Document:

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                                                                    EXHIBIT 10.1

                       FORM OF STOCK PURCHASE AGREEMENT

Cyberonics, Inc.
16511 Space Center Boulevard, Suite 600
Houston, Texas 77058

The undersigned (the "INVESTOR"), hereby confirms its agreement with you as
follows:

1. This Stock Purchase Agreement (the "AGREEMENT") is made as of the date set
forth below among Cyberonics, Inc., a Delaware corporation (the "COMPANY"), and
the Investor.

2. The Company has authorized the sale and issuance of up to 2,525,000 shares
(the "SHARES") of common stock of the Company, $.01 par value per share (the
"COMMON STOCK"), to certain investors in a private placement (the "OFFERING").

3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor _______ Shares at a
purchase price of $18.00 per Share, or an aggregate purchase price of
$____________________, pursuant to the Terms and Conditions for Purchase of
Shares attached hereto as Annex I and incorporated herein by this reference as
if fully set forth herein. Unless otherwise requested by the Investor in Exhibit
A, certificates representing the Shares purchased by the Investor will be
registered in the Investor's name and address as set forth below.

4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three years with
the Company or its affiliates, (b) neither it, nor any group of which it is a
member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any National Association of Securities
Dealers, Inc. ("NASD") member. Exceptions:

(If no exceptions, write "none." If left blank, response will be deemed to be
"none.")

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Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.

                                       DATED AS OF:  February 13, 2001

                                       "INVESTOR"

                                       By: ____________________________________
                                       Print Name: ____________________________
                                       Title: _________________________________
                                       Address: _______________________________

AGREED AND ACCEPTED:
CYBERONICS, INC.

By: ______________________________
Title: ___________________________

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                                                                    EXHIBIT 10.1

                                     ANNEX I

                   TERMS AND CONDITIONS FOR PURCHASE OF SHARES

         1. AGREEMENT TO SELL AND PURCHASE THE SHARES; SUBSCRIPTION DATE.

                  1.1 PURCHASE AND SALE. At the Closing (as defined in Section
2), the Company will sell to the Investor, and the Investor will purchase from
the Company, upon the terms and conditions hereinafter set forth, the number of
Shares set forth in paragraph 3 of the Stock Purchase Agreement to which these
Terms and Conditions for Purchase of Shares are attached as Annex I and at the
purchase price set forth in such paragraph.

                  1.2 OTHER INVESTORS. As part of the Offering, the Company
proposes to enter into this same form of Stock Purchase Agreement with certain
other investors (the "OTHER INVESTORS"), and the Company expects to complete
sales of Shares to them. (The Investor and the Other Investors are hereinafter
sometimes collectively referred to as the "INVESTORS," and this Agreement and
the Stock Purchase Agreements executed by the Other Investors are hereinafter
sometimes collectively referred to as the "AGREEMENTS.") The Company will accept
executed Agreements from Investors for the purchase of Shares commencing upon
the date on which the Company provides the Investors with the proposed purchase
price per Share and concluding upon the date (the "SUBSCRIPTION DATE") on which
the Company has notified U.S. Bancorp Piper Jaffray Inc. (in its capacity as
Placement Agent for the Shares, the "PLACEMENT AGENT") in writing that it is no
longer accepting Agreements for the purchase of Shares in the Offering.

                  1.3 PLACEMENT AGENT FEE. Investor acknowledges that the
Company intends to pay the Placement Agent a fee in respect of the sale of
Shares to the Investor.

         2. DELIVERY OF THE SHARES AT CLOSING. The completion of the purchase
and sale of the Shares (the "CLOSING") shall occur at a place and time, no later
than February 16, 2001 (the "CLOSING DATE"), to be specified by the Company and
the Placement Agent, and of which the Investors will be notified in advance by
the Placement Agent. At the Closing, the Company shall deliver to the Investor
one or more stock certificates representing the number of Shares set forth on
the signature page hereto, each such certificate to be registered in the name of
the Investor or, if so indicated on the Stock Certificate Questionnaire attached
hereto as Exhibit A, in the name of a nominee designated by the Investor
provided that, if requested by the Investor, stock certificates representing
such Shares shall be delivered in escrow to such Investor's agent prior to the
Closing, to be held until the completion of the Closing. In addition, on or
prior to the Closing Date, the Company shall cause counsel to the Company to
deliver to the Investors a legal opinion in the form attached hereto as Exhibit
D.

         The Company's obligation to issue and sell the Shares to the Investor
shall be subject to the following conditions, any one or more of which may be
waived by the Company: (a) receipt by the Company of the purchase price for the
Shares being purchased hereunder as set forth on the Signature Page hereto; (b)
completion of purchases and sales under the Agreements with the Other Investors;
and (c) the accuracy of the representations and warranties made by the Investors
and the fulfillment of those undertakings of the Investors to be fulfilled prior
to the Closing.

         The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) the Company's agreement to issue and sell, and the Investors'
agreement to purchase, on the Closing Date, not less than ___________
(_________) shares of Common Stock; (b) the delivery to the Investor by counsel
to the Company of a legal opinion in

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the form attached hereto as Exhibit D; (c) the representations and warranties of
the Company contained in Section 3 being true and correct on and as of such
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing; (d) the absence of any order,
writ, injunction, judgment or decree that questions the validity of the
Agreements or the right of the Company to enter into such Agreements or to
consummate the transactions contemplated hereby and thereby; and (e) the
delivery to the Investor by the Secretary or Assistant Secretary of the Company
of a certificate stating that the condition specified in part (c) of this
paragraph has been fulfilled

         3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. Except as
otherwise described in the Company's Annual Report on Form 10-K for the year
ended June 30, 2000 (and any amendments thereto filed prior to the date hereof),
the Company's Proxy Statement for its 2000 Annual Meeting of Stockholders, or
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
2000 or any of the Company's Current Reports on Form 8-K filed since July 1,
2000 (collectively, the "SEC REPORTS"), the Company hereby represents and
warrants to, and covenants with, the Investor as of the date hereof and the
Closing Date, as follows:

                  3.1 ORGANIZATION. Each of the Company and its Subsidiaries (as
defined in Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act")) is duly incorporated and validly existing in good standing
under the laws of the jurisdiction of its organization. Each of the Company and
its Subsidiaries has full power and authority to own, operate and occupy its
properties and to conduct its business as presently conducted and is registered
or qualified to do business and in good standing in each jurisdiction in which
it owns or leases property or transacts business and where the failure to be so
qualified would have a material adverse effect upon the Company and its
Subsidiaries taken as a whole, or the business, financial condition, properties,
operations or assets of the Company and its Subsidiaries, taken as a whole, or
the Company's ability to perform its obligations under the Agreements ("MATERIAL
ADVERSE EFFECT"), and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification, which proceeding is likely to result in a
Material Adverse Effect.

                  3.2 DUE AUTHORIZATION. The Company has all requisite power and
authority to execute, deliver and perform its obligations under the Agreements,
and the Agreements have been duly authorized and validly executed and delivered
by the Company and constitute legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except as rights
to indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

                  3.3 NON-CONTRAVENTION. The execution and delivery of the
Agreements, the issuance and sale of the Shares to be sold by the Company under
the Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not conflict with or
constitute a violation of, or default (with the passage of time or otherwise)
under, (i) any bond, debenture, note or other evidence of indebtedness, or any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
their respective properties are bound, where such conflict, violation or default
is reasonably expected to result in a Material Adverse Effect, (ii) the
certificate of incorporation, by-laws or other organizational documents of the
Company or any of its Subsidiaries, or (iii) any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority binding upon the Company or any of its Subsidiaries or their
respective properties, where such conflict, violation or default is likely to
result in a Material

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Adverse Effect. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body, administrative
agency, or other governmental body in the United States is required for the
execution and delivery of the Agreements by the Company and the valid issuance
of sale of the Shares by the Company pursuant to the Agreements, other than such
as have been made or obtained, and except for any filings required to be made
under federal or state securities laws.

                  3.4 CAPITALIZATION. The capitalization of the Company as of
September 30, 2000 is as described in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000. The Company has not issued any
capital stock since September 30, 2000 other than pursuant to (i) the exercise
of employee stock options under the stock option plans disclosed in the SEC
Reports, (ii) the exercise of rights under the Company's Employee Stock Purchase
Plan disclosed in the SEC Reports, (iii) the exercise of stock options granted
in the ordinary course of hiring employees and (iv) honorarium grants. The
Shares to be sold pursuant to the Agreements have been duly authorized, and when
issued and paid for in accordance with the terms of the Agreements, will be duly
and validly issued, fully paid and nonassessable. The outstanding shares of
capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable, have been issued in compliance with the registration
requirements of federal and state securities laws, and were not issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except for options issued under the Company's stock option
plans and rights under the Company's Employee Stock Purchase Plan, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company or any
of its Subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind, in either case to which the Company or any of its
Subsidiaries is a party and providing for the issuance or sale of any capital
stock of the Company or any of its Subsidiaries, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, no preemptive right, co-sale right, registration right,
right of first refusal or other similar right exists with respect to the
issuance and sale of the Shares, except as provided in the Agreements. There are
no stockholders agreements, voting agreements or other similar agreements with
respect to the Common Stock to which the Company is a party. The Company owns
the entire equity interest in its Subsidiaries, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest.

                  3.5 LEGAL PROCEEDINGS. There is no material legal or
governmental proceeding pending, or to the knowledge of the Company, threatened,
to which the Company or any of its Subsidiaries is a party or of which the
business or property of the Company or any of its Subsidiaries is subject.
Neither the Company nor any Subsidiary is a party to the provisions of any
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other government body which is material to the business
or operation of the Company and its Subsidiaries, taken as a whole.

                  3.6 NO VIOLATIONS. Neither the Company nor any of its
Subsidiaries is in violation of its certificate of incorporation, bylaws or
other organizational documents, or in violation of any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company or any of its Subsidiaries, which
violation, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect, nor is the Company or any of its Subsidiaries in
default (and there exists no condition which, with the passage of time or
otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound or by which the property of the Company or any of
its Subsidiaries is bound, which default is reasonably likely to have a Material
Adverse Effect.

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                  3.7 GOVERNMENTAL PERMITS, Etc. Each of the Company and its
Subsidiaries has all necessary franchises, licenses, certificates and other
authorizations from any foreign, federal, state or local government or
governmental agency, department or body that are currently necessary for the
operation of the business of the Company and its Subsidiaries as currently
conducted, except where the failure to currently possess such franchises,
licenses, certificates and other authorizations is not reasonably be expected to
have a Material Adverse Effect.

                  3.8 INTELLECTUAL PROPERTY.

                           (A) Except for matters which are not reasonably
likely to have a Material Adverse Effect, (i) each of the Company and its
Subsidiaries has ownership of, or a license or other legal right to use, all
patents, copyrights, trade secrets, trademarks, customer lists, designs,
manufacturing or other processes, computer software, systems, data compilation,
research results or other proprietary rights used in the business of the Company
or its Subsidiaries (collectively, "INTELLECTUAL PROPERTY") and (ii) all of the
Intellectual Property owned by the Company or its Subsidiaries consisting of
patents, registered trademarks and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights or the corresponding offices of
other jurisdictions and have been maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States
and/or such other jurisdictions.

                           (B) Except for matters which are not reasonably
likely to have a Material Adverse Effect, all material licenses or other
material agreements under which (i) the Company or any of its Subsidiaries
employs rights in Intellectual Property, or (ii) the Company or any of its
Subsidiaries has granted rights to others in Intellectual Property owned or
licensed by the Company or any of its Subsidiaries, are in full force and effect
and there is no default by the Company or any of its Subsidiaries thereto.

                           (C) The Company believes that it has taken all steps
reasonably required in accordance with sound business practice and business
judgment to establish and preserve the Company's ownership of all material
Intellectual Property owned by the Company or its Subsidiaries.

                           (D) Except for matters which are not reasonably
likely to have a Material Adverse Effect, to the knowledge of the Company, (i)
the present business, activities and products of the Company and its
Subsidiaries do not infringe any intellectual property of any other person; (ii)
neither the Company nor any of its Subsidiaries is making unauthorized use of
any confidential information or trade secrets of any person; and (iii) the
activities of any of the employees on behalf of the Company or any of its
Subsidiaries do not violate any agreements or arrangements related to
confidential information or trade secrets of persons other than the Company or
its Subsidiaries or restricting any such employee's engagement in business
activities of any nature.

                           (E) No proceedings are pending, or to the knowledge
of the Company, threatened, which challenge the rights of the Company or any of
its Subsidiaries in respect of the Company's or any of its Subsidiaries' right
to the use of the Intellectual Property, except for matters which are not
reasonably likely to have a Material Adverse Effect.

                  3.9 FINANCIAL STATEMENTS. The consolidated financial
statements of the Company and the related notes contained in the SEC Reports
present fairly, in accordance with generally accepted accounting principles, the
consolidated financial position of the Company and its Subsidiaries as of the
dates indicated, and the results of their operations, cash flows and the changes
in stockholders' equity for the periods therein specified, subject, in the case
of unaudited financial statements for interim periods, to

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normal year-end audit adjustments. Such consolidated financial statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified, except that unaudited financial statements may not
contain all footnotes required by generally accepted accounting principles.

                  3.10 NO MATERIAL ADVERSE CHANGE. Since September 30, 2000,
there has not been (i) a change that has had or is reasonably likely to have a
Material Adverse Effect, (ii) any obligation, direct or contingent, that is
material to the Company or any of its Subsidiaries considered as one enterprise,
incurred by the Company or any of its Subsidiaries, except obligations incurred
in the ordinary course of business, (iii) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or any of its
Subsidiaries, or (iv) any loss or damage (whether or not insured) to the
physical property of the Company or any of its Subsidiaries which has been
sustained which has a Material Adverse Effect.

                  3.11 NASDAQ COMPLIANCE. The Company's Common Stock is
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and is listed on the Nasdaq National Market (the
"NASDAQ STOCK MARKET"), and the Company has taken no action designed to, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq Stock Market. The issuance of the Shares does not require
shareholder approval, including, without limitation, pursuant to the Nasdaq
Marketplace Rules.

                  3.12 REPORTING STATUS. Except for the definitive proxy
statement for the Company's fiscal 2000 annual meeting of stockholders, the
Company has timely made all filings required under the Exchange Act during the
12 months preceding the date of this Agreement, and all of those documents
complied in all material respects with the SEC's requirements as of their
respective filing dates, and the information contained therein as of the
respective dates thereof did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances under which they were
made not misleading. The Company is currently eligible to register the resale of
Common Stock in a secondary offering on a registration statement on Form S-3
under the Securities Act.

                  3.13 NO MANIPULATION OF STOCK. The Company has not taken and
will not, in violation of applicable law, take any action outside the ordinary
course of business designed to or that might reasonably be expected to cause or
result in unlawful manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares.

                  3.14 ACCOUNTANTS. Arthur Andersen LLP, who expressed their
opinion with respect to the consolidated financial statements to be incorporated
by reference from the Company's Annual Report on Form 10-K for the year ended
June 30, 2000 into the Registration Statement (as defined below) and the
prospectus which forms a part thereof (the "Prospectus"), have advised the
Company that they are, and to the best knowledge of the Company they are,
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder (the "RULES AND REGULATIONS").

                  3.15 CONTRACTS. Except for matters which are not reasonably
likely to have a Material Adverse Effect, the contracts listed as exhibits to
the SEC Reports that are material to the Company, other than those contracts
that are substantially or fully performed or expired by their terms, are in full
force and effect on the date hereof, and none of the Company, its Subsidiaries
nor, to the Company's knowledge, any other party to such contracts is in breach
of or default under any of such contracts.

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                  3.16 TAXES. Except for matters which are not reasonably
expected to have a Material Adverse Effect, the Company has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of a
tax deficiency which has been asserted or threatened against the Company.

                  3.17 TRANSFER TAXES. On the Closing Date, all stock transfer
or other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares hereunder will be, or will
have been, fully paid or provided for by the Company and the Company will have
complied with all laws imposing such taxes.

                  3.18 INVESTMENT COMPANY. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for an investment company, within the meaning of the Investment Company Act of
1940, as amended.

                  3.19 INSURANCE. The Company and its Subsidiaries maintain
insurance of the types and in the amounts that the Company reasonably believes
is adequate for the their businesses, including, but not limited to, insurance
covering real and personal property owned or leased by the Company and its
Subsidiaries against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against by similarly situated companies, all of which
insurance is in full force and effect.

                  3.20 OFFERING MATERIALS. The Company has not in the past nor
will it hereafter take any action to sell, offer for sale or solicit offers to
buy any securities of the Company which would bring the offer or sale of the
Shares as contemplated by this Agreement within the provisions of Section 5 of
the Securities Act.

                  3.21 LISTING. The Company shall comply with all requirements
of the NASD with respect to the issuance of the Shares and the listing thereof
on the Nasdaq Stock Market.

                  3.22 RELATED PARTY TRANSACTIONS. No transaction has occurred
between or among the Company, any of the Subsidiaries and their affiliates,
officers or directors or any affiliate or affiliates of any such officer or
director that with the passage of time will be required to be disclosed pursuant
to Section 13, 14 or 15(d) of the Exchange Act.

                  3.23 BOOKS AND RECORDS. The books, records and accounts of the
Company and the Subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in, and dispositions of, the assets of, and the
operations of, the Company and the Subsidiaries. The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

         4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.

                  4.1 INVESTOR KNOWLEDGE AND STATUS. The Investor represents and
warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined in Regulation D under the Securities Act and
has requested, received, reviewed and considered all information it deemed
relevant in making an informed decision to purchase the Shares; (ii) the
Investor understands that the

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Shares are "restricted securities" and have not been registered under the
Securities Act and is acquiring the number of Shares set forth on the Signature
Page hereto in the ordinary course of its business and for its own account for
investment only, has no present intention of distributing any of such Shares and
has no arrangement or understanding with any other persons regarding the
distribution of such Shares (this representation and warranty not limiting the
Investor's right to sell Shares pursuant to the Registration Statement or
otherwise, or other than with respect to any claim arising out of a breach of
this representation and warranty, the Investor's right to indemnification under
Section 6.3); (iii) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (iv) the Investor has answered all
questions on the Signature Page hereto and the Investor Questionnaire attached
hereto as Exhibit B for use in preparation of the Registration Statement and the
answers thereto are true and correct as of the date hereof and will be true and
correct as of the Closing Date; (v) the Investor will notify the Company
immediately of any change in any of such information until such time as the
Investor has sold all of its Shares or until the Company is no longer required
to keep the Registration Statement effective; and (vi) the Investor has, in
connection with its decision to purchase the number of Shares set forth on the
signature page hereto, relied only upon the representations and warranties of
the Company contained herein. Investor understands that the issuance of the
Shares to the Investor has not been registered under the Securities Act, or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of the Investor's investment intent as expressed herein. The
Placement Agent is not authorized to make any representation or use any
information in connection with the placement, purchase and sale of the Shares,
and no person is authorized to provide any representation which is inconsistent
or in addition to those in the SEC Reports. The Investor acknowledges that it
has not received or relied on any such representations.

                  4.2 INTERNATIONAL ACTIONS. The Investor acknowledges,
represents and agrees that no action has been or will be taken in any
jurisdiction outside the United States by the Company or the Placement Agent
that would permit an offering of the Shares, or possession or distribution of
offering materials in connection with the issue of the Shares, in any
jurisdiction outside the United States. If the Investor is located outside the
United States, it has or will take all actions necessary for the sale of the
Shares to comply with all applicable laws and regulations in each foreign
jurisdiction in which it purchases, offers, sells or delivers Shares or has in
its possession or distributes any offering material, in all cases at its own
expense.

                  4.3 REGISTRATION REQUIRED. The Investor hereby covenants with
the Company not to make any sale of the Shares without complying with the
provisions of this Agreement, including Section 6.2 hereof, and without
effectively causing the prospectus delivery requirement under the Securities Act
to be satisfied (unless the Investor is selling such Shares in a transaction not
subject to the prospectus delivery requirement), and the Investor acknowledges
that the certificates evidencing the Shares will be imprinted with a legend that
prohibits their transfer except in accordance therewith. The Investor
acknowledges that as set forth in, and subject to the provisions of, Section
6.2, there may occasionally be times when the Company, based on the advice of
its counsel, determines that it must suspend the use of the Prospectus forming a
part of the Registration Statement until such time as an amendment to the
Registration Statement has been filed by the Company and declared effective by
the SEC or until the Company has amended or supplemented such Prospectus.

                  4.4 POWER AND AUTHORITY. The Investor further represents and
warrants to, and covenants with, the Company that (i) the Investor has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) this Agreement

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constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.

                  4.5 NO DISPOSITIONS. Except with the prior written consent of
the Company, the Investor will not, prior to the effectiveness of the
Registration Statement, or, if earlier, 60 days from the Closing Date, sell,
offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any
right with respect to (collectively, a "Disposition"), the Common Stock of the
Company, nor will Investor engage in any hedging or other transaction which is
designed to or could reasonably be expected to lead to or result in a
Disposition of Common Stock of the Company by the Investor or any other person
or entity. Such prohibited hedging or other transactions would include, without
limitation, effecting any short sale or having in effect any short position
(whether or not such sale or position is against the box and regardless of when
such position was entered into) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to the
Common Stock of the Company or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the Common Stock of the Company.

                  4.6 NO TAX OR LEGAL ADVICE. The Investor understands that
nothing in this Agreement, or any other materials presented to the Investor in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Shares.

         5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Shares being purchased and the
payment therefor.

         6. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.

                  6.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:

                           (A) subject to receipt of necessary information from
the Investors, prepare and file with the SEC, as soon as practicable, but in no
event later than five (5) business days after the Closing Date, a registration
statement on Form S-3 (the "Registration Statement") to enable the resale of the
Shares by the Investors from time to time through the automated quotation system
of the Nasdaq Stock Market or in privately-negotiated transactions;

                           (B) use its reasonable efforts, subject to receipt of
necessary information from the Investors, to cause the Registration Statement to
become effective as soon as practicable, but in no event later than sixty (60)
days after the Registration Statement is filed by the Company. If the
Registration Statement has not been declared effective by the SEC on or before
the date that is 90 days after the Closing Date, the Company shall, on the 91st
day after the Closing Date and each 45th day thereafter, issue to the Investor
 .01 additional shares of Common Stock (which shall be deemed to be Shares), up
to a maximum of .03 additional shares of Common Stock, for every Share purchased
in the Offering until the Registration Statement is declared effective by the
SEC (rounded up to the nearest Share after aggregating all Shares held by the
Investor);

                                       8
<PAGE>   11

                           (C) use its reasonable efforts to prepare and file
with the SEC such amendments and supplements to the Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement current and effective for a period not exceeding, with
respect to each Investor's Shares purchased hereunder, the earlier of (i) the
second anniversary of the Closing Date, (ii) the date on which the Investor may
sell all Shares then held by the Investor without restriction by the volume
limitations of Rule 144(e) of the Securities Act or (iii) such time as all
Shares purchased by such Investor in this Offering have been sold pursuant to a
registration statement;

                           (D) furnish to the Investor with respect to the
Shares registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses (including supplemental prospectuses) and
preliminary versions of the Prospectus filed with the Securities Exchange
Commission ("Preliminary Prospectuses") in conformity with the requirements of
the Securities Act and such other documents as the Investor may reasonably
request, in order to facilitate the public sale or other disposition of all or
any of the Shares by the Investor, provided, however, that unless waived by the
Company in writing, the obligation of the Company to deliver copies of
Prospectuses or Preliminary Prospectuses to the Investor shall be subject to the
receipt by the Company of reasonable assurances from the Investor that the
Investor will comply with the applicable provisions of the Securities Act and of
such other securities or blue sky laws as may be applicable in connection with
any use of such Prospectuses or Preliminary Prospectuses;

                           (E) file documents required of the Company for normal
blue sky clearance in states reasonably specified in writing by the Investor
prior to the effectiveness of the Registration Statement, provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;

                           (F) bear all expenses (other than underwriting
discounts and commissions, if any) in connection with the procedures in
paragraph (a) through (e) of this Section 6.1 and the registration of the Shares
pursuant to the Registration Statement; and

                           (G) advise the Investors, promptly after it shall
receive notice or obtain knowledge of the issuance of any stop order by the SEC
delaying or suspending the effectiveness of the Registration Statement or of the
initiation of any proceeding for that purpose; and it will promptly use its
commercially reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should
be issued.

         With a view to making available to the Investor the benefits of Rule
144 (or its successor rule) and any other rule or regulation of the SEC that may
at any time permit the Investor to sell Shares to the public without
registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) such date as all of the Investor's Shares may be resold
pursuant to Rule 144(k) or any other rule of similar effect or (B) such date as
all of the Investor's Shares shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and under the Exchange Act; and (iii) furnish to the Investor
upon request, as long as the Investor owns any Shares, (A) a written statement
by the Company that it has complied with the reporting requirements of the
Securities Act and the Exchange Act, (B) a copy of the Company's most recent
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other
information as may be reasonably requested in order to avail the Investor of any
rule or regulation of the SEC that permits the selling of any such Shares
without registration.

                                       9
<PAGE>   12

         It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 6.1 that the Investor shall furnish to
the Company such information regarding itself, the Shares to be sold by
Investor, and the intended method of disposition of such securities as shall be
required to effect the registration of the Shares.

         The Company understands that the Investor disclaims being an
underwriter, but the Investor being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has hereunder.

                  6.2 TRANSFER OF SHARES AFTER REGISTRATION; SUSPENSION.

                           (A) The Investor agrees that it will not effect any
Disposition of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act other than
transactions exempt from the registration requirements of the Securities Act,
except as contemplated in the Registration Statement referred to in Section 6.1
and as described below, and that it will promptly notify the Company of any
changes in the information set forth in the Registration Statement regarding the
Investor or its plan of distribution.

                           (B) Except in the event that paragraph (c) below
applies, the Company shall: (i) if deemed necessary by the Company, prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that, as thereafter delivered to purchasers of the Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) provide the Investor copies of any documents
filed pursuant to Section 6.2(b)(i); and (iii) upon request, inform each
Investor who so requests that the Company has complied with its obligations in
Section 6.2(b)(i) (or that, if the Company has filed a post-effective amendment
to the Registration Statement which has not yet been declared effective, the
Company will notify the Investor to that effect, will use its reasonable efforts
to secure the effectiveness of such post-effective amendment as promptly as
possible and will promptly notify the Investor pursuant to Section 6.2(b)(i)
hereof when the amendment has become effective).

                           (C) Subject to paragraph (d) below, in the event: (i)
of any request by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to a Registration Statement or related Prospectus or for
additional information; (ii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Shares for sale in any jurisdiction or the initiation of any proceeding for such
purpose; or (iv) of any event or circumstance which necessitates the making of
any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company shall
promptly deliver a certificate in writing to the Investor (the "SUSPENSION
NOTICE") to the effect of the

                                       10
<PAGE>   13

foregoing and, upon receipt of such Suspension Notice, the Investor will refrain
from selling any Shares pursuant to the Registration Statement (a "SUSPENSION")
until the Investor's receipt of copies of a supplemented or amended Prospectus
prepared and filed by the Company, or until it is advised in writing by the
Company that the current Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in any such Prospectus. In the event of any Suspension, the Company
will use its reasonable efforts to cause the use of the Prospectus so suspended
to be resumed as soon as reasonably practicable within 30 days after delivery of
a Suspension Notice to the Investors. In addition to and without limiting any
other remedies (including, without limitation, at law or at equity) available to
the Investor, the Investor shall be entitled to specific performance in the
event that the Company fails to comply with the provisions of this Section
6.2(c).

                           (D) Notwithstanding the foregoing paragraphs of this
Section 6.2, the Company shall use its reasonable efforts to ensure that the
Investor shall not be prohibited from selling Shares under the Registration
Statement as a result of Suspensions on more than two occasions of not more than
30 days each in any twelve month period, and that no Suspension is separated by
a period of less than thirty (30) days from a prior Suspension. If a Suspension
is in effect for more than 90 days (consecutive or non-consecutive) in any
twelve-month period, the Company shall, on the 91st day of the Suspension and
each 45th day thereafter, issue to the Investor .01 shares of Common Stock
(which shall be deemed to be Shares), up to a maximum of .03 additional shares
of Common Stock, for every Share purchased in the Offering until the Suspension
is lifted.

                           (E) Provided that a Suspension is not then in effect
the Investor may sell Shares under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such Shares.
Upon receipt of a request therefor, the Company will provide an adequate number
of current Prospectuses to the Investor and to any other parties requiring such
Prospectuses.

                           (F) In the event of a sale of Shares by the Investor,
unless such requirement is waived by the Company in writing, the Investor must
also deliver to the Company's transfer agent, with a copy to the Company, a
Certificate of Subsequent Sale substantially in the form attached hereto as
Exhibit C, so that the shares may be properly transferred.

         6.3 Indemnification. For the purpose of this Section 6.3:

                           (A) the term "SELLING STOCKHOLDER" shall include the
Investor and each person, if any, who controls the Investor within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act;

                           (B) the term "REGISTRATION STATEMENT" shall include
any final Prospectus, exhibit, supplement or amendment included in or relating
to, and any document incorporated by reference in, the Registration Statement
(or deemed to be a part thereof) referred to in Section 6.1; and

                           (C) the term "UNTRUE STATEMENT" shall include any
untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

                                    (I) The Company agrees to indemnify and hold
harmless each Selling Stockholder from and against any losses, claims, damages
or liabilities to which such Selling Stockholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) any untrue statement of a material fact contained in the
Registration Statement, (ii) any inaccuracy in the

                                       11
<PAGE>   14

representations and warranties of the Company contained in the Agreement or the
failure of the Company to perform its obligations hereunder or (iii) any failure
by the Company to fulfill any undertaking included in the Registration
Statement, and the Company will reimburse such Selling Stockholder for any
reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim, provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Selling Stockholder specifically for use in preparation of the Registration
Statement or the failure of such Selling Stockholder to comply with its
covenants and agreements contained in Sections 4.1, 4.2, 4.3 or 6.2 hereof or
any statement or omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Investor prior to the pertinent sale or
sales by the Investor.

                                    (II) The Investor agrees to indemnify and
hold harmless the Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any failure to comply with the covenants and agreements
contained in Section 4.1, 4.2, 4.3 or 6.2 hereof, or (ii) any untrue statement
of a material fact contained in the Registration Statement if such untrue
statement was made in reliance upon and in conformity with written information
furnished by or on behalf of the Investor specifically for use in preparation of
the Registration Statement, and the Investor will reimburse the Company (or such
officer, director or controlling person), as the case may be, for any legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim. The obligation to indemnify shall
be limited to the net amount of the proceeds received by the Investor from the
sale of the Shares pursuant to the Registration Statement.

                                    (III) Promptly after receipt by any
indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 6.3, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, but the omission to so notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party under this Section
6.3 (except to the extent that such omission materially and adversely affects
the indemnifying party's ability to defend such action) or from any liability
otherwise than under this Section 6.3. Subject to the provisions hereinafter
stated, in case any such action shall be brought against an indemnified person,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, shall
be entitled to assume the defense thereof, with counsel reasonably satisfactory
to such indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof (unless it has
failed to assume the defense thereof and appoint counsel reasonably satisfactory
to the indemnified party), such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the reasonable opinion of counsel to the indemnified person,
for the same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the indemnified
person shall be entitled to retain its own counsel at the expense of such
indemnifying person; provided, however, that no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable

                                       12
<PAGE>   15

in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld. No indemnifying person
shall, without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could reasonably have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person from all
liability on claims that are the subject matter of such proceeding.

                                    (IV) If the indemnification provided for in
this Section 6.3 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Investor on the other in connection with the statements or omissions or other
matters which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, in the case of an untrue statement, whether the untrue statement
relates to information supplied by the Company on the one hand or the Investor
on the other and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement. The Company and the
Investor agree that it would not be just and equitable if contribution pursuant
to this subsection (d) were determined by pro rata allocation (even if the
Investors were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), the Investor
shall not be required to contribute any amount in excess of the amount by which
the gross amount received by the Investor from the sale of the Shares to which
such loss relates exceeds the amount of any damages which the Investor has
otherwise been required to pay by reason of such untrue statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

                                    (V) The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 6.3, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 6.3 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Securities
Act and the Exchange Act.

         6.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions precedent
imposed by Section 4 or this Section 6 upon the transferability of the Shares
shall cease and terminate as to any particular number of the Shares when such
Shares shall have been effectively registered under the Securities Act and sold
or otherwise disposed of in accordance with the intended method of disposition
set forth in the Registration Statement covering such Shares or at such time as
an opinion of counsel satisfactory to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.

                                       13
<PAGE>   16

         6.5 INFORMATION AVAILABLE. So long as the Registration Statement is
effective covering the resale of Shares owned by the Investor, the Company will
furnish (or to the extent such information is available electronically through
the Company's filings with the SEC, the Company will make available) to the
Investor:

                           (A) as soon as practicable after it is available, one
copy of (i) its Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants) and (ii) if not
included in substance in the Annual Report to Stockholders, its Annual Report on
Form 10-K (the foregoing, in each case, excluding exhibits);

                           (B) upon the reasonable request of the Investor, all
exhibits excluded by the parenthetical to subparagraph (a)(ii) of this Section
6.5 as filed with the SEC and all other information that is made available to
stockholders; and

                           (C) upon the reasonable request of the Investor, an
adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses; and the Company, upon the reasonable request of the
Investor, will meet with the Investor or a representative thereof at the
Company's headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Shares and will otherwise reasonably
cooperate with the Investor conducting an investigation for the purpose of
reducing or eliminating the Investor's exposure to liability under the
Securities Act, including the reasonable production of information at the
Company's headquarters; provided, that the Company shall not be required to
disclose any confidential information to or meet at its headquarters with the
Investor until and unless the Investor shall have entered into a confidentiality
agreement in form and substance reasonably satisfactory to the Company with the
Company with respect thereto.

                  6.6 PUBLIC STATEMENTS. The Company will not issue any public
statement, press release or any other public disclosure listing Investor as one
of the purchasers of the Shares without Investor's prior written consent, except
as may be required by applicable law or rules of any exchange on which the
Company's securities are listed.

         7. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within domestic United
States by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express (or comparable
service) or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, three business days after so mailed, (ii)
if delivered by nationally recognized overnight carrier, one (1) business day
after so mailed, (iii) if delivered by International Federal Express (or
comparable service), two (2) business days after so mailed, (iv) if delivered by
facsimile, upon electric confirmation of receipt and shall be delivered as
addressed as follows:

                           (a) if to the Company, to:

                                    Cyberonics, Inc.
                                    16511 Space Center Boulevard, Suite 600
                                    Houston, TX 77058
                                    Attn: Pamela Westbrook
                                    Phone: (281) 228-7200
                                    Telecopy: (281) 332-3615

                                       14
<PAGE>   17

                                    with a copy mailed to:

                                    Vinson & Elkins
                                    2300 First City Tower
                                    1001 Fannin
                                    Houston, TX  77002
                                    Attn:  David Oelman
                                    Phone:  (713) 758-3708
                                    Telecopy:  (713) 615-5861

                           (B) if to the Investor, at its address on the
Signature Page hereto, or at such other address or addresses as may have been
furnished to the Company in writing.

         8. CHANGES. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investor.

         9. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.

         10. SEVERABILITY. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

         11. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Texas, without giving
effect to the principles of conflicts of law.

         12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.

         13. CONFIDENTIAL DISCLOSURE AGREEMENT. Notwithstanding any provision of
this Agreement to the contrary, any confidential disclosure agreement previously
executed by the Company and the Investor in connection with the transactions
contemplated by this Agreement shall remain in full force and effect in
accordance with its terms following the execution of this Agreement and the
consummation of the transactions contemplated hereby.

                                       15<PAGE>   1
                                                                    EXHIBIT 10.1

                            THE MEN'S WEARHOUSE, INC.
                               401(k) SAVINGS PLAN

                            AMENDMENT AND RESTATEMENT
                            EFFECTIVE JANUARY 1, 1998

<PAGE>   2

                  THE MEN'S WEARHOUSE, INC. 401(k) SAVINGS PLAN

         THIS AGREEMENT adopted by The Men's Wearhouse, Inc., a Texas
corporation (the "Sponsor"),

                                   WITNESSETH:

         WHEREAS, effective February 1, 1978, the Sponsor established The Men's
Wearhouse, Inc. 401(k) Savings Plan (the "Plan").

         WHEREAS, the K&G Men's Center 401(k) Savings Plan was merged into the
Plan effective August 1, 2000;

         WHEREAS, the Sponsor desires to amend and restate the Plan;

         NOW, THEREFORE, the Plan is hereby amended and restated in its entirety
as set forth below.

<PAGE>   3

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                            SECTION

<S>                                                                                                         <C>
ARTICLE I - DEFINITIONS

         Account.............................................................................................1.01
         Active Service......................................................................................1.02
         Affiliated Employer.................................................................................1.03
         Annual Compensation.................................................................................1.04
         Annuity Starting Date...............................................................................1.05
         Beneficiary or Beneficiaries........................................................................1.06
         Board...............................................................................................1.07
         Code................................................................................................1.08
         Committee...........................................................................................1.09
         Considered Compensation.............................................................................1.10
         Contribution........................................................................................1.11
         Direct Rollover.....................................................................................1.12
         Distributee.........................................................................................1.13
         Eligible Retirement Plan............................................................................1.14
         Eligible Rollover Distribution......................................................................1.15
         Employee............................................................................................1.16
         Employer or Employers...............................................................................1.17
         Entry Date..........................................................................................1.18
         ERISA...............................................................................................1.19
         Five Percent Owner..................................................................................1.20
         Former K&G Plan Participant.........................................................................1.21
         Highly Compensated Employee.........................................................................1.22
         Hour of Service.....................................................................................1.23
         K&G Plan............................................................................................1.24
         Leased Employee.....................................................................................1.25
         Matched Salary Deferral Contribution................................................................1.26
         Member..............................................................................................1.27
         Non-Highly Compensated Employee.....................................................................1.28
         Period of Service...................................................................................1.29
         Period of Severance.................................................................................1.30
         Plan................................................................................................1.31
         Plan Year...........................................................................................1.32
         Qualified Domestic Relations Order..................................................................1.33
         QJSA................................................................................................1.34
         QPSA................................................................................................1.35
         Regulation..........................................................................................1.36
         Required Beginning Date.............................................................................1.37
         Retirement Age......................................................................................1.38
         Rollover Contribution...............................................................................1.39
         Separation From Service.............................................................................1.40
</TABLE>

                                      -i-
<PAGE>   4
<TABLE>
<S>                                                                                                          <C>
         Service.............................................................................................1.41
         Severs Service......................................................................................1.42
         Sponsor.............................................................................................1.43
         Sponsor Stock.......................................................................................1.44
         Spouse..............................................................................................1.45
         Trust...............................................................................................1.46
         Trustee.............................................................................................1.47
         Valuation Date......................................................................................1.48

ARTICLE II - ELIGIBILITY

         Eligibility Requirements............................................................................2.01
         Early Participation for Rollover Purposes...........................................................2.02
         Eligibility Upon Reemployment.......................................................................2.03
         Cessation of Participation..........................................................................2.04
         Recommencement of Participation.....................................................................2.05

ARTICLE III - CONTRIBUTIONS

         Salary Deferral Contributions.......................................................................3.01
         Matching Contributions..............................................................................3.02
         Supplemental Contributions..........................................................................3.03
         Rollover Contributions and Plan-to-Plan Transfers...................................................3.04
         QNECS - Extraordinary Employer Contributions........................................................3.05
         Nondeductible Contributions Not Required............................................................3.06
         Form of Payment of Contributions....................................................................3.07
         Deadline for Payment of Employer Contributions......................................................3.08
         Return of Contributions for Mistake,
               Disqualification or Disallowance of Deduction.................................................3.09

ARTICLE IV - ALLOCATION AND VALUATION OF ACCOUNTS

         Information Statements from Employer................................................................4.01
         Allocation of Salary Deferral Contribution..........................................................4.02
         Allocation of Matching Contribution.................................................................4.03
         Allocation of Supplemental Contribution.............................................................4.04
         Allocation of QNEC..................................................................................4.05
         Valuation of Accounts...............................................................................4.06
         No Rights Unless Otherwise Prescribed...............................................................4.07

ARTICLE V - BENEFITS

         Retirement Benefit..................................................................................5.01
         Death Benefit.......................................................................................5.02
         Distribution Methods Available......................................................................5.03
         Election of Distribution Method.....................................................................5.04
         Qualified Joint and Survivor Annuity Requirements
               for Former K&G Plan Participants..............................................................5.05
</TABLE>

                                      -ii-
<PAGE>   5
<TABLE>
<S>                                                                                                          <C>
         Qualified Preretirement Survivor Annuity Requirements
               for Former K&G Plan Participants..............................................................5.06
         Lump Sum Payment of Small Amounts Upon Separation From Service......................................5.07
         Form of Payment.....................................................................................5.08
         Direct Rollover Option..............................................................................5.09
         Time of Distributions...............................................................................5.10
         Consent to Distributions Upon Separation From Service...............................................5.11
         Information Provided to Members.....................................................................5.12
         Designation of Beneficiary..........................................................................5.13
         Distributions to Disabled Persons...................................................................5.14
         Distributions Pursuant to Qualified Domestic Relations Orders.......................................5.15
         Claims Procedure....................................................................................5.16

ARTICLE VI - IN-SERVICE DISTRIBUTIONS AND LOANS

         In-Service Financial Hardship Distributions.........................................................6.01
         In-Service Age 59 1/2 Distributions.................................................................6.02
         In-Service Withdrawal of Rollover Contributions.....................................................6.03
         Loans...............................................................................................6.04

ARTICLE VII - ACTIVE SERVICE

         When Active Service Begins..........................................................................7.01
         Aggregation of Service..............................................................................7.02
         Period of Service of Less Than One Year.............................................................7.03
         Periods of Severance Due to Child Birth or Adoption.................................................7.04
         Transfers...........................................................................................7.05
         Employment Records Conclusive.......................................................................7.06
         Service Credit Required under Federal Law...........................................................7.07

ARTICLE VIII - INVESTMENT ELECTIONS

         Investment Funds Established........................................................................8.01
         Election Procedures Established.....................................................................8.02

ARTICLE IX - VOTING OF SPONSOR STOCK AND TENDER OFFERS

         Voting of Sponsor Stock ............................................................................9.01
         Tender Offers ......................................................................................9.02
         Shares Credited.....................................................................................9.03
         Conversion .........................................................................................9.04
         Named Fiduciary.....................................................................................9.05

ARTICLE X - ADOPTION OF PLAN BY OTHER EMPLOYERS

         Adoption Procedure.................................................................................10.01
         No Joint Venture Implied...........................................................................10.02
         All Trust Assets Available to Pay All Benefits.....................................................10.03
         Qualification a Condition Precedent to Adoption and Continued Participation........................10.04
</TABLE>

                                      -iii-

<PAGE>   6
<TABLE>
<S>                                                                                                         <C>
ARTICLE XI- AMENDMENT AND TERMINATION

         Right to Amend and Limitations Thereon.............................................................11.01
         Mandatory Amendments...............................................................................11.02
         Withdrawal of Employer.............................................................................11.03
         Termination of Plan................................................................................11.04
         Partial or Complete Termination or Complete Discontinuance of Contributions........................11.05

ARTICLE XII- MISCELLANEOUS

         Plan Not an Employment Contract....................................................................12.01
         Benefits Provided Solely From Trust................................................................12.02
         Assignments Prohibited.............................................................................12.03
         Requirements Upon Merger or Consolidation of Plans.................................................12.04
         Merger of K&G Plan.................................................................................12.05
         Forfeiture by Lost Members or Beneficiaries........................................................12.06
         Gender of Words Used...............................................................................12.07
         Severability.......................................................................................12.08
         Reemployed Veterans................................................................................12.09
         Governing Law......................................................................................12.10

         APPENDIX A - LIMITATIONS ON CONTRIBUTIONS

         APPENDIX B - TOP-HEAVY REQUIREMENTS

         APPENDIX C - ADMINISTRATION OF THE PLAN

         APPENDIX D - FUNDING
</TABLE>

                                      -iv-
<PAGE>   7

                                    ARTICLE I

                                   DEFINITIONS

         The words and phrases defined in this Article shall have the meaning
set out in the definition unless the context in which the word or phrase appears
reasonably requires a broader, narrower or different meaning.

         1.01 "ACCOUNT" means all ledger accounts pertaining to a Member which
are maintained by the Committee to reflect the Member's interest in the Trust.
The Committee shall establish the following Accounts and any additional Accounts
that the Committee considers necessary to reflect the entire interest of the
Member in the Trust. Each of the Accounts listed below and any additional
Accounts established by the Committee shall reflect the Contributions or amounts
transferred to the Trust, if any, and the appreciation or depreciation of the
assets in the Trust and the income earned or loss incurred on the assets in the
Trust attributable to the Contributions and/or other amounts transferred to the
Account.

                  (a) Salary Deferral Contribution Account - the Member's
         before-tax contributions.

                  (b) Matching Contribution Account - the Employer's matching
         contributions, if any, made pursuant to Section 3.02.

                  (c) Supplemental Contribution Account - the Employer's
         contributions, if any, made pursuant to Section 3.03.

                  (d) QNEC Account - the Employer's contributions, known as
         "qualified nonelective employer contributions", made as a means of
         passing the actual deferral percentage test of section 401(k) of the
         Code or the actual contribution percentage test of section 401(m) of
         the Code.

                  (e) Rollover Account - funds transferred from another
         qualified plan or individual retirement account for the benefit of a
         Member.

         1.02 "ACTIVE SERVICE" means the Periods of Service which are counted
for eligibility purposes as calculated under Article VII.

         1.03 "AFFILIATED EMPLOYER" means the Employer and any employer which is
a member of the same controlled group of corporations within the meaning of
section 414(b) of the Code or which is a trade or business (whether or not
incorporated) which is under common control (within the meaning of section
414(c) of the Code), which is a member of an affiliated service group (within
the meaning of section 414(m) of the Code) with the Employer, or which is
required to be aggregated with the Employer under section 414(o) of the Code.
For purposes of the limitation on allocations contained in Appendix A, the
definition of Affiliated Employer is modified by substituting the phrase "more
than 50 percent" in place of the phrase "at least 80 percent" each place the
latter phrase appears in section 1563(a)(1) of the Code.

                                      I-1
<PAGE>   8

         1.04 "ANNUAL COMPENSATION" means the Employee's wages from the
Affiliated Employers as defined in section 3401(a) of the Code for purposes of
federal income tax withholding at the source (but determined without regard to
any rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed) modified by including
elective contributions under a cafeteria plan described in section 125 of the
Code and elective contributions to any plan qualified under section 401(k),
408(k), or 403(b) of the Code. Except for purposes of Section A.4.1 of Appendix
A of the Plan, Annual Compensation in excess of $150,000.00 (as adjusted by the
Secretary of Treasury) shall be disregarded. If the Plan Year is ever less than
twelve months, the $150,000.00 limitation (as adjusted by the Secretary of
Treasury) will be prorated by multiplying the limitation by a fraction, the
numerator of which is the number of months in the Plan Year, and the denominator
of which is 12.

         1.05 "ANNUITY STARTING DATE" means the first day of the first period
for which an amount is payable as an annuity, or in the case of a benefit
payable in the form of a lump sum, the date on which the Trustee disburses the
lump sum.

         1.06 "BENEFICIARY" OR "BENEFICIARIES" means the person or persons, or
the trust or trusts created for the benefit of a natural person or persons or
the Member's or former Member's estate, designated by the Member or former
Member to receive the benefits payable under the Plan upon his death.

         1.07 "BOARD" means the board of directors of the Sponsor.

         1.08 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.

         1.09 "COMMITTEE" means the committee appointed by the Sponsor to
administer the Plan.

         1.10 "CONSIDERED COMPENSATION" means as to each Employee, that
Employee's Annual Compensation modified by excluding the following items (even
if includable in gross income): awards, tax gross-up payments, reimbursements or
other expense allowances (such as the payment of moving expenses or automobile
mileage reimbursements), cash and noncash fringe benefits (such as the use of an
automobile owned by the Employer and club memberships), deferred compensation
(such as stock options and pay for accrued vacation upon Separation From
Service), compensation under a plan meeting the requirements of Section 423 of
the Code, and welfare benefits (such as severance pay). However, effective March
25, 2000, for purposes of determining the amount of Salary Deferral
Contributions the Employer shall make with respect to Members who receive
salaried remuneration, "Considered Compensation" shall not include bonuses.
Considered Compensation in excess of $150,000.00 (as adjusted by the Secretary
of Treasury) shall be disregarded. If the Plan Year is ever less than twelve
months, the $150,000.00 limitation (as adjusted by the Secretary of Treasury)
will be prorated by multiplying the limitation by a fraction, the numerator of
which is the number of months in the Plan Year, and the denominator of which is
12.

                                      I-2
<PAGE>   9

         1.11 "CONTRIBUTION" means the total amount of contributions made under
the terms of the Plan. Each specific type of Contribution shall be designated by
the type of contribution made as follows:

                  (a) Salary Deferral Contribution - a contribution made by the
         Employer pursuant to the Employee's salary deferral agreement.

                  (b) Matching Contribution - a contribution made by the
         Employer pursuant to Section 3.02.

                  (c) Supplemental Contribution - a contribution made by the
         Employer pursuant to Section 3.03.

                  (d) QNEC - an extraordinary contribution, known as a
         "qualified nonelective employer contribution", made by the Employer as
         a means of passing the actual deferral percentage test of section
         401(k) of the Code or the actual contribution percentage test of
         section 401(m) of the Code.

                  (e) Rollover Contribution - a contribution made by a Member
         which consists of any part of an eligible rollover distribution (as
         defined in section 402 of the Code) from a qualified employee trust
         described in section 401(a) of the Code.

         1.12 "DIRECT ROLLOVER" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.

         1.13 "DISTRIBUTEE" means an Employee or former Employee. In addition,
the Employee's or former Employee's surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the alternate payee under a
Qualified Domestic Relations Order, are Distributees with regard to the interest
of the Spouse or former Spouse.

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

         1.15 "ELIGIBLE ROLLOVER DISTRIBUTION" as defined in section 402 of the
Code 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: (a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's Beneficiary, or for a specified period
of ten years or more; (b) any distribution to the extent the distribution is
required under section 401(a)(9) of the Code; (c) the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities); and, effective for distributions after December 31, 1998, (d) any
financial hardship distribution described in section 401(k)(2) of the Code from
a Member's Salary Deferral Contribution Account or from

                                      I-3
<PAGE>   10

the Member's QNEC Account (to the extent that QNECs were treated as Section
401(k) Contributions under Appendix A).

         1.16 "EMPLOYEE" means, except as otherwise specified in this Section,
all common law employees of an Affiliated Employer and all Leased Employees.

         1.17 "EMPLOYER" OR "EMPLOYERS" means the Sponsor, K&G Men's Center,
Inc., a Delaware corporation, K&G Men's Company Inc., a Delaware corporation,
TMW Purchasing LLC, a Delaware limited liability company, TMW Marketing Company,
Inc., a California corporation, The Men's Wearhouse of Texas LP, a Delaware
limited partnership, TMW Merchants LLC, a Delaware limited liability company,
The Men's Wearhouse of Michigan, Inc., a Delaware corporation, and TMW Finance
LP, a Delaware limited partnership, and any other business organization that
adopts the Plan.

         1.18 "ENTRY DATE" means the first day of each calendar quarter, January
1, April 1, July 1, and October 1. Effective August 1, 2000, "Entry Date" means
the first day of any month.

         1.19 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.

         1.20 "FIVE PERCENT OWNER" means an Employee who is a five percent owner
as defined in section 416(i) of the Code.

         1.21 "FORMER K&G PLAN PARTICIPANT" means a Member whose account balance
under the K&G Plan was transferred to the Plan.

         1.22 "HIGHLY COMPENSATED EMPLOYEE" means an Employee of an Affiliated
Employer who, during the Plan Year or the preceding Plan Year, (a) was at any
time a Five Percent Owner at any time during the Plan Year or the preceding Plan
Year or (b) had Annual Compensation from the Affiliated Employers in excess of
$80,000.00 (as adjusted from time to time by the Secretary of the Treasury) for
the preceding Plan Year.

         1.23 "HOUR OF SERVICE" means each hour that an Employee is paid or
entitled to payment by an Affiliated Employer for the performance of duties.

         1.24 "K&G PLAN" means the K&G Men's Center 401(k) Plan.

         1.25 "LEASED EMPLOYEE" means any person who (a) is not a common law
employee of an Affiliated Employer, (b) pursuant to an agreement between an
Affiliated Employer and any other person, has performed services for an
Affiliated Employer (or for an Affiliated 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 and (c) performs the services
under primary direction and control of the recipient.

         1.26 "MATCHED SALARY DEFERRAL CONTRIBUTION" means that portion of the
Salary Deferral Contribution that the Board determines to match from time to
time in its sole discretion.

                                      I-4
<PAGE>   11

         1.27 "MEMBER" means the person or persons employed by an Employer
during the Plan Year and eligible to participate in the Plan.

         1.28 "NON-HIGHLY COMPENSATED EMPLOYEE" means an Employee who is not a
Highly Compensated Employee.

         1.29 "PERIOD OF SERVICE" means a period of employment with an
Affiliated Employer which commences on the day on which an Employee performs his
initial Hour of Service or performs his initial Hour of Service upon returning
to the employ of an Affiliated Employer, whichever is applicable, and ends on
the date the Employee Severs Service.

         1.30 "PERIOD OF SEVERANCE" means the period of time commencing on the
date an Employee Severs Service and ending on the date the Employee again
performs an Hour of Service.

         1.31 "PLAN" means The Men's Wearhouse, Inc. 401(k) Savings Plan, as
amended from time to time.

         1.32 "PLAN YEAR" means the calendar year.

         1.33 "QUALIFIED DOMESTIC RELATIONS ORDER" means a qualified domestic
relations order as defined in section 414(p) of the Code.

         1.34 "QJSA" means a qualified joint and survivor annuity which is
purchased with the Member's or former Member's Account balance as of the date of
distribution to provide equal monthly payments for the life of the Member or
former Member, and after his death, monthly payments for the life of his
surviving Spouse in a monthly amount equal to one-half the amount of the monthly
payment made while he was alive.

         1.35 "QPSA" means a qualified preretirement survivor annuity which is
purchased with the Member's Account balance as of the date of distribution that
will provide equal monthly payments for the life of his surviving Spouse.

         1.36 "REGULATION" means the Department of Treasury regulation
specified, as it may be changed from time to time.

         1.37 "REQUIRED BEGINNING DATE" means:

                  (a) effective January 1, 2001, in the case of an individual
         who is not a Five Percent Owner in the Plan Year that ends in the
         calendar year in which he attains age 70 1/2, the Required Beginning
         Date is April 1 of the calendar year following the later of (i) the
         calendar year in which the individual attains age 70 1/2, or (ii) the
         calendar year in which the individual incurs a Separation From Service;
         and

                  (b) in the case of an individual who is a Five Percent Owner
         in the Plan Year that ends in the calendar year in which he attains age
         70 1/2, the Required Beginning Date is April 1 of the calendar year
         following the year in which he attains age 70 1/2.

                                      I-5
<PAGE>   12

         1.38 "RETIREMENT AGE" means age 59 1/2.

         1.39 "ROLLOVER CONTRIBUTION" means the amount contributed by a Member
of the Plan which consists of any part of an Eligible Rollover Distribution from
a qualified employee trust described in section 401(a) of the Code.

         1.40 "SEPARATION FROM SERVICE" means an individual's termination of
employment with an Affiliated Employer without commencing or continuing
employment with (a) any other Affiliated Employer or (b) any other entity under
circumstances where, under Regulations and Internal Revenue Service rulings, the
individual is not deemed to have incurred a Separation From Service within the
meaning of section 401(k)(2) of the Code.

         1.41 "SERVICE" means the period or periods that a person is paid or is
entitled to payment for performance of duties with an Affiliated Employer.

         1.42 "SEVERS SERVICE" means the earlier of the following events: (a)
the Employee's quitting, retiring, dying or being discharged, (b) the completion
of a period of 365 continuous days in which the Employee remains absent from
Service (with or without pay) for any reason other than quitting, retiring,
dying or being discharged, such as vacation, holiday, sickness, disability,
leave of absence, layoff or any other absence or (c) the second anniversary of
the commencement of a continuous period of absence occasioned by the reason of
the pregnancy of the Employee, the birth of a child of the Employee, the
placement of a child with the Employee in connection with the adoption of the
child by the Employee or the caring for the child for a period commencing
immediately after the child's birth or placement.

         1.43 "SPONSOR" means The Men's Wearhouse, Inc., a Texas corporation.

         1.44 "SPONSOR STOCK" means the common stock of The Men's Wearhouse,
Inc., a Texas corporation, the Sponsor.

         1.45 "SPOUSE" means the person to whom the Member or former Member is
married under applicable local law. In addition, to the extent provided in a
Qualified Domestic Relations Order, a surviving former spouse of a Member or
former Member will be treated as the Spouse of the Member or former Member, and
to the same extent any current spouse of the Member or former Member will not be
treated as a Spouse of the Member or former Member.

         1.46 "TRUST" means the trust estate created to fund the Plan.

         1.47 "TRUSTEE" means collectively one or more persons or corporations
with trust powers which have been appointed by the initial Sponsor and have
accepted the duties of Trustee and any successor appointed by the Sponsor.

         1.48 "VALUATION DATE" means each business day of the Plan Year.

                                      I-6
<PAGE>   13

                                   ARTICLE II

                                   ELIGIBILITY

         2.01 ELIGIBILITY REQUIREMENTS. Each Employee who is employed by an
Employer shall be eligible to participate in the Plan beginning on the Entry
Date that occurs with or next follows the date on which the Employee completes
three months of Active Service. However, an Employee who is included in a unit
of Employees covered by a collective bargaining agreement between the Employees'
representative and the Employer shall be excluded, even if he has met the
requirements for eligibility, if there has been good faith bargaining between
the Employer and the Employees' representative pertaining to retirement benefits
and the agreement does not require the Employer to include such Employees in the
Plan. In addition, a Leased Employee shall not be eligible to participate in the
Plan unless the Plan's qualified status is dependent upon coverage of the Leased
Employee. An Employee who is a nonresident alien (within the meaning of section
7701(b) of the Code) and receives no earned income (within the meaning of
section 911(d)(2) of the Code) from any Affiliated Employer that constitutes
income from sources within the United States (within the meaning of section
861(a)(3) of the Code) is not eligible to participate in the Plan. During any
period in which an individual is classified by an Employer as an independent
contractor with respect to such Employer, the individual is not eligible to
participate in the Plan (even if he is subsequently reclassified by the Internal
Revenue Service as a common law employee of the Employer and the Employer
acquiesces to the reclassification). An Employee who is a nonresident alien
(within the meaning of section 7701(b) of the Code) and who does receive earned
income (within the meaning of section 911(d)(2) of the Code) from any Affiliated
Employer that constitutes income from sources within the United States (within
the meaning of section 861(a)(3) of the Code) all of which is exempt from United
States income tax under an applicable tax convention is not eligible to
participate in the Plan. An Employee who is expatriated to the United States
from another country is not eligible to participate in the Plan for so long as
he continues to accrue deferred compensation or retirement benefits under any
agreement or program to which an Affiliated Employer other than an Employer is a
party. Finally, an Employee who is employed outside the United States is not
eligible to participate in the Plan unless the Committee elects to permit him to
participate in the Plan.

         2.02 EARLY PARTICIPATION FOR ROLLOVER PURPOSES. An Employee who
satisfies the eligibility requirements specified in Section 2.01 other than the
service requirement shall be eligible to make Rollover Contributions to the Plan
on the Entry Date next following (not coincident with) the date on which he
completes an Hour of Service.

         2.03 ELIGIBILITY UPON REEMPLOYMENT. If an Employee incurs a Separation
From Service with the Employer prior to the date he initially begins
participating in the Plan, he shall be eligible to begin participation in the
Plan on the later of the date he would have become a Member if he did not incur
a Separation From Service or the date on which he performs an Hour of Service
after he incurs a Separation from Service. Subject to Section 2.04, once an
Employee becomes a Member, his eligibility to participate in the Plan shall
continue until he Severs Service.

                                      II-1
<PAGE>   14

         2.04 CESSATION OF PARTICIPATION. An individual who has become a Member
will cease to be a Member on the earliest of the date on which he (a) Severs
Service, (b) is transferred from the employ of an Employer to the employ of an
Affiliated Employer that has not adopted the Plan, (c) becomes included in a
unit of employees covered by a collective bargaining agreement that does not
require coverage of those employees under the Plan, (d) becomes a Leased
Employee, or (e) becomes included in another classification of Employees who,
under the terms of the Plan, are not eligible to participate. Under these
circumstances, the Member's Account becomes frozen; he cannot contribute to the
Plan or share in the allocation of any Contributions for the frozen period.
However, his Accounts shall continue to share in any Plan income allocable to
his Accounts during the frozen period of time.

         2.05 RECOMMENCEMENT OF PARTICIPATION. A former Member will again become
a Member on the day on which he again becomes included in a classification of
Employees that, under the terms of the Plan, is eligible to participate.

                                      II-2

<PAGE>   15

                                   ARTICLE III

                                  CONTRIBUTIONS

         3.01 SALARY DEFERRAL CONTRIBUTIONS. The Employer shall make a Salary
Deferral Contribution in an amount equal to the amount by which its Members'
Considered Compensation was reduced as a result of salary deferral agreements.
Any such salary deferral agreement shall be an agreement in a form satisfactory
to the Committee to prospectively receive Considered Compensation from the
Employer in a reduced amount and to have the Employer contribute an amount equal
to the amount of the reduction to the Trust on account of the Member. A Member's
right to benefits derived from Salary Deferral Contributions made to the Plan on
his behalf shall be nonforfeitable. Any such salary deferral agreement shall be
revocable in accordance with its terms, provided that no revocation shall be
retroactive or permit payment to the Member of the amount required to be
contributed to the Trust. A Member shall be entitled to prospectively modify his
salary deferral agreement at least once a year. A Member shall be entitled to
revoke, on a prospective basis, his salary deferral agreement at any time. A
Member who revokes his salary reduction agreement may file a new salary
reduction agreement with an effective date no earlier than the first day of the
next Plan Year. A Member may increase or may decrease, on a prospective basis,
his salary reduction percentage or dollar amount as of the first day of each
calendar quarter.

         Effective August 1, 2000, the following rules shall apply with respect
to a Member's salary deferral election: (a) a Member's election to reduce his
Considered Compensation may not exceed 25 percent of his Considered
Compensation; (b) a Member who revokes his salary reduction agreement may file a
new salary reduction agreement with an effective date as of the first day of any
month subsequent to the month in which he revoked the agreement; and (c) a
Member may increase or may decrease, on a prospective basis, his salary
reduction percentage or dollar amount as of the first day of each month.

         Effective January 1, 2001, the maximum amount a Member may elect to
reduce his Considered Compensation under his salary deferral agreement shall be
determined by the Committee, in its sole discretion from time to time. In
addition, the election to have Salary Deferral Contributions made, the ability
to change the rate of Salary Deferral Contributions, the right to suspend Salary
Deferral Contributions, and the manner of commencing new Salary Deferral
Contributions shall be permitted under any uniform method determined by the
Committee from time to time.

         3.02 MATCHING CONTRIBUTIONS. Each Employer will make a Matching
Contribution to be allocated to its Employees who are Members in an amount equal
to five percent of the first $2,000.00 of each such Member's Salary Deferral
Contribution for the Plan Year. Effective as of March 1, 1999, with respect to
Considered Compensation deferred on or after such date, each Employer will make
a Matching Contribution to be allocated to its Employees who are Members in an
amount equal to eight percent of the first $2,000.00 of each such Member's
Salary Deferral Contribution for the Plan Year. Effective as of March 1, 2000,
with respect to Considered Compensation deferred on or after such date, each
Employer will make a Matching Contribution to be allocated to its Employees who
are Members in an amount equal to ten percent of the first $2,000.00 of each
such Member's Salary Deferral Contribution for the Plan Year. Effective

                                     III-1

<PAGE>   16

January 1, 2001, each Employer shall make a Matching Contribution in such
amount, and for such period, if any, as shall be determined by the Board. A
Member's right to benefits derived from Matching Contributions made to the Plan
on his behalf shall be nonforfeitable.

         3.03 SUPPLEMENTAL CONTRIBUTIONS. Each Employer may contribute for a
Plan Year a Supplemental Contribution to be allocated among Members in such
amount, if any, as shall be determined by the Employer. The rate of the
Supplemental Contribution need not be uniform among all divisions of the
Employer. A Member's right to benefits derived from Supplemental Contributions
made to the Plan on his behalf shall be nonforfeitable.

         3.04 ROLLOVER CONTRIBUTIONS AND PLAN-TO-PLAN TRANSFERS. The Committee
may permit Rollover Contributions by Members and/or direct transfers to or from
another qualified plan on behalf of Members from time to time. If Rollover
Contributions and/or direct transfers to or from another qualified plan are
permitted, the opportunity to make those contributions and/or direct transfers
must be made available to Members on a nondiscriminatory basis. For this purpose
only, all Employees who are included in a classification of Employees who are
eligible to participate in the Plan shall be considered to be Members of the
Plan even though they may not have met the Active Service requirements for
eligibility. However, they shall not be entitled to elect to have Salary
Deferral Contributions made or to share in Employer Contributions or forfeitures
unless and until they have met the requirements for eligibility, contributions
and allocations. A Rollover Contribution shall not be accepted unless it is
directly rolled over to the Plan in a rollover described in section 401(a)(31)
of the Code. A Member shall not be permitted to make a Rollover Contribution if
the property he intends to contribute is for any reason unacceptable to the
Trustee. A Member's right to benefits attributable to his Rollover Contributions
made to the Plan shall be nonforfeitable.

         3.05 QNECS - EXTRAORDINARY EMPLOYER CONTRIBUTIONS. Any Employer may
make a QNEC in such amount, if any, as shall be determined by it. A Member's
right to benefits derived from QNECs made to the Plan on his behalf shall be
nonforfeitable. In no event will QNECs be distributed before Salary Deferral
Contributions may be distributed.

         3.06 NONDEDUCTIBLE CONTRIBUTIONS NOT REQUIRED. Notwithstanding any
other provision of the Plan, no Employer shall be required to make any
contribution that would be a "nondeductible contribution" within the meaning of
section 4972 of the Code.

         3.07 FORM OF PAYMENT OF CONTRIBUTIONS. Contributions may be paid to the
Trustee either in cash or in qualifying employer securities (as such term is
defined in section 407(d) of ERISA) or any combination thereof, provided that
payment may not be made in any form constituting a prohibited transaction under
section 4975 of the Code or section 406 of ERISA.

         3.08 DEADLINE FOR PAYMENT OF EMPLOYER CONTRIBUTIONS. Salary Deferral
Contributions and Matching Contributions shall be paid to the Trustee in
installments. The installment for each payroll period shall be paid as soon as
administratively feasible. The Matching Contributions, the Supplemental
Contributions and QNECs for a Plan Year shall be paid to the Trustee in one or
more installments, as the Employer may from time to time determine; provided,
however, that such contributions may not be paid later than the time

                                     III-2
<PAGE>   17

prescribed by law (including extensions thereof) for filing the Employer's
income tax return for its taxable year ending with or within such Plan Year.

         3.09 RETURN OF CONTRIBUTIONS FOR MISTAKE, DISQUALIFICATION OR
DISALLOWANCE OF DEDUCTION. Subject to the limitations of section 415 of the
Code, the assets of the Trust shall not revert to any Employer or be used for
any purpose other than the exclusive benefit of the Members, former Members, and
their Beneficiaries and the reasonable expenses of administering the Plan
except:

                  (a) any Employer Contribution made because of a mistake of
         fact may be repaid to the Employer within one year after the payment of
         the Contribution; and

                  (b) all Employer Contributions are conditioned upon their
         deductibility under section 404 of the Code; therefore, to the extent
         the deduction is disallowed, the Contributions may be repaid to the
         Employer within one year after the disallowance.

         The Employer has the exclusive right to determine if a Contribution or
any part of it is to be repaid or is to remain as a part of the Trust except
that the amount to be repaid is limited, if the Contribution is made by mistake
of fact or if the deduction for the Contribution is disallowed, to the excess of
the amount contributed over the amount that would have been contributed had
there been no mistake or over the amount disallowed. Earnings which are
attributable to any excess contribution cannot be repaid. Losses attributable to
an excess contribution must reduce the amount that may be repaid. All repayments
of Contributions made due to a mistake of fact or with respect to which a
deduction is disallowed are limited so that the balance in a Member's or former
Member's Account cannot be reduced to less than the balance that would have been
in the Member's or former Member's Account had the mistaken amount or the amount
disallowed never been contributed.

                                     III-3
<PAGE>   18

                                   ARTICLE IV

                      ALLOCATION AND VALUATION OF ACCOUNTS

         4.01 INFORMATION STATEMENTS FROM EMPLOYER. Upon request by the
Committee, the Employer shall provide the Committee with a schedule setting
forth the amount of its Salary Deferral Contribution, Supplemental Contribution,
QNEC, and restoration contribution; the names of its Members, the number of
years of Active Service of each of its Members, the amount of Considered
Compensation and Annual Compensation paid to each Member, and the amount of
Considered Compensation and Annual Compensation paid to all its Members. Such
schedules shall be conclusive evidence of such facts.

         4.02 ALLOCATION OF SALARY DEFERRAL CONTRIBUTION. The Committee shall
allocate the Salary Deferral Contribution among the Members by allocating to
each Member the amount by which his Considered Compensation was reduced pursuant
to a salary deferral agreement (as described in Section 3.01) and shall credit
each such Member's share to his Salary Deferral Contribution Account.

         4.03 ALLOCATION OF MATCHING CONTRIBUTION. The Committee shall
separately allocate the Matching Contribution made by an Employer among the
Employer's Members in the proportion which the Matched Salary Deferral
Contributions of each such Member bears to the total Matched Salary Deferral
Contributions of all such Members. Each Member's proportionate share shall be
credited to his Matching Contribution Account.

         4.04 ALLOCATION OF SUPPLEMENTAL CONTRIBUTION. For each Plan Year, the
Committee shall allocate the Supplemental Contribution made by an Employer among
the Members who are employed by the Employer during the Plan Year, based upon
each such Member's Considered Compensation paid by the Employer as compared to
the Considered Compensation for all such Members employed by the Employer and
eligible for the allocation.

         4.05 ALLOCATION OF QNEC. The Committee shall separately allocate the
QNEC among the Non-Highly Compensated Employees who are Members based upon each
such Member's Considered Compensation as compared to the Considered Compensation
of all such Members.

         4.06 VALUATION OF ACCOUNTS. A Member's or former Member's Accounts
shall be valued at fair market value on each Valuation Date. The earnings and
losses attributable to any asset in the Trust will be allocated solely to the
Account of the Member or former Member on whose behalf the investment in the
asset was made. In determining the fair market value of the Members' or former
Member's Accounts, the Trustee shall utilize such sources of information as it
may deem reliable including, but not limited to, stock market quotations,
statistical evaluation services, newspapers of general circulation, financial
publications, advice from investment counselors or brokerage firms, or any
combination of sources which in the opinion of the Trustee will provide the
price such assets were last traded at on a registered stock exchange; provided,
however, that with respect to regulated investment company shares, the Trustee
shall rely exclusively on information provided to it by the investment adviser
to such funds.

                                      IV-1
<PAGE>   19

         4.07 NO RIGHTS UNLESS OTHERWISE PRESCRIBED. No allocations,
adjustments, credits, or transfers shall ever vest in any Member or former
Member any right, title, or interest in the Trust except at the times and upon
the terms and conditions herein set forth.

                                      IV-2

<PAGE>   20

                                    ARTICLE V

                                    BENEFITS

         5.01 RETIREMENT BENEFIT. Upon his Separation From Service, a Member or
former Member is entitled to receive 100 percent of all of his Account balances.

         5.02 DEATH BENEFIT. Subject to Sections 5.05 and 5.06, if a Member or
former Member dies, the death benefit payable to his Beneficiary shall be 100
percent of the remaining amount of his Account balances.

         5.03 DISTRIBUTION METHODS AVAILABLE. Effective with respect to a
distribution with an Annuity Starting Date that occurs on or after July 1, 2001,
the only distribution method available under the Plan is a lump sum payment.
With respect to a distribution with an Annuity Starting Date that occurs prior
to July 1, 2001, subject to Sections 5.05, 5.06 and 5.07, the distribution
methods available under the Plan are (a) a lump sum payment or (b) periodic
installment payments. If a Member or former Member elects periodic installment
payments, his Account balances shall be paid in substantially equal monthly,
quarterly, semi-annual or annual periodic installments (as elected by him) for a
specified number of years which may not exceed his life expectancy or the joint
and last survivor life expectancy of him and his Beneficiary. Life expectancies
will be determined, under Regulations issued under section 79 of the Code, as of
the time payments commence. If installments are elected, the Committee may
direct that the Member's or former Member's interest in the Plan be segregated
and invested separately. Upon the death of a Member or former Member prior to
the complete distribution of his Account balances, his Beneficiary may elect to
receive the Beneficiary's interest in the Account in (a) an immediate lump sum
cash payment or (b) installment payments for any period not in excess of the
period (if any) selected by the Member or former Member.

         5.04 ELECTION OF DISTRIBUTION METHOD. Each Member or former Member
shall have the right to elect the method of distribution applicable to him. An
election of an option available under this Article shall be made within the
90-day period that ends on the Member's or former Member's Annuity Starting
Date, and may be rescinded or changed by a Member or former Member at any time
prior to the distribution. An election, change, or rescission of an option must
be made by executing and properly filing the form or forms approved by the
Committee. Proof of age and other information may be required by the Committee.

         5.05 QUALIFIED JOINT AND SURVIVOR ANNUITY REQUIREMENTS FOR FORMER K&G
PLAN PARTICIPANTS. This Section shall be effective only with respect to a
distribution with an Annuity Starting Date that occurs prior to July 1, 2001.
Except for small benefits payable under Section 5.07, each Member or former
Member who (a) is a Former K&G Plan Participant, (b) is married on his Annuity
Starting Date, and (c) does not die before his Annuity Starting Date will be
paid in the form of a QJSA, unless he and his Spouse make a valid election to
waive this form of payment. Except for small benefits payable under Section
5.07, each other Member who does not die before the Annuity Starting Date, will
be paid in the form of a life only annuity unless he makes a valid election to
waive this form of payment. A Member's waiver of the QJSA form of payment will
not be effective unless the waiver (1) designates a specific nonspouse
Beneficiary who will receive Plan benefits and (2) specifies the particular
optional form of benefits selected

                                       V-1
<PAGE>   21

instead of the QJSA. Also, a Member's or former Member's waiver of the QJSA will
not be effective unless his Spouse signs either a specific or a general consent
to his waiver. A specific spousal consent must (1) be in writing, (2) consent to
the waiver of the QJSA, (3) consent to the specific nonspouse Beneficiary
designated by the Member or former Member to receive Plan benefits, (4) consent
to the particular optional form of benefit selected by the Member or former
Member, (5) acknowledge the effect of the Spouse's consent to the Member's or
former Member's waiver of the QJSA, and (6) be witnessed by a notary public or a
Plan representative. A general spousal consent must (1) be in writing, (2)
consent to the Member's or former Member's waiver of the QJSA, (3) specify that
the Member or former Member can change the Beneficiary designated by him to
receive Plan benefits, without any requirement of further consent by the Spouse,
(4) specify that the Member or former Member can change the optional form of
benefit elected by the Member or former Member, without any requirement of
further consent by the Spouse, (5) acknowledge that the Spouse has the right to
limit consent to a specific Beneficiary and a specific optional form of benefit,
and that the Spouse voluntarily elects to relinquish both of those rights, (6)
acknowledge the effect of the Spouse's consent to the Member's or former
Member's waiver of the QJSA, and (7) be witnessed by a notary public or a Plan
representative. However, a Member's or former Member's election to waive the
QJSA shall be effective if it is established to the satisfaction of the
Committee that spousal consent to his waiver may not be obtained because (1)
there is no Spouse, (2) the Spouse cannot be located, or (3) there exist such
other circumstances which obviate the necessity of obtaining the spousal
consent. Any consent by the Member's or former Member's Spouse (or establishment
that the consent of the Member's or former Member's Spouse may not be obtained)
shall be effective only with respect to such Spouse.

         5.06 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY REQUIREMENTS FOR FORMER
K&G PLAN PARTICIPANTS.

                  (a) General Rules. This Section shall be effective only with
         respect to a distribution with an Annuity Starting Date that occurs
         prior to July 1, 2001. Except for small benefits payable under Section
         5.07, the death benefit of a Member or former Member who (1) is a
         Former K&G Plan Participant, (2) is married on the date of his death
         and (3) dies before his Annuity Starting Date will be paid in the form
         of a QPSA, unless he and his Spouse make a valid election to waive this
         form of payment. Subject to Section 5.10 the surviving Spouse of such a
         Member or former Member may elect to have payments commence to her as
         soon as administratively practicable, or at any later date selected by
         her.

                  (b) Waivers. Any valid election to waive the QPSA must be made
         in writing by the Member or former Member and consented to by the
         Member's or former Member's Spouse. Any spousal consent to the waiver
         must: (1) be witnessed by a member of the Committee, the Trustee, or a
         notary public, and (2) consent to the specific nonspouse Beneficiary or
         Beneficiaries selected by the Member or former Member (or permit future
         changes in designations by the Member provided that general consent
         requirements similar to those described in Section 5.05 are satisfied).
         However, if the Member or former Member establishes to the satisfaction
         of the Committee or the Trustee that the spouse's written consent
         cannot be obtained because there is no Spouse or the Spouse cannot be
         located, a waiver signed only by the Member or former Member

                                       V-2
<PAGE>   22

         will be considered a valid election. The consent to a waiver is valid
         only with respect to the Spouse who signs it; therefore, if the Member
         or former Member remarries after executing a waiver, the Member's or
         former Member's new Spouse must execute a new consent. The Member or
         former Member may revoke a prior waiver without his Spouse's consent at
         any time before benefit payments begin. Except as specified below, an
         election to waive the QPSA will be valid only if it is made after the
         first day of the Plan Year in which the Member or former Member attains
         age 35 and before the Member's or former Member's death.

                  (c) Pre-Age 35 Waivers. A Member or former Member may waive
         the QPSA, with spousal consent, before the first day of the Plan Year
         in which he attains age 35 if the Sponsor provides him a written
         explanation of the QPSA (that meets the requirements of Section 5.12)
         within the period beginning one year before he Severs Service and
         ending one year after he Severs Service. However, any such waiver will
         expire and become invalid beginning on the first day of the Plan Year
         in which the Member or former Member attains age 35.

         5.07 LUMP SUM PAYMENT OF SMALL AMOUNTS UPON SEPARATION FROM SERVICE.
Notwithstanding any other provision of the Plan other than Section 5.09,
effective August 1, 2000, each Member or former Member (a) who does not die
before the Annuity Starting Date and (b) whose Account balances at the time of a
distribution to him on account of his Separation From Service are, in the
aggregate, less than or equal to $5,000.00, shall be paid in the form of a
single sum payment. Subject to Section 5.09, effective August 1, 2000, if a
Member or former Member dies before he has received any payment from the Plan,
and the total of his Account balances at the time of the distribution is less
than or equal to $5,000.00, his Beneficiary shall be paid in the form of a lump
sum payment. For this purpose, for distributions prior to October 18, 2000, if
the aggregate value of a Member's or former Member's Account balances determined
at the time of any prior payment to him exceeded $5,000.00, then the benefit to
be distributed at any subsequent time shall be deemed to exceed that amount. If
a Distributee who is subject to this Section 5.07 does not furnish instructions
in accordance with Plan procedures to directly roll over his Plan benefit within
45 days after he has been given direct rollover forms, he will be deemed to have
elected a lump sum cash distribution of his entire Plan benefit.

         5.08 FORM OF PAYMENT. All payments from the Plan shall be made in the
form of cash.

         5.09 DIRECT ROLLOVER OPTION. To the extent required under Regulations,
a Distributee has the right to direct that any portion of his Eligible Rollover
Distribution will be directly paid to an Eligible Retirement Plan specified by
him that will accept the Eligible Rollover Distribution.

         5.10 TIME OF DISTRIBUTIONS. Notwithstanding any other provision of the
Plan, all benefits payable under the Plan shall be distributed, or commence to
be distributed, in compliance with the following provisions:

                  (a) DISTRIBUTION DEADLINES FOR MEMBERS OR FORMER MEMBERS WHO
         ARE 70 1/2 OR OLDER. If a Member or former Member attains 70 1/2 and
         the Member or former

                                       V-3
<PAGE>   23

         Member is required to receive a distribution under section 401(a)(9) of
         the Code, the Member or former Member must elect to receive a
         distribution in one lump sum or in installments which must commence by
         his Required Beginning Date. If installments are elected, each
         installment paid must be equal to or greater than the minimum required
         distribution under section 401(a)(9) of the Code.

                  (b) DISTRIBUTION DEADLINE FOR DEATH BENEFITS. If a Member or
         former Member dies before the distribution of his Plan benefit has
         commenced, his entire interest shall be distributed within five years
         after his death. If a Member or former Member dies after the
         distribution of his Plan benefit has commenced, the remaining portion
         of his interest in the Plan, if any, will be distributed at least as
         rapidly as under the method of distribution selected by him.

                  (c) LIMITATIONS ON DEATH BENEFITS. Benefits payable under the
         Plan shall not be provided in any form that would cause a Member's
         death benefit to be more than incidental. Any distribution required to
         satisfy the incidental benefit requirement shall be considered a
         required distribution for purposes of section 401(a)(9) of the Code.

                  (d) COMPLIANCE WITH SECTION 401(a)(9). All distributions under
         the Plan will be made in accordance with the requirements of section
         401(a)(9) of the Code and all Regulations promulgated thereunder. The
         provisions of the Plan reflecting section 401(a)(9) of the Code
         override any distribution options in the Plan inconsistent with such
         Section.

                  (e) COMPLIANCE WITH SECTION 401(a)(14). Unless the Member or
         former Member otherwise elects, the payment of benefits under the Plan
         to the Member or former Member will begin not later than the 60th day
         after the close of the Plan Year in which occurs the latest of (a) the
         date on which the Member or former Member attains the later of age 62
         or Retirement Age, (b) the tenth anniversary of the year in which the
         Member or former Member commenced participation in the Plan, or (c) the
         Member's or former Member's Separation From Service.

         5.11 CONSENT TO DISTRIBUTIONS UPON SEPARATION FROM SERVICE.
Notwithstanding any other provision of the Plan, no benefit shall be distributed
or commence to be distributed to a Member or former Member prior to his
attainment of the later of age 62 or Retirement Age without his consent, unless
the benefit is payable in a single sum under Section 5.07. Any such consent
shall be valid only if given not more than 90 days prior to the Member's or
former Member's Annuity Starting Date and after his receipt of the notice
regarding benefits described in Section (a).

         5.12 INFORMATION PROVIDED TO MEMBERS. Information regarding the form of
benefits available under the Plan shall be provided to Members or former Members
in accordance with the following provisions:

                  (a) General Information. Except as otherwise provided in
         paragraph (c), the Sponsor shall provide each Member or former Member
         with a written general explanation or description of (1) the
         eligibility conditions and other material features of

                                       V-4
<PAGE>   24

         the optional forms of benefit available under the Plan, (2) the
         relative values of the optional forms of benefit available under the
         Plan, and (3) the Member's or former Member's right, if any, to defer
         receipt of the distribution.

                  (b) Time for Giving Notice. The written general explanation or
         description regarding any optional forms of benefit available under the
         Plan shall be provided to a Member or former Member no less than 30
         days and no more than 90 days before his Annuity Starting Date unless
         he legally waives this requirement.

                  (c) Exception for Members with Small Benefit Amounts.
         Notwithstanding the preceding provisions of this Section, no
         information regarding any optional forms of benefit otherwise available
         under the Plan shall be provided to the Member or former Member if his
         benefit is payable in a single sum under Section 5.07.

                  (d) QJSA Notice. No less than 30 days (seven days if the
         Member or former Member legally waives the 30-day notice requirement)
         and no more than 90 days before the Annuity Starting Date of a Member
         or former Member who is subject to Section 5.05, the Sponsor shall
         provide him a written notice explaining the terms and conditions of
         each retirement option, and in particular (1) the automatic QJSA or
         life annuity, (2) the Member's or former Member's right to make, and
         the effect of, a waiver of the automatic QJSA, (3) the right of the
         Member's or former Member's Spouse to consent or not to consent to such
         a waiver, (4) the right to make, and the effect of, a revocation of a
         previous waiver or election, (5) the eligibility conditions and other
         material features of the optional forms of benefit, (6) the relative
         values of the optional forms of benefit, and (7) the Member's or former
         Member's right to request a written explanation of the financial effect
         upon a Member's or former Member's annuity of electing to waive the
         QJSA or life annuity.

                  (e) QPSA Notice. The Sponsor will provide each Member or
         former Member who is subject to Section 5.06 a written explanation of:
         (a) the terms and conditions of the QPSA, (b) the Member's or former
         Member's right to waive the QPSA and the effect of the waiver, (c) the
         rights of the Member's or former Member's Spouse, and (d) the right to
         revoke a prior waiver and the effect of the revocation. This written
         explanation will be provided within the latest of the period (a)
         beginning on the first day of the Plan Year in which the Member or
         former Member attains age 32 and ending with the close of the Plan Year
         preceding the Plan Year in which the Member or former Member attains
         age 35, (b) ending one year after the individual becomes a Member, or
         (c) ending one year after the QPSA rules first become effective with
         respect to the Member or former Member.

         5.13 DESIGNATION OF BENEFICIARY. Each Member has the right to designate
and to revoke the designation of his Beneficiary or Beneficiaries. Each
designation or revocation must be evidenced by a written document in the form
required by the Committee, signed by the Member and filed with the Committee. If
no designation is on file at the time of a Member's death or if the Committee
determines that the designation is ineffective, the designated Beneficiary shall
be the Member's Spouse, if living, or if not, the executor, administrator or
other personal representative of the Member's estate. If a Member is considered
to be married

                                       V-5
<PAGE>   25

under local law, the Member's designation of any Beneficiary, other than the
Member's Spouse, shall not be valid unless the spouse acknowledges in writing
that she understands the effect of the Member's beneficiary designation and
consents to it. The consent must be to a specific Beneficiary. The written
acknowledgement and consent must be filed with the Committee, signed by the
Spouse and at least two witnesses, one of whom must be a member of the Committee
or a notary public. However, if the Spouse cannot be located or there exist
other circumstances as described in sections 401(a)(11) and 417(a)(2) of the
Code, the requirement of the Member's Spouse's acknowledgement and consent may
be waived. If a Beneficiary other than the Member's Spouse is named, the
designation shall become invalid if the Member is later determined to be married
under local law, the Member's missing Spouse is located or the circumstances
which resulted in the waiver of the requirement of obtaining the consent of the
Member's Spouse no longer exist.

         5.14 DISTRIBUTIONS TO DISABLED PERSONS. If the Committee determines
that any person to whom a payment is due is unable to care for his affairs
because of physical or mental disability, it shall have the authority to cause
the payments to be made to the Spouse, brother, sister or other person the
Committee determines to have incurred, or to be expected to incur, expenses for
that person unless a prior claim is made by a qualified guardian or other legal
representative. The Committee and the Trustee shall not be responsible to
oversee the application of those payments. Payments made pursuant to this power
shall be a complete discharge of all liability under the Plan and the Trust and
the obligations of the Employer, the Trustee, the Trust and the Committee.

         5.15 DISTRIBUTIONS PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS. The
Committee will instruct the Trustee to pay benefits in accordance with the terms
of any order that has been determined, in accordance with Plan procedures, to be
a Qualified Domestic Relations Order. A Qualified Domestic Relations Order may
require the payment of an immediate cash lump sum to an alternate payee even if
the Member or former Member is not then entitled to receive an immediate payment
of Plan benefits.

         5.16 CLAIMS PROCEDURE. When a benefit is due, the Member, former
Member, or Beneficiary should submit his claim to the person or office
designated by the Committee to receive claims. Under normal circumstances, a
final decision shall be made as to a claim within 90 days after receipt of the
claim. If the Committee notifies the claimant in writing during the initial
90-day period, it may extend the period up to 180 days after the initial receipt
of the claim. The written notice must contain the circumstances necessitating
the extension and the anticipated date for the final decision. If a claim is
denied during the claims period, the Committee must notify the claimant in
writing. The denial must include the specific reasons for it, the Plan
provisions upon which the denial is based, and the claims review procedure. If
no action is taken during the claims period, the claim is treated as if it were
denied on the last day of the claims period.

         If a Member's, former Member's, or Beneficiary's claim is denied and he
wants a review, he must apply to the Committee in writing. That application may
include any comment or argument the claimant wants to make. The claimant may
either represent himself or appoint a representative, either of whom has the
right to inspect all documents pertaining to the claim and

                                       V-6
<PAGE>   26

its denial. The Committee may schedule any meeting with the claimant or his
representative that it finds necessary or appropriate to complete its review.

         The request for review must be filed within 60 days after the denial.
If it is not, the denial becomes final. If a timely request is made, the
Committee must make its decision, under normal circumstances, within 60 days of
the receipt of the request for review. However, if the Committee notifies the
claimant prior to the expiration of the initial review period, it may extend the
period of review up to 120 days following the initial receipt of the request for
a review. All decisions of the Committee must be in writing and must include the
specific reasons for their action and the Plan provisions on which their
decision is based. If a decision is not given to the claimant within the review
period, the claim is treated as if it were denied on the last day of the review
period.

                                       V-7
<PAGE>   27

                                   ARTICLE VI

                       IN-SERVICE DISTRIBUTIONS AND LOANS

         6.01 IN-SERVICE FINANCIAL HARDSHIP DISTRIBUTIONS.

                  (a) General. Prior to his Separation From Service, a Member is
         entitled to receive a distribution from his Salary Deferral
         Contribution Account (except for income that was not credited to his
         Salary Deferred Contribution Account as of December 31, 1988), his
         Rollover Account, his Matching Contribution Account and his
         Supplemental Contribution Account in the event of an immediate and
         heavy financial need incurred by the Member and the Committee's
         determination that the withdrawal is necessary to alleviate that
         hardship.

                  (b) Permitted Reasons For Financial Hardship Withdrawals. A
         distribution shall be made on account of financial hardship only if the
         distribution is for: (i) Expenses for medical care described in section
         213(d) of the Code previously incurred by the Member, the Member's
         Spouse, or any dependents of the Member (as defined in section 152 of
         the Code) or necessary for these persons to obtain medical care
         described in section 213(d) of the Code, (ii) costs directly related to
         the purchase (excluding mortgage payments) of a principal residence for
         the Member, (iii) payment of tuition and related educational fees for
         the next 12 months of post-secondary education for the Member, his
         Spouse, children, or dependents (as defined in section 152 of the
         Code), (iv) payments necessary to prevent the eviction of the Member
         from his principal residence or foreclosure on the mortgage of the
         Member's principal residence, or (v) any other event added to this list
         by the Commissioner of Internal Revenue.

                  (c) Amount. A distribution to satisfy an immediate and heavy
         financial need shall not be made in excess of the amount of the
         immediate and heavy financial need of the Member and the Member must
         have obtained all distributions, other than hardship distributions, and
         all nontaxable (at the time of the loan) loans currently available
         under all plans maintained by the Employer. The amount of a Member's
         immediate and heavy financial need includes any amounts necessary to
         pay any federal, state or local income taxes or penalties reasonably
         anticipated to result from the financial hardship distribution.

                  (d) Suspension of Participation in Certain Benefit Programs.
         The Member's hardship distribution shall terminate his right to have
         the Employer make any Salary Deferral Contributions on his behalf until
         the next time Salary Deferral Contributions are permitted after the
         lapse of 12 months following the hardship distribution and his timely
         filing of a written request to resume his Salary Deferral
         Contributions. In addition, for 12 months after he receives a hardship
         distribution from the Plan, the Member is prohibited from making
         elective contributions and employee contributions to or under all other
         qualified and nonqualified plans of deferred compensation maintained by
         the Employer, including stock option plans, stock purchase plans and
         Code section 401(k) cash or deferred arrangements that are part of
         cafeteria plans described in section 125 of the Code. However, the
         Member is not prohibited from making contributions to a health

                                      VI-1
<PAGE>   28

         or welfare benefit plan, including one that is part of a cafeteria plan
         within the meaning of section 125 of the Code.

                  (e) Resumption of Salary Deferral Contributions. When the
         Member resumes Salary Deferral Contributions, he cannot have the
         Employer make any Salary Deferral Contributions in excess of the limit
         in section 402(g) of the Code for that taxable year reduced by the
         amount of Salary Deferral Contributions made by the Employer on the
         Member's behalf during the taxable year of the Member in which he
         received the hardship distribution.

                  (f) Order of Withdrawals. Financial hardship distributions
         will be made in the following order: First withdrawals will be made
         from the Member's Supplemental Contribution Account, then from his
         Matching Contribution Account, then from his Rollover Account, and
         finally, from his Salary Deferral Contribution Account. A Member shall
         not be entitled to receive a financial hardship distribution of any
         amount credited to his QNEC Account, or of any income that is allocable
         or credited to his Member's Salary Deferral Contribution Account.

                  (g) Method of Payment. Distributions pursuant to this Section
         6.01 will normally be paid in lump sums. However, the QJSA requirements
         of Section 5.05 will apply to any distributions made prior to July 1,
         2001 under this Section 6.01 with respect to a Member who is a Former
         K&G Plan Participant.

         6.02 IN-SERVICE AGE 59 1/2 DISTRIBUTIONS. Prior to his Separation From
Service, a Member may withdraw part or all of his Account balance on or after
the date that he attains age 59 1/2. Distributions pursuant to this Section 6.02
will normally be paid in lump sums in cash. However, the QJSA requirements of
Section 5.05 will apply to any distributions made prior to July 1, 2001 under
this Section 6.02 with respect to a Member who is a Former K&G Plan Participant.

         6.03 IN-SERVICE WITHDRAWAL OF ROLLOVER CONTRIBUTIONS. Each Member may
withdraw part or all of his Rollover Account balance at any time. Withdrawals
pursuant to this Section 6.03 will normally be paid in lump sums in cash.
However, the QJSA requirements of Section 5.05 will apply to any distributions
made made prior to July 1, 2001 under this Section 6.03 with respect to a Member
who is a Former K&G Plan Participant.

         6.04 LOANS. The Committee may direct the Trustees to make loans to
Members (and Beneficiaries who are "parties in interest" within the meaning of
ERISA) who have a vested interest in the Plan. The Loan Committee established by
the Committee will be responsible for administering the Plan loan program. All
loans will comply with the following requirements:

                  (a) All loans will be made solely from the Member's or
         Beneficiary's Account.

                  (b) Loans will be available on a nondiscriminatory basis to
         all Beneficiaries who are "parties in interest" within the meaning of
         ERISA, and to all Members.

                  (c) Loans will not be made for less than $500.00.

                                      VI-2
<PAGE>   29

                  (d) The maximum amount of a loan may not exceed the lesser of
         (A) $50,000.00 reduced by the person's highest outstanding loan balance
         from the Plan during the preceding one-year period, or (B) one-half of
         the present value of the person's Account balances under the Plan
         determined as of the date on which the loan is approved by the Loan
         Committee.

                  (e) Any loan from the Plan will be evidenced by a note or
         notes (signed by the person applying for the loan) having such
         maturity, bearing such rate of interest, and containing such other
         terms as the Loan Committee will require by uniform and
         nondiscriminatory rules consistent with this Section and proper lending
         practices.

                  (f) All loans will bear a reasonable rate of interest which
         will be established by the Loan Committee.

                  (g) Each loan will be fully secured by a pledge of the
         borrowing person's Account balance. No more than 50 percent of the
         person's Account balance (determined immediately after the origination
         of the loan) will be considered as security for any loan.

                  (h) Generally, the term of the loan will not be more than five
         years. The Loan Committee may agree to a longer term (but not more than
         seven years) only if such term is otherwise reasonable and the proceeds
         of the loan are to be used to acquire a dwelling which will be used
         within a reasonable time (determined at the time the loan is made) as
         the principal residence of the borrowing person.

                  (i) The loan agreement will require level amortization over
         the term of the loan. A Member's loan agreement will also require that
         loan repayments be made through payroll deductions.

                  (j) If a person fails to make required payments for two
         calendar quarters, the loan will be in default.

                  (k) If a Member has an outstanding loan from the Plan at the
         time of his Separation From Service, the outstanding loan principal
         balance and any accrued but unpaid interest will become immediately due
         in full. The Member will have the right to immediately pay the Trustee
         that amount. If the Member fails to repay the loan, the Trustee will
         foreclose on the loan and the Member will be deemed to have received a
         Plan distribution of the amount foreclosed upon. The Trustee will not
         foreclose upon a Member's Salary Deferral Contribution Account or QNEC
         Account until the Member's Separation From Service.

                  (l) If a Beneficiary defaults on his loan, the Trustee will
         foreclose on the loan and the Beneficiary will be deemed to have
         received a Plan distribution of the amount foreclosed upon.

                  (m) No person shall be entitled to apply for a new Plan loan
         until at least 60 days have transpired since he fully repaid his last
         loan from the Plan.

                                      VI-3
<PAGE>   30

                  (n) No amount that is pledged as collateral for a Plan loan to
         a Participant will be available for withdrawal before he has fully
         repaid his loan.

                  (o) All interest payments made pursuant to the terms of the
         loan agreement will be credited to the borrowing person's Account and
         will not be considered as general earnings of the Trust to be allocated
         to other Members.

                  (p) Prior to July 1, 2001, the Spouse of a Member who is a
         Former K&G Plan Participant must consent to any loan from the Member's
         Plan Account. The Spouse's consent must (1) be in writing, (2) consent
         to the loan, (3) acknowledge the effect of the Spouse's consent to the
         Member's borrowing from the Plan, and (4) be witnessed by a notary
         public or a Plan representative.

                                      VI-4
<PAGE>   31

                                   ARTICLE VII

                                 ACTIVE SERVICE

         7.01 WHEN ACTIVE SERVICE BEGINS. For purposes of eligibility, Active
Service begins when an Employee first performs an Hour of Service for an
Affiliated Employer. If an Employee who has begun Active Service Severs Service
he shall recommence Active Service when he again performs an Hour of Service for
an Affiliated Employer.

         7.02 AGGREGATION OF SERVICE. When determining an Employee's Active
Service, all Periods of Service, whether or not completed consecutively, shall
be aggregated on a per day basis. For purposes of eligibility and vesting, only
full years of Active Service shall be counted. In aggregating Active Service, 30
days shall be counted as one month and 12 months shall be counted as one year.
No fractional years shall be counted for purposes of eligibility.

         7.03 PERIODS OF SERVICE OF LESS THAN ONE YEAR. If an Employee performs
an Hour of Service within 12 months after he Severs Service, the intervening
Period of Severance shall be counted as a Period of Service.

         7.04 PERIODS OF SEVERANCE DUE TO CHILD BIRTH OR ADOPTION. The period of
time between (a) the first anniversary of the first day of an absence from
Service by reason of the pregnancy of the Employee, the birth of a child of the
Employee, the placement of a child with the Employee in connection with the
adoption of the child by the Employee or for purposes of caring for the child
for a period beginning immediately following the birth or placement and (b) the
second anniversary of the first day of the absence shall not be counted as a
Period of Service or a Period of Severance.

         7.05 TRANSFERS. If an Employee is transferred to the employ of an
Affiliated Employer, he will continue to earn Active Service for eligibility
purposes.

         7.06 EMPLOYMENT RECORDS CONCLUSIVE. The employment records of the
Employer shall be conclusive for all determinations of Active Service.

         7.07 SERVICE CREDIT REQUIRED UNDER FEDERAL LAW. An Employee shall be
credited with such additional years of Active Service as are required under any
applicable law of the United States.

                                      VII-1
<PAGE>   32

                                  ARTICLE VIII

                              INVESTMENT ELECTIONS

         8.01 INVESTMENT FUNDS ESTABLISHED. It is contemplated that the assets
of the Plan shall be invested in such categories of assets as may be determined
from time to time by the Committee and announced and made available on an equal
basis to all Members and former Members. In accordance with procedures
established by the Committee, each Member and former Member may designate the
percentage of his Employer Matching Contribution Account, QNEC Account, Rollover
Contribution Account and Salary Deferral Contribution Account to be invested in
each investment fund available under the Plan. Up to one hundred percent of the
Trust assets may be invested in Sponsor Stock.

         8.02 ELECTION PROCEDURES ESTABLISHED. The Committee shall, from time to
time, establish rules to be applied in a nondiscriminatory manner as to all
matters relating to the administration of the investment of funds including, but
not limited to, the following:

                  (a) the percentage of a Member's or former Member's Account as
         it exists, from time to time, that may be transferred from one fund to
         another and the limitations based on amounts, percentages, time, or
         frequency, if any, on such transfers;

                  (b) the percentage of a Member's future contributions, when
         allocated to his Account, that may be invested in any one or more funds
         and the limitations based upon amounts, percentages, time, or
         frequency, if any, on such investments in various funds;

                  (c) the procedures for making investment elections and
         changing existing investment elections;

                  (d) the period of notice required for making investment
         elections and changing existing investment elections;

                  (e) the handling of income and change of value in funds when
         funds are in the process of being transferred between investment funds
         and to investment funds; and

                  (f) all other matters necessary to permit the orderly
         operation of investment funds within the Plan.

When the Committee changes any previous applicable rule, it shall state the
effective time of the change and the procedures for complying with any such
change. Any change shall remain effective until such date as stated in the
change, or if none is stated, then until revoked or changed in a like manner.

                                     VIII-1
<PAGE>   33

                                   ARTICLE IX

                   VOTING OF SPONSOR STOCK AND TENDER OFFERS

         9.01 VOTING OF SPONSOR STOCK. When the Sponsor files preliminary or
final proxy solicitation materials with the Securities and Exchange Commission,
the Sponsor shall cause a copy of all materials to be simultaneously sent to the
Trustee. Based on these materials, the Trustee shall prepare a voting
instruction form. At the time of mailing of notice of each annual or special
stockholders' meeting of the Sponsor, the Sponsor shall cause a copy of the
notice and all proxy solicitation materials to be sent to each Member with an
interest in Sponsor Stock held in the Trust, together with the foregoing voting
instruction form to be returned to the Trustee or its designee. The form shall
show the number of full and fractional shares of the Sponsor Stock credited to
each Member's or former Member's Account. The Sponsor shall provide the Trustee
with a copy of any materials provided to the Members and shall certify to the
Trustee that the materials have been mailed or otherwise sent to the Members and
former Members.

         Each Member and former Member with an interest in Sponsor Stock held in
the Trust shall have the right to direct the Trustee as to the manner in which
the Trustee is to vote the number of shares of the Sponsor Stock reflecting such
Member's or former Member's proportional interest in the Sponsor Stock held in
the Trust. Directions from a Member or former Member to the Trustee concerning
the voting of the Sponsor Stock shall be communicated in writing, or by mailgram
or similar means. These directions shall be held in confidence by the Trustee
and shall not be divulged to the Sponsor, or any officer or employee thereof, or
any other person except to the extent that the Sponsor must have the safeguarded
information in order to comply with federal laws or state laws not preempted by
ERISA. Upon its receipt of the directions, the Trustee shall vote the shares of
the Sponsor Stock reflecting the Member's or former Member's proportional
interest in the Sponsor Stock held in the Trust as directed by the Member or
former Member. The Trustee shall vote shares of the Sponsor Stock reflecting
such Member's or former Member's proportional interest in the Sponsor Stock held
in the Trust for which it has received no directions from the Member or former
Member in the same proportion on each issue as it votes those shares for which
it received voting directions from Members and former Members. The Trustee shall
vote shares of the Sponsor Stock not credited to Members' or former Members'
Accounts in the same proportion on each issue as it votes those shares credited
to Members' and former Members' Accounts for which it received voting directions
from Members and former Members.

         9.02 TENDER OFFERS. Upon commencement of a tender offer for any
securities held in the Trust that are the Sponsor Stock, the Sponsor shall
notify each Member and former Member of the tender offer and utilize its best
efforts to timely distribute or cause to be distributed to each Member and
former Member the same information that is distributed to other stockholders of
the Sponsor in connection with the tender offer, and, after consulting with the
Trustee, shall provide and pay for a means by which the Member or former Member
may direct the Trustee whether or not to tender the Sponsor Stock credited to
the Member's or former Member's Accounts. The Sponsor shall provide the Trustee
with a copy of any material provided to the Members and former Members and shall
certify to the Trustee that the materials have been mailed or otherwise sent to
Members and former Members.

                                      IX-1
<PAGE>   34

         Each Member and former Member shall have the right to direct the
Trustee to tender or not to tender some or all of the shares of the Sponsor
Stock reflecting his proportional interest in the Sponsor Stock held in the
Trust. Directions from a Member or former Member to the Trustee concerning the
tender of the Sponsor Stock shall be communicated in writing, or by mailgram or
such similar means as is agreed upon by the Trustee and the Sponsor under the
preceding paragraph. These directions shall be held in confidence by the Trustee
and shall not be divulged to the Sponsor, or any officer or employee thereof, or
any other person except to the extent that the consequences of such directions
are reflected in reports regularly communicated to any such persons in the
ordinary course of the performance of the Trustee's services hereunder. The
Trustee shall tender or not tender shares of Sponsor Stock as directed by the
Member or former Member. To the extent that Members or former Members fail to
affirmatively direct the Trustee or fail to issue valid directions to the
Trustee to tender shares of the Sponsor Stock credited to their Accounts, those
Members or former Members will be deemed to have instructed the Trustee not to
tender those shares. Accordingly, the Trustee shall not tender shares of Sponsor
Stock credited to a Member's or former Member's Accounts for which it has
received no directions or invalid directions from the Member or former Member.

         The Trustee shall tender that number of shares of the Sponsor Stock not
credited to Members' or former Members' Accounts which is determined by
multiplying the total number of shares of the Sponsor Stock not credited to
Members' or former Members' Accounts by a fraction of which the numerator is the
number of shares of the Sponsor Stock credited to Members' or former Members'
accounts for which the Trustee has received valid directions from Members or
former Members to tender (which directions have not been withdrawn as of the
date of this determination) and of which the denominator is the total number of
shares of the Sponsor Stock credited to Members' or former Members' Accounts.

         A Member or former Member who has directed the Trustee to tender some
or all of the shares of the Sponsor Stock credited to the Member's or former
Member's Accounts may, at any time prior to the tender offer withdrawal date,
direct the Trustee to withdraw some or all of the tendered shares, and the
Trustee shall withdraw the directed number of shares from the tender offer prior
to the tender offer withdrawal deadline. Prior to the withdrawal deadline, if
any shares of the Sponsor Stock not credited to Members' or former Members'
Accounts have been tendered, the Trustee shall redetermine the number of shares
of the Sponsor Stock that would be tendered under this Section if the date of
the foregoing withdrawal were the date of determination, and withdraw from the
tender offer the number of shares of the Sponsor Stock not credited to Members'
or former Members' Accounts necessary to reduce the amount of tendered Sponsor
Stock not credited to Members' or former Members' Accounts to the amount so
redetermined. A Member or former Member shall not be limited as to the number of
directions to tender or withdraw that the Member or former Member may give to
the Trustee.

         A direction by a Member or former Member to the Trustee to tender
shares of the Sponsor Stock reflecting the Member's or former Member's
proportional interest in the Sponsor Stock held in the Trust shall not be
considered a written election under the Plan by the Member or former Member to
withdraw, or have distributed, any or all of his withdrawable shares. The
Trustee shall credit to each proportional interest of the Member or former
Member from which the tendered shares were taken the proceeds received by the
Trustee in exchange for the shares of the Sponsor Stock tendered from that
interest.

                                      IX-2
<PAGE>   35

         9.03 SHARES CREDITED. For all purposes of this Article, the number of
shares of the Sponsor Stock deemed "credited" to a Member's or former Member's
Accounts as of the relevant date (the record date or the date specified in the
tender offer) shall be calculated by reference to the number of shares reflected
on the books of the transfer agent as of the relevant date. In the case of a
tender offer, the number of shares credited shall be determined as of a date as
close as administratively feasible to the relevant date.

         9.04 CONVERSION. All provisions in this Article shall also apply to any
securities received as a result of a conversion of the Sponsor Stock.

         9.05 NAMED FIDUCIARY. For purposes of ERISA, each Member or former
Member shall be the named fiduciary for purposes of section 403(a)(1) of ERISA
in connection with the exercise of voting and tender offer rights relating to
shares of the Sponsor Stock credited to his Accounts and any shares of the
Sponsor Stock not credited to his Accounts that may be affected by his voting or
tender decision.

                                      IX-3
<PAGE>   36

                                   ARTICLE X

                       ADOPTION OF PLAN BY OTHER EMPLOYERS

         10.01 ADOPTION PROCEDURE. Any business organization may, with the
approval of the Board, adopt the Plan by:

                  (a) a certified resolution or consent of the board of
         directors of the adopting Employer or an executed adoption instrument
         (approved by the board of directors of the adopting Employer) agreeing
         to be bound as an Employer by all the terms, conditions and limitations
         of the Plan except those, if any, specifically described in the
         adoption instrument; and

                  (b) providing all information required by the Committee and
         the Trustee.

         10.02 NO JOINT VENTURE IMPLIED. The document which evidences the
adoption of the Plan by an Employer shall become a part of the Plan. However,
neither the adoption of the Plan and the Trust by an Employer nor any act
performed by it in relation to the Plan and the Trust shall ever create a joint
venture or partnership relation between it and any other Employer.

         10.03 ALL TRUST ASSETS AVAILABLE TO PAY ALL BENEFITS. The Accounts of
Members employed by the Employers that adopt the Plan shall be commingled for
investment purposes. All assets in the Trust shall be available to pay benefits
to all Members employed by any Employer.

         10.04 QUALIFICATION A CONDITION PRECEDENT TO ADOPTION AND CONTINUED
PARTICIPATION. The adoption of the Plan and the Trust by a business organization
is contingent upon and subject to the express condition precedent that the
initial adoption meets all statutory and regulatory requirements for
qualification of the Plan and the exemption of the Trust that are applicable to
it and that the Plan and Trust continue in operation to maintain their qualified
and exempt status. In the event the adoption fails to initially qualify, the
adoption shall fail retroactively for failure to meet the condition precedent
and the portion of the Trust assets applicable to the adoption shall be
immediately returned to the adopting business organization and the adoption
shall be void ab initio. In the event the adoption as to a given business
organization later becomes disqualified and loses its exemption for any reason,
the adoption shall fail retroactively for failure to meet the condition
precedent and the portion of the Trust assets allocable to the adoption by that
business organization shall be immediately spun off, retroactively as of the
last date for which the Plan qualified, to a separate trust for its sole benefit
and an identical but separate Plan shall be created, retroactively effective as
of the last date the Plan as adopted by that business organization qualified,
for the benefit of the Members covered by that adoption.

                                       X-1
<PAGE>   37

                                   ARTICLE XI

                            AMENDMENT AND TERMINATION

         11.01 RIGHT TO AMEND AND LIMITATIONS THEREON. The Sponsor has the sole
right to amend the Plan. An amendment may be made by a certified resolution or
consent of the Board, or by an instrument in writing executed by the appropriate
officer of the Sponsor. The amendment must describe the nature of the amendment
and its effective date. No amendment shall:

                  (a) vest in an Employer any interest in the Trust;

                  (b) cause or permit the Trust assets to be diverted to any
         purpose other than the exclusive benefit of the present or future
         Members and their Beneficiaries except under the circumstances
         described in Section 3.09;

                  (c) decrease the Account of any Employee, or eliminate an
         optional form of payment in violation of section 411(d)(6) of the Code;

                  (d) increase substantially the duties or liabilities of the
         Trustee without its written consent; or

                  (e) change the vesting schedule to one which would result in
         the nonforfeitable percentage of a Member's Account (determined as of
         the later of the date of the adoption of the amendment or of the
         effective date of the amendment) of any Member being less than the
         nonforfeitable percentage computed under the Plan without regard to the
         amendment. If the Plan's vesting schedule is amended, if the Plan is
         amended in any other way that affects the computation of the Member's
         nonforfeitable percentage, or if the Plan is deemed amended by an
         automatic change to or from a top-heavy vesting schedule, each Member
         with at least three years of Active Service as of the date of the
         amendment or change shall have his nonforfeitable percentage computed
         under the Plan without regard to the amendment or the change if that
         results in a higher nonforfeitable percentage.

         Each Employer shall be deemed to have adopted any amendment made by the
Sponsor unless the Employer notifies the Committee of its rejection in writing
within 30 days after it receives a copy of the amendment. A rejection shall
constitute a withdrawal from the Plan by that Employer unless the Sponsor
acquiesces in the rejection.

         11.02 MANDATORY AMENDMENTS. The Contributions of each Employer to the
Plan are intended to be:

                  (a) deductible under the applicable provisions of the Code;

                  (b) except as otherwise prescribed by applicable law, exempt
         from the Federal Social Security Act;

                                      XI-1
<PAGE>   38

                  (c) except as otherwise prescribed by applicable law, exempt
         from withholding under the Code; and

                  (d) excludable from any Employee's regular rate of pay, as
         that term is defined under the Fair Labor Standards Act of 1938, as
         amended.

         The Sponsor shall make any amendment necessary to carry out this
intention, and it may be made retroactively.

         11.03 WITHDRAWAL OF EMPLOYER. An Employer may withdraw from the Plan
and the Trust if the Sponsor does not acquiesce in its rejection of an amendment
or by giving written notice of its intent to withdraw to the Committee. The
Committee shall then determine the portion of the Trust assets that is
attributable to the Members employed by the withdrawing Employer and shall
notify the Trustee to segregate and transfer those assets to the successor
trustee when it receives a designation of the successor from the withdrawing
Employer.

         A withdrawal shall not terminate the Plan and the Trust with respect to
the withdrawing Employer, if the Employer either appoints a successor trustee
and reaffirms the Plan and the Trust as its new and separate plan and trust
intended to qualify under section 401(a) of the Code, or establishes another
plan and trust intended to qualify under section 401(a) of the Code.

         The determination of the Committee, in its sole discretion, of the
portion of the Trust assets that is attributable to the Members employed by the
withdrawing Employer shall be final and binding upon all parties; and, the
Trustee's transfer of those assets to the designated successor Trustee shall
relieve the Trustee of any further obligation, liability or duty to the
withdrawing Employer, the Members employed by that Employer and their
Beneficiaries, and the successor trustee.

         11.04 TERMINATION OF PLAN. The Sponsor may terminate the Plan and the
Trust with respect to all Employers by executing and delivering to the Committee
and the Trustee, a notice of termination, specifying the date of termination.

         11.05 PARTIAL OR COMPLETE TERMINATION OR COMPLETE DISCONTINUANCE OF
CONTRIBUTIONS. Without regard to any other provision of the Plan, if there is a
partial or total termination of the Plan or there is a complete discontinuance
of the Employer's Contributions, each of the affected Members shall immediately
become 100 percent vested in his Account as of the end of the last Plan Year for
which a substantial Employer Contribution was made and in any amounts later
allocated to his Account. If the Employer then resumes making substantial
Contributions at any time, the appropriate vesting schedule shall again apply to
all amounts allocated to each affected Member's Account beginning with the Plan
Year for which they were resumed.

                                      XI-2
<PAGE>   39

                                   ARTICLE XII

                                  MISCELLANEOUS

         12.01 PLAN NOT AN EMPLOYMENT CONTRACT. The maintenance of the Plan and
the Trust is not a contract between any Employer and its Employees which gives
any Employee the right to be retained in its employment. Likewise, it is not
intended to interfere with the rights of any Employer to discharge any Employee
at any time or to interfere with the Employee's right to terminate his
employment at any time.

         12.02 BENEFITS PROVIDED SOLELY FROM TRUST. All benefits payable under
the Plan shall be paid or provided for solely from the Trust. No Employer
assumes any liability or responsibility to pay any benefit provided by the Plan.

         12.03 ASSIGNMENTS PROHIBITED. No principal or income payable or to
become payable from the Trust assets shall be subject to anticipation or
assignment by a Member, former Member, or by a Beneficiary to attachment by,
interference with, or control of any creditor of a Member, former Member, or
Beneficiary; or to being taken or reached by any legal or equitable process in
satisfaction of any debt or liability of a Member, former Member, or Beneficiary
prior to its actual receipt by the Member, former Member, or Beneficiary. Any
attempted conveyance, transfer, assignment, mortgage, pledge, or encumbrance of
any Trust assets, any part of it, or any interest in it by a Member, former
Member, or Beneficiary prior to distribution shall be void, whether that
conveyance, transfer, assignment, mortgage, pledge, or encumbrance is intended
to take place or become effective before or after any distribution of Trust
assets or the termination of the Trust itself. The Trustee shall never under any
circumstances be required to recognize any conveyance, transfer, assignment,
mortgage, pledge or encumbrance by a Member, former Member, or Beneficiary of
the Trust, any part of it, or any interest in it, or to pay any money or thing
of value to any creditor or assignee of a Member, former Member, or Beneficiary
for any cause whatsoever. These prohibitions against the alienation of a
Member's Account shall not apply to a Qualified Domestic Relations Order or to a
voluntary revocable assignment of benefits not in excess of ten percent of the
amount of any payment from the Plan if such assignment complies with Regulations
issued under 401(a)(13) of the Code. Further, these prohibitions shall not apply
to any offset of a Member's benefit under the Plan against an amount that the
Member or former Member is ordered or required to pay to the Plan if (a) the
order or requirement to pay arises (1) under a judgment of conviction for a
crime involving the Plan, (2) under a civil judgment (including a consent order
or decree) entered by a court in an action in connection with an alleged
violation of part 4 of subtitle B of title I of ERISA, or (3) is pursuant to a
settlement agreement between the Secretary of Labor and the Member or former
Member in connection with an alleged violation of part 4 of subtitle B of title
I of ERISA by a fiduciary or any other person and (b) the judgment, order,
decree or settlement agreement expressly provides for the offset of all or a
part of the amount ordered or required to be paid to the Plan against the
Member's or former Member's benefits provided under the Plan.

         12.04 REQUIREMENTS UPON MERGER OR CONSOLIDATION OF PLANS. The Plan
shall not merge or consolidate with or transfer any assets or liabilities to any
other plan unless each Member would receive a benefit immediately after the
merger, consolidation, or transfer which

                                     XII-1

<PAGE>   40

is equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan had then
terminated).

         12.05 MERGER OF K&G PLAN. Effective August 1, 2000, notwithstanding any
provision of the K&G Plan to the contrary, the provisions of the Plan shall
apply to each Employee employed by K&G Men's Center, Inc. and K&G Men's Company
Inc.; provided, however that the distribution options available under the K&G
Plan shall be preserved in the Plan in accordance with section 411(d)(6) of the
Code.

         12.06 FORFEITURE BY LOST MEMBERS OR BENEFICIARIES. If a person who is
entitled to a distribution cannot be located during a reasonable search after
the Trustee has initially attempted making payment, that person's Account shall
be forfeited. Such amount shall be used to reduce the Employer's contribution
under the Plan. However, if at any time prior to the termination of the Plan and
the complete distribution of the Trust assets, the former Member or Beneficiary
files a claim with the Committee for the forfeited benefit, that benefit shall
be reinstated (without adjustment for trust income or losses during the
forfeited period) effective as of the date of the receipt of the claim. As soon
as appropriate following the Employer's Contribution of the reinstated amount,
it shall be paid to the former Member or Beneficiary in a single sum.

         12.07 GENDER OF WORDS USED. If the context requires it, words of one
gender when used in the Plan shall include the other gender, and words used in
the singular or plural shall include the other.

         12.08 SEVERABILITY. Each provision of this Agreement may be severed. If
any provision is determined to be invalid or unenforceable, that determination
shall not affect the validity or enforceability of any other provision.

         12.09 REEMPLOYED VETERANS. The requirements of the Uniformed Services
Employment and Reemployment Rights Act of 1994 will be complied with in the
operation of the Plan in the manner permitted under section 414(u) of the Code.

         12.10 GOVERNING LAW. The provisions of the Plan shall be construed,
administered, and governed under the laws of the United States unless the
specific matter in question is governed by state law in which event the laws of
the State of Texas shall apply.

                                     XII-2
<PAGE>   41

         IN WITNESS WHEREOF, The Men's Wearhouse, Inc. has caused this Agreement
to be executed this 20th day of February, 2001, in multiple counterparts, each
of which shall be deemed to be an original, to be effective the 1st day of
January, 1998, except for those provisions which have an earlier effective date
provided by law, or as otherwise provided under applicable provisions of the
Plan.

                                   THE MEN'S WEARHOUSE, INC.

                                   By  /s/ NEILL P. DAVIS
                                       -----------------------------------------

                                   Title  Senior Vice President, Chief Financial
                                          --------------------------------------
                                   Officer and Treasurer
                                   ---------------------------------------------

<PAGE>   42

                                   APPENDIX A

                  LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

                              PART A.1 DEFINITIONS

         DEFINITIONS. As used herein the following words and phrases have the
meaning attributed to them below:

         A.1.1 "ACTUAL CONTRIBUTION RATIO" shall mean the ratio of Section
401(m) Contributions actually paid into the Trust on behalf of an Employee for a
Plan Year to the Employee's Annual Compensation for the same Plan Year. For this
purpose, Annual Compensation for any portion of the Plan Year in which the
Employee was not an eligible Employee (as defined in Section A.2.4) will not be
taken into account.

         A.1.2 "ACTUAL DEFERRAL PERCENTAGE" means, for a specified group of
Employees for a Plan Year, the average of the ratios (calculated separately for
each Employee in the group) of the amount of Section 401(k) Contributions
actually paid into the Trust on behalf of the Employee for the Plan Year to the
Employee's Annual Compensation for the Plan Year.

         A.1.3 "ACTUAL DEFERRAL RATIO" means the ratio of Section 401(k)
Contributions actually paid into the Trust on behalf of an Employee for a Plan
Year to the Employee's Annual Compensation for the same Plan Year. For this
purpose, Annual Compensation for any portion of the Plan Year in which the
Employee was not an eligible Employee (as defined in Section A.2.3) will not be
taken into account.

         A.1.4 "ANNUAL ADDITIONS" means the sum of the following amounts
credited on behalf of a Member for the Limitation Year: (a) Employer
contributions, (b) Employee contributions and (c) forfeitures. Excess 401(k)
Contributions for a Plan Year are treated as Annual Additions for that Plan Year
even if they are corrected through distribution. Excess Deferrals that are
timely distributed as set forth in Section A.3.1 will not be treated as Annual
Additions.

         A.1.5 "CONTRIBUTION PERCENTAGE" shall mean, for a specified group of
Employees for a Plan Year, the average of the ratios (calculated separately for
each Employee in the group) of the amount of Section 401(m) Contributions
actually paid into the Trust on behalf of the Employee for the Plan Year to the
Employee's Annual Compensation for the Plan Year.

         A.1.6 "EXCESS AGGREGATE 401(m) CONTRIBUTIONS" means, with respect to
any Plan Year, the excess of (a) the aggregate amount of Section 401(m)
Contributions actually paid into the Trust on behalf of Highly Compensated
Employees for the Plan Year over (b) the maximum amount of those contributions
permitted under the limitations set out in the first sentence of Section A.2.4.

         A.1.7 "EXCESS AMOUNT" shall mean the excess of the Annual Additions
credited to the Member's Account for the Limitation Year over the Maximum
Permissible Amount.

         A.1.8 "EXCESS 401(k) CONTRIBUTIONS" means, with respect to any Plan
Year, the excess of (a) the aggregate amount of Section 401(k) Contributions
actually paid to the Trustee on

                                      A-1
<PAGE>   43

behalf of Highly Compensated Employees for the Plan Year over (b) the maximum
amount of those contributions permitted under the limitations set out in the
first sentence of Section A.2.3.

         A.1.9 "LIMITATION YEAR" shall mean the Plan Year. All qualified plans
maintained by any Affiliated Employer must use the same Limitation Year. If the
Limitation Year is amended to a different 12-consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year in which the
amendment is made.

         A.1.10 "MAXIMUM PERMISSIBLE AMOUNT" shall mean the lesser of (a) the
dollar limitation in effect under section 415(c)(1)(A) of the Code for the
Limitation Year, or (b) 25 percent of the Member's Annual Compensation for the
Limitation Year. The Annual Compensation limitation referred to in clause (b) of
the immediately preceding sentence shall not apply to any contribution for
medical benefits (within the meaning of section 401(h) or section 419(A)(f)(2)
of the Code) that is otherwise treated as an Annual Addition under section
415(l)(1) or section 419(A)(d)(2) of the Code. If a short Limitation Year is
created because of an amendment changing the Limitation Year to a different
12-consecutive month period, the Maximum Permissible Amount shall not exceed the
dollar limitation in effect under section 415(c)(1)(A) of the Code multiplied by
a fraction, the numerator of which is the number of months in the short
Limitation Year, and the denominator of which is 12.

         A.1.11 "SECTION 401(K) CONTRIBUTIONS" means the sum of Salary Deferral
Contributions made on behalf of the Member during the Plan Year, and QNECs that
the Employer elects to have treated as section 401(k) Contributions pursuant to
section 401(k)(3)(d)(ii) of the Code.

         A.1.12 "SECTION 401(M) CONTRIBUTIONS" shall mean the sum of Employer
Matching Contributions made on behalf of the Member during the Plan Year and
other amounts that the Employer elects to have treated as Section 401(m)
Contributions pursuant to section 401(m)(3)(B) of the Code. However, Employer
Matching Contributions and Salary Deferral Contributions that the Employer could
otherwise elect to have treated as Section 401(m) Contributions are not Section
401(m) Contributions to the extent that they are used to enable the Plan to
satisfy the minimum contribution requirements of section 416 of the Code.

                     PART A.2 LIMITATIONS ON CONTRIBUTIONS

         A.2.1 LIMITATIONS BASED UPON DEDUCTIBILITY AND THE MAXIMUM ALLOCATION
PERMITTED TO A MEMBER'S ACCOUNT. Notwithstanding any other provision of the
Plan, no Employer shall make any contribution that would be a nondeductible
contribution within the meaning of section 4972 of the Code or that would cause
the limitation on allocations to each Member's Account under section 415 of the
Code and Section A.4.1 to be exceeded.

         A.2.2 DOLLAR LIMITATION UPON SALARY DEFERRAL CONTRIBUTIONS. The maximum
Salary Deferral Contribution that a Member may elect to have made on his behalf
during the Member's taxable year may not, when added to the amounts deferred
under other plans or arrangements described in sections 401(k), 408(k) and
403(b) of the Code, exceed $7,000 (as adjusted by the Secretary of Treasury).
For purposes of applying the requirements of Section A.2.3, Excess Deferrals
shall not be disregarded merely because they are Excess Deferrals or because
they are distributed in accordance with this Section. However, Excess Deferrals
made to the Plan on

                                      A-2
<PAGE>   44

behalf of Non-Highly Compensated Employees are not to be taken into account
under Section A.2.3.

         A.2.3 LIMITATION BASED UPON ACTUAL DEFERRAL PERCENTAGE. The Actual
Deferral Percentage for eligible Highly Compensated Employees for any Plan Year
must bear a relationship to the Actual Deferral Percentage for all other
eligible Employees for the preceding Plan Year which meets either of the
following tests:

                  (a) the Actual Deferral Percentage of the eligible Highly
         Compensated Employees is not more than the Actual Deferral Percentage
         of all other eligible Employees multiplied by 1.25; or

                  (b) the excess of the Actual Deferral Percentage of the
         eligible Highly Compensated Employees over that of all other eligible
         Employees is not more than two percentage points, and the Actual
         Deferral Percentage of the eligible Highly Compensated Employees is not
         more than the Actual Deferral Percentage of all other eligible
         Employees multiplied by two.

         For purposes of this test an eligible Employee is an Employee who is
directly or indirectly eligible to make Salary Deferral Contributions for all or
part of the Plan Year. A person who is suspended from making Salary Deferral
Contributions because he has made a withdrawal is an eligible Employee. If no
Salary Deferral Contributions are made for an eligible Employee, the Actual
Deferral Ratio that shall be included for him in determining the Actual Deferral
Percentage is zero. If the Plan and any other plan or plans which include cash
or deferred arrangements are considered as one plan for purposes of section
401(a)(4) or 410(b) of the Code, the cash or deferred arrangements included in
the Plan and the other plans shall be treated as one plan for purposes of this
Section. If any Member who is a Highly Compensated Employee is a participant in
any other cash or deferred arrangements of the Employer, when determining the
deferral percentage of such Member, all such cash or deferred arrangements are
treated as one plan for these dates.

         Notwithstanding the foregoing, an individual who is not a Highly
Compensated Employee will not be treated as an eligible Employee for purposes of
this Section A.2.3 if the Sponsor elects to apply section 401(b)(4)(3) of the
Code in defining whether the Plan meets the requirements of section 401(k)(3) of
the Code.

         A Salary Deferral Contribution will be taken into account under the
Actual Deferral Percentage test of section 401(k) of the Code and this Section
for a Plan Year only if it relates to Considered Compensation that either would
have been received by the Employee in the Plan Year (but for the deferral
election) or is attributable to services performed by the Employee in the Plan
Year and would have been received by the Employee within 2 1/2 months after the
close of the Plan Year (but for the deferral election). In addition, a Section
401(k) Contribution will be taken into account under the Actual Deferral
Percentage test of section 401(k) of the Code and this Section for a Plan Year
only if it is allocated to an Employee as of a date within that Plan Year. For
this purpose a Section 401(k) Contribution is considered allocated as of a date
within a Plan Year if the allocation is not contingent on participation or
performance of services after

                                      A-3
<PAGE>   45

such date and the Section 401(k) Contribution is actually paid to the Trust no
later than 12 months after the Plan Year to which the Section 401(k)
Contribution relates.

         Failure to correct Excess 401(k) Contributions by the close of the Plan
Year following the Plan Year for which they were made will cause the Plan's cash
or deferred arrangement to be disqualified for the Plan Year for which the
Excess 401(k) Contributions were made and for all subsequent years during which
they remain in the Trust. Also, the Employer will be liable for a ten percent
excise tax on the amount of Excess 401(k) Contributions unless they are
corrected within 2 1/2 months after the close of the Plan Year for which they
were made.

         A.2.4 LIMITATION BASED UPON CONTRIBUTION PERCENTAGE. The Contribution
Percentage for eligible Highly Compensated Employees for any Plan Year must not
exceed the greater of the following:

                  (a) the Contribution Percentage for all other eligible
         Employees for the preceding Plan Year multiplied by 1.25; or

                  (b) the lesser of the Contribution Percentage for all other
         eligible Employees for the preceding Plan Year multiplied by two, or
         the Contribution Percentage for all other eligible Employees for the
         preceding Plan Year plus two percentage points.

         For purposes of this test an eligible Employee is an Employee who is
directly or indirectly eligible to receive an allocation of Employer Matching
Contributions for all or part of the Plan Year. Except as provided below, an
Employee who would be eligible to receive an allocation of Employer Matching
Contributions but for his election not to participate is an eligible Employee.
An Employee who would be eligible to receive an allocation of Matching Employer
Contributions but for the limitations on his Annual Additions imposed by section
415 of the Code is an eligible Employee.

         Notwithstanding the foregoing, an individual who is not a Highly
Compensated Employee will not be treated as an eligible Employee for purposes of
this Section A.2.4 if the Sponsor elects to apply section 401(b)(4)(B) of the
Code in determining whether the Plan meets the requirements of section 401(m)(2)
of the Code.

         If no Section 401(m) Contributions are made on behalf of an eligible
Employee the Actual Contribution Ratio that shall be included for him in
determining the Contribution Percentage is zero. If the Plan and any other plan
or plans to which Section 401(m) Contributions are made are considered as one
plan for purposes of section 401(a)(4) or 410(b) of the Code, the Plan and those
plans are to be treated as one. The Actual Contribution Ratio of a Highly
Compensated Employee who is eligible to participate in more than one plan of an
Affiliated employer to which employee or matching contributions are made is
calculated by treating all the plans in which the Employee is eligible to
participate as one plan. However, plans that are not permitted to be aggregated
under Regulation section 1.410(m)-1(b)(3)(ii) are not aggregated for this
purpose.

         An Employer Matching Contribution will be taken into account under this
Section for a Plan Year only if (1) it is allocated to the Employee's Account as
of a date within the Plan Year, (2) it is paid to the Trust no later than the
end of the 12-month period beginning after the close of

                                      A-4
<PAGE>   46

the Plan Year, and (3) it is made on behalf of an Employee on account of his
Salary Deferral Contributions for the Plan Year.

         At the election of the Employer, a Member's Salary Deferral
Contributions, and QNECs made on behalf of the Member during the Plan Year shall
be treated as Section 401(m) Contributions that are Employer Matching
Contributions provided that the conditions set forth in Regulation section
1.401(m)-1(b)(5) are satisfied. Salary Deferral Contributions may not be treated
as Employer Matching Contributions for purposes of the contribution percentage
test set forth in this Section unless such contributions, including those taken
into account for purposes of the test set forth in this Section, satisfy the
actual deferral percentage test set forth in Section A.2.3. Moreover, Salary
Deferral Contributions and QNECs may not be taken into account for purposes of
the test set forth in this Section to the extent that such contributions are
taken into account in determining whether any other contributions satisfy the
actual deferral percentage test set forth in Section A.2.3. Finally, Salary
Deferral Contributions and QNECs may be taken into account for purposes of the
test set forth in this Section only if they are allocated to the Employee's
Account as of a date within the Plan Year being tested within the meaning of
Regulation section 1.401(k)-1(b)(4).

         Failure to correct Excess Aggregate 401(m) Contributions by the close
of the Plan Year following the Plan Year for which they were made will cause the
Plan to fail to be qualified for the Plan Year for which the Excess Aggregate
401(m) Contributions were made and for all subsequent years during which they
remain in the Trust. Also, the Employer will be liable for a ten percent excise
tax on the amount of Excess Aggregate 401(m) Contributions unless they are
corrected within 2 1/2 months after the close of the Plan Year for which they
were made.

         A.2.5 ALTERNATIVE LIMITATION BASED UPON ACTUAL DEFERRAL PERCENTAGE AND
CONTRIBUTION PERCENTAGE. If the second alternative permitted in Sections A.2.3
and A.2.4 is used for both the actual deferral percentage test and the
contribution percentage test the following additional limitation on Salary
Deferral Contributions shall apply. The Actual Deferral Percentage plus the
Contribution Percentage of the eligible Highly Compensated Employees cannot
exceed the greater of (a) or (b), where

         (a)      is the sum of:

                  (i) 1.25 times the greater of the Actual Deferral Percentage
         or the Contribution Percentage of the eligible Non-Highly Compensated
         Employees for the preceding Plan Year, and

                  (ii) the lesser of (x) two percentage points plus the lesser
         of the Actual Deferral Percentage or the Contribution Percentage of the
         eligible Non-Highly Compensated Employees for the preceding Plan Year
         or (y) two times the lesser of the Actual Deferral Percentage or the
         Contribution Percentage of the group of eligible Non-Highly Compensated
         Employees for the preceding Plan Year; and

                                      A-5
<PAGE>   47

         (b)      is the sum of:

                  (i) 1.25 times the lesser of the Actual Deferral Percentage or
         the Contribution Percentage of the eligible Non-Highly Compensated
         Employees for the preceding Plan Year, and

                  (ii) the lesser of (x) two percentage points plus the greater
         of the Actual Deferral Percentage or the Contribution Percentage of the
         eligible Non-Highly Compensated Employees for the preceding Plan Year
         or (y) two times the greater of the Actual Deferral Percentage or the
         Contribution Percentage of the group of eligible Non-Highly Compensated
         Employees for the preceding Plan Year.

           PART A.3 CORRECTION PROCEDURES FOR ERRONEOUS CONTRIBUTIONS

         A.3.1 EXCESS DEFERRAL FAIL SAFE PROVISION. As soon as practical after
the close of each Plan Year, the Committee shall determine if there would be any
Excess Deferrals. If there would be an Excess Deferral by a Member, the Excess
Deferral as adjusted by any earnings or losses, will be distributed to the
Member no later than April 15 following the Member's taxable year in which the
Excess Deferral was made. The income allocable to the Excess Deferrals for the
taxable year of the Member shall be determined by multiplying the income for the
taxable year of the Member allocable to Salary Deferral Contributions by a
fraction. The numerator of the fraction is the amount of the Excess Deferrals
made on behalf of the Member for the taxable year. The denominator of the
fraction is the Member's total Salary Deferral Account balance as of the
beginning of the taxable year plus the Member's Salary Deferral Contributions
for the taxable year.

         A.3.2 ACTUAL DEFERRAL PERCENTAGE FAIL SAFE PROVISION. As soon as
practicable after the close of each Plan Year, the Committee shall determine
whether the Actual Deferral Percentage for the Highly Compensated Employees
would exceed the limitation set forth in Section A.2.3. If the limitation would
be exceeded for a Plan Year, before the close of the following Plan Year (a) the
amount of Excess 401(k) Contributions for that Plan Year (and any income
allocable to those contributions as calculated in the specific manner required
by Section A.3.5) shall be distributed or (b) the Employer may make a Qualified
Nonelective Employer Contribution which it elects to have treated as a Section
401(k) Contribution.

         The amount of Excess 401(k) Contributions to be distributed shall be
determined in the following manner:

         First, the Plan will determine how much the Actual Deferral Ratio of
the Highly Compensated Employee with the highest Actual Deferral Ratio would
have to be reduced to satisfy the Actual Deferral Percentage Test or cause such
Actual Deferred Ratio to equal the Actual Deferral Ratio of the Highly
Compensated Employee with the next highest Actual Deferred Ratio. If a lesser
reduction would enable the Plan to satisfy the Actual Deferral Percentage Test,
only the lesser reduction may be made. Second, this process is repeated until
the Actual Deferral Percentage Test is satisfied. The amount of Excess 401(k)
Contributions is

                                      A-6
<PAGE>   48

equal to the sum of these hypothetical reductions multiplied, in each case, by
the Highly Compensated Employee's Annual Compensation.

         Then, the total amount of Excess 401(k) Contributions shall be
distributed on the basis of the respective amounts attributable to each Highly
Compensated Employee. The Highly Compensated Employees subject to the actual
distribution are determined using the "dollar leveling method." The Salary
Deferral Contributions of the Highly Compensated Employee with the greatest
dollar amount of Salary Deferral Contributions and other contributions treated
as Section 401(k) Contributions for the Plan Year are reduced by the amount
required to cause that Highly Compensated Employee's Salary Deferral
Contributions to equal the dollar amount of the Salary Deferral Contributions
and other contributions treated as Section 401(k) Contributions for the Plan
Year of the Highly Compensated Employee with the next highest dollar amount.
This amount is then distributed to the Highly Compensated Employee with the
highest dollar amount. However, if a lesser deduction, when added to the total
dollar amount already distributed under this Section A.3.2 would equal the total
Excess 401(k) Contributions, the lesser reduction shall be distributed. This
process shall be continued until the amount of the Excess 401(k) Contributions
have been distributed. Recharacterized Excess 401(k) Contributions will first be
determined using the ratio leveling method, then the dollar method.

         Qualified Nonelective Employer Contributions will be treated as Section
401(k) Contributions only if: (a) the conditions described in Regulation section
1.401(k)-1(b)(5) are satisfied and (b) they are allocated to Members' Accounts
as of a date within that Plan Year and are actually paid to the Trust no later
than the end of the 12-month period immediately following the Plan Year to which
the contributions relate. If the Employer makes a Qualified Nonelective Employer
Contribution that it elects to have treated as a Section 401(k) Contribution,
the Contribution will be in an amount necessary to satisfy the Actual Deferral
Percentage test and will be allocated first to those Non-Highly Compensated
Employees who had the lowest Actual Deferral Ratio. The Excess 401(k)
Contributions of Highly Compensated Employees will not be recharacterized to the
extent that the recharacterized amounts would exceed the Contribution Percentage
as determined prior to applying the Contribution Percentage limitations.

         Any distributions of the Excess 401(k) Contributions for any Plan Year
are to be made to Highly Compensated Employees on the basis of the amount of
contributions by, or on behalf of, each Highly Compensated Employee. The amount
of Excess 401(k) Contributions to be distributed for any Plan Year must be
reduced by any excess Salary Deferral Contributions previously distributed for
the taxable year ending in the same Plan Year.

         A.3.3 CONTRIBUTION PERCENTAGE FAIL SAFE PROVISION. If the limitation
set forth in Section A.2.4 would be exceeded for any Plan Year any one or more
of the following corrective action shall be taken before the close of the
following Plan Year as determined by the Committee in its sole discretion: (a)
the amount of the Excess Aggregate 401(m) Contributions for that Plan Year (and
any income allocable to those Contributions as calculated in the manner set
forth in Section A.3.5) shall be either distributed, or forfeited to the extent
they are not vested or (b) the Employer may make a QNEC which it elects to have
treated as a Section 401(m) Contribution. Forfeitures of Excess Aggregate 401(m)
Contributions shall be allocated to Members who are Non-Highly Compensated
Employees as if such Contributions were additional Employer Matching
Contributions for the Plan Year.

                                      A-7
<PAGE>   49

         The amount of Excess Aggregate 401(m) Contributions to be distributed
shall be determined in the following manner:

         First, the Plan will determine how much the Actual Contribution Ratio
of the Highly Compensated Employee with the highest Actual Contribution Ratio
would have to be reduced to satisfy the Actual Contribution Percentage Test or
cause such Actual Contribution Ratio to equal the Actual Contribution Ratio of
the Highly Compensated Employee with the next highest Actual Contribution Ratio.
If a lesser reduction would enable the Plan to satisfy the Actual Contribution
Percentage Test, only this lesser reduction may be made. Second, this process is
repeated until the Actual Contribution Percentage Test is satisfied. The amount
of Excess Aggregate 401(m) Contributions is equal to the sum of these
hypothetical reductions multiplied, in each case, by the Highly Compensated
Employee's Annual Compensation.

         Then, the total amount of Excess Aggregate 401(m) Contributions shall
be distributed on the basis of the respective amounts attributable to each
Highly Compensated Employee. The Highly Compensated Employees subject to the
actual distribution are determined using the "dollar leveling method." The
After-Tax Contributions and Matching Contributions of the Highly Compensated
Employee with the greatest dollar amount of After-Tax Contributions and Matching
Contributions and other contributions treated as Section 401(m) Contributions
for the Plan Year are reduced by the amount required to cause that Highly
Compensated Employee's After-Tax and Matching Contributions and other
contributions treated as Section 401(m) Contributions for the Plan Year to equal
the dollar amount of After-Tax and Matching Contributions and other
contributions treated as Section 401(m) Contributions for the Plan Year of the
Highly Compensated Employee with the next highest dollar amount. This amount is
then distributed to the Highly Compensated Employee with the highest dollar
amount. However, if a lesser reduction, when added to the total dollar amount
already distributed under this Section A.3.3., would equal the total Excess
Aggregate 401(n) Contributions, the lesser reduction amount shall be
distributed. This process shall be continued until the amount of the Excess
Aggregate 401(m) Contributions have been distributed.

         The corrective actions take under this Section A.3.3 must satisfy the
requirements of section 401(a)(4) of the Code. After correction, each level of
Employer Matching Contributions must be currently and effectively available to a
group of employees that satisfies the minimum coverage requirements of section
410(b) of the Code. A method under which employee contributions are distributed
to highly compensated employees to the extent necessary to meet the requirements
of section 401(m)(2) while matching contributions attributable to such employee
contributions remain allocated to the employee's account will not meet the
requirement of section 401(a)(4).

         A.3.4 ALTERNATIVE LIMITATION FAIL SAFE. As soon as practicable after
the close of each Plan Year, the Committee shall determine whether the
alternative limitation would be exceeded. If the limitation would be exceeded
for any Plan Year, before the close of the following Plan Year the Actual
Deferral Percentage or Contribution Percentage of the eligible Highly
Compensated Employees, or a combination of both, shall be reduced by
distributions made in the manner described in the Regulations. These
distributions shall be in addition to and not in lieu of distributions required
for Excess 401(k) Contributions and Excess Aggregate 401(m) Contributions.

                                      A-8
<PAGE>   50

         A.3.5 INCOME ALLOCABLE TO EXCESS 401(k) CONTRIBUTIONS AND EXCESS
AGGREGATE 401(m) CONTRIBUTIONS. The income allocable to Excess 401(k)
Contributions for the Plan Year shall be determined by multiplying the income
for the Plan Year allocable to Section 401(k) Contributions by a fraction. The
numerator of the fraction shall be the amount of Excess 401(k) Contributions
made on behalf of the Member for the Plan Year. The denominator of the fraction
shall be the Member's total Account balance attributable to Section 401(k)
Contributions as of the beginning of the Plan Year plus the Member's Section
401(k) Contributions for the Plan Year. The income allocable to Excess Aggregate
401(m) Contributions for a Plan Year shall be determined by multiplying the
income for the Plan Year allocable to Section 401(m) Contributions by a
fraction. The numerator of the fraction shall be the amount of Excess Aggregate
401(m) Contributions made on behalf of the Member for the Plan Year. The
denominator of the fraction shall be the Member's total Account balance
attributable to Section 401(m) Contributions as of the beginning of the Plan
Year plus the Member's Section 401(m) Contributions for the Plan Year.

                       PART A.4 LIMITATION ON ALLOCATIONS

         A.4.1 BASIC LIMITATION ON ALLOCATIONS. The Annual Additions which may
be credited to a Member's Accounts under the Plan for any Limitation Year will
not exceed the Maximum Permissible Amount reduced by the Annual Additions
credited to a Member's Account for the same Limitation Year under any other
qualified defined contribution plans maintained by any Affiliated Employer. If
the Annual Additions with respect to the Member under such other qualified
defined contribution plans are less than the Maximum Permissible Amount and the
Employer Contribution that would otherwise be contributed or allocated to the
Member's Accounts under the Plan would cause the Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed or allocated
under the Plan will be reduced so that the Annual Additions under all qualified
defined contribution plans maintained by any Affiliated Employer for the
Limitation Year will equal the Maximum Permissible Amount. If the Annual
Additions with respect to the Member under such other qualified defined
contribution plans in the aggregate are equal to or greater than the Maximum
Permissible Amount, no amount will be contributed or allocated to the Member's
Account under the Plan for the Limitation Year.

         A.4.2 ESTIMATION OF MAXIMUM PERMISSIBLE AMOUNT. Prior to determining
the Member's actual Annual Compensation for the Limitation Year, the Employer
may determine the Maximum Permissible Amount on the basis of a reasonable
estimation of the Member's Annual Compensation for such Limitation Year,
uniformly determined for all Members similarly situated. As soon as is
administratively feasible after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year shall be determined on the basis of
the Member's actual Annual Compensation for such Limitation Year.

         A.4.3 ATTRIBUTION OF EXCESS AMOUNTS. If a Member's Annual Additions
under the Plan and all other qualified defined contribution plans maintained by
an Affiliated Employer result in an Excess Amount, the total Excess Amount shall
be attributed to the Plan.

         A.4.4 TREATMENT OF EXCESS AMOUNTS. If an Excess Amount attributed to
the Plan is held or contributed as a result of or because of (i) the allocation
of forfeitures, (ii) reasonable error in estimating a Member's Considered
Compensation, (iii) reasonable error in calculating

                                       A-9
<PAGE>   51

the maximum Salary Deferral Contribution that may be made with respect to a
Member under section 415 of the Code or (iv) any other facts and circumstances
which the Commissioner of Internal Revenue finds to be justified, the Excess
Amount shall be reduced as follows:

                  (a) First, the Excess Amount shall be reduced to the extent
         necessary by distributing to the Member all Salary Deferral
         Contributions together with their earnings. These distributed amounts
         are disregarded for purposes of the testing and limitations contained
         in this Appendix A.

                  (b) Second, if the Member is still employed by the Employer at
         the end of the Limitation Year, then such Excess Amounts shall not be
         distributed to the Member, but shall be reallocated to a suspense
         account and shall be reapplied to reduce future Employer Contributions
         (including any allocation of forfeitures) under the Plan for such
         Member in the next Limitation Year, and for each succeeding Limitation
         Year, if necessary.

                  (c) If, after application of paragraph (b) of this Section, an
         Excess Amount still exists, and the Member is not still employed by the
         Employer at the end of the Limitation Year, then such Excess Amounts in
         the Member's Accounts shall not be distributed to the Member, but shall
         be reallocated to a suspense account and shall be reapplied to reduce
         future Employer Contributions (including allocation of any
         forfeitures), for all remaining Members in the next Limitation Year and
         each succeeding Limitation Year if necessary.

                  (d) If a suspense account is in existence at any time during
         the Limitation Year pursuant to this Section, it will not participate
         in the allocation of the Trust's investment gains and losses. If a
         suspense account is in existence at any time during a particular
         Limitation Year, all amounts in the suspense account must be allocated
         and reallocated to Members' Accounts before any Employer Contribution
         may be made to the Plan for that Limitation Year. Excess Amounts may
         not be distributed to Members or former Members. If the Plan is
         terminated while a suspense account described in this Section is in
         existence, the amount in such suspense account shall revert to the
         Employer(s) to which it is attributable.

                                      A-10
<PAGE>   52

                                   APPENDIX B

                             TOP-HEAVY REQUIREMENTS

                              PART B.1 DEFINITIONS

         DEFINITIONS. As used herein, the following words and phrases have the
meaning attributed to them below:

         B.1.1 "AGGREGATE ACCOUNTS" means the total of all Account balances
derived from Employer Contributions and Rollover Contributions.

         B.1.2 "AGGREGATION GROUP" means (a) each plan of the Employer or any
Affiliated Employer in which a Key Employee is a Member and (b) each other plan
of the Employer or any Affiliated Employer which enables any plan in (a) to meet
the requirements of either section 401(a)(4) or 410 of the Code. Any Employer
may treat a plan not required to be included in the Aggregation Group as being a
part of the group if the group would continue to meet the requirements of
section 401(a)(4) and 410 of the Code with that plan being taken into account.

         B.1.3 "DETERMINATION DATE" means for a given Plan Year the last day of
the preceding Plan Year or in the case of the first Plan Year the last day of
that Plan Year.

         B.1.4 "KEY EMPLOYEE" means an Employee or former or deceased Employee
or Beneficiary of an Employee who at any time during the Plan Year or any of the
four preceding Plan Years is (a) an officer of an Employer or any Affiliated
Employer having Annual Compensation greater than 50 percent of the annual
addition limitation of section 415(b)(1)(A) of the Code for the Plan Year, (b)
one of the ten employees having Annual Compensation from an Employer or any
Affiliated Employer of greater than 100 percent of the annual addition
limitation of section 415(c)(1)(A) of the Code for the Plan Year and owning or
considered as owning (within the meaning of section 318 of the Code) the largest
interest in an Employer or any Affiliated Employer, treated separately, (c) a
Five Percent Owner of an Employer or any Affiliated Employer, treated
separately, or (d) a one percent owner of an Employer or any Affiliated
Employer, treated separately, having Annual Compensation from an Employer or any
Affiliated Employer of more than $150,000.00. For this purpose no more than 50
employees or, if lesser, the greater of three employees or ten percent of the
employees shall be treated as officers. Section 416(i) of the Code shall be used
to determine percentage of ownership. For the purpose of the test set out in (b)
above, if two or more employees have the same interest in an Employer, the
employee with the greater Annual Compensation from the Employer shall be treated
as having the larger interest.

         B.1.5 "NON-KEY EMPLOYEE" means any Employee who is not a Key Employee.

         B.1.6 "TOP-HEAVY PLAN" means any plan which has been determined to be
top-heavy under the test described in Appendix B of the Plan.

                                      B-1
<PAGE>   53

                              PART B.2 APPLICATION

         B.2.1 APPLICATION. The requirements described in this Appendix B shall
apply to each Plan Year that the Plan is determined to be a Top-Heavy Plan.

         B.2.2 TOP-HEAVY TEST. If on the Determination Date the Aggregate
Accounts of Key Employees in the Plan exceed 60 percent of the Aggregate
Accounts of all Employees in the Plan, the Plan shall be a Top-Heavy Plan for
that Plan Year. In addition, if the Plan is required to be included in an
Aggregation Group and that group is a top-heavy group, the Plan shall be treated
as a Top-Heavy Plan. An Aggregation Group is a top-heavy group if on the
Determination Date the sum of (a) the present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans in the Aggregation
Group which contains the Plan, plus (b) the total of all of the accounts of Key
Employees under all defined contribution plans included in the Aggregation Group
(which contains the Plan) is more than 60 percent of a similar sum determined
for all employees covered in the Aggregation Group which contains the Plan.

         In applying the above tests, the following rules shall apply:

                  (a) in determining the present value of the accumulated
         accrued benefits for any Employee or the amount in the account of any
         Employee, the value or amount shall be increased by all distributions
         made to or for the benefit of the Employee under the Plan during the
         five-year period ending on the Determination Date;

                  (b) all rollover contributions made after December 31, 1983 by
         the Employee to the Plan shall not be considered by the Plan for either
         test;

                  (c) if an Employee is a Non-Key Employee under the plan for
         the Plan Year but was a Key Employee under the plan for another prior
         Plan Year, his Account shall not be considered; and

                  (d) benefits shall not be taken into account in determining
         the top-heavy ratio for any Employee who has not performed services for
         the Employer during the last five-year period ending upon the
         Determination Date.

         B.2.3 VESTING RESTRICTIONS IF PLAN BECOMES TOP-HEAVY. If a Member has
at least one Hour of Service during a Plan Year when the Plan is a Top-Heavy
Plan, he shall either vest under each of the normal vesting provisions of the
Plan or under the following vesting schedule, whichever is more favorable:

<TABLE>
<CAPTION>

                                                                                   Percentage of Amount Vested
                                                                                     In Accounts Containing
Completed Years of Active Service                                                    Employer Contributions
                                                                                   ---------------------------
<S>                                                                                <C>
Less than two years.....................................................                          0
Two years but less than three years.....................................                         20
Three years but less than four years....................................                         40
Four years but less than five years.....................................                         60
Five years but less than six years......................................                         80
Six years or more.......................................................                        100
</TABLE>

                                       B-2
<PAGE>   54

If the Plan ceases to be a Top-Heavy Plan, this requirement shall no longer
apply. After that date, the normal vesting provisions of the Plan shall be
applicable to all subsequent Contributions by the Employer.

         B.2.4 MINIMUM CONTRIBUTIONS IF PLAN BECOMES TOP-HEAVY. If the Plan is a
Top-Heavy Plan and the normal allocation of the Employer Contribution and
forfeitures is less than three percent of any Non-Key Employee Member's Annual
Compensation, the Committee, without regard to the normal allocation procedures,
shall allocate the Employer Contribution and the forfeitures among the Members
who are in the employ of the Employer at the end of the Plan Year in proportion
to each Member's Annual Compensation as compared to the total Annual
Compensation of all Members for that Plan Year until each Non-Key Employee
Member has had an amount equal to the lesser of (i) the highest rate of
Contribution applicable to any Key Employee, or (ii) three percent of his Annual
Compensation allocated to his Account. At that time, any more Employer
Contributions or forfeitures shall be allocated under the normal allocation
procedures described earlier in the Plan. Salary Deferral Contributions made on
behalf of Key Employees are included in determining the highest rate of Employer
Contributions. Salary Deferral Contributions made on behalf of Non-Key Employees
are not included for that purpose. Amounts that may be treated as Section 401(k)
Contributions made on behalf of Non-Key Employees may not be included in
determining the minimum contribution required under this Section to the extent
that they are treated as Section 401(k) Contributions for purposes of the Actual
Deferral Percentage test.

         In applying this restriction, the following rules shall apply:

                  (a) Each Employee who is eligible for membership (without
         regard to whether he has made mandatory contributions, if any are
         required, or whether his compensation is less than a stated amount)
         shall be entitled to receive an allocation under this Section; and

                  (b) All defined contribution plans required to be included in
         the Aggregation Group shall be treated as one plan for purposes of
         meeting the three percent maximum; this required aggregation shall not
         apply if the Plan is also required to be included in an Aggregation
         Group which includes a defined benefit plan and the Plan enables that
         defined benefit plan to meet the requirements of sections 401(a)(4) or
         410 of the Code.

         B.2.5 DISREGARD OF GOVERNMENT PROGRAMS. If the Plan is a Top-Heavy
Plan, it must meet the vesting and benefit requirements described in this
Article without taking into account contributions or benefits under Chapter 2 of
the Code (relating to the tax on self-employment income), Chapter 21 of the Code
(relating to the Federal Insurance Contributions Act), Title II of the Social
Security Act, or any other Federal or State law.

                                      B-3
<PAGE>   55

         B.2.6 RESTRICTION IF PLAN BECOMES SUPER TOP-HEAVY. For Plan Years
beginning before January 1, 2000, the Plan is a super Top-Heavy Plan if as of
the Determination Date the Plan would continue to meet the test specified in
Section B.2.2 of this Appendix B for being a Top-Heavy Plan, if 90 percent were
substituted for 60 percent. In any Plan Year that the Plan is a super Top-Heavy
Plan, the limitations in section 415 of the Code and Appendix A of the Plan
shall be applied by substituting the number "1.00" for the number "1.25"
wherever it appears therein. Such substitution shall not cause a reduction in
any accrued benefit attributable to contributions for a Plan Year prior to the
Plan Year in which the Plan is a super Top-Heavy Plan.

                                      B-4
<PAGE>   56

                                   APPENDIX C

                           ADMINISTRATION OF THE PLAN

         C.1 APPOINTMENT, TERM, RESIGNATION, AND REMOVAL. The Board shall
appoint an Committee of not less than two persons, the members of which shall
serve until their resignation, death, or removal. The Sponsor shall notify the
Trustee in writing of its composition from time to time. Any member of the
Committee may resign at any time by giving written notice of such resignation to
the Sponsor. Any member of the Committee may be removed by the Board, with or
without cause. Vacancies in the Committee arising by resignation, death,
removal, or otherwise shall be filled by such persons as may be appointed by the
Board.

         C.2 POWERS. The Committee shall have exclusive responsibility for the
administration of the Plan, according to the terms and provisions of this
document, and shall have all powers necessary to accomplish such purposes,
including, but not by way of limitation, the right, power, and authority:

                  (a) to make rules and regulations for the administration of
         the Plan which are not inconsistent with the terms and provisions
         thereof, provided such rules and regulations are evidenced in writing;

                  (b) to construe all terms, provisions, conditions, and
         limitations of the Plan; and its construction thereof made in good
         faith and without discrimination in favor of or against any Member or
         former Member shall be final and conclusive on all parties at interest;

                  (c) to correct any defect, supply any omission, or reconcile
         any inconsistency which may appear in the Plan in such manner and to
         such extent as it shall deem expedient to carry the Plan into effect
         for the greatest benefit of all parties at interest, and its judgment
         in such matters shall be final and conclusive as to all parties at
         interest;

                  (d) to select, employ, and compensate from time to time such
         consultants, actuaries, accountants, attorneys, and other agents and
         employees as the Committee may deem necessary or advisable for the
         proper and efficient administration of the Plan, and any agent, firm,
         or employee so selected by the Committee may be a disqualified person,
         but only if the requirements of section 4975(d) of the Code have been
         met;

                  (e) to resolve all questions relating to the eligibility of
         Employees to become Members, and to determine the period of Active
         Service and the amount of Considered Compensation upon which the
         benefits of each Member shall be calculated;

                  (f) to resolve all controversies relating to the
         administration of the Plan, including but not limited to (1)
         differences of opinion arising between the Employer and a Member or
         former Member, and (2) any questions it deems advisable to determine in
         order to promote the uniform and nondiscriminatory administration of
         the Plan for the benefit of all parties at interest;

                                      C-1
<PAGE>   57

                  (g) to direct and instruct or to appoint an investment manager
         or managers which would have the power to direct and instruct the
         Trustee in all matters relating to the preservation, investment,
         reinvestment, management, and disposition of the Trust; provided,
         however, that the Committee shall have no authority that would prevent
         the Trustee from being an "agent independent of the issuer," as that
         term is defined in Rule 10b-18 promulgated under the Securities
         Exchange Act of 1934, at any time that the Trustee's failure to
         maintain such status would result in the Sponsor or any other person
         engaging in a "manipulative or deceptive device or contrivance" under
         the provisions of Rule 10b-6 of such Act;

                  (h) to direct and instruct the Trustee in all matters relating
         to the payment of Plan benefits and to determine a Member's or former
         Member's entitlement to a benefit should he appeal a denial of his
         claim for a benefit or any portion thereof; and

                  (i) to delegate such of its clerical and recordation duties
         under the Plan as it may deem necessary or advisable for the proper and
         efficient administration of the Plan.

         C.3 ORGANIZATION. The Committee shall select from among its members a
chairman, who shall preside at all of its meetings, and shall select a
secretary, without regard as to whether that person is a member of that
Committee, who shall keep all records, documents, and data pertaining to its
supervision of the administration of the Plan.

         C.4 QUORUM AND MAJORITY ACTION. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at any meeting will decide any
question brought before that meeting. In addition, the Committee may decide any
question by a vote, taken without a meeting, of a majority of its members.

         C.5 SIGNATURES. The chairman, the secretary, and any one or more of the
members of the Committee to which the Committee has delegated the power, shall
each, severally, have the power to execute any document on behalf of the
Committee, and to execute any certificate or other written evidence of the
action of the Committee. The Trustee, after being notified of any such
delegation of power in writing, shall thereafter accept and may rely upon any
document executed by such member or members as representing the action of the
Committee until the Committee files with the Trustee a written revocation of
that delegation of power.

         C.6 DISQUALIFICATION OF COMMITTEE MEMBERS. A member of the Committee
who is also a Member of the Plan shall not vote or act upon any matter relating
solely to himself, unless he is the sole member of the Committee.

         C.7 DISCLOSURE TO MEMBERS. The Committee shall make available to each
Member, former Member, and Beneficiary for his examination such records,
documents, and other data as are required under ERISA, but only at reasonable
times during business hours. No Member, former Member, or Beneficiary shall have
the right to examine any data or records reflecting the compensation paid to any
other Member, former Member, or Beneficiary, and the Committee shall not be
required to make any data or records available other than those required by
ERISA.

                                       C-2
<PAGE>   58

         C.8 STANDARD OF PERFORMANCE. The Committee and each of its members
shall use the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such
matters would use in conducting his business as the administrator of the Plan;
shall, when exercising its power to direct investments, diversify the
investments of the Plan so as to minimize the risk of large losses, unless under
the circumstances it is clearly prudent not to do so; and shall otherwise act in
accordance with the provisions of the Plan and ERISA.

         C.9 LIABILITY OF COMMITTEE AND LIABILITY INSURANCE. No member of the
Committee shall be liable for any act or omission of any other member of the
Committee, the Trustee, any investment manager, or any Member who directs the
investment of his Account or other agent appointed by the Committee except to
the extent required by the terms of ERISA, and any other applicable state or
federal law, which liability cannot be waived. No member of the Committee shall
be liable for any act or omission on his own part except to the extent required
by the terms of ERISA, and any other applicable state or federal law, which
liability cannot be waived. In this connection, each provision hereof is
severable and if any provision is found to be void as against public policy, it
shall not affect the validity of any other provision hereof.

         Further, it is specifically provided that the Trustee may, at the
direction of the Committee, purchase out of the Trust assets hereof insurance
for the members of the Committee and any other fiduciaries appointed by the
Committee, and for the Trust itself to cover liability or losses occurring by
reason of the act or omission of any one or more of the members of the Committee
or any other fiduciary appointed by them under the Plan, provided such insurance
permits recourse by the insurer against the members of the Committee or the
other fiduciaries concerned in the case of a breach of a fiduciary obligation by
one or more members of the Committee or other fiduciary covered thereby.

         C.10 BONDING. No member of the Committee shall be required to give bond
for the performance of his duties hereunder unless required by a law which
cannot be waived.

         C.11 COMPENSATION. The Committee shall serve without compensation for
their services, but shall be reimbursed by the Employers for all expenses
properly and actually incurred in the performance of their duties under the Plan
unless the Employers elect to have such expenses paid out of the Trust assets.

         C.12 PERSONS SERVING IN DUAL FIDUCIARY ROLES. Any person, group of
persons, corporations, firm, or other entity may serve in more than one
fiduciary capacity with respect to the Plan, including the ability to serve both
as a successor trustee and as a member of the Committee.

         C.13 ADMINISTRATOR. For all purposes of ERISA, the administrator of the
Plan within the meaning of ERISA shall be the Sponsor. The Sponsor shall have
final responsibility for compliance with all reporting and disclosure
requirements imposed with respect to the Plan under any federal or state law, or
any regulations promulgated thereunder.

         C.14 NAMED FIDUCIARY. The members of the Committee shall be the "named
fiduciary" for purposes of section 402(a)(1) of ERISA, and as such shall have
the authority to

                                      C-3

<PAGE>   59

control and manage the operation and administration of the Plan, except to the
extent such authority and control is allocated or delegated to other parties
pursuant to the terms of the Plan.

         C.15 STANDARD OF JUDICIAL REVIEW OF COMMITTEE ACTIONS. The Committee
has full and absolute discretion in the exercise of each and every aspect of its
authority under the Plan, including without limitation, the authority to
determine any person's right to benefits under the Plan, the correct amount and
form of any such benefits; the authority to decide any appeal; the authority to
review and correct the actions of any prior administrative committee; and all of
the rights, powers, and authorities specified in this Appendix and elsewhere in
the Plan. Notwithstanding any provision of law or any explicit or implicit
provision of this document or, any action taken, or ruling or decision made, by
the Committee in the exercise of any of its powers and authorities under the
Plan will be final and conclusive as to all parties other than the Sponsor or
Trustee, including without limitation all Members, former Members, and
Beneficiaries, regardless of whether the Committee or one or more members
thereof may have an actual or potential conflict of interest with respect to the
subject matter of such action, ruling, or decision. No such final action,
ruling, or decision of the Committee will be subject to de novo review in any
judicial proceeding; and no such final action, ruling, or decision of the
Committee may be set aside unless it is held to have been arbitrary and
capricious by a final judgment of a court having jurisdiction with respect to
the issue.

         C.16 INDEMNIFICATION OF COMMITTEE BY THE SPONSOR. The Sponsor shall
indemnify and hold harmless the Committee, the Committee members, and any
persons to whom the Committee has allocated or delegated its responsibilities in
accordance with the provisions hereof, as well as any other fiduciary who is
also an officer, director, or Employee of an Employer, and hold each of them
harmless from and against all claims, loss, damages, expense, and liability
arising from their responsibilities in connection with the administration of the
Plan which is not otherwise paid or reimbursed by insurance, unless the same
shall result from their own willful misconduct.

                                      C-4
<PAGE>   60

                                   APPENDIX D

                                     FUNDING

         D.1 BENEFITS PROVIDED SOLELY BY TRUST. All benefits payable under the
Plan shall be paid or provided for solely from the Trust, and the Employer
assumes no liability or responsibility therefor.

         D.2 FUNDING OF PLAN. The Plan shall be funded by one or more separate
Trusts. If more than one Trust is used, each Trust shall be designated by the
name of the Plan followed by a number assigned by the Committee at the time the
Trust is established.

         D.3 INCORPORATION OF TRUST. Each Trust is a part of the Plan. All
rights or benefits which accrue to a person under the Plan shall be subject also
to the terms of the agreements creating the Trust or Trusts and any amendments
to them which are not in direct conflict with the Plan.

         D.4 AUTHORITY OF TRUSTEE. Each Trustee shall have full title and legal
ownership of the assets in the separate Trust which, from time to time, is in
his separate possession. No other Trustee shall have joint title to or joint
legal ownership of any asset in one of the other Trusts held by another Trustee.
Each Trustee shall be governed separately by the trust agreement entered into
between the Employer and that Trustee and the terms of the Plan without regard
to any other agreement entered into between any other Trustee and the Employer
as a part of the Plan.

         D.5 ALLOCATION OF RESPONSIBILITY. To the fullest extent permitted under
section 405 of ERISA, the agreements entered into between the Employer and each
of the Trustees shall be interpreted to allocate to each Trustee its specific
responsibilities, obligations and duties so as to relieve all other Trustees
from liability either through the agreement, Plan or ERISA, for any act of any
other Trustee which results in a loss to the Plan because of his act or failure
to act.

         D.6 TRUSTEE'S FEES AND EXPENSES. The Trustee shall receive for its
services as Trustee hereunder the compensation which from time to time may be
agreed upon by the Sponsor and the Trustee. All of such compensation, together
with the expenses incurred by the Trustee in connection with the administration
of this Trust, including fees for legal services rendered to the Trustee, all
other charges and disbursements of the Trustee, and all other expenses of the
Plan shall be charged to and deducted from the Trust assets, unless the Sponsor
elects in writing to have any part or all of such compensation, expenses,
charges, and disbursements paid directly by the Sponsor. The Trustee shall
deduct from and charge against the Trust assets any and all taxes paid by it
which may be levied or assessed upon or in respect of the Trust hereunder or the
income thereof, and shall equitably allocate the same among the several Members
and former Members.

                                      D-1

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