any
part of the Trust Fund to be used for or diverted to purposes other than for the
exclusive benefit of Participants,  Former Participants,  Beneficiaries or other
persons entitled to benefits,  and no such amendment or termination shall reduce
the accrued benefit of any Participant, Former Participant, Beneficiary or other
person who may be entitled to benefits,  without his consent.  In the event of a
termination or partial termination of the Plan, or in the


<PAGE>

                                      -43-

event of a complete discontinuance of the Employer's  contributions to the Plan,
the Accounts of each affected person shall forthwith become  nonforfeitable  and
shall be payable in accordance with the provisions of Article XIII.


         SECTION 15.2 AMENDMENT OR TERMINATION OTHER THAN BY WAKE FOREST FEDERAL
                      SAVINGS & LOAN ASSOCIATION

         In the event that a  corporation  or trade or business  other than Wake
Forest  Federal  Savings  &  Loan  Association   shall  adopt  this  Plan,  such
corporation  or trade or business  shall,  by adopting  the Plan,  empower  Wake
Forest  Federal  Savings  & Loan  Association  to amend or  terminate  the Plan,
insofar as it shall cover  employees of such  corporation  or trade or business,
upon the terms and conditions set forth in section 15.1; provided, however, that
any such  corporation  or trade or  business  may,  by  action  of its  board of
directors or other  governing body,  amend or terminate the Plan,  insofar as it
shall cover  employees of such  corporation  or trade or business,  at different
times  and  in a  different  manner.  In the  event  of any  such  amendment  or
termination by action of the board of directors or other  governing body of such
a corporation or trade or business, a separate plan shall be deemed to have been
established for the employees of such corporation or trade or business,  and the
assets  of such plan  shall be  segregated  from the  assets of this Plan at the
earliest  practicable  date  and  shall  be dealt  with in  accordance  with the
documents governing such separate plan.


         SECTION 15.3 CONFORMITY TO INTERNAL REVENUE CODE.

         The Employer has established the Plan with the intent that the Plan and
Trust will at all times be  qualified  under  section  401(a)  and exempt  under
section 501(a) of the Code and with the intent that contributions under the Plan
will be allowed as  deductions  in computing  the net income of the Employer for
federal income tax purposes,  and the provisions of the Plan and Trust Agreement
shall be construed to effectuate such intentions.  Accordingly, notwith standing
anything to the contrary hereinbefore provided, the Plan and the Trust Agreement
may be  amended  at any  time  without  prior  notice  to  Participants,  Former
Participants,  Beneficiaries or any other persons entitled to benefits,  if such
amendment is deemed by the Board to be necessary or  appropriate  to  effectuate
such intent.


         SECTION 15.4 CONTINGENT NATURE OF CONTRIBUTIONS.

         (a) All  ESOP  Contributions  to the  Plan  are  conditioned  upon  the
issuance by the Internal  Revenue Service of a  determination  that the Plan and
Trust are qualified  under  section  401(a) of the Code and exempt under section
501(a) of the Code. If the Employer  applies to the Internal Revenue Service for
such a determination within 90 days after the date on which it files its federal
income tax return for its taxable  year that  includes  the last day of the Plan
Year in which the Plan is adopted,  and if the Internal Revenue Service issues a
determination  that the Plan and Trust are not so qualified or exempt,  all ESOP
Contributions  made by the  Employer  prior  to the  date of  receipt  of such a
determination may, at the election of the Employer,  be returned to the Employer
within one year after the date of such determination.

         (b) All ESOP Contributions and Loan Repayment Contributions to the Plan
are made upon the  condition  that such ESOP  Contributions  and Loan  Repayment
Contributions  will be allowed as a deduction in computing the net income of the
Employer for federal income tax purposes.  To the extent that any such deduction
is disallowed,  the amount  disallowed may, at the election of the Employer,  be
returned to the Employer within one year after the deduction is disallowed.



<PAGE>

                                      -44-

         (c) Any  contribution to the Plan made by the Employer as a result of a
mistake  of fact may,  at the  election  of the  Employer,  be  returned  to the
Employer within one year after such contribution is made.



                                   ARTICLE XVI

                     SPECIAL RULES FOR TOP HEAVY PLAN YEARS


         SECTION 16.1 IN GENERAL.

         As of the Determination Date for each Plan Year, the Plan Administrator
shall  determine  whether  the Plan is a Top Heavy Plan in  accordance  with the
provisions of this Article XVI. If, as of such Determination Date, the Plan is a
Top Heavy Plan, then the Plan Year immediately following such Determination Date
shall be a Top Heavy Plan Year and the special  provisions  of this  Article XVI
shall be in effect; provided, however, that if, as of the Determination Date for
the Plan Year in which the Effective Date occurs,  the Plan is a Top Heavy Plan,
such Plan Year  shall be a Top  Heavy  Plan  Year,  and the  provisions  of this
Article XVI shall be given retroactive effect for such Plan Year.


         SECTION 16.2 DEFINITION OF TOP HEAVY PLAN.

         (a) Subject to section 16.2(c),  the Plan is a Top Heavy Plan if, as of
a Determination  Date: (i) it is not a member of a Required  Aggregation  Group,
and  (ii)(A) the sum of the  Cumulative  Accrued  Benefits of all Key  Employees
exceeds 60% of (B) the sum of the Cumulative  Accrued  Benefits of all Employees
(excluding  former  Key  Employees),  former  Employees  (excluding  former  Key
Employees and other former Employees who have not performed any services for the
Employer or any Affiliated  Employer during the immediately  preceding five Plan
Years), and their Beneficiaries.

         (b) Subject to section 16.2(c),  the Plan is a Top Heavy Plan if, as of
a Determination Date: (i) the Plan is a member of a Required  Aggregation Group,
and  (ii)(A) the sum of the  Cumulative  Accrued  Benefits of all Key  Employees
under all plans that are members of the Required  Aggregation  Group exceeds 60%
of (B) the sum of the Cumulative  Accrued  Benefits of all Employees  (excluding
former Key  Employees),  former  Employees  (excluding  former Key Employees and
other former  Employees  who have not performed any services for the Employer or
any Affiliated  Employer during the immediately  preceding five Plan Years), and
their Beneficiaries under all plans that are members of the Required Aggregation
Group.

         (c) Notwithstanding sections 16.2(a) and 16.2(b), the Plan is not a Top
Heavy  Plan if,  as of a  Determination  Date:  (i) the  Plan is a  member  of a
Permissible  Aggregation  Group,  and (ii)(A) the sum of the Cumulative  Accrued
Benefits  of  all  Key  Employees  under  all  plans  that  are  members  of the
Permissible  Aggregation  Group  does  not  exceed  60%  of (B)  the  sum of the
Cumulative  Accrued Benefits of all Employees  (excluding former Key Employees),
former Employees  (excluding former Key Employees and other former Employees who
have not  performed  any services for the  Employer or any  Affiliated  Employer
during the immediately preceding five Plan Years), and their Beneficiaries under
all plans that are members of the Permissible Aggregation Group.




<PAGE>

                                      -45-

         SECTION 16.3 DETERMINATION DATE.

         The  Determination  Date for the Plan Year in which the Effective  Date
occurs shall be the last day of such Plan Year, and the  Determination  Date for
each Plan Year beginning  after the Plan Year in which the Effective Date occurs
shall be the last day of the preceding Plan Year. The Determination Date for any
other  qualified  plan  maintained  by the Employer for a plan year shall be the
last day of the preceding  plan year of each such plan,  except that in the case
of the first plan year of such plan, it shall be the last day of such first plan
year.


         SECTION 16.4 CUMULATIVE ACCRUED BENEFITS.

         (a) An individual's Cumulative Accrued Benefits under this Plan as of a
Determination Date are equal to the sum of:

                  (i) the balance  credited to such  individual's  Account under
         this  Plan  as  of  the  most  recent   Valuation  Date  preceding  the
         Determination Date;

                  (ii) the amount of any ESOP  Contributions  or Loan  Repayment
         Contributions  made  after  such  Valuation  Date but on or before  the
         Determination Date; and

                  (iii) the  amount of any  distributions  of such  individual's
         Cumulative  Accrued Benefits under the Plan during the five year period
         ending on the Determination Date.

For  purposes  of this  section  16.4(a),  the  computation  of an  individual's
Cumulative Accrued Benefits,  and the extent to which  distributions,  rollovers
and transfers are taken into  account,  will be made in accordance  with section
416 of the Code and the regulations thereunder.

         (b) For purposes of this Plan, the term "Cumulative  Accrued  Benefits"
with respect to any other  qualified  plan,  shall mean the  cumulative  accrued
benefits determined for purposes of section 416 of the Code under the provisions
of such plans.

         (c) For  purposes  of  determining  the top heavy  status of a Required
Aggregation  Group or a Permissible  Aggregation  Group, the Cumulative  Accrued
Benefits  under this Plan and the  Cumulative  Accrued  Benefits under any other
plan shall be determined as of the Determination Date that falls within the same
calendar year as the Determination  Dates for all other members of such Required
Aggregation Group or Permissible Aggregation Group.


         SECTION 16.5 KEY EMPLOYEES.

         (a) For purposes of the Plan,  the term Key Employee means any employee
or former employee of the Employer or any Affiliated Employer who is at any time
during the current Plan Year or was at any time during the immediately preceding
four Plan Years:

                  (i) a Five Percent Owner;



<PAGE>

                                      -46-

                  (ii) a person who would be  described  in section  1.23 if the
         number "1%" were  substituted  for the number "5%" in section  1.23 and
         who  has an  annual  Total  Compensation  from  the  Employer  and  any
         Affiliated Employer of more than $150,000;

                  (iii) an Officer of the  Employer or any  Affiliated  Employer
         who has an annual Total Compensation  greater than 50% of the amount in
         effect under section  415(b)(1)(A)  of the Code for any such Plan Year;
         or

                  (iv) one of the ten persons  owning the largest  interests  in
         the Employer and having an annual Total  Compensation from the Employer
         or any Affiliated Employer in excess of the dollar limitation in effect
         under section 415(c)(1)(A) of the Code for such Plan Year.

         (b) For purposes of section 16.5(a):

                  (i) for  purposes  of section  16.5(a)(iii),  in the event the
         Employer  or  any  Affiliated  Employer  has  more  officers  than  are
         considered Officers,  the term Key Employee shall mean those of ficers,
         up to the maximum number,  with the highest annual  compensation in any
         one of the five con  secutive  Plan Years  ending on the  Determination
         Date; and

                  (ii)  for  purposes  of  section  16.5(a)(iv),  if two or more
         persons  have equal  ownership  interests  in the  Employer,  each such
         person shall be considered as having a larger  ownership  interest than
         any such person with a lower annual  compensation  from the Employer or
         any Affiliated Employer.

         (c) For purposes of section 16.5(a):  (i) a person's  compensation from
Affiliated  Employers  shall  be  aggregated,  but his  ownership  interests  in
Affiliated  Employers  shall not be  aggregated;  (ii) an employee shall only be
deemed to be an officer if he has the power and  responsibility  of a person who
is an officer  within the meaning of section 416 of the Code; and (iii) the term
Key Employee shall also include the Beneficiary of a deceased Key Employee.


         SECTION 16.6 REQUIRED AGGREGATION GROUP.

         For purposes of this Article  XVI, a Required  Aggregation  Group shall
consist  of (a) this  Plan;  (b) any other  qualified  plans  maintained  by the
Employer and any  Affiliated  Employers  that cover Key  Employees;  and (c) any
other  qualified  plans that are  required  to be  aggregated  for  purposes  of
satisfying the requirements of sections 401(a)(4) or 410(b) of the Code.


         SECTION 16.7 PERMISSIBLE AGGREGATION GROUP.

         For purposes of this Article XVI, a Permissible Aggregation Group shall
consist of (a) the Required  Aggregation Group and (b) any other qualified plans
maintained by the Employer and any Affiliated Employers; provided, however, that
the  Permissible  Aggregation  Group must satisfy the  requirements  of sections
401(a)(4) and 410(b) of the Code.


         SECTION 16.8 SPECIAL REQUIREMENTS DURING TOP HEAVY PLAN YEARS.


<PAGE>

                                      -47-

         (a)  Notwithstanding  any other  provision of the Plan to the contrary,
for each Top Heavy Plan Year,  in the case of a  Participant  (other  than a Key
Employee)  on the  last  day of such  Top  Heavy  Plan  Year  who is not  also a
participant in another  qualified plan which satisfies the minimum  contribution
and  benefit  requirements  of  section  416 of the Code  with  respect  to such
Participant,  the sum of the ESOP Contributions and Loan Repayment Contributions
made with respect to such  Participant,  when  expressed as a percentage  of his
Total  Compensation  for such Top Heavy Plan Year,  shall not be less than 3% of
such Participant's  Total Compensation for such Top Heavy Plan Year or, if less,
the highest  combined rate,  expressed as a percentage of Total  Compensation at
which ESOP Contributions and Loan Repayment Contributions were made on behalf of
a Key  Employee  for such Top  Heavy  Plan  Year.  The  Employer  shall  make an
additional  contribution  to the  Account  of  each  Participant  to the  extent
necessary to satisfy the foregoing requirement.

         (b) For any Top Heavy Plan Year,  the number "1.0" shall be substituted
for the number "1.25" in sections 8.2(c)(iii) and 8.2(c)(iv), except that:

                  (i) this section 16.8(b) shall not apply to any individual for
         a Top Heavy  Plan  Year that is not a Super Top Heavy  Plan Year if the
         requirements  of section  16.8(a) would be satisfied for such Super Top
         Heavy Plan Year if the number "4%" were  substituted  for the number 3%
         in section 16.8(a); and

                  (ii) this section 16.8(b) shall not apply to an individual for
         a Top Heavy Plan Year if, during such Top Heavy Plan Year, there are no
         ESOP  Contributions or Loan Repayment  Contributions  allocated to such
         individual under this Plan, there are no contributions  under any other
         qualified  defined  contribution  plan maintained by the Employer,  and
         there are no accruals for such individual  under any qualified  defined
         benefit plan maintained by the Employer.

For purposes of this section 16.8(b), the term Super Top Heavy Plan Year means a
Top Heavy Plan Year in which the Plan would meet the  definitional  requirements
of sections  16.2(a) or 16.2(b) if the term "90%" were  substituted for the term
"60%" in sections 16.2(a), 16.2(b) and 16.2(c).



                                  ARTICLE XVII

                            MISCELLANEOUS PROVISIONS


         SECTION 17.1 GOVERNING LAW.

         The Plan shall be construed, administered and enforced according to the
laws of the State of North  Carolina  without  giving  effect to the conflict of
laws  principles  thereof,  except to the extent that such laws are preempted by
federal law.


         SECTION 17.2 NO RIGHT TO CONTINUED EMPLOYMENT.

         Neither the  establishment  of the Plan, nor any provisions of the Plan
or of the Trust Agreement establishing the Trust Fund nor any action of the Plan
Administrator, the Committee or the Trustee, shall be held or


<PAGE>

                                      -48-


construed to confer upon any Employee any right to a continuation  of employment
by the  Employer.  The  Employer  reserves  the right to dismiss any Employee or
otherwise  deal with any  Employee to the same extent as though the Plan had not
been adopted.


         SECTION 17.3 CONSTRUCTION OF LANGUAGE.

         Wherever  appropriate  in the Plan,  words used in the  singular may be
read in the plural,  words used in the plural may be read in the  singular,  and
words  importing  the masculine  gender may be read as referring  equally to the
feminine and the neuter.  Any  reference  to an Article or section  number shall
refer to an Article or section of the Plan, unless otherwise indicated.


         SECTION 17.4 HEADINGS.

         The  headings  of  Articles  and  sections  are  included   solely  for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.


         SECTION 17.5 MERGER WITH OTHER PLANS.

         The Plan shall not be merged or  consolidated  with,  nor  transfer its
assets or  liabilities  to,  any other  plan  unless  each  Participant,  Former
Participant,  Beneficiary and other person entitled to benefits,  would (if that
plan  then  terminated)   receive  a  benefit   immediately  after  the  merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive if the Plan had terminated  immediately before the
merger, consolidation or transfer.


         SECTION 17.6 NON-ALIENATION OF BENEFITS.

         (a)  Except as  provided  in  section  17.6(b),  the right to receive a
benefit  under the Plan  shall not be  subject  in any  manner to  anticipation,
alienation  or  assignment,  nor shall  such  right be liable  for or subject to
debts,  contracts,   liabilities  or  torts.  Should  any  Participant,   Former
Participant  or other  person  attempt  to  anticipate,  alienate  or assign his
interest  in or right to a benefit,  or should any person  claiming  against him
seek to subject such  interest or right to legal or equitable  process,  all the
interest or right of such  Participant  or Former  Participant  or other  person
entitled to benefits in the Plan shall cease, and in that event such interest or
right shall be held or applied, at the direction of the Plan Administrator,  for
or to the benefit of such Participant or Former Participant,  or other person or
his spouse,  children or other dependents in such manner and in such proportions
as the Plan Administrator may deem proper.

         (b) This section 17.6 shall not  prohibit the Plan  Administrator  from
recognizing  a Domestic  Relations  Order that is  determined  to be a Qualified
Domestic Relations Order in accordance with section 17.7.


         SECTION 17.7 PROCEDURES INVOLVING DOMESTIC RELATIONS ORDERS.



<PAGE>

                                      -49-


         Upon receiving a Domestic Relations Order, the Plan Administrator shall
segregate in a separate  account or in an escrow  account or separately  account
for the amounts payable to any person pursuant to such Domestic Relations Order,
pending a  determination  whether such Domestic  Relations  Order  constitutes a
Qualified  Domestic Relations Order, and shall give notice of the receipt of the
Domestic Relations Order to the Participant or Former Participant and each other
person  affected  thereby.  If,  within 18 months after receipt of such Domestic
Relations Order, the Plan  Administrator,  a court of competent  jurisdiction or
another  appropriate  authority  determines  that such Domestic  Relations Order
constitutes a Qualified Domestic  Relations Order, the Plan Administrator  shall
direct the Trustee to pay the segregated  amounts (plus any interest thereon) to
the person or persons  entitled thereto under the Qualified  Domestic  Relations
Order. If it is determined that the Domestic  Relations Order is not a Qualified
Domestic  Relations Order or if no  determination  is made within the prescribed
18-month  period,  the  segregated  amounts shall be  distributed  as though the
Domestic Relations Order had not been received, and any later determination that
such Domestic  Relations Order constitutes a Qualified  Domestic Relations Order
shall be applied only with respect to benefits that remain  undistributed on the
date of such  determination.  The  Plan  Administrator  shall be  authorized  to
establish such  reasonable  administrative  procedures as he deems  necessary or
appropriate  to  administer  this  section  17.7.  This  section  17.7  shall be
construed  and  administered  so as to comply with the  requirements  of section
401(a)(13) of the Code.


         SECTION 17.8 LEASED EMPLOYEES.

         (a) Subject to section  17.8(b),  a leased employee shall be treated as
an Employee for purposes of the Plan.  For  purposes of this section  17.8,  the
term  "leased  employee"  means  any  person  (i)  who  would  not,  but for the
application  of this  section  17.8,  be an Employee and (ii) who pursuant to an
agreement between the Employer and any other person ("leasing organization") has
performed for the Employer (or for the Employer 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,  services  of a type  historically
performed by employees in the business field of the Employer.

         (b) For purposes of the Plan:

                  (i)  contributions or benefits provided to the leased employee
         by  the  leasing   organization  which  are  attributable  to  services
         performed  for  the  Employer  shall  be  treated  as  provided  by the
         Employer; and

                  (ii) section 17.8(a) shall not apply to a leased employee if:

                           (A)  the  number  of  leased   employees   performing
                  services for the Employer does not exceed 20% of the number of
                  the  Employer's  Employees  who  are  not  Highly  Compensated
                  Employees; and

                           (B)  such  leased  employee  is  covered  by a  money
                  purchase   pension   plan   providing   (I)  a   nonintegrated
                  contribution  rate of at least  10% of the  leased  employee's
                  compensation;  (II)  immediate  participation;  (III) full and
                  immediate vesting;  and (IV) coverage for all of the employees
                  of the leasing organization (other than employees who per form
                  substantially   all  of  their   services   for  the   leasing
                  organization).




<PAGE>

                                      -50-

         SECTION 17.9 STATUS AS AN EMPLOYEE STOCK OWNERSHIP PLAN.

         It is intended that the Plan  constitute an "employee  stock  ownership
plan," as defined in section  4975(e)(7)  of the Code and section  407(d)(6)  of
ERISA.  The Plan shall be  construed  and  administered  to give  effect to such
intent.