Document:

EXHIBIT 10.3

                                  PIPER IMPACT
                                   401(K) PLAN
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                               TABLE OF CONTENTS

                                                                       SECTION

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 of Directors..................................................1.07
      Code  ..............................................................1.08
      Committee...........................................................1.09
      Considered Compensation.............................................1.10
      Contribution........................................................1.11
      Direct Rollover.....................................................1.12
      Disability..........................................................1.13
      Distributee.........................................................1.14
      Eligible Retirement Plan............................................1.15
      Eligible Rollover Distribution......................................1.16
      Employee............................................................1.17
      Employer or Employers...............................................1.18
      ERISA ..............................................................1.19
      Excess Deferral.....................................................1.20
      Five Percent Owner..................................................1.21
      Highly Compensated Employee.........................................1.22
      Hour of Service.....................................................1.23
      Leased Employee.....................................................1.24
      Matched Salary Deferral Contribution................................1.25
      Member..............................................................1.26
      Non-Highly Compensated Employee.....................................1.27
      Period of Service...................................................1.28
      Period of Severance.................................................1.29
      Plan  ..............................................................1.30
      Plan Year...........................................................1.31
      Qualified Domestic Relations Order..................................1.32
      QJSA  ..............................................................1.33
      QPSA  ..............................................................1.34
      Regulation..........................................................1.35
      Required Beginning Date.............................................1.36
      Retirement Age......................................................1.37
      Rollover Contribution...............................................1.38
      Separation From Service.............................................1.39

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      Service.............................................................1.40
      Severs Service......................................................1.41
      Sponsor.............................................................1.42
      Sponsor Stock.......................................................1.43
      Spouse..............................................................1.44
      Transferred.........................................................1.45
      Trust ..............................................................1.46
      Trustee.............................................................1.47
      Trust Fund..........................................................1.48
      Valuation Date......................................................1.49

ARTICLE II - ACTIVE SERVICE

      When Active Service Begins..........................................2.01
      Aggregation of Service..............................................2.02
      Periods of Service of Less Than One Year............................2.03
      Service Prior to Severance..........................................2.04
      Periods of Severance Due to Child Birth or Adoption.................2.05
      Transfers...........................................................2.06
      Employment Records Conclusive.......................................2.07
      Service Credit Required under Federal Law...........................2.08
      Special Transitional Rule...........................................2.09
      Credit for Service With Piper Impact, Inc. a Tennessee
            Corporation...................................................2.10

ARTICLE III - ELIGIBILITY

      Eligibility Requirements............................................3.01
      Eligibility Upon Reemployment.......................................3.02
      Cessation of Participation..........................................3.03
      Recommencement of Participation.....................................3.04

ARTICLE IV - CONTRIBUTIONS

      Salary Deferral Contributions.......................................4.01
      Employer Matching Contributions.....................................4.02
      Supplemental Contributions..........................................4.03
      Rollover Contributions and Plan-to-Plan Transfers...................4.04
      Qualified Nonelective Employer Contributions........................4.05
      Restoration Contributions...........................................4.06
      Nondeductible Contributions Not Required............................4.07
      Form of Payment of Contributions....................................4.08
      Deadline for Payment of Employer Contributions......................4.09
      Return of Contributions for Mistake, Disqualification or
            Disallowance of Deduction.....................................4.10

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ARTICLE V - ALLOCATION AND VALUATION OF ACCOUNTS

      Information Statements from Employer................................5.01
      Allocation of Salary Deferral Contribution..........................5.02
      Allocation of Matching Employer Contribution........................5.03
      Allocation of Supplemental Contribution.............................5.04
      Allocation of Qualified Nonelective Employer Contribution...........5.05
      Allocation of Dividends on Sponsor Stock............................5.06
      Sponsor Stock Splits................................................5.07
      Valuation of Accounts...............................................5.08
      Allocation of Forfeitures...........................................5.09
      Restoration of Forfeited Amounts....................................5.10
      No Vesting Unless Otherwise Prescribed..............................5.11

ARTICLE VI - BENEFITS

      Valuation of Accounts for Withdrawals and Distributions.............6.01
      Death Benefit.......................................................6.02
      Retirement Benefit..................................................6.03
      Disability Benefit..................................................6.04
      Severance Benefit...................................................6.05
      Distributions Pursuant to Qualified Domestic Relations Orders.......6.06
      Financial Hardship Distributions....................................6.07
      Age 591/2Distributions..............................................6.08
      Loans ..............................................................6.09
      Forfeiture by Lost Members or Beneficiaries.........................6.10
      Forfeiture on Termination of Participation..........................6.11
      Claims Procedure....................................................6.12
      Normal Form of Distributions........................................6.13
      Direct Rollover Option..............................................6.14
      Choice of Distribution Methods......................................6.15
      Single Sum Payments of Small Amounts Upon Separation From Service...6.16
      Consent to Distributions Upon Separation From Service...............6.17
      Qualified Joint and Survivor Annuity Requirements...................6.18
      Qualified Preretirement Survivor Annuity Requirements...............6.19
      Information Provided to Members.....................................6.20
      Optional Forms of Distributions.....................................6.21
      Time of Distributions...............................................6.22
      Designation of Beneficiary..........................................6.23
      Distributions to Disabled Persons...................................6.24

ARTICLE VII - ADMINISTRATION OF THE PLAN

      Appointment, Term of Service & Removal..............................7.01

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      Powers..............................................................7.02
      Organization........................................................7.03
      Quorum and Majority Action..........................................7.04
      Signatures..........................................................7.05
      Disqualification of Committee Member................................7.06
      Disclosure to Members...............................................7.07
      Liability of Committee and Liability Insurance......................7.08
      Exemption from Bond.................................................7.09
      Compensation........................................................7.10
      Persons Serving in Dual Fiduciary Roles.............................7.11
      Administrator.......................................................7.12

ARTICLE VIII - TRUST FUND AND CONTRIBUTIONS

      Funding of Plan.....................................................8.01
      Incorporation of Trust..............................................8.02
      Authority of Trustee................................................8.03
      Allocation of Responsibility........................................8.04

ARTICLE IX - ADOPTION OF PLAN BY OTHER EMPLOYERS

      Adoption Procedure..................................................9.01
      No Joint Venture Implied............................................9.02
      All Trust Assets Available to Pay All Benefits......................9.03
      Qualification a Condition Precedent to Adoption and Continued
            Participation.................................................9.04

ARTICLE X - AMENDMENT AND TERMINATION

      Right to Amend and Limitations Thereon.............................10.01
      Mandatory Amendments...............................................10.02
      Withdrawal of Employer.............................................10.03
      Termination of Plan................................................10.04
      Partial or Complete Termination or Complete Discontinuance of
            Contributions................................................10.05
      Continuance Permitted Upon Sale or Transfer of Assets..............10.06

ARTICLE XI - MISCELLANEOUS

      Plan Not an Employment Contract....................................11.01
      Benefits Provided Solely From Trust................................11.02
      Assignments Prohibited.............................................11.03
      Requirements Upon Merger or Consideration of Plans.................11.04
      Gender of Words Used...............................................11.05
      Severability.......................................................11.06
      Reemployed Veterans................................................11.08
      Governing Law......................................................11.09

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      APPENDIX A - LIMITATIONS ON CONTRIBUTIONS

      APPENDIX B - TOP-HEAVY REQUIREMENTS

      APPENDIX C - OPTIONAL FORMS OF DISTRIBUTIONS

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                                  PIPER IMPACT
                                   401(K) PLAN

      THIS AGREEMENT adopted by Piper Impact, Inc., a Delaware corporation (the
"Sponsor"),

                             W I T N E S S E T H:

      WHEREAS, effective January 1, 1995, Piper Impact, Inc., a Tennessee
corporation (the "Prior Employer") established the Piper Impact 401(k) Plan (the
"Plan") which is intended to be a profit sharing plan that satisfies the
requirements of sections 401(a) and 401(k) of the Internal Revenue Code of 1986,
as amended; and

      WHEREAS, effective as of March 29, 1996, the Sponsor purchased
substantially all of the assets of the Prior Employer;

      WHEREAS, on August 9, 1996, the Sponsor assumed sponsorship of the Plan
and the Prior Employer terminated its participation in the Plan; and

      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.
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                                    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 Fund.
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 Fund. Each of the Accounts listed below and any additional
Accounts established by the Committee shall reflect the Contributions or amounts
transferred to the Trust Fund, if any, and the appreciation or depreciation of
the assets in the Trust Fund and the income earned or loss incurred on the
assets in the Trust Fund 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 Employer Contribution Account -- the Employer's
      matching contributions.

            (c) Supplemental Contribution Account -- the Employer's
      discretionary contributions, if any, made pursuant to Section 4.03.

            (d) Qualified Nonelective Employer Contribution Account -- the
      Employer's 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
either eligibility or vesting purposes as calculated under Article II.

      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.

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      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. However, for purposes of Appendix A of the Plan, effective
for Limitation Years beginning before January 1, 1998, "Annual Compensation"
does not include any salary deferral contributions to plan qualified under
section 401(k) of the Code or any amount that is deferred at the election of the
Employee and is not includable in the gross income of the Employee by reason of
section 125 of the Code. Except for purposes of Section 1.1 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 OF DIRECTORS" means the board of directors, the executive
committee or other body given management responsibility for 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 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, and
modified further by excluding the following items (even if includable in gross
income), reimbursements or other expense allowances, fringe benefits (cash and
noncash), moving expenses, deferred compensation, overtime wages, and welfare
benefits. 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.

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      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 -- contributions made by the
      Employer under the Employee's salary deferral agreement.

            (b) Matching Employer Contribution -- matching contributions made by
      the Employer.

            (c) Supplemental Contribution -- contributions made by the Employer
      on discretionary basis pursuant to Section 4.03.

            (d) Qualified Nonelective Employer Contribution -- contributions
      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 - contributions made by a Member which
      consist 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 "DISABILITY" means a mental or physical disability which, in the
opinion of a physician selected by the Committee, shall prevent the Member from
earning a reasonable livelihood with any Affiliated Employer and which can be
expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months and which: (a) was not contracted,
suffered or incurred while the Member was engaged in, or did not result from
having engaged in, a felonious criminal enterprise; (b) did not result from
alcoholism or addiction to narcotics; and (c) did not result from an injury
incurred while a member of the Armed Forces of the United States for which the
Member receives a military pension.

      1.14 "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.

      1.15 "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.

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      1.16 "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; and (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).

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

      1.18 "EMPLOYER" OR "EMPLOYERS" means the Sponsor and any other business
organization which has adopted this Plan.

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

      1.20 "EXCESS DEFERRAL" means that part, if any, of the Salary Deferral
Contribution of a Member for his taxable year which, when added to the amounts
he deferred under other plans or arrangements described in sections 401(k),
408(k) and 403(b) of the Code, exceeds the deferral dollar limitation permitted
by section 402(g) of the Code.

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

      1.22 "HIGHLY COMPENSATED EMPLOYEE" means an Employee of an Employer or 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 for which an Employee is paid or
entitled to payment for the performance of duties for an Affiliated Employer.

      1.24 "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.

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      1.25 "MATCHED SALARY DEFERRAL CONTRIBUTION" means that portion of the
Salary Deferral Contribution attributable to each Member that does not exceed
six percent of the Member's Considered Compensation earned while the Employee
was a Member.

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

      1.27 "NON-HIGHLY COMPENSATED EMPLOYEE" means an Employee of the Employer
who is not a Highly Compensated Employee.

      1.28 "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.

      1.29 "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.

      1.30  "PLAN" means the Plan, including all subsequent amendments.

      1.31  "PLAN YEAR" means the calendar year, the fiscal year of the Plan.

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

      1.33 "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.

      1.34 "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 the surviving Spouse.

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

      1.36  "REQUIRED BEGINNING DATE" means:

            (a) 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 Severs Service; and

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            (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 in which he
      attains age 70 1/2.

      1.37 "RETIREMENT AGE" means the later of time a Member attains age 65 or
the fifth anniversary of the date he commenced participation in the Plan. Once a
Member has attained his Retirement Age he shall have a 100 percent
nonforfeitable interest in his Account balance at all times.

      1.38 "ROLLOVER CONTRIBUTION" means the amount contributed by a Member of
the Plan 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.

      1.39 "SEPARATION FROM SERVICE" means an individual's termination of
employment with an Affiliated Employer without commencing or continuing
employment with any other Affiliated Employer.

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

      1.41 "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.

      1.42 "SPONSOR" means Piper Impact, Inc., a Delaware corporation.

      1.43 "SPONSOR STOCK" means the common stock of Quanex Corporation, a
Delaware corporation, the parent of the Sponsor.

      1.44 "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.

      1.45 "TRANSFERRED" means, when used with respect to an Employee, the
termination of employment with one Employer and the contemporaneous commencement
of employment with another Employer.

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      1.46 "TRUST" means the one or more trust estates 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 "TRUST FUND" means all of the trust estates established under the
terms of the Plan to fund the Plan, whether held to fund a particular group of
Accounts or held to fund all of the Accounts of Members, collectively.

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

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                                  ARTICLE II

                                ACTIVE SERVICE

      2.01 WHEN ACTIVE SERVICE BEGINS. For purposes of eligibility and vesting,
Active Service begins when an Employee first performs an Hour of Service for an
Affiliated Employer. Once an Employee has begun Active Service for purposes of
eligibility or vesting and Severs Service he shall recommence Active Service for
those purposes when he again performs an Hour of Service for an Affiliated
Employer.

      2.02 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 or vesting.

      2.03 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.

      2.04 SERVICE PRIOR TO SEVERANCE. If an Employee Severs Service at a time
when he does not have any vested right to amounts credited to his Matching
Employer Contribution Account or his Supplemental Contribution Account and the
Period of Severance continues for a continuous period of five years or more, the
Period of Service completed by the Employee before the Period of Severance shall
not be taken into account if his Period of Severance equals or exceeds his
Period of Service, whether or not consecutive, completed before the Period of
Severance.

      2.05 PERIODS OF SEVERANCE DUE TO CHILD BIRTH OR ADOPTION. If the period of
time between 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 the
second anniversary of the first day of the absence occurs during or after the
first Plan Year beginning after December 31, 1984, it shall neither be counted
as a Period of Service nor of Severance.

      2.06 TRANSFERS. If an Employee of one Employer is Transferred to the
service of another Employer, his Active Service shall not be interrupted and he
shall continue to be in Active Service for purposes of eligibility, vesting and
allocation of Contributions and/or forfeitures. If an Employee is transferred to
the service of an Affiliated Employer that has not adopted the Plan he will not
Sever Service; however, even though he shall continue to be in Active Service
for eligibility and vesting purposes he shall not receive any allocation of
Contributions or forfeitures.

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

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      2.08 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.

      2.09 SPECIAL TRANSITIONAL RULE. Any person who was an Employee before
March 1, 1997, will have all or a portion of his Active Service figured under
the provisions of the Plan in effect before March 1, 1997, if that method of
calculating service is more beneficial for the Employee than the method
otherwise set out in this Article II.

      2.10 CREDIT FOR SERVICE WITH PIPER IMPACT, INC. A TENNESSEE CORPORATION.
For purposes of determining an Employee's Active Service for eligibility to
participate and vesting, his service with Piper Impact, Inc., a Tennessee
corporation will be counted as Active Service under the Plan.

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                                   ARTICLE III

                                   ELIGIBILITY

      3.01 ELIGIBILITY REQUIREMENTS. Effective April 1, 1997, each Employee
shall be eligible to participate in the Plan beginning on the entry date which
occurs with or next follows the date on which the Employee completes three
months of Active Service. However, all Employees who are included in a unit of
Employees covered by a collective bargaining agreement between the Employees'
representative and the Employer shall be excluded, even if they have 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. 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. The Plan's
entry dates will be January 1, April 1, July 1 and October 1 of each Plan Year.

      3.02 ELIGIBILITY UPON REEMPLOYMENT. If an Employee Severs Service with the
Employer prior to the date he initially begins participating in the Plan, he
shall be eligible to begin participation in this Plan on the later of the date
he would have become a Member if he did not Sever Service or the date on which
he performs an Hour of Service after he Severs Service. Subject to Section 3.03,
once an Employee becomes a Member, his eligibility to participate in the Plan
shall continue until he Severs Service.

      3.03 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 Employer Contributions or forfeitures for
the

                                      III-1
<PAGE>
frozen period. However, his Accounts shall continue to share in any Plan income
allocable to his Accounts during the frozen period of time.

      3.04 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 who, under the terms of the Plan, are eligible to participate.

                                      III-2
<PAGE>
                                   ARTICLE IV

                                  CONTRIBUTIONS

      4.01 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 Fund on account of the Member. 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 Fund. A Member shall be
entitled to prospectively modify his salary deferral agreement at least once a
year. A Member's right to benefits derived from Salary Deferral Contributions
made to the Plan on his behalf shall be nonforfeitable. 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.

      4.02 EMPLOYER MATCHING CONTRIBUTIONS. The Employer shall make an Employer
Matching Contribution in an amount equal to 25 percent of the Matched Salary
Deferral Contributions for all Members.

      4.03 SUPPLEMENTAL CONTRIBUTIONS. The Employer may contribute for any Plan
Year a Supplemental Contribution in such amount, if any, as shall be determined
by the Employer.

      4.04 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 Rollover Contribution Account shall be established for any Employee
who makes a Rollover Contribution.

      4.05 QUALIFIED NONELECTIVE EMPLOYER CONTRIBUTIONS. The Employer may make a
Qualified Nonelective Employer Contribution in such amount, if any, as shall be
determined by the

                                      IV-1
<PAGE>
Employer. A Member's right to benefits derived from Qualified Nonelective
Employer Contributions made to the Plan on his behalf shall be nonforfeitable.
In no event will Qualified Nonelective Employer Contributions be distributed
before Salary Deferral Contributions may be distributed

      4.06 RESTORATION CONTRIBUTIONS. The Employer shall, for each Plan Year,
make a restoration contribution in an amount equal to the sum of (a) such
amount, if any, as shall be necessary to fully restore all Matching Employer
Contribution Accounts and Supplemental Contribution Accounts required to be
restored pursuant to the provisions of Section 5.10, after application of all
forfeitures and any appreciation in the value of the Trust Fund available for
such restoration; plus (b) an amount equal in value to the value of forfeited
benefits described in and payable under Section 6.09.

      4.07 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.

      4.08 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.

      4.09 DEADLINE FOR PAYMENT OF EMPLOYER CONTRIBUTIONS. Salary Deferral
Contributions shall be paid to the Trustee in installments. The installment for
each payroll period shall be paid as soon as administratively feasible, and
shall be in an amount equal to the amount by which all Members' Considered
Compensation was reduced pursuant to salary deferral agreements for such period.
The Matching Employer Contributions, Supplemental Contributions and Qualified
Nonelective Employer Contributions 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
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.

      4.10 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 and their Beneficiaries and the
reasonable expenses of administering the Plan except:

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

            (b) all Contributions are conditioned upon the Plan's initial
      qualification under section 401 of the Code and may be repaid to the
      Employer within one year after the date of denial of the initial
      qualification of the Plan; and

                                      IV-2
<PAGE>
            (c) 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 Fund 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 Account
cannot be reduced to less than the balance that would have been in the Member's
Account had the mistaken amount or the amount disallowed never been contributed.

                                      IV-3
<PAGE>
                                    ARTICLE V

                      ALLOCATION AND VALUATION OF ACCOUNTS

      5.01 INFORMATION STATEMENTS FROM EMPLOYER. As soon as practical after the
last day of each calendar quarter, the Employer shall provide the Committee with
a schedule setting forth the amount of its Salary Deferral Contribution,
Employer Matching Contribution, Supplemental Employer Contribution, Qualified
Nonelective Employer Contribution, 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 paid to each Member, and the amount of
Considered Compensation paid to all its Members. Such schedules shall be
conclusive evidence of such facts.

      5.02 ALLOCATION OF SALARY DEFERRAL CONTRIBUTION. The Committee shall
allocate the Employer's Salary Deferral Contribution among the Employer's
Members by allocating to each such Member the amount by which his Considered
Compensation was reduced pursuant to a salary deferral agreement (as described
in Section 4.1) and shall credit each such Member's share to the Member's Salary
Deferral Contribution Account.

      5.03 ALLOCATION OF MATCHING EMPLOYER CONTRIBUTION. The Committee shall
separately allocate the Employer Matching Contribution 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 Employer Contribution Account.

      5.04 ALLOCATION OF SUPPLEMENTAL CONTRIBUTION. The Committee shall allocate
the Supplemental Contribution among the Employer's Members in the proportion
that the Considered Compensation of each Member for the Plan Year bears to the
total Considered Compensation of all Members for the Plan Year. Each Member's
proportionate share shall be credited to his Supplemental Contribution Account.

      5.05 ALLOCATION OF QUALIFIED NONELECTIVE EMPLOYER CONTRIBUTION. The
Committee shall separately allocate the Qualified Nonelective Employer
Contribution 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.

      5.06 ALLOCATION OF DIVIDENDS ON SPONSOR STOCK. Cash and Sponsor Stock
dividends paid with respect to Sponsor Stock shall be allocated among the
Members and former Members with Account balances in proportion to the number of
shares of Sponsor Stock (of the class with respect to which the dividend is
paid) allocated to Member's or former Member's Account as of the record date for
the dividend.

      5.07 SPONSOR STOCK SPLITS. If the shares of Company Stock are subdivided,
the additional shares acquired by the Trustee upon the subdivision will be
allocated among the Members and former Members with Account balances in
proportion to the number of shares of Sponsor Stock (of

                                      V-1
<PAGE>
the class with respect to which the subdivision is made) allocated to the
Member's or former Member's Account as of the record date for the subdivision.

      5.08 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 Fund 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.

      5.09 ALLOCATION OF FORFEITURES. At the time a forfeiture occurs, the
amount forfeited will first be used to reinstate any Account required to be
reinstated under Section 5.10, and any remaining amount will be applied to the
payment of Matching Employer Contributions or Supplemental Contributions.

      5.10 RESTORATION OF FORFEITED AMOUNTS. If a Member or former Member who
forfeited any portion of his Matching Employer Contribution Account or his
Supplemental Contribution Account pursuant to the provisions of Section 6.10
resumes employment covered under the Plan, then the following provisions shall
apply:

            (a) REPAYMENT REQUIREMENT. The Member's Employer Matching
      Contribution Account and Supplemental Contribution Account shall be
      restored if he repays to the Trustee the full amount of any distribution
      from the Employer Matching Contribution Account and Supplemental
      Contribution Account with respect to which the forfeiture arose. Such
      repayment must be made prior to the earlier of (a) the date on which he
      incurs a Period of Severance of five years, or (b) the fifth anniversary
      of the first date on which the Member is subsequently re-employed by the
      Employer.

            (b) MEMBERS WITH NO VESTED INTEREST. If a Member or former Member
      who forfeited any portion of his Employer Matching Contribution Account
      pursuant to the provisions of Section 6.10 received no distribution from
      his Employer Matching Contribution Account or his Supplemental
      Contribution Account as a result of his termination of participation in
      the Plan (because his vested percentage was zero), that Account will be
      restored if, and only if, he resumes employment covered under the Plan
      prior to incurring a Period of Severance of five years.

            (c) AMOUNT RESTORED. The amount to be restored under the preceding
      provisions of this Section shall be the dollar value of the amount in the
      Member's Employer Matching Contribution Account and Supplemental
      Contribution Account, both the amount distributed and the amount
      forfeited, unadjusted by any subsequent gains or losses. The Member's

                                      V-2
<PAGE>
      Employer Matching Contribution Account or his Supplemental Contribution
      Account balance shall be restored as soon as administratively practicable
      after the later of the date the Member resumes employment covered under
      the Plan or the date on which any required repayment is completed. No
      distribution shall be made to a Member from his Employer Matching
      Contribution Account or his Supplemental Contribution Account as a result
      of a prior Separation From Service after the restoration of such Account
      has been effectuated.

            (d) NO OTHER BASIS FOR RESTORATION. Except as otherwise provided
      above, a Member's Employer Matching Contribution Account and Supplemental
      Contribution Account shall not be restored upon resumption of employment
      covered by the Plan. Any portion of the Trust Fund attributable to Years
      of Service prior to resumption of employment by a Member whose Employer
      Matching Contribution Account and Supplemental Contribution Account has
      not been restored shall be held and distributed in accordance with
      applicable provisions of the Plan and elections made thereunder. A
      separate Employer Matching Contribution Account and Supplemental
      Contribution Account shall be established and maintained for Employer
      Matching Contributions and Supplemental Contributions allocable to such a
      Member after his resumption of employment covered by the Plan.

      5.11 NO VESTING 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 Fund except at the times and upon the terms and
conditions herein set forth.

                                      V-3
<PAGE>
                                   ARTICLE VI

                                    BENEFITS

      6.01 VALUATION OF ACCOUNTS FOR WITHDRAWALS AND DISTRIBUTIONS. For the
purpose of making a distribution or withdrawal, a Member's Accounts shall be his
Accounts as valued as of the Valuation Date which is coincident with or next
follows the event which caused the distribution or withdrawal, adjusted for
Contributions, distributions and withdrawals, if any, made between the Valuation
Date and that event.

      6.02 DEATH BENEFIT. Subject to Sections 6.18 and 6.19 and Appendix C, if a
Member or former Member dies, the death benefit payable to his Beneficiary shall
be 100 percent of the remaining amount in all of his Accounts as of the day he
dies.

      6.03 RETIREMENT BENEFIT. An Employee may retire on the first day of any
month after he attains his Retirement Age. If a Member retires, he is entitled
to receive 100 percent of all of his Accounts as of the day he retires.

      6.04 DISABILITY BENEFIT. Upon an Employee's Separation From Service due to
a Disability, he is entitled to receive 100 percent of all of his Accounts as of
the day he terminated because of his Disability.

      6.05 SEVERANCE BENEFIT. Upon an Employee's Separation From Service for any
reason other than death, retirement after attaining Retirement Age or
disability, he is entitled to receive (a) 100 percent of all of his Accounts,
except his Matching Employer Contribution Account and Supplemental Contribution
Account, and (b) that percentage of his Matching Employer Contribution Account
and Supplemental Contribution Account, if any, as shown in the vesting schedule
below, as of the date of his Separation From Service.

                                                 Percentage of Amount Invested
                                                    In Accounts Containing
Completed Years of Active Service                   Employer Contributions
---------------------------------                   ----------------------

          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%

      Prior to a Member's Separation From Service, he will have a nonforfeitable
interest in the portion of the Matching Employer Contributions and Supplemental
Contributions specified in the above vesting schedule.

                                      VI-1
<PAGE>
      6.06 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.

      6.07  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, his Rollover Account, his vested interests in his Matching
      Employer 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 all other qualified and nonqualified plans of deferred
      compensation maintained by the Employer, including stock option plans,

                                      VI-2
<PAGE>
      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 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 Rollover Account, then from his Matching Employer Contribution
      Account, then from his Supplemental Contribution 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 Qualified Nonelective Employer Contribution 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 6.07
      will normally be paid in lump sums. However, the QJSA requirements of
      Section 6.13 will apply to any distributions made under this Section 6.07
      on or after the date as of which an Employer elects to treat the Plan and
      the Quanex Corporation Salaried Employees' Pension Plan as one plan for
      purposes of section 410(b) of the Code.

      6.08 AGE 59 1/2 DISTRIBUTIONS. Prior to his Separation From Service, a
Member may withdraw part or all of his vested Account balance on or after the
date that he attains age 59 1/2 . Distributions pursuant to this Section 6.08
will normally be paid in lump sums. However, the QJSA requirements of Section
6.13 will apply to any distributions made under this Section 6.08 on or after
the date as of which an Employer elects to treat the Plan and the Quanex
Corporation Salaried Employees Pension Plan as one plan for purposes of section
410(b) of the Code.

      6.09 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 $1,000.00.

                                      VI-3
<PAGE>
            (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 vested Account balance 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. In determining the proper rate of
      interest to be charged, at the time any loan is made or renewed, the Loan
      Committee will contact at least two of the largest banks in the geographic
      location in which the Member or Beneficiary resides to determine what
      interest rate the banks would charge for a similar loan taking into
      account the collateral offered.

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

            (h) The term of the loan will not be less than 18 months. 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 a required payment within 30 days of
      the due date set forth in the loan agreement, 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 Contributions Account or Qualified Nonelective Employer
      Contributions Account until the Member's Separation From Service.

                                      VI-4
<PAGE>
            (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 90 days have transpired since he fully repaid his last loan from
      the Plan.

            (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 Fund to be allocated to
      other Members.

            (p) The Spouse of a Member must consent to any loan from the Plan
      that is made, extended or renewed after the date on which an Employer
      elects to treat the Plan and the Quanex Corporation Salaried Employees'
      Pension Plan as one plan for purposes of section 410(b) of the Code. 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.

      6.10 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. However, if at any time prior to the termination of the Plan and
the complete distribution of the Trust Fund, 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.

      6.11 FORFEITURE ON TERMINATION OF PARTICIPATION. If as a result of his
Separation From Service a former Member receives, not later than the end of the
second Plan Year following the Plan Year in which his Separation From Service
occurs, a distribution of his entire vested interest in his Account, the
nonvested amount in his Account is immediately forfeited. A former Member who
receives no distribution upon his Separation From Service because he has no
vested interest shall be treated as if he received a distribution of his entire
vested interest and that interest was less than $5,000.00.

      If a former Member who has a vested interest in his Account receives no
distribution or a distribution of less than the full amount of his entire vested
interest as a result of his Separation From Service, the nonvested amount in his
Account is immediately forfeited following five consecutive one-year Periods of
Severance.

      6.12 CLAIMS PROCEDURE. When a benefit is due, the Member or Beneficiary
should submit his claim to the person or office designated by the Committee to
receive claims. Under normal

                                      VI-5
<PAGE>
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 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 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 90 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.

      6.13 NORMAL FORM OF DISTRIBUTIONS. The normal form of distributions under
the Plan is a cash lump sum payment.

      6.14 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.

      6.15 CHOICE OF DISTRIBUTION METHODS. 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.

      6.16 SINGLE SUM PAYMENT OF SMALL AMOUNTS UPON SEPARATION FROM SERVICE.
Notwithstanding any other provision of the Plan, each Member or former Member
(a) who does not die before the Annuity Starting Date and (b) whose vested
Account balance at the time of a distribution to him on account of his
Separation From Service is less than or equal to $5,000.00, shall be paid in the
form of a single sum payment. A surviving Spouse or other Beneficiary of a

                                      VI-6
<PAGE>
Member or former Member whose Account balance is less than or equal to $5,000.00
shall be paid in the form of a single sum payment. For this purpose, if the
value of a Member's or former Member's Account balance 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.

      6.17 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 6.16. 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 6.21(a).

      6.18 QUALIFIED JOINT AND SURVIVOR ANNUITY REQUIREMENTS. On and after the
date on which an Employer elects to treat the Plan and the Quanex Corporation
Salaried Employees' Pension Plan as one plan for purposes of section 410(b) of
the Code, this Section 6.18 will apply. Except for small benefits payable under
Section 6.16, each Member or former Member who (a) is married on his Annuity
Starting Date and (b) 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 6.16, 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 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.

                                      VI-7
<PAGE>
      6.19  QUALIFIED PRERETIREMENT SURVIVOR ANNUITY REQUIREMENTS.

            (a) GENERAL RULES. On and after the date on which an Employee elects
      to treat the Plan and the Quanex Corporation Salaried Employees' Pension
      Plan as one plan for purposes of section 410(b) of the Code, this Section
      6.19 will apply. Except for small benefits payable under Section 6.12, the
      death benefit of a Member or former Member who (1) is married on the date
      of his death and (2) 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 6.21, 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 6.18 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 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 6.20) 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.

      6.20 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

                                      VI-8
<PAGE>
      or description of (1) the eligibility conditions and other material
      features of 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 6.16.

            (d) QJSA NOTICE. This paragraph applies on and after the date on
      which an Employer elects to treat the Plan and the Quanex Corporation
      Salaried Employees' Pension Plan as one plan for purposes of section
      410(b) of the Code. 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 6.18, 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. This paragraph applies on and after the date on
      which an Employer elects to treat the Plan and the Quanex Corporation
      Salaried Employees' Pension Plan as one plan for purposes of section
      410(b) of the Code. The Sponsor will provide each Member or former Member
      who is subject to Section 6.19 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.

                                      VI-9
<PAGE>
      6.21 OPTIONAL FORMS OF DISTRIBUTION. On and after the date on which an
Employer elects to treat the Plan and the Quanex Corporation Salaried Employees'
Pension Plan as one plan for purposes of section 410(b) of the Code, all of the
optional forms of payment available under the Quanex Corporation Salaried
Employees' Pension Plan (as discussed more fully in Appendix C hereto) will be
available under the Plan.

      6.22 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, the Member or
      former Member must elect to receive the distribution required under
      section 401(a)(9) of the Code 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 installment 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.

      6.23 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

                                      VI-10
<PAGE>
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 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.

      6.24 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 Trust and the
obligations of the Employer, the Trustee, the Trust Fund and the Committee.

                                      VI-11
<PAGE>
                                   ARTICLE VII

                           ADMINISTRATION OF THE PLAN

      7.01 APPOINTMENT, TERM OF SERVICE & REMOVAL. The Board of Directors shall
appoint a Committee to administer the Plan. The members shall serve until their
resignation, death or removal. Any member may resign at any time by mailing a
written resignation to the Board of Directors. Any member may be removed by the
Board of Directors, with or without cause. Vacancies may be filled by the Board
of Directors from time to time.

      7.02 POWERS. The Committee is a fiduciary. It has the exclusive
responsibility for the general administration of the Plan and Trust, and has all
powers necessary to accomplish that purpose, including but not limited to the
following rights, powers, and authorities:

            (a) to make rules for administering the Plan and Trust so long as
      they are not inconsistent with the terms of the Plan;

            (b) to construe all provisions of the Plan and Trust;

            (c) to correct any defect, supply any omission, or reconcile any
      inconsistency which may appear in the Plan or Trust;

            (d) to select, employ, and compensate at any time any consultants,
      actuaries, accountants, attorneys, and other agents and employees the
      Committee believes necessary or advisable for the proper administration of
      the Plan and Trust; any firm or person selected may be a disqualified
      person, but only if the requirements of section 4975(d) of the Code have
      been met;

            (e) to determine all questions relating to eligibility, Active
      Service, Compensation, allocations and all other matters relating to
      benefits or Members' entitlement to benefits;

            (f) to determine all controversies relating to the administration of
      the Plan and Trust, including but not limited to any differences of
      opinion arising between an Employer and the Trustee or a Member, or any
      combination of them and any questions it believes advisable for the proper
      administration of the Plan and Trust;

            (g) to direct or to appoint an investment manager or managers who
      can direct the Trustee in all matters relating to the investment,
      reinvestment and management of the Trust Fund;

            (h) to direct the Trustee in all matters relating to the payment of
      Plan benefits; and

                                     VII-1
<PAGE>
            (i) to delegate any clerical or recordation duties of the Committee
      as the Committee believes is advisable to properly administer the Plan and
      Trust.

The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Section and all other Sections of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.

      7.03 ORGANIZATION. The Committee may select, from among its members, a
chairman, and may select a secretary. The secretary need not be a member of the
Committee. The secretary shall keep all records, documents and data pertaining
to its administration of the Plan and Trust.

      7.04 QUORUM AND MAJORITY ACTION. A majority of the Committee constitutes a
quorum for the transaction of business. The vote of a majority of the members
present at any meeting shall 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.

      7.05 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 it is notified of any delegation of
power in writing, shall accept and may rely upon any document executed by the
appropriate member or members as representing the action of the Committee until
the Committee files a written revocation of that delegation of power with the
Trustee.

      7.06 DISQUALIFICATION OF COMMITTEE MEMBER. 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.

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

      7.08 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 appointed by the Committee or any
other agent appointed by the Committee unless required by the terms of ERISA or
another applicable state or federal law under which liability cannot be waived.
No member of the Committee shall be liable for any act or omission of his own
unless required by ERISA or another applicable state or federal law under which
liability cannot be waived.

      If the Committee directs the Trustee to do so, it may purchase out of the
Trust Fund insurance for the members of the Committee, for any other fiduciaries
appointed by the Committee and for the Trust Fund itself to cover liability or
losses occurring because of the act or omission of any one or

                                      VII-2
<PAGE>
more of the members of the Committee or any other fiduciary appointed under the
Plan. But, that insurance must permit recourse by the insurer against the
members of the Committee or the other fiduciaries concerned if the loss is
caused by breach of a fiduciary obligation by one or more members of the
Committee or other fiduciary.

      7.09 EXEMPTION FROM BOND. No member of the Committee is required to give
bond for the performance of his duties unless required by a law which cannot be
waived.

      7.10 COMPENSATION. The Committee shall serve without compensation but
shall be reimbursed by the Trust Fund for all expenses properly incurred in the
performance of its duties unless the Employer elects to pay those expenses.

      7.11 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 serving as both Trustee
and as a member of the Committee.

      7.12 ADMINISTRATOR. For all purposes of ERISA, the administrator of the
Plan is the Sponsor. The administrator has the final responsibility for
compliance with all reporting and disclosure requirements imposed under all
applicable federal or state laws and regulations.

                                      VII-3
<PAGE>
                                  ARTICLE VIII

                          TRUST FUND AND CONTRIBUTIONS

      8.01 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.

      8.02 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.

      8.03 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.

      8.04 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, the 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.

                                     VIII-1
<PAGE>
                                   ARTICLE IX

                       ADOPTION OF PLAN BY OTHER EMPLOYERS

      9.01 ADOPTION PROCEDURE. Any business organization may, with the approval
of the Board of Directors, 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.

      9.02 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 its related Trust Fund by an Employer nor any act
performed by it in relation to the Plan and its related Trust Fund shall ever
create a joint venture or partnership relation between it and any other
Employer.

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

      9.04 QUALIFICATION A CONDITION PRECEDENT TO ADOPTION AND CONTINUED
PARTICIPATION. The adoption of the Plan and the Trust or Trusts used to fund the
Plan 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 or
Trusts and that the Plan and the Trust or Trusts that are applicable to it
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 Fund 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 Fund 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.

                                      IX-1
<PAGE>
                                    ARTICLE X

                            AMENDMENT AND TERMINATION

      10.01 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 of Directors, 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 Fund;

            (b) cause or permit the Trust Fund 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
      4.10;

            (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.

      10.02 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;

                                      X-1
<PAGE>
            (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.

      10.03 WITHDRAWAL OF EMPLOYER. An Employer may withdraw from the Plan and
its related Trust Fund 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 Fund 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 or Trustees when it receives a designation of the successor from the
withdrawing Employer.

      A withdrawal shall not terminate the Plan and its related Trust Fund with
respect to the withdrawing Employer, if the Employer either appoints a successor
Trustee or Trustees and reaffirms the Plan and its related Trust Fund 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 Fund 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 or Trustees.

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

      10.05 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.

      10.06 CONTINUANCE PERMITTED UPON SALE OR TRANSFER OF ASSETS. An Employer's
participation in the Plan and its related Trust Fund shall not automatically
terminate if it consolidates

                                      X-2
<PAGE>
or merges and is not the surviving corporation, sells substantially all of its
assets, is a party to a reorganization and its Employees and substantially all
of its assets are transferred to another entity, liquidates, or dissolves, if
there is a successor organization. Instead, the successor may assume and
continue the Plan and its related Trust Fund by executing a direction, entering
into a contractual commitment or adopting a resolution providing for the
continuance of the Plan and its related Trust Fund. Only upon the successor's
rejection of the Plan and its related Trust Fund or its failure to respond to
the Employer's, the Sponsor's or the Trustee's request that it affirm its
assumption of the Plan within 90 days of the request shall the Plan
automatically terminate. In that event, the appropriate portion of the Trust
Fund shall be distributed exclusively to the Members or their Beneficiaries as
soon as possible. If there is a disposition to an unrelated entity of
substantially all of the assets used by the Employer in a trade or business or a
disposition by the Employer of its interest in a subsidiary, the Employer may
make a lump sum distribution from the Plan if it continues the Plan after the
disposition; but the distribution can only be made for those Members who
continue employment with the acquiring entity.

                                      X-3
<PAGE>
                                   ARTICLE XI

                                  MISCELLANEOUS

      11.01 PLAN NOT AN EMPLOYMENT CONTRACT. The adoption and maintenance of the
Plan and its related Trust Fund 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.

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

      11.03 ASSIGNMENTS PROHIBITED. No principal or income payable or to become
payable from the Trust Fund shall be subject: to anticipation or assignment by a
Member or by a Beneficiary to attachment by, interference with, or control of
any creditor of a 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
or Beneficiary prior to its actual receipt by the Member or Beneficiary. Any
attempted conveyance, transfer, assignment, mortgage, pledge, or encumbrance of
the Trust Fund, any part of it, or any interest in it by a 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
this Trust Fund itself. The Trustee shall never under any circumstances be
required to recognize any conveyance, transfer, assignment, mortgage, pledge or
encumbrance by a Member or Beneficiary of the Trust Fund, 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 or Beneficiary for any cause whatsoever. These prohibitions
against the alienation of a Member's Account shall not apply to Qualified
Domestic Relations Orders.

      11.04 REQUIREMENTS UPON MERGER OR CONSIDERATION OF PLANS. The Plan shall
not merge or consolidate with or transfer any assets or liabilities to any other
plan unless each Member would (if the Plan then terminated) receive a benefit
immediately after the merger, consolidation, or transfer which is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation, or transfer (if the Plan had then terminated).

      11.05 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.

      11.06 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.

                                      XI-1
<PAGE>
      11.07 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.

      11.08 GOVERNING LAW. The provisions of the Plan shall be construed,
administered, and governed under the laws of the State of Texas and, to the
extent applicable, by the laws of the United States.

                                      XI-2
<PAGE>
      IN WITNESS WHEREOF, Piper Impact, Inc. has caused this Agreement to be
executed this 13th day of July 1998, 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.

                                    PIPER IMPACT, INC.

                                    By         WAYNE M. ROSE

                                            VICE PRESIDENT AND CFO
                                    --------------------------------------------
                                                    Title

                                      XI-3
<PAGE>
                                   APPENDIX A

                          LIMITATIONS ON CONTRIBUTIONS

                               PART A. DEFINITIONS

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

            (a) "ACTUAL CONTRIBUTION RATIO" means 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, effective for Plan Years starting on or after January 1,
      1998, Annual Compensation for any portion of the Plan Year in which the
      Employee was not an eligible Employee (as defined in Section 2.1 of
      Appendix A) will not be taken into account.

            (b) "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.

            (c) "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, effective for Plan Years starting on or after January 1,
      1998, Annual Compensation for any portion of the Plan Year in which the
      Employee was not an eligible Employee (as defined in Section 2.1 of
      Appendix A) will not be taken into account.

            (d) "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 3.2 of
      Appendix A will not be treated as Annual Additions.

            (e) "CONTRIBUTION 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(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.

            (f) "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 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 2.1 of Appendix A.

            (g) "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 to the Trustee 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 2.2 of Appendix A.

            (h) "LIMITATION YEAR" means the calendar year.

            (i) "SECTION 401(K) CONTRIBUTIONS" means the sum of Salary Deferral
      Contributions made on behalf of the Member during the Plan Year, Matching
      Contributions (to the extent that the Matching contributions are not used
      to enable the Plan to satisfy the minimum contribution requirements of
      section 416 of the Code) and Qualified Nonelective Employer Contributions
      that the Employer elects to have treated as section 401(k) Contributions
      pursuant to section 401(k)(3)(d)(ii) of the Code.

                                     -1-
<PAGE>
            (j) "SECTION 401(M) CONTRIBUTIONS" means the sum of Matching
      Contributions and After-Tax 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, 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 B. SUMMARY OF SECTIONS 415 AND 402(G) LIMITATIONS

      1.1 SECTION 415 LIMITATION ON TOTAL ALLOCATIONS. The Annual Additions that
may be credited to an individual Member's Accounts under this Plan and any other
qualified defined contribution plan maintained by an Affiliated Employer for a
Limitation Year shall not exceed the lesser of (a) $30,000.00 (as adjusted by
the Secretary of Treasury), or (b) 25 percent of the Member's Annual
Compensation for the Limitation Year. If the Limitation Year is ever less than
12 months, the $30,000.00 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 Limitation Year, and the denominator of
which is 12. The Plan will be operated in compliance with section 415 of the
Code and its Regulations, the terms of which are incorporated in this Plan.

      1.2 DOLLAR LIMITATION ON 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 on a
pre-tax basis under other plans or arrangements described in sections 401(k),
408(k), 403(b) and 408(p) of the Code exceed $7,000.00 (as adjusted by the
Secretary of Treasury). For purposes of applying the requirements of Section 2.1
of Appendix A and Appendix B, Excess Deferrals shall not be disregarded merely
because they are Excess Deferrals or because they are distributed in accordance
with Section 3.2 of Appendix A. However, Excess Deferrals made to the Plan on
behalf of Non-Highly Compensated Employees will not be taken into account under
Section 2.1 of Appendix A.

          PART C.  SUMMARY OF SECTIONS 401(K) AND 401(M) LIMITATIONS

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

            (a) the Actual Deferral Percentage of the 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 Highly
      Compensated Employees over that of all other eligible Employees is not
      more than two percentage points, and the Actual Deferral Percentage of the
      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 this 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
this Plan and the other plans shall be treated as one plan for these tests. If
any Highly Compensated Employee is a Member of this Plan and any other cash or
deferred arrangements of the Employer, when determining the deferral percentage
of the Employee, all of the cash or deferred arrangements are treated as one. A
Salary Deferral Contribution will be taken into account under the Actual
Deferral Percentage test of Code section 401(k) and this Section for a Plan Year
only if it relates to Annual 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,

                                     -2-
<PAGE>
a Section 401(k) Contribution will be taken into account under the Actual
Deferral Percentage test of Code section 401(k) 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 that date and the Section 401(k) Contribution is
actually paid to the Trustee 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 Plan Fund.
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.

      2.2 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:

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

            (d) 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 make After-Tax Contributions or to receive an
allocation of Matching Contributions under the Plan for all or part of the Plan
Year. A person who is suspended from making After-Tax Contributions because he
has made a withdrawal, a person who would be eligible to receive an allocation
of Matching Contributions but for his election not to participate and a person
who would be eligible to receive an allocation of Matching Contributions but for
the limitation on his Annual Additions imposed by section 415 of the Code are
all eligible Employees. 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 this 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,
this 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. A Matching Contribution will be taken into account
under this Section 2.2 of Appendix A for a Plan Year only if (a) it is allocated
to the Employee's Account as of a date within the Plan Year, (b) it is paid to
the Trustee no later than the end of the 12-month period beginning after the
close of the Plan Year, and (c) 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 Qualified Nonelective
Employer Contributions made on behalf of the Member during the Plan Year shall
be treated as Section 401(m) Contributions that are 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 Matching
Contributions for purposes of the Contribution Percentage test unless the
contributions, including those taken into account for purposes of the test,
satisfy the Actual Deferral Percentage test set forth in Section 2.1 of Appendix
A. Salary Deferral Contributions and Qualified Nonelective Employer
Contributions may not be taken into account for purposes of the test to the
extent that those contributions are taken into account in determining whether
any other contributions satisfy the Actual Deferral Percentage test set forth in
Section 2.1 of Appendix A. Finally, Salary Deferral Contributions and Qualified
Nonelective Employer Contributions may be taken into account for purposes of the
test 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 Plan Fund. 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.

                                     -3-
<PAGE>
      2.3 ALTERNATIVE LIMITATION BASED UPON ACTUAL DEFERRAL PERCENTAGE AND
CONTRIBUTION PERCENTAGE. If the second alternative permitted in Sections 2.1 and
2.2 of Appendix A 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

            (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 D.  CORRECTION PROCEDURES FOR ERRONEOUS CONTRIBUTIONS

      3.1 CORRECTION OF EXCESS ANNUAL ADDITIONS. If Annual Additions are made in
excess of the limitations contained in Section 1.1 of Appendix A, to the maximum
extent permitted by law, those excess Annual Additions shall be attributed to
the Plan. If an excess Annual Addition attributed to the Plan is held or
contributed as a result of the allocation of forfeitures, reasonable error in
estimating a Member's Annual Compensation, reasonable error in calculating the
maximum Salary Deferral Contribution that may be made for a Member under section
415 of the Code or because of other facts and circumstances which the
Commissioner of Internal Revenue finds to be justified, the excess Annual
Addition shall be corrected as follows:

            (a) first, the excess Annual Addition shall be reduced to the extent
      necessary by distributing to the Member all Employee After-Tax
      Contributions and then 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 Plan Year, any remaining excess funds shall be placed in an
      unallocated suspense account to be applied to reduce future Employer
      Contributions for that Member for as many Plan Years as are necessary to
      exhaust the suspense account in keeping with the amounts which would
      otherwise be allocated to that Member's Account; and

            (c) third, if the Member is not employed by the Employer at the end
      of the Plan Year, the remaining excess funds shall be placed in an
      unallocated suspense account to reduce future Employer Contributions for
      all remaining Members for as many Plan Years as are necessary to exhaust
      the suspense account.

                                     -4-
<PAGE>
            (d) If the Plan terminates prior to the exhaustion of the suspense
      account, the remaining amount shall revert to the Employer.

      3.2 EXCESS DEFERRAL FAIL SAFE. 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.

      3.3 ACTUAL DEFERRAL PERCENTAGE FAIL SAFE. 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 2.1 of Appendix A. 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 3.6 of Appendix A) shall be distributed, or (b) to the extent
provided in Regulations, and permitted by the Committee, the Employee may elect
to treat the amount of the Excess 401(k) Contributions as an amount distributed
to the Employee and then contributed by the Employee to the Plan as an Employee
After-Tax Contribution, provided the recharacterized amounts shall remain
subject to the same rules and restrictions to which the Salary Deferral
Contributions are subjected, or (c) 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 that amount of the Salary Deferral Contributions by or on behalf of
those Highly Compensated Employees with the largest Salary Deferral
Contributions as is equal to the Excess 401(k) Contributions, taken ratably from
each Account, based solely on those Salary Deferral Contributions for the Plan
Year. This initial distribution shall not reduce those Accounts affected below
the next highest level of Salary Deferral Contributions. If any further
reduction is necessary, the same process is to be repeated at the next highest
level of Salary Deferral Contributions by or on behalf of the Highly Compensated
Employees, and if necessary repeated in successively lower levels of Salary
Deferral Contributions until the cash or deferred arrangement satisfies the
Actual Deferral Percentage test. Qualified Nonelective Employer Contributions
shall 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 Trustee 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 Ratios. 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. Excess 401(k) Contributions may not be
recharacterized after 2 1/2 months after the close of the Plan Year to which the
recharacterization relates. The amount of recharacterized Excess 401(k)
Contributions, in combination with After-Tax Contributions actually made by the
Member, may not exceed the maximum amount of After-Tax Contributions (determined
without regard to Section 2.2 of Appendix A) that the Member could have made
under the provisions of the Plan in effect on the first day of the Plan Year in
the absence of recharacterization. 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 or recharacterized 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.

      3.4 CONTRIBUTION PERCENTAGE FAIL SAFE. If the limitation set forth in
Section 2.1 or 2.2 of Appendix A would be exceeded for any Plan Year, before the
close of the following Plan Year any one or more of the following corrective
actions shall be taken, 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 specific
manner required by Section 3.6 of Appendix A) shall be distributed, or (b) the
Employer may make a Qualified

                                     -5-
<PAGE>
Nonelective Employer Contribution which it elects to have treated as a Section
401(m) Contribution. Any distributions of the Excess Aggregate 401(m)
Contributions for any Plan Year are to be made to Highly Compensated Employees
on the basis of the amount of Section 401(m) Contributions made to the Plan by
or on their behalf determined under the leveling procedure described in Section
3.3 of Appendix A.

      3.5 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.

      3.6 INCOME ALLOCABLE TO EXCESS 401(K) AND EXCESS AGGREGATE 401(M)
CONTRIBUTIONS. The income allocable to Excess 401(k) Contributions for any
Member 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 is the amount of Excess 401(k) Contributions made on behalf of
the Member for the Plan Year. The denominator of the fraction is 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 is the amount of Excess Aggregate 401(m) Contributions made on behalf
of the Member for the Plan Year. The denominator of the fraction is 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.

                                     -6-
<PAGE>
                                   APPENDIX B

                             TOP-HEAVY REQUIREMENTS

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

      (a) "AGGREGATE ACCOUNTS" means the total of all Account balances derived
from Employer Contributions and Rollover Contributions.

      (b) "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.

      (c) "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.

      (d) "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.

      (e) "NON-KEY EMPLOYEE" means any Employee who is not a Key Employee.

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

      1.1 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 .

     1.2 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, this 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:

                                     -1-
<PAGE>
      (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.

     1.3 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:

                                                   Percentage of Amount Invested
                                                      In Accounts Containing
      Completed Years of Active Service               Employer Contributions
      ---------------------------------               ----------------------

      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%

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.

      1.4 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

                                     -2-
<PAGE>
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.

      1.5 COVERAGE UNDER MULTIPLE TOP-HEAVY PLANS. 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 tax on self-employment income), Chapter 21 of the Code
(relating to Federal Insurance Contributions Act), Title II of the Social
Security Act or any other federal or state law.

      If a Non-Key Employee is covered by both a Top-Heavy defined contribution
plan and a defined benefit plan, he shall receive the defined benefit minimum,
offset by the benefits provided under the defined contribution plan.

      1.6 RESTRICTIONS IF PLAN BECOMES SUPER TOP-HEAVY. If the Plan is
determined to be a Top-Heavy Plan, the number "1.00" must be substituted for the
number "1.25" when applying the limitations of section 415 of the Code to the
Plan, unless the Plan would not be a Top-Heavy Plan if "90%" were substituted
for "60%" and the Employer Contribution for the Plan Year for each Non-Key
Employee, who is a Member, is not less than four percent of the Member's Annual
Compensation.

                                     -3-
<PAGE>
                                   APPENDIX C

                         OPTIONAL FORMS OF DISTRIBUTION

      Subject to Sections 6.16, 6.18 and 6.19 of the Plan, the optional forms of
distributions set forth below shall be available on and after the date on which
an Employer elects to treat the Plan and the Quanex Corporation Salaried
Employees' Pension Plan as one plan for purposes of section 410(b) of the Code:

      1.    OPTION A. A pension under which the Member or former Member shall
            receive equal monthly payments for his lifetime.

      2.    OPTION B. A last survivor pension under which the Member or former
            Member shall receive 85 percent of the monthly pension benefit
            otherwise payable under Option A, and upon the death of the Member
            or former Member, the Beneficiary shall receive1/2of the monthly
            pension benefit paid to the Member or former Member prior to this
            death, provided however, that if the Beneficiary is younger than the
            Member or former Member, the 85 percent factor shall be reduced by
            one percent for each full year's difference in the age of the Member
            or former Member and the Beneficiary, and if the Beneficiary is
            older than the Member or former Member, the 85 percent factor shall
            be increased by one percent for each full years difference in the
            age of the Member or former Member and the Beneficiary (up to a
            maximum of 100 percent).

      3.    OPTION C. A last survivor pension under which the Member or former
            Member shall receive 70 percent of the monthly pension benefit
            otherwise payable under Option A, and upon the death of the Member
            or former Member, the Beneficiary shall receive a monthly pension
            benefit equal to that paid to the Member or former Member.

      4.    OPTION D. A reduced monthly pension payable to the Member or former
            Member during his lifetime, provided that, if the Member or former
            Member dies prior to his receipt of an amount equal to 120 monthly
            payments, the then-present value of the remainder of such 120
            monthly payments shall be payable to his Beneficiary in a lump sum.
            If the former Member dies prior to his receipt of all of such 120
            payments without having designated a Beneficiary, of if the
            Beneficiary predeceases the former Member, the then-present value of
            any remaining payments shall be paid in a lump sum to the former
            Member's estate. If the designated Beneficiary dies after the former
            Member and before all of such 120 monthly payments have been made,
            the then-present value of the unpaid balance of such payments shall
            be paid in a lump sum to the Beneficiary's estate.

      5.    LIMITATIONS ON OPTIONS B, C AND D.

            (a)   Options A, B and C will not be available to any member if the
                  reduced pension is less than $10 per month.

            (b)   Except as otherwise provided elsewhere in the Plan, any
                  election shall be automatically revoked if either the Member
                  or former Member or Beneficiary dies before the Member's or
                  former Member's Annuity Starting Date.

            (c)   Where the Beneficiary is a person other than the Member's or
                  former Member's Spouse, the Beneficiary under either Option B
                  or Option C must be of such age and sex that the amount
                  payable to the Member or former Member will exceed 50 percent
                  of the amount that would otherwise be payable if the Member or
                  former Member had elected a life annuity for his life.

            No pension can exceed the life of the Member or former Member or the
            life of the Member or former Member and his designated Beneficiary,
            or in the case of a period certain, the life expectancy of the
            Member or former Member or the life expectancy of the Member or
            former Member and his designated Beneficiary.

                                     -1-EXHIBIT 10.4

                               FIRST AMENDMENT TO
                          THE PIPER IMPACT 401(K) PLAN

      THIS AGREEMENT by Piper Impact, Inc., a Delaware corporation, (the
"Sponsor"),

                                  WITNESSETH:

      WHEREAS, on July 13, 1998, the Sponsor executed the amendment and
restatement of the plan agreement known as the "Piper Impact 401(k) Plan" (the
"Plan"); and

      WHEREAS, the Sponsor retained the right in Section 10.01 of the Plan to
amend the Plan from time to time; and

      WHEREAS, the directors of the Sponsor have approved resolutions to amend
the Plan;

      NOW, THEREFORE, the Sponsor agrees as follows:

      (1) Effective January 1, 1999, Section 4.03 of the Plan is amended in its
entirety to provide as follows:

                  4.03 SUPPLEMENTAL CONTRIBUTIONS. The Employer may contribute
            for any Plan Year a Supplemental Contribution for its Employees who
            are on its payroll for its Utah plant in such amount, if any, as
            shall be determined by the Employer. The Employer may contribute for
            any Plan Year a Supplemental Contribution for its Employees who are
            on its payroll for its Mississippi plant in such amount, if any, as
            shall be determined by its Employer. The amount of Supplemental
            Contribution made on behalf of Employees on the Employer's payroll
            for its Utah and Mississippi plants need not be uniform.

      (2) Effective January 1, 1999, Section 5.04 of the Plan is amended in its
entirety to provide as follows:

                  5.04 ALLOCATION OF SUPPLEMENTAL CONTRIBUTION. The Committee
            shall allocate the Supplemental Contribution for its Employees who
            are on its payroll for its Utah plant among the Employer's Members
            who are on its payroll for its Utah plant in the proportion that the
            Considered Compensation of each such Member bears to the total
            Considered Compensation of all such Members for the Plan Year. The
<PAGE>
            Committee shall allocate the Supplemental Contribution for its
            Employees who are on its payroll for its Mississippi plant among the
            Employer's Members who are on its payroll for its Mississippi plant
            in the proportion that the Considered Compensation of each such
            Member bears to the total Considered Compensation of all such
            Members for the Plan Year.

      IN WITNESS WHEREOF, the Sponsor has caused this Agreement to be executed
this 7th day of December, 1998.

                                    PIPER IMPACT, INC.

                                    By     VERNON E. OECHSLE

                                    Title: PRESIDENT AND CEO

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