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<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED JANUARY 29, 2005

                                       OR

[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM
_____________________________ TO ____________________________________

                           COMMISSION FILE NO. 0-28784

                                 HOT TOPIC, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 CALIFORNIA                                77-0198182
       (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

           18305 E. SAN JOSE AVE.                            91748
        CITY OF INDUSTRY, CALIFORNIA                       (Zip Code)
  (Address of principal executive offices)

       Registrant's telephone number, including area code: (626) 839-4681
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:
                           COMMON STOCK, NO PAR VALUE
                                (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]

     Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

     The aggregate market value of Common Stock held by non-affiliates of the
Registrant as of July 30, 2004 was approximately $739,697,726 based on the
closing price on that date of the Registrant's Common Stock on the Nasdaq
National Stock Market. All outstanding shares of voting stock, except for shares
held by executive officers and members of the Board of Directors and their
affiliates are deemed to be held by non-affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

     The number of shares outstanding of the Registrant's Common Stock was
44,814,650 as of April 2, 2005.


                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the Registrant's Definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on June 15, 2005 to be filed with the
Securities and Exchange Commission (the "SEC") no later than 120 days after
January 29, 2005, are incorporated by reference into Part III of this Form 10-K
(Items 10 through 13).

<PAGE>

                                 HOT TOPIC, INC.

                           ANNUAL REPORT ON FORM 10-K
                                     FOR THE
                           YEAR ENDED JANUARY 29, 2005

                                TABLE OF CONTENTS

                                   PART I                                   PAGE
                                   ------

Item 1.   Business                                                            3
Item 2.   Properties                                                         23
Item 3.   Legal Proceedings                                                  23
Item 4.   Submission of Matters to a Vote of Security Holders                24

                                     PART II
                                     -------

Item 5.   Market for Registrant's Common Equity, Related Shareholder
          Matters and Issuer Purchases of Equity Securities                  25
Item 6.   Selected Financial Data                                            26
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                          28
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk         36
Item 8.   Financial Statements and Supplemental Data                         36
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure                                           37
Item 9A.  Controls and Procedures                                            37
Item 9B.  Other Information                                                  40

                                    PART III
                                    --------

Item 10.  Directors and Executive Officers of the Registrant                 40
Item 11.  Executive Compensation                                             40
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management and Related Shareholder Matters                         40
Item 13.  Certain Relationships and Related Transactions                     40
Item 14.  Principal Accountant Fees and Services                             40

                                     PART IV
                                     -------

Item 15.  Exhibits and Financial Statement Schedules                         40


                                       2.
<PAGE>

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE

     THIS REPORT CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT"). THESE STATEMENTS INCLUDE, FOR EXAMPLE, STATEMENTS REGARDING OUR
EXPECTATIONS, BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE, SUCH AS
THE EXTENT AND TIMING OF FUTURE REVENUES AND EXPENSES AND CUSTOMER DEMAND, OTHER
EXPECTED FINANCIAL RESULTS AND INFORMATION, NEW STORE OPENINGS AND NEW STORE
CONCEPTS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE BASED ON
INFORMATION AVAILABLE TO US AS OF THE DATE OF THIS REPORT. WE WILL NOT
NECESSARILY UPDATE ANY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN OR UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE
OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS, OR INDUSTRY RESULTS TO BE
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED. RISKS, UNCERTAINTIES AND OTHER FACTORS RELATED TO US ARE LOCATED, AMONG
OTHER PLACES, IN PART I, ITEM 1 UNDER THE CAPTION "CERTAIN RISKS RELATED TO THE
COMPANY'S BUSINESS" AND IN PART II, ITEM 7 UNDER THE CAPTION "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

                                     PART I

ITEM 1.   BUSINESS

GENERAL

     We are a mall-based specialty retailer operating the Hot Topic and Torrid
store concepts. Hot Topic stores sell a selection of music/pop culture-licensed
and music/pop culture-influenced apparel, accessories and gift items for young
men and women principally between the ages of 12 and 22. Torrid stores sell
apparel, lingerie, shoes and accessories designed for various lifestyles for
plus-size females between the ages of 15 and 29. We opened our first Hot Topic
store in 1989 and our first Torrid store in 2001. At the end of fiscal 2004 (the
fiscal year ended January 29, 2005), we operated 592 Hot Topic stores throughout
the United States and Puerto Rico, and 76 Torrid stores. We also sell
merchandise on two websites, www.hottopic.com ("hottopic.com") and
www.torrid.com ("torrid.com"), which reflect the Hot Topic and Torrid store
concepts and carry merchandise similar to that sold in the respective stores.
Throughout this report, the terms "our", "we" and "us" refer to Hot Topic, Inc.
and its subsidiaries.

     We opened 91 Hot Topic and 24 Torrid stores during fiscal 2004. We also
occasionally relocate, expand, or close existing stores. During fiscal 2004, we
expanded or relocated ten stores. We plan to open approximately 65 new Hot Topic
stores and 45 Torrid stores in the fiscal year ending January 28, 2006 ("fiscal
2005"). As of March 9, 2005, five of these new Hot Topic stores and one of these
new Torrid stores were open.

THE MARKET

     The music-licensed apparel industry essentially began in the 1960s with
bootleggers selling tee shirts at concert venues. Over the next two decades,
artists began to realize the commercial potential of licensing their likenesses
and logos to tee shirt manufacturers and others who produced assorted
merchandise. We believe that during recent years, the music industry has been
significantly impacted by the availability and accessibility of Internet and
digital technology and the continuing success of MTV and other music television
networks. These media enable fans not only to listen to the latest music and
artists 24 hours a day, but also to experience a full sight and sound package of
appearance and attitude. This is in stark contrast to past decades when the
vinyl record cover and a few magazines of modest circulation were the primary
source of young people's information about their music and favorite bands. The
growing importance of the Internet is illustrated in a recent U.S. Census Bureau
report, stating that 80% of America's school-age children have Internet access
either at home or at school, regardless of their ethnic group or household
income. MTV music television reached 86 million households in the United States
in December 2003, according to Viacom International, Inc., MTV's parent company.


                                       3.
<PAGE>

     As a result, both emerging and well-known artists, and the fashions they
inspire, are much more visible today than ever before. We believe that this
increased visibility has contributed to a rise in demand for music/pop
culture-licensed and music/pop culture-influenced apparel and accessories. We
believe teenagers throughout the United States have similar fashion preferences,
largely as a result of the nationwide influence of the Internet, MTV and other
music television networks, music distribution (including through the rapidly
growing avenue provided by digital music and "downloads"), movies and television
programs.

     Hot Topic's target customers are young men and women between the ages of 12
and 22, who are passionate about music, music videos, pop culture trends and
music-inspired fashion. We believe our music/pop culture-influenced merchandise
appeals to teenagers from diverse socio-economic backgrounds and that our
customers are broadly representative of the teenage population in the United
States.

     Teenagers represent both a growing part of the United States population and
an increasing source of purchasing power. The U.S. Census Bureau estimates that
the teenage population (ages 12-19) in the United States reached approximately
33 million in 2004, and by 2008, there are likely to be more teenagers in the
United States than at any other time in history. Teenage spending has also
increased annually. The average American teen spent approximately $91 a week in
2004 according to Teen Research Unlimited. In the past seven years, teenage
spending has grown an average of 5% per year, to $169 billion in 2004.

     We developed the Torrid concept after analyzing customer feedback and
researching the market demographics. We concluded there was a significant
portion of young women consumers who were plus-size and unable to find and buy a
broad enough selection of "cool" fashion forward clothes in comparison to their
smaller sized friends. We launched Torrid in the first half of fiscal 2001, with
the opening of six locations across the country and a website, torrid.com.
Torrid's target customers are plus-size females ages 15 to 29, who are primarily
influenced by fashion trends, and also by pop culture. We believe the Torrid
assortment allows young customers wearing sizes 12 to 26 to match the style,
excitement and selection available at other non-plus-size junior retailers.

HOT TOPIC BUSINESS STRATEGY

     Our goal for Hot Topic stores is to be a leading retailer of music/pop
culture-licensed and music/pop culture-influenced apparel, accessories and gift
items for young men and women. Elements of Hot Topic's business strategy
include:

     o    FOCUS ON UNIQUE MUSIC/POP CULTURE-ORIENTED MERCHANDISE

     We believe that fashions and products associated with popular music artists
and pop culture trends have a significant influence on teenagers. We have
developed a unique strategy focused exclusively on offering music/pop
culture-licensed and music/pop culture-influenced merchandise in the mall
environment. Accordingly, we believe we are well positioned to capitalize on the
growing teenage population and demand for music/pop culture-influenced
merchandise.

     o    OFFER "EVERYTHING ABOUT THE MUSIC" AND POP CULTURE

     Hot Topic stores are designed to serve as a headquarters for music/pop
culture-licensed and music/pop culture-influenced apparel, accessories and gift
items. Hot Topic's slogan, "Everything About The Music" and its ability to
relate and understand relevant pop culture trends are reflected in its broad
assortment of products. We believe Hot Topic's selection of music/pop
culture-licensed merchandise is the most extensive assortment available in a
single mall store. Hot Topic complements its licensed merchandise with a unique
and eclectic assortment of music/pop culture-influenced apparel and accessories,
and frequently responds to changes in trends and demand by introducing new items
and categories. We believe Hot Topic has a history of being the first to offer
the latest music/pop culture fashions, which has made Hot Topic a destination
store for teenagers.


                                       4.
<PAGE>

     o    PROMOTE MUSIC-INSPIRED CULTURE

     Hot Topic is committed to addressing the music-inspired lifestyles of its
customers by building a culture throughout the organization that reflects a
passion for music. We diligently track alternative and rock music trends by
regularly monitoring new music, music video releases and radio station air play,
visiting nightclubs around the country, and attending concerts. We also actively
solicit feedback from our associates and customers. We believe these activities
allow us to react quickly to emerging trends, and provide a competitive
advantage over retailers who do not devote the time and resources necessary to
anticipate these trends.

     o    LISTEN TO THE CUSTOMER

     Hot Topic does not dictate fashion trends, but rather seeks to identify
music artists, music and pop culture trends at their early stages and react
accordingly to keep its in-store product assortment current with those trends.
We have developed a disciplined approach to buying and a dynamic inventory
planning and allocation process to support our merchandise strategy. We
regularly test new merchandise in select Hot Topic stores before chain-wide
distribution. We also order a majority of our merchandise not more than 60 to 90
days before delivery, allowing us to respond quickly to emerging trends. We are
also aggressive in taking prompt markdowns to maintain a fresh merchandise mix.
By actively managing the mix of categories and products in Hot Topic stores, we
believe we are able to capitalize on emerging trends and minimize our dependence
on any one particular merchandise category. We believe this approach to managing
Hot Topic's merchandise mix has contributed to strong merchandise margins and
markdown rates that are lower than industry average.

     o    EMPHASIZE CUSTOMER SERVICE AND THE IN-STORE EXPERIENCE

     Hot Topic store associates are trained to provide a value-added,
non-intrusive customer experience. Sales associates are encouraged to greet
customers, provide information about new music/fashion trends and suggest
merchandise that meets the customer's lifestyle and music preferences. Hot Topic
provides its teenage customers the same level of respect and attention that is
afforded to adult customers at other retail stores, while also providing
friendly and informed customer service for parents. We believe that a high level
of employee product knowledge and a commitment to music/fashion create
credibility and differentiate Hot Topic from other teenage-focused retailers.

     We also seek to create an exciting and compelling shopping environment
focusing on the lifestyles of our core customer. Hot Topic stores are designed
with an industrial theme that incorporates dense merchandising and utilizes a
professional sound system playing alternative music to create a fun, high-energy
store that teens will consider "their place" to shop with friends. We believe
this atmosphere enhances Hot Topic's image as a source for music/pop
culture-inspired fashion while encouraging customers to shop in its stores for
longer periods of time.

TORRID BUSINESS STRATEGY

     Our goal for Torrid stores is to become a leading specialty retailer of
fashion forward plus-size young women's apparel and accessories. Elements of
Torrid's business strategy include:

     o    FOCUS ON CURRENT FASHION TRENDS IN APPAREL AND ACCESSORIES THAT ALLOW
          THE PLUS-SIZE CUSTOMER TO FEEL FEMININE, BEAUTIFUL, AND SEXY


                                       5.
<PAGE>

     Our Torrid merchandising team focuses on providing a fashion forward
merchandise assortment that reflects the influence of cutting edge fashion
trends and pop culture. These influences provide the inspiration for hip, trendy
apparel and accessories that our plus-size customer relates to. We believe that
Torrid is the first mall concept to offer a complete store assortment of fashion
forward apparel for plus-size young women.

     o    LISTEN TO THE CUSTOMER

     Torrid does not dictate fashion trends, but rather listens to customers and
emphasizes current fashion direction, as well as pop culture influences, to
identify and keep current with emerging trends. These trends dictate a fashion
forward merchandise selection with strong customer appeal. Torrid, like Hot
Topic, seeks direct feedback at the grass-roots level from Torrid store
associates and customers. This feedback has a direct influence on future
purchases of Torrid merchandise.

     o    EMPHASIZE CUSTOMER SERVICE AND THE IN-STORE EXPERIENCE

     We train Torrid store associates to provide one-on-one service to
customers. Because we believe that the plus-size customer has been previously
unable to find sufficient quantities and selections of fashionable apparel in
line with current trends like her friends buy and wear, Torrid's customer
service approach focuses on suggesting outfits and ensuring the correct fit.

     Through a focus on customer service and a trendy fashion merchandise
offering, Torrid seeks to create a compelling shopping environment that the
younger plus-size female customer is looking for. We believe that the warm
reception, trendy fashion offerings, and helpful customer service by Torrid
associates help to create a welcoming and exciting environment that will be
attractive to, and preferred by, the Torrid customer.

STORE LOCATIONS

     As of January 29, 2005, we operated 592 Hot Topic stores throughout the
United States and Puerto Rico and 76 Torrid stores in 25 states in both
metropolitan and middle markets. Between January 30, 2005 and March 9, 2005, we
opened an additional five Hot Topic stores and one Torrid store. The following
chart shows, as of March 9, 2005, the number of Hot Topic and Torrid stores we
operate in each state in which those stores are located:



                                       6.
<PAGE>

<TABLE>
HOT TOPIC, INC.
STORES BY STATE

                        --------------------------------------------------------------------------------------------------------
                                     HOT TOPIC STORES                            TORRID STORES                   TOTAL COMPANY
                        --------------------------------------------------------------------------------------------------------
                           OPEN AT       NEW HT        OPEN AT        OPEN AT     NEW TORRID       OPEN AT          OPEN AT
                          1/29/2005   FY05 TO DATE     3/9/2005      1/29/2005   FY05 TO DATE     3/9/2005         3/9/2005
<S>                          <C>           <C>            <C>           <C>          <C>            <C>               <C>
Alabama                       6                           6                                                            6
Alaska                        3                           3                                                            3
Arizona                      14                           14             4                           4                18
Arkansas                      2                           2                                                            2
California                   66             2             68            29                           29               97
Colorado                     11                           11             1                           1                12
Connecticut                   7                           7                                                            7
Delaware                      2                           2                                                            2
Florida                      37                           37             2                           2                39
Georgia                      12                           12             1                           1                13
Hawaii                        4                           4                                                            4
Idaho                         3                           3                                                            3
Illinois                     17                           17             2                           2                19
Indiana                      12                           12             1                           1                13
Iowa                          9                           9                                                            9
Kansas                        5                           5                                                            5
Kentucky                      7                           7                                                            7
Louisiana                     8                           8                                                            8
Maine                         2                           2                                                            2
Maryland                     14                           14             2                           2                16
Massachusetts                15                           15             3                           3                18
Michigan                     23                           23             2                           2                25
Minnesota                    12                           12             1                           1                13
Mississippi                   2                           2                                                            2
Missouri                     13                           13             2                           2                15
Montana                       3                           3                                                            3
Nebraska                      4                           4              1                           1                 5
Nevada                        5                           5              2                           2                 7
New Hampshire                 4                           4              1                           1                 5
New Jersey                   16                           16             3             1             4                20
New Mexico                    7                           7              1                           1                 8
New York                     28                           28             5                           5                33
North Carolina               12             1             13                                                          13
North Dakota                  3                           3                                                            3
Ohio                         26                           26             1                           1                27
Oklahoma                      7                           7                                                            7
Oregon                        7                           7              2                           2                 9
Pennsylvania                 28             1             29             1                           1                30
Rhode Island                  1                           1                                                            1
South Carolina                6                           6                                                            6
South Dakota                  2                           2                                                            2
Tennessee                    15                           15             2                           2                17
Texas                        49                           49             5                           5                54
Utah                          8                           8                                                            8
Vermont                       2                           2                                                            2
Virginia                     14                           14                                                          14
Washington                   18                           18             1                           1                19
West Virginia                 4                           4                                                            4
Wisconsin                    11                           11             1                           1                12
Wyoming                       1                           1                                                            1
Puerto Rico                   5             1             6                                                            6

               TOTAL         592            5            597            76             1             77               674
--------------------------------------------------------------------------------------------------------------------------------


                                                                7.
</TABLE>
<PAGE>

EXPANSION STRATEGY

     The following table provides a history of our store expansion:

                                                  FISCAL YEAR
                               ------------------------------------------------
                                2000     2001    2002    2003    2004      2005
                                                                         THROUGH
                                                                          3-9-05
                               ------------------------------------------------
                                              (Number of stores)
Stores at beginning of year      212      274     352     445     554      668

Hot Topic stores opened           62       73      74      84      91        5
Hot Topic stores closed*                  (1)     (2)             (1)
Torrid stores opened                        6      21      25      24        1
                               ------------------------------------------------
Stores at end of year            274      352     445     554     668      674
                               ------------------------------------------------
Hot Topic and Torrid stores
expanded or relocated              5        7       8       4      10        1
                               ------------------------------------------------

     *    Victorville, CA store closed in fiscal 2001 and re-opened in the first
          quarter of fiscal 2002, and is included in our current store count.
          Parklane, NV and Bayfair, CA store leases expired in the fourth
          quarter of fiscal 2002 and were not renewed. Cupertino, CA store lease
          expired in the first quarter of fiscal 2004 and was not renewed.

     Our expansion strategy is to open stores primarily in shopping malls and
selected entertainment centers in both new and existing markets throughout the
United States. We opened 91 new Hot Topic stores and 24 Torrid stores in fiscal
2004, and we also expanded or relocated ten existing stores. During fiscal 2005,
we plan to open approximately 65 new Hot Topic stores and 45 new Torrid stores.
Additionally, we plan to expand or relocate approximately 20 existing stores. We
have identified regional malls nationwide and in Puerto Rico for potential new
locations.

     We evaluate potential store locations based on a variety of criteria
relevant to our merchandising strategy, including: the sales of the mall and
anchor stores, sales of teenage-oriented and plus-size stores, age demographics
in the trade area, median family income and other economic factors. We have a
real estate committee that meets regularly to evaluate and select store
locations. We generally seek potential store sites between 1,500 square feet and
2,000 square feet for Hot Topic stores, and between 2,200 square feet and 2,600
square feet for Torrid stores. Our Hot Topic stores currently average
approximately 1,700 square feet and our Torrid stores currently average
approximately 2,500 square feet.

STORE-LEVEL ECONOMICS

     During fiscal 2004, we achieved average Hot Topic store net sales of
approximately $1,048,000 and average Hot Topic store net sales per square foot
of approximately $602. We cannot guarantee that these results will continue or
that future average store-level sales will not vary from historical results.

HOT TOPIC MERCHANDISING

     Our Hot Topic stores serve as a headquarters for music/pop culture-licensed
and music/pop culture-influenced apparel, accessories and gift items. Music/pop
culture-licensed merchandise includes tee shirts, hats, posters, stickers,
patches, postcards, books, novelty accessories, compact discs and albums.
Music/pop culture-influenced merchandise includes woven and knit tops, skirts,
pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses,
cosmetics, leather accessories and gift items. Approximately half of Hot Topic's
products are music/pop culture-licensed and the other half are music/pop
culture-influenced products. A key strategy of our Hot Topic stores is to offer
a diverse product assortment. We have more than 20 distinct merchandise
categories or "departments." On average, over 120 different licensed band tee


                                       8.
<PAGE>

shirts are carried in each store, from current artists such as Green Day, AFI,
Slipknot, Good Charlotte, ICP and Linkin Park to classic rock artists such as
The Ramones, Nirvana, Bob Marley, The Rolling Stones, Metallica and Led
Zeppelin. New items and categories are regularly tested to stay current with
customer demand and new product trends.

     During fiscal 2004, 53% of Hot Topic's net sales were generated in apparel
categories and 47% of Hot Topic's net sales were produced in non-apparel
categories (including accessories, gifts, intimate apparel and shoes).

     Our Hot Topic merchandising staff consists of a General Merchandise
Manager, Divisional Merchandise Managers, and a staff of buyers and assistant
buyers who manage the various product categories. The merchandising staff
reflects our culture in that its decisions and actions are influenced by music
and pop culture. In determining which merchandise to buy, the staff spends
considerable time viewing music videos, reviewing industry music sales,
monitoring alternative radio station air play, consulting with sales associates
(to draw from their different experiences and perspectives), reviewing customer
requests, attending trade shows and reading music and fashion industry
periodicals. In addition, the merchandising staff regularly visits nightclubs
and attends concerts and other events that attract young people.

     Hot Topic has several lines of private label merchandise to complement and
supplement current product offerings. We believe that Hot Topic brands play an
important part in differentiating its stores from those of its competitors and
provide us with higher margin opportunities as compared to other merchandise. We
estimate that in fiscal 2004 our Hot Topic brands accounted for approximately
25% of our sales, the same percentage as in fiscal 2003. Our proprietary brands
include Ugly Shirt, Morbid Metals (body jewelry), Morbid Threads (men's and
women's apparel and hosiery) and MT:2 (men's and women's apparel). Some shoes
are also sold under the Hot Topic label.

     In order to reduce fashion risk and maintain the ability to respond quickly
to emerging trends, Hot Topic buys a majority of its merchandise not more than
60 to 90 days in advance of delivery. We also often begin with smaller test
purchases prior to chain-wide distribution. We regularly monitor store sales by
merchandise theme and classification, Stock Keeping Units (SKUs), color and size
to determine types and amounts of products to purchase, to detect products and
trends that are emerging or declining, and to manage the product mix in our
stores by responding to the spending patterns of our customers. We also develop
good relationships with our vendors because we understand their importance of
facilitating a quick response.

TORRID MERCHANDISING

     Our Torrid stores serve a premier destination for current trends in fashion
apparel and accessories for plus-size young women. We believe that the Torrid
customer wants to wear the same types of merchandise as her smaller-sized peers.
Torrid's merchandise includes novelty tee shirts, fashion tops, pants, shorts,
skirts, dresses, jackets, swimwear, intimate apparel, shoes, hosiery,
accessories, gifts, and beauty products. Torrid apparel is sized 12 to 26. A
broad selection of merchandise comes from established branded vendors, including
Dickies, Paris Blues, Z Cavaricchi, LEI, Fine and Hot Kiss and more fashion
forward vendors, such as Tripp. Torrid works with these and other vendors to
monitor and maintain its own plus-size apparel fit specifications for young
women. We believe Torrid's selection of fashion items from these and similar
vendors gives the Torrid customer an opportunity to buy the same or similar
branded items that have been available to other young women of the same age who
are not plus-size. We research current fashion trends and customer requests and
then work with vendors to design and manufacture them for Torrid. The Torrid fit
specialist team works with the manufacturers' design teams to help ensure that
fit and quality standards are achieved and maintained.

     During fiscal 2004, approximately 75% of Torrid's net sales were generated
in apparel categories and approximately 25% of Torrid's net sales were produced
in non-apparel categories (including accessories, gifts, intimate apparel and
shoes).


                                       9.
<PAGE>

     Our Torrid merchandising staff consists of a General Merchandise Manager, a
Divisional Merchandise Manager, a fit specialist team, and a staff of buyers and
assistant buyers who manage all product categories. The Torrid merchandising
staff's decisions and actions are influenced by customer and store associate
feedback. The merchandising staff spends considerable time visiting trendy young
fashion shopping areas and nightclubs, researching international fashion trends,
and attending trade shows and other events that attract young people. We also
believe that emerging fashion trends in the junior market and pop culture
influence Torrid's merchandising direction. The range of pop culture and music
artists that influence Torrid fashion is much broader than at Hot Topic,
consistent with the broader target customer base of females ages 15 to 29.

     Approximately 40% of Torrid merchandise is purchased from established
branded vendors. The remaining 60% is Torrid's private label merchandise that
provides the customer with unique, fashion forward merchandise, often at more
competitive prices than branded merchandise. Private label merchandise also
often provides Torrid with higher margin opportunities as compared to other
merchandise. In order to reduce fashion risk and maintain the ability to respond
quickly to emerging trends, Torrid buys a majority of its merchandise not more
than 120 days, and many times less than 75 days, in advance of delivery. We
often begin with small purchases for testing.

PLANNING AND ALLOCATION OF MERCHANDISE

     Planning and allocation of our inventory is done at the store, merchandise
classification and SKU levels, using integrated third-party software. Most
merchandise is ordered in bulk and then allocated to each store based on store
inventory plans and SKU performance using JDA's Advanced Allocation software.
Buyers and inventory analysts determine SKU reorder quantities by using a
proprietary automated software program which considers sales history, projected
sales, planned inventories by store, store demographics, geographic preferences,
store openings and planned markdown dates.

     Our headquarters and distribution facility located in the City of Industry,
California is approximately 250,000 square feet. Vendors deliver all merchandise
to this facility, where it is inspected, allocated, picked, prepared and boxed
for shipment to our stores and internet customers. We ship merchandise to stores
each weekday, providing our Hot Topic and Torrid stores with a steady flow of
new and reordered merchandise. Minimal back stock is maintained in our
distribution facility and at our stores, so that most of our merchandise is
available for sale on the selling floors of our stores. No single vendor
accounted for more than 7% of our merchandise purchases during fiscal 2004.

     We have entered into a lease (with a purchase option) for an additional
distribution center facility in Tennessee, which we expect to be operational by
the end of the second quarter of fiscal 2005. We believe this second
distribution center will allow for us to accommodate our growth for many years.
We also expect improved delivery times to many of our stores, especially east
coast locations. The Tennessee distribution center will receive merchandise for
and ship merchandise primarily to stores in the eastern half of the country.

HOT TOPIC AND TORRID STORE OPERATIONS

     Hot Topic and Torrid store operations are managed by separate teams of a
Vice President of Store Operations, regional directors and district managers. On
average, each district manager supervises approximately six to eight stores. A
store manager and two or three assistant managers manage individual stores. In
addition to managers and assistant managers, a typical store has approximately
six to ten part-time sales associates, depending on the season. The store
manager and district manager are responsible for the hiring and training of new
associates. We have established training and operating procedures to assist
field management in the supervision and training of all associates. We have also
designed a store manager training program, which is used to train externally
hired managers.

     We strive to create a store environment that customers will consider "their
place" to shop with friends. We seek to hire sales associates who are like our
customers - energetic people who are knowledgeable and passionate about music
and pop culture-inspired fashion, as well as trendy fashion inspiration. We


                                      10.
<PAGE>

understand the importance of focusing on the preferences and opinions of our
target customers. So store associates, who have the closest and most frequent
contacts and interactions with our customers, from time to time accompany buyers
on buying trips. Additionally, in return for feedback on fashion and other
trends, we reimburse store associates for the cost of attending concerts. They
are also encouraged to directly communicate customer feedback as well as their
own merchandise and product ideas to the buyers and management. Our culture and
our direct interaction with and respect for sales associates are significant
factors in producing associate retention rates that we believe are higher than
the industry average.

     The primary goal of the sales associate position is to provide superior,
informed customer service in order to maximize sales and minimize inventory
shrinkage. Store management receives daily store sales and category results so
that performance can be measured against set goals. Postage-paid "report cards"
are provided in all stores for customers to grade performance and make
recommendations to us. We train associates to greet each customer, to inform the
customer about new music and fashion trends and to suggest merchandise that
matches the customer's lifestyle, music and fashion preferences and/or trends.
We believe that our associates' high level of product knowledge and customer
service differentiates us from other specialty retailers.

     District managers, along with all members of the store teams, have a base
pay rate and may qualify to receive certain bonus payouts. District managers may
also qualify to receive stock option grants. All of our employees who meet
certain eligibility criteria are eligible to participate in our Employee Stock
Purchase Plan. We believe that our continued success is dependent in part on our
ability to attract, retain and motivate qualified associates. In particular, the
success of our growth will be dependent on our ability to promote and/or recruit
talented district and store managers. In order to ensure new stores have a
capable pool of candidates, we have assigned dedicated field recruiters to work
with each region's management team.

MARKETING, PROMOTION AND INTERNET

     We generally open stores in high traffic malls in areas of high teenage and
young adult population, and we rely on existing customers, associates, store
design and exciting music to attract new customers to our stores. To further
promote Hot Topic stores, we sponsor various music events and conduct periodic
contests. For example, since 2000, we have co-sponsored a major summer rock
tour, Ozzfest (headlined by Ozzy Osbourne). As an Ozzfest sponsor, our name has
been associated with promotional activities at each venue. Torrid enhances its
image through visual advertising and promotion, with an emphasis on lifestyle
photography illustrating a young plus-size woman in various lifestyle activities
and fashions representative of the feminine, beautiful and/or sexy essence of
the brand. In the fourth quarter of fiscal 2004, Torrid began testing in a small
number of stores a customer loyalty program called Divastyle. In addition to our
broad selection of merchandise for sale, including some Internet-only items, our
websites offer merchandise, tour dates, contests, job postings, store locations
and community features such as band reviews and advice columns. Our net sales
from Internet operations rose by 25% in fiscal 2004 compared to fiscal 2003 and
contributed approximately 2.8% of total sales in fiscal 2004.

     In fiscal 2004, we established the Hot Topic Foundation. The Foundation's
objective is to support programs and organizations that specifically focus on
encouraging and educating youth in music, creative writing, painting,
photography, and filmmaking. The Foundation has been funded through donations
from our employees, our company, and our customers. As of January 29, 2005,
$339,000 has been raised for the benefit of the Foundation. We are pleased with
the meaningful contributions the Foundation has made to school music programs
and other initiatives, and we believe these activities have a positive influence
on young people.

INFORMATION TECHNOLOGY

     Our information systems provide integration of store, merchandising,
distribution, financial, and human resources. Software licensed from GERS Retail
Systems is used for SKU and classification inventory tracking, purchase order
management, open-to-buy, merchandise distribution, automated ticket making, and
sales audit. Our financial systems are licensed from Lawson Software and are
used for general ledger, accounts payable, and asset management as integrated


                                      11.
<PAGE>

financials. Sales are updated daily in the merchandising reporting systems by
polling sales information from each store's point-of-sale, or POS, terminals.
Our POS system consists of registers providing price look-up, time and
attendance, e-mail and credit card/check/gift card authorization. Through
automated nightly two-way electronic communication with each store, sales
information and payroll hours are uploaded to the host system. The host system
downloads price changes, performs system maintenance and provides software
updates to the stores. We evaluate information obtained through nightly polling
to implement merchandising decisions, including product purchasing/reorders,
markdowns and allocation of merchandise on a daily basis. In June 2004, we
implemented our new warehouse management system in our California distribution
center, which is licensed from Manhattan Associates.

     Our Wide Area Network ("WAN") is used to connect all locations with
real-time e-mail and several Intranet applications. In addition, this technology
has improved operating efficiency in such areas as credit card and gift card
authorization, store-to-store transfer, product lookup, product location and
several other applications to eliminate paper distribution and paperwork.

     In 2005, we plan to open a new distribution center in Tennessee and
implement a new Internet order management software system and a customer loyalty
software system. We believe our enhancements to existing systems and additions
of new systems will help support our growth.

TRADEMARKS

     We have registered on the Principal Register of the United States Patent
and Trademark Office our retail store service marks Hot Topic(R) and Torrid(R)
in various forms. We have also registered various other trademarks for
merchandise such as Morbid Make-Up(R), Morbid Scents(R), Morbid Metals(R),
Morbid Threads(R), Tragedy(R), Misery(R), and MT:2(R); and general marks such as
our slogan "Everything About the Music". Each federal registration is renewable
indefinitely if the mark is in use at the time of the renewal. We have several
trademark applications on file with the USPTO, for which we hope to obtain
registration in the future. In addition, we have common law trademark rights to
certain trademarks, service marks and trade names used in our business from time
to time. We are not aware of our use of any of our marks raising any claims of
infringement or other challenges to our right to use our marks in the United
States. We also have additional registrations and pending applications in
foreign jurisdictions. All other trademarks, trade names and service marks
referenced in this report and in our stores are the property of their respective
owners.

HOT TOPIC COMPETITION

     We compete with other retailers for vendors, customers, suitable retail
locations and qualified associates. Hot Topic currently competes with street
alternative and vintage clothing stores located primarily in metropolitan areas
and with other mall-based teenage-focused retailers such as Abercrombie & Fitch,
Aeropostale, American Eagle Outfitters, Anchor Blue (Millers Outpost), Charlotte
Russe Inc., Claire's Stores, Inc., Forever 21, Old Navy (a division of Gap
Inc.), Pacific Sunwear of California, Inc., Spencer Gifts, Inc., The Buckle, Wet
Seal, Inc., and Urban Outfitters, Inc.; and, to a lesser extent, with music
stores. Some of our competitors are larger and have substantially greater
financial, marketing and other resources than us. The principal factors of
competition are merchandise selection, connection to the music industry,
customer service, store location and price.

TORRID COMPETITION

     Based on direct customer research we have conducted, we believe that
plus-size female teens and young women have historically shopped for apparel at
department stores, discount stores such as Target and specialty stores such as
Lane Bryant. Though a source of competition, we believe such stores generally
target more mature customers, which is also reflected in their store
environments. We are not aware of other exclusively mall-based chains that are
specifically targeting younger plus-size fashion forward customers. Torrid
competes with traditional department stores, local specialty stores and junior
teen retailers that offer a combination of junior and plus-sizes, such as Deb
Shops. Torrid also competes with traditional plus-size catalogs and web sites,
as well as Delia's Corp. and Alloy, Inc. which carry both junior and junior
plus-sizes. Many companies compete for the junior customers and additional
competitors may enter into the plus-size female market.


                                      12.
<PAGE>

EMPLOYEES

     We employed approximately 2,030 full-time and 5,940 part-time employees,
which we refer to as associates, as of March 9, 2005. Of our 7,970 associates,
approximately 600 were headquarters and distribution center personnel and the
remainder were field management and store associates. The number of part-time
associates changes with seasonal needs. None of our associates are covered by
collective bargaining agreements. We believe that our relationships with our
associates are good.

EXECUTIVE OFFICERS AND KEY EMPLOYEES

     Our executive officers and key employees and their ages at March 9, 2005
are as follows:

<TABLE>
          NAME            AGE                   POSITION
-----------------------  -----   ------------------------------------------------------
<S>                        <C>   <C>
Elizabeth McLaughlin       44    Chief Executive Officer and Director
Gerald Cook                52    President, Hot Topic
Patricia Van Cleave        57    President, Torrid
James McGinty              42    Chief Financial Officer
Tom Beauchamp              52    Senior Vice President and Chief Information Officer
Christopher Kearns         38    Senior Vice President, General Counsel and Secretary
Cindy Boden                50    Vice President, Torrid Store Operations
Christopher Daniel         47    Vice President, Torrid General Merchandise Manager
Ed Gusman                  46    Vice President, Hot Topic Store Operations
Tricia Higgins             37    Vice President, Distribution
Darrell Kinsley            42    Vice President, Store Design and Visual Merchandising
Alain Krakirian            39    Vice President, Hot Topic Planning and Allocation
Cindy Levitt               44    Vice President, Hot Topic General Merchandise Manager
Sue McPherson-Spissu       37    Vice President, Logistics
John Neppl                 48    Vice President, Real Estate and Construction
George Wehlitz, Jr.        44    Vice President, Finance
</TABLE>

     ELIZABETH MCLAUGHLIN has served as Chief Executive Officer and on the Board
of Directors since 2000. From 1996 through 2000, Ms. McLaughlin served as Senior
Vice President and General Merchandise Manager. From 1993 through 1996, Ms.
McLaughlin was our Vice President, Operations. Prior to joining us, Ms.
McLaughlin held various positions with Millers Outpost and The Broadway. Ms.
McLaughlin holds a B.A. degree in Economics from the University of California at
Irvine. Ms. McLaughlin is a Director of Noodles & Company, a privately held
quick casual restaurant concept. She is also a member of the Board of Visitors
for the Anderson School at UCLA.


                                      13.
<PAGE>

     GERALD COOK has been President, Hot Topic since September 2003. From
February 2001 to September 2003, he was Chief Operating Officer. From February
1999 until joining us, he was the President and Chief Operating Officer of
Travel 2000, Inc. Subsequent to his departing Travel 2000, Inc., that company
filed for chapter 11 bankruptcy in March 2001. From 1995 to April 1998, Mr. Cook
was Senior Vice President, Operations for The Bombay Company, Inc. and from 1989
to 1995, Mr. Cook was the Vice President, Stores and the Vice President, General
Merchandising Manager of Woman's World Stores. Prior to 1989, he held management
positions with Barnes & Noble/B Dalton, The Gap Stores and the Limited, Inc. Mr.
Cook holds a B.S. degree in Business Administration from the University of
Minnesota.

     PATRICIA VAN CLEAVE has been President, Torrid since September 2003. From
September 2002 to September 2003, she was Chief Merchandising Officer. From July
1998 to June 2001, she was the President and CEO of Sundance Catalog Company.
From May 1995 until joining Sundance, she was the President of Cherokee. Prior
to joining Cherokee, she was Executive Vice President of Merchandising for
apparel, fashion accessories and intimate apparel for The Broadway. She came to
The Broadway from The Bon Marche, a Seattle-based division of Federated
Department Stores where she was Senior Vice President, General Merchandise
Manager of Apparel. Prior to that she held management positions for The Broadway
Southwest, John Wanamaker, The May Company and Daytons. Ms. Van Cleave holds a
B.S. degree in Business and Textiles from the University of Minnesota.

     JAMES MCGINTY has served as Chief Financial Officer since February 2001.
Mr. McGinty joined us in August 2000 as Vice President, Finance and was promoted
to Chief Financial Officer in February 2001. From July 1996 to July 2000, Mr.
McGinty was Vice President-Controller at Victoria's Secret Stores, the leading
brand and largest specialty retailer division of the Limited, Inc. From 1984 to
1996, he held various financial and accounting positions within the Structure
and Express divisions of the Limited, Inc. Mr. McGinty holds a B.S. degree in
Accounting from Miami University in Oxford, Ohio.

     TOM BEAUCHAMP has been Senior Vice President and Chief Information Officer
since June 2004. Mr Beauchamp has over 30 years of Information technology
experience. From October 2001 until joining us, he was Chief Information Officer
for CMI Marketing, a provider of loyalty marketing programs. From January 2000
until June of 2001, Mr. Beauchamp was Chief Information Officer of Columbia
House. From June 1999 through January 2001, he was Senior Vice President, Chief
Information Officer for Oxford Health Plans. From March 1996 through June 1999,
he was Senior Vice President, Chief Information Officer for Woolworth
Corporation. Prior to 1996, Mr. Beauchamp held management positions with
Montgomery Ward, Limited, Inc., Millers Outpost, and The Broadway.

     CHRISTOPHER KEARNS has served as Senior Vice President, General Counsel and
Secretary since April 2004. Prior to that, Mr. Kearns spent a decade as an
attorney in private practice, most recently as a Partner with the law firm
Cooley Godward LLP, which he joined in 1996. Mr. Kearns holds a B.A. degree in
History and a specialization in Business Administration from UCLA, and a J.D.
with honors from the University of California, Hastings College of the Law.

     CINDY BODEN has been Vice President, Torrid Store Operations since October
2003. Prior to that, Ms. Boden held Regional Director positions with Hot Topic
both in the Northeast and the Midwest regions, beginning in 2000. From 1993 to
1997, Ms. Boden was a Regional Manager for County Seat stores. From 1990 to
1992, she held the position of Regional Manager for Millers Outpost stores.
Prior to Millers Outpost, she was a District Manager for Brookstone for five
years. Ms. Boden holds a B.S. degree in Textiles and Clothing with a minor in
Business Administration from the University of Minnesota at Mankato.

     CHRISTOPHER DANIEL has served as Vice President, General Merchandise
Manager for Torrid since October 2004. From September 1996 until September 2004,
he was the Vice President of Design and Product Development for Mervyn's, a
division of Target Corporation. Prior to that, Mr. Daniel held management
positions in merchandising and product development with Structure, a division of
Limited, Inc., Charming Shoppes, a national women's specialty retailer, and


                                      14.
<PAGE>

Dayton-Hudson, the department store division of Target Corporation. Prior to
that, he held merchandising positions with Bullock's, a Los Angeles based
division of Federated Stores and Miller and Rhoads, a division of Allied stores
based in Richmond, Virginia. Mr. Daniel holds a B.A. degree in English
literature from the University of Richmond in Richmond, Virginia.

     ED GUSMAN has served as Vice President, Hot Topic Store Operations since
January 2005. From January 2004 to January 2005, Mr. Gusman was the Senior
Regional Director for the Eastern United States. From March 2001 to December
2003, Mr. Gusman was the Regional Director for the Southeast. From September
1999 to February 2001, he was the district manager for Urban Outfitters for the
Mid Atlantic, Southeast. From May 1994 to August 1999, Mr. Gusman was a regional
director for Zany Brainy, heading up their expansion on the West Coast. From
1990 to 1994, he was regional director for Brentano's, Waldenbooks Super Store.
Prior to that, he held various management positions with Waldenbooks.

     TRICIA HIGGINS has been Vice President, Distribution since October 2004 and
is responsible for the Distribution Center in the City of Industry. From
February 2004 to October 2004, she was Vice President, Internet. Before her
promotion to Vice President, Internet, she held the position of Director,
Internet, beginning in June 2002. Prior to joining us, she was Director, Contact
Center Operations for Cooking.com. From 1997 to August 2000, Ms. Higgins was
Director, Retail Operations for the Williams-Sonoma, Pottery Barn and Hold
Everything divisions of Williams-Sonoma, Inc. From 1994 to July 1997, she held
various positions with The Disney Stores, Inc. in Retail Operations and New
Business Development. Ms. Higgins holds a B.A. degree in Psychology from Indiana
University.

     DARRELL KINSLEY was promoted to Vice President, Store Design and Visual
Merchandising, in January 2005. From February 2000 through December 2004, Mr.
Kinsley was Vice President, Hot Topic Store Operations. From June 1998 through
February 2000, Mr. Kinsley was Regional Director for the western United States.
From February 1997 through June 1998, he was Regional Director for the eastern
United States. Mr. Kinsley joined us in February 1995 as the District Manager
for the eastern United States and was responsible for the expansion into the
East Coast. Mr. Kinsley holds a business management leadership certificate from
the Anderson School of Business at the University of California, Los Angeles.

     ALAIN KRAKIRIAN has been Vice President, Hot Topic Planning and Allocation
since February 2000. From July 1997 through February 2000, Mr. Krakirian was
Director of Planning and Allocation. Mr. Krakirian was a Planning Manager at
Disney Stores from December 1996 to July 1997 and the Director of Merchandise
Planning and Allocation at Kids Mart from February 1996 to December 1996. From
September 1991 to January 1996, Mr. Krakirian held various merchandise control
and planning positions at Clothestime Stores, including Director of Merchandise
Control and Information Office from October 1994 to January 1996. Mr. Krakirian
holds a B.S. degree in Finance from the University of LaVerne and an M.B.A.
degree from Pepperdine University.

     CINDY LEVITT has been Vice President, Hot Topic General Merchandise Manager
since February 2000. From June 1996 to February 2000, she served as Divisional
Merchandise Manager, Apparel and Music. Ms. Levitt has held senior buying
positions since 1989. Prior to her career at Hot Topic, Ms. Levitt held buying
positions at The May Company. Ms. Levitt holds a degree in Fashion Merchandising
from Orange Coast College.

     SUE MCPHERSON-SPISSU has been Vice President, Logistics since October 2004.
From October 2001 to October 2004, she was Vice President, Distribution Center
and E-Commerce. Ms. McPherson-Spissu was Vice-President, Distribution Center
from February 2001 to October 2001 and was Divisional Vice President of
Distribution Center from February 2000 to February 2001. From March 1995 to
February 2000, she was Director of the Distribution Center. Ms. McPherson-Spissu
joined us in 1989 as a store associate in our first store while attending the
University of Southern California. Ms. McPherson-Spissu holds a B.S. degree in
Business from the University of Southern California.


                                      15.
<PAGE>

     JOHN NEPPL joined us in October 2001 as Vice President, Real Estate and
Construction. From January 1995 to September 2001, Mr. Neppl served as
Vice-President of Real Estate and Construction for Eastern Mountain Sports,
Inc., a specialty retailer based in New Hampshire. Mr. Neppl served as Director
of Real Estate at Miller's Outpost/Anchor Blue from October 1987 to December
1994. Mr. Neppl held various financial positions with Mervyn's department
stores, a division of Target Corporation, from October 1978 to September 1987.
Mr. Neppl received a B.S. degree in Accounting from Villanova University.

     GEORGE WEHLITZ, JR. has been Vice President, Finance since August 2003. He
joined us in February 2002 as Vice President, Controller. From August 2000 to
February 2002, Mr. Wehlitz was Chief Financial Officer at The Popcorn Factory,
Inc., a catalog company for gourmet popcorn gifts. From 1987 to 2000 Mr. Wehlitz
held various financial-related positions, at the divisional and corporate level,
for The Bombay Company, Inc. Mr. Wehlitz holds a B.A. degree in Accounting from
Texas Christian University and is a Certified Public Accountant.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS

     To our present knowledge, compliance with federal, state and local
provisions enacted or adopted for protection of the environment has had no
material effect upon our operations.

INTERNET WEBSITE

     We make available free of charge through our investor relations website at
www.corporatewindow.com/fl/hott/frame.html our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC. We also make available our
Standards of Business Ethics at www.corporatewindow.com/fl/hott/frame.html.

                 CERTAIN RISKS RELATED TO THE COMPANY'S BUSINESS

     Before deciding to invest in Hot Topic, Inc. or to maintain or increase an
investment in Hot Topic, Inc., readers should carefully consider the risks
described below, in addition to the other information contained in this Annual
Report on Form 10-K and in other filings with the SEC, including our Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. The risks described below
are not the only risks we face. Additional risks that are not presently known to
us or that we currently deem immaterial may also affect our business. If any of
these known or unknown risks actually occur, our business, financial condition
and results of operations could be seriously harmed, and our stock price could
decline.

     OUR AGGRESSIVE GROWTH STRATEGY ANTICIPATES A SIGNIFICANT NUMBER OF NEW
STORE OPENINGS, WHICH COULD CREATE CHALLENGES WE MAY NOT BE ABLE TO ADEQUATELY
MEET.

     Our net sales have grown significantly during the past several years,
primarily as a result of the opening of new stores and, to a lesser extent, the
introduction of new products. Of our 668 stores opened as of January 29, 2005,
115 had been open for less than one full year. We intend to continue to pursue
an aggressive growth strategy for the foreseeable future, and our future
operating results will depend largely upon our ability to open and operate
stores successfully and to profitably manage a larger business. We currently
anticipate opening approximately 110 stores, consisting of 65 Hot Topic and 45
Torrid stores, during fiscal 2005, which will result in a significant increase
in the number of stores we operate. Five of these Hot Topic stores and one of
these Torrid stores were opened as of March 9, 2005. Operation of a greater
number of new stores and expansion into new markets may present competitive and
merchandising challenges that are different from those currently encountered by
us in our existing stores and markets. In addition, as the number of stores
increases, we may face risks associated with market saturation of our products
and concepts. There can be no assurance that our expansion will not adversely
affect the individual financial performance of our existing stores or our
overall results of operations, or that new stores will achieve sales and
profitability levels consistent with existing stores. Further, there can be no
assurance that we will successfully achieve our expansion targets or, if
achieved, that planned expansion will result in profitable operations.


                                      16.
<PAGE>

     THIS GROWTH STRATEGY REQUIRES EFFECTIVE UPSCALING OF OUR OPERATIONS, AND WE
MAY NOT BE ABLE TO DO THIS SUFFICIENTLY TO EFFECTIVELY PREVENT NEGATIVE IMPACT
ON OUR OPERATIONS AND FINANCIAL RESULTS.

     In order to manage our planned expansion, among other things, we will need
to locate suitable store sites; negotiate acceptable lease terms; obtain
adequate capital resources on acceptable terms; source sufficient levels of
inventory; hire and train store managers and sales associates; integrate new
stores into our existing operations; and maintain adequate distribution center
space and information technology and other operations systems.

     We have entered into a lease (with a purchase option) for an additional
distribution center facility located in Tennessee, which we expect to be
operational in the second quarter of fiscal 2005, and we face challenges and
risks associated with establishing operations in this facility. In particular,
there are staffing and logistical concerns, as well as financial risks and other
risks associated with opening a significant facility in a site approximately
2,000 miles from our headquarters and current distribution center.

     We also need to continually evaluate the adequacy of our management
information and distribution systems. Implementing new systems and changes made
to existing systems could present challenges we do not anticipate and could
impact our business (for example, we experienced some delay in product
distribution during our second quarter of fiscal 2004 upon implementing our new
warehouse management system). We cannot anticipate all of the changing demands
that our expanding operations will impose on our business, systems and
procedures, and our failure to adapt to such changing demands could have a
material adverse effect on our results of operations and financial condition.
Our failure to timely implement initiatives necessary to support our expanding
operations could also materially impact our business.

     EXPANDING OUR OPERATIONS TO INCLUDE AN INCREASING NUMBER OF TORRID STORES
AND ANY OTHER NEW CONCEPTS PRESENTS RISKS WE HAVE FACED WITH THE HOT TOPIC
CONCEPT BUT ALSO NEW RISKS DUE TO DIFFERENCES IN CONCEPT OBJECTIVES AND
STRATEGIES.

     Our ability to expand into new concepts, and in particular our Torrid
concept, has not been fully tested. Accordingly, the operation of Torrid stores
and the sale of Torrid merchandise over the Internet are subject to numerous
risks, including unanticipated operational problems; lack of experience; lack of
customer acceptance; new vendor relationships; competition from existing and new
retailers; and diversion of management's attention from the Hot Topic concept.
The Torrid concept involves implementation of a retail apparel concept which is
subject to most of the same risks as the Hot Topic concept, as well as
additional risks inherent in a concept that concentrates on apparel and fashion,
including risks of difficulty in merchandising, uncertainty of customer
acceptance, fluctuations in fashion trends and customer tastes, extreme
competition with a less differentiated product offering and attendant mark-down
risks. We may not be able to generate continued customer interest in Torrid
stores and products, and the Torrid concept may not be able to support the store
or Internet sales formats. Risks inherent in any new concept are particularly
acute with respect to Torrid, because this is our first significant new venture,
and the nature of the Torrid business differs in certain respects from that of
the Hot Topic business. There can be no assurance that the Torrid stores or
website will achieve sales and profitability levels that justify our investment.

     THE SUCCESS OF OUR BUSINESS DEPENDS ON ESTABLISHING AND MAINTAINING GOOD
RELATIONSHIPS WITH MALL OPERATORS AND DEVELOPERS, AND PROBLEMS WITH THOSE
RELATIONSHIPS COULD MAKE IT MORE DIFFICULT FOR US TO EXPAND TO CERTAIN SITES OR
OFFER CERTAIN PRODUCTS.

     Any restrictions on our ability to expand to new store sites or to offer a
broad assortment of merchandise could have a material adverse effect on our
business, results of operations and financial condition. If our relations with
mall operators or developers become strained, or we otherwise encounter
difficulties in leasing store sites, we may not grow as planned and may not
reach certain revenue levels and other operating targets. Risks associated with
these relationships are more acute given recent consolidation in that industry,
and we have seen certain increases in expenses as a result of such consolidation
that could continue.


                                      17.
<PAGE>

     OUR COMPARABLE STORE SALES ARE SUBJECT TO FLUCTUATION RESULTING FROM
FACTORS WITHIN AND OUTSIDE OUR CONTROL, AND LOWER THAN EXPECTED COMPARABLE STORE
SALES COULD IMPACT OUR BUSINESS AND OUR STOCK PRICE.

     A variety of factors affects our comparable store sales including, among
others, the timing of new music releases and music/pop culture-related products;
music and fashion trends; the general retail sales environment and the effect of
the overall economic environment; our ability to efficiently source and
distribute products; changes in our merchandise mix; and our ability to execute
our business strategy efficiently. Our comparable store sales results have
fluctuated significantly in the past and we believe that such fluctuations will
continue. The following table shows our comparable store sales results for
recent periods:

          Fiscal Year          2004      2003      2002      2001
          ----------------------------------------------------------
                              (2.9)%     7.4%      5.0%      3.9%

                              FY 2004         FY 2003
          -----------------------------------------------
          1st Quarter             4.0%            2.6%
          2nd Quarter           (2.1)%            5.2%
          3rd Quarter           (4.2)%           10.8%
          4th Quarter           (6.0)%            8.5%

     Past comparable store sales results are not an indicator of future results,
and there can be no assurance that our comparable store sales results will not
decrease in the future. Changes in our comparable store sales results could
cause our stock price to fluctuate substantially.

     OUR SUCCESS RELIES ON POPULARITY WITH YOUNG PEOPLE OF MUSIC, POP CULTURE,
AND FASHION TRENDS, AND WE MAY NOT BE ABLE TO REACT TO TRENDS IN A WAY TO
PREVENT DECLINING POPULARITY AND SALES OF OUR PRODUCTS.

     Our financial performance is largely dependent upon the continued
popularity of alternative and rock music, the Internet and digital music, music
videos, and MTV and other music television networks among teenagers and college
age adults; the emergence of new artists and the success of music releases and
music/pop culture-related products; the continuance of a significant level of
teenage spending on music/pop culture-licensed and music/pop culture-influenced
products; and our ability to anticipate and keep pace with the music, fashion
and merchandise preferences of our customers. The popularity of particular types
of music, artists, styles, trends and brands is subject to change. Our failure
to anticipate, identify and react appropriately to changing trends could lead
to, among other things, excess inventories and higher markdowns, which could
have a material adverse effect on our results of operations and financial
condition, and on our image with customers. There can be no assurance that our
new products will be met with the same level of acceptance as in the past or
that the failure of any new products will not have an adverse material effect on
our business, results of operations and financial condition.

     ECONOMIC CONDITIONS COULD CHANGE IN WAYS THAT REDUCE OUR SALES OR INCREASE
OUR EXPENSES.

     Certain economic conditions affect the level of consumer spending on
merchandise we offer, including, among others, employment levels; salary and
wage levels; interest rates; taxation; and consumer confidence in future
economic conditions. We are also dependent upon the continued popularity of
malls as a shopping destination, the ability of mall anchor tenants and other
attractions to generate customer traffic, and the development of new malls. A
slowdown in the United States economy or an uncertain economic outlook could
lower consumer spending levels and cause a decrease in mall traffic or new mall
development, each of which would adversely affect our growth, sales results and
financial performance.

     CHANGES IN LAWS, INCLUDING EMPLOYMENT LAWS AND LAWS RELATED TO OUR
MERCHANDISE, COULD MAKE CONDUCTING OUR BUSINESS MORE EXPENSIVE OR CHANGE THE WAY
WE DO BUSINESS.


                                      18.
<PAGE>

     In addition to increased regulatory compliance requirements, changes in
laws could make ordinary conduct of our business more expensive or require us to
change the way we do business. For example, changes in federal and state minimum
wage laws could raise the wage requirements for certain of our associates, which
would likely cause us to reexamine our entire wage structure for stores. Other
laws related to employee benefits and treatment of employees could also
negatively impact us such as by increasing benefits costs such as medical
expenses. Moreover, changes in product safety or other consumer protection laws
could lead to increased costs to us for certain merchandise, or additional labor
costs associated with readying merchandise for sale. It is often difficult for
us to plan and prepare for potential changes to applicable laws.

     TIMING AND SEASONAL ISSUES COULD NEGATIVELY IMPACT OUR FINANCIAL
PERFORMANCE FOR GIVEN PERIODS.

     Our quarterly results of operations may fluctuate materially depending on,
among other things, the timing of store openings and related pre-opening and
other startup expenses, net sales contributed by new stores, increases or
decreases in comparable store sales, releases of new music and music/pop
culture-related products, shifts in timing of certain holidays, changes in our
merchandise mix and overall economic and political conditions.

     Our business is also subject to seasonal influences, with heavier
concentrations of sales during the back-to-school, Halloween and Holiday
(defined as the week of Thanksgiving through the first few days of January)
seasons, and other periods when schools are not in session. The Holiday season
has historically been our single most important selling season. We believe that
the importance of the summer vacation and back-to-school seasons (which affect
operating results in the second and third quarters, respectively) and to a
lesser extent, the spring break season (which affects operating results in the
first quarter) as well as Halloween (which affects operating results in the
third quarter), all reduce our dependence on the Holiday selling season, but
this may not always be the case to the same degree. As is the case with many
retailers of apparel, accessories and related merchandise, we typically
experience lower net sales in the first fiscal quarter relative to other
quarters.

     WE HAVE MANY IMPORTANT VENDOR RELATIONSHIPS, AND OUR ABILITY TO GET
MERCHANDISE COULD BE HURT BY CHANGES IN THOSE RELATIONSHIPS AND EVENTS HARMFUL
TO OUR VENDORS COULD IMPACT OUR RESULTS OF OPERATION.

     Our financial performance depends on our ability to purchase desired
merchandise in sufficient quantities at competitive prices. Although we may have
many sources of merchandise, substantially all of our music/pop culture-licensed
products are available only from vendors that have exclusive license rights. In
addition, certain of our products are supplied by small, specialized vendors,
some of which create unique products primarily for us. Our smaller vendors
generally have limited resources, production capacities and operating histories,
and some of our vendors have restricted the distribution of their merchandise in
the past. We generally have no long-term purchase contracts or other contractual
assurances of continued supply, pricing or access to new products. There can be
no assurance that we will be able to acquire desired merchandise in sufficient
quantities on acceptable terms in the future. Any inability to acquire suitable
merchandise, or the loss of one or more key vendors, may have a material adverse
effect on our business, results of operations and financial condition.

     TECHNOLOGY AND OTHER RISKS ASSOCIATED WITH OUR INTERNET SALES COULD HINDER
OUR OVERALL FINANCIAL PERFORMANCE.

     We sell merchandise over the Internet through the websites hottopic.com and
torrid.com. Our Internet operations are subject to numerous risks and pose risks
to our overall business, including, among other things: hiring; retention and
training of personnel to conduct the Internet operations; diversion of sales
from our stores; rapid technological change and the need to invest in additional
computer hardware and software to support sales, customer service and order
fulfillment; liability for online content; failure of computer hardware and
software, including computer viruses, telecommunication failures, online
security breaches and similar disruptions; governmental regulation; and credit
card fraud. There can be no assurance that our Internet operations will achieve
sales and profitability levels that justify our investment in them.


                                      19.
<PAGE>

     WE HAVE MADE AND PLAN TO CONTINUE TO MAKE SIGNIFICANT CHANGES TO
INFORMATION SYSTEMS AND SOFTWARE USED IN OPERATION OF OUR BUSINESS, AND WE MAY
NOT BE ABLE TO EFFECTIVELY ADOPT CHANGES IN A WAY TO PREVENT FAILURES IN OUR
OPERATIONS OR NEGATIVE IMPACT ON OUR FINANCIAL PERFORMANCE AND REPORTING.

     Over the past several years, we have made improvements to existing hardware
and software systems, as well as implemented new systems. For example, we have
invested approximately $6 million to enhance the functionality of our current
GERS Retail Systems software and to implement new financial system software from
Lawson. In addition, we are investing approximately $10 million in the
implementation of a new warehouse management software system, a new Internet
order management software system, and a new customer loyalty software system. We
expect to significantly increase our reliance on these systems in fiscal 2005.
If these information systems and software do not work effectively, we may
experience delays or failures in our operations. These delays or failures could
adversely impact the promptness and accuracy of our merchandise distribution,
transaction processing, financial accounting and reporting and ability to
properly forecast earnings and cash requirements. For example, in the second
quarter of 2004, we experienced some delay in product distribution upon
implementation of our new warehouse management system. To manage growth of our
operations and personnel, we may need to continue to improve our operational and
financial systems, transaction processing, and procedures and controls, and in
doing so, we could incur substantial additional expenses.

     LOSS OF KEY PEOPLE OR AN INABILITY TO HIRE NECESSARY AND SIGNIFICANT
PERSONNEL COULD HURT OUR BUSINESS.

     Our financial performance depends largely on the efforts and abilities of
senior management, especially Elizabeth McLaughlin, our Chief Executive Officer,
who has been with us since 1993. We have a $2,000,000 key-person life insurance
policy on Ms. McLaughlin. However, the sudden loss of Ms. McLaughlin's services
or the services of other members of our management team could have a material
adverse effect on our business, results of operations and financial condition.
Furthermore, there can be no assurance that Ms. McLaughlin and our existing
management team will be able to manage Hot Topic, Inc. or our growth or that we
will be able to attract and retain additional qualified personnel as needed in
the future.

     OUR RELIANCE ON UNITED PARCEL SERVICE, TEMPORARY EMPLOYEES AND OTHER
MECHANICS OF SHIPPING OF OUR MERCHANDISE CREATES DISTRIBUTION RISKS AND
UNCERTAINTIES THAT COULD HURT OUR SALES AND BUSINESS.

     We rely upon United Parcel Service for our product shipments, including
shipments to and from a significant number of our stores. Our reliance on this
source for shipments is subject to risks, including employee strikes and
inclement weather, associated with United Parcel Service's ability to provide
delivery services that adequately meet our shipping needs. We are also dependent
upon temporary associates to adequately staff our distribution facility,
particularly during busy periods such as the Holiday season and while multiple
stores are opening. There can be no assurance that we will continue to receive
adequate assistance from our temporary associates, or that there will continue
to be sufficient sources of temporary associates. Additionally, certain products
are imported and subject to delivery delays based on availability and ports
capacity.

     THERE IS A RISK WE COULD ACQUIRE MERCHANDISE WITHOUT FULL RIGHTS TO SELL
IT, WHICH COULD LEAD TO DISPUTES OR LITIGATION AND HURT OUR FINANCIAL
PERFORMANCE AND STOCK PRICE.

     We purchase licensed merchandise from a number of suppliers who hold
manufacturing and distribution rights under the terms of certain licenses. We
generally rely upon vendors' representations concerning manufacturing and
distribution rights and do not independently verify whether these vendors
legally hold adequate rights to licensed properties they are manufacturing or
distributing. If we acquire unlicensed merchandise, we could be obligated to
remove such merchandise from our stores, incur costs associated with destruction
of merchandise if the distributor is unwilling or unable to reimburse us, and be
subject to liability under various civil and criminal causes of action,
including actions to recover unpaid royalties and other damages. Any of these
results could have a material adverse effect on our business, results of
operations and financial condition.


                                      20.
<PAGE>

     WE FACE INTENSE COMPETITION, AND AN INABILITY TO ADEQUATELY ADDRESS IT, OR
THE SUCCESS OF OUR COMPETITORS, COULD LIMIT OR PREVENT OUR BUSINESS GROWTH AND
SUCCESS.

     The retail apparel and accessory industry is highly competitive. We compete
with other retailers for vendors, teenage and young adult customers, suitable
store locations and qualified associates and management personnel. Hot Topic
currently competes with street alternative stores located primarily in
metropolitan areas; with other mall-based teenage-focused retailers such as
Abercrombie & Fitch, Aeropostale, American Eagle Outfitters, Anchor Blue,
Charlotte Russe Inc., Claire's Stores, Inc., Forever 21, Pacific Sunwear of
California, Inc., Spencer Gifts, Inc., H&M, The Buckle, Wet Seal, Inc., and
Urban Outfitters, Inc.; and, to a lesser extent, with music stores and mail
order catalogs and websites. Torrid has additional competitors, such as Alloy,
Inc., Deb Shops, Delia's Corp., Old Navy (a division of Gap Inc.), Lane Bryant,
and plus-size departments in department stores and discount stores as well as
numerous potential competitors who may begin or increase efforts to market and
sell products competitive with Torrid's products. Some of our competitors are
larger and may have greater financial, marketing and other resources. Direct
competition with these and other retailers may increase significantly in the
future, which could require us, among other things, to lower our prices.
Increased competition could have a material adverse effect on our business,
results of operations and financial condition.

     WAR, TERRORISM AND OTHER CATASTROPHES COULD NEGATIVELY IMPACT OUR
CUSTOMERS, PLACES WHERE WE DO BUSINESS, AND OUR EXPENSES, ALL OF WHICH COULD
HURT OUR BUSINESS.

     The effects of war or acts of terrorism could have a material adverse
effect on our business, operating results and financial condition. The terrorist
attacks in New York and Washington, D.C. on September 11, 2001 disrupted
commerce and intensified the uncertainty of the U.S. economy, a condition which
has persisted due to recent military actions. The continued threat of terrorism
and heightened security and military action in response to this threat, or any
future acts of terrorism, may cause further disruptions and create further
uncertainties. To the extent that such disruptions or uncertainties negatively
impact shopping patterns and/or mall traffic, or adversely affect consumer
confidence or the economy in general, our business, operating results and
financial condition could be materially and adversely affected.

     In addition, a few years ago, California experienced substantially
increased costs of electricity and gas caused by, among other things, disruption
in energy supplies. Our principal executive offices, distribution center and a
significant number of our stores are located in California. If we experience a
sustained disruption in energy supplies, or if electricity and gas costs in
California fluctuate dramatically, our results of operations could be materially
and adversely affected. California is also subject to natural disasters such as
earthquakes and floods. A significant natural disaster or other catastrophic
event affecting our facilities could have a material adverse impact on our
business, financial condition and operating results.

     THERE ARE NUMEROUS RISKS THAT COULD CAUSE OUR STOCK PRICE TO FLUCTUATE
SUBSTANTIALLY.

     Our common stock is quoted on the Nasdaq National Market, which has
experienced and is likely to experience in the future significant price and
volume fluctuations, which could adversely affect our stock price without regard
to our financial performance. In addition, we believe that factors such as
quarterly fluctuations in our financial results and comparable store sales;
announcements by other apparel, accessory and gift item retailers; the trading
volume of our stock; changes in estimates of our performance by securities
analysts; overall economic and political conditions; the condition of the
financial markets; and other events or factors outside of our control could
cause our stock price to fluctuate substantially.


                                      21.
<PAGE>

     OUR CHARTER DOCUMENTS AND OTHER CIRCUMSTANCES COULD PREVENT A TAKEOVER OR
CAUSE DILUTION OF OUR EXISTING SHAREHOLDERS, WHICH COULD BE DETRIMENTAL TO
EXISTING SHAREHOLDERS AND HINDER BUSINESS SUCCESS.

     Our Articles of Incorporation and Bylaws contain provisions that may have
the effect of delaying, deterring or preventing a takeover of Hot Topic, Inc.
For instance, our Articles of Incorporation include certain "fair price
provisions" generally prohibiting business combinations with controlling or
significant shareholders unless certain minimum price or procedural requirements
are satisfied, and our Bylaws prohibit shareholder action by written consent.
Additionally, our Board of Directors has the authority to issue, without
shareholder approval, up to 10,000,000 shares of "blank check" preferred stock
having such rights, preferences and privileges as designated by the Board of
Directors. The issuance of these shares could have a dilutive effect on certain
shareholders, and potentially prohibit a takeover of Hot Topic, Inc. by
requiring the preferred shareholders to approve such a transaction.

     We also have a significant number of authorized and unissued shares of our
common stock available under our Articles of Incorporation. These shares provide
us with the flexibility to issue our common stock for future business and
financial purposes including stock splits, raising capital and providing equity
incentives to employees, officers and directors. However, the issuance of these
shares could result in dilution to our shareholders.

     WE INCUR COSTS ASSOCIATED WITH REGULATORY COMPLIANCE, AND THIS COST COULD
BE SIGNIFICANT.

     All companies are subject to laws and regulations, some of which require
certain actions to be taken (or not taken) and costs to be incurred relating to
business processes and risk management. There are additional requirements for
public companies, including the provisions of the Sarbanes-Oxley Act of 2002.
With regard to the Sarbanes-Oxley Act, we have and will continue to incur
significant expense as we continue to address the implications of applicable
rules and our operations relative thereto, and as we work to respond to and
comply with applicable requirements. Among other things, we have incurred and
will incur additional expenses as we implement Section 404 of the Sarbanes-Oxley
Act. Section 404 requires management to report on, and our independent auditors
to attest to, our internal controls. Compliance with these rules could also
result in continued diversion of management's time and attention, which could be
disruptive to normal business operations.

     If we do not satisfactorily or timely comply with these requirements,
possible consequences could include sanction or investigation by regulatory
authorities such as the Securities and Exchange Commission or the Nasdaq
National Market, incomplete or late filing of our annual report on Form 10-K, or
civil or criminal liability. Our stock price and business could also be
adversely affected.

     THERE ARE LITIGATION AND OTHER CLAIMS AGAINST US FROM TIME TO TIME, WHICH
COULD DISTRACT MANAGEMENT FROM OUR BUSINESS ACTIVITIES, AND COULD LEAD TO
ADVERSE CONSEQUENCES TO OUR BUSINESS AND FINANCIAL CONDITION.

     As a growing company with expanding operations, we are increasingly
involved from time to time with litigation and other claims against us. These
arise primarily in the ordinary course of our business, and include employee
claims, commercial disputes, intellectual property issues and product-oriented
allegations. Often these cases raise complex factual and legal issues, which are
subject to risks and uncertainties and which could require significant
management time. Although we do not currently believe that the outcome of any
current litigation and claims against us will have a material adverse effect on
us, adverse settlements or resolutions may occur and negatively impact earnings,
injunctions against us could have an adverse effect on our business by requiring
us to do or prohibiting us from doing certain things, and other unexpected
events could have a negative impact on us.

                                      22.
<PAGE>

     RECENT ACCOUNTING REGULATION CHANGES WILL REQUIRE THE EXPENSING OF STOCK
OPTIONS.

     Recently effective accounting regulation changes require that all publicly
traded companies begin recording compensation expense related to all unvested
and newly granted stock options prospectively for interim or annual periods
beginning after June 15, 2005. Currently, we include such expenses on a pro
forma basis in the notes to our quarterly and annual financial statements in
accordance with accounting principles generally accepted in the United States of
America and do not include compensation expense related to stock options in our
reported earnings in the financial statements. When we begin expensing stock
options as provided above, our reported earnings will be negatively impacted and
our stock price could decline.

ITEM 2.   PROPERTIES

     We lease all of our existing store locations, with lease terms expiring
between 2005 and 2015. At January 29, 2005, we had a total of 1,214,424 leased
store square feet (Hot Topic and Torrid stores) with an average store size of
1,810 square feet (Hot Topic and Torrid stores). The leases for most of the
existing stores are for approximately ten-year terms and provide for contingent
rent based upon a percent of sales in excess of specified minimums. Leases for
future stores will likely include similar contingent rent provisions.

     We lease our headquarters and distribution center facility, located in City
of Industry, California, which is approximately 250,000 square feet. Our lease
expires April 2014, and the annual base rent is approximately $1,110,000. We
have entered into a lease (with a purchase option) for an additional
distribution center facility in Tennessee, which is approximately 300,000 square
feet, which we expect to be operational by the end of the second quarter of
fiscal 2005.

ITEM 3.   LEGAL PROCEEDINGS

     On June 23, 2004, a non-profit corporation named Center for Environmental
Health filed a lawsuit in Federal district court in Alameda, California against
over two dozen retailers, large and small, including Hot Topic, Inc. Other
defendants include teen retailers like Claire's and Wet Seal, department stores
like Sears, Nordstrom, Macy's and J.C. Penney, and large retailers like Wal-Mart
and Target. Certain of the defendants, but not Hot Topic, were also named
defendants in a substantially similar lawsuit filed by the State of California.
The complaint in each case alleges, in general, that the defendant retailers
have violated certain California statutes by not providing sufficient warning
about an alleged potential for lead exposure relating to costume jewelry sold in
stores. The complaints do not contain allegations of personal injury. In August
2004, we were served another complaint, filed in the Circuit Court of Shelby
County, Tennessee, claiming we are liable due to alleged lead content in our
costume jewelry we allegedly target to children. This complaint is an alleged
class action, again excluding any personal injury claim, with counts of
negligence and breach of implied warranty. Similar claims had been made, prior
to service upon us, against other retailers in the same jurisdiction by
plaintiffs represented by the same law firm. Currently, a motion to dismiss is
under consideration by the court in a separate case against another retailer,
and the Tennessee case against us has been delayed pending the court's ruling on
that motion. We expect to file a similar motion to dismiss for our case. The
plaintiffs in the above California cases seek unspecified fines and penalties,
attorneys' fees and costs, and injunctive and other equitable relief; and the
plaintiff in the Tennessee case seeks unspecified money damages, punitive
damages, attorneys' fees and injunctive relief on behalf of the alleged class.
We continue to evaluate appropriate action in each of these cases with our
counsel. In each case, we believe we have meritorious defenses to the
plaintiff's claims and intend to defend against such claims; though it is
impossible to predict the outcome of the proceeding, and it is possible the
plaintiff will be awarded requested remedies or that we may determine it
appropriate to settle the lawsuit which could require us to take or not take
certain actions.

     On September 17, 2004, a former Torrid employee filed a lawsuit against us
in Superior Court of Los Angeles County, on behalf of a purported class. The
lawsuit asserts claims for failure to provide adequate meal or rest breaks,
improper payment of overtime wages, failure to timely pay wages at end of
employment and unfair business practices. The lawsuit seeks compensatory
damages, statutory penalties, punitive damages, attorneys' fees and injunctive
relief. On October 21, 2004, we filed an answer denying the material allegations
of the complaint, and we intend to vigorously defend ourselves against the
various claims. Discovery has begun in connection with this matter but at the
present time we are unable to predict the outcome of this matter.


                                      23.
<PAGE>

     On November 18, 2004, a former Torrid employee filed a lawsuit against us
in Superior Court of Los Angeles County, on behalf of a purported class. The
lawsuit asserts claims for, among other things, failure to pay overtime wages
and unfair business practices. The lawsuit seeks compensatory damages, statutory
penalties, restitution, interest and other costs, and attorneys' fees. We intend
to vigorously defend ourselves against the various claims, though at the present
time we are unable to predict the outcome of this matter.

     Though significant litigation or awards against us could seriously harm our
business and financial results, we do not at this time expect any of the
above-described litigation to have a material adverse effect on us.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.




                                      24.
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
          ISSUER PURCHASES OF EQUITY SECURITIES

     Our Common Stock is traded on the Nasdaq National Market under the symbol
"HOTT." The following table shows, for the periods indicated, the high and low
end-of-day closing sales prices of our shares of Common Stock, as reported on
the Nasdaq National Market. Such quotations represent inter-dealer prices
without retail markup, markdown or commission and may not necessarily represent
actual transactions.

             2004 FISCAL YEAR QUARTERS            HIGH        LOW
             ------------------------------------------------------
             First Quarter                       $30.79     $21.78

             Second Quarter                      $22.91     $14.87

             Third Quarter                       $20.56     $14.49

             Fourth Quarter                      $20.95     $15.46


             2003 FISCAL YEAR QUARTERS            HIGH        LOW
             ------------------------------------------------------
             First Quarter                       $16.35     $14.01

             Second Quarter                      $19.67     $15.69

             Third Quarter                       $29.25     $18.33

             Fourth Quarter                      $31.85     $26.60

     On August 12, 2003, we announced that our Board of Directors approved a
three-for-two stock split (in the form of a dividend) of our common stock. On
the effective date of September 2, 2003, shareholders received a dividend of one
additional share for every two shares they owned at the close of business on the
record date of August 21, 2003. The prices listed in the above table have been
adjusted for the split.

     On March 9, 2005, the last sales price of our common stock as reported on
the Nasdaq National Market was $23.05 per share. As of March 9, 2005, there were
approximately 208 holders of record of our common stock. This number does not
reflect the actual number of beneficial holders of our common stock, which we
believe to be in excess of 25,000 holders.

     On March 19, 2004, we announced that our Board of Directors approved the
repurchase of up to an aggregate of 2,000,000 shares of our common stock during
the period ending January 29, 2005. As of July 31, 2004 we had completed the
repurchase of 2,000,000 shares of our common stock at a cost of $46.8 million at
an average price of $23.41.

     On August 18, 2004, we announced that our Board of Directors approved an
additional repurchase of up to an aggregate of 2,000,000 shares of our common
stock during the period ending January 29, 2005. As of January 29, 2005 we had
completed the repurchase of 2,000,000 shares of our common stock at a cost of
$32.8 million at an average price of $16.42. The following table summarizes
activity in the quarter ended January 29, 2005.


                                      25.
<PAGE>

<TABLE>
                                         ISSUER PURCHASES OF EQUITY SECURITIES
-------------------------------------------------------------------------------------------------------------------------
                                                                              TOTAL NUMBER OF
                                                                            SHARES PURCHASED AS       MAXIMUM NUMBER OF
                                                                              PART OF PUBLICLY     SHARES THAT MAY YET BE
                               TOTAL NUMBER OF       AVERAGE PRICE PAID      ANNOUNCED PLANS OR      PURCHASED UNDER THE
      FISCAL PERIOD           SHARES PURCHASED           PER SHARE                PROGRAMS            PLANS OR PROGRAMS
------------------------      ----------------       ------------------     -------------------    ----------------------
<S>                               <C>                      <C>                   <C>                          <C>
November 28, 2004 -
January 1, 2005                   1,000,000                $15.98                2,000,000                    -
                              ----------------       ------------------     -------------------    ----------------------
Total                             1,000,000                $15.98                2,000,000                    -
                              ================       ==================     ===================    ======================
</TABLE>

     We have not paid any cash dividends since inception and do not anticipate
paying any cash dividends in the foreseeable future.

     Please see Item 12 for information about our equity compensation plans.

ITEM 6.   SELECTED FINANCIAL DATA

     The following table summarizes selected financial data for each of the five
fiscal years in the period ended January 29, 2005 and have been restated to
reflect adjustments that are discussed further in Note 2. "Restatement of
Financial Statements" in the Notes to Consolidated Financial Statements included
in Item 8. "Financial Statements and Supplementary Data" in this Form 10-K. This
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes included elsewhere in this Annual Report on Form 10-K.


                                      26.
<PAGE>

<TABLE>
                                                                            Fiscal Year (as restated)
                                                         --------------------------------------------------------------
                                                            2004          2003         2002         2001         2000
                                                         ---------     ---------    ---------    ---------    ---------
(In thousands, except per share data, number of stores, comparable store
sales and sales per square foot)
<S>                                                      <C>           <C>          <C>          <C>          <C>
Statement of Operations Data:
Net sales                                                $ 656,468     $ 572,039    $ 443,250    $ 336,094    $ 257,187
Cost of goods sold, including buying, distribution
    and occupancy costs                                    422,712       352,277      274,008      205,756      154,765
                                                         ---------     ---------    ---------    ---------    ---------
Gross margin                                               233,756       219,762      169,242      130,338      102,422
Selling, general and administrative expenses               170,384       143,952      115,634       86,950       67,917
                                                         ---------     ---------    ---------    ---------    ---------
Operating income                                            63,372        75,810       53,608       43,388       34,505
Interest income, net                                           919         1,318        1,371        1,884        1,925
                                                         ---------     ---------    ---------    ---------    ---------
Income before income taxes                                  64,291        77,128       54,979       45,272       36,430
Provision for income taxes                                  24,618        29,539       20,892       17,146       13,479
                                                         ---------     ---------    ---------    ---------    ---------
Net income                                               $  39,673     $  47,589    $  34,087    $  28,126    $  22,951
                                                         =========     =========    =========    =========    =========

Net income per share:
    Basic                                                $    0.86     $    1.00    $    0.72    $    0.61    $    0.52
    Diluted                                              $    0.83     $    0.96    $    0.69    $    0.56    $    0.48
Weighted average shares outstanding:
    Basic                                                   46,379        47,479       47,027       46,467       44,502
    Diluted                                                 47,875        49,588       49,276       49,829       48,104

Selected Operating Data:
Number of stores at year end                                   668           554          445          352          274
Comparable stores sales                                       (2.9)%         7.4%         5.0%         3.9%        16.7%
Average sales per square foot                            $     571     $     619    $     619    $     636    $     669
Average sales per store                                  $   1,034     $   1,106    $   1,064    $   1,036    $   1,020

Balance Sheet Data:
Cash and short-term investments                          $  66,339     $ 128,205    $  83,418    $  71,310    $  51,288
Working capital                                             87,221       141,803       90,261       82,370       61,253
Total assets                                               278,395       296,082      215,854      169,904      123,317
Shareholders' equity                                     $ 187,562     $ 221,279    $ 158,756    $ 133,738    $  98,135



                                                           27.
</TABLE>
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     The following discussion of our results of operations, financial condition
and liquidity, and other matters should be read in conjunction with our
Consolidated Financial Statements and Notes related thereto included in Item 8.
"Financial Statements and Supplementary Data" in this Form 10-K. These
statements have been prepared in conformity with accounting principles generally
accepted in the United States and require our management to make estimates and
assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from these estimates.

          GENERAL

     We are a mall-based specialty retailer operating the Hot Topic and Torrid
store concepts. Hot Topic stores sell a selection of music/pop culture-licensed
and music/pop culture-influenced apparel, accessories and gift items for young
men and women principally between the ages of 12 and 22. Torrid stores sell
apparel, lingerie, shoes and accessories designed for various lifestyles for
plus-size females between the ages of 15 and 29. We opened our first Hot Topic
store in 1989 and our first Torrid store in 2001. At the end of fiscal 2004 (the
fiscal year ended January 29, 2005), we operated 592 Hot Topic stores throughout
the United States and Puerto Rico, and 76 Torrid stores. We also sell
merchandise on two websites, www.hottopic.com ("hottopic.com") and
www.torrid.com ("torrid.com"), which reflect the Hot Topic and Torrid store
concepts and carry merchandise similar to that sold in the respective stores.

     We consider a store comparable after it has been open for 15 full months.
If a store is relocated or expanded by more than 15% in total square footage, it
is removed from the comparable store base and, similar to new stores, becomes
comparable after 15 full months. At the end of fiscal 2004, 471 of the 592 Hot
Topic stores were included in the comparable store base, compared to 401 of the
502 stores open at the end of fiscal 2003. At the end of fiscal 2004, 46 of the
76 Torrid stores were included in the comparable store base, compared to 22 of
the 52 stores open at the end of fiscal 2003.

     We operate on a 52 or 53-week fiscal year, which ends on the Saturday
nearest to January 31. Fiscal 2004, 2003 and 2002 were 52-week fiscal years.

     See Note 2 to the Consolidated Financial Statements included in this report
for a summary of changes related to accounting of leases on our consolidated
balance sheet as of January 31, 2004, as well as our consolidated statements of
income and cash flows for the fiscal years ended January 31, 2004 and February
1, 2003. This Management's Discussion and Analysis gives effect to those
corrections.


                                      28.
<PAGE>

RESULTS OF OPERATIONS

     The following table shows, for the periods indicated, certain selected
statement of operations data expressed as a percentage of net sales and certain
store data:

                                                          FISCAL YEAR
                                                 -------------------------------
                                                    2004      2003      2002
                                                    ----      ----      ----
Net sales                                         100.0%    100.0%     100.0%
 Cost of goods sold, including
   buying, distribution & occupancy
   costs                                           64.4%     61.6%      61.8%
                                                   -----     -----      -----
Gross margin                                       35.6%     38.4%      38.2%
Selling, general and administrative expenses       25.9%     25.1%      26.1%
                                                   -----     -----      -----
Operating income                                    9.7%     13.3%      12.1%
Interest income, net                                0.1%      0.2%       0.3%
                                                    ----      ----       ----
Income before income tax                            9.8%     13.5%      12.4%
Provision for income taxes                          3.8%      5.2%       4.7%
                                                    ----      ----       ----
Net income                                          6.0%      8.3%       7.7%
                                                    ====      ====       ====

Number of stores at year end                         668       554        445
Comparable store sales                            (2.9)%      7.4%       5.0%

FISCAL 2004 COMPARED TO FISCAL 2003

     Net sales increased approximately $84.4 million, or 14.8%, to $656.5
million in fiscal 2004 from $572.0 million in fiscal 2003. The components of
this $84.4 million increase in net sales are as follows:

        AMOUNT
     ($ MILLIONS)                          DESCRIPTION
     ------------   -----------------------------------------------------------
        $75.6       Net sales from new Hot Topic stores opened during fiscal
                    2004 and Hot Topic stores not yet qualifying as comparable
                    stores

         19.2       Net sales from new Torrid stores opened during fiscal 2004
                    and Torrid stores not yet qualifying as comparable stores

        (14.4)      2.9% decrease in comparable store net sales in fiscal 2004
                    compared to fiscal 2003

          4.0       Increase in Internet sales (hottopic.com and torrid.com)

     -----------
       $84.4        TOTAL
     ===========

     The annual average Hot Topic store volume decreased to $1.05 million in
fiscal 2004 from $1.13 million in fiscal 2003. Hot Topic sales of apparel
category merchandise, as a percentage of total net sales, were 53% in fiscal
2004 compared to 52% in fiscal 2003. The increase in apparel was primarily due
to increases in men's music-related tee shirts partially offset by decreases in
women's bottoms, men's fashion tops and men's bottoms.


                                      29.
<PAGE>

     Gross margin increased approximately $14.0 million to $233.8 million in
fiscal 2004 from $219.8 million in fiscal 2003. As a percentage of net sales,
gross margin decreased to 35.6% in fiscal 2004 from 38.4% in fiscal 2003. The
significant components of this 2.8% decrease in gross margin, as a percentage of
net sales, are as follows:

           %                               DESCRIPTION
     ------------   -----------------------------------------------------------
        (2.1)%      Decrease in merchandise margin, principally due to higher
                    markdown activity driven by lower comparable store sales

        (0.5)       Increase in occupancy and store depreciation expenses,
                    primarily due to deleveraging over lower comparable store
                    sales

        (0.2)       Increase in distribution expenses and buying costs,
                    primarily due to higher freight costs and deleveraging
                    payroll costs over lower comparable store sales

     -----------
        (2.8)%      TOTAL
     ===========

     Selling, general and administrative expenses increased approximately $26.4
million to $170.4 million during fiscal 2004 from $144.0 million during fiscal
2003. As a percentage of net sales, selling, general and administrative expenses
were 25.9% for fiscal 2004 compared to 25.1% in fiscal 2003. The total dollar
increase in selling, general and administrative expenses was primarily
attributable to an increase in the number of retail stores from 554 at the end
of fiscal 2003 to 668 at the end of fiscal 2004 and the corresponding additional
payroll and other expenses required to support these additional stores. The
significant components of this 0.8% increase in selling, general and
administrative expenses as a percentage of net sales are as follows:

           %                               DESCRIPTION
     ------------   -----------------------------------------------------------
         0.5%       Increase in store payroll due to deleveraging of payroll
                    costs over lower comparable store sales, and increase in
                    payroll-related benefits costs, partially offset by lower
                    store bonus payouts

         0.5%       Increase in other store expenses as a result of
                    deleveraging expenses over lower comparable store sales
                    along with increases in store supply costs and expenses
                    related to our wide area network

         0.1%       Increase in depreciation and amortization as a result of
                    our new warehouse management software implemented during
                    2004 and higher marketing expenses to support new
                    advertising programs.

        (0.3)%      Decrease in other general and administrative expenses
                    primarily due to a decrease in performance based
                    compensation, partially offset by an increase in payroll
                    related benefits costs and an increase in professional
                    fees related to implementing Section 404 of the
                    Sarbanes-Oxley Act

     ------------
         0.8%       TOTAL
     ============

     Operating income decreased approximately $12.4 million to $63.4 million
during fiscal 2004 from $75.8 million during fiscal 2003. As a percentage of net
sales, operating income was 9.7% in fiscal 2004 compared to 13.3% in fiscal
2003. Operating income on an average store basis was approximately $103,000 in
fiscal 2004 as compared to $151,000 in fiscal 2003.


                                      30.
<PAGE>

     Net interest income decreased to $0.9 million in fiscal 2004 from $1.3
million in fiscal 2003, principally due to lower average cash balances, which
was primarily a result of cash used for purposes of common stock repurchases.

     Our effective tax rate was 38.3% in both fiscal 2004 and 2003.

FISCAL 2003 COMPARED TO FISCAL 2002

     Net sales increased approximately $128.8 million, or 29.1%, to $572.0
million in fiscal 2003 from $443.2 million in fiscal 2002. The components of
this $128.8 million increase in net sales are as follows:

        AMOUNT
     ($ MILLIONS)                          DESCRIPTION
     ------------   -----------------------------------------------------------
        $71.5       Net sales from new Hot Topic stores opened during fiscal
                    2003 and Hot Topic stores not yet qualifying as comparable
                    stores

         20.3       Net sales from new Torrid stores opened during fiscal 2003
                    and Torrid stores not yet qualifying as comparable stores

         29.1       7.4% increase in comparable store net sales in fiscal 2003
                    compared to fiscal 2002

          7.9       Increase in Internet sales (hottopic.com and torrid.com)

     ------------
       $128.8       TOTAL
     ============

     The annual average Hot Topic store volume increased to $1.13 million in
fiscal 2003 from $1.07 million in fiscal 2002. Hot Topic sales of apparel
category merchandise, as a percentage of total net sales, were 52% in fiscal
2003 compared to 51% in fiscal 2002. The increase in apparel was primarily due
to increases in men's novelty tee shirts and men's music-related tee shirts
partially offset by decreases in women's apparel (women's bottoms and novelty
tees), men's fashion tops and men's bottoms. The sales mix for Hot Topic in
fiscal 2003 saw a decrease in sales of non-apparel merchandise (including
accessories, gifts, intimate apparel and shoes) to 48% from 49% in fiscal 2002.

     Gross margin increased approximately $50.6 million to $219.8 million in
fiscal 2003 from $169.2 million in fiscal 2002. As a percentage of net sales,
gross margin increased to 38.4% in fiscal 2003 from 38.2% in fiscal 2002. The
significant components of this 0.2% improvement in gross margin, as a percentage
of net sales, are as follows:

           %                               DESCRIPTION
     ------------   -----------------------------------------------------------
          0.4%      Decrease in distribution expenses, primarily due to
                    significant savings in freight costs, due to change in
                    shipping method to stores, and labor costs, due to
                    productivity improvements

          0.2       Decrease in store depreciation as a result of leverage
                    gained from higher comparable store sales, partially offset
                    by an increase in store occupancy resulting from higher rent
                    expenses and common area charges

         (0.4)      Decrease in merchandise margin, principally due to lower
                    initial markup and higher shrinkage, partially offset by
                    lower markdowns.

     ------------
          0.2%      TOTAL
     ============


                                      31.
<PAGE>

     Selling, general and administrative expenses increased approximately $28.4
million to $144.0 million during fiscal 2003 from $115.6 million during fiscal
2002. As a percentage of net sales, selling, general and administrative expenses
were 25.1% for fiscal 2003 compared to 26.1% in fiscal 2002. The total dollar
increase in selling, general and administrative expenses was primarily
attributable to an increase in the number of retail stores from 445 at the end
of fiscal 2002 to 554 at the end of fiscal 2003 and the corresponding additional
payroll and other expenses required to support these additional stores. The
significant components of this 1.0% decrease in selling, general and
administrative expenses as a percentage of net sales are as follows:

           %                               DESCRIPTION
     ------------   -----------------------------------------------------------
         (1.2)%     Decrease in store payroll and administrative salary expense
                    resulting from leverage gained from higher comparable store
                    sales and controlling payroll costs

         (0.1)      Decrease in pre-opening expenses

          0.3       Increase in administrative performance based payroll
                    expenses, partially offset by headquarters expenses which
                    benefited from leverage gained from higher comparable store
                    sales

     -----------
         (1.0)%     TOTAL
     ===========

     Operating income increased approximately $22.2 million to $75.8 million
during fiscal 2003 from $53.6 million during fiscal 2002. As a percentage of net
sales, operating income was 13.3% in fiscal 2003 compared to 12.1% in fiscal
2002. Operating income on an average store basis was approximately $151,000 in
fiscal 2003 as compared to $133,000 in fiscal 2002.

     Net interest income decreased to $1.3 million in fiscal 2003 from $1.4
million in fiscal 2002, principally due to lower interest rates offset in part
by the additional interest earned from higher average cash balances.

     Our effective tax rate was 38.3% in fiscal 2003 and 38.0% in fiscal 2002.
The higher rate for fiscal 2003 is principally attributable to lower tax-exempt
interest income as a percentage of pre-tax income in fiscal 2003 as compared to
fiscal 2002.

QUARTERLY RESULTS AND SEASONALITY

     Our quarterly results of operations may fluctuate materially depending on,
among other things, the timing of store openings and related pre-opening and
other startup expenses, net sales contributed by new stores, increases or
decreases in comparable store sales, releases of new music and music/pop
culture-related products, shifts in timing of certain holidays, changes in our
merchandise mix and overall economic and political conditions.

     Our business is also subject to seasonal influences, with heavier
concentrations of sales during the back-to-school, Halloween and Holiday seasons
(defined as the week of Thanksgiving through the first few days of January), and
other periods when schools are not in session. The Holiday season remains our
single most important selling season. We believe, however, that the importance
of the summer vacation and back-to-school seasons (which affect operating
results in the second and third quarters, respectively) and to a lesser extent,
the spring break season (which affects operating results in the first quarter)
as well as Halloween (which affects operating results in the third quarter), all
reduce our dependence on the Holiday selling season. Furthermore, summer
vacation, back-to-school season and spring break season take place at somewhat
different times in different parts of the country, spreading the impact of these
events on our sales over a longer period. As is the case with many retailers of
apparel, accessories and related merchandise, we typically experience lower
first fiscal quarter net sales relative to other quarters.


                                      32.
<PAGE>

     The following table shows certain statement of operations and selected
operating data for each of our last eight fiscal quarters (13 week periods). See
Note 2 to the Consolidated Financial Statements for changes related to
accounting for leases, which are reflected in the amounts below. The quarterly
statement of operations data and selected operating data shown below were
derived from our unaudited financial statements, which in the opinion of
management contain all adjustments (consisting only of normal recurring
adjustments) necessary for fair presentation. Results in any quarter are not
necessarily indicative of results that may be achieved for a full year.

<TABLE>
                                              FISCAL YEAR 2004 (AS RESTATED)                FISCAL YEAR 2003 (AS RESTATED)
                                       -------------------------------------------    ------------------------------------------
                                        FIRST      SECOND      THIRD      FOURTH       FIRST     SECOND      THIRD      FOURTH
                                        -----      ------      -----      ------       -----     ------      -----      ------
                                                     (In thousands, except selected operating and per share data)
<S>                                    <C>        <C>         <C>         <C>         <C>        <C>         <C>        <C>
STATEMENT OF OPERATIONS DATA:
     Net sales                         $128,143   $136,263    $180,808    $211,254    $100,657   $115,728    $161,546   $194,108

     Gross margin                       44,185     46,650      64,540      78,381      35,350     41,397      62,754     80,261

     Operating income                    8,200      7,135      19,987      28,050       6,501      9,090      24,128     36,091

     Net income                         $5,277     $4,528     $12,448     $17,420      $4,254     $5,740     $15,093    $22,502


 Net income per share:
     Basic                               $0.11      $0.10       $0.27       $0.39       $0.09      $0.12       $0.32      $0.47

     Diluted                             $0.11      $0.09       $0.26       $0.38       $0.09      $0.12       $0.30      $0.45


Weighted average shares outstanding:
     Basic                              48,019     46,565      46,086      44,944      46,968     47,360      47,656     47,932

     Diluted                            50,131     48,023      47,202      46,127      48,567     49,127      49,917     50,342


SELECTED OPERATING DATA:
     Comparable stores sales               4.0%      (2.1)%      (4.2)%      (6.0)%       2.6%      (5.2)%      10.8%       8.5%

     Stores open at end of period          581        613         649         668         468        497         540        554
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     In recent years, we have satisfied our cash requirements principally from
cash flows from operations and to a lesser extent proceeds from the exercise of
stock options. During the last three fiscal years, our primary uses of cash have
been to finance store openings and purchase merchandise inventories, as well as
periodic repurchases of our common stock. In August 2004, we announced the
approval by our Board of Directors of the repurchase of up to 2,000,000 shares
of our common stock. As of January 29, 2005 we had completed the repurchase of
2,000,000 shares of our common stock at an average price of $16.42. In addition,
pursuant to authorization by our Board of Directors in March 2004, we
repurchased 2,000,000 shares of our common stock at an average price of $23.41
during the six months ended July 31, 2004. We also maintain a $5.0 million
unsecured credit agreement for the purpose of issuing letters of credit,
primarily for inventory purchases. At January 29, 2005, we had $0.1 million of
outstanding letters of credit under the credit agreement. At the end of fiscal


                                      33.
<PAGE>

2004, we had $66.3 million in cash, cash equivalents and short-term investments,
a decrease of $61.9 million, or 48%, compared to the $128.2 million at the end
of fiscal 2003. Working capital was $87.2 million, $141.8 million, and $90.3
million for fiscal 2004, 2003 and 2002, respectively. The decrease in working
capital from 2003 to 2004 is primarily attributable to cash used for the
repurchase of our common stock.

     Net cash flows provided by operating activities were $71.1 million, $78.6
million and $64.8 million in fiscal 2004, 2003, and 2002, respectively. The $7.5
million decrease in cash flows from operating activities in fiscal 2004 as
compared to fiscal 2003 was primarily attributable to decreases in net income,
accrued liabilities and tax benefits from exercise of stock options, partially
offset by increases in deferred rent, deferred taxes, and depreciation and
amortization, and decrease in the change of inventory compared to fiscal 2003.
The significant changes in net cash provided by operating activities were due
primarily to the increase in store growth to 668 stores at the end of fiscal
2004 compared to 554 stores at the end of fiscal 2003.

     Net cash flows used in investing activities were $2.6 million, $88.2
million and $41.6 million in fiscal 2004, 2003 and 2002, respectively. In fiscal
2004, approximately $39 million was used for the construction of 91 Hot Topic
stores, 24 Torrid stores, expansion and refurbishment of ten Hot Topic and
Torrid stores and progress payments for construction of stores opening in early
fiscal 2005. We used approximately $14 million on computer hardware and software
and $5 million on our headquarters and distribution center infrastructure. We
opened 115, 109, and 95 stores in fiscal 2004, 2003 and 2002, respectively. Net
cash used in investing activities was reduced by the net proceeds ($55 million)
of short-term investments sold.

     Net cash flows used in financing activities were $75.1 million in fiscal
2004 compared to net cash flows provided by financing activities of $8.3 million
and net cash flows used in financing activities of $14.3 million in fiscal 2003
and 2002, respectively. The $83.5 million decrease in fiscal 2004 compared to
fiscal 2003 was principally a result of $79.6 million of cash used to repurchase
our common stock in fiscal 2004 and $3.9 million related to a decrease in
proceeds from exercise of stock options.

     We anticipate that we will spend approximately $56 million on capital
expenditures in fiscal 2005, including approximately $38 million for stores, $10
million for the second distribution center located in Tennessee, and $8 million
for computer hardware and software. The $38 million for stores is to be
primarily used for the construction of 65 Hot Topic stores and 45 Torrid stores,
and expansion of approximately 20 existing stores.

     During fiscal 2004, our average gross capital expenditures for a new Hot
Topic store, including leasehold improvements and furniture and fixtures,
totaled approximately $235,000. The average initial gross inventory for the new
Hot Topic stores opened in 2004 was approximately $110,000 and the average
pre-opening costs for a new Hot Topic store were approximately $21,000. Initial
inventory requirements vary at new stores depending on the season and current
merchandise trends. We expect the average total cost per square foot associated
with opening a Hot Topic store to be approximately the same in fiscal 2005 as
those in fiscal 2004. Hot Topic stores are planned to be approximately 1,700
square feet compared to Torrid stores which are planned to be approximately
2,500 square feet. The costs associated with opening a new Torrid store will be
higher than a Hot Topic store primarily due to the larger size of the Torrid
stores. The actual costs that we will incur in connection with opening future
stores cannot be predicted with precision because such costs will vary based
upon, among other things, geographic location, store size, and the extent of the
build-out required at the selected sites.

     The following table summarizes our contractual obligations as of January
29, 2005, and the timing and effect that such commitments are expected to have
on our liquidity and capital requirements in future periods:


                                      34.
<PAGE>

<TABLE>
                                                    PAYMENTS DUE BY PERIOD ($ IN THOUSANDS)
                                         -----------------------------------------------------------------------
                                                                                                      MORE THAN
CONTRACTUAL OBLIGATIONS                      TOTAL     WITHIN 1 YEAR     2-3 YEARS      4-5 YEARS       5 YEARS
                                             -----     -------------     ---------      ---------    -----------
<S>                                        <C>             <C>            <C>            <C>           <C>
OPERATING LEASES                           $339,423        $45,969        $90,538        $82,495       $120,421
PURCHASE OBLIGATIONS                         55,624         55,624              -              -              -
LETTERS OF CREDIT AND OTHER OBLIGATIONS       3,283          3,021            262              -              -
                                         -----------------------------------------------------------------------

TOTAL CONTRACTUAL OBLIGATIONS              $398,330       $104,614        $90,800        $82,495       $120,421
                                         =======================================================================
</TABLE>

     See Note 6 to our consolidated financial statements for additional
disclosure related to operating lease obligations.

     On March 19, 2004, we announced that our Board of Directors approved the
repurchase of up to an aggregate of 2,000,000 shares of our common stock during
the period ending January 29, 2005. As of July 31, 2004 we had completed the
repurchase of 2,000,000 shares of our common stock at a cost of $46.8 million at
an average price of $23.41.

     On August 18, 2004, we announced that our Board of Directors approved an
additional repurchase of up to an aggregate of 2,000,000 shares of our common
stock during the period ending January 29, 2005. As of January 29, 2005 we had
completed the repurchase of 2,000,000 shares of our common stock at a cost of
$32.8 million at an average price of $16.42.

     We believe that our existing cash balances and cash generated from
operations will be sufficient to fund our operations, planned expansion and
repurchase of our common stock through at least the next 12 months.

CRITICAL ACCOUNTING POLICIES

     Management's discussion and analysis of Hot Topic, Inc.'s financial
condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an ongoing basis, we
evaluate estimates, including those related primarily to inventories, long-lived
assets and contingencies. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

     We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our consolidated
financial statements. For a further discussion about the application of these
and other accounting policies, see Note 1 to our audited consolidated financial
statements included elsewhere in this report.

     INVENTORIES: Inventories and related cost of sales are accounted for by the
retail method. The cost of inventory is valued at the lower of average cost or
market, on a first-in, first-out (FIFO) basis, utilizing the retail method. Each
month, slow moving or seasonally obsolete merchandise is marked down. The first
markdown is typically 25% to 50% of the original retail price. Typically, in
cases where the merchandise does not sell after the first markdown, an
additional markdown is made in a subsequent month. Any marked down merchandise
that does not sell is typically marked down to a zero value and removed from the
store, approximately three months after the original markdown. In determining
the lower of average cost or market value of period-ending inventories,
consistently applied valuation criteria are used. Consideration is given to a
number of quantitative factors, including anticipated subsequent permanent
markdowns and aging of inventories. To the extent our estimated markdowns at
year-end prove to be insufficient, additional future markdowns will need to be
recorded.


                                      35.
<PAGE>

     VALUATION OF LONG-LIVED ASSETS: We assess the impairment of long-lived
assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors considered important that could trigger an
impairment review include a significant underperformance relative to expected
historical or projected future operating results, a significant change in the
manner of the use of the asset or a significant negative industry or economic
trend. If we were to determine that the carrying value of long-lived assets may
not be recoverable based upon the existence of one or more of the above
indicators of impairment, we would measure any impairment based on a projected
discounted cash flow method using a discount rate determined by management. To
date, we have not recorded any significant impairment of a long-lived asset. In
the event future store performance is lower than forecasted results, future cash
flows may be lower than expected, which could result in future impairment
charges. While we believe recently opened stores will provide sufficient cash
flow, material changes in results could result in future impairment charges.

     REVENUE RECOGNITION: Sales are recognized upon the purchase by customers at
our retail store locations and websites, less merchandise returned by customers.
We provide a reserve for projected merchandise returns based on historical
experience. As the reserve for merchandise returns is based on estimates the
actual returns could differ from the reserve, which could impact sales. Revenue
from gift cards, gift certificates and store merchandise credits is recognized
at the time of redemption. Shipping and handling revenues from our websites are
included as a component of net sales.

     RENT EXPENSE: Rent expense under our operating leases typically provide for
fixed non-contingent rent escalations. We recognize rent expense on a
straight-line over the non-cancelable term of each lease, commencing when we
take possession of the property. Construction allowances are recorded as a
deferred rent liability, which we amortize as a reduction of rent expense over
the non-cancelable term of each lease.

     SELF-INSURANCE: We are self-insured for medical insurance coverage and
workers compensation insurance coverage, up to maximum exposure limits, above
which we are covered by insurance policies. We maintain a liability for
estimated claims based on historical claims experience and other actuarial
assumptions.

     INCOME TAXES: Current income tax expense is the amount of income taxes
expected to be payable for the current year. The combined federal, state and
local income tax expense is calculated using estimated effective annual tax
rates. A deferred income tax asset or liability is established for the expected
future consequences of temporary differences in the financial reporting and tax
bases of assets and liabilities. We consider future taxable income and ongoing
prudent and feasible tax planning in assessing the value of our deferred tax
assets. Evaluating the value of these assets is necessarily based on our
judgment. If we were to determine that it is more likely than not that these
assets will not be realized, we would reduce the value of these assets to their
expected realizable value through a valuation allowance, thereby decreasing net
income. If we subsequently were to determine that the deferred tax assets, which
had been written down, would be realized in the future, the value of the
deferred tax assets would be increased, thereby increasing net income in the
period when that determination was made. We have recorded tax contingencies
based on our estimates of current tax exposures and adjust our estimates as
circumstances or regulations change.

INFLATION

     We do not believe that inflation has had a material adverse effect on our
net sales or results of operations. We have generally been able to pass along
increased costs related to inflation through increases in selling prices.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are not a party to any derivative financial instruments. Our exposure to
market risk primarily relates to changes in interest rates on our investments
with maturities of less than three months (which are considered to be cash and
cash equivalents) and short-term investments with maturities in excess of three
months. Changes in interest rates affect the investment income earned on those
investments.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our consolidated financial statements and notes listed in Item 15(a) are
incorporated herein by reference.


                                      36.
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     Not applicable.

ITEM 9A.   CONTROLS AND PROCEDURES

a) CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES

     The management of the company maintains disclosure controls and procedures
that are designed to ensure that the information required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is recorded, processed, summarized and reported within the time periods
specified in the Security and Exchange Commissions's (the "SEC") rules and
forms, and that such information is accumulated and communicated to management,
including the Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO"), as appropriate, to allow timely decisions regarding required
disclosure.

     A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of inherent limitations, our disclosure controls and
procedures may not prevent or detect misstatements. In addition, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected.

     We conducted an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures in connection with the preparation of
this annual report, under the supervision of and with the participation of our
management, including the CEO and CFO.

     In making our assessment, we used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control--Integrated Framework. Based on that evaluation, our CEO and CFO
concluded that our disclosure controls and procedures were not effective as of
January 29, 2005, for the following reason: On March 2, 2005, we announced that
our financial statements were to be restated, relating to certain lease
accounting and leasehold depreciation accounting practices, consistent with
similar adjustments made by many other retailers and other publicly traded
companies concerning these practices. This restatement is described elsewhere in
this annual report. Although prior to the end of fiscal 2004, management
surfaced certain lease accounting issues based upon the internal control
practice of reviewing industry publications and financial statement filings and
brought this to the attention of our independent registered public accounting
firm, the decision to modify our lease accounting policy and practices was not
made prior to the end of the fiscal year. Our conclusion to change our
accounting policy and restate was made, among other things, in consideration of
the views of the Office of the Chief Accountant of the SEC expressed in its
letter related to these matters dated February 7, 2005. Accordingly, we
concluded that our controls over the selection of appropriate assumptions and
factors affecting lease accounting practices were not effective as of January
29, 2005.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     We are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f). Our internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of our assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect
on the financial statements.


                                      37.
<PAGE>

     All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.

     Our management has assessed the effectiveness of our internal control over
financial reporting as of January 29, 2005. In making our assessment, management
used the criteria set forth by the COSO in Internal Control--Integrated
Framework. In particular, our management evaluated the impact of the lease
accounting corrections described above on such assessment and concluded that the
control deficiency that resulted in the restatement of previously issued
financial statements for understatement of rent expense and deferred rent
represented a material weakness. As a result, management concluded that, as of
January 29, 2005, our internal control over financial reporting was not
effective based on the criteria set forth by COSO in Internal
Control--Integrated Framework.

     A material weakness in internal control over financial reporting is a
control deficiency (within the meaning of the Public Company Accounting
Oversight Board ("PCAOB") Auditing Standard No. 2), or combination of control
deficiencies, that results in there being more than a remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected. PCAOB Auditing Standard No. 2 identifies a number of
circumstances that, because of their likely significant negative effect on
internal control over financial reporting, are to be regarded as at least
significant deficiencies as well as strong indicators that a material weakness
exists, including the restatement of previously issued financial statements to
reflect the correction of a misstatement.

     Our independent registered public accounting firm, Ernst & Young LLP, has
issued an attestation report on management's assessment of our internal control
over financial reporting. This report appears below.

REMEDIATION STEPS

     We have remediated the material weakness in internal control by correcting
our application of lease accounting principles for free rent periods. We have
implemented controls to ensure all future leases will be reviewed and accounted
for in accordance with SFAS No. 13, FTB No. 85-3 and FTB No. 88-1. We believe
these steps will help ensure continued compliance with, among other things, the
views of the Office of the Chief Accountant of the SEC expressed as of February
7, 2005 and described above.

b) CHANGE IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     During our last fiscal quarter, ended January 29, 2005, as part of our
review of lease accounting policies discussed above, we remediated our controls
associated with our accounting for tenant improvement allowances and the related
deferred rent credit and depreciation expense. These changes in internal control
identified the need to restate previously issued financial statements to record
tenant improvement allowances as a deferred rent credit, to record the related
fixed assets at their gross amount, and to record adjustments to depreciation
and rent expense.

c) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

     We have audited management's assessment, included in the accompanying
Report of Management on Internal Control over Financial Reporting, that Hot
Topic, Inc. did not maintain effective internal control over financial reporting
as of January 29, 2005, because of the effect of the Company's insufficient
controls over the selection and monitoring of appropriate assumptions and
factors affecting lease accounting, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Hot Topic, Inc.'s
management is responsible for maintaining effective internal


                                      38.
<PAGE>

control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on management's assessment and an opinion on the effectiveness of the
company's internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected. The following material weakness has been identified and included in
management's assessment: In its assessment as of January 29, 2005, management
identified as a material weakness the Company's insufficient controls over the
selection and monitoring of appropriate assumptions and factors affecting lease
accounting. As a result of this material weakness in internal control, Hot
Topic, Inc. concluded the Company's previously reported rent expense and
deferred rent liabilities had been understated and that previously issued
financial statements should be restated. This material weakness was considered
in determining the nature, timing, and extent of audit tests applied in our
audit of the 2004 financial statements, and this report does not affect our
report dated March 11, 2005 on those financial statements.

     In our opinion, management's assessment that Hot Topic, Inc. did not
maintain effective internal control over financial reporting as of January 29,
2005 is fairly stated, in all material respects, based on the COSO control
criteria. Also, in our opinion, because of the effect of the material weakness
described above on the achievement of the objectives of the control criteria,
Hot Topic, Inc. has not maintained effective internal control over financial
reporting as of January 29, 2005, based on the COSO control criteria.


                                           /s/ Ernst & Young LLP

Los Angeles, California
March 11, 2005


                                      39.
<PAGE>

ITEM 9B.   OTHER INFORMATION

     Not applicable.

                                    PART III

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     See the section entitled "Executive Officers and Key Employees" in Part I,
Item 1 hereof for information regarding our executive officers.

     The information required by this item with respect to directors is
incorporated by reference to the information appearing under the caption
"Election of Directors", contained in our Definitive Proxy Statement which will
be filed with the SEC within 120 days of January 29, 2005 pursuant to Regulation
14A in connection with the solicitation of proxies for our Annual Meeting of
Shareholders to be held on June 15, 2005 (the "2005 Proxy Statement").

     Certain other information required by this item is incorporated by
reference to the information appearing under the captions "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Standards of Business Ethics" in
the 2005 Proxy Statement.

ITEM 11.   EXECUTIVE COMPENSATION

     The information required by this item is incorporated by reference to the
information appearing under the caption "Executive Compensation" in the 2005
Proxy Statement.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
           RELATED SHAREHOLDER MATTERS

     The information required by this item is incorporated by reference to the
information appearing under the captions "Security Ownership of Certain
Beneficial Owners and Management" and "Equity Compensation Plan Information" in
the 2005 Proxy Statement.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is incorporated by reference to the
information appearing under the caption "Certain Transactions" in the 2005 Proxy
Statement.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this item is incorporated by reference to the
information appearing under the caption "Ratification of Selection of
Independent Auditors" in the 2005 Proxy Statement.


                                     PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a)(1) CONSOLIDATED FINANCIAL STATEMENTS

          The following consolidated financial statements required by this item
are submitted in a separate section beginning on page F-1 of this Annual Report
on Form 10-K:


                                      40.
<PAGE>

<TABLE>
                                                                                          PAGE
<S>                                                                                       <C>
     Report of Ernst & Young LLP, Independent Registered Public Accounting Firm......     F-1
     Consolidated Balance Sheets as of January 29, 2005 and January 31, 2004.........     F-2
     Consolidated Statements of Income for the years ended January 29, 2005,
           January 31, 2004, and February 1, 2003 ...................................     F-3
     Consolidated Statements of Shareholders' Equity for the years ended
           January 29, 2005, January 31, 2004, and February 1, 2003..................     F-4
     Consolidated Statements of Cash Flows for the years ended January 29, 2005,
           January 31, 2004, and February 1, 2003....................................     F-5
     Notes to Consolidated Financial Statements......................................     F-6
</TABLE>

     (a)(2) FINANCIAL STATEMENT SCHEDULES

          Schedule II - Valuation and Qualifying Accounts

          All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission other than the ones listed
above are not required under the related instructions or are not applicable, and
therefore, have been omitted.


                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

                  FOR THE FISCAL YEARS ENDED JANUARY 29, 2005,
                     JANUARY 31, 2004, AND FEBRUARY 1, 2003

                                              Provision
                                  Balance at  Charged to               Balance
                                  Beginning   Costs and                at End
                                   of Year     Expenses   Deductions   of Year
                                  ---------   ---------   ---------   ---------
FISCAL 2004
-----------
Allowance for sales returns       $     512   $      65   $       -   $     577
Allowance for aged inventory          1,057         453           -       1,510
                                  ---------   ---------   ---------   ---------
                                  $   1,569   $     518   $       -   $   2,087
                                  =========   =========   =========   =========

FISCAL 2003
-----------
Allowance for sales returns       $     350   $     162   $       -   $     512
Allowance for aged inventory            866         191           -       1,057
                                  ---------   ---------   ---------   ---------
                                  $   1,216   $     353   $       -   $   1,569
                                  =========   =========   =========   =========

FISCAL 2002
-----------
Allowance for sales returns       $       -   $     350   $       -   $     350
Allowance for aged inventory            490         376           -         866
                                  ---------   ---------   ---------   ---------
                                  $     490   $     726   $       -   $   1,216
                                  =========   =========   =========   =========


                                      41.
<PAGE>
     (a)(3) EXHIBITS

     The exhibits listed under Item 15(c) hereof are filed with, and
incorporated by reference into, this Annual Report on Form 10-K. Management
contracts or compensatory plans or arrangements required to be filed pursuant to
Item 15(c) are so identified therein.

     EXHIBIT
      NUMBER                    DESCRIPTION OF DOCUMENT
     -------                    -----------------------

       3.1     Amended and Restated Articles of Incorporation. (1)

       3.2     Certificate of Amendment of Amended and Restated Articles of
               Incorporation

       3.3     Amended and Restated Bylaws, as amended.

       4.1     Reference is made to Exhibits 3.1 and 3.2.

       4.2     Specimen stock certificate. (1)

     10.1a     Form of Indemnity Agreement to be entered into between
               Registrant and its directors and officers. (1)

     10.2a     1996 Equity Incentive Plan (the "1996 Plan"), as amended.

     10.3a     Form of Nonstatutory Stock Option Agreement of Registrant
               pursuant to the 1996 Plan. (1)

     10.4a     Form of Incentive Stock Option Agreement of Registrant
               pursuant to the 1996 Plan. (1)

     10.5a     Non-Employee Directors' Stock Option Plan, as amended.

     10.6a     Employee Stock Purchase Plan, as amended.

     10.7a     401(k) Defined Contribution Plan of Registrant, effective as
               of August 1, 1995, as amended.

      10.8     Industrial Real Estate Lease (Multi-Tenant Facility), dated
               December 10, 1998, entered into between Registrant's wholly
               owned subsidiary, Hot Topic Administration, Inc. and
               Majestic Realty Co. and Patrician Associates, Inc. (2)

      10.9     Guaranty of Lease, dated December 10, 1998, entered into
               between the Registrant and Majestic Realty Co. and Patrician
               Associates, Inc. (2)

     10.10     First Amendment to Industrial Real Estate Lease, dated March
               19, 2001, by and between Majestic - Fullerton Road, LLC, PFG
               Fullerton Limited Partnership, and Hot Topic Administration,
               Inc. (3)

    10.11a     Employment Offer Letter dated January 12, 2001, between the
               Registrant and Gerald Cook. (3)

    10.12a     Form of Restricted Stock Bonus Agreement between the
               Registrant and each of its non-employee directors as of
               March 7, 2001 (with Robert Jaffe for 1,905 shares, and with
               each of Bruce Quinnell, Edgar Berner, Andrew Schuon and
               Corrado Federico for 1,587 shares) and as of September 24,
               2001 (with Cynthia Cohen for 1,178 shares and vesting from
               September 24, 2001) and as of January 28, 2002 (with W.
               Scott Hedrick for 618 shares and vesting from January 28,
               2002). (4)

    10.13a     Employment Offer Letter dated August 14, 2002, between the
               Registrant and Patricia Van Cleave. (6)

    10.14a     Employment Letter dated January 23, 2003, between the
               Registrant and James McGinty. (6)

     10.15     Third Amendment to Industrial Real Estate Lease, dated
               February 25, 2004, by and among Majestic-Fullerton Road,
               LLC, PFG Fullerton Limited Partnership, and Hot Topic
               Administration, Inc. (7)


                                      42.
<PAGE>

     10.16     Employment Offer Letter dated March 15, 2004, between the
               Registrant and Christopher J. Kearns. (7)

     10.17     Centre Pointe Distribution Park Lease, dated June 1, 2004,
               by and among Crescent Resources, LLC and Hot Topic, Inc. (8)

     10.18     Employment Offer Letter dated May 13, 2004, between the
               Registrant and Thomas Beauchamp. (8)

        21     Hot Topic, Inc. List of Subsidiaries

      23.1     Consent of Ernst & Young LLP, Independent Registered Public
               Accounting Firm.

      24.1     Power of Attorney is contained on the signature page.

      31.1     Certification, dated April 13, 2005, of Registrant's Chief
               Executive Officer required by Section 302 of the
               Sarbanes-Oxley Act of 2002.

      31.2     Certification, dated April 13, 2005, of Registrant's Chief
               Financial Officer required by Section 302 of the
               Sarbanes-Oxley Act of 2002.

      32.1     Certifications, dated April 13, 2005, of Registrant's Chief
               Executive Officer and Chief Financial Officer required by
               Section 906 of the Sarbanes-Oxley Act of 2002.


------------
(1)  Filed as an exhibit to Registrant's Registration Statement on Form SB-2
     (No. 333-5054-LA) and incorporated herein by reference.

(2)  Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
     ended January 30, 1999 and incorporated herein by reference.

(3)  Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
     ended February 3, 2001 and incorporated herein by reference.

(4)  Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
     quarter ended May 5, 2001 and incorporated herein by reference.

(5)  Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
     ended February 2, 2002 and incorporated herein by reference.

(6)  Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
     ended February 1, 2003 and incorporated herein by reference.

(7)  Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
     quarter ended May 1, 2004 and incorporated herein by reference.

(8)  Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
     quarter ended July 31, 2004 and incorporated herein by reference.

a    Denotes management contract or compensatory plan or arrangement.

     (d)  FINANCIAL STATEMENT SCHEDULES

          Reference is made to Item 15(a)(2).


                                      43.
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                    HOT TOPIC, INC.


                                    By: /s/ Elizabeth McLaughlin
                                       -----------------------------
                                            Elizabeth McLaughlin
                                            Chief Executive Officer and Director
                                    April 13, 2005


                                POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Elizabeth McLaughlin and James McGinty,
or either of them, his attorney-in-fact, each with the power of substitution,
for him or her in any and all capacities, to sign any amendments to this Report,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

            NAME                           POSITION                    DATE
----------------------------   -------------------------------   ---------------
  /s/ ELIZABETH MCLAUGHLIN     Chief Executive Officer and        April 13, 2005
----------------------------   Director (PRINCIPAL EXECUTIVE
    Elizabeth McLaughlin       OFFICER)

      /s/ JAMES MCGINTY        Chief Financial Officer            April 13, 2005
----------------------------   (PRINCIPAL FINANCIAL OFFICER)
        James McGinty

   /s/ GEORGE WEHLITZ, JR.     Vice President, Finance            April 13, 2005
----------------------------   (PRINCIPAL ACCOUNTING
     George Wehlitz, Jr.       OFFICER)

     /s/ BRUCE QUINNELL        Chairman of the Board              April 8, 2005
----------------------------
       Bruce Quinnell

     /s/ KATHLEEN MASON        Director                           April 7, 2005
----------------------------
       Kathleen Mason

    /s/ CORRADO FEDERICO       Director                           April 7, 2005
----------------------------
      Corrado Federico

      /s/ ANDREW SCHUON        Director                           April 11, 2005
----------------------------
        Andrew Schuon

      /s/ CYNTHIA COHEN        Director                           April 8, 2005
----------------------------
        Cynthia Cohen

    /s/ W. SCOTT HEDRICK       Director                           April 10, 2005
----------------------------
      W. Scott Hedrick


                                      44.
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Hot Topic, Inc.

     We have audited the accompanying consolidated balance sheets of Hot Topic,
Inc. and subsidiaries as of January 29, 2005 and January 31, 2004 (restated) and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended January 29, 2005. Our
audit also included the financial statement schedule listed in the Index at Item
15(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hot Topic, Inc.
and its subsidiaries at January 29, 2005 and January 31, 2004, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 29, 2005, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth herein.

     As described in Note 2, Restatement of the Financial Statements, the
Company has corrected its accounting for leases and restated previously issued
financial statements.

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of Hot
Topic, Inc. and subsidiaries internal control over financial reporting as of
January 29, 2005, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 11, 2005 expressed an unqualified opinion
on management's assessment of the effectiveness of internal control over
financial reporting and an adverse opinion on the effectiveness of internal
control over financial reporting.


                                            /s/ ERNST & YOUNG LLP

Los Angeles, California
March 11, 2005


                                      F-1
<PAGE>

<TABLE>
                                HOT TOPIC, INC. AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                              (In thousands, except share amounts)


                                                                    January 29,    January 31,
                                                                       2005            2004
                                                                                  (As Restated)
                                                                   ----------------------------
<S>                                                                <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents                                        $      5,248    $     11,886
  Short-term investments                                                 61,091         116,319
  Inventory                                                              60,481          51,937
  Prepaid expenses and other                                             12,390          10,654
  Deferred tax assets                                                     2,541           2,259
                                                                   ----------------------------
Total current assets                                                    141,751         193,055

Leaseholds, fixtures and equipment, net                                 136,401         102,838
Deposits and other                                                          243             189
                                                                   ----------------------------
Total assets                                                       $    278,395    $    296,082
                                                                   ============================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                 $     17,874    $     15,841
  Accrued liabilities                                                    27,769          28,133
  Income taxes payable                                                    8,887           7,278
                                                                   ----------------------------
Total current liabilities                                                54,530          51,252

Deferred rent                                                            30,227          21,843
Deferred tax liability                                                    6,076           1,708

Commitments and contingencies                                                 -               -

Shareholders' equity:
Preferred shares, no par value; 10,000,000 shares
  authorized; no shares issued and outstanding                                -               -
Common shares, no par value; 150,000,000 shares authorized;
  44,592,836 and 48,120,989 shares issued and outstanding at
  January 29, 2005 and January 31, 2004, respectively                    90,921          86,238
Retained earnings                                                        96,847         135,242
Accumulated other comprehensive loss                                       (206)           (201)
                                                                   ----------------------------
Total shareholders' equity                                              187,562         221,279
                                                                   ----------------------------
Total liabilities and shareholders' equity                         $    278,395    $    296,082
                                                                   ============================

See notes to consolidated financial statements.


                                               F-2
</TABLE>
<PAGE>

<TABLE>
                                HOT TOPIC, INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF INCOME
                            (In thousands, except per share amounts)


                                                                      Years Ended
                                                     ------------------------------------------
                                                      January 29,    January 31,    February 1,
                                                         2005           2004           2003
                                                                    (As Restated)  (As Restated)
                                                     ------------------------------------------
<S>                                                  <C>            <C>            <C>
Net sales                                            $    656,468   $    572,039   $    443,250
Cost of goods sold, including buying,
  distribution and occupancy costs                        422,712        352,277        274,008
                                                     ------------------------------------------
Gross margin                                              233,756        219,762        169,242

Selling, general and administrative expenses              170,384        143,952        115,634
                                                     ------------------------------------------
Operating income                                           63,372         75,810         53,608

Interest income, net                                          919          1,318          1,371
                                                     ------------------------------------------
Income before income taxes                                 64,291         77,128         54,979

Provision for income taxes                                 24,618         29,539         20,892
                                                     ------------------------------------------
Net income                                           $     39,673   $     47,589   $     34,087
                                                     ==========================================

Net income per share:
  Basic                                              $       0.86   $       1.00   $       0.72
                                                     ==========================================
  Diluted                                            $       0.83   $       0.96   $       0.69
                                                     ==========================================

Shares used in computing net income per share:
  Basic                                                    46,379         47,479         47,027
  Diluted                                                  47,875         49,588         49,276


See notes to consolidated financial statements.


                                               F-3
</TABLE>
<PAGE>

<TABLE>
                                                  Hot Topic, Inc. and Subsidiaries
                                           Consolidated Statements of Shareholders' Equity
                                                           (In thousands)


                                                              Common Shares                          Accumulated Other     Total
                                                       -----------------------------     Retained      Comprehensive   Shareholders'
                                                           Shares         Amount         Earnings          Loss           Equity
                                                       ----------------------------------------------------------------------------
<S>                                                          <C>       <C>             <C>             <C>             <C>
BALANCE AT FEBRUARY 2, 2002 (As restated)                    47,063    $     60,643    $     73,095    $          -    $    133,738
  Exercise of stock options                                   1,195           4,942               -               -           4,942
  Employee stock purchase plan                                   33             418               -               -             418
  Restricted stock awards                                        15             153               -               -             153
  Repurchase of common stock                                 (1,500)           (171)        (19,529)              -         (19,700)
  Tax benefit from exercise of stock options                      -           5,118               -               -           5,118
  Net income (As restated)                                        -               -          34,087               -          34,087
                                                       ----------------------------------------------------------------------------
BALANCE AT FEBRUARY 1, 2003 (As restated)                    46,806          71,103          87,653               -         158,756
  Exercise of stock options                                   1,261           7,696               -               -           7,696
  Employee stock purchase plan                                   46             666               -               -             666
  Restricted stock awards                                         8             180               -               -             180
  Fractional shares purchased in 3-for-2 stock split              -             (23)              -               -             (23)
  Tax benefit from exercise of stock options                      -           6,616               -               -           6,616
  Comprehensive income:
    Net income (As restated)                                      -               -          47,589               -          47,589
    Unrealized loss on marketable securities, net                 -               -               -            (201)           (201)
                                                                                                                       ------------
      Total comprehensive income                                                                                             47,388
                                                       ----------------------------------------------------------------------------
BALANCE AT JANUARY 31, 2004 (As restated)                    48,121          86,238         135,242            (201)        221,279
  Exercise of stock options                                     409           3,662               -               -           3,662
  Employee stock purchase plan                                   54             862               -               -             862
  Restricted stock awards                                         9             155               -               -             155
  Repurchase of common stock                                 (4,000)         (1,581)        (78,068)                        (79,649)
  Tax benefit from exercise of stock options                      -           1,585               -               -           1,585
  Comprehensive Income:
    Net income                                                    -               -          39,673               -          39,673
    Unrealized loss on marketable securities, net                 -               -               -              (5)             (5)
                                                                                                                       ------------
      Total comprehensive income                                                                                             39,668
                                                       ----------------------------------------------------------------------------
BALANCE AT January 29, 2005                                  44,593    $     90,921    $     96,847    $       (206)   $    187,562
                                                       ============================================================================



                                                                 F-4
</TABLE>
<PAGE>

<TABLE>
                                    HOT TOPIC, INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (In thousands)

                                                                           Years Ended
                                                          --------------------------------------------
                                                           January 29,     January 31,     February 1,
                                                              2005            2004            2003
                                                                          (As Restated)   (As Restated)
                                                          --------------------------------------------
<S>                                                       <C>             <C>             <C>
OPERATING ACTIVITIES
Net income                                                $     39,673    $     47,589    $     34,087
Adjustments to reconcile net income to net cash
provided by operating activities:
  Depreciation and amortization                                 24,635          20,360          16,364
  Tax benefit from exercise of stock options                     1,585           6,616           5,118
  Stock-based compensation                                         155             155             142
  Loss on disposal of fixed assets                                 751             656             278
  Changes in operating assets and liabilities:
    Inventory                                                   (8,544)        (13,528)         (8,856)
    Prepaid expenses and other current assets                   (1,736)         (2,787)         (2,431)
    Deposits and other assets                                      (53)            (18)              3
    Accounts payable                                             2,033             434           4,155
    Accrued liabilities                                         (1,459)          8,519           7,528
    Deferred rent                                                8,383           6,270           4,940
    Deferred taxes                                               4,086           3,793            (655)
    Income taxes payable                                         1,609             548           4,166
                                                          --------------------------------------------
Net cash provided by operating activities                       71,118          78,607          64,839

INVESTING ACTIVITIES
Purchases of leasehold, fixtures and equipment                 (57,853)        (41,959)        (38,401)
Proceeds from sale of short-term investments                   162,931          52,906          46,105
Purchases of short-term investments                           (107,709)        (99,146)        (49,296)
                                                          --------------------------------------------
Net cash used in investing activities                           (2,631)        (88,199)        (41,592)

FINANCING ACTIVITIES
Repurchase of common stock                                     (79,649)            (23)        (19,700)
Proceeds from employee stock purchases and exercise
  of stock options                                               4,524           8,362           5,370
                                                          --------------------------------------------
Net cash (used in) provided by financing activities            (75,125)          8,339         (14,330)
                                                          --------------------------------------------
(Decrease) increase in cash and cash equivalents                (6,638)         (1,253)          8,917
Cash and cash equivalents at beginning of year                  11,886          13,139           4,222
                                                          --------------------------------------------
Cash and cash equivalents at end of year                  $      5,248    $     11,886    $     13,139
                                                          ============================================

SUPPLEMENTAL INFORMATION
Cash paid during the year for interest                    $          8    $         40    $         19
                                                          ============================================
Cash paid during the year for income taxes                $     17,400    $     18,614    $     12,317
                                                          ============================================


See notes to consolidated financial statements.


                                                  F-5
</TABLE>
<PAGE>

                        HOT TOPIC, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 29, 2005

NOTE 1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS ACTIVITIES

Hot Topic, Inc. is a mall-based specialty retailer operating the Hot Topic and
Torrid store concepts. Hot Topic sells a selection of music/pop culture-licensed
and music/pop culture-influenced apparel, accessories and gift items for young
men and women principally between the ages of 12 and 22. In fiscal 2001 (the
fiscal year ended February 2, 2002), we launched a second retail concept under
the trade name Torrid. Torrid sells apparel, lingerie, shoes and accessories
designed for various lifestyles for plus-size females between the ages of 15 and
29. At the end of the fiscal year ending January 29, 2005, we operated 592 Hot
Topic stores in 50 states and Puerto Rico, and 76 Torrid stores. We also
maintain two distinct websites, www.hottopic.com ("hottopic.com") and
www.torrid.com ("torrid.com"), which reflect the Hot Topic and Torrid store
concepts and sell merchandise similar to that sold in the respective stores. We
have one reportable segment given the similarities of the economic
characteristics among the store formats.

Throughout this report, the terms "our", "we" and "us" refer to Hot Topic, Inc.
and its subsidiaries.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Hot Topic, Inc.
and our wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

RECLASSIFICATIONS

Certain reclassifications have been made to prior year amounts to conform to
current year presentation. The common stock and retained earnings balances at
January 31, 2004 and February 1, 2003 have been reclassified to reflect the
excess of the repurchase cost of common stock over its issuance price (as
determined on a first-in, first-out basis) as a reduction of retained earnings.
Previously, all common stock repurchases had been charged against common stock.

FISCAL YEAR

Our fiscal year is on a 52-53 week basis and ends on the Saturday nearest to
January 31. The fiscal years ended January 29, 2005, January 31, 2004 and
February 1, 2003 were 52-week years.

CASH AND CASH EQUIVALENTS

We consider all highly liquid investments with maturities of less than three
months when purchased to be cash equivalents. We are potentially exposed to a
concentration of credit risk when cash deposits in banks are in excess of
federally insured limits.


                                      F-6
<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

We consider carrying amounts of cash and cash equivalents, receivables, and
accounts payable to approximate fair value because of the short maturity of
these financial instruments.

Amounts outstanding under the unsecured bank credit agreement are held at their
estimated fair values because they accrue interest at rates which generally
fluctuate with interest rate trends.

SHORT-TERM INVESTMENTS

Short-term investments with maturities in excess of three months consist
primarily of interest bearing bonds that are highly liquid, low risk with a
minimum credit quality rating of A-1 (Standard and Poor's), SP-1 (Moody's
Investor Service) or equivalent, and are available for sale. At January 29, 2005
and January 31, 2004, short-term investments consisted of municipal bonds of
$37.7 million and $96.0 million, government obligations of $15.3 million and
$12.7 million, and corporate bonds of $8.0 million and $7.6 million,
respectively. Short-term investments are recorded at fair market value, based on
established market prices as of the end of the period for which the values are
determined.

Unrealized gains and losses, net, from short-term investments comprise
accumulated other comprehensive loss, reflected in the Shareholders' Equity
section of the Consolidated Balance Sheets, which for the fiscal years ended
January 29, 2005 and January 31, 2004 were $5,000 and $201,000, respectively. As
a result, for the years ended January 29, 2005 and January 31, 2004, the
Company's other comprehensive income was lower than its net income.

INVENTORY

Inventories and related cost of sales are accounted for by the retail method.
The cost of inventory is valued at the lower of average cost or market, on a
first-in, first-out (FIFO) basis.

LEASEHOLD, FIXTURES AND EQUIPMENT

Leasehold, fixtures and equipment are recorded at cost or in the case of
capitalized leases, at the present value of future minimum lease payments.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets (3-10 years). Leasehold improvements are amortized
using the straight-line method over the shorter of ten years or the life of the
lease. Expenditures for repairs that do not significantly extend the life of the
asset are expensed as incurred.

REVENUE RECOGNITION

Sales are recognized upon the purchase by customers at our retail store
locations and websites, less merchandise returned by customers. We provide a
reserve for projected merchandise returns based on historical experience.
Revenue from gift cards, gift certificates and store merchandise credits is
recognized at the time of redemption. Shipping and handling revenues from our
websites are included as a component of net sales.


                                      F-7
<PAGE>

COST OF GOODS SOLD, INCLUDING BUYING, DISTRIBUTION AND OCCUPANCY COSTS

Cost of goods sold, including buying, distribution and occupancy costs includes:
merchandise costs, freight, inventory shrink, payroll expenses associated with
the merchandising and distribution departments, distribution center expenses
including rent, common area maintenance charges, real estate taxes,
depreciation, utilities, supplies and maintenance; and store expenses including
rents, common area maintenance charges, real estate taxes, and depreciation.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include: payroll expenses
associated with stores, store operating expenses, store pre-opening costs,
marketing expenses; and payroll and other expenses associated with headquarters
and administrative functions.

STORE PRE-OPENING COSTS

Costs incurred in connection with the opening of a new store are expensed as
incurred.

SHIPPING AND HANDLING COSTS

We classify shipping and handling costs in costs of goods sold, including
buying, distribution and occupancy costs in the accompanying statements of
income.

LEASES

Rent expense under non-cancelable operating leases with scheduled rent increases
or free rent periods is accounted for on a straight-line basis over the lease
term, beginning on the date of initial possession, which is generally when we
enter the space and begin construction build-out. The amount of the excess of
straight-line rent expense over scheduled payments is recorded as a deferred
rent liability. Construction allowances and other such lease incentives are
recorded as deferred credits, and are amortized on a straight-line basis as a
reduction of rent expense.

ADVERTISING COSTS

Advertising costs are expensed the first time the event occurs or as incurred.
Advertising expenses were $1,152,000, $1,065,000, and $521,000 for the years
ended January 29, 2005, January 31, 2004, and February 1, 2003, respectively. At
January 29, 2005 and January 31, 2004, the amount of advertising costs reported
as prepaid advertising was $49,000 and $42,000, respectively.

INCOME TAXES

We utilize Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which prescribes the use of the liability method
to compute the difference between the tax basis of assets and liabilities and
the related financial reporting amounts using currently enacted tax laws and
rates.

NET INCOME PER SHARE

Net income per share has been computed in accordance with Financial Accounting
Standards Board ("FASB") Statement No. 128, "Earnings per Share" (see Note 8). A
three-for-two stock split became effective September 2, 2003. All share and per
share amounts prior to that date have been restated to reflect the stock split
and all previous stock splits.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.


                                      F-8
<PAGE>

LONG-LIVED ASSETS

Long-lived assets are reviewed for events or changes in circumstances that
indicate that their carrying value may not be recoverable. The review is based
on comparing the expected undiscounted cash flows to the carrying amount of such
assets. If it is determined that the carrying amount of the long-lived assets is
not recoverable, we will recognize an impairment loss, measured by the future
discounted cash flow method. At January 29, 2005, we believe there has been no
impairment of the value of such assets to date.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", which
establishes accounting and reporting standards for impairment and disposition of
long-lived assets, including discontinued operations. SFAS No. 144 became
effective for all financial statements issued for fiscal years beginning after
December 15, 2001 and, generally, its provisions are to be applied
prospectively. The adoption of SFAS No. 144 did not have a significant impact on
our results of operations or financial condition.

STOCK-BASED COMPENSATION

SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and
Disclosure an Amendment of SFAS No. 123", amends the disclosure requirements of
SFAS No. 123, "Accounting for Stock-Based Compensation", to require more
prominent disclosures in both annual and interim financial statements regarding
the method of accounting for stock-based employee compensation and the effect of
the method used on reported results.

We account for stock-based awards to employees and directors using the intrinsic
value method of accounting in accordance with Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." We follow
the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 requires disclosures of
the effects of an entity's accounting policy with respect to stock-based
employee compensation on reported net income (loss) and earnings (loss) per
share in annual and interim financial statements. We are required to follow the
prescribed disclosure format and have provided the additional disclosures
required by SFAS No. 148 for the fiscal years ended January 29, 2005, January
31, 2004 and February 1, 2003.

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if we accounted for our employee stock
incentives under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for fiscal 2004,
2003, and 2002: weighted average risk-free interest rates of 5%; dividend yields
of 0%; weighted average volatility factors of the expected market price of our
common stock of 0.48 for fiscal 2004, 0.40 for fiscal 2003, and 0.61 for fiscal
2002; and a weighted average expected life of the options of 3.6 years for
fiscal 2004, 5 years for fiscal 2003 and 2002. The weighted average fair value
of options granted during the year are $8.57, $6.70, and $8.53 per share for
fiscal 2004, 2003, and 2002, respectively.


                                      F-9
<PAGE>

For purposes of pro forma disclosures, the estimated fair value of the options,
based on the Black-Scholes option pricing model, is amortized to expense over
the options' vesting periods. The following is the pro forma information using
the fair value method under SFAS No. 123, as amended by SFAS No. 148 (in
thousands, except per share amounts):

<TABLE>
                                                                       Years Ended
                                                      --------------------------------------------
                                                                       January 31,     February 1,
                                                       January 29,        2004            2003
                                                          2005        (As Restated)   (As Restated)
                                                      ------------    ------------    ------------
<S>                                                        <C>             <C>             <C>
Net income
   As reported                                             $39,673         $47,589         $34,087
   Add: Stock-based compensation expense
        included in reported net income, net of
        related tax effects                                     96              96              88
   Deduct: Total stock-based compensation
        expense determined under fair value
        method for all awards, net of related
        tax effects                                        (11,804)         (5,166)         (4,189)
                                                      ------------    ------------    ------------
   Pro forma                                               $27,965         $42,519         $29,986
                                                      ============    ============    ============

Basic earnings per share:
   As reported                                               $0.86           $1.00           $0.72
   Pro forma                                                 $0.60           $0.90           $0.64

Diluted earnings per share:
   As reported                                               $0.83           $0.96           $0.69
   Pro forma                                                 $0.59           $0.87           $0.61
</TABLE>

ACCELERATED OPTIONS

We accelerated the vesting of certain stock options awarded to employees,
officers and directors under various stock option plans, which had exercise
prices that were below market closing price on January 4, 2005. Options to
purchase approximately 1.38 million shares became exercisable immediately as a
result of the vesting acceleration. Our Board approved the vesting acceleration
as a result of SFAS No. 123 requiring the expensing of stock options effective
later in 2005 which with respect to such accelerated options would have
negatively impacted our results from operations.

COMPREHENSIVE INCOME

We report comprehensive income in accordance with the provisions of SFAS 130,
"Reporting Comprehensive Income." SFAS 130 established standards for the
reporting and display of comprehensive income. Components of comprehensive
income include net earnings (loss), foreign currency translation adjustments and
gains/losses associated with investments available for sale. Comprehensive
income for the fiscal years ended January 29, 2005 and January 31, 2004 were
$39.7 million and $47.4 million, respectively.


                                      F-10
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities." In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of the
entity if the investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN 46(R) clarifies the application of ARB No. 51, "Consolidated
Financial Statements," to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
subordinated financial support from other parties. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after January 31, 2003. The consolidation requirements apply to older entities
in the first fiscal year or interim period beginning after June 15, 2003.
Certain of the disclosure requirements apply in all financial statements issued
after January 31, 2003, regardless of when the variable interest entity was
established. FIN 46(R) applies immediately to variable interest entities created
after December 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. It applies no later than the
first reporting period ending after March 15, 2004, to variable interest
entities in which an enterprise holds a variable interest (other than special
purpose) that it acquired before January 1, 2004. FIN 46(R) applies to public
enterprises as of the beginning of the applicable interim or annual period. We
do not currently have any variable interest entities and the adoption of the
provisions of FIN 46 and FIN 46(R) did not have a material impact on our results
of operations or financial condition.

In November 2003, consensus was reached on Emerging Issues Task Force ("EITF")
Issue No. 03-10, "Application of EITF Issue No. 02-16, `Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor,' by
Resellers to Sales Incentives Offered to Consumers by Manufacturers." Under
Issue 02-16, cash consideration received by a customer from a vendor is presumed
to be a price reduction of the vendor's products or services and should
therefore be characterized as a reduction of cost of sales when recognized in
the income statement of the customer. Issue No. 03-10 is effective for fiscal
periods beginning after November 25, 2003. The adoption of Issue No. 03-10 did
not have a material impact on our operating results or financial condition.

In March 2004, the EITF reached a consensus on EITF Issue No. 03-1 ("EITF
03-1"), "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments," for which the measurement and recognition provisions were
to be effective for reporting periods beginning after June 15, 2004. However, in
September 2004, the EITF issued FASB Staff Position EITF Issue No. 03-1-1,
"Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, `The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments,'"
which postponed the measurement and recognition provisions of EITF 03-1, but
maintained the disclosure requirements for all investments within the scope of
the guidance to be effective in annual financial statements for fiscal years
ending after June 15, 2004. EITF 03-1 provides a three-step process for
determining whether investments, including debt securities, are other than
temporarily impaired and requires additional disclosures in annual financial
statements. An investment is impaired if the fair value of the investment is
less than its cost. EITF 03-1 outlines that an impairment would be considered
other-than-temporary unless: a) the investor has the ability and intent to hold
an investment for a reasonable period of time sufficient for the recovery of the
fair value up to (or beyond) the cost of the investment, and b) evidence


                                      F-11
<PAGE>

indicating that the cost of the investment is recoverable within a reasonable
period of time outweighs evidence to the contrary. Although not presumptive, a
pattern of selling investments prior to the forecasted recovery of fair value
may call into question the investor's intent. In addition, the severity and
duration of the impairment should also be considered in determining whether the
impairment is other-than-temporary. We do not expect the adoption of EITF 03-1
to have a material impact on our results of operations or financial condition
because our investments are short-term in nature and consist primarily of
interest bearing bonds that are highly liquid and low risk with a minimum credit
quality rating of A-1 (Standard and Poor's), SP-1 (Moody's Investor Service) or
equivalent

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an Amendment
of ARB No. 43, Chapter 4". SFAS No. 151 clarifies that abnormal amounts of idle
facility expense, freight, handling costs, and wasted materials (spoilage)
should be recognized as current-period charges. In addition, SFAS No. 151
requires the allocation of fixed production overheads to the cost of conversion
be based on the normal capacity of the production facilities. SFAS No. 151 is
effective for fiscal years beginning after June 15, 2005. We do not expect the
adoption of SFAS No. 151 to have a material impact on our operating results or
financial condition.

In December 2004, the FASB issued SFAS No. 153, "Exchange of Nonmentary Assets,
an amendment of APB Opinion No. 29". SFAS No. 153 eliminates the exception for
nonmonetary exchanges of similar productive assets, which were previously
required to be recorded on a carryover basis rather than a fair value basis.
Instead, this statement provides that exchanges of nonmonetary assets that do
not have commercial substance be reported at carryover basis rather than a fair
value basis. A nonmonetary exchange is considered to have commercial substance
if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The provisions of this statement are effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. We do not expect the adoption of SFAS No. 153 to have a material impact on
our operating results or financial condition.

In December 2004, the FASB issued Statement No. 123 (revised 2004), "Share-Based
Payment" ("SFAS No. 123R"), which is a revision of SFAS No. 123. SFAS No. 123R
supersedes APB No. 25 and amends Statement No. 95, "Statement of Cash Flows."
Under SFAS No. 123, companies must calculate and record in the income statement
the cost of equity instruments, such as stock options, awarded to employees for
services received and pro forma disclosure is no longer permitted. The cost of
the equity instruments will be measured based on fair value of the instruments
on the date they are granted (with certain exceptions) and will be required to
be recognized over the period during which the employees are required to provide
services in exchange for the equity instruments. The statement is effective in
the first interim or annual reporting period beginning after June 15, 2005.

SFAS No. 123R provides two alternatives for adoption: (1) a "modified
prospective" method in which compensation cost is recognized for all awards
granted subsequent to the effective date of this statement as well as for the
unvested portion of awards outstanding as of the effective date; or (2) a
"modified retrospective" method which follows the approach in the "modified
prospective" method, but also permits entities to restate prior periods to
record compensations cost calculated under SFAS No. 123 for the pro forma
disclosure. We are currently evaluating our share-based payment programs on our
results of operations, and do not expect the adoption of SFAS No. 123 to have a
material impact on our overall financial position but could significantly impact
results of operations.

The impact of adopting SFAS No. 123R cannot be accurately estimated at this time
because it will depend on levels of share-based awards granted in the future.
However, had we adopted SFAS No. 123R in prior periods, the impact of that
standard would have approximated the impact of SFAS No. 123 as described in the


                                      F-12
<PAGE>

disclosure of pro forma net income and earnings per share in Note 1 to our
consolidated financial statements. SFAS No 123R also requires the benefits of
tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow. This change will reduce net operating cash flows and
increase net financing cash flows in periods after adoption. While the amount of
this change cannot be estimated at this time, the amount of operating cash flows
recognized in prior periods for such excess tax deductions were $1.6 million,
$6.6 million, and $5.1 million in fiscal 2004, 2003 and 2002, respectively.


NOTE 2. RESTATEMENT OF FINANCIAL STATEMENTS

In accordance with SFAS No. 13, "Accounting for Leases" and Financial Accounting
Standards Board Technical Bulletin No. 88-1, "Issues Relating to Accounting for
Leases" ("FTB 88-1"), we account for rental expense for step provisions and
escalation clauses on a straight-line basis over the minimum lease term, with
such amounts being included along with other related rent expense as part of
"Cost of goods sold, including buying, distribution and occupancy costs."
Construction allowances and other lease concessions received from landlords are
amortized over the minimum lease term on a straight-line basis as part of "Cost
of goods sold, including buying, distribution and occupancy costs." However, in
our detailed accounts, we had previously recorded this amortization as a
reduction of depreciation expense, rather than rent expense. Both depreciation
and rent expense are reflected within "Cost of goods sold, including buying,
distribution and occupancy costs" on the statements of income.

Historically, our balance sheets have reflected the unamortized portion of
construction allowances and other lease concessions as a reduction of
"Leaseholds, fixtures and equipment, net," instead of as a component of deferred
rent liability. Further, our historical statements of cash flows have reflected
construction allowances and other lease concessions received as a reduction of
"Leaseholds, fixtures and equipment, net" (within "investing" cash flows),
rather than as an operating lease activity (within "operating" cash flows).

We had historically recognized rent expense on a straight-line basis over the
lease term. Our leases typically have a rent commencement date to coincide with
the initial occupancy date, or store opening date. The store opening date
coincided with the commencement of business operations, which is the intended
use of the property. Management re-evaluated FASB Technical Bulletin No. 85-3,
"Accounting for Operating Leases with Scheduled Rent Increases" and determined
that the lease term for amortization purposes should commence on the date we
take possession of the leased space for construction purposes, which is
generally two months prior to a store opening date. Excluding tax impacts, the
correction of this accounting requires us to record additional rent credits in
"Deferred rent" and to adjust "Retained earnings" on the consolidated balance
sheets, as well as to record additional rent expense in the form of deferred
rent amortization in "Costs of goods sold, including, buying, distribution and
occupancy costs" on the consolidated statements of income for the years ended
January 31, 2004 and February 1, 2003. The cumulative effect of these changes is
a reduction to retained earnings of $1.6 million as of the beginning of fiscal
2002 and incremental decreases to retained earnings of $543,000 and $453,000,
for the fiscal years ended 2002 and 2003, respectively. The impact of these
adjustments reduced net income recorded in the first, second and third quarters
of fiscal 2004 by $82,000, $119,000, and $132,000, respectively and changed net
income recorded in the first, second, third and fourth quarters of fiscal 2003
by ($156,000), ($150,000), ($178,000) and $31,000, respectively.


                                      F-13
<PAGE>

The following is a summary of the effects of these changes on our consolidated
balance sheets as of January 31, 2004 and February 1, 2003, as well as the
effects of these changes on our consolidated statements of income and cash flows
for fiscal years 2003 and 2002 (in thousands, except share data):

<TABLE>
                                                                                  Consolidated Statements of Income
                                                                            --------------------------------------------
                                                                                 As
                                                                             Previously
Fiscal Year Ended January 31, 2004                                            Reported      Adjustments      As Restated
----------------------------------------------------------------------      ------------    ------------    ------------
<S>                                                                         <C>             <C>             <C>
Cost of goods sold, including buying, distribution and occupancy costs      $    351,542    $        735    $    352,277
Operating income                                                                  76,545            (735)         75,810
Income before income taxes                                                        77,863            (735)         77,128
Provision for income taxes                                                        29,821            (282)         29,539
Net income                                                                        48,042            (453)         47,589
Net income per share - basic                                                        1.01           (0.01)           1.00
Net income per share - diluted                                                      0.97           (0.01)           0.96

Fiscal Year Ended February 1, 2003
----------------------------------------------------------------------
Cost of goods sold, including buying, distribution and occupancy costs      $    273,132    $        876    $    274,008
Operating income                                                                  54,484            (876)         53,608
Income before income taxes                                                        55,855            (876)         54,979
Provision for income taxes                                                        21,225            (333)         20,892
Net income                                                                        34,630            (543)         34,087
Net income per share - basic                                                        0.74           (0.01)           0.72
Net income per share - diluted                                                      0.70           (0.01)           0.69
</TABLE>


<TABLE>
                                                                                     Consolidated Balance Sheets
                                                                            --------------------------------------------
                                                                                 As
                                                                             Previously
January 31, 2004                                                              Reported      Adjustments      As Restated
----------------------------------------------------------------------      ------------    ------------    ------------
<S>                                                                         <C>             <C>             <C>
Leasehold, fixtures and equipment, net                                      $     88,348    $     14,490    $    102,838
Total assets                                                                     281,592          14,490         296,082
Income taxes payable                                                               7,242              36           7,278
Deferred rent                                                                      3,155          18,688          21,843
Deferred taxes, net                                                                3,316          (1,608)          1,708
Retained earnings                                                                137,868          (2,626)        135,242
Total shareholders' equity                                                       223,905          (2,626)        221,279
Total liabilities and shareholders' equity                                       281,592          14,490         296,082
</TABLE>


                                      F-14
<PAGE>

<TABLE>
                                                                                Consolidated Statements of Cash Flows
                                                                            --------------------------------------------
                                                                                 As
                                                                             Previously
Fiscal Year Ended January 31, 2004                                            Reported      Adjustments      As Restated
----------------------------------------------------------------------      ------------    ------------    ------------
<S>                                                                         <C>             <C>             <C>
Net cash provided by operating activities                                   $     72,302    $      6,305    $     78,607
Net cash provided by investing activities                                        (81,894)         (6,305)        (88,199)

Fiscal Year Ended February 1, 2003
----------------------------------------------------------------------
Net cash provided by operating activities                                   $     60,317    $      4,522    $     64,839
Net cash provided by investing activities                                        (37,070)         (4,522)        (41,592)
</TABLE>


<TABLE>
                                                                           Consolidated Statements of Shareholders' Equity
                                                                           -----------------------------------------------
                                                                                 As
                                                                             Previously
February 2, 2002                                                              Reported      Adjustments      As Restated
----------------------------------------------------------------------      ------------    ------------    ------------
<S>                                                                         <C>             <C>             <C>
Retained earnings                                                           $     74,725    $     (1,630)   $     73,095
</TABLE>



NOTE 3.  LEASEHOLDS, FIXTURES AND EQUIPMENT

Leaseholds, fixtures and equipment are summarized as follows (in thousands):

                                                                   January 31,
                                                    January 29,        2004
                                                       2005       (As Restated)
                                                    -----------    -----------
Furniture, fixtures and equipment                   $   110,503    $    78,476
Leasehold improvements                                  115,579         91,175
                                                    -----------    -----------
                                                        226,082        169,651

Less: accumulated depreciation and amortization         (89,681)       (66,813)
                                                    -----------    -----------
                                                    $   136,401    $   102,838
                                                    ===========    ===========


                                      F-15
<PAGE>

NOTE 4. ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):

                                                                  January 31,
                                                    January 29,       2004
                                                       2005      (As Restated)
                                                    -----------   -----------
Accrued payroll and related expenses                $     4,194   $     9,833
Gift cards, gift certificates and
     store merchandise credits                            7,943         5,713
Accrued percentage rents                                  1,858         4,012
Other                                                    13,774         8,575
                                                    -----------   -----------
                                                    $    27,769   $    28,133
                                                    ===========   ===========

NOTE 5. BANK CREDIT AGREEMENT

We maintain an unsecured bank credit agreement of $5.0 million. The credit
agreement will expire in August 2005 and we expect to renew the credit agreement
under similar terms. Letters of credit are issued under the credit agreement,
which are primarily used for inventory purchases. At January 29, 2005, we had
$130,000 of outstanding letters of credit issued under the credit agreement.

NOTE 6. COMMITMENTS AND CONTINGENCIES

LEASES

We have entered into lease agreements for retail, distribution and office space,
vehicles, and equipment under primarily noncancelable leases with terms ranging
from approximately two to ten years. The retail space leases provide for rents
based upon the greater of the minimum annual rental amounts or 5% to 8% of
annual sales volume. Certain leases provide for increasing minimum annual rental
amounts. Rent expense is recorded on a straight-line basis over the term of the
lease based on us taking possession of premises. Accordingly, deferred rent, as
reflected in the accompanying balance sheets, represents the difference between
rent expense accrued and amounts paid under the terms of the lease agreements.
Total rent expense for the years ended January 29, 2005, January 31, 2004, and
February 1, 2003 was $44,341,000, $38,572,000, and $30,787,000, respectively,
including contingent rentals of $4,259,000, $4,866,000, and $3,670,000,
respectively.


                                      F-16
<PAGE>

Annual future minimum lease payments under operating leases as of January 29,
2005 are as follows (in thousands):

Fiscal Year                                Operating Leases
-----------                                ----------------
2005                                          $   45,969
2006                                              45,875
2007                                              44,663
2008                                              42,504
2009                                              39,991
Thereafter                                       120,420
                                              ----------
Total minimum operating lease payments        $  339,422
                                              ==========


LITIGATION

We are involved in various matters of litigation during the ordinary course of
business. Management does not currently believe any such matters will have a
material adverse effect on our financial condition or results of operations.

INDEMNITIES, COMMITMENTS AND GUARANTEES

During the ordinary course of business, we have made certain indemnities,
commitments and guarantees under which we may be required to make payments in
relation to certain transactions. These indemnities include those given to
various lessors in connection with facility leases for certain claims arising
from such facility or lease and indemnities to our directors and officers to the
maximum extent permitted under the laws of the State of California. We have
issued guarantees in the form of letters of credit as security for some
merchandise shipments from overseas. There were $130,000 of these letters of
credit outstanding at January 29, 2005. The durations of these indemnities,
commitments and guarantees vary. Some of these indemnities, commitments and
guarantees do not provide for any limitation of the maximum potential future
payments we could be obligated to make. We have not recorded any liability for
these indemnities, commitments and guarantees in the accompanying consolidated
financial statements.


NOTE 7. SHAREHOLDERS' EQUITY

STOCK SPLIT

On August 12, 2003, we announced that our Board of Directors approved a
three-for-two stock split (in the form of a dividend) of our common stock. On
the effective date of September 2, 2003, shareholders received a dividend of one
additional share for every two shares they owned at the close of business on the
record date of August 21, 2003. All share and per share amounts have been
restated to reflect this stock split and all previous stock splits effectuated
by us.


                                      F-17
<PAGE>

STOCK REPURCHASE

On May 8, 2002, we announced that our Board of Directors approved the repurchase
of up to an aggregate of 1,500,000 shares of our common stock during the period
ending January 31, 2003. As of January 31, 2003, we completed the repurchase of
1,500,000 shares of our common stock at a cost of $19.7 million, at an average
price of $13.13 per common share.

On March 19, 2004, we announced that our Board of Directors approved the
repurchase of up to an aggregate of 2,000,000 shares of our common stock during
the period ending January 29, 2005. As of July 31, 2004 we completed the
repurchase of 2,000,000 shares of our common stock at a cost of $46.8 million at
an average price of $23.41.

On August 18, 2004, we announced that our Board of Directors approved an
additional repurchase of up to an aggregate of 2,000,000 shares of our common
stock during the period ending January 29, 2005. As of January 29, 2005, we
completed the repurchase of 2,000,000 shares of our common stock at a cost of
$32.8 million at an average price of $16.42.

EMPLOYEE STOCK PURCHASE PLAN

In June 1996, the Board of Directors adopted the Employee Stock Purchase Plan
(the "Stock Purchase Plan"). The Stock Purchase Plan provides for the issuance
of up to 1,350,000 shares of common stock to our employees. All eligible
employees are granted identical rights to purchase common stock for each Board
authorized offering under the Stock Purchase Plan. Rights granted pursuant to
any offering under the Stock Purchase Plan terminate immediately upon cessation
of an employee's employment for any reason. In general, an employee may withdraw
from participation in an offering at any time during the purchase period for
such offering. Rights granted under the Stock Purchase Plan are not transferable
and may be exercised only by the person to whom such rights are granted. The
initial offering under the Stock Purchase Plan commenced October 24, 1996 and
terminated December 31, 1996. Subsequent offerings occur every six months
commencing January 1, 1997.

EQUITY INCENTIVE AND STOCK OPTION PLANS

Under the our 1996 Equity Incentive Plan, we may grant stock options, stock
bonuses, restricted stock purchase rights and stock appreciation rights to
employees, our directors or consultants, as deemed appropriate by the Board of
Directors. Under our 1996 Non-Employee Directors' Stock Option Plan and together
with the 1996 Equity Incentive Plan (the "Plans"), we may grant stock options to
non-employee directors. The exercise price of options granted under the Plans
shall be determined by the Board of Directors at the date of grant and shall not
be lower than (i) 100% of the fair market value of our common stock on the date
of grant for incentive stock options, (ii) 85% of the fair market value our
common stock on the date of grant for non-statutory stock options, and (iii)
110% of the fair market value of our common stock on the date of grant for
persons possessing 10% or more of the total combined voting power of all classes
of stock. Unless the Board of Directors declares otherwise, options vest over
four years and generally expire ten years from the date of grant. An aggregate
of 19,020,000 shares of common stock may be issued pursuant to the Plans. During
fiscal 2003, the Plans were amended to increase the aggregate number of shares
of common stock authorized for issuance by 2,775,000 shares. As of January 29,
2005, 2,388,671 shares were available for future grants. No options, under the
Plans, have been granted to consultants.


                                      F-18
<PAGE>

We granted 7,737; 8,855; and 8,424 shares of restricted common stock in the year
ended January 29, 2005, January 31, 2004, and February 1, 2003, respectively, to
non-employee directors under the 1996 Equity Incentive Plan. The 7,737
restricted shares issued in fiscal 2004 will vest in the year ending January 28,
2006, the 8,855 restricted shares issued in fiscal 2003 vested in the year ended
January 29, 2005, the 8,424 restricted shares issued in fiscal 2002 vested in
the year ended January 31, 2004. All awarded common shares will remain
restricted until such time the recipient is no longer a member of our Board of
Directors. The value of these grants is expensed over the vesting period and
$155,000, $155,000, and $142,000 was expensed in the years ended January 29,
2005, January 31, 2004, and February 1, 2003, respectively.


A summary of our stock option activity and related information follows:

<TABLE>
                                         January 29, 2005         January 31, 2004         February 1, 2003
                                      ----------------------   ----------------------   ----------------------
                                                    Weighted                 Weighted                 Weighted
                                                    Average                  Average                  Average
                                                    Exercise                 Exercise                 Exercise
                                        Options      Price       Options      Price       Options      Price
                                      ----------------------   ----------------------   ----------------------
<S>                                    <C>          <C>         <C>          <C>         <C>          <C>
Outstanding at beginning of year       4,813,795    $  11.28    4,876,941    $   8.70    4,891,268    $   5.85
Granted                                1,447,750    $  24.75    1,396,931    $  15.78    1,394,475    $  15.14
Exercised                               (409,446)   $   8.94   (1,260,630)   $   6.11   (1,195,529)   $   4.13
Forfeited                               (159,254)   $  19.51     (199,447)   $  12.37     (213,273)   $  10.88
                                      ----------------------   ----------------------   ----------------------
Outstanding at end of year             5,692,845    $  14.67    4,813,795    $  11.28    4,876,941    $   8.70
                                      ======================   ======================   ======================

                                      ----------------------   ----------------------   ----------------------
Exercisable at end of year             4,417,071    $  14.48    2,146,586    $   7.80    2,000,054    $   5.06
                                      ======================   ======================   ======================
</TABLE>


                                      F-19
<PAGE>

Exercise prices for the 5,692,845 options outstanding as of January 29, 2005
ranged from $1.51 to $27.60. The weighted average contractual life of those
options is 7.2 years. The following table summarizes information about stock
options outstanding as of January 29, 2005:

<TABLE>
                                                       Outstanding Options
                             -------------------------------------------------------------------------
 Range of Exercise Prices                       Weighted      Weighted                      Weighted
                                                Average       Average                        Average
                                 Number         Exercise     Contractual     Number         Exercise
                              Outstanding        Price          Life       Exercisable       Price
------------------------------------------------------------------------------------------------------
<S>                            <C>              <C>             <C>         <C>             <C>
        $1.51 - $3.73            780,942        $  2.88         4.4           780,942       $  2.88
        $5.97 - $11.00         1,112,878        $  8.90         5.9         1,040,596       $  8.80
       $11.23 - $15.33         1,139,378        $ 14.77         7.1           739,432       $ 14.77
       $15.61 - $25.06         1,491,697        $ 16.56         8.3           691,589       $ 17.25
       $25.51 - $27.60         1,167,950        $ 25.52         9.1         1,164,512       $ 25.52
                             -------------------------------------------------------------------------
        $1.51 - $27.60         5,692,845        $ 14.67         7.2         4,417,071       $ 14.48
                             =========================================================================
</TABLE>

We recorded tax benefits associated with the exercise of non-qualified stock
options and non-qualifying dispositions of incentive stock options. The tax
benefits increased shareholders' equity and decreased income taxes payable in
the amounts of $1,585,000, $6,616,000, and $5,118,000 for the years ended
January 29, 2005, January 31, 2004, and February 1, 2003, respectively.


NOTE 8. NET INCOME PER SHARE

We compute net income per share pursuant to Statement of Financial Accounting
Standards No. 128 "Earnings Per Share." Basic net income per share is computed
based on the weighted average number of common shares outstanding for the
period. Diluted net income per share is computed based on the weighted average
number of common shares outstanding for the period and potentially dilutive
common stock equivalents outstanding for the period.

A reconciliation of the numerator and denominator of basic earnings per share
and diluted earnings per share is as follows (all amounts in thousands except
per share amounts):

<TABLE>
                                                          January 29,   January 31,   February 1,
                                                             2005          2004           2003
                                                                       (As Restated) (As Restated)
                                                          -----------   -----------   -----------
<S>                                                       <C>           <C>           <C>
Basic Earnings Per Share Computation:
      Numerator                                           $    39,673   $    47,589   $    34,087
      Denominator:
          Weighted average common shares outstanding           46,379        47,479        47,027
                                                          -----------   -----------   -----------
          Total shares                                         46,379        47,479        47,027
                                                          ===========   ===========   ===========
      Basic earnings per share                            $      0.86   $      1.00   $      0.72
                                                          ===========   ===========   ===========

Diluted Earnings Per Share Computation:
      Numerator                                           $    39,673   $    47,589   $    34,087
      Denominator:
          Weighted average common shares outstanding           46,379        47,479        47,027
          Incremental shares from assumed
               conversion of options                            1,496         2,109         2,249
                                                          -----------   -----------   -----------
          Total shares                                         47,875        49,588        49,276
                                                          ===========   ===========   ===========
      Diluted earnings per share                          $      0.83   $      0.96   $      0.69
                                                          ===========   ===========   ===========
</TABLE>


                                      F-20
<PAGE>

NOTE 9. INCOME TAXES

Composition of the provision for income taxes for the years ended (in
thousands):

                                     January 29,    January 31,    February 1,
                                         2005          2004           2003
                                                   (As Restated)  (As Restated)
                                     -----------    -----------    -----------
Current:
     Federal                         $    17,141    $    21,169    $    18,570
     State                                 3,574          4,577          2,963
                                     -----------    -----------    -----------
                                          20,715         25,746         21,533
                                     -----------    -----------    -----------

Deferred:
     Federal                               3,949          4,155           (415)
     State                                   (46)          (362)          (226)
                                     -----------    -----------    -----------
                                           3,903          3,793           (641)
                                     -----------    -----------    -----------
Total income tax expense             $    24,618    $    29,539    $    20,892
                                     ===========    ===========    ===========


Significant components of our deferred tax assets and liabilities as of (in
thousands):

                                                    January 29,    January 31,
                                                       2005           2004
                                                                  (As Restated)
                                                    -----------    -----------
Current deferred tax assets:
     Inventory                                      $       940    $       701
     Accrued vacation and other                             779            727
     State taxes                                            566            597
     Other assets                                           256            234
                                                    -----------    -----------
Net current deferred tax assets                           2,541          2,259
                                                    -----------    -----------

Noncurrent deferred tax assets (liabilities):
     Depreciation                                        (6,600)        (2,447)
     Deferred rent                                          524            739
                                                    -----------    -----------
Total noncurrent deferred tax liabilities                (6,076)        (1,708)
                                                    -----------    -----------
Net deferred tax liabilities                        $    (3,535)   $      (551)
                                                    ===========    ===========


                                      F-21
<PAGE>

Reconciliation of the provision for income taxes to the statutory tax rate for
the years ended:

<TABLE>
                                                  January 29,     January 31,     February 1,
                                                      2005            2004            2003
                                                  -----------     -----------     -----------
<S>                                                      <C>             <C>             <C>
Statutory federal rate                                 35.0%           35.0%           35.0%
Permanent differences                                  (0.2)           (0.4)           (0.5)
State and local taxes, net of federal benefit           3.6             3.6             3.7
Other items                                            (0.1)            0.1            (0.2)
                                                  -----------     -----------     -----------
Effective income tax rate                              38.3%           38.3%           38.0%
                                                  ===========     ===========     ===========
</TABLE>

We operate in numerous tax jurisdictions and are subject to routine tax
examinations. Any such examinations could involve difficult issues and multiple
years. Although we cannot predict the outcome of future examinations, amounts
that could be owed in excess of amounts accrued will impact future tax expense
but will not impact our financial condition.

NOTE 10. EMPLOYEE BENEFIT PLAN

Effective January 1, 1995, we adopted the Hot Topic 401(k) Retirement Savings
Plan (the "401(k) Plan"). All employees who have been employed by us for at
least one year of service, maintained a minimum of 1,000 hours worked during the
year and are at least 21 years of age are eligible to participate. Employees may
contribute to the 401(k) Plan up to 25% of their current compensation, subject
to a statutorily prescribed annual limit. We may at our discretion contribute
certain amounts to eligible employees' accounts. We have not made any
contributions to the 401(k) Plan.


                                      F-22

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>2
<FILENAME>hottopic_10kex3-2.txt
<TEXT>
<PAGE>
EXHIBIT 3.2

                              STATE OF CALIFORNIA

                               SECRETARY OF STATE


         I, BILL JONES, Secretary of State of the State of California, hereby
certify:

         That the attached transcript of 1 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it is
full, true and correct.


                                    IN WITNESS WHEREOF, I execute this
                                    certificate and affix the Great Seal of the
                                    State of California this day of

                                                  Jul - 5 2002
                                    --------------------------------------------

                                             /s/ Bill Jones

[Seal of the State of California]

                                             Secretary of State



<PAGE>

                            CERTIFICATE OF AMENDMENT
                            OF AMENDED AND RESTATED
                           ARTICLES OF INCORPORATION
                               OF HOT TOPIC, INC.


Elizabeth M. McLaughlin and James J. McGinty certify that:

         ONE: They are the duly elected and acting Chief Executive Officer and
President, and Chief Financial Officer and Secretary, respectively, of Hot
Topic, Inc., a California corporation.

         TWO: The first paragraph of Article III of the Amended and Restated
Articles of Incorporation of this corporation is amended in its entirety to read
as follows:

                                      III

         "The Corporation is authorized to issue two classes of shares
designated "Common Stock" and "Preferred Stock," respectively. The number of
shares of Common Stock authorized to be issued is one hundred fifty million
(150,000,000) and the number of shares of Preferred Stock authorized to be
issued is ten million (10,000,000)."

         THREE: The foregoing Amendment of Amended and Restated Articles of
Incorporation has been duly approved by the Board of Directors of the
corporation.

         FOUR: The foregoing Amendment of Amended and Restated Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding shares of the corporation entitled to vote on the approval
of the amendment was 31,569,255 shares of Common Stock. The number of shares
voting in favor of the amendment equaled or exceeded the vote required. The
percentage vote required was more than fifty percent (50%) of the outstanding
shares of Common Stock. There are no outstanding shares of Preferred Stock.

         We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.

Date: June 13, 2002                     /s/ Elizabeth M. McLaughlin
                                        ----------------------------------------
                                        Elizabeth M. McLaughlin
                                        Chief Executive Officer and President


                                        /s/ James J. McGinty
                                        ----------------------------------------
                                        Jame J. McGinty

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>3
<FILENAME>hottopic_10kex3-3.txt
<TEXT>
<PAGE>
EXHIBIT 3.3


================================================================================



                    AMENDED AND RESTATED BYLAWS (AS AMENDED)

                                       OF


                                 HOT TOPIC, INC.






================================================================================


<PAGE>
<TABLE>
<S>  <C>

ARTICLE I             OFFICES....................................................................................1

         Section 1.        Principal Office......................................................................1

         Section 2.        Other Offices.........................................................................1

ARTICLE II            MEETINGS OF SHAREHOLDERS...................................................................1

         Section 1.        Place of Meeting......................................................................1

         Section 2.        Annual Meeting........................................................................1

         Section 3.        Special Meeting.......................................................................3

         Section 4.        Notice of Shareholders' Meetings......................................................3

         Section 5.        Manner of Giving Notice; Affidavit of Notice..........................................4

         Section 6.        Quorum................................................................................4

         Section 7.        Adjourned Meeting; Notice.............................................................4

         Section 8.        Voting................................................................................5

         Section 9.        Waiver of Notice or Consent by Absent Shareholders....................................5

         Section 10.       Shareholder Action by Written Consent Without a Meeting...............................6

         Section 11.       Proxies...............................................................................6

         Section 12.       Inspectors of Election................................................................6

ARTICLE III           DIRECTORS..................................................................................7

         Section 1.        Powers................................................................................7

         Section 2.        Number and Qualification of Directors.................................................7

         Section 3.        Election and Term of Office of Directors..............................................8

         Section 4.        Vacancies.............................................................................8

         Section 5.        Place of Meetings and Meetings by Telephone...........................................8

         Section 6.        Annual Meeting........................................................................8

         Section 7.        Other Regular Meetings................................................................9

         Section 8.        Special Meetings......................................................................9

         Section 9.        Quorum................................................................................9

         Section 10.       Waiver of Notice......................................................................9

         Section 11.       Adjournment..........................................................................10

         Section 12.       Notice of Adjournment................................................................10

         Section 13.       Action Without Meeting...............................................................10

         Section 14.       Fees and Compensation of Director....................................................10

         Section 15.       Removal Without Cause................................................................10




<PAGE>

ARTICLE IV            COMMITTEES................................................................................10

         Section 1.        Committees of Directors..............................................................10

         Section 2.        Meetings and Action of Committees....................................................11

ARTICLE V             OFFICERS..................................................................................11

         Section 1.        Officers.............................................................................11

         Section 2.        Election of Officers.................................................................11

         Section 3.        Subordinate Officers.................................................................11

         Section 4.        Removal and Resignation of Officers..................................................11

         Section 5.        Vacancies in Offices.................................................................12

         Section 6.        Chairman of the Board................................................................12

         Section 7.        President............................................................................12

         Section 8.        Vice President.......................................................................12

         Section 9.        Secretary............................................................................12

         Section 10.       Chief Financial Officer..............................................................13

         Section 11.       Excessive Compensation...............................................................13

ARTICLE VI            RECORDS AND REPORTS.......................................................................13

         Section 1.        Maintenance and Inspection of Share Register.........................................13

         Section 2.        Maintenance and Inspection of Bylaws.................................................14

         Section 3.        Maintenance and Inspection of Other Corporate Records................................14

         Section 4.        Inspection by Directors..............................................................14

         Section 5.        Annual Report to Shareholders........................................................14

         Section 6.        Financial Statements.................................................................14

         Section 7.        Annual Statement of General Information..............................................15

ARTICLE VII           GENERAL CORPORATE MATTERS.................................................................15

         Section 1.        Record Date for Purposes Other than Notice and Voting................................15

         Section 2.        Checks, Drafts, Evidences of Indebtedness............................................16

         Section 3.        Corporate Contracts and Instruments; How Executed....................................16

         Section 4.        Certificate for Shares...............................................................16

         Section 5.        Lost Certificates....................................................................17

         Section 6.        Representation of Shares of Other Corporations.......................................17

         Section 7.        Construction and Definitions.........................................................17

ARTICLE VIII          AMENDMENTS................................................................................17

         Section 1.        Amendment by Shareholders............................................................17

         Section 2.        Amendment by Directors...............................................................17




<PAGE>

ARTICLE IX            INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS..............................18

         Section 1.        Director.............................................................................18

         Section 2.        Officers, Employees and Other Agents.................................................18

         Section 3.        Determination by the Corporation.....................................................18

         Section 4.        Good Faith...........................................................................18

         Section 5.        Expenses.............................................................................19

         Section 6.        Enforcement..........................................................................19

         Section 7.        Non-Exclusivity of Rights............................................................20

         Section 8.        Survival of Rights...................................................................20

         Section 9.        Insurance............................................................................20

         Section 10.       Amendments...........................................................................20

         Section 11.       Employee Benefit Plans...............................................................20

         Section 12.       Saving Clause........................................................................20

         Section 13.       Certain Definitions..................................................................20
</TABLE>



<PAGE>

                    AMENDED AND RESTATED BYLAWS (AS AMENDED)

                                       OF

                                 HOT TOPIC, INC.

                                   ARTICLE I

                                     OFFICES

         SECTION 1. PRINCIPAL OFFICE. The board of directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office is
located outside this state, and the corporation has one or more business offices
in this state, the board of directors shall fix and designate a principal
business office in the State of California.

         SECTION 2. OTHER OFFICES. The board of directors may at any time
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.

                                   ARTICLE II

                            MEETINGS OF SHAREHOLDERS

         SECTION 1. PLACE OF MEETING. Meetings of shareholders shall be held at
any place within or outside the State of California designated by the board of
directors. In the absence of any such designation, shareholders' meetings shall
be held at the principal executive office of the corporation.

         SECTION 2. ANNUAL MEETING. The annual meeting of the shareholders shall
be held each year on a date and at a time designated by the board of directors.
If this day shall be a legal holiday, then the meeting shall be held on the next
succeeding business day, at the same hour. At each annual meeting, directors
shall be elected and other proper business may be transacted.

         At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the board
of directors, (ii) otherwise properly brought before the meeting by or at the
direction of the board of directors, or (iii) otherwise properly brought before
the meeting by a shareholder. For business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date specified in the corporation's proxy
statement released to shareholders in connection with the previous year's annual
meeting of shareholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the shareholder to be timely must
be so received a reasonable time before the solicitation is made. A
shareholder's notice to the secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,

                                       1


<PAGE>

as they appear on the corporation's books, of the shareholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the shareholder, (iv) any material interest of the
shareholder in such business and (v) any other information that is required to
be provided by the shareholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent of a shareholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a shareholder proposal in the proxy
statement and form of proxy for a shareholders' meeting, shareholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph. The chairman of the annual meeting shall, if the facts
warrant, determine and declare at the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this
paragraph, and, if he should so determine, he shall so declare at the meeting
that any such business not properly brought before the meeting shall not be
transacted.

         Only persons who are nominated in accordance with the procedures set
forth in this paragraph shall be eligible for election as directors. Nominations
of persons for election to the board of directors of the corporation may be made
at a meeting of shareholders by or at the direction of the board of directors or
by any shareholder of the corporation entitled to vote in the election of
directors at the meeting who complies with the notice procedures set forth in
this paragraph. Such nominations, other than those made by or at the direction
of the board of directors, shall be made pursuant to timely notice in writing to
the secretary of the corporation in accordance with the provisions of the
preceding paragraph. Such shareholder's notice shall set forth (i) as to each
person, if any, whom the shareholder proposes to nominate for election or re
election as a director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the shareholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such shareholder giving notice, the
information required to be provided pursuant to the preceding paragraph. At the
request of the board of directors, any person nominated by a shareholder for
election as a director shall furnish to the secretary of the corporation that
information required to be set forth in the shareholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph. The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that a nomination was not made in
accordance with the provisions of this paragraph, and if he should so determine,
he shall so declare at the meeting, and the defective nomination shall be
disregarded.


                                       2


<PAGE>

         SECTION 3. SPECIAL MEETING. Special meetings of the shareholders may be
called at any time by the board of directors, the chairman of the board, the
president, a vice president, the secretary or by one or more shareholders
holding not less than one-tenth (1/10th) of the voting power of the corporation.
Except as next provided, notice shall be given as for the annual meeting.

         Upon receipt of a written request addressed to the chairman, president,
vice president or secretary, mailed or delivered personally to such office by
any person (other than the board) entitled to call a special meeting of
shareholders, such officer shall cause notice to be given, to the shareholders
entitled to vote, that a meeting will be held at a time requested by the person
or persons calling the meeting, not less than thirty-five (35) nor more than
sixty (60) days after the receipt of such request. If such notice is not given
within twenty (20) days after receipt of such request, the persons calling the
meeting may give notice thereof in the manner provided by these bylaws or apply
to the Superior Court as provided in Section 305(c) of the Corporations Code of
California. Such person's notice delivered to such office shall set forth as to
each matter such person proposes to bring before the special meeting (i) a brief
description of the business desired to be brought before the special meeting and
the reasons for conducting such business at the special meeting, (ii) the name
and address, as they appear on the corporation's books, of the person proposing
such business, if applicable, (iii) the class and number of shares of the
corporation which are beneficially owned by the person, if applicable, (iv) any
material interest of the person in such business and (v) any other information
that is required to be provided by the shareholder pursuant to Regulation 14A
under the 1934 Act.

         SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings
shall be sent or otherwise given in accordance with Section 5 of this Article II
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted, or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the shareholders. The notice of any meeting at which directors are to
be elected shall include the name of any nominee or nominees whom, at the time
of the notice, management intends to present for election.

         If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (ii)
an amendment of the articles of incorporation, pursuant to Section 902 of that
Code, (iii) a reorganization of the corporation, pursuant Section 1201 of that
Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900
of that Code, or (v) a distribution in dissolution other than in accordance with
the rights of outstanding preferred shares, pursuant to Section 2007 of that
Code, the notice shall also state the general nature of that proposal.

                                       3


<PAGE>

         SECTION 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the
corporation's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegram or other means of written
communication.

         If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of giving of the notice.

         An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving the notice, and shall be filed and
maintained in the minute book of the corporation.

         SECTION 6. QUORUM. The presence in person or by proxy of the holders of
a majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.

         SECTION 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual
or special, whether or not a quorum is present, may be adjourned from time to
time by the vote of the majority of the shares represented at that meeting,
either in person or by proxy, but in the absence of a quorum, no other business
may be transacted at that meeting, except as provided in Section 6 of this
Article II.

         When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from the
date set for the original meeting, in which case the board of directors shall
set a new record date. Notice of any such adjourned meeting shall be given to
each shareholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of sections 4 and 5 of this Article II. At any
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.

                                       4


<PAGE>

         SECTION 8. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 11
of this Article II, subject to the provisions of Sections 702 to 704, inclusive,
of the Corporations Code of California (relating to voting shares held by a
fiduciary, in the name of a corporation or in joint ownership). The
shareholders' vote may be by voice vote or by ballot; provided, however, that
any election for directors must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of directors,
any shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but, if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares that the shareholder is entitled to
vote. If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on any matter (other than the
election of directors) shall be the act of the shareholders, unless the vote of
a greater number or voting by classes is required by the Corporations Code of
California or by the articles of incorporation.

         At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or more
candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates' names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which that shareholder's shares are entitled, or distribute the
shareholder's votes on the same principle among any or all of the candidates, as
the shareholder thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected.

         So long as the corporation has equity securities qualified for trading
on the Nasdaq National Market: (A) cumulative voting shall no longer be
available to the shareholders, (B) the immediately preceding paragraph shall no
longer be applicable, (C) the third sentence of the first paragraph of this
Section 8 shall read, "Any shareholder may vote part of the shares in favor of
the proposal and refrain from voting the remaining shares or vote them against
the proposal, but, if the shareholder fails to specify the number of shares
which the shareholder is voting affirmatively, it will be conclusively presumed
that the shareholder's approving vote is with respect to all shares that the
shareholder is entitled to vote", and (D) the parenthetical reference in the
first paragraph of this Section 8, "(other than the election of directors),"
shall no longer be applicable.

         SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions at any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice, a consent to holding of the meeting or an approval of the
minutes. The waiver of notice or consent need not specify either the business to
be transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 4 of this Article II,
the waiver of notice or consent shall state the general nature of the proposal.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.

                                       5


<PAGE>

         Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.

         SECTION 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. No
action shall be taken by the shareholders of the corporation, except at an
annual or special meeting of the shareholders called in accordance with these
bylaws.

             (a) RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of or to vote at
any meeting, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days before the
date of any such meeting, and in this event only shareholders of record on the
date so fixed are entitled to notice or to vote, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Corporations Code of
California. If the board of directors does not so fix a record date, the record
date for determining shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the business day next
preceding the day an which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.

         SECTION 11. PROXIES. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the corporation stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of
Sections 705(e) and 705(f) of the Corporations Code of California.

                                       6


<PAGE>

         SECTION 12. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the board of directors may appoint any persons other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the chairman of the meeting may, and upon
the request of any shareholder or a shareholder's proxy shall, appoint a person
to fill that vacancy.

         These inspectors shall:

             (a) Determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum and
the authenticity, validity and effect of proxies;

             (b) Receive votes, ballots or consents;

             (c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;

             (d) Count and tabulate all votes or consents;

             (e) Determine when the polls shall close;

             (f) Determine the result; and

             (g) Do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.

                                  ARTICLE III

                                    DIRECTORS

         SECTION 1. POWERS. Subject to the provisions of the Corporations Code
of California and any limitations in the articles of incorporation and these
bylaws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.

         SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The number of
directors of the corporation shall be not less than six (6) nor more than eleven
(11) and the exact number of directors shall be fixed within these limits from
time to time by approval of the board of directors. The indefinite number of
directors may be changed, or a definite number fixed without provision for an
indefinite number, by a duly adopted amendment to the articles of incorporation
or by an amendment to this bylaw duly adopted by the vote of holders of
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares entitled to
vote. No amendment may change the stated maximum number of authorized directors
to a number greater than two (2) times the stated minimum number of directors
minus one (1).

                                       7


<PAGE>

         SECTION 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting by the shareholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.

         SECTION 4. VACANCIES. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director. Each director so elected shall hold office until the
next annual meeting of the shareholders and until a successor has been elected
and qualified.

         A vacancy or vacancies in the board of directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be voted for at that
meeting.

         The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.

         Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.

         No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.

         SECTION 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the board of directors may be held at any place within or outside
the State of California that has been designated from time to time by resolution
of the board. In the absence of such a designation, regular meetings shall be
held at the principal executive office of the corporation. Special meetings of
the board shall be held at any place within or outside the State of California
that has been designated in the notice of the meeting or, if not stated in the
notice or there is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another, and all such directors shall
be deemed to be present in person at the meeting.

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<PAGE>

         SECTION 6. ANNUAL MEETING. Immediately following each annual meeting of
shareholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired election of officers and the transaction of
other business. Notice of this meeting shall not be required.

         SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the board
of directors shall be held without call at such time as shall from time to time
be fixed by the board of directors. Such regular meetings may be held without
notice.

         SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board, the president, any vice president, the secretary or any two directors.

         Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In the event that the notice
is mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In the event that the notice
is delivered personally or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight (48)
hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose of the meeting, or the place of the meeting if the meeting
is to be held at the principal executive office of the corporation.

         SECTION 9. QUORUM. A majority of the authorized number of directors
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 11 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors, subject to
the provisions of Section 310 of the Corporations Code of California (as to
approval of contracts or transactions in which a director has a direct or
indirect material financial interest), Section 311 of that Code (as to
appointment of committees) and Section 317(e) of that Code (as to
indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.

         SECTION 10. WAIVER OF NOTICE. The transaction of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any director who
attends the meeting without protesting, before or at its commencement, the lack
of notice to that director.

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<PAGE>

         SECTION 11. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and place.

         SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting, in the manner specified
in Section 8 of this Article III, to the directors who were not present at the
time of the adjournment.

         SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
that action. Such action by written consent shall have the same force and effect
as a unanimous vote of the board of directors. Such written consent or consents
shall be filed with the minutes of the proceedings of the board.

         SECTION 14. FEES AND COMPENSATION OF DIRECTOR. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. This Section 14 shall not be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise, and receiving compensation for those services.

         SECTION 15. REMOVAL WITHOUT CAUSE. Any or all of the directors may be
removed without cause if the removal is approved by the outstanding shares
entitled to vote.

                                   ARTICLE IV

                                   COMMITTEES

         SECTION 1. COMMITTEES OF DIRECTORS. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two (2) or more directors,
to serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any committee, to the extent provided in
the resolution of the board, shall have all the authority of the board, except
with respect to:

             (a) the approval of any action which, under the Corporations Code
of California, also requires shareholders' approval or approval of the
outstanding shares;

             (b) the filling of vacancies on the board of directors or any
committee;

             (c) the fixing of compensation of the directors for serving on the
board or any committee;

             (d) the amendment or repeal of bylaws or the adoption of new
bylaws;

             (e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;


                                       10


<PAGE>

             (f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors;

             (g) the appointment of any other committees of the board of
directors or the members of these committees.

         SECTION 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Section 5 (place of meetings),
Section 7 (regular meetings), Section 8 (special meetings and notice), Section 9
(quorum), Section 10 (waiver of notice), Section 11 (adjournment), Section 12
(notice of adjournment) and Section 13 (action without meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members, except
that the time of regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the committee; special
meetings of committees may also be called by resolution of the board of
directors; and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.

                                   ARTICLE V

                                    OFFICERS

         SECTION 1. OFFICERS. The officers of the corporation shall be a
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article V. Any number of offices may be
held by the same person.

         SECTION 2. ELECTION OF OFFICERS. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the board of
directors, and each shall serve at the pleasure of the board, subject to the
rights, if any, of an officer under any contract of employment.

         SECTION 3. SUBORDINATE OFFICERS. The board of directors may appoint,
and may empower the president to appoint, such other officers as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the bylaws or as
the board of directors may from time to time determine.

         SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the board of directors, at any regular
or special meeting of the board, or, except in case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.


                                       11


<PAGE>

         Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

         SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these bylaws for regular appointments to that
office.

         SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer be elected, shall, if present, preside at meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the board of directors or prescribed by the
bylaws. If there is no president, the chairman of the board shall in addition be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article V.

         SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the board of directors. He shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or these bylaws.

         SECTION 8. VICE PRESIDENT. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
board of directors or, if not ranked, a vice president designated by the board
of directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for each of them,
respectively, by the board of directors or the bylaws, and the president or the
chairman of the board.

         SECTION 9. SECRETARY. The secretary shall keep or cause to be kept, at
the principal executive office or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice given, the names
of those present at directors' meetings or committee meetings, the number of
shares present or represented at shareholders' meetings, and the proceedings.

         The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.


                                       12


<PAGE>

         The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required by these bylaws or by
law to be given, and shall keep the seal of the corporation, if one be adopted,
in safe custody, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.

         SECTION 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by any directors.

         The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have the powers and perform such other
duties as may be prescribed by the board of directors or these bylaws.

         SECTION 11. EXCESSIVE COMPENSATION. If the Internal Revenue Service
disallows as a business deduction to the corporation any part of the salary or
other compensation paid by it to any officer, director or employee as being
excessive compensation, that part disallowed shall be repaid to the corporation
by the officer, director or employee, unless the board of directors declares
otherwise.

                                   ARTICLE VI

                               RECORDS AND REPORTS

         SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The
corporation shall keep at its principal executive office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number and classes of shares
held by each shareholder.

         A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five (5) days' prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand and on the tender of such shareholders' names
and addresses, a list of who are entitled to vote for the election of directors,
and their shareholdings, as of the most recent record date for which that list
has been compiled or as of a date specified by the shareholder after the date of
demand. This list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or the date specified in the demand as the date as of which the list is
to be compiled. The record of shareholders shall also be open to inspection on
the written demand of any shareholder or holder of a voting trust certificate,
at any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. Any inspection and copying under this Section 1 may be made in
person or by an agent or attorney for the shareholder or holder of a voting
trust certificate making the demand.

                                       13


<PAGE>

         SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall
keep at its principal executive office, or if its principal executive office is
not in the State of California, at its principal business office in this state,
the original or a copy of the bylaws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
California and the corporation has no principal business office in this state,
the Secretary shall, upon the written request of any shareholder, furnish to
that shareholder a copy of the bylaws as amended to date.

         SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The
accounting books and records and minutes of proceedings of the shareholders and
the board of directors and any committee or committees of the board of directors
shall be kept at such place or places designated by the board of directors or,
in the absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form in any other form capable of
being converted into written form. The minutes and accounting books and records
shall be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate, at any reasonable time during usual business
hours, for a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. The inspection may
be made in person or by an agent or attorney, and shall include he right to copy
and make extracts. These rights of inspection shall extend to the records of
each subsidiary corporation of the corporation.

         SECTION 4. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. This inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the right
to copy and make extracts of documents.

         SECTION 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the Corporations Code of California
is expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the board of directors from issuing annual or other periodic reports
to the shareholders of the corporation as they consider appropriate.

         SECTION 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as of
the end of each such period, that has been prepared by the corporation shall be
kept on file in the principal executive office of the corporation for twelve
(12) months and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.

                                       14


<PAGE>

         If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and a balance
sheet of the corporation as of the end of that period, the chief financial
officer shall cause that statement to be prepared, if not already prepared, and
shall deliver personally or mail that statement or statements to the person
making the request within thirty (30) days after the receipt of the request. If
the corporation has not sent to the shareholder an annual report which is
available for the last fiscal year, this report shall likewise be delivered or
mailed to the shareholder within thirty (30) days after the request.

         The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.

         The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.

         SECTION 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation
shall, by the end of the calendar month of the anniversary date of its
incorporation each year, file with the Secretary of State of the State of
California, on the prescribed form, a statement setting forth the authorized
number of directors, the number of any vacancies on the board, the names and
complete business or residence addresses of all incumbent directors, the names
and complete business or residence addresses of the chief executive officer,
secretary and chief financial officer, the street address of its principal
executive office, if the principal executive office is not in this state, the
principal business office in this state, and the general type of business
constituting the principal business activity of the corporation, together with a
designation of the agent of the corporation for the purpose of service of
process, all in compliance with Section 1502 of the Corporations Code of
California.

                                  ARTICLE VII

                            GENERAL CORPORATE MATTERS

         SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days before any such action, and in that case only shareholders of record
on the date so fixed are entitled to receive the dividend, distribution,
allotment, rights or to exercise the rights, as the case may be, notwithstanding
any transfer of any shares on the books of the corporation after the record date
so fixed, except as otherwise provided in the Corporations Code of California.

                                       15


<PAGE>

         If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.

         SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks,
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as from time to
time determined by resolution of the board of directors.

         SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board
of directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and this authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.

         SECTION 4. CERTIFICATE FOR SHARES. A certificate or certificates for
shares of the capital stock of the corporation may be issued to each shareholder
when any of these shares are fully paid, and the board of directors may
authorize the issuance of certificates or shares as partly paid provided that
these certificates shall state the amount of consideration to be paid for them
and the amount paid. All certificates shall be signed in the name of the
corporation by the chairman of the board or vice chairman of the board or the
president or vice president and by the chief financial officer or an assistant
treasurer or the secretary or any assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all of
the signatures on the certificate may be facsimile. In the event that any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed on a certificate shall have ceased to be that officer, transfer
agent or registrar before that certificate is issued, it may be issued by the
corporation with the same effect as if that person were an officer, transfer
agent or registrar at the date of issue.

         Notwithstanding any provision in these bylaws to the contrary, the
board of directors of the corporation may issue, record and transfer its shares
of capital stock by electronic or other means not involving any issuance of
certificates, including provisions for notice to purchasers in substitution for
the required statements on certificates required by the Corporations Code of
California, and as may be required by the California Commissioner of Corporation
in administering the California Corporate Securities Law of 1968, which has been
(1) approved by the United States Securities and Exchange Commission, (2) is
authorized in any statute of the United States or (3) is in accordance with
Division 8 (commencing with Section 801) of the California Commercial Code. If
the board of directors implements the provisions of this paragraph, the
provisions shall not become effective as to previously issued and outstanding
certificated shares until the certificates therefor have been surrendered to the
corporation.

                                       16


<PAGE>

         SECTION 5. LOST CERTIFICATES. Except as provided in this Section 5, no
new certificate for shares shall be issued to replace an old certificate unless
the latter is surrendered to the corporation and canceled at the same time. The
board of directors may, in case any share certificate or certificate for any
other security is lost, stolen or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the board may require,
including provision for indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
that may be made against it, including any expense or liability on account of
the alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.

         SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman
of the board, the president, any vice president or any other person authorized
by resolution of the board of directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority granted to these officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.

         SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
Corporations Code of California shall govern the construction of these bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular and the term "person"
includes both a corporation and a natural person.

                                  ARTICLE VIII

                                   AMENDMENTS

         SECTION 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or
these bylaws may be amended or repealed by the vote of a majority of the
outstanding shares entitled to vote; provided, however, that (i) if the articles
of incorporation of the corporation set forth the number of authorized directors
of the corporation, the authorized number of directors may be changed only by an
amendment of the articles of incorporation, and (ii) Article II, Sections 2, 3,
8 and 10, Article III, Sections 2 and 4 and this Article VIII, Section 1 of
these bylaws may be altered, amended or repealed by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of
the outstanding shares entitled to vote.

         SECTION 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article VIII, bylaws other than a
bylaw or an amendment of a bylaw changing the authorized number of directors may
be adopted, amended or repealed by the board of directors.

                                       17


<PAGE>

                                   ARTICLE IX

                          INDEMNIFICATION OF DIRECTORS,
                         OFFICERS, EMPLOYEES AND AGENTS

         SECTION 1. DIRECTOR. The corporation shall indemnify its directors to
the fullest extent not prohibited by the Corporations Code of California;
provided, however, that the corporation may limit the extent of such
indemnification by individual contracts with its directors; and, provided,
further, that the corporation shall not be required to indemnify any director in
connection with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the corporation or its directors, officers,
employees or other agents unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the board of directors
of the corporation or (iii) such indemnification is provided by the corporation,
in its sole discretion, pursuant to the powers vested in the corporation under
the Corporations Code of California.

         SECTION 2. OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have power to indemnify its officers, employees and other agents as set forth in
the Corporations Code of California.

         SECTION 3. DETERMINATION BY THE CORPORATION. Promptly after receipt of
a request for indemnification hereunder (and in any event within 90 days
thereof), a reasonable, good faith determination as to whether indemnification
of the director is proper under the circumstances because such director has met
the applicable standard of care shall be made by:

             (a) a majority vote of a quorum consisting of directors who are not
parties to such proceeding;

             (b) if such quorum is not obtainable, by independent legal counsel
in a written opinion; or

             (c) approval or ratification by the affirmative vote of a majority
of the shares of this corporation represented and voting at a duly held meeting
at which a quorum is present (which shares voting affirmatively also constitute
at least a majority of the required quorum) where the shares owned by the person
to be indemnified shall not be considered entitled to vote thereon.

SECTION 4.        GOOD FAITH.

             (a) For purposes of any determination under this bylaw, a director
shall be deemed to have acted in good faith and in a manner he reasonably
believed to be in the best interests of the corporation and its shareholders,
and, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe that his conduct was unlawful, if his action is
based on information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or presented by:

                                       18


<PAGE>

                  (1) one or more officers or employees of the corporation whom
the director believed to be reliable and competent in the matters presented;

                  (2) counsel, independent accountants or other persons as to
matters which the director believed to be within such person's professional
competence; and

                  (3) a committee of the Board upon which such director does not
serve, as to matters within such committee's designated authority, which
committee the director believes to merit confidence; so long as, in each case,
the director acts without knowledge that would cause such reliance to be
unwarranted.

             (b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in the best interests of the
corporation and its shareholders or that he had reasonable cause to believe that
his conduct was unlawful.

             (c) The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
Corporations Code of California.

         SECTION 5. EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any director in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it shall be
determined ultimately that such person is not entitled to be indemnified under
this bylaw or otherwise.

         SECTION 6. ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors under
this bylaw shall be deemed to be contractual rights and be effective to the same
extent and as if provided for in a contract between the corporation and the
director. Any right to indemnification or advances granted by this bylaw to a
director shall be enforceable by or on behalf of the person holding such right
in the forum in which the proceeding is or was pending or, if such forum is not
available or a determination is made that such forum is not convenient, in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. The claimant in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also the
expense of prosecuting his claim. The corporation shall be entitled to raise as
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any proceeding in advance of its final
disposition when the required undertaking has been tendered to the corporation)
that the claimant has not met the standards of conduct that make it permissible
under the Corporations Code of California for the corporation to indemnify the
claimant for the amount claimed. Neither the failure of the corporation
(including its board of directors, independent legal counsel or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the
Corporations Code of California, nor an actual determination by the corporation
(including its board of directors, independent legal counsel or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.

                                       19


<PAGE>

         SECTION 7. NON-EXCLUSIVITY OF RIGHTS. To the fullest extent permitted
by the corporation's articles of incorporation and the Corporations Code of
California, the rights conferred on any person by this bylaw shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of the articles of incorporation, bylaws,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding office. The corporation is specifically authorized to enter into
individual contracts with any or all of its directors, officers, employees or
agents respecting indemnification and advances, to the fullest extent permitted
by the Corporations Code of California and the corporation's articles of
incorporation.

         SECTION 8. SURVIVAL OF RIGHTS. The rights conferred on any person by
this bylaw shall continue as to a person who has ceased to be a director and
shall inure to the benefit of the heirs, executors and administrators of such a
person.

         SECTION 9. INSURANCE. The corporation, upon approval by the board of
directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this bylaw.

         SECTION 10. AMENDMENTS. Any repeal or modification of this bylaw shall
only be prospective and shall not affect the rights under this bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.

         SECTION 11. EMPLOYEE BENEFIT PLANS. The corporation shall indemnify the
directors and officers of the corporation who serve at the request of the
corporation as trustees, investment managers or other fiduciaries of employee
benefit plans to the fullest extent permitted by the Corporations Code of
California, and any other applicable laws.

         SECTION 12. SAVING CLAUSE. If this bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director to the fullest extent
permitted by any applicable portion of this bylaw that shall not have been
invalidated, or by any other applicable law.

         SECTION 13. CERTAIN DEFINITIONS. For the purposes of this bylaw, the
following definitions shall apply:

             (a) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.


                                       20


<PAGE>

             (b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding, including expenses of
establishing a right to indemnification under this bylaw or any applicable law.

             (c) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.

             (d) References to a "director," "officer," "employee" or "agent" of
the corporation shall include, without limitation, situations where such person
is serving corporation as a director, officer, employee, trustee or agent of
another corporation, partnership, joint venture, trust or other enterprise.


                                       21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2A
<SEQUENCE>4
<FILENAME>hottopic_10kex10-2a.txt
<TEXT>
<PAGE>
EXHIBIT 10.2a


                                 HOT TOPIC, INC.

                           1996 EQUITY INCENTIVE PLAN

                           ADOPTED ON JANUARY 20, 1993
                             AMENDED ON JULY 8, 1994
                            AMENDED ON MARCH 27, 1996
                      AMENDED AND RESTATED ON JUNE 14, 1996
                          AMENDED ON FEBRUARY 18, 1998
                    APPROVED BY SHAREHOLDERS ON MAY 27, 1998
                          AMENDED ON FEBRUARY 24, 2000
                    APPROVED BY SHAREHOLDERS ON JUNE 28, 2000
                            AMENDED ON MARCH 20, 2003
                    APPROVED BY SHAREHOLDERS ON JUNE 12, 2003
     SHARES SUBJECT TO THE PLAN AUTOMATICALLY ADJUSTED ON DECEMBER 27, 1999,
           DECEMBER 27, 2000, FEBRUARY 6, 2002 AND SEPTEMBER 2, 2003.


                                  INTRODUCTION

         Originally adopted on January 20, 1993 as the "1993 Stock Option Plan
of Hot Topic, Inc.," the plan is hereby amended and restated and retitled the
"1996 Equity Incentive Plan."

1. PURPOSES.

         (a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.

         (b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

         (c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.


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2. DEFINITIONS.

         (a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

         (b) "BOARD" means the Board of Directors of the Company.

         (c) "CODE" means the Internal Revenue Code of 1986, as amended.

         (d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

         (e) "COMPANY" means Hot Topic, Inc., a California corporation.

         (f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.

         (g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.

         (h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The Chief Executive Officer of the Company may determine, in his or
her sole discretion, whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board or the Chief Executive Officer of the Company,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
their successors.

         (i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.


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         (j) "DIRECTOR" means a member of the Board.

         (k) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.

         (l) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

         (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (n) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:

                  (1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
Stock Market, the Fair Market Value of a share of common stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;

                  (2) If the common stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;

                  (3) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.

         (o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

         (p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

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         (q) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted pursuant to subsection 8(b)(3) of the Plan.

         (r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

         (s) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

         (t) "OPTION" means a stock option granted pursuant to the Plan.

         (u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

         (v) "OPTIONEE" means a person who holds an outstanding Option.

         (w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

         (x) "PLAN" means this Hot Topic, Inc. 1996 Equity Incentive Plan.

         (y) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.

         (z) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 8 of the Plan.

         (aa) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.

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         (bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

         (cc) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.

3. ADMINISTRATION.

         (a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

         (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

                  (1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each such person.

                  (2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

                  (3) To amend the Plan or a Stock Award as provided in Section
13.

                  (4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

         (c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such

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Subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, at any time the Board or the Committee may delegate to a committee of
one or more members of the Board the authority to grant Stock Awards to eligible
persons who (1) are not then subject to Section 16 of the Exchange Act and/or
(2) are either (i) not then Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting from such Stock Award,
or (ii) not persons with respect to whom the Company wishes to avoid the
application of Section 162(m) of the Code.

         (d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply if the Board or the Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.

4. SHARES SUBJECT TO THE PLAN.

         (a) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate Eighteen Million Three Hundred Thousand
(18,300,000) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan. Shares subject
to Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.

         (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

5. ELIGIBILITY.

         (a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants. Notwithstanding the foregoing, no
Stock Awards shall be granted to a Director (including a Director who is an
Employee or a Consultant) prior to August 15, 1996 (or such later date as the
amendments to Rule 16b-3 adopted by the Securities and Exchange Commission
pursuant to Release No. 34-37260 become effective as to the Company), unless
such Director is expressly declared eligible to participate in the Plan by
action of the Board or the Committee.


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         (b) No person shall be eligible for the grant of an Option or an award
to purchase restricted stock if, at the time of grant, such person owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates unless the exercise price of such Option
is at least one hundred ten percent (110%) of the Fair Market Value of such
stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant, or in the case of a
restricted stock purchase award, the purchase price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.

         (c) Subject to the provisions of Section 12 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than One Million Eight Hundred Thousand
(1,800,000) shares of the Company's common stock in any twelve (12) month
period. This subsection 5(c) shall not apply prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act and, following such registration, shall not apply until (i) the
earliest of: (A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of common
stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of shareholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.

6. OPTION PROVISIONS.

         Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

         (a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

         (b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option granted on or after March 20, 2003 shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; and the exercise price
of each Nonstatutory Stock Option granted prior to March 20, 2003 shall be not
less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.


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         (c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.

         In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.

         (d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option may be
transferred by the Optionee upon such terms and conditions as are set forth in
the Option Agreement for such Nonstatutory Option, as the Board or the Committee
shall determine in its discretion, including (without limitation) pursuant to a
"domestic relations order" within the meaning of such rules, regulations or
interpretations of the Securities and Exchange Commission as are applicable for
purposes of Section 16 of the Exchange Act (a "DRO"). In the event of a transfer
of a Nonstatutory Option as provided in the Option Agreement, the transferee
shall be entitled to exercise such Nonstatutory Option to the extent of his or
her interest received in such transfer, subject to the terms and conditions of
the Option Agreement. Notwithstanding the foregoing, the person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.

         (e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

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         (f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date thirty (30) days after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

         An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of thirty (30) days after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant during
which the exercise of the Option would not be in violation of such registration
requirements.

         (g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.


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         (h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

         (i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.

7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

         Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

         (a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit. Subject to the provisions
of Section 12 relating to adjustments upon changes in stock, stock awarded on or
after March 20, 2003 pursuant to restricted stock purchase agreements or stock
bonus agreements shall not exceed in the aggregate Ninety Three Thousand
(93,000) shares of the Company's common stock.

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         (b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the agreement so provides, pursuant to a DRO (as defined
in subsection 6(d) hereof), so long as stock awarded under such agreement
remains subject to the terms of the agreement.

         (c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.

         (d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.

         (e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.

8. STOCK APPRECIATION RIGHTS.

         (a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. If a Stock
Appreciation Right is granted to an individual who is at the time subject to
Section 16(b) of the Exchange Act (a "Section 16(b) Insider"), the Stock Award
Agreement of grant shall incorporate all the terms and conditions at the time
necessary to assure that the subsequent exercise of such right shall qualify for
the safe-harbor exemption from short-swing profit liability provided by Rule
16b-3 promulgated under the Exchange Act (or any successor rule or regulation).
Except as provided in subsection 5(d), no limitation shall exist on the
aggregate amount of cash payments the Company may make under the Plan in
connection with the exercise of a Stock Appreciation Rights.


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         (b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:

                  (1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.

                  (2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.

                  (3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
will be granted independently of any Option and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They shall
be denominated in share equivalents. The appreciation distribution payable on
the exercised Independent Right shall be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent Right
on such date, over (B) the aggregate Fair Market Value (on the date of the grant
of the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.


                                       12


<PAGE>

9. COVENANTS OF THE COMPANY.

         (a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.

         (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock under such Stock
Awards unless and until such authority is obtained.

10. USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.

11. MISCELLANEOUS.

         (a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.

         (b) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

                                       13


<PAGE>

         (c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause the right of the Company's Board of Directors
and/or the Company's shareholders to remove any Director pursuant to the terms
of the Company's Bylaws and the provisions of the California Corporations Code
(or the applicable laws of the Company's state of incorporation if the Company's
state of incorporation should change in the future), or the right to terminate
the relationship of any Consultant pursuant to the terms of such Consultant's
agreement with the Company or Affiliate.

         (d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

         (e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d), 7(b) or 8(b), as a condition of exercising or acquiring stock
under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.

                                       14


<PAGE>

         (f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.

12. ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a), the maximum
number of shares subject to award to any person during any twelve (12) month
period pursuant to subsection 5(c), the maximum number of shares subject to
award pursuant to restricted stock purchase agreements or stock bonus agreements
under subsection 7(a) and the outstanding Stock Awards will be appropriately
adjusted in the class(es) and number of shares and price per share of stock
subject to such outstanding Stock Awards. Such adjustments shall be made by the
Board or the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company".)

         (b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group (within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then: (i) any surviving or acquiring corporation shall assume any
Stock Awards outstanding under the Plan or shall substitute similar Stock Awards
(including an award to acquire the same consideration paid to the shareholders
in the transaction described in this subsection 12(b)) for those outstanding
under the Plan; or (ii) in the event any surviving or acquiring corporation
refuses to assume such Stock Awards or to substitute similar awards for those
outstanding under the Plan, then, (A) with respect to Stock Awards held by
persons then performing services as Employees, Directors or Consultants, the
vesting of such Stock Awards and, if applicable, exercisability of such Stock
Awards shall be accelerated prior to such event and the Stock Awards terminated
if not exercised after such acceleration and at or prior to such event, and (B)
with respect to any other Stock Awards outstanding under the Plan, such Stock
Awards shall be terminated if not exercised prior to such event.


                                       15


<PAGE>

13. AMENDMENT OF THE PLAN AND STOCK AWARDS.

         (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

                  (i) Increase the number of shares reserved for Stock Awards
under the Plan;

                  (ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires shareholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code);

                  (iii) Materially increase the benefits accruing to
participants under the Plan; or

                  (iv) Modify the Plan in any other way if such modification
requires shareholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b-3.

         (b) The Board may in its sole discretion submit any other amendment to
the Plan for shareholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

         (c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

                                       16


<PAGE>

         (d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.

         (e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.

14. TERMINATION OR SUSPENSION OF THE PLAN.

         (a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the date that is
ten (10) years following the earlier of (i) the date of the amendment and
restatement of the Plan as determined by the Board, or (ii) the date such
amendment and restatement is approved by the shareholders of the Company. No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.

         (b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.

15. EFFECTIVE DATE OF PLAN.

         The Plan, as amended by the Board on June 14, 1996, shall become
effective on the same day that the Company's initial public offering of shares
of common stock becomes effective. Prior to the effectiveness of such initial
public offering, the terms and conditions of the Plan as in effect prior to its
amendment by the Board on June 14, 1996 shall continue to apply. No Stock Awards
granted under the Plan shall be exercised unless and until the Plan has been
approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.




                                       17
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5A
<SEQUENCE>5
<FILENAME>hottopic_10kex10-5a.txt
<TEXT>
<PAGE>
EXHIBIT 10.5a

                                 HOT TOPIC, INC.

                 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

                            ADOPTED ON JUNE 14, 1996
                    APPROVED BY SHAREHOLDERS ON JULY 9, 1996
                          AMENDED ON FEBRUARY 18, 1998
                    APPROVED BY SHAREHOLDERS ON MAY 27, 1998
                          AMENDED ON FEBRUARY 24, 2000
                    APPROVED BY SHAREHOLDERS ON JUNE 28, 2000

     SHARES SUBJECT TO THE PLAN AUTOMATICALLY ADJUSTED ON DECEMBER 27, 1999,
           DECEMBER 27, 2000, FEBRUARY 6, 2002 AND SEPTEMBER 2, 2003.

1. PURPOSE.

         (a) The purpose of the 1996 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of Hot Topic, Inc.
(the "Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.

         (b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").

         (c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

2. ADMINISTRATION.

         (a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"), unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).

         (b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

                                       1


<PAGE>

3. SHARES SUBJECT TO THE PLAN.

         (a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate seven hundred twenty thousand
(720,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.

         (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4. ELIGIBILITY.

         Options shall be granted only to Non-Employee Directors of the Company.

5. GRANTS.

         (a) Each person who is elected or appointed for the first time to be a
Non-Employee Director shall automatically be granted, upon the date of his or
her initial election or appointment, an option to purchase ten thousand (10,000)
shares of common stock (an "Initial Grant"), PROVIDED HOWEVER that in the case
of a new Non-Employee Chairman of the Board, such person shall automatically be
granted, upon the date of his or her initial election or appointment, an option
to purchase fifteen thousand (15,000) shares of common stock.

         (b) On the date of each annual meeting of shareholders, commencing with
the 2000 annual meeting, each person who is then a Non-Employee Director shall
automatically be granted an option to purchase two thousand five hundred (2,500)
shares of common stock (an "Annual Grant"), PROVIDED HOWEVER that in the case of
a Non-Employee Chairman of the Board, such person shall automatically be
granted, on each such annual meeting date, an option to purchase three thousand
seven hundred fifty (3,750) shares. Notwithstanding the foregoing, a
Non-Employee Director shall not be entitled to an Annual Grant if (i) such
Non-Employee Director has served as a Non-Employee Director for less than three
(3) months, or (ii) such Non-Employee failed to attend at least seventy five
percent (75%) of the meetings (A) of the Board which occurred while the
Non-Employee Director was a member of the Board and (B) of each committee of
which such Non-Employee Director was a member.

                                       2


<PAGE>

         (c) Non-Employee Directors may also be granted options to purchase
shares in amounts deemed appropriate by the Board of Directors.

6. OPTION PROVISIONS.

         Each option shall be subject to the following terms and conditions:

         (a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date three (3) months following the
date of termination of such service; PROVIDED HOWEVER that if such termination
of service is due to the optionee's death, the option shall terminate on the
earlier of the Expiration Date or twelve (12) months following the date of the
optionee's death. In any and all circumstances, an option may be exercised
following termination of the optionee's service as a Non-Employee Director or
employee of or consultant to the Company or any Affiliate only as to that number
of shares as to which it was exercisable as of the date of termination of all
such service under the provisions of subparagraph 6(e).

         (b) The exercise price of each option shall be one hundred percent
(100%) of the fair market value of the stock subject to such option on the date
such option is granted.

         (c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than 100 shares; but when the number of shares being purchased upon an
exercise is 100 or more shares, the optionee may elect to make payment of the
exercise price under one of the following alternatives:

                  (i) Payment of the exercise price per share in cash at the
time of exercise;

                  (ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in THE WALL STREET JOURNAL,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair market
value on the date preceding the date of exercise; or

                                       3


<PAGE>

                  (iii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in THE WALL STREET JOURNAL,
payment pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board which results in the receipt of cash (or check) by the
Company either prior to the issuance of shares of the Company's common stock or
pursuant to the terms of irrevocable instructions issued by the optionee prior
to the issuance of shares of the Company's common stock.

                  (iv) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(iii) above.

         (d) An option shall not be transferable except by will or by the laws
of descent and distribution, or pursuant to a domestic relations order, and
shall be exercisable during the lifetime of the person to whom the option is
granted only by such person (or by his guardian or legal representative) or
transferee pursuant to such an order. Notwithstanding the foregoing, the
optionee may, by delivering written notice to the Company in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
optionee, shall thereafter be entitled to exercise the option.

         (e) The option shall become exercisable in installments over a period
of four (4) years from the date of grant as follows: twenty-five percent (25%)
shall be exercisable commencing on the date one year after the date of grant of
the option and six and one-quarter percent (6.25%) shall be exercisable at the
end of each calendar quarter thereafter, provided that the optionee has, during
the entire period prior to such vesting date, continuously served as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate of the Company, whereupon such option shall become fully exercisable
in accordance with its terms with respect to that portion of the shares
represented by that installment.

         (f) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(d), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionee or permitting the optionee to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

                                       4


<PAGE>

         (g) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.

7. COVENANTS OF THE COMPANY.

         (a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.

         (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; PROVIDED HOWEVER that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.

8. USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.

9. MISCELLANEOUS.

         (a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.

         (b) Nothing in the Plan, or in any instrument executed pursuant
thereto, shall confer upon any Non-Employee Director any right to continue in
the service of the Company or any Affiliate in any capacity or shall affect any
right of the Company, its Board or shareholders or any Affiliate to remove any
Non-Employee Director pursuant to the Company's Bylaws and the provisions of the
laws of the Company's state of incorporation.

                                       5


<PAGE>

         (c) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.

         (d) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.

         (e) As used in this Plan, "fair market value" means, as of any date,
the value of the common stock of the Company determined as follows:

                  (i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation The Nasdaq
Stock Market, the fair market value of a share of common stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable.

                  (ii) If the common stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable.

                  (iii) In the absence of an established market for the common
stock, the fair market value shall be determined in good faith by the Board.

10. ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will

                                       6


<PAGE>

be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")

         (b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then the time during which options outstanding under the Plan may be
exercised shall be accelerated prior to such event and the options terminated if
not exercised after such acceleration and at or prior to such event.

11. AMENDMENT OF THE PLAN.

         (a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. Except as
provided in paragraph 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company
within twelve (12) months before or after the adoption of the amendment if such
amendment requires shareholder approval in order for the Plan to comply with the
requirements of Rule 16b-3 promulgated under the Exchange Act, Section 162(m) of
the Internal Revenue Code or any Nasdaq or securities exchange requirements.

         (b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.

                                       7


<PAGE>

12. TERMINATION OR SUSPENSION OF THE PLAN.

         (a) The Board may suspend or terminate the Plan at any time. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.

         (b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.

         (c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.

13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.

         (a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
shareholders of the Company.

         (b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.


                                       8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6A
<SEQUENCE>6
<FILENAME>hottopic_10kex10-6a.txt
<TEXT>
<PAGE>
EXHIBIT 10.6a

                                 HOT TOPIC, INC.
                          EMPLOYEE STOCK PURCHASE PLAN
                              ADOPTED JUNE 14, 1996
                  APPROVED BY THE STOCKHOLDERS ON JULY 9, 1996
     SHARES SUBJECT TO THE PLAN AUTOMATICALLY ADJUSTED ON DECEMBER 27, 1999,
            DECEMBER 27, 2000, FEBRUARY 6, 2002 AND SEPTEMBER 2, 2003

1. PURPOSE.

         (a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Hot Topic, Inc., a California corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.

         (b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").

         (c) The Company, by means of the Plan, seeks to retain the services of
its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

         (d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.

2. ADMINISTRATION.

         (a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.

         (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

                  (i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).

                  (ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

                  (iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.


                                       1


<PAGE>

                  (iv) To amend the Plan as provided in paragraph 13.

                  (v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company and its Affiliates and to carry out the intent that the Plan be
treated as an "employee stock purchase plan" within the meaning of Section 423
of the Code.

         (c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

3. SHARES SUBJECT TO THE PLAN.

         (a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate one million three hundred fifty
thousand (1,350,000) shares of the Company's common stock (the "Common Stock").
If any right granted under the Plan shall for any reason terminate without
having been exercised, the Common Stock not purchased under such right shall
again become available for the Plan.

         (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4. GRANT OF RIGHTS; OFFERING.

         (a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 5 through 8, inclusive.

         (b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.

                                       2


<PAGE>

5. ELIGIBILITY.

         (a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.

         (b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:

                  (i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;

                  (ii) the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and

                  (iii) the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.

         (c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.


                                       3


<PAGE>

         (d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.

         (e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

6. RIGHTS; PURCHASE PRICE.

         (a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding ten percent (10%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.

         (b) In connection with each Offering made under the Plan, the Board or
the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a maximum aggregate number of shares which
may be purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.

         (c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:

                  (i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or

                  (ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.

                                       4


<PAGE>

7. PARTICIPATION; WITHDRAWAL; TERMINATION.

         (a) An eligible employee may become a participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company
intended to comply with Section 401(k), Section 402(e)(3), Section 125, Section
402(h), or Section 403(b) of the Code, and also including any deferrals under a
non-qualified deferred compensation plan or arrangement established by the
Company), which shall include or exclude (as provided for each Offering) the
following items of compensation: bonuses, commissions, overtime pay, incentive
pay, profit sharing, other remuneration paid directly to the employee, the cost
of employee benefits paid for by the Company or an Affiliate, education or
tuition reimbursements, imputed income arising under any group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company or an Affiliate under any employee benefit plan, and similar items of
compensation, as determined by the Board or Committee. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.

         (b) At any time during an Offering, a participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.

         (c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee) under the Offering, without
interest.

                                       5


<PAGE>

         (d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.

8. EXERCISE.

         (a) On each Purchase Date specified therefor in the relevant Offering,
each participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.

         (b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.

9. COVENANTS OF THE COMPANY.

         (a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.

                                       6


<PAGE>

         (b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.

10. USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.

11.      RIGHTS AS A SHAREHOLDER.

         A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.

12.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")

         (b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) the acquisition by
any person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act" or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.

                                       7


<PAGE>

13.      AMENDMENT OF THE PLAN.

         (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

                  (i) Increase the number of shares reserved for rights under
         the Plan;

                  (ii) Modify the provisions as to eligibility for participation
         in the Plan (to the extent such modification requires shareholder
         approval in order for the Plan to obtain employee stock purchase plan
         treatment under Section 423 of the Code or to comply with the
         requirements of Rule 16b-3 promulgated under the Securities Exchange
         Act of 1934, as amended ("Rule 16b-3")); or

                  (iii) Modify the Plan in any other way if such modification
         requires shareholder approval in order for the Plan to obtain employee
         stock purchase plan treatment under Section 423 of the Code or to
         comply with the requirements of Rule 16b-3.

         It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under it into
compliance therewith.

         (b) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.

14. DESIGNATION OF BENEFICIARY.

         (a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.


                                       8


<PAGE>

         (b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

15. TERMINATION OR SUSPENSION OF THE PLAN.

         (a) The Board in its discretion, may suspend or terminate the Plan at
any time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.

         (b) Rights and obligations under any rights granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.

16. EFFECTIVE DATE OF PLAN.

         The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the shareholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.


                                       9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7A
<SEQUENCE>7
<FILENAME>hottopic_10kex10-7a.txt
<TEXT>
<PAGE>
EXHIBIT 10.7a




                                 HOT TOPIC, INC.

                           401(k) PROFIT SHARING PLAN




<PAGE>

                                TABLE OF CONTENTS

ARTICLE 1..................................................................- 2 -
DEFINITIONS................................................................- 2 -
     1.1   ACP or ACP TEST.................................................- 2 -
     1.2   ACTUAL DEFERRAL PERCENTAGE TEST.................................- 2 -
     1.3   ADP or ADP TEST.................................................- 4 -
     1.4   ADMINISTRATOR...................................................- 4 -
     1.5   ADOPTING EMPLOYER...............................................- 4 -
     1.6   AFFILIATED EMPLOYER.............................................- 5 -
     1.7   AGE.............................................................- 5 -
     1.8   ANNIVERSARY DATE................................................- 5 -
     1.9   ANNUITY STARTING DATE...........................................- 5 -
     1.10  AVERAGE CONTRIBUTION PERCENTAGE TEST............................- 5 -
     1.11  BENEFICIARY.....................................................- 8 -
     1.12  BREAK IN SERVICE................................................- 8 -
     1.13  CODE............................................................- 8 -
     1.14  CODE ss.3401 COMPENSATION.......................................- 9 -
     1.15  CODE ss.415 COMPENSATION........................................- 9 -
     1.16  COMPENSATION....................................................- 9 -
     1.17  DISABILITY.....................................................- 11 -
     1.18  EARLY RETIREMENT AGE...........................................- 11 -
     1.19  EARNED INCOME..................................................- 11 -
     1.20  ELECTIVE DEFERRAL..............................................- 11 -
     1.21  ELECTIVE DEFERRAL ACCOUNT......................................- 12 -
     1.22  ELIGIBLE PARTICIPANT...........................................- 12 -
     1.23  EMPLOYEE.......................................................- 12 -
     1.24  EMPLOYER.......................................................- 13 -
     1.25  ERISA..........................................................- 13 -
     1.26  EXCESS AGGREGATE CONTRIBUTIONS.................................- 13 -
     1.27  EXCESS CONTRIBUTIONS...........................................- 13 -
     1.28  EXCESS ELECTIVE DEFERRALS......................................- 13 -
     1.29  FIDUCIARY......................................................- 13 -
     1.30  FISCAL YEAR....................................................- 13 -
     1.31  FORFEITURE.....................................................- 13 -
     1.32  FORM W-2 COMPENSATION..........................................- 14 -
     1.33  HCE............................................................- 14 -
     1.34  HIGHLY COMPENSATED EMPLOYEE....................................- 14 -
     1.35  HOUR OF SERVICE................................................- 14 -
     1.36  KEY EMPLOYEE...................................................- 15 -
     1.37  LEASED EMPLOYEE................................................- 16 -
     1.38  LIMITATION YEAR................................................- 16 -




<PAGE>

     1.39  MATCHING CONTRIBUTION..........................................- 16 -
     1.40  MATCHING CONTRIBUTION ACCOUNT..................................- 16 -
     1.41  MATERNITY OR PATERNITY LEAVE...................................- 16 -
     1.42  NHCE...........................................................- 16 -
     1.43  NON-ELECTIVE CONTRIBUTIONS.....................................- 16 -
     1.44  NON-ELECTIVE CONTRIBUTION ACCOUNT..............................- 17 -
     1.45  NON-HIGHLY COMPENSATED EMPLOYEE................................- 17 -
     1.46  NON-KEY EMPLOYEE...............................................- 17 -
     1.47  NORMAL RETIREMENT AGE..........................................- 17 -
     1.48  NORMAL RETIREMENT DATE.........................................- 17 -
     1.49  OWNER-EMPLOYEE.................................................- 17 -
     1.50  PARTICIPANT....................................................- 17 -
     1.51  PARTICIPANT'S ACCOUNT..........................................- 17 -
     1.52  PERIOD OF SERVICE..............................................- 17 -
     1.53  PERIOD OF SEVERANCE............................................- 20 -
     1.54  PERMISSIVE AGGREGATION GROUP...................................- 20 -
     1.55  PLAN...........................................................- 20 -
     1.56  PLAN YEAR......................................................- 20 -
     1.57  POLICY.........................................................- 20 -
     1.58  QMAC...........................................................- 20 -
     1.59  QNEC...........................................................- 20 -
     1.60  QUALIFIED JOINT AND SURVIVOR ANNUITY...........................- 20 -
     1.61  QUALIFIED MATCHING CONTRIBUTION................................- 20 -
     1.62  QUALIFIED NON-ELECTIVE CONTRIBUTION............................- 21 -
     1.63  QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.......................- 21 -
     1.64  REQUIRED AGGREGATION GROUP.....................................- 21 -
     1.65  REQUIRED BEGINNING DATE........................................- 21 -
     1.66  ROLLOVER ACCOUNT...............................................- 22 -
     1.67  ROLLOVER CONTRIBUTION..........................................- 22 -
     1.68  SAFE HARBOR CONTRIBUTION ACCOUNT...............................- 22 -
     1.69  SELF-EMPLOYED INDIVIDUAL.......................................- 22 -
     1.70  SHAREHOLDER-EMPLOYEE...........................................- 22 -
     1.71  SPONSOR........................................................- 23 -
     1.72  SPOUSE.........................................................- 23 -
     1.73  TERMINATION OF EMPLOYMENT......................................- 23 -
     1.74  TERMINATED PARTICIPANT.........................................- 23 -
     1.75  TOP HEAVY......................................................- 23 -
     1.76  TOP HEAVY MINIMUM ALLOCATION...................................- 23 -
     1.77  TOP HEAVY RATIO................................................- 23 -
     1.78  TRUSTEE........................................................- 24 -
     1.79  TRUST FUND.....................................................- 24 -
     1.80  VALUATION DATE.................................................- 24 -
     1.81  VESTED AGGREGATE ACCOUNT.......................................- 25 -



<PAGE>

     1.82  VESTED, VESTED INTEREST or VESTING.............................- 25 -
     1.83  VOLUNTARY EMPLOYEE CONTRIBUTION................................- 25 -
     1.84  VOLUNTARY EMPLOYEE CONTRIBUTION ACCOUNT........................- 25 -

ARTICLE 2.................................................................- 26 -
PLAN PARTICIPATION........................................................- 26 -
     2.1   ELIGIBILITY REQUIREMENTS.......................................- 26 -
     2.2   ENTRY DATE.....................................................- 27 -
     2.3   WAIVER OF PARTICIPATION........................................- 27 -
     2.4   PARTICIPATION UPON REEMPLOYMENT................................- 27 -
     2.5   EXCLUSION OF ELIGIBLE EMPLOYEE.................................- 27 -
     2.6   INCLUSION OF INELIGIBLE EMPLOYEE...............................- 27 -

ARTICLE 3.................................................................- 28 -
CONTRIBUTIONS AND ALLOCATIONS.............................................- 28 -
     3.1   EMPLOYER CONTRIBUTIONS.........................................- 28 -
     3.2   ALLOCATION OF EMPLOYER CONTRIBUTIONS...........................- 30 -
     3.3   ALLOCATION OF EARNINGS AND LOSSES..............................- 34 -
     3.4   ALLOCATION OF FORFEITURES......................................- 34 -
     3.5   TOP HEAVY MINIMUM ALLOCATION...................................- 35 -
     3.6   SAFE HARBOR CONTRIBUTIONS......................................- 36 -
     3.7   ROLLOVER CONTRIBUTIONS.........................................- 39 -
     3.8   VOLUNTARY EMPLOYEE CONTRIBUTIONS...............................- 41 -

ARTICLE 4.................................................................- 42 -
PLAN BENEFITS.............................................................- 42 -
     4.1   BENEFIT UPON NORMAL RETIREMENT.................................- 42 -
     4.2   BENEFIT UPON LATE RETIREMENT...................................- 42 -
     4.3   BENEFIT UPON DEATH.............................................- 42 -
     4.4   BENEFIT UPON DISABILITY........................................- 42 -
     4.5   BENEFIT UPON TERMINATION.......................................- 42 -
     4.6   DETERMINATION OF VESTED INTEREST...............................- 43 -

ARTICLE 5.................................................................- 44 -
DISTRIBUTION OF BENEFITS..................................................- 44 -
     5.1   BENEFIT UPON RETIREMENT........................................- 44 -
     5.2   BENEFIT UPON DEATH.............................................- 44 -
     5.3   DISABILITY BENEFITS............................................- 45 -
     5.4   BENEFIT UPON TERMINATION.......................................- 46 -
     5.5   CASH-OUT OF BENEFITS...........................................- 46 -
     5.6   RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS........................- 47 -
     5.7   RESTORATION OF FORFEITED ACCOUNT BALANCE.......................- 48 -
     5.8   SPOUSAL CONSENT REQUIREMENTS...................................- 49 -
     5.9   APPLICATION OF CODE ss.401(a)(9) REQUIREMENTS..................- 49 -



<PAGE>

     5.10  STATUTORY COMMENCEMENT OF BENEFITS.............................- 49 -
     5.11  SEGREGATION OF BENEFIT BEFORE DISTRIBUTION.....................- 49 -
     5.12  DISTRIBUTION IN EVENT OF INCAPACITY............................- 50 -
     5.13  MISSING PARTICIPANTS AND UNCLAIMED BENEFITS....................- 50 -
     5.14  DIRECT ROLLOVERS...............................................- 51 -
     5.15  DISTRIBUTION OF PROPERTY.......................................- 51 -
     5.16  DISTRIBUTIONS SUBJECT TO CODE ss.401(a)(11) REQUIREMENTS.......- 52 -
     5.17  FINANCIAL HARDSHIP DISTRIBUTIONS...............................- 55 -
     5.18  IN-SERVICE DISTRIBUTIONS.......................................- 56 -
     5.19  DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS......................- 56 -
     5.20  DISTRIBUTION OF EXCESS CONTRIBUTIONS...........................- 57 -
     5.21  DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.................- 59 -
     5.22  ELIMINATION OF CERTAIN FORMS OF PAYMENT........................- 60 -

ARTICLE 6.................................................................- 61 -
CODE SS.415 LIMITATIONS...................................................- 61 -
     6.1   MAXIMUM ANNUAL ADDITION........................................- 61 -
     6.2   ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION.........................- 61 -
     6.3   MULTIPLE PLANS AND MULTIPLE EMPLOYERS..........................- 62 -
     6.4   ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS......................- 62 -
     6.5   MULTIPLE PLAN REDUCTION........................................- 62 -

ARTICLE 7.................................................................- 65 -
DUTIES OF THE TRUSTEE.....................................................- 65 -
     7.1   APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION...............- 65 -
     7.2   INVESTMENT ALTERNATIVES OF THE TRUSTEE.........................- 65 -
     7.3   VALUATION OF THE TRUST FUND....................................- 67 -
     7.4   COMPENSATION AND EXPENSES......................................- 68 -
     7.5   PAYMENTS FROM THE TRUST FUND...................................- 68 -
     7.6   PAYMENT OF TAXES...............................................- 68 -
     7.7   ACCOUNTS, RECORDS AND REPORTS..................................- 68 -
     7.8   EMPLOYMENT OF AGENTS AND COUNSEL...............................- 68 -
     7.9   DIVISION OF DUTIES AND INDEMNIFICATION.........................- 69 -
     7.10  APPOINTMENT OF INVESTMENT MANAGER..............................- 70 -
     7.11  ASSIGNMENT AND ALIENATION OF BENEFITS..........................- 70 -
     7.12  EXCLUSIVE BENEFIT RULE.........................................- 70 -
     7.13  PURCHASE OF INSURANCE..........................................- 71 -
     7.14  LOANS TO PARTICIPANTS..........................................- 72 -
     7.15  DIRECTED INVESTMENT ACCOUNTS...................................- 74 -
     7.16  SUPERSEDING TRUST OR CUSTODIAL AGREEMENT.......................- 76 -


<PAGE>

ARTICLE 8.................................................................- 77 -
DUTIES OF THE ADMINISTRATOR...............................................- 77 -
     8.1   APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION...............- 77 -
     8.2   POWERS AND DUTIES OF THE ADMINISTRATOR.........................- 77 -
     8.3   APPOINTMENT OF ADMINISTRATIVE COMMITTEE........................- 77 -
     8.4   FINALITY OF ADMINISTRATIVE DECISIONS...........................- 77 -
     8.5   MULTIPLE ADMINISTRATORS........................................- 77 -
     8.6   COMPENSATION AND EXPENSES......................................- 77 -
     8.7   APPOINTMENT OF AGENTS AND COUNSEL..............................- 78 -
     8.8   CORRECTING ADMINISTRATIVE ERRORS...............................- 78 -
     8.9   PROMULGATING NOTICES AND PROCEDURES............................- 78 -
     8.10  CLAIMS PROCEDURES..............................................- 78 -
     8.11  QUALIFIED DOMESTIC RELATIONS ORDERS............................- 81 -

ARTICLE 9.................................................................- 83 -
AMENDMENT, TERMINATION AND MERGER.........................................- 83 -
     9.1   AMENDMENT OF THE PLAN..........................................- 83 -
     9.2   TERMINATION OF PLAN BY SPONSOR.................................- 83 -
     9.3   TERMINATION OF PARTICIPATION BY ADOPTING EMPLOYER..............- 84 -
     9.4   MERGER OR CONSOLIDATION........................................- 84 -

ARTICLE 10................................................................- 85 -
MISCELLANEOUS PROVISIONS..................................................- 85 -
     10.1  NO CONTRACT OF EMPLOYMENT......................................- 85 -
     10.2  TITLE TO ASSETS................................................- 85 -
     10.3  QUALIFIED MILITARY SERVICE.....................................- 85 -
     10.4  BONDING OF FIDUCIARIES.........................................- 85 -
     10.5  SEVERABILITY OF PROVISIONS.....................................- 85 -
     10.6  GENDER AND NUMBER..............................................- 85 -
     10.7  HEADINGS AND SUBHEADINGS.......................................- 85 -
     10.8  LEGAL ACTION...................................................- 85 -
     10.9  QUALIFIED PLAN STATUS..........................................- 86 -
     10.10 MAILING OF NOTICES TO ADMINISTRATOR, EMPLOYER OR TRUSTEE.......- 86 -
     10.11 PARTICIPANT NOTICES AND WAIVERS OF NOTICES TO PARTICIPANTS.....- 86 -
     10.12 NO DUPLICATION OF BENEFITS.....................................- 86 -
     10.13 EVIDENCE FURNISHED CONCLUSIVE..................................- 86 -
     10.14 RELEASE OF CLAIMS..............................................- 86 -
     10.15 MULTIPLE COPIES OF PLAN AND/OR TRUST...........................- 86 -
     10.16 LIMITATION OF LIABILITY AND INDEMNIFICATION....................- 86 -



<PAGE>

                                 HOT TOPIC, INC.
                           401(k) PROFIT SHARING PLAN

         THIS AGREEMENT is made and entered into as of the _______ day of
____________________, __________, between HOT TOPIC, INC. (hereafter referred to
as the "Sponsor") and JAMES MCGINTY, ELIZABETH MCLAUGHLIN, JANE CRUZ, GERALD
COOK AND GEORGE WEHLITZ (hereafter collectively referred to as the Trustee).

                              W I T N E S S E T H:

         WHEREAS, the Sponsor originally established a Code ss.401(k) plan
(hereafter referred to as the "Plan"), effective August 1, 1995, in order to
provide retirement and other incidental benefits to Employees who are eligible
to participate therein; and

         WHEREAS, in accordance with the terms of the Plan, the Sponsor has the
ability at any time, and from time to time, to amend the Plan;

         NOW, THEREFORE, effective January 1, 2003 (except for those specific
provisions that have an earlier effective date), the Sponsor hereby amends and
restates the Plan in its entirety in order to comply with the requirements of
the Employee Retirement Income Security Act of 1974 and the Internal Revenue
Code of 1986, as amended by the Uruguay Round Agreements Act, the Small Business
Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Internal Revenue
Service Restructuring and Reform Act of 1998, the Community Renewal Tax Relief
Act of 2000, and all applicable rulings and regulations issued thereunder, and
the Trustee accepts the Plan under the following terms and conditions:
ARTICLE 1

                                     - 1 -


<PAGE>

                                   DEFINITIONS

1.1      ACP OR ACP TEST
         The term ACP means the Average Contribution Percentage as defined in
         Section 1.10(c). The term ACP Test means the Average Contribution
         Percentage Test.

1.2      ACTUAL DEFERRAL PERCENTAGE TEST
         The term Actual Deferral Percentage Test (or ADP Test) means either of
         the following nondiscrimination tests for Elective Deferrals: (1) the
         ADP for Participants who are HCEs will not exceed the ADP for
         Participants who are NHCEs multiplied by 1.25; or (2) the ADP for
         Participants who are HCEs will not exceed the ADP for Participants who
         are NHCEs multiplied by 2.0, provided that the ADP for Participants who
         are HCEs does not exceed the ADP for Participants who are NHCEs by more
         than 2 percentage points. The ADP Test for any Plan Year will be
         determined in accordance with the following provisions:

         (a)      TESTING METHOD: The ADP Test will be determined each Plan Year
                  by either Current Year Testing or Prior Year Testing (as
                  described in paragraph (b) below) as follows: Current Year
                  Testing is used for the 1997 Plan Year; Current Year Testing
                  is used for the 1998 Plan Year; Current Year Testing is used
                  for the 1999 Plan Year; Current Year Testing is used for the
                  2000 Plan Year; Current Year Testing is used for the 2001 Plan
                  Year; and Prior Year Testing is used for the 2002 Plan Year
                  and for each Plan Year thereafter until otherwise elected by
                  the Employer by means of a Plan amendment.

         (b)      DEFINITION OF CURRENT AND PRIOR YEAR TESTING: The term Current
                  Year Testing means the ADP Test will be determined for a Plan
                  Year by comparing the ADP of Participants who are Highly
                  Compensated Employees for that Plan Year to the ADP of
                  Participants who were Non-Highly Compensated Employees for
                  that Plan Year. The term Prior Year Testing means the ADP Test
                  will be determined for a Plan Year by comparing the ADP of
                  Participants who are Highly Compensated Employees for that
                  Plan Year to the ADP of Participants who were Non-Highly
                  Compensated Employees for the prior Plan Year. If Prior Year
                  Testing is specified in paragraph (a), then in the case of the
                  first Plan Year in which the Plan permits any Participant to
                  make Elective Deferrals (unless this is a successor Plan), the
                  ADP used for Participants who were Non-Highly Compensated
                  Employees in the prior Plan Year will be the greater of 3% or
                  their actual ADP for the first Plan Year in which Elective
                  Deferrals were permitted. Prior Year Testing cannot be used in
                  any Plan Year in which a supplemental Safe Harbor Notice is
                  issued that reduces or eliminates a Safe Harbor Matching
                  Contribution for that Plan Year.

         (c)      DEFINITION OF ACTUAL DEFERRAL PERCENTAGE: The term Actual
                  Deferral Percentage (ADP) means, for a specified group of
                  Participants for a Plan Year, the average of the ratios
                  calculated separately for each Participant in such group of
                  (1) the amount of Employer contributions actually paid on
                  behalf of such Participant for the Plan Year to (2) the
                  Compensation of such Participant for such Plan Year.

         (d)      CONTRIBUTIONS USED TO DETERMINE ADP TEST: Employer
                  contributions used to determine the ADP Test include Elective
                  Deferrals, including Excess Elective Deferrals as defined in
                  Section 1.28, but excluding Excess Elective Deferrals of NHCEs
                  that arise solely from Elective Deferrals made to this Plan or
                  any other plans maintained by this Employer and Elective
                  Deferrals that are taken into account in the ACP Test if the
                  ADP Test is satisfied both with and without exclusion of these
                  Elective Deferrals. The Employer may also elect each Plan Year


                                     - 2 -


<PAGE>

                  to include QMACs and/or QNECs, and in any Plan Year in which
                  Current Year Testing is used, may further elect to include
                  such QNECs and/or QMACs only to the extent necessary to pass
                  the ADP Test. In computing ADPs, an Employee who would be a
                  Participant but for the failure to make Elective Deferrals
                  will be treated as a Participant on whose behalf no Elective
                  Deferrals are made.

         (e)      HIGHLY COMPENSATED EMPLOYEES: A Participant is a Highly
                  Compensated Employee for a particular Plan Year if he or she
                  meets the definition of a Highly Compensated Employee in
                  effect for that Plan Year. A Participant is a Non-Highly
                  Compensated Employee for a particular Plan Year if he or she
                  does not meet the definition of a Highly Compensated Employee
                  in effect for that Plan Year. The ADP for any Participant who
                  is a HCE for the Plan Year and who is eligible to have
                  Elective Deferrals (and QNECs or QMACs, or both, if treated as
                  Elective Deferrals for purposes of the ADP Test) allocated to
                  his or her accounts under two or more arrangements described
                  in Code ss.401(k) that are maintained by this Employer will be
                  determined as if such Elective Deferrals (and, if applicable,
                  QNECs or QMACs, or both) were made under a single arrangement.
                  If a HCE participates in two or more cash or deferred
                  arrangements that have different Plan Years, all cash or
                  deferred arrangements ending with or within the same calendar
                  year will be treated as a single arrangement; except that
                  certain plans will be treated as separate if mandatorily
                  disaggregated under regulations under Code ss.401(k).

         (f)      OTHER RULES: In determining the ADP Test, (1) if this Plan
                  satisfies the requirements of Code ss.401(k), ss.401(a)(4), or
                  ss.410(b) only if aggregated with one or more other plans, or
                  if one or more other plans satisfy such requirements only if
                  aggregated with this Plan, then this section will be applied
                  by determining the ADP of Employees as if all such plans were
                  a single plan. For any Plan Year in which the Employer elects
                  prior year testing under this Section, adjustments to the ADP
                  of Non-Highly Compensated Employees for the prior Plan Year
                  will be made in accordance with Notice 98-1 and any
                  superseding guidance. Plans may be aggregated to satisfy Code
                  ss.401(k) only if they have the same Plan Year and use the
                  same ADP testing method; (2) Elective Deferrals, QNECs and
                  QMACs must be made before the last day of the 12-month period
                  immediately following the Plan Year to which contributions
                  relate; (3) the Employer will maintain records sufficient to
                  demonstrate satisfaction of the ADP test and the amount of
                  QNECs or QMACs, or both, used in such test; and (4) the
                  determination and treatment of the ADP amounts of any
                  Participant will satisfy such other requirements as may be
                  prescribed by the Secretary of the Treasury.

         (g)      CHANGE TO PRIOR YEAR TESTING: If the Employer elects Current
                  Year Testing for any Plan Year, the Employer can only elect to
                  change to Prior Year Testing in accordance with the
                  requirements in Notice 98-1 (or superseding guidance). If the
                  Employer elects to change to Prior Year Testing, the ADP for
                  NHCEs for the prior year will be determined by counting only
                  (1) Elective Deferrals for those NHCEs that were counted for
                  purposes of the ADP Test (and not the ACP Test) under the
                  Current Year Testing method for the prior year, and (2) QNECs
                  that were allocated to the accounts of those NHCEs for the
                  prior year but that were not used to satisfy the ADP Test or
                  the ACP Test under the Current Year Testing method for the
                  prior year. Thus, if the Employer elects to change to Prior
                  Year Testing, the following contributions made for the prior
                  year will be disregarded: QNECs used to satisfy either the ADP
                  Test or ACP Test under the Current Year Testing method for the


                                     - 3 -


<PAGE>

                  prior testing year, Elective Deferrals taken into account for
                  purposes of the ACP Test, and all QMACs. The limitations on
                  double counting do not apply for testing years beginning
                  before January 1, 2001, and if the Plan changes to Prior Year
                  Testing for the first time for any Plan Year after 1997, the
                  ADP for NHCEs will be the same as for the Plan Year
                  immediately preceding the Plan Year for which the change to
                  Prior Year Testing was effective.

1.3      ADP OR ADP TEST
         The term ADP means the Actual Deferral Percentage as defined in Section
         1.2(c). The term ADP Test means the Actual Deferral Percentage Test.

1.4      ADMINISTRATOR
         The term Administrator means the Employer unless another Administrator
         is appointed by the Employer pursuant to the provisions of Section 8.1
         of the Plan.

1.5      ADOPTING EMPLOYER
         The term Adopting Employer means any entity that adopts this Plan with
         the consent of the Sponsor. An Employee's transfer to or from any
         Employer or Adopting Employer will not affect his or her Participant's
         Account balance, total Years of Service (or Periods of Service) and
         total Years of Service as a Participant (or Periods of Service as a
         Participant). All Adopting Employers will be subject to the following
         provisions:

         (a)      MULTIPLE EMPLOYER PLAN PROVISIONS UNDER CODE SS.413(C):
                  Notwithstanding any other provision in the Plan to the
                  contrary, unless the Plan is a collectively bargained plan
                  described in Regulation ss.1.413-1(a), the following
                  provisions will apply with respect to any Adopting Employer
                  that is not an Affiliated Employer of the Sponsor:

                  (1)      INSTANCES OF SEPARATE EMPLOYER TESTING: Employees of
                           any such Adopting Employer will be treated separately
                           for purposes of testing under the provisions of Code
                           ss.401(a)(4), Code ss.401(k), Code ss.401(m) and, if
                           the Sponsor and the Adopting Employer do not share
                           Employees, Code ss.416. Furthermore, the terms of
                           Code ss.410(b) will be applied separately on an
                           employer-by-employer basis by the Sponsor (and the
                           Adopting Employers which are part of the Affiliated
                           Group which includes the Sponsor) and each Adopting
                           Employer that is not an Affiliated Employer of the
                           Sponsor, taking into account the generally applicable
                           rules described in Code ss.401(a)(5), ss.414(b) and
                           ss.414(c).

                  (2)      INSTANCES OF SINGLE EMPLOYER TESTING: Employees of
                           the Adopting Employer will be treated as part of a
                           single employer plan for purposes of eligibility to
                           participate under Article 2 and under the provisions
                           of Code ss.410(a). Furthermore, the terms of Code
                           ss.411 relating to Vesting will be applied as if all
                           Employees of all such Adopting Employers and the
                           Sponsor were employed by a single employer, except
                           that the rules regarding Breaks in Service will be
                           applied under such regulations as may be prescribed
                           by the Secretary of Labor.

                  (3)      COMMON TRUST: Contributions made by any such Adopting
                           Employer will be held in a common Trust Fund with
                           contributions made by the Sponsor, and all such
                           contributions will be available to pay the benefits
                           of any Participant or Beneficiary who is an Employee
                           of the Sponsor or any such Adopting Employer.

                  (4)      COMMON DISQUALIFICATION PROVISION: The failure of
                           either the Sponsor or any such Adopting Employer to
                           satisfy the qualification requirements under Code
                           ss.401(a), as modified by the provisions of Code
                           ss.413(c), will result in the disqualification of the
                           Plan for all such Employers maintaining the Plan.

                                     - 4 -


<PAGE>

         (b)      TERMINATION OF ADOPTION: An Adopting Employer may terminate
                  participation in the Plan by delivering written notice to the
                  Sponsor, the Administrator and the Trustee; but in accordance
                  with Article 9, only the Sponsor can terminate the Plan. If a
                  request for and approval of a transfer of assets from this
                  Plan to any successor qualified retirement plan maintained by
                  the Adopting Employer or its successor is not made in
                  accordance with Section 9.3, Participants who are no longer
                  Employees because the Adopting Employer terminates Plan
                  participation will only be entitled to the commencement of
                  their benefits (1) in the case of Participants who are no
                  longer Employees of an Adopting Employer that is an Affiliated
                  Employer of the Sponsor, in accordance with Article 5 after
                  their death, retirement, Disability or Termination of
                  Employment from the Adopting Employer or former Adopting
                  Employer; and (2) in the case of Participants who are no
                  longer Employees of an Adopting Employer that is not an
                  Affiliated Employer of the Sponsor, within a reasonable time
                  thereafter as if the Plan had been terminated under Section
                  9.2.

1.6      AFFILIATED EMPLOYER
         The term Affiliated Employer means any of the following of which the
         Employer is a part: (1) a controlled group of corporations as defined
         in Code ss.414(b); (2) a trade or business (whether or not
         incorporated) under common control under Code ss.414(c); (3) any
         organization (whether or not incorporated) which is a member of an
         affiliated service group under Code ss.414(m); and (4) any other entity
         required to be aggregated under Code ss.414(o).

1.7      AGE
         The term Age means an Employee's actual attained age.

1.8      ANNIVERSARY DATE
         The term Anniversary Date means December 31st.

1.9      ANNUITY STARTING DATE
         The term Annuity Starting Date means the first day of the first period
         for which an amount is paid as an annuity, or, in the case of a benefit
         not payable as an annuity, the first day all events have occurred which
         entitle the Participant to such benefit. The first day of the first
         period for which a benefit is to be received by reason of Disability
         will be treated as the Annuity Starting Date only if such benefit is
         not an auxiliary benefit.

1.10     AVERAGE CONTRIBUTION PERCENTAGE TEST
         The term Average Contribution Percentage (or ACP) Test means the
         greater of one of the following nondiscrimination tests for Matching
         Contributions and Employee contributions: (1) the ACP for Participants
         who are HCEs will not exceed the ACP for Participants who are NHCEs
         multiplied by 1.25; or (b) the ACP for Participants who are HCEs will
         not exceed the ACP for Participants who are NHCEs multiplied by 2.0,
         provided that the ACP for Participants who are HCEs does not exceed the
         ACP for Participants who are NHCEs by more than 2 percentage points.
         The ACP Test for any Plan Year will be determined in accordance with
         the following:

         (a)      TESTING METHOD: The ACP Test will be determined each Plan Year
                  by the Current Year Testing method as described in paragraph
                  (b) below.

         (b)      DEFINITION OF CURRENT AND PRIOR YEAR TESTING: The term Current
                  Year Testing means the ACP Test will be determined for a Plan
                  Year by comparing the ACP of Participants who are Highly
                  Compensated Employees for that Plan Year to the ACP of
                  Participants who were Non-Highly Compensated Employees for
                  that Plan Year. The term Prior Year Testing means the ACP Test
                  will be determined for a Plan Year by comparing the ACP of
                  Participants who are Highly Compensated Employees for that
                  Plan Year to the ACP of Participants who were Non-Highly
                  Compensated Employees for the prior Plan Year. If Prior Year


                                     - 5 -


<PAGE>

                  Testing is specified in paragraph (a), then for the first Plan
                  Year in which the Plan permits any Participant to make
                  Voluntary Employee Contributions, provides for Matching
                  Contributions, or both (unless this Plan is a successor Plan),
                  the ACP used for Participants who were Non-Highly Compensated
                  Employees in the prior Plan Year will be the greater of 3% or
                  their actual ACP for the first Plan Year. Prior Year Testing
                  cannot be used in any Plan Year in which a supplemental Safe
                  Harbor Notice is issued that reduces or eliminates a Safe
                  Harbor Matching Contribution for that Plan Year.

         (c)      DEFINITION OF AVERAGE CONTRIBUTION PERCENTAGE: For purposes of
                  this Section, the term Average Contribution Percentage (or
                  ACP) means the average of the Contribution Percentages of the
                  "eligible" Participants in a group.

         (d)      DEFINITION OF CONTRIBUTION PERCENTAGE: For purposes of this
                  Section, the term Contribution Percentage means the ratio
                  (expressed as a percentage) of the Participant's Contribution
                  Percentage Amounts to the Participant's Compensation for the
                  Plan Year.

         (e)      DEFINITION OF CONTRIBUTION PERCENTAGE AMOUNTS: For purposes of
                  this Section, the term Contribution Percentage Amounts means
                  the sum of the Employee Contributions, Matching Contributions
                  and Qualified Non-Elective Contributions (to the extent not
                  used in the ADP Test) made under the plan on behalf of the
                  participant for the Plan Year.

         (f)      CONTRIBUTIONS USED IN DETERMINING CONTRIBUTION PERCENTAGE
                  AMOUNTS: Contribution Percentage Amounts will not include
                  Matching Contributions that are forfeited either to correct
                  Excess Aggregate Contributions or because the contributions to
                  which they relate are Excess Deferrals, Excess Contributions,
                  or Excess Aggregate Contributions. The Employer may elect each
                  Plan Year to include as Contribution Percentage Amounts QNECs
                  and/or Elective Deferrals so long as the ADP Test is met
                  before the Elective Deferrals are used in the ACP Test and
                  continues to be met following the exclusion of those Elective
                  Deferrals that are used to meet the ACP Test. For any Plan
                  Year in which Current Year Testing is specified in paragraph
                  (a) above, the Employer may further elect to include such
                  QNECs and/or Elective Deferrals as Contribution Percentage
                  Amounts only to the extent necessary to satisfy the ACP (and
                  Multiple Use) Test.

         (g)      MULTIPLE USE: If one or more HCEs participate in both a cash
                  or deferred arrangement and in a plan subject to the ACP Test
                  maintained by the Employer, and if the sum of the ADP and ACP
                  of those HCEs subject to either or both tests exceeds the
                  Aggregate Limit, then the ACP of those HCEs who also
                  participate in a cash or deferred arrangement will be reduced
                  as described in Section 5.21 so that the limit is not
                  exceeded. The amount by which each HCE's Contribution
                  Percentage Amount is reduced will be treated as an Excess
                  Aggregate Contribution. The ADP and ACP of HCEs are determined
                  after any corrections required to meet the ADP Test and the
                  ACP Test and are deemed to be the maximum permitted under such
                  tests for the Plan Year. Multiple use does not occur if either
                  the ADP or the ACP of the HCEs does not exceed 1.25 multiplied
                  by the ADP and the ACP of the NHCEs.

         (h)      HIGHLY COMPENSATED EMPLOYEES: A Participant is a HCE for a
                  particular Plan Year if he or she meets the definition of a
                  HCE in effect for that Plan Year; and a Participant is a NHCE
                  for a particular Plan Year if he or she does not meet the
                  definition of a HCE in effect for that Plan Year. The
                  Contribution Percentage for any Participant who is a HCE and
                  who is eligible to have Contribution Percentage Amounts
                  allocated to his or her account under two or more plans
                  described in Code ss.401(a), or arrangements described in Code
                  ss.401(k) that are maintained by the Employer, will be


                                     - 6 -


<PAGE>

                  determined as if the total of such Contribution Percentage
                  Amounts was made under each plan. If a HCE participates in two
                  or more cash or deferred arrangements that have different plan
                  years, all cash or deferred arrangements ending with or within
                  the same calendar year will be treated as a single
                  arrangement. Notwithstanding the foregoing, certain plans will
                  be treated as separate if mandatorily disaggregated under
                  regulations under Code ss.401(m).

         (i)      OTHER RULES: In determining the ACP Test, if this Plan
                  satisfies the requirements of Code ss.401(m), ss.401(a)(4) or
                  ss.410(b) only if aggregated with one or more other plans, or
                  if one or more other plans satisfy such requirements only if
                  aggregated with this Plan, then this section will be applied
                  by determining the Contribution Percentage of Employees as if
                  all such plans were a single plan. For any Plan Year in which
                  the Employer elects Prior Year Testing under this Section,
                  adjustments to the ACP of Non-Highly Compensated Employees for
                  the prior Plan Year will be made in accordance with Notice
                  98-1 and any superseding guidance. Plans with the same Plan
                  Year may be aggregated to satisfy Code ss.401(m). In
                  determining the Contribution Percentage test, Employee
                  contributions are considered to have been made in the Plan
                  Year in which contributed to the Plan, and Matching
                  Contributions and QNECs will be considered made for a Plan
                  Year if made no later than the end of the twelve-month period
                  beginning on the day after the close of the Plan Year. The
                  Employer will maintain records sufficient to demonstrate
                  satisfaction of the ACP Test and the amount of QNECs or QMACs,
                  or both, used in such test. The determination and treatment of
                  the Contribution Percentage of any Participant will satisfy
                  such other requirements as may be prescribed by the Secretary
                  of the Treasury.

         (j)      AGGREGATE LIMIT: The term Aggregate Limit means the sum of (1)
                  125% of the greater of the ADP of Participants who are NHCEs
                  for the current Plan Year (or for the prior Plan Year for any
                  Plan Year for which prior year testing has been elected) or
                  the ACP of Participants who are NHCEs subject to Code
                  ss.401(m) for the Plan Year beginning with or within the
                  current Plan Year (or for the prior Plan Year for any Plan
                  Year for which prior year testing has been elected) of the
                  cash or deferred arrangement (2) the lesser of 200% or two
                  plus the lesser of such ADP or ACP. The word "lesser" will be
                  substituted for "greater" in (1) above, and the word "greater"
                  will be substituted for "lesser" after "two plus the" in (2)
                  above if that would result in a larger Aggregate Limit.

         (k)      "ELIGIBLE" PARTICIPANT: For purposes of this Section, an
                  "eligible" Participant is any Employee who is eligible to make
                  an Employee Contribution, or an Elective Deferral (if the
                  Employer takes such contributions into account in the
                  calculation of the Contribution Percentage), or to receive a
                  Matching Contribution (including forfeitures) or a QMAC. If an
                  Employee Contribution is required as a condition of Plan
                  participation, any Employee who would be a Participant if such
                  Participant made such a contribution will be treated as an
                  "eligible" Participant on behalf of whom no Employee
                  Contributions are made. An Employee Contribution means any
                  contribution made by or on behalf of a Participant that is
                  included in the Participant's gross income in the year in
                  which made and that is maintained under a separate account to
                  which earnings and losses are allocated.

         (l)      CHANGE TO PRIOR YEAR TESTING: If the Employer elects Current
                  Year Testing for any Plan Year, the Employer can only elect to
                  change to prior year testing in accordance with the
                  requirements in Notice 98-1 (or superseding guidance). If the
                  Employer amends the Plan to elect prior year testing, the ACP
                  for NHCEs for the prior year will be determined by taking into
                  account only (1) Voluntary Employee Contributions for those
                  NHCEs for the prior year, and (2) Matching Contributions for
                  those NHCEs that were taken into account in the ACP Test (and


                                     - 7 -


<PAGE>

                  not the ADP Test) under the current year testing method for
                  the prior year, and (3) QNECs that were allocated to the
                  accounts of those NHCEs for the prior year but that were not
                  used to satisfy the ACP Test or the ADP Test under the current
                  year testing method for the prior year. Thus, if the Employer
                  elects to change to prior year testing, the following
                  contributions made for the prior year will be disregarded:
                  QNECs used to satisfy either the ADP or ACP Test under the
                  current year testing method for the prior testing year, QMACs
                  taken into account in the ADP Test, and all Elective
                  Deferrals. These limitations on double counting do not apply
                  for testing years beginning before January 1, 1999, and if the
                  Plan changes to prior year testing for the first time for the
                  1998 Plan Year, the ACP for NHCEs will be the same as for the
                  1997 Plan Year.

1.11     BENEFICIARY
         The term Beneficiary means the recipient designated by the Participant
         to receive the Plan benefits payable upon the death of the Participant,
         or the recipient designated by a Beneficiary to receive any benefits
         which may be payable in the event of the Beneficiary's death prior to
         receiving the entire death benefit to which the Beneficiary is
         entitled. All such Beneficiary designations will be made in accordance
         with the following provisions:

         (a)      BENEFICIARY DESIGNATIONS BY A PARTICIPANT: Subject to the
                  provisions of Section 5.8 regarding the rights of a
                  Participant's Spouse, each Participant may designate a
                  Beneficiary on a form supplied by the Administrator, and may
                  change or revoke that designation by filing written notice
                  with the Administrator. If a Participant completes or has
                  completed a Beneficiary designation form in which the
                  Participant designates his or her Spouse as the Beneficiary,
                  and the Participant and the Participant's Spouse are legally
                  divorced subsequent to the date of such designation, then the
                  designation of such Spouse as a Beneficiary hereunder will be
                  deemed null and void unless the Participant, subsequent to the
                  legal divorce, reaffirms the designation by completing a new
                  Beneficiary designation form. In the absence of a written
                  Beneficiary designation form, the Participant will be deemed
                  to have designated the following Beneficiaries in the
                  following order: (1) the Participant's Spouse, if then living;
                  (2) the Participant's issue, per stirpes; and (3) the
                  Participant's estate.

         (b)      BENEFICIARY DESIGNATIONS BY A BENEFICIARY: In the absence of a
                  Beneficiary designation or other directive from the deceased
                  Participant to the contrary, any Beneficiary may name his or
                  her own Beneficiary in accordance with Section 5.2(e) to
                  receive any benefits which may be payable in the event of the
                  Beneficiary's death prior to the receipt of all the
                  Participant's death benefits to which the Beneficiary was
                  entitled.

         (c)      BENEFICIARIES CONSIDERED CONTINGENT UNTIL DEATH OF
                  PARTICIPANT: Notwithstanding any provision in this Section,
                  any Beneficiary named hereunder will be considered a
                  contingent Beneficiary until the death of the Participant (or
                  Beneficiary, as the case may be), and until such time will
                  have no rights granted to Beneficiaries under the Plan.

1.12     BREAK IN SERVICE
         The term Break in Service means a 1-Year Period of Severance.
         Notwithstanding the foregoing, a Participant who incurs a Break in
         Service but does not terminate employment with the Employer will
         continue to be eligible to make Elective Deferrals to the Plan, but
         will no longer be eligible to receive an allocation of any other
         Employer contributions.

1.13     CODE
         The term Code means the Internal Revenue Code of 1986, as amended, and
         the regulations and rulings promulgated thereunder by the Internal
         Revenue Service.

                                     - 8 -


<PAGE>

1.14     CODE SS.3401 COMPENSATION
         The term Code ss.3401 Compensation means wages within the meaning of
         Code ss.3401(a) that are actually paid or made available in gross
         income for the purposes of income tax withholding at the source but
         determined without regard to any rules under Code ss.3401 that limit
         the remuneration included in wages based on the nature or location of
         the employment or the services performed (such as the exception for
         agricultural labor in Code ss.3401(a)(2)).

1.15     CODE SS.415 COMPENSATION
         The term Code ss.415 Compensation means Earned Income, wages, salaries,
         fees for professional services and other amounts received (without
         regard to whether or not an amount is paid in cash) for personal
         services actually rendered in the course of employment with the
         Employer maintaining the Plan, including, but not limited to,
         commissions paid salespersons, compensation for services based on a
         percentage of profits, commissions on insurance premiums, tips,
         bonuses, fringe benefits, and reimbursements, or other expense
         allowances under a non-accountable plan as described in IRS regulation
         ss.1.62-2(c). A Participant's Code ss.415 Compensation will be
         determined subject to the following provisions:

         (a)      AMOUNTS EXCLUDED FROM CODE SS.415 COMPENSATION: Code ss.415
                  Compensation does not include (1) Employer contributions to a
                  plan of deferred compensation which are not includible in
                  gross income for the taxable year in which contributed, or
                  Employer contributions to a simplified employee pension plan
                  to the extent such contributions are deductible by the
                  Employee, or any distributions from a plan of deferred
                  compensation; (2) amounts realized from a non-qualified stock
                  option, or when restricted stock or property held by the
                  Employee either becomes freely transferable or is no longer
                  subject to a substantial risk of forfeiture; (3) amounts
                  realized from the sale, exchange or other disposition of stock
                  acquired under a qualified stock option; and (4) other amounts
                  which receive special tax benefits, or contributions made by
                  an Employer (whether or not under a salary reduction
                  agreement) towards the purchase of an annuity described in
                  Code ss.403(b) (whether or not the amounts are excludible from
                  an Employee's gross income).

         (b)      TREATMENT OF ELECTIVE DEFERRALS AND OTHER AMOUNTS: For
                  Limitation Years beginning on or after January 1, 1998, Code
                  ss.415 Compensation will include any elective deferrals as
                  defined in Code ss.402(g)(3), and any amounts contributed or
                  deferred at the election of the Employee that were not
                  includible in the gross income by reason of Code ss.125 or
                  ss.457. Code ss.415 Compensation will also include elective
                  amounts that are not includible in the gross income of the
                  Employee by reason of Code ss.132(f)(4) for Limitation Years
                  beginning on or after January 1, 2001 (or if elected by the
                  Administrator on a non-discriminatory basis, any earlier
                  Limitation Year beginning on or after January 1, 1998).

1.16     COMPENSATION
         The term Compensation means amounts received by a Participant from the
         Employer during a Compensation Determination Period, determined subject
         to the following provisions:

         (a)      COMPENSATION USED TO DETERMINE ELECTIVE DEFERRALS: In
                  determining the amount of a Participant's Elective Deferrals
                  for a Plan Year, the term Compensation means a Participant's
                  Form W-2 Compensation actually paid during a Compensation
                  Determination Period, determined subject to the following
                  provisions:

                  (1)      COMPENSATION DETERMINATION PERIOD: Under this
                           paragraph (a), the Compensation Determination Period
                           is the Plan Year.

                                     - 9 -


<PAGE>

                  (2)      TREATMENT OF ELECTIVE DEFERRALS: For purposes of this
                           paragraph (a), Employer contribution amounts made
                           pursuant to a salary reduction agreement which are
                           not currently includible in the gross income of an
                           Employee by reason of Code ss.125, ss.402(e)(3),
                           ss.402(h)(1)(B), or ss.403(b) will, at the election
                           of the Administrator on a non-discriminatory basis,
                           be included in determining Compensation. In addition,
                           if elected by the Administrator on a
                           non-discriminatory basis, Compensation will also
                           include elective amounts that are not includible in
                           the gross income of the Employee by reason of Code
                           ss.132(f)(4), beginning with the Plan Year elected by
                           the Administrator but not earlier than the Plan Year
                           beginning on or after January 1, 1998.

                  (3)      CERTAIN AMOUNTS EXCLUDED FROM COMPENSATION: For
                           purposes of this paragraph (a), any amount which
                           would otherwise be considered Compensation under this
                           paragraph but which is received by a Participant
                           under the following circumstances will not be
                           considered Compensation for purposes of this
                           paragraph: (1) any amount received as a bonus; (2)
                           any amount received as a commission; (3) any amount
                           intended as reimbursement for moving expenses; (4)
                           any amount intended as reimbursement for car
                           expenses; and (5) any amount taxable for purposes of
                           Domestic Partner medical coverage and Stock Options.

                  (4)      AMOUNTS RECEIVED PRIOR TO BECOMING A PARTICIPANT: All
                           amounts which would be considered Compensation under
                           this paragraph but which are received by an Employee
                           prior to the date the Employee becomes a Participant
                           in the Plan will be considered Compensation for
                           purposes of this paragraph (a). However, the
                           Administrator may elect to limit Compensation under
                           this paragraph to Compensation received during the
                           period during which the cash or deferred arrangement
                           was in effect under the Plan.

                  (5)      COMPENSATION RECEIVED WHILE IN AN INELIGIBLE CLASS OF
                           EMPLOYEES: Compensation for purposes of this
                           paragraph (a) will exclude any amount received while
                           an Employee is a member of an ineligible class of
                           Employees as described in Section 2.1(a)(2).

         (b)      COMPENSATION USED TO DETERMINE MATCHING CONTRIBUTIONS:
                  Matching Contributions are not currently permitted under the
                  terms of the Plan.

         (c)      COMPENSATION USED TO DETERMINE NON-ELECTIVE CONTRIBUTIONS:
                  Non-Elective Contributions are not currently permitted under
                  the terms of the Plan.

         (d)      COMPENSATION USED IN DETERMINING THE ACP TEST AND ADP TEST: In
                  determining the ACP Test, the term Compensation means a
                  Participant's Form W-2 Compensation. In determining the ADP
                  Test, the term Compensation means a Participant's Form W-2
                  Compensation. However, in determining a Participant's ADP or
                  ACP, the Administrator may elect (1) to include or exclude
                  Elective Deferrals; (2) to include or exclude any items of
                  compensation includible or excludible under Code ss.414(s) and
                  the regulations thereunder, provided such adjusted definition
                  conforms to the nondiscrimination requirements of those
                  regulations; and/or (3) to limit Compensation taken into
                  account in computing a Participant's ADP or ACP to
                  Compensation received only for the portion of the Plan Year in
                  which the Participant was a Participant and only for the
                  portion of the Plan Year during which the Plan contained a
                  cash or deferred arrangement. The Plan Administrator's
                  election as described above must be consistent and uniform
                  with respect to all Participants and all plans of the Employer
                  for any particular Plan Year.

                                     - 10 -


<PAGE>

         (e)      COMPENSATION USED FOR TOP HEAVY PURPOSES: Notwithstanding
                  anything in this Section to the contrary, in determining Top
                  Heavy allocations under Section 3.5, the term Compensation
                  means the Code ss.415 Compensation received by an Employee
                  during an entire Compensation Determination Period excluding
                  amounts received while a member of an ineligible class of
                  Employees as described in Section 2.1(a)(2).

         (f)      COMPENSATION OF OWNER-EMPLOYEES AND SHAREHOLDER-EMPLOYEES: For
                  purposes of this Plan, the Compensation of an Owner-Employee
                  or a Self-Employed Individual will equal his or her Earned
                  Income up to the dollar limit described in the next paragraph.

         (g)      DOLLAR LIMITATION ON COMPENSATION: Notwithstanding anything in
                  this Section to the contrary, a Participant's Compensation for
                  any Compensation Determination Period will not exceed the
                  limitation set forth in Code ss.401(a)(17) as in effect for
                  that determination period. If a Compensation Determination
                  Period consists of fewer than 12 months, the Code
                  ss.401(a)(17) limitation will be multiplied by a fraction, the
                  numerator of which is the number of months in that
                  determination period, and the denominator of which is 12.

         (h)      COMPENSATION LIMITATION ELECTION AVAILABLE TO CERTAIN
                  PARTICIPANTS: Except for purposes of determining Top Heavy
                  allocation requirements under Section 3.5 or the Code ss.415
                  limitations under Article 6, any Participant who is a Key
                  Employee, an Owner-Employee, a Self-Employed Individual, or a
                  Highly Compensated Employee may elect for any Plan Year, on a
                  form prescribed by the Administrator to limit Compensation for
                  all purposes under this Plan.

         (i)      REPEAL OF FAMILY AGGREGATION RULES: The family aggregation
                  rules that were described in Code ss.401(a)(17)(A) as in
                  effect prior to January 1, 1997 will not apply to this Plan
                  for Plan Years beginning on or after January 1, 1997.

1.17     DISABILITY
         The term Disability means a physical or mental condition arising after
         an Employee has become a Participant that qualifies the Participant for
         disability benefits under the Social Security Act in effect on the date
         the Participant suffers the Disability.

1.18     EARLY RETIREMENT AGE
         There is no Early Retirement Age under the Plan.

1.19     EARNED INCOME
         The term Earned Income means net earnings from self-employment in the
         trade or business with respect to which the Plan is established and for
         which personal services of the individual are a material
         income-producing factor. Net earnings (1) will be determined without
         regard to items not included in gross income and the deductions
         allocable thereto, and for taxable years beginning after December 31,
         1989, with regard to the deduction allowed by Code ss.164(f); and (2)
         will be reduced by deductible Employer contributions to a qualified
         retirement plan for taxable years beginning after December 31, 1989.

1.20     ELECTIVE DEFERRAL
         The term Elective Deferrals means Employer contributions made to the
         Plan at the election of the Participant in lieu of cash compensation,
         and will include contributions made pursuant to a salary reduction
         agreement or other deferral mechanism, as follows:

                                     - 11 -


<PAGE>

         (a)      DETERMINATION OF AMOUNT: In any taxable year, a Participant's
                  Elective Deferral is the sum of all Employer contributions
                  made on behalf of such Participant pursuant to an election to
                  defer under any qualified cash or deferred arrangement under
                  Code ss.401(k), any simplified employee pension cash or
                  deferred arrangement under Code ss.402(h)(1)(B), any SIMPLE
                  individual retirement plan under Code ss.408(p), any eligible
                  deferred compensation plan under Code ss.457, any plan under
                  Code ss.501(c)(18), and any Employer contributions made on the
                  behalf of a Participant for the purchase of an annuity
                  contract under Code ss.403(b) pursuant to a salary reduction
                  agreement. Elective Deferrals will not include any deferrals
                  properly distributed as excess Annual Additions.

         (b)      RESTRICTIONS ON WITHDRAWAL: Elective Deferrals (exclusive of
                  earnings thereon) can only be withdrawn upon the earlier of
                  the date (1) a Participant incurs a Termination of Employment;
                  (2) a Participant dies; (3) a Participant suffers a
                  Disability; (4) an event described in Code ss.401(k)(10)
                  occurs; (5) a Participant receives a hardship distribution if
                  hardship distributions are permitted by the Employer under
                  Section 5.17; and (6) a Participant reaches Age 59 1/2 if on
                  or after such date a pre-retirement in-service withdrawal of
                  Elective Deferrals is permitted by the Employer under Section
                  5.18.

1.21     ELECTIVE DEFERRAL ACCOUNT
         The term Elective Deferral Account means the sub-account of a
         Participant's Account to which the Participant's Elective Deferrals are
         credited.

1.22     ELIGIBLE PARTICIPANT
         The term Eligible Participant means a Participant eligible in
         accordance with the following provisions to receive an allocation of
         any Matching Contributions, Non-Elective Contributions and Forfeitures
         that are allocable for the Plan Year:

         (a)      MATCHING CONTRIBUTIONS AND RELATED FORFEITURES: Matching
                  Contributions are not currently permitted under the terms of
                  the Plan.

         (b)      NON-ELECTIVE CONTRIBUTIONS AND RELATED FORFEITURES:
                  Non-Elective Contributions are not currently permitted under
                  the terms of the Plan.

1.23     EMPLOYEE
         The term Employee means (a) any person reported on the payroll records
         of the Employer as an employee who is deemed by the Employer to be a
         common law employee; (b) except for determining eligibility to
         participate in this Plan, any person reported on the payroll records of
         an Affiliated Employer of the Sponsor or an Adopting Employer as an
         employee who is deemed by the Affiliated Employer to be a common law
         employee, even if the Affiliated Employer is not an Adopting Employer;
         (c) any Self-Employed Individual who derives Earned Income from the
         Employer; (d) any Owner-Employee; and (e) any person who is considered
         a Leased Employee but who (1) is not covered by a plan described in
         Code ss.414(n)(5), or (2) is covered by a plan described in Code
         ss.414(n)(5), but Leased Employees constitute more than 20% of the
         Employer's non-highly compensated workforce. However, the term Employee
         will not include any individual who is not reported on the payroll
         records of the Employer or an Affiliated Employer as a common law
         employee. If such person is later determined by the Sponsor or by a
         court or governmental agency to be or to have been an Employee, he or
         she will only be eligible for participation prospectively and may
         participate in the Plan as of the next entry date in Section 2.2
         following such determination and after the satisfaction of all other
         eligibility requirements.

                                     - 12 -


<PAGE>

1.24     EMPLOYER
         The term Employer means the Sponsor, any Adopting Employer, and any
         direct predecessor business entity of the Sponsor or an Adopting
         Employer that was or would have been considered an Affiliated Employer
         of the Sponsor or an Adopting Employer. Where applicable, such as
         determining Hours of Service, Periods of Service and Years of Service,
         the term Employer or Adopting Employer will also mean any business
         entity that was an Adopting Employer. As to any Employee, the term
         Employer at the time of reference means the employer of such Employee.

1.25     ERISA
         The term ERISA means the Employee Retirement Income Security Act of
         1974, as amended, and the regulations and rulings promulgated
         thereunder.

1.26     EXCESS AGGREGATE CONTRIBUTIONS
         The term Excess Aggregate Contributions means, with respect to any Plan
         Year, the excess of (1) the aggregate Contribution Percentage Amounts
         used in computing the numerator of the Contribution Percentage actually
         made on behalf of Participants who are Highly Compensated Employees for
         such Plan Year, over (2) the maximum Contribution Percentage Amounts
         permitted by the ACP Test (determined by hypothetically reducing
         contributions made on behalf of Participants who are Highly Compensated
         Employees in order of their Contribution Percentages beginning with the
         highest of such percentages). Such determination will be made after
         first determining Excess Elective Deferrals and then determining Excess
         Contributions. The terms Average Contribution Percentage, Contribution
         Percentage and Contribution Percentage Amount are defined in Sections
         1.10(c), 1.10(d) and 1.10(e).

1.27     EXCESS CONTRIBUTIONS
         The term Excess Contributions means, with respect to any Plan Year, the
         excess of the aggregate amount of Employer contributions actually taken
         into account in computing the ADP of Participants who are Highly
         Compensated Employees for such Plan Year, over the maximum amount of
         such contributions permitted by the ADP Test (determined by
         hypothetically reducing contributions made for Participants who are
         Highly Compensated Employees in order of their ADPs, beginning with the
         highest of such percentages).

1.28     EXCESS ELECTIVE DEFERRALS
         The term Excess Elective Deferrals means Elective Deferrals that are
         includible in a Participant's gross income under Code ss.402(g) to the
         extent such Participant's Elective Deferrals for a taxable year exceed
         the dollar limit under such Code Section.

1.29     FIDUCIARY
         The term Fiduciary means any individual or entity which exercises any
         discretionary authority or control over the management of the Plan or
         over the disposition of the assets of the Plan; renders investment
         advice for a fee or other compensation (direct or indirect); has any
         discretionary authority or responsibility over Plan administration; or
         acts to carry out a fiduciary responsibility, when designated by a
         named Fiduciary pursuant to authority granted by the Plan; subject,
         however, to any exception granted directly or indirectly by the
         provisions of ERISA or any applicable regulations. The Sponsor is the
         "named Fiduciary" for purposes of ERISA ss.402(a)(2).

1.30     FISCAL YEAR
         The term Fiscal Year means the Employer's accounting year beginning
         February 1st and ending the following January 31st.

1.31     FORFEITURE
         The term Forfeiture means the amount by which a Participant's Account
         balance exceeds his or her Vested Interest upon the earlier to occur of
         (a) the date the Participant receives a distribution of his or her


                                     - 13 -


<PAGE>

         Vested Interest under Article 5; or (b) the date the Participant incurs
         5 consecutive Breaks in Service after Termination of Employment. No
         Forfeitures will occur solely as a result of the withdrawal of a
         Participant's own contributions to the Plan or a Participant's transfer
         to an Affiliated Employer or Adopting Employer. All Forfeitures will be
         placed in the Forfeiture Account pending allocation pursuant to Section
         3.4.

1.32     FORM W-2 COMPENSATION
         The term Form W-2 Compensation means wages within the meaning of Code
         ss.3401(a) and all other payments of compensation actually paid or made
         available in gross income to an Employee by the Employer in the course
         of the Employer's trade or business for which the Employer is required
         to furnish the Employee a Form W-2 under Code ss.6041(d), ss.6051(a)(3)
         and ss.6052. Compensation must be determined without regard to any
         rules under Code ss.3401(a) limiting remuneration included in wages
         based on the nature or location of the employment or services performed
         (such as the exception for agricultural labor in Code ss.3401(a)(2)).

1.33     HCE
         The term HCE means a Highly Compensated Employee.

1.34     HIGHLY COMPENSATED EMPLOYEE
         The term Highly Compensated Employee means, for Plan Years beginning
         after December 31, 1996, any Employee who during the Plan Year or
         during the look-back year was a 5% owner as defined in Code
         ss.416(i)(1), or who for the look-back year had Code ss.415
         Compensation in excess of $80,000 as adjusted in accordance with Code
         ss.415(d) (except that the base year will be the calendar quarter
         ending September 30, 1996). In determining who is a highly compensated
         former Employee, the rules for determining Highly Compensated Employee
         status as in effect for the Plan Year or look-back year for which the
         determination is being made (in accordance with temporary regulation
         1.414(q)-1T, A-4 and Notice 97-45) will be applied. In determining if
         an Employee is a Highly Compensated Employee for Plan Years beginning
         in 1997, the amendments to Code ss.414(q) are deemed to have been in
         effect for years beginning in 1996. If the Employer maintains more than
         one qualified retirement plan, the definition of Highly Compensated
         Employee must be consistently applied to all such plans.

         (a)      DETERMINATION OF LOOK-BACK YEAR: The look-back year will be
                  the 12 month period immediately preceding the Plan Year for
                  which the determination is being made.

         (b)      TOP PAID GROUP ELECTION: In determining if an Employee is a
                  Highly Compensated Employee based on Code ss.415 Compensation,
                  the top paid group election set forth in Code ss.414(q)(3) is
                  not being applied for any Plan Year beginning on or after
                  January 1, 1997.

         (c)      REPEAL OF FAMILY AGGREGATION RULES: The family aggregation
                  rules that were described in Code ss.414(q)(6) as in effect
                  prior to January 1, 1997 will not apply to this Plan for Plan
                  Years beginning on or after January 1, 1997.

1.35     HOUR OF SERVICE
         The term Hour of Service means, with respect to any provision of the
         Plan in which service is determined by reference to an Employee's
         Periods of Service, each hour for which an Employee is paid, or is
         entitled to payment, by the Employer or an Affiliated Employer for the
         performance of duties. With respect to any provision of the Plan in
         which service is determined by reference to an Employee's Years of
         Service, the term Hour of Service means the following:

                                     - 14 -


<PAGE>

         (a)      DETERMINATION OF HOURS: The term Hour of Service means (1)
                  each hour an Employee is paid, or entitled to payment, for the
                  performance of duties for the Employer or an Affiliated
                  Employer, which will be credited to the Employee for the
                  computation period in which the duties are performed; (2) each
                  hour for which an Employee is paid, or entitled to payment, by
                  the Employer or an Affiliated Employer on account of a period
                  of time during which no duties are performed (irrespective of
                  whether the employment relationship has terminated) due to
                  vacation, holiday, illness, incapacity (including disability),
                  layoff, jury duty, military duty or leave of absence, except
                  that no more than 501 hours will be credited under this clause
                  (2) for any single continuous period (whether or not such
                  period occurs in a single computation period); and (3) each
                  hour for which back pay, irrespective of mitigation of
                  damages, is either awarded or agreed to by the Employer or an
                  Affiliated Employer, except that the same hours will not be
                  credited both under clause (1) or clause (2) and under this
                  clause (3), and these hours will be credited for the
                  computation period or periods to which the award or agreement
                  pertains rather than the computation period in which the
                  award, agreement or payment is made. Hours of Service will be
                  calculated and credited pursuant to DOL regulation
                  2530.200b-2(b) and (c), which are incorporated herein by
                  reference.

         (b)      MATERNITY OR PATERNITY LEAVE: In determining if a Break in
                  Service for participation and vesting has occurred in a
                  computation period, an individual on Maternity or Paternity
                  Leave will receive credit for up to 501 Hours of Service which
                  would otherwise have been credited but for such absence, or in
                  any case in which such Hours of Service cannot be determined,
                  8 Hours of Service per day of such absence. Hours of Service
                  credited for Maternity or Paternity Leave will be credited in
                  the computation period in which the absence begins if the
                  crediting is necessary to prevent a Break in Service in that
                  period, or in all other cases, in the following computation
                  period.

         (c)      USE OF EQUIVALENCIES: Notwithstanding paragraph (a), the
                  Administrator may elect for all Employees or for one or more
                  different classifications of Employees (provided such
                  classifications are reasonable and are consistently applied)
                  to apply one or more of the following equivalency methods in
                  determining the Hours of Service of an Employee paid on an
                  hourly or salaried basis. Under such equivalency methods, an
                  Employee will be credited with either (1) 190 Hours of Service
                  for each month in which he or she is paid or entitled to
                  payment for at least one Hour of Service; or (2) 95 Hours of
                  Service for each semi-monthly period in which he or she is
                  paid or entitled to payment for at least one Hour of Service;
                  or (3) 45 Hours of Service for each week in which he or she is
                  paid or entitled to payment for at least one Hour of Service;
                  or (4) 10 Hours of Service for each day in which he or she is
                  paid or entitled to payment for at least one Hour of Service.

1.36     KEY EMPLOYEE
         The term Key Employee means any Employee, Former Employee, deceased
         Employee, or Beneficiary who at any time during the Plan Year
         containing the Determination Date for the Plan Year in question or any
         of the prior 4 Plan Years was one of the following:

         (a)      OFFICERS: An officer of the Employer whose Code ss.415
                  Compensation exceeds 50% of the amount in effect under Code
                  ss.415(b)(1)(A), except that no more than fifty Employees (or,
                  if lesser, the greater of three or 10% of the Employees) will
                  be treated as officers.

         (b)      OWNERS: An owner (or was considered an owner under Code
                  ss.318) of one of the ten largest interests in the Employer
                  whose Code ss.415 Compensation exceeds 100% of the dollar
                  limitation in effect under Code ss.415(c)(1)(A), but if two
                  Employees own the same interest in the Employer, the Employee


                                     - 15 -


<PAGE>

                  with the greater annual Code ss.415 Compensation will be
                  treated as owning a larger interest; or a 5% owner of the
                  Employer as defined in Code ss.416(i)(1)(B)(i); or a 1% owner
                  of the Employer as defined in Code ss.416(i)(1)(B)(ii) whose
                  annual Code ss.415 Compensation is more than $150,000.

1.37     LEASED EMPLOYEE
         The term Leased Employee means, for Plan Years beginning on or after
         January 1, 1997, any person within the meaning of Code ss.414(n)(2) and
         ss.414(o) who is not reported on the payroll records of the Employer as
         a common law employee and who provides services to the Employer if (a)
         the services are provided under an agreement between the Employer and a
         leasing organization; (b) the person has performed services for the
         Employer or for the Employer and related persons as determined under
         Code ss.414(n)(6) on a substantially full time basis for a period of at
         least one year; and (c) the services are performed under the primary
         direction and control of the Employer. Contributions or benefits
         provided to a Leased Employee by the leasing organization attributable
         to services performed for the Employer will be treated as provided by
         the Employer. A Leased Employee will not be considered an Employee of
         the recipient if he is covered by a money purchase plan providing (a) a
         non-integrated Employer contribution rate of at least 10% of Code
         ss.415 Compensation, including amounts contributed by the Employer
         pursuant to a salary reduction agreement which are excludible from the
         Leased Employee's gross income under a cafeteria plan covered by Code
         ss.125, a cash or deferred plan under Code ss.401(k), a SEP under Code
         ss.408(k) or a tax-deferred annuity under Code ss.403(b), and also
         including, for Plan Years beginning on or after January 1, 2001, any
         elective amounts that are not includible in the gross income of the
         Leased Employee because of Code ss.132(f)(4); (b) immediate
         participation; and (c) full and immediate vesting. This exclusion is
         only available if Leased Employees do not constitute more than 20% of
         the recipient's non-highly compensated work force.

1.38     LIMITATION YEAR
         The term Limitation Year means the Plan Year.

1.39     MATCHING CONTRIBUTION
         The term Matching Contribution means an Employer contribution made to
         this or any other defined contribution plan on behalf of a Participant
         on account of Voluntary Employee Contributions made by such
         Participant, or on account of a Participant's Elective Deferral, under
         a Plan maintained by the Employer.

1.40     MATCHING CONTRIBUTION ACCOUNT
         The term Matching Contribution Account means the sub-account of a
         Participant's Account to which Matching Contributions are credited.

1.41     MATERNITY OR PATERNITY LEAVE
         The term Maternity or Paternity Leave means that an Employee is absent
         from work because of the Employee's pregnancy; because of the birth of
         the Employee's child; because of the placement of a child with the
         Employee in connection with the adoption of such child by the Employee;
         or because of the need to care for such child for a period beginning
         immediately following the child's birth or placement as set forth
         above.

1.42     NHCE
         The term NHCE means a Non-Highly Compensated Employee.

1.43     NON-ELECTIVE CONTRIBUTIONS
         The term Non-Elective Contribution means an Employer contribution other
         than a Matching Contribution or a QMAC that the Participant may not
         elect to receive in cash until such contributions are distributed from
         the Plan.

                                     - 16 -


<PAGE>

1.44     NON-ELECTIVE CONTRIBUTION ACCOUNT
         The term Non-Elective Contribution Account means the sub-account of a
         Participant's Account to which Non-Elective Contributions are credited.

1.45     NON-HIGHLY COMPENSATED EMPLOYEE
         The term Non-Highly Compensated Employee means any Employee who is not
         a Highly Compensated Employee.

1.46     NON-KEY EMPLOYEE
         The term Non-Key Employee means any Employee who is not a Key Employee.

1.47     NORMAL RETIREMENT AGE
         The term Normal Retirement Age means the date a Participant reaches Age
         59 1/2. There is no mandatory retirement age.

1.48     NORMAL RETIREMENT DATE
         The term Normal Retirement Date means the date a Participant reaches
         Normal Retirement Age.

1.49     OWNER-EMPLOYEE
         The term Owner-Employee means (1) in the case of an Employer or
         Affiliated Employer which is an unincorporated trade or business, an
         individual who owns the entire interest in such Employer or Affiliated
         Employer; and (2) in the case of an Employer or Affiliated Employer
         which is a partnership, an individual who owns more than 10% of either
         the capital interest or the profit interest in such Employer or
         Affiliated Employer.

1.50     PARTICIPANT
         The term Participant means any Employee who has met the eligibility and
         participation requirements of the Plan. However, an individual who is
         no longer an Employee will not be deemed a Participant if his or her
         entire Plan benefit (a) is fully guaranteed by an insurance company and
         is legally enforceable at the sole choice of such individual against
         such insurance company, provided that a contract, Policy, or
         certificate describing the benefits to which such individual is
         entitled under the Plan has been issued to such individual; or (b) is
         paid in a lump sum distribution which represents such individual's
         entire interest in the Plan; or (c) is paid in some other form of
         distribution and the final payment thereunder has been made.

1.51     PARTICIPANT'S ACCOUNT
         The term Participant's Account means the account to which is credited a
         Participant's share of Employer contributions, Forfeitures (if any)
         that are allocated under Section 3.4, investment earnings or losses
         allocated under Section 3.3, and the proceeds of insurance Policies (if
         any) that are purchased on a Participant's life under Section 7.13.
         Each Participant's Account will be divided into the following Employer
         contribution sub-accounts for accounting purposes: the Elective
         Deferral Account, and if applicable, the Matching Contribution Account,
         the Qualified Matching Contribution Account, the Non-Elective
         Contribution Account, the Qualified Non-Elective Contribution Account,
         the Safe Harbor Contribution Account, and any other sub-accounts as the
         Administrator may determine necessary from time to time.

1.52     PERIOD OF SERVICE
         The term Period of Service means a period during which an Employee is
         employed by an Employer or an Affiliated Employer beginning on an
         Employee's Employment Commencement Date or Re-employment Commencement
         Date as defined in paragraph (b), and ending on the Severance from
         Service Date as defined in paragraph (d). For any provision of the Plan
         in which an Employee's service is determined by his or her Period of
         Service, a 1-Year Period of Service and all other Periods of Service
         will be determined in accordance with the following provisions:

                                     - 17 -


<PAGE>

         (a)      CREDIT FOR AN HOUR OF SERVICE AS A PERIOD OF SERVICE: If an
                  Employee performs an Hour of Service during a period which
                  would otherwise be considered a Period of Severance as
                  indicated in paragraph (c) below, the Plan must take into
                  account such period and the Employee will receive credit for
                  such as a Period of Service.

         (b)      DEFINITION OF EMPLOYMENT COMMENCEMENT DATE: The term
                  Employment Commencement Date means the first day an Employee
                  performs an Hour of Service for an Employer or an Affiliated
                  Employer; and the term Reemployment Commencement Date means
                  the first day following a Period of Severance on which an
                  Employee performs an Hour of Service for an Employer or an
                  Affiliated Employer.

         (c)      DEFINITION OF PERIOD OF SEVERANCE: The term Period of
                  Severance means the period beginning on the Severance from
                  Service Date and ending on the Reemployment Commencement Date.
                  A Participant will incur a 1-Year Period of Severance if the
                  Employee fails to perform an Hour of Service during a
                  12-consecutive month period following the earlier of either
                  (1) the Severance from Service Date on which an Employee
                  retires, dies, quits or is discharged from employment by an
                  Employer or an Affiliated Employer, or (2) the Severance from
                  Service Date on which an Employee remains absent from service
                  with an Employer or an Affiliated Employer (with or without
                  pay) for any reason other than the Employee retiring, dying,
                  quitting or being discharged from employment by an Employer or
                  an Affiliated Employer, such as for vacation, holiday,
                  illness, incapacity (including disability), layoff, jury duty,
                  military duty or leave of absence. In the case of a
                  Participant who is on Maternity or Paternity Leave, the
                  12-consecutive month period beginning on the first anniversary
                  of the first day of such Maternity or Paternity Leave will not
                  constitute a Period of Severance. If the Employee does perform
                  an Hour of Service during the periods indicated in clauses (1)
                  or (2) above, the Plan must take into account such period and
                  the Employee will receive credit for such as a Period of
                  Service.

         (d)      DEFINITION OF SEVERANCE FROM SERVICE DATE: The term Severance
                  from Service Date means the date on which an Employee retires,
                  dies, quits or is discharged from employment by an Employer or
                  an Affiliated Employer; or if earlier the first anniversary of
                  the date on which an Employee remains absent from service with
                  an Employer or an Affiliated Employer (with or without pay)
                  for any reason other than the Employee retiring, dying,
                  quitting or being discharged from employment by an Employer or
                  an Affiliated Employer, such as for vacation, holiday,
                  illness, incapacity (including disability), layoff, jury duty,
                  military duty or leave of absence.

         (e)      AGGREGATING PERIODS OF SERVICE AND FRACTIONAL PERIODS OF
                  SERVICE: A 1-Year Period of Service is a 12-consecutive month
                  Period of Service. An Employee will receive credit for Periods
                  of Service of less than 12 consecutive months, by aggregating,
                  subject to the limitations below, all non-successive Periods
                  of Service and all Periods of Service which are fractional
                  years or which do not constitute a whole 1-Year Period of
                  Service, whether or not consecutive. Fractional periods of a
                  year are expressed in terms of days, on the basis that a day
                  of service is credited if an Employee completes an Hour of
                  Service during such day, and on the basis that 12 months of
                  service (30 days being deemed to be a month in the case of the
                  aggregation of fractional months) or 365 days of service
                  equals a 1-Year Period of Service.

                                     - 18 -


<PAGE>

         (f)      PRIOR SERVICE CREDIT: An Employee will not receive credit for
                  Periods of Service with any other entity except as otherwise
                  set forth herein with respect to the Employer, an Affiliated
                  Employer, and any business that was an Adopting Employer.

         (g)      REEMPLOYMENT BEFORE A 1-YEAR PERIOD OF SEVERANCE: If an
                  Employee terminates employment but is re-employed by the
                  Employer before a Period of Severance, his or her Periods of
                  Service and employment will not be deemed to have been
                  interrupted during such Plan Year and, if the Employee was a
                  Participant (or otherwise satisfied the requirements for
                  participation specified in Section 2.1 of the Plan), he or she
                  will remain (or become) a Participant immediately upon his or
                  her re-employment by the Employer. If an Employee was not a
                  Participant in the Plan but otherwise satisfied the
                  requirements for participation specified in the Plan, he or
                  she will become a Participant on the later of the date the
                  Employee would have entered the Plan had he or she not
                  terminated employment with the Employer, or upon his
                  Reemployment Commencement Date.

         (h)      REEMPLOYMENT AFTER A 1-YEAR PERIOD OF SEVERANCE: If a former
                  Employee terminates employment and is re-employed by an
                  Employer or an Affiliated Employer after a 1-Year Period of
                  Severance, Periods of Service completed prior to the 1-Year
                  Period of Severance will be counted, subject to the following:

                  (1)      DETERMINATION OF PERIODS OF SERVICE FOR ELIGIBILITY:
                           For eligibility purposes, if such Employee did not
                           have a Vested Interest in his or her Participant's
                           Account before the 1-Year Period of Severance and the
                           number of the Employee's consecutive 1-Year Periods
                           of Severance equals or exceeds the greater of five or
                           the aggregate number of 1-Year Periods of Service,
                           Periods of Service completed prior to the 1-Year
                           Period of Severance will not be counted. The
                           aggregate number of 1-Year Periods of Service will
                           not include any Period of Service previously
                           disregarded hereunder by reason of prior 1-Year
                           Periods of Severance. If such Employee's Periods of
                           Service are disregarded under this paragraph, he or
                           she will be treated as a new Employee for eligibility
                           purposes.

                  (2)      DETERMINATION OF PERIODS OF SERVICE FOR PURPOSES
                           OTHER THAN ELIGIBILITY: For all purposes other than
                           eligibility, if the Employee has incurred five
                           consecutive 1-Year Periods of Severance, Periods of
                           Service completed prior to such five consecutive
                           1-Year Periods of Severance will not be counted for
                           such purposes if the Participant did not have a
                           Vested Interest in his or her Participant's Account
                           and the number of the Employee's consecutive 1-Year
                           Periods of Severance equals or exceeds the aggregate
                           number of 1-Year Periods of Service before such
                           period.

                  (3)      ENTRY OR REENTRY INTO THE PLAN: If such Employee was
                           a Participant before the 1-Year Period of Severance,
                           such Employee will be reinstated as a Participant
                           upon his or her Reemployment Commencement Date. If
                           the Employee was not a Participant before incurring
                           the 1-Year Period of Severance but (A) had satisfied
                           the eligibility requirements in Section 2.1, such
                           Employee will enter the Plan as a Participant on the
                           later of his or her Reemployment Commencement Date or
                           the date the Employee would have entered the Plan had
                           he or she not terminated employment with the
                           Employer; or (B) had not satisfied the eligibility
                           requirements set forth in Section 2.1, such Employee
                           will be eligible to enter the Plan as a Participant
                           after satisfaction of any such eligibility
                           requirements, in which event the Employee will enter
                           the Plan as a Participant on the applicable entry
                           date set forth in Section 2.2. In all events, the
                           Employee will receive credit for all Periods of
                           Service which were completed prior to the 1-Year
                           Period of Severance.

                                     - 19 -


<PAGE>

                  (4)      RE-ENTRY FOR PURPOSES OF MAKING DEFERRALS:
                           Notwithstanding the preceding subparagraph, such
                           Employee, solely for the purpose of making Elective
                           Deferrals, will re-enter the Plan immediately upon
                           re-employment.

         (i)      IGNORING SERVICE FOR ELIGIBILITY IF MORE THAN 1-YEAR PERIOD OF
                  SERVICE IS REQUIRED: If this Plan at any time provides that an
                  Employee must complete more than either a 1-Year Period of
                  Service or 12 months of service for eligibility purposes, and
                  provides that an Employee will have a 100% Vested Interest in
                  his or her Participant's Account upon becoming a Participant
                  in the Plan, then the Period of Service of an Employee who
                  incurs a 1-Year Period of Severance before satisfying such
                  eligibility requirement will not be counted for eligibility
                  purposes.

1.53     PERIOD OF SEVERANCE
         See Section 1.52(c).

1.54     PERMISSIVE AGGREGATION GROUP
         The term Permissive Aggregation Group means a Required Aggregation
         Group plus any Employer plan(s) which when considered as a group with
         the Required Aggregation Group would continue to satisfy Code
         ss.401(a)(4) and ss.410.

1.55     PLAN
         The term Plan means this plan and trust agreement, which is named the
         Hot Topic, Inc. 401(k) Profit Sharing Plan.

1.56     PLAN YEAR
         The term Plan Year means the Plan's accounting year beginning January
         1st and ending the following December 31st.

1.57     POLICY
         The term Policy means a life insurance policy or annuity contract
         purchased pursuant to the provisions of Section 7.13 of the Plan.

1.58     QMAC
         The term QMAC means a Qualified Matching Contribution.

1.59     QNEC
         The term QNEC means a Qualified Non-Elective Contribution.

1.60     QUALIFIED JOINT AND SURVIVOR ANNUITY
         The term Qualified Joint and Survivor Annuity means an immediate
         annuity for the life of the Participant with a survivor benefit for the
         life of the Participant's Spouse that is not less than 50% or more than
         100% of the annuity payable during the joint lives of the Participant
         and his or her Spouse and is the benefit that can be purchased with the
         Participant's Vested Aggregate Account. The survivor benefit will be
         50% unless a higher percentage is elected by the Participant.

1.61     QUALIFIED MATCHING CONTRIBUTION
         The term Qualified Matching Contribution means a Matching Contribution
         that (a) is used for the purpose of satisfying the ADP Test or the ACP
         Test; (b) a Participant may not elect to receive in cash until
         distributed from the Plan; and (c) is subject to the distribution and
         nonforfeitability requirements of Code ss.401(k) when made to the Plan.

                                     - 20 -


<PAGE>

1.62     QUALIFIED NON-ELECTIVE CONTRIBUTION
         The term Qualified Non-Elective Contribution means a contribution
         (other than a Matching Contribution or a Qualified Matching
         Contribution) that is made by the Employer that (a) is used for the
         purpose of satisfying the ADP Test or the ACP Test; (b) a Participant
         may not elect to receive in cash until distributed from the Plan; and
         (c) is subject to the distribution and nonforfeitability requirements
         of Code ss.401(k) when made to the Plan. Qualified Non-Elective
         Contributions may be considered in determining the Top Heavy Minimum
         Contribution under Section 3.5. For any Plan Year in which the Employer
         elects Current Year Testing under Sections 1.2 and/or 1.10, in lieu of
         distributing Excess Contributions under Section 5.20 or Excess
         Aggregate Contributions under Section 5.21, the Employer may make a
         Qualified Non-Elective Contribution on behalf of Participants in an
         amount sufficient to satisfy the ADP Test and/or the ACP Test, to the
         extent permitted in Sections 1.2 and 1.10.

1.63     QUALIFIED PRERETIREMENT SURVIVOR ANNUITY
         The term Qualified Preretirement Survivor Annuity means a survivor
         annuity for the life of a deceased Participant's surviving Spouse that
         is equal to the amount of benefit that can be purchased by 50% of the
         deceased Participant's Vested Aggregate Account balance determined at
         the date of death. In determining a Participant's Vested Aggregate
         Account balance for purposes of this Section, any security interest
         held by the Plan because of a loan outstanding to the Participant will
         be taken into consideration.

1.64     REQUIRED AGGREGATION GROUP
         The term Required Aggregation Group means (a) each qualified deferred
         compensation Plan of the Employer in which at least one Key Employee
         participates or participated at any time during the determination
         period (regardless of whether the plan has terminated), and (b) any
         other qualified deferred compensation plan of the Employer which
         enables a plan described in (a) to meet the requirements of Code
         ss.401(a)(4) or ss.410.

1.65     REQUIRED BEGINNING DATE
         The term Required Beginning Date means, for Plan Years beginning on or
         after January 1, 1997, for a Participant who is not a 5% owner, April
         1st of the calendar year following the later of the calendar year in
         which the Participant reaches Age 70 1/2 or the calendar year in which
         the Participant actually retires. For a Participant who is a 5% owner,
         the term Required Beginning Date means April 1st of the calendar year
         following the calendar year in which the Participant reaches Age 70
         1/2. A Participant will be treated as a 5% owner if he or she is a 5%
         owner as defined in Code ss.416 at any time during the Plan Year ending
         with or within the calendar year in which such Participant reaches Age
         70 1/2. Once distributions have begun to a 5% owner, they must continue
         even if the Participant ceases to be a 5% owner in a subsequent year.
         Notwithstanding the foregoing to the contrary, however, a Participant
         may have a later Required Beginning Date determined as follows:

         (a)      ELIMINATION OF PRE-RETIREMENT AGE 70 1/2 DISTRIBUTION OPTION:
                  The pre-retirement Age 70 1/2 distribution option will only be
                  eliminated for Employees who reach Age 70 1/2 in or after a
                  calendar year that begins after the later of December 31,
                  1998, or the adoption date of this amended Plan. The
                  pre-retirement Age 70 1/2 distribution option is an optional
                  form of benefit under which benefits payable in a particular
                  distribution form (including any modifications that may be
                  elected after benefit commencement) begin at a time during the
                  period that begins on or after January 1st of the calendar
                  year in which an Employee reaches Age 70 1/2 and ends April 1
                  of the immediately following calendar year.

                                     - 21 -


<PAGE>

         (b)      ELECTION TO DEFER: If the Administrator offered an election to
                  defer distributions, a Participant who is not a 5% owner who
                  reaches Age 70 1/2 in years after 1995 and who made the
                  election by April 1st of the calendar year following the year
                  in which he or she reached Age 70 1/2 (or by December 31, 1997
                  in the case of a Participant who reached Age 70 1/2 in 1996)
                  may defer distribution until the calendar year following the
                  calendar year in which his or her retirement occurs. If the
                  Administrator does not offer such an election, or if the
                  election is offered but not made, the Participant will begin
                  receiving distributions by April 1st of the calendar year
                  following the year in which he or she reaches age 70 1/2 (or
                  by December 31, 1997 in the case of a Participant who reached
                  Age 70 1/2 in 1996).

         (c)      ELECTION TO SUSPEND: If the Administrator offered an election
                  to suspend distributions, a Participant who is not a 5% owner
                  who reaches Age 70 1/2 prior to 1997 and who made the election
                  may stop distributions and recommence by April 1st of the
                  calendar year following the year in which the Participant
                  actually retires. In such an event, the Administrator may, on
                  a uniform non-discriminatory basis, elect that a new Annuity
                  Starting Date will begin upon the distribution recommencement
                  date.

1.66     ROLLOVER ACCOUNT
         The term Rollover Account means the account to which a Participant's
         Rollover Contributions (if permitted under Section 3.7) are allocated.
         A Participant will at all times have a 100% Vested Interest in all
         amounts credited to his or her Rollover Account.

1.67     ROLLOVER CONTRIBUTION
         The term Rollover Contribution means an amount transferred to this Plan
         (a) in a trustee to trustee transfer from another qualified plan; (b)
         from another qualified plan as a distribution eligible for tax free
         rollover treatment and which is transferred by the Participant to this
         Plan within 60 days following his receipt thereof; (c) from a conduit
         individual retirement account if the only assets therein were
         previously distributed to the Participant by another qualified plan as
         a distribution eligible for a tax free rollover within 60 days of
         receipt thereof and earnings on the assets; or (d) from a conduit
         individual retirement account meeting the requirements of (a) and
         transferred to this Plan within 60 days of receipt thereof.. Any
         portion of a Rollover Contribution made under clause (a) as part of a
         trustee to trustee transfer which was subject at the time of the
         transfer to the Qualified Joint and Survivor Annuity and Qualified
         Pre-retirement Survivor Annuity requirements of Code ss.401(a)(11) must
         be distributed in accordance with Section 5.16.

1.68     SAFE HARBOR CONTRIBUTION ACCOUNT
         The term Safe Harbor Contribution Account means the sub-account of a
         Participant's Account to which is credited any Employer "safe harbor"
         contributions that are made to the Plan pursuant to the provisions of
         Section 3.6.

1.69     SELF-EMPLOYED INDIVIDUAL
         The term Self-Employed Individual means anyone who owns an interest
         (other than stock) in the Employer and has Earned Income for the Plan
         Year or who would have had Earned Income but for the fact the Employer
         had no net profits for the Plan Year.

1.70     SHAREHOLDER-EMPLOYEE
         The term Shareholder-Employee means, in the case of an Employer or
         Affiliated Employer which is an electing small business corporation, an
         individual who is an employee or officer of such electing small
         business corporation and owns, or is considered as owning within the
         meaning of Code ss.318(a)(1), on any day during the taxable year of
         such corporation, more than 5% of the outstanding stock of the
         corporation.

                                     - 22 -


<PAGE>

1.71     SPONSOR
         The term Sponsor means Hot Topic, Inc. (and any successor thereto that
         elects to assume sponsorship of this Plan).

1.72     SPOUSE
         The term Spouse means the person to whom a Participant is legally
         married; provided, however, that such person has been married to the
         Participant throughout the one year period ending on the earlier of the
         Annuity Starting Date or the date of the Participant's death.

1.73     TERMINATION OF EMPLOYMENT
         The term Termination of Employment means that a Participant has ceased
         to be an Employee for reasons other than retirement, death, or
         Disability.

1.74     TERMINATED PARTICIPANT
         The term Terminated Participant means a Participant who has ceased to
         be an Employee for reasons other than retirement, death or Disability.

1.75     TOP HEAVY
         The term Top Heavy means for any Plan Year beginning after December 31,
         1983 (a) that the Top Heavy Ratio exceeds 60% and the Plan is not part
         of a Required Aggregation Group or Permissive Aggregation Group; or (b)
         that the Plan is a part of a Required Aggregation Group but not a
         Permissive Aggregation Group and the Top Heavy Ratio for the group
         exceeds 60%; or (c) that the Plan is a part of a Required Aggregation
         Group and a Permissive Aggregation Group and the Top Heavy Ratio for
         the Permissive Aggregation Group exceeds 60%.

1.76     TOP HEAVY MINIMUM ALLOCATION
         The term Top Heavy Minimum Allocation means an amount of Employer
         contributions and Forfeitures equal to 3% of an Employee's Compensation
         (or such higher or lesser percentage of Compensation as may otherwise
         be indicated in Section 3.5).

1.77     TOP HEAVY RATIO
         In determining if this Plan is Top Heavy or Super Top Heavy, the Top
         Heavy Ratio will be determined in accordance with the following
         provisions:

         (a)      RULE 1: If the Employer maintains one or more defined
                  contribution plans (including any simplified employee pension
                  plans) and has not maintained any defined benefit plan which
                  during the 5-year period ending on the Determination Date had
                  accrued benefits, the Top Heavy Ratio for this Plan alone or
                  for the Required or Permissive Aggregation Group is a
                  fraction, the numerator of which is the sum of the account
                  balances of all Key Employees as of the Determination Date
                  (including any part of any account balance distributed during
                  the 5-year period ending on the Determination Date), and the
                  denominator of which is the sum of the account balances
                  (including any part of any account balance distributed during
                  the 5-year period ending on the Determination Date) determined
                  under Code ss.416 and the regulations thereunder. Both the
                  numerator and the denominator of the Top Heavy Ratio will be
                  increased to reflect any contribution that are not actually
                  made as of the Determination Date but that are required to be
                  taken into account under Code ss.416 and the regulations
                  thereunder.

         (b)      RULE 2: If the Employer maintains one or more defined
                  contribution plans (including a simplified employee pension
                  plan) and maintains or has maintained one or more defined
                  benefit plans which during the 5-year period ending on the
                  Determination Date has had any accrued benefits, the Top Heavy
                  Ratio for any Required or Permissive Aggregation Group is a
                  fraction, the numerator of which is the sum of account


                                     - 23 -


<PAGE>

                  balances under the aggregated defined contribution plans for
                  all Key Employees determined in accordance with paragraph (a)
                  above, and the present value of accrued benefits under the
                  aggregated defined benefit plans for all Key Employees as of
                  the Determination Date, and the denominator of which is the
                  sum of the account balances under the aggregated defined
                  contribution plans for all Participants, determined in
                  accordance with paragraph (a), and the present value of
                  accrued benefits under the aggregated defined benefit plans
                  for all Participants as of the Determination Date, all
                  determined under Code ss.416 and the regulations thereunder.
                  The accrued benefits under a defined benefit plan in both the
                  numerator and denominator of the Top Heavy Ratio are increased
                  for any distribution made in the 5-year period ending on the
                  Determination Date.

         (c)      RULE 3: For purposes of paragraphs (a) and (b), the value of
                  account balances and the present value of accrued benefits
                  will be determined as of the most recent Valuation Date that
                  falls within or ends with the 12-month period ending on the
                  Determination Date, except as provided in Code ss.416 and the
                  regulations thereunder for the first and second Plan Years of
                  a defined benefit plan. The account balances and accrued
                  benefits will be disregarded for a Participant who (1) is not
                  a Key Employee but who was a Key Employee in a prior year or
                  (2) has not been credited with at least 1 Hour of Service with
                  any Employer maintaining the Plan at any time during the
                  5-year period ending on the Determination Date. The
                  calculation of the Top Heavy Ratio and the extent to which
                  distributions, rollovers, and transfers are taken into account
                  will be made in accordance with Code ss.416 and the
                  regulations thereunder. When aggregating plans, the value of
                  accounts and accrued benefits will be calculated with
                  reference to the Determination Date that falls within the same
                  calendar year. The accrued benefit of a Participant other than
                  a Key Employee will be determined under (1) the method, if
                  any, that uniformly applies for accrual purposes under all
                  defined benefit plans maintained by the Employer, or (2)
                  effective as of the first Plan Year beginning after December
                  31, 1986, if there is no such method, as if such benefit
                  accrued not more rapidly than the slowest accrual rate
                  permitted under the fractional rule of Code ss.411(b)(1)(C).
                  Deductible employee contributions will not be taken into
                  account in determining the Top Heavy Ratio.

         (d)      DEFINITION OF DETERMINATION DATE: In determining the Top Heavy
                  Ratio, the term Determination Date means the last day of the
                  preceding Plan Year except for the first Plan Year when the
                  Determination Date means the last day of such first Plan Year.

1.78     TRUSTEE
         The term Trustee means the person(s) or entity named as trustee or
         trustees in this Plan, or in any superseding trust under Section 7.16,
         and any successor to such Trustee or Trustees.

1.79     TRUST FUND
         The term Trust Fund or Trust means the assets of the Plan.

1.80     VALUATION DATE
         Except as otherwise provided in paragraph (c) of the definition of Top
         Heavy Ratio, the term Valuation Date means the date on which the
         Trustee determines the value of the Trust Fund. The Trust Fund must be
         valued at least annually as of the last day of the Plan Year, but the
         Administrator can elect to have all or any portion of the assets of the
         Trust Fund valued more frequently, including, but not limited to,
         semi-annually, quarterly, monthly, or daily.

                                     - 24 -


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1.81     VESTED AGGREGATE ACCOUNT
         The term Vested Aggregate Account means the aggregate amount in a
         Participant's Account, Rollover Account (if any), Voluntary Employee
         Contribution Account (if any), and any other accounts as the
         Administrator may determine necessary from time to time, in which the
         Participant has a Vested Interest.

1.82     VESTED, VESTED INTEREST OR VESTING
         The terms Vested, Vested Interest, and Vesting mean a Participant's
         nonforfeitable percentage in an account maintained on his or her behalf
         under the terms of the Plan. A Participant's Vested Interest in his or
         her Participant's Account will be determined under the provisions of
         Section 4.6.

1.83     VOLUNTARY EMPLOYEE CONTRIBUTION
         The term Voluntary Employee Contribution means a non-deductible
         contribution made to the Plan by a Participant.

1.84     VOLUNTARY EMPLOYEE CONTRIBUTION ACCOUNT
         The term Voluntary Employee Contribution Account means the account to
         which a Participant's Voluntary Employee Contributions are allocated. A
         Participant will at all times have a 100% Vested Interest in all
         amounts credited to his or her Voluntary Employee Contribution Account.

                                     - 25 -


<PAGE>

                                    ARTICLE 2
                               PLAN PARTICIPATION

2.1      ELIGIBILITY REQUIREMENTS
         Any Employee who was a Participant on December 31, 2002 will be
         eligible to continue as a Participant. Any other Employee who was not
         already a Participant on December 31, 2002 and is in an eligible class
         of Employees as described in paragraphs (a), (b) and (c) below, and who
         for purposes of this Article 2 is hereafter referred to as an Eligible
         Employee, will become eligible to enter the Plan as a Participant on
         the applicable entry date described in Section 2.2 in accordance with
         the following provisions:

         (a)      ELIGIBILITY FOR ELECTIVE DEFERRALS: The eligibility
                  requirements for the purpose of making Elective Deferrals to
                  the Plan are as follows:

                  (1)      GENERAL ELIGIBILITY REQUIREMENTS: For the purpose of
                           making Elective Deferrals only, an Eligible Employee
                           described in subparagraph (2) will enter the Plan as
                           a Participant on the applicable entry date in Section
                           2.2 upon reaching Age 21 and completing a 1-Year
                           Period of Service.

                  (2)      ELIGIBLE CLASSES OF EMPLOYEES: For the purpose of
                           making Elective Deferrals, all Employees are eligible
                           to participate in the Plan upon satisfying the
                           eligibility requirements in subparagraph (1) except
                           for the following ineligible classes of Employees:
                           (1) Employees whose employment is governed by the
                           terms of a collective bargaining agreement between
                           Employee representatives and the Employer in which
                           retirement benefits were the subject of good faith
                           bargaining, unless such agreement expressly provides
                           for the inclusion of such Employees as Participants
                           in the Plan; (2) Employees who are non-resident
                           aliens who do not receive any earned income from the
                           Employer which constitutes income from sources within
                           the United States; and (3) Any person who is
                           considered a Leased Employee but who (A) is not
                           covered by a plan described in Code ss.414(n)(5), or
                           (B) is covered by a plan described in Code
                           ss.414(n)(5) but Leased Employees constitute more
                           than 20% of the Employer's non-highly compensated
                           workforce.

         (b)      ELIGIBILITY FOR MATCHING CONTRIBUTIONS: Matching Contributions
                  are not currently permitted under the terms of the Plan.

         (c)      ELIGIBILITY FOR NON-ELECTIVE CONTRIBUTIONS: Non-Elective
                  Contributions are not currently permitted under the terms of
                  the Plan.

         (d)      PARTICIPATION BY EMPLOYEES WHOSE STATUS CHANGES: If an
                  Employee who is not an Eligible Employee under paragraphs (a),
                  (b) or (c) above becomes an Eligible Employee thereunder, such
                  Employee will participate in the Plan immediately solely for
                  the purpose set forth therein if he or she satisfies the
                  eligibility requirements set forth in such paragraph and would
                  have previously become a Participant for the purpose set forth
                  in such paragraph had he or she been an Eligible Employee
                  under such paragraph. The participation of a Participant who
                  becomes a member of an ineligible class will be suspended, and
                  such Participant will be entitled to an allocation of Employer
                  contributions and Forfeitures for the Plan Year only to the
                  extent of Hours of Service completed while an Eligible
                  Employee. Upon returning to an eligible class of Employees, a
                  suspended Participant will immediately participate again in
                  the Plan. The Vested Interest of an Employee who ceases to be
                  an Eligible Employee will continue to increase in accordance
                  with Section 4.6.

                                     - 26 -


<PAGE>

         (e)      PARTICIPATION BY FORMER PARTICIPANTS: A Participant who
                  terminates employment with the Employer for any reason but who
                  is reemployed as an Eligible Employee will again become a
                  Participant in the Plan as provided in the definition of
                  Period of Service.

2.2      ENTRY DATE
         An Eligible Employee who has satisfied the eligibility requirements set
         forth in Section 2.1 will enter the Plan as a Participant in accordance
         with the following provisions:

         (a)      ENTRY DATE FOR ELECTIVE DEFERRALS: In order to make Elective
                  Deferrals, an Eligible Employee described in Section 2.1(a)(2)
                  who satisfies the eligibility requirements in Section
                  2.1(a)(1) will enter the Plan as a Participant on the first
                  day of the month that coincides with or next follows the date
                  on which the Employee first satisfies such eligibility
                  requirements.

         (b)      ENTRY DATE FOR MATCHING CONTRIBUTIONS: Matching Contributions
                  are not currently permitted under the terms of this Plan

         (c)      ENTRY DATE FOR NON-ELECTIVE CONTRIBUTIONS: Non-Elective
                  Contributions are not currently permitted under the terms of
                  this Plan

2.3      WAIVER OF PARTICIPATION
         Employees who have satisfied the eligibility requirements set forth in
         Section 2.1 are not permitted to waive participation in the Plan.

2.4      PARTICIPATION UPON REEMPLOYMENT
         If an Employee terminates employment and is re-employed by the Employer
         or an Affiliated Employer, his or her Period of Service for purposes of
         eligibility (as well as the time such Employee enters or re-enters the
         Plan as a Participant) will be determined in accordance with the rules
         described in the definition of Period of Service.

2.5      EXCLUSION OF ELIGIBLE EMPLOYEE
         If any Employee who should have been included as a Participant is
         erroneously excluded from the Plan in any Plan Year and discovery of
         such omission is not made until after a contribution for that Plan Year
         has been allocated, the Employer will correct the omission so that the
         omitted Employee receives the same amount which the Employee would have
         received had he or she not been omitted. Such omission can be corrected
         by one or more of the following methods: (a) by making an additional
         contribution to the Plan on behalf of the omitted Employee; (b) by
         allocating any available Forfeitures on behalf of the omitted Employee;
         and/or (c) by any other method of correction permitted under Revenue
         Procedure 2000-16 or any subsequent Revenue Procedure or guidance
         issued by the Internal Revenue Service.

2.6      INCLUSION OF INELIGIBLE EMPLOYEE
         If any person who should not have been included as a Participant is
         erroneously included in any Plan Year and discovery of that incorrect
         inclusion is not made until after a contribution for that Plan Year has
         been allocated, and such ineligible Employee has not received a
         distribution of the amount erroneously allocated to him or her, then
         the amount erroneously contributed with respect to the ineligible
         Employee cannot be refunded to the Employer and will be applied as a
         Forfeiture (other than Elective Deferrals, which will be distributed to
         the ineligible Employee) for the Plan Year in which the error is
         discovered.

                                     - 27 -


<PAGE>

                                   ARTICLE 3
                          CONTRIBUTIONS AND ALLOCATIONS

3.1      EMPLOYER CONTRIBUTIONS
         Each Plan Year the Employer will make a contribution to the Plan, the
         amount of which will be determined in accordance with the following
         provisions:

         (a)      ELECTIVE DEFERRALS: Each Participant may enter into a Salary
                  Deferral Agreement authorizing the Employer to withhold a
                  percentage of the Participant's Compensation as an Elective
                  Deferral. The amount of each Participant's Elective Deferral
                  for any Plan Year will be determined in accordance with the
                  following provisions, subject to any limitations thereon that
                  may be imposed by the Administrator:

                  (1)      DEFERRAL PERCENTAGE: For each contribution period, a
                           Participant may elect that up to the maximum amount
                           of Compensation that will not cause the Plan to
                           violate the ADP Test for the Plan Year be withheld as
                           an Elective Deferral. Elective Deferrals may be made
                           in whole percentages of Compensation or in specific
                           dollar amounts as designated by the Participant. The
                           Administrator will have the right to direct that such
                           percentages of Compensation be rounded to the next
                           highest or lowest dollar. Furthermore, on a uniform
                           nondiscriminatory basis, the Administrator may permit
                           a Participant to identify separate components of the
                           Participant's Compensation (such as base salary,
                           bonuses, etc.) and to specify that a different
                           percentage (or dollar amount) apply to each such
                           component.

                  (2)      ANNUAL DOLLAR LIMITATION: The actual dollar amount
                           withheld during the course of a Plan Year under
                           subparagraph (1) cannot exceed the lesser of (A) the
                           maximum dollar amount permitted for that Plan Year
                           under Code ss.402(g)(5), or (B) the maximum amount
                           permitted for that Plan Year under subparagraph (1).

                  (3)      DEFERRAL ELECTION WITH RESPECT TO BONUSES AND
                           SEVERANCE: On a uniform nondiscriminatory basis, and
                           subject to the limits set forth in subparagraph (2)
                           above, the Administrator may permit a Participant to
                           make an election to defer up to 100% of (A)
                           Compensation received as a bonus that is paid after
                           the end of the Plan Year for which the bonus is
                           payable, but which is not paid more than two and
                           one-half months after the last day of the Plan Year;
                           and (B) Compensation received as severance pay
                           provided such Compensation is received in a single
                           lump sum payment. Severance pay that is received in
                           the form of installment payments is not eligible for
                           Elective Deferrals under this Plan.

                  (4)      SALARY REDUCTION AGREEMENT: In accordance with such
                           procedures as may be specified by the Administrator,
                           each Participant will complete a Salary Deferral
                           Agreement on a form made available by, and filed
                           with, the Administrator. A Participant may, in
                           accordance with those procedures, (A) amend the
                           agreement to increase or decrease the percentage
                           being withheld; and (B) suspend or cancel the
                           agreement. If a Participant cancels or suspends the
                           agreement, the Participant will not be permitted to
                           put a new agreement into effect until such time as
                           set forth in the procedures established by the
                           Administrator. If necessary to insure that the Plan
                           satisfies the ADP Test, the Administrator may also
                           amend or terminate a Participant's agreement on
                           written notice to the Participant.

                                     - 28 -


<PAGE>

                  (5)      PARTICIPANT ELECTION TO DEFER UP TO 100% OF
                           COMPENSATION: On a uniform nondiscriminatory basis,
                           the Administrator may permit a Participant whose
                           Salary Deferral Agreement has not authorized the
                           Employer to withhold at the maximum rate permitted
                           under subparagraph (1) to increase the total amount
                           withheld for a Plan Year to the maximum rate
                           permitted under subparagraph (1), in which event the
                           Participant may authorize the Employer to withhold a
                           supplemental amount up to 100% of his or her eligible
                           Compensation for one or more pay periods. In no event
                           can the sum of the amount withheld under the Salary
                           Deferral Agreement plus the supplemental withholding
                           exceed the lesser of (A) the maximum amount permitted
                           under subparagraph (1) above; or (B) the maximum
                           dollar amount permitted for that Plan Year under Code
                           ss.402(g)(5); or (C) 25% of the Participant's Code
                           ss.415 Compensation for that Plan Year.

                  (6)      ELECTIVE DEFERRALS MUST SATISFY ADP TEST: All
                           Elective Deferrals made for a Plan Year must satisfy
                           the ADP Test. Elective Deferrals that exceed the Code
                           ss.402(g)(5) dollar limitation will be deemed Excess
                           Elective Deferrals and will be returned under Section
                           5.19. Elective Deferrals that do not satisfy the ADP
                           Test will be deemed Excess Contributions and will be
                           returned under Section 5.20.

                  (7)      PAYROLL DEDUCTION AUTHORIZATION: An Elective Deferral
                           will constitute a payroll deduction authorization for
                           purposes of applicable state law.

         (b)      MATCHING CONTRIBUTIONS: Matching Contributions are not
                  currently permitted.

         (c)      NON-ELECTIVE CONTRIBUTIONS: Non-Elective Contributions are not
                  currently permitted.

         (d)      QUALIFIED MATCHING CONTRIBUTIONS: The Employer may make a
                  Qualified Matching Contribution each Plan Year in such amount
                  as the Employer, in its sole discretion, may determine. The
                  Employer may also elect to treat all or any portion of a
                  Matching Contribution as a Qualified Matching Contribution.

         (e)      QUALIFIED NON-ELECTIVE CONTRIBUTIONS: The Employer may elect
                  to make a Qualified Non-Elective Contribution each Plan Year
                  in such amount as the Employer determines. The Employer may
                  also elect to treat as a Qualified Non-Elective Contribution
                  all or any portion of a Non-Elective Contribution not yet
                  allocated under Section 3.2(c).

         (f)      CONTRIBUTION PERIOD: Each Plan Year, any contribution that is
                  made under the terms of the Plan may, at the election of the
                  Administrator, be contributed to the Plan each payroll period;
                  each month; each Plan quarter; on an annual basis; or on any
                  other less than annual contribution period basis as determined
                  by the Employer, provided such contribution period does not
                  discriminate in favor of Highly Compensated Employees. The
                  Employer may elect a different contribution period for each
                  type of contribution.

         (g)      CONTRIBUTION LIMITATIONS: Notwithstanding paragraphs (a), (b)
                  and (c), (1) the sum of all Employer contributions will not
                  exceed the maximum amount deductible under Code ss.404 and
                  will not exceed the limitations set forth in Code ss.415; and
                  (2) for Plan Years beginning on or after January 1, 1997, if
                  this Plan provides contributions or benefits for Employees
                  some or all of whom are Owner-Employees, such contributions or
                  benefits can only be provided with respect to the Earned
                  Income of such Owner-Employee which is derived from the trade
                  or business with respect to which the Plan is established.

         (h)      REFUND OF CONTRIBUTIONS: Contributions made to the Plan by the
                  Employer can only be returned to the Employer in accordance
                  with the following provisions:

                                     - 29 -


<PAGE>

                  (1)      FAILURE TO INITIALLY QUALIFY: If the Plan fails to
                           initially satisfy the requirements of Code ss.401(a)
                           and the Employer declines to amend the Plan to
                           satisfy such requirements, contributions made prior
                           to the date such qualification is denied must be
                           returned to the Employer within 1 year of the date of
                           such denial, but only if the application for the
                           qualification is made by the time prescribed by law
                           for filing the Employer's tax return for the taxable
                           year in which the Plan is adopted, or by such later
                           date as the Secretary of the Treasury may prescribe.

                  (2)      CONTRIBUTIONS MADE UNDER A MISTAKE OF FACT: If a
                           contribution is attributable in whole or in part to a
                           good faith mistake of fact, including a good faith
                           mistake in determining the deductibility of the
                           contribution under Code ss.404, then an amount may be
                           returned to the Employer which is equal to the excess
                           of the amount contributed over the amount which would
                           have been contributed had the mistake not occurred.
                           Earnings attributable to any such excess contribution
                           will not be returned, but losses attributable to the
                           excess contribution will reduce the amount so
                           returned. Such amount will be returned within one
                           year of the date the contribution was made or the
                           deduction disallowed, as the case may be.

                  (3)      NONDEDUCTIBLE CONTRIBUTIONS: Except to the extent an
                           Employer may intentionally make a nondeductible
                           contribution, for example to correct an
                           administrative error or restore a Forfeiture, any
                           contribution by the Employer is conditioned on its
                           deductibility and will otherwise be returned to the
                           Employer.

         (i)      FORM OF CONTRIBUTION: The Employer's contribution (if any) may
                  consist of (1) cash; (2) qualifying employer securities or
                  qualifying employer real property as defined in ss.407(d) of
                  ERISA, provided the acquisition of such qualifying employer
                  securities or qualifying real property securities satisfies
                  the requirements of ss.408(e) of ERISA; or (3) any other
                  property that is permitted under Code ss.4975 and is
                  acceptable to the Trustee.

3.2      ALLOCATION OF EMPLOYER CONTRIBUTIONS
         Subject to the Top Heavy allocation requirements under Section 3.5 and
         the Code ss.415 limitations of Article 6, each Eligible Participant's
         share of the various types of Employer contributions made under the
         Plan will be allocated to his or her Participant's Account in
         accordance with the following provisions:

         (a)      ELECTIVE DEFERRALS: Each Participant's Elective Deferrals
                  contributed under Section 3.1(a) will be allocated to the
                  Participant's Elective Deferral Account.

         (b)      MATCHING CONTRIBUTIONS: Matching Contributions are not
                  currently permitted.

         (c)      NON-ELECTIVE CONTRIBUTIONS: Non-Elective Contributions are not
                  currently permitted.

         (d)      QUALIFIED MATCHING CONTRIBUTIONS: Qualified Matching
                  Contributions contributed under Section 3.1(d) and any
                  Matching Contributions permitted and contributed under Section
                  3.1(b) that are treated as QMACs will be allocated in
                  accordance with the following provisions to the Qualified
                  Matching Contribution Account of each Participant for whom a
                  Qualified Matching Contribution is made for the Plan Year:

                  (1)      PARTICIPANTS ELIGIBLE FOR ALLOCATION: Qualified
                           Matching Contributions will be allocated on behalf of
                           each Eligible Participant who for the Plan Year is a
                           Non-Highly Compensated Employee who made an Elective
                           Deferral for the Plan Year and is considered an
                           Eligible Participant for the purpose of receiving a


                                     - 30 -


<PAGE>

                           Matching Contribution allocation, or if eligibility
                           for Matching Contributions is more restrictive than
                           for Elective Deferrals, is considered an Eligible
                           Participant only for the purpose of making Elective
                           Deferrals.

                  (2)      PERMISSIBLE METHODS OF ALLOCATION: Any allocation of
                           Qualified Matching Contributions to an Eligible
                           Participant who is described in subparagraph (1)
                           above will be made using one of the methods described
                           in subparagraphs (2)(A) through (F) below. However,
                           the actual method used for a particular Plan Year
                           will be the method set forth in subparagraph (3)
                           below.

                           (A)      PRO-RATA METHOD: The allocation will be made
                                    in the ratio that the Elective Deferral of
                                    each such Eligible Participant bears to the
                                    total Elective Deferrals of all such
                                    Eligible Participants, except that any
                                    Elective Deferrals that are not used to
                                    determine the basic Matching Contribution
                                    allocated to a Participant under Section
                                    3.1(b) or Section 3.2(b) will not be
                                    counted.

                           (B)      PRO-RATA METHOD USING BOTTOM-UP BASED ON
                                    COMPENSATION: The allocation will be made
                                    beginning with a group of one or more of
                                    such Eligible Participants and who have the
                                    lowest Compensation for the Plan Year and
                                    continuing with the next one or more such
                                    Eligible Participants who have the next
                                    lowest Compensation until no further
                                    allocations are required to pass the ADP or
                                    ACP Tests. The amount so allocated for the
                                    Plan Year to any such Eligible Participant
                                    will be in the ratio that such Eligible
                                    Participant's Elective Deferral bears to the
                                    total Elective Deferrals of all such
                                    Eligible Participants, except that any
                                    Elective Deferrals not used to determine
                                    basic Matching Contributions allocated to a
                                    Participant under Section 3.1(b) or 3.2(b)
                                    will not be counted.

                           (C)      PRO-RATA METHOD USING BOTTOM-UP BASED ON
                                    ELECTIVE DEFERRALS: The allocation will be
                                    made beginning with a group of one or more
                                    of such Eligible Participants for the Plan
                                    Year and who have the lowest Elective
                                    Deferral amount for the Plan Year and
                                    continuing with the next one or more
                                    Eligible Participants who have the next
                                    lowest Elective Deferral amount until no
                                    further allocations are required for the
                                    Plan to pass the ADP or ACP Tests. The
                                    amount so allocated for the Plan Year to any
                                    such Eligible Participant will be in the
                                    ratio that such Eligible Participant's
                                    Elective Deferral bears to the total
                                    Elective Deferrals of all such Eligible
                                    Participants, except that any Elective
                                    Deferrals not used to determine the basic
                                    Matching Contributions allocated to a
                                    Participant under Section 3.1(b) or 3.2(b)
                                    will not be counted.

                           (D)      PER CAPITA METHOD: The amount that is
                                    allocated for the Plan Year to any such
                                    Eligible Participant for the Plan Year will
                                    be on a per capita (equal dollar amount)
                                    basis to each such Eligible Participant.

                           (E)      PER CAPITA METHOD USING BOTTOM-UP BASED ON
                                    COMPENSATION: The allocation will be made
                                    beginning with a group of one or more of
                                    such Eligible Participants who have the
                                    lowest Compensation for the Plan Year and
                                    continuing with the next one or more such
                                    Eligible Participants who have the next
                                    lowest Compensation until no further


                                     - 31 -


<PAGE>

                                    allocations are required for the Plan to
                                    pass the ADP or ACP Tests. The amount so
                                    allocated for the Plan Year to any such
                                    Eligible Participant will be on a per capita
                                    (equal dollar amount) basis to each such
                                    Eligible Participant.

                           (F)      PER CAPITA METHOD USING BOTTOM-UP BASED ON
                                    ELECTIVE DEFERRALS: The allocation will be
                                    made beginning with a group of one or more
                                    of such Eligible Participants who have the
                                    lowest Elective Deferral amount for the Plan
                                    Year and continuing with the next one or
                                    more such Eligible Participants who have the
                                    next lowest Elective Deferral amount until
                                    no further allocations are required for the
                                    Plan to pass the ADP or ACP Tests. The
                                    amount so allocated for the Plan Year to any
                                    such Eligible Participant will be on a per
                                    capita (equal dollar) basis to each such
                                    Eligible Participant.

                  (3)      ACTUAL METHOD OF QMAC ALLOCATION: Until this
                           subparagraph (3) is amended by the Employer to
                           specify a different method of allocation, QMACs will
                           be allocated using the method described in
                           subparagraph (2)(A) above.

                  (4)      PERMISSIBLE DISAGGREGATION: Permissible
                           disaggregation under Code ss.410(b)(4) or
                           ss.401(k)(3)(F) will be used for the ADP and/or ACP
                           Test for the Plan Year to further limit the number of
                           Eligible Participants who receive such allocation to
                           those Participants (i) who also satisfy the maximum
                           minimum age and service requirements of Code
                           ss.410(a)(1)(A) for the purpose of making Elective
                           Deferrals or eligibility to share in Matching
                           Contributions, or (ii) to those Participants who do
                           not satisfy the maximum minimum age and service
                           requirements of Code ss.410(a)(1)(A) for the purpose
                           of making Elective Deferrals or eligibility to share
                           in Matching Contributions; and if permissible
                           disaggregation under Code ss.410(b)(4) is used for
                           the ADP and/or ACP Tests for the Plan Year, the
                           Employer will separately determine the amount to be
                           allocated hereunder with respect to such Eligible
                           Participants in clauses (i) and (ii).

                  (5)      ALLOCATION TO HCES: If the Employer makes an
                           additional Qualified Matching Contribution after no
                           further allocation of QMACs is required for the Plan
                           to pass the ADP and/or ACP Tests, any such
                           contribution will be allocated in the same manner
                           described in subparagraph (3) above (provided however
                           that the ADP and/or ACP Tests continue to be
                           satisfied) to all such Eligible Participants who for
                           the Plan Year are HCEs (or to all such Eligible
                           Participants who are HCEs or NHCEs) who made an
                           Elective Deferral and are considered Eligible
                           Participants for the purpose of receiving a Matching
                           Contribution allocation.

         (e)      QUALIFIED NON-ELECTIVE CONTRIBUTIONS: Qualified Non-Elective
                  Contributions contributed under Section 3.1(e) and
                  Non-Elective Contributions contributed under Section 3.1(c)
                  that are treated as QNECS will be allocated to the Qualified
                  Non-Elective Contribution Account of an Eligible Participant
                  in accordance with the following:

                  (1)      PARTICIPANTS ELIGIBLE FOR ALLOCATION: Subject to
                           subparagraphs (2) and (3) below, Qualified
                           Non-Elective Contributions will be allocated on
                           behalf of each Eligible Participant who for the Plan
                           Year is a Non-Highly Compensated Employee and is
                           considered an Eligible Participant for the purpose of
                           receiving a Non-Elective Contribution allocation for
                           the Plan Year, or if Non-Elective Contributions are
                           not permitted or if eligibility for Non-Elective
                           Contributions is more restrictive than for Elective
                           Deferrals, is considered an Eligible Participant only
                           for the purpose of making Elective Deferrals.

                                     - 32 -


<PAGE>

                  (2)      PERMISSIBLE METHODS OF ALLOCATION: Any allocation of
                           Qualified Non-Elective Contributions under this
                           Section to an Eligible Participant who is described
                           in subparagraph (1) above will be made using one of
                           the methods described in subparagraphs (2)(A) through
                           (D) below. However, the actual method used for a
                           particular Plan Year will be the method set forth in
                           subparagraph (3) below.

                           (A)      PRO-RATA METHOD: The amount that is so
                                    allocated for any such Eligible Participant
                                    will be in the ratio that his or her
                                    Compensation bears to the total Compensation
                                    of all such Eligible Participants.

                           (B)      PRO-RATA METHOD USING BOTTOM-UP BASED ON
                                    COMPENSATION: The allocation will be made
                                    beginning with a group of one or more of
                                    such Eligible Participants who have the
                                    lowest Compensation for the Plan Year and
                                    continuing with the next one or more such
                                    Eligible Participants who have the next
                                    lowest Compensation until no further
                                    allocations are required to pass the ADP or
                                    ACP Tests. The amount that is so allocated
                                    for the Plan Year to any such Eligible
                                    Participant will be in the ratio that the
                                    Compensation of each such Eligible
                                    Participant bears to the total Compensation
                                    of all such Eligible Participants.

                           (C)      PER CAPITA METHOD: The amount that is so
                                    allocated for the Plan Year to any such
                                    Eligible Participant will be on a per capita
                                    (equal dollar amount) basis to each Eligible
                                    Participant.

                           (D)      PER CAPITA METHOD USING BOTTOM-UP BASED ON
                                    COMPENSATION: The allocation will be made
                                    beginning with a group of one or more of
                                    such Eligible Participants who have the
                                    lowest Compensation for the Plan Year and
                                    continuing with the next one or more
                                    Eligible Participants who have the next
                                    lowest Compensation until no further
                                    allocations are required for the Plan to
                                    pass the ADP or ACP Tests. The amount so
                                    allocated for the Plan Year to any such
                                    Eligible Participant will be on a per capita
                                    (equal dollar amount) basis to each such
                                    Eligible Participant.

         (3)      ACTUAL METHOD OF QNEC ALLOCATION: Until this subparagraph (3)
                  is amended by the Employer to specify a different method of
                  allocation, QNECs will be allocated using the method described
                  in subparagraph (2)(A) above.

         (4)      PERMISSIBLE DISAGGREGATION: Permissable disaggregation under
                  Code ss.410(b)(4) or ss.401(k)(3)(F) will be used for the ADP
                  and/or ACP Test for the Plan Year to further limit the number
                  of Eligible Participants who receive such allocation to those
                  Participants (i) who also satisfy the maximum minimum age and
                  service requirements of Code ss.410(a)(1)(A) for the purpose
                  of making Elective Deferrals or eligibility to share in
                  Matching Contributions, or (ii) to those Participants who do
                  not satisfy the maximum minimum age and service requirements
                  of Code ss.410(a)(1)(A) for the purpose of making Elective
                  Deferrals or eligibility to share in Matching Contributions;
                  and if permissable disaggregation under Code ss.410(b)(4) is
                  used for the ADP and/or ACP Tests for the Plan Year, the
                  Employer will separately determine the amount to be allocated
                  hereunder with respect to such Eligible Participants in
                  clauses (i) and (ii).

                                     - 33 -


<PAGE>

         (5)      ALLOCATION TO HCES: If the Employer makes an additional
                  Qualified Non-Elective Contribution after no further
                  allocation of QNECs is required for the Plan to pass the ADP
                  and/or ACP Tests, any such contribution will be allocated in
                  the same manner described in subparagraph (3) (provided
                  however that the ADP and/or ACP Tests continue to be
                  satisfied) to all such Eligible Participants who for the Plan
                  Year are HCEs (or to all such Eligible Participants who are
                  HCEs or NHCEs) and are considered Eligible Participants for
                  the purpose of receiving a Non-Elective Contribution
                  allocation for the Plan Year.

3.3      ALLOCATION OF EARNINGS AND LOSSES
         As of each Valuation Date, accounts which have not been distributed
         since the prior Valuation Date will have the net income of the Trust
         Fund earned since the prior Valuation Date allocated in accordance with
         such rules and procedures as may be established by the Administrator,
         and applied in a uniform and nondiscriminatory manner; or accounts will
         be valued and adjusted as hereinafter set forth in this Section. Net
         income is the net of any interest, dividends, unrealized appreciation
         and depreciation, capital gains and losses, and investment expenses of
         the Trust Fund determined on each Valuation Date.

         (a)      NON-SEGREGATED ELECTIVE DEFERRAL ACCOUNTS: Elective Deferral
                  Accounts which have not been segregated from the general Trust
                  Fund for investment will have net income allocated thereto in
                  the ratio that the value of each such non-segregated account
                  bears to the total value of all such non-segregated accounts
                  on the Valuation Date. For purposes of this paragraph, the
                  value of each such account on the Valuation Date will be
                  determined on a time-weighted basis as determined by the
                  Administrator.

         (b)      NON-SEGREGATED MATCHING CONTRIBUTION ACCOUNTS: Matching
                  Contributions are not currently permitted under the terms of
                  this Plan.

         (c)      NON-SEGREGATED NON-ELECTIVE CONTRIBUTION ACCOUNTS:
                  Non-Elective Contributions are not currently permitted under
                  the terms of this Plan.

         (d)      FORFEITURE ACCOUNT: The Forfeiture Account will share in the
                  allocation of the Plan's earnings and losses under this
                  Section.

         (e)      SEGREGATED ACCOUNTS AND POLICY DIVIDENDS: Any accounts which
                  have been segregated for investment purposes, including any
                  Directed Investment Accounts that may be established in
                  accordance with Section 7.15 and any other accounts (including
                  Directed Investment Accounts) which are valued on a daily
                  basis, will only have the net income earned thereon allocated
                  thereto. Any insurance Policy dividends or credits will be
                  allocated to the Participant's Account for whose benefit the
                  Policy is held.

3.4      ALLOCATION OF FORFEITURES
         The Administrator may elect each Plan Year to first use all or any
         portion of the Forfeiture Account to pay administration costs of the
         Plan, and/or to restore previously forfeited Account balances as
         provided under Section 5.7 or Section 5.13. Subject to the Top Heavy
         allocation requirements under Section 3.5 and the Code ss.415
         limitations of Article 6, any remaining Forfeitures will be used by the
         Administrator in the following manner:

         (a)      FORFEITURES OF MATCHING CONTRIBUTIONS: Matching Contributions
                  are not currently permitted under the terms of the Plan.

                                     - 34 -


<PAGE>

         (b)      FORFEITURES OF NON-ELECTIVE CONTRIBUTIONS: Non-Elective
                  Contributions are not currently permitted under the terms of
                  the Plan.

         (c)      EXCESS AGGREGATE CONTRIBUTIONS: The Administrator may elect
                  that all of any portion of the Forfeitures which are
                  attributable to Excess Aggregate Contributions will (1) be
                  allocated (after all other Forfeitures) to the Matching
                  Contribution Account of each Participant who is a Non-Highly
                  Compensated Employee who made Elective Deferrals or Employee
                  contributions. The allocation will be made in the ratio which
                  each such Participant's Compensation for the Plan Year bears
                  to the total Compensation of all such Participants for such
                  Plan Year; and/or (2) be applied to reduce Employer
                  contributions for the Plan Year in which the excess arose to
                  the extent it exceeds Employer contributions or the Employer
                  has already contributed for such Plan Year.

3.5      TOP HEAVY MINIMUM ALLOCATION
         In any Top Heavy Plan Year in which a Key Employee receives an
         allocation of Employer contributions or Forfeitures, each Employee who
         is described in paragraph (a) below will receive the Top Heavy benefit
         required under the provisions of Code ss.416, such benefit to be
         determined in accordance with the following provisions:

         (a)      PARTICIPANTS WHO MUST RECEIVE TOP HEAVY MINIMUM ALLOCATION:
                  For each Plan Year in which a Top Heavy contribution is
                  required, the Top Heavy Minimum Allocation (or such lesser
                  amount as may be permitted under paragraph (b) below) will be
                  made for each Participant who is a Non-Key Employee employed
                  by an Employer on the last day of the Plan Year in an eligible
                  class of Employees as described in Section 2.1, even if such
                  Participant (1) fails to complete any minimum Hours of Service
                  or Period of Service required to receive an allocation of
                  Employer contributions or Forfeitures for the Plan Year; (2)
                  fails to make elective contributions to the Plan in the case
                  of a cash or deferred arrangement; (3) receives Compensation
                  that is less than a stated amount; or (4) declines to make a
                  mandatory Employee contribution to the Plan.

         (b)      LESSER ALLOCATION ALLOWED: If the amount of Employer
                  contributions and Forfeitures allocated to the Participant's
                  Account of each Key Employee for the Plan Year is less than 3%
                  of his or her Compensation, and if this Plan is not required
                  to be included in an Aggregation Group to enable a defined
                  benefit plan to meet the requirements of Code ss.401(a)(4) or
                  ss.410, then the amount allocated under this Section for each
                  Participant who is described in paragraph (a) above will be
                  equal to the largest percentage of Employer contributions and
                  Forfeitures allocated to the Participant's Account of a Key
                  Employee for that Plan Year, determined after taking into
                  account elective contributions made by a Key Employee to a
                  cash or deferred arrangement maintained by the Employer.

         (c)      PARTICIPATION IN MULTIPLE DEFINED CONTRIBUTION PLANS: If a
                  Participant described in paragraph (a) above participates in
                  this Plan and in one or more defined contribution plans that
                  are included with this Plan in a Required Aggregation Group,
                  and if the allocation of Employer contributions and
                  Forfeitures in this Plan or any other such defined
                  contribution plan is insufficient to satisfy the Top Heavy
                  requirement with respect to such Participant, such requirement
                  will nevertheless be deemed to be satisfied if the aggregate
                  allocation of Employer contributions and Forfeitures made
                  under this Plan and all other such plans on behalf of such
                  Participant is sufficient to satisfy the Top Heavy
                  requirement. If not, the Employer will make an additional
                  contribution to this Plan and/or to one or more such plans on
                  behalf of the Participant in order that the aggregate
                  allocation of Employer contributions and Forfeitures to this
                  Plan and all such plans satisfies the Top Heavy requirements
                  with respect to such Participant.

                                     - 35 -


<PAGE>

         (d)      PARTICIPATION IN DEFINED BENEFIT PLAN AND DEFINED CONTRIBUTION
                  PLAN: Any Participant described in paragraph (a) above who
                  participates in this Plan and in a defined benefit plan which
                  is included with this Plan in a Required Aggregation Group
                  will, in lieu of the allocation provided under paragraph (a)
                  above, receive an allocation under this Plan (or any other
                  defined contribution plan sponsored by the Employer) which is
                  equal to 5% of Compensation. However, in any Top Heavy
                  Limitation Year beginning before January 1, 2000 in which the
                  Employer wishes to avail itself of the adjustment described in
                  Section 6.5(f), (1) the 5% allocation described herein will be
                  increased to 7.5%; and (2) the allocation under paragraph (a)
                  above for each Non-Key Employee described therein who is a
                  Participant only in this Plan will be increased from 3% to 4%
                  of Compensation. Notwithstanding the foregoing to the contrary
                  however, the Administrator may determine, in a uniform
                  non-discriminatory manner which is intended to satisfy the
                  requirements of Code ss.416(f) regarding the preclusion of
                  required duplication and inappropriate omission of Top Heavy
                  minimum benefits or contributions, that such Non-Key Employee
                  will receive the minimum Top Heavy benefit required under Code
                  ss.416 under the defined benefit plan in lieu of any such
                  benefit under the terms of this Plan.

         (e)      CONTRIBUTIONS THAT CAN BE USED TO SATISFY TOP HEAVY MINIMUM:
                  The following contributions will be taken into account in
                  determining if the Employer has contributed an amount
                  necessary to satisfy the requirements of this Section:
                  Non-Elective Contributions; Qualified Non-Elective
                  Contributions; Safe Harbor Non-Elective Contributions under
                  Section ; and any other contributions as may be permitted by
                  law. However, Elective Deferrals cannot be used to satisfy the
                  Top Heavy requirements.

3.6      SAFE HARBOR CONTRIBUTIONS
         For Plan Years beginning on or after January 1, 1999, this Section will
         apply for any such Plan Year in which the Sponsor, by the Sponsor's
         written resolution and issuance of a Safe Harbor Notice (as described
         in paragraph (d) below), elects to administer the Plan pursuant to the
         "safe harbor" provisions of Code ss.401(k)(12) (pertaining to
         alternative methods of satisfying the ADP Test) and/or Code
         ss.401(m)(11) (pertaining to additional alternative methods of
         satisfying the ACP Test). The Sponsor's written resolution must specify
         the Plan Year for which the safe harbor is elected, the method by which
         the safe harbor is to be satisfied, and whether "safe harbor"
         contributions will be made to HCEs as well as NHCEs. The Sponsor's
         written resolution will be deemed to be an amendment to this Plan if
         made in accordance with Notice 98-52, Notice 2000-3 and any subsequent
         guidance issued by the Internal Revenue Service.

         (a)      DEFINITIONS: For any Plan Year in which the Sponsor elects to
                  administer the Plan in accordance with this Section, the
                  following definitions will apply:

                  (1)      ACP TEST SAFE HARBOR MATCHING CONTRIBUTION: The term
                           ACP Test Safe Harbor Matching Contribution means a
                           Matching Contribution described in paragraph (c)
                           below.

                  (2)      ADP TEST SAFE HARBOR CONTRIBUTION: The term ADP Test
                           Safe Harbor Contribution means a "Basic Matching
                           Contribution" as described in paragraph (b)(1); an
                           "Enhanced Matching Contribution" as described in
                           paragraph (b)(2); and a Non-Elective Contribution as
                           described in paragraph (b)(3).

                  (3)      COMPENSATION: The term Compensation is defined in
                           Section 1.16, except that for purposes of this
                           Section: (1) no dollar limitation other than the Code
                           ss.401(a)(17) limitation will apply under this
                           paragraph to Non-Highly Compensated Employees; and


                                     - 36 -


<PAGE>

                           (2) Compensation may, at the discretion of the
                           Administrator, be excluded (i) for any period during
                           which an Employee was not a Participant in the Plan;
                           and (ii) for any period during which a cash or
                           deferred election was not in effect under the terms
                           of the Plan. However, solely for purposes of
                           determining Compensation subject to a Participant's
                           deferral election, the Employer may use an
                           alternative definition to the one described in the
                           preceding sentence, provided such alternative
                           definition is a reasonable definition within the
                           meaning of regulation ss.1.414(s)-1(d)(2) and permits
                           each Participant to make sufficient Elective
                           Deferrals to receive the maximum amount of Matching
                           Contributions (determined using the definition of
                           Compensation described in the preceding sentence)
                           available under the Plan.

                  (4)      MATCHING CONTRIBUTION: The term Matching Contribution
                           means a contribution made by the Employer because of
                           a Safe Harbor Participant's Elective Deferrals.

                  (5)      SAFE HARBOR PARTICIPANT: The term Safe Harbor
                           Participant means each Participant who (i) is a
                           Non-Highly Compensated Employee (and if the Employer
                           elects, one or more Highly Compensated Employees) for
                           the Plan Year; and (ii) was eligible to make an
                           Elective Deferral at any time during the Plan Year or
                           who would have been eligible to make Elective
                           Deferrals but for a suspension due to a hardship
                           distribution or a statutory limitation (such as Code
                           ss.402(g) and ss.415). However, for Plan Years
                           beginning on or after January 1, 1999, a Safe Harbor
                           Participant will only include those Participants
                           described in the preceding sentence who have reached
                           Age 21 and completed 1 at least Year of Service.

         (b)      ADP TEST SAFE HARBOR CONTRIBUTIONS: For a Plan Year in which
                  the Employer wishes to utilize the alternative method of
                  satisfying the ADP Test, the Employer must make an ADP Test
                  Safe Harbor Contribution to the Plan in the form of a "Basic
                  Matching Contribution", an "Enhanced Matching Contribution"
                  and/or a "Safe Harbor Non-Elective Contribution", or a "Safe
                  Harbor Alternative Contribution". The Employer must specify in
                  the Safe Harbor Notice which ADP Test Safe Harbor Contribution
                  it intends to make for the Plan Year, and any such
                  contribution will be made in accordance with one of the
                  following provisions:

                  (1)      BASIC MATCHING CONTRIBUTION: If the Employer elects
                           to make a Basic Matching Contribution, it will be
                           made on behalf of each Safe Harbor Participant in an
                           amount equal to the sum of (i) 100% of the amount
                           such Participant's Elective Deferrals that do not
                           exceed 3% of his or her Compensation; plus (ii) 50%
                           of the amount of such Participant's Elective
                           Deferrals that exceed 3% of his or her Compensation
                           but do not exceed 5% of Compensation ("Basic Matching
                           Contributions"). The maximum match that can be made
                           under this Basic Matching Contribution formula is 4%
                           of Compensation which would apply to any Safe Harbor
                           Participant who defers at least 5% of Compensation.

                  (2)      ENHANCED MATCHING CONTRIBUTION: If the Employer
                           elects to make an "Enhanced Matching Contribution" on
                           behalf of each Safe Harbor Participant, such
                           contribution will be an amount equal to the sum of
                           (A) and (B) as follows:

                           (A)      The amount of such Participant's Elective
                                    Deferrals that do not exceed the percentage
                                    specified in the Safe Harbor Notice (which
                                    percentage must be at least 3% but not more
                                    than 6%) of Compensation; plus

                                     - 37 -


<PAGE>

                           (B)      The percentage specified in the Safe Harbor
                                    Notice of such Participant's Elective
                                    Deferrals that exceed the percentage
                                    specified in the Safe Harbor Notice (which
                                    percentage must be at least 3% but not more
                                    than 6%) of the Participant's Compensation
                                    for the Plan Year and that do not exceed the
                                    percentage specified in the Safe Harbor
                                    Notice of the Employee's Compensation for
                                    the Plan Year. Notwithstanding the
                                    foregoing, Matching Contributions
                                    contributed under this subparagraph must, at
                                    any rate of Elective Deferrals, equal at
                                    least the Matching Contribution the
                                    Participant would have received if the
                                    Employer were making Basic Matching
                                    Contributions, but the rate of match cannot
                                    increase as deferrals increase.

                  (3)      SAFE HARBOR NON-ELECTIVE CONTRIBUTION: If the
                           Employer elects to make a Safe Harbor Non-Elective
                           Contribution for each Safe Harbor Participant, it
                           will be an amount equal to at least 3% of each such
                           Participant's Compensation.

                  (4)      ALLOCATION OF ADP TEST SAFE HARBOR CONTRIBUTIONS: All
                           ADP Test Safe Harbor Contributions (other than Safe
                           Harbor Alternative Contributions) will be allocated
                           to a Participant's Safe Harbor Contribution Account;
                           and under no circumstances will such contributions be
                           allocated with regard to permitted disparity under
                           Code ss.401(1).

                  (5)      VESTING AND DISTRIBUTION OF ADP TEST SAFE HARBOR
                           CONTRIBUTIONS: ADP Test Safe Harbor Contributions
                           allocated to a Participant's Safe Harbor Contribution
                           Account will be 100% Vested at all times, and can
                           only be distributed upon the earlier of the date a
                           Participant incurs a Termination of Employment; the
                           date a Participant dies; the date a Participant
                           suffers a Disability; the date a Participant reaches
                           Age 59 1/2 if on or after such date in-service
                           withdrawals are permitted under Section 5.18; or the
                           date an event described in Code ss.401(k)(10) occurs.
                           ADP Test Safe Harbor Contributions may not be
                           distributed because of hardship.

                  (6)      TRUE-UP ELECTION: If for any Plan Year "Basic
                           Matching Contributions" or "Enhanced Matching
                           Contributions" are made to the Plan on a basis that
                           is more frequent than annual, and if on the last day
                           of any such Plan Year the dollar amount of any such
                           contribution made on behalf of a Safe Harbor
                           Participant is less than the dollar amount that would
                           have been made if such contribution for that Plan
                           Year had been contributed on an annual basis only,
                           then the Employer may elect for any such Plan Year to
                           make an additional contribution in order to make the
                           amount contributed for a Safe Harbor Participant for
                           the full Plan Year equal to the amount that would
                           have been made if the contribution for that Plan Year
                           had been contributed on an annual basis only.
                           However, any such additional contribution can only be
                           made to the Plan on a uniform nondiscriminatory
                           basis.

         (c)      ACP TEST SAFE HARBOR MATCHING CONTRIBUTIONS: In order to use
                  the alternative method of satisfying the ACP Test, the
                  Employer may, in addition to the ADP Test Safe Harbor
                  Contributions described in paragraph (b) above, elect in its
                  Safe Harbor Notice to make an ACP Test Safe Harbor Matching
                  Contribution to the Plan on behalf of each Safe Harbor
                  Participant. Such contribution will be made in accordance with
                  the following provisions, and must be equal to one of the
                  following amounts:

                                     - 38 -


<PAGE>

                  (1)      SINGLE TIER FIXED FORMULA: The amount determined by
                           multiplying the Safe Harbor Participant's Elective
                           Deferrals for the Plan Year by the matching
                           percentage specified in the Safe Harbor Notice;
                           provided, however, that such amount cannot exceed 6%
                           of the Safe Harbor Participant's Compensation.

                  (2)      TWO TIERED FIXED FORMULA: The amount determined by
                           multiplying the Safe Harbor Participant's Elective
                           Deferrals that do not exceed the percentage specified
                           in the Safe Harbor Notice of such Participant's
                           Compensation for the Plan Year by the "first tier"
                           matching percentage specified in the Safe Harbor
                           Notice, plus the amount determined by multiplying the
                           Safe Harbor Participant's Elective Deferrals
                           thereafter by the "second tier percentage" specified
                           in the Safe Harbor Notice, but no such contribution
                           will be made with respect to Elective Deferrals that
                           exceed 6% of the Participants Compensation.
                           Notwithstanding the foregoing, the "second tier
                           percentage" cannot exceed the "first tier
                           percentage".

                  (3)      SINGLE TIER DISCRETIONARY FORMULA: An amount
                           determined by multiplying the Safe Harbor
                           Participant's Elective Deferrals for the Plan Year by
                           a discretionary percentage, excluding any such
                           Elective Deferrals in excess of 6% of the Safe Harbor
                           Participant's Compensation; provided, however, that
                           such amount cannot exceed 4% of the Safe Harbor
                           Participant's Compensation.

                  (4)      OTHER FORMULAS: An amount determined by any other
                           formula in which (i) Matching Contributions are not
                           made on Elective Deferrals in excess of 6% of
                           Compensation, (ii) the amount of Matching
                           Contributions subject to the Employer's discretion
                           cannot exceed 4% of Compensation, (iii) no HCE can
                           receive a greater rate of Matching Contributions than
                           an NHCE at the same rate of Elective Deferrals, and
                           (iv) the rate of Matching Contributions cannot
                           increase as a Participant's Elective Deferrals
                           increase.

                  (5)      VESTING AND DISTRIBUTION OF ACP TEST SAFE HARBOR
                           CONTRIBUTIONS: Unless otherwise indicated in the Safe
                           Harbor Notice to be nonforfeitable, ACP Test Safe
                           Harbor Matching Contributions will be Vested in
                           accordance with the Vesting schedule in Section
                           4.6(c). Forfeitures of non-Vested ACP Test Safe
                           Harbor Matching Contributions will be used to reduce
                           Employer contributions.

         (d)      SAFE HARBOR NOTICE: The term Safe Harbor Notice means a
                  written notice provided by the Employer to all eligible
                  Employees in accordance with Notice 98-52 and 2000-3, and any
                  subsequent guidance issued by the Internal Revenue Service. In
                  addition to any other election periods provided under the
                  Plan, each Participant may make or modify a deferral election
                  during the 30-day period immediately following receipt of the
                  Notice.

3.7      ROLLOVER CONTRIBUTIONS
         Subject to any rules or procedures that may be established by the
         Administrator under paragraph (f) below, any Employee who is in an
         eligible class of Employees, regardless of whether such Employee has
         satisfied the Plan's eligibility requirements, may, with the consent of
         the Administrator, make Rollover Contributions to the Plan. Rollover
         Contributions will be allocated to a Participant's Rollover Account
         and, subject to any rules or procedures established hereunder, will be
         administered in accordance with the following provisions:

         (a)      INVESTMENT OF ROLLOVER ACCOUNTS: Except for that portion which
                  a Participant may be permitted to self-direct under Section
                  7.15, the Administrator may choose for investment purposes to
                  either segregate Rollover Accounts into separate interest
                  bearing accounts or to invest Rollover Accounts as part of the
                  general Trust Fund, in which case such accounts will share in
                  the allocation of earnings and losses under Section 3.3(a).

                                     - 39 -


<PAGE>

         (b)      WITHDRAWAL OF ROLLOVERS: Subject to paragraph (c) below, an
                  Employee may request a withdrawal of all or any portion of his
                  or her Rollover Account at any time prior to becoming a
                  Participant in the Plan, and thereafter upon the earlier of
                  (1) the date the Employee is entitled to a distribution of his
                  or her Participant's Account under the provisions of Article
                  5, or (2) within an administratively reasonable time after the
                  Employee's Termination of Employment. An Employee may also
                  request a withdrawal of all or any portion of his or her
                  Rollover Account at any time prior to the dates described in
                  (1) and (2) above. The Administrator may require up to 60 days
                  notice in advance of the requested date of withdrawal. A
                  Rollover withdrawal will not prevent an Employee from accruing
                  future benefits from Employer contributions. Any amount
                  withdrawn may be redeposited to the Participant's Rollover
                  Account if such prior withdrawn distribution continues to
                  qualify as a Rollover Contribution except for the fact that
                  the amount originated from this Plan.

         (c)      SPOUSAL CONSENT REQUIREMENTS UPON WITHDRAWAL: Any Rollover
                  Contribution that at the time it is made to this Plan is no
                  longer subject to the requirements of Code ss.401(a)(11) can
                  be withdrawn from the Plan without the consent of the
                  Participant's Spouse. However, the withdrawal of any Rollover
                  Contribution that was a direct or indirect transfer as defined
                  in Code ss.401(a)(11) from a defined benefit plan, a money
                  purchase plan, a target benefit plan, a stock bonus plan, or a
                  profit sharing plan that provided for a life annuity form of
                  payment to the Participant will be subject to the spousal
                  consent requirements in Section 5.16.

         (d)      FORM OF DISTRIBUTION: Any Rollover Contribution a Participant
                  withdraws from the Plan prior to the time the Participant is
                  entitled to a distribution of his or her Participant's Account
                  will only be distributed in a lump sum. Any amount remaining
                  in a Participant's Rollover Account at the time the
                  Participant is entitled to a distribution of his or her
                  Participant's Account that is not subject to the spousal
                  consent requirements in paragraph (c) above will be
                  distributed, at the election of the Participant, in a lump-sum
                  or in the same manner as the Participant's Account under
                  Article 5. Any amount remaining in the Participant's Rollover
                  Account at the time the Participant is entitled to a
                  distribution of his or her Participant's Account that is
                  subject to the spousal consent requirements will be
                  distributed in accordance with Section 5.16.

         (e)      SPECIAL RULE FOR WITHDRAWAL OF ELECTIVE DEFERRALS:
                  Notwithstanding paragraph (b) to the contrary, the limitations
                  described in regulation 1.401(k)-1(d) will apply to the
                  withdrawal of any Rollover Contributions which are
                  attributable to a Participant's elective contributions as
                  defined in regulation 1.401(k)-1(g)(3) and which are
                  transferred to this Plan in a trustee to trustee transfer from
                  another qualified plan.

         (f)      ESTABLISHMENT OF ADMINISTRATIVE PROCEDURES: The Administrator
                  may, in a separate written document, establish rules or
                  procedures regarding the conditions under which Rollover
                  Contributions can be made to and/or withdrawn from the Plan by
                  an Employee. Such separate written document, when properly
                  executed, will be deemed incorporated in this Plan. The rules
                  or procedures set forth therein may be modified or amended by
                  the Administrator without the necessity of amending this
                  Section of the Plan, but any such modifications must be
                  communicated to Participants in the manner described in
                  Section 8.9. Notwithstanding the foregoing, (1) a summary plan
                  description or summary of material modifications thereto in
                  which the rules or procedures regarding the making and/or
                  withdrawal of Rollover Contributions are described will be
                  considered a separate written document sufficient to satisfy
                  the requirements (including the execution requirement) of this
                  paragraph; and (2) any rules or procedures established under
                  this paragraph must be applied by the Administrator in a
                  uniform nondiscriminatory manner.

                                     - 40 -


<PAGE>

3.8      VOLUNTARY EMPLOYEE CONTRIBUTIONS
         Voluntary Employee Contributions are not currently permitted.





                                     - 41 -


<PAGE>

                                    ARTICLE 4
                                  PLAN BENEFITS

4.1      BENEFIT UPON NORMAL RETIREMENT
         Every Participant who has reached Normal Retirement Age will be
         entitled upon termination of employment to receive his or her Vested
         Aggregate Account balance determined as of the most recent Valuation
         Date coinciding with or immediately preceding the date of distribution.
         Distribution will be made under Section 5.1.

4.2      BENEFIT UPON LATE RETIREMENT
         A Participant who has reached Normal Retirement Age and who remains
         employed by the Employer will continue to participate in the Plan and
         will continue to receive allocations under Article 3 until he or she
         terminates employment with the Employer. However, notwithstanding
         Section 4.1 to the contrary, such Participant may at any time after
         reaching Normal Retirement Age (1) choose to have distributed prior to
         actual retirement all or part of his or her Vested Aggregate Account
         balance determined as of the most recent Valuation Date coinciding with
         or immediately preceding the date of distribution (but any portion
         thereof which is attributable to elective contributions, qualified
         matching contributions and/or qualified non-elective contributions made
         to a cash or deferred arrangement can only be distributed if the
         Participant has also reached Age 59 1/2); or (2) choose to have such
         Vested Aggregate Account balance transferred to another qualified
         retirement plan maintained by the Employer. Upon actual retirement, the
         Participant will be entitled to his or her undistributed Vested
         Aggregate Account balance determined as of the most recent Valuation
         Date coinciding with or immediately preceding the date of distribution.
         Distribution will be made under Section 5.1.

4.3      BENEFIT UPON DEATH
         Upon the death of a Participant prior to Termination of Employment, or
         upon the death of a Terminated Participant prior to distribution of his
         or her Vested Aggregate Account, his or her Beneficiary will be
         entitled to the Participant's Vested Aggregate Account balance
         determined as of the most recent Valuation Date coinciding with or
         immediately preceding the date of distribution. If any Beneficiary who
         is alive on the date of the Participant's death dies before receiving
         the entire death benefit to which he or she is entitled, the balance of
         the death benefit will be distributed to the Beneficiary's beneficiary
         in accordance with Section 5.2. The Administrator's determination that
         a Participant has died and that a particular person has a right to
         receive a death benefit will be final. Distribution will be made in
         accordance with Section 5.2.

4.4      BENEFIT UPON DISABILITY
         If a Participant suffers a Disability prior to Termination of
         Employment and terminates employment with the Employer as a result of
         that Disability, or if a Terminated Participant suffers a Disability
         prior to a distribution of his or her Vested Aggregate Account balance,
         he or she will be entitled to his or her Vested Aggregate Account
         balance determined as of the most recent Valuation Date coinciding with
         or immediately preceding the date of distribution. Distribution will be
         made in accordance with Section 5.3.

4.5      BENEFIT UPON TERMINATION
         A Participant who incurs a Termination of Employment will be entitled
         to his or her Vested Aggregate Account balance determined as of the
         most recent Valuation Date coinciding with or immediately preceding the
         date of distribution. A Terminated Participant's Vested Aggregate
         Account will be distributed under Section 5.4 unless, prior to the time
         of distribution set forth therein, the Participant (1) dies, in which
         case distribution will be made under 5.2; or (2) suffers a Disability,
         in which case distribution will be made under Section 5.3.

                                     - 42 -


<PAGE>

4.6      DETERMINATION OF VESTED INTEREST
         A Participant's Vested Interest in his or her Participant's Account
         will be determined in accordance with the following provisions:

         (a)      VESTING UPON RETIREMENT, DEATH OR DISABILITY: A Participant's
                  Account will be 100% Vested upon reaching Normal Retirement
                  Age prior to Termination of Employment, and also upon death or
                  Disability prior to Termination of Employment.

         (b)      100% VESTING OF ELECTIVE DEFERRALS, QMACS AND QNECS: A
                  Participant will at all times have a 100% Vested Interest in
                  his or her Elective Deferral Account, Qualified Matching
                  Contribution Account and Qualified Non-Elective Contribution
                  Account.

         (c)      VESTING OF MATCHING CONTRIBUTIONS: Matching Contributions are
                  not currently permitted under the terms of the Plan.

         (d)      VESTING OF NON-ELECTIVE CONTRIBUTIONS: Non-Elective
                  Contributions are not currently permitted under the terms of
                  the Plan.

         (e)      AMENDMENTS TO VESTING SCHEDULE: No amendment may directly or
                  indirectly reduce a Participant's Vested Interest in his or
                  her Participant's Account. If the Plan is amended in any way
                  that directly or indirectly affects the computation of a
                  Participant's Vested Interest in his or her Participant's
                  Account or the Plan is deemed amended by an automatic change
                  to or from a Top Heavy vesting schedule, the following will
                  apply:

                  (1)      PARTICIPANT ELECTION: Any Participant with at least
                           three 1-Year Periods of Service may, by filing a
                           written request with the Administrator, elect to have
                           the Vested Interest in his or her Participant's
                           Account computed by the vesting schedule in effect
                           prior to the amendment. A Participant who fails to
                           make an election will have his or her Vested Interest
                           computed under the new schedule. The period in which
                           the election may be made will begin on the date the
                           amendment is adopted or is deemed to be made and will
                           end on the latest of (1) 60 days after the date the
                           amendment is adopted; (2) 60 days after the date the
                           amendment becomes effective; or (3) 60 days after the
                           date the Participant is issued written notice of the
                           amendment by the Employer or Administrator.

                  (2)      PRESERVATION OF VESTED INTEREST: Notwithstanding the
                           foregoing to the contrary, if the vesting schedule is
                           amended, then in the case of an Employee who is a
                           Participant as of the later of the date such
                           amendment is adopted or the date it becomes
                           effective, the Vested Interest in his or her
                           Participant's Account determined as of such date will
                           not be less than his or her Vested Interest computed
                           under the Plan without regard to such amendment.

                                     - 43 -


<PAGE>

                                    ARTICLE 5
                            DISTRIBUTION OF BENEFITS

5.1      BENEFIT UPON RETIREMENT
         Unless a cash-out occurs under Section 5.5, and except as otherwise
         provided in Section 5.16 regarding the distribution of benefits that
         remain subject to the Qualified Joint and Survivor Annuity requirements
         of Code ss.401(a)(11), the retirement benefit a Participant is entitled
         to receive under Section 4.1 or Section 4.2 will be distributed as
         follows:

         (a)      FORMS OF DISTRIBUTION: A Participant can elect to have his or
                  her retirement benefit distributed as follows: (1) in one lump
                  sum payment; or (2) in substantially equal monthly, quarterly,
                  semi-annual or annual cash installments over a period certain
                  that does not extend beyond the Participant's life, or beyond
                  the lives of the Participant and his or her designated
                  Beneficiary (or beyond the life expectancy of the Participant
                  or the joint and last survivor expectancy of the Participant
                  and his or her designated Beneficiary), which will either be
                  paid from the Plan or paid by a nontransferable immediate or
                  deferred annuity selected by the Trustee which provides for
                  the installment payments.

         (b)      TIME OF DISTRIBUTION: Distribution will begin within an
                  administratively reasonable time after the date (1) a
                  Participant actually retires; or (2) a Participant who elects
                  late retirement under Section 4.2 requests payment as
                  permitted therein. However, distribution must begin under this
                  Section no later than the Required Beginning Date.

5.2      BENEFIT UPON DEATH
         Unless a cash-out occurs under Section 5.5, a deceased Participant's
         death benefit as determined under Section 4.3 will be distributed as
         follows:

         (a)      SURVIVING SPOUSE: If a Participant dies before the Annuity
                  Starting Date and is married on the date of his or her death,
                  the Participant's surviving Spouse will be entitled to receive
                  100% of the Participant's death benefit unless the surviving
                  Spouse has waived that right under Section 5.8. Unless the
                  Participant directed through a Beneficiary designation form
                  that the benefit be paid in a specific form of distribution
                  permitted under Section 5.1(a), the surviving Spouse can elect
                  any form of distribution permitted under Section 5.1(a). If
                  the surviving Spouse elects to receive installment payments,
                  the death benefit will either be paid from the Plan or be paid
                  by a nontransferable immediate or deferred annuity selected by
                  the Trustee which provides for the installment payments. Upon
                  the death of a Participant, distribution will be made to the
                  surviving Spouse within an administratively reasonable time
                  after he or she requests payment, but distribution must begin
                  no later than December 31st of the calendar year in which the
                  Participant would have attained Age 70 1/2.

         (b)      DEATH OF SURVIVING SPOUSE BEFORE DISTRIBUTION BEGINS: If the
                  surviving Spouse dies before distribution of the benefit
                  begins, distribution will be made as if the surviving Spouse
                  were the Participant. Distribution will be considered as
                  having commenced when the deceased Participant would have
                  reached Age 70 1/2 even if payments have been made to the
                  surviving Spouse before that date.

         (c)      NON-SPOUSE BENEFICIARY: Unless the Participant directed
                  through a Beneficiary designation form that the death benefit
                  be paid in a specific form of distribution permitted under
                  Section 5.1(a), a non-Spouse Beneficiary can elect any form of
                  distribution permitted under Section 5.1(a). If the
                  Beneficiary elects to receive installment payments, the death


                                     - 44 -


<PAGE>

                  benefit will either be paid from the Plan or be paid by a
                  nontransferable immediate or deferred annuity selected by the
                  Trustee which provides for the installment payments. Upon the
                  death of a Participant, distribution will be made within an
                  administratively reasonable time after a non-Spouse
                  Beneficiary requests payment; but distribution of the entire
                  death benefit must be made by December 31st of the calendar
                  year which contains the 5th anniversary of the date of the
                  Participant's death unless installment payments begin no later
                  than December 31st of the calendar year immediately following
                  the calendar year in which the Participant died.

         (d)      DISTRIBUTION IF THE PARTICIPANT OR OTHER PAYEE IS IN PAY
                  STATUS: If a Participant or Beneficiary who has started
                  receiving distribution of his or her benefit dies before the
                  entire benefit has been distributed, the balance of the
                  benefit will be distributed to the Participant's Beneficiary
                  (or Beneficiary's beneficiary) at least as rapidly as under
                  the method of distribution being used on the date of the
                  Participant's or Beneficiary's death.

         (e)      PAYMENTS TO A BENEFICIARY OF A BENEFICIARY: In the absence of
                  a Beneficiary designation or other directive from the deceased
                  Participant to the contrary, any Beneficiary may name his or
                  her own Beneficiary to receive any benefits payable in the
                  event of the Beneficiary's death prior to receiving the entire
                  death benefit to which the Beneficiary is entitled; and if a
                  Beneficiary has not named his or her own Beneficiary, the
                  Beneficiary's estate will be the Beneficiary. If any benefit
                  is payable under this paragraph to a Beneficiary of the
                  deceased Participant's Beneficiary or to the estate of the
                  deceased Participant's Beneficiary, or to any other
                  Beneficiary or the estate thereof, subject to the limitations
                  regarding the latest dates for benefit payment in paragraphs
                  (a) and (c) above, the Administrator may (1) continue to pay
                  the remaining value of such benefits in the amount and form
                  already commenced, or pay such benefits in any other manner
                  permitted under the Plan for a Participant or Beneficiary, and
                  (2) if payments have not already commenced, pay such benefits
                  in any other manner permitted under the Plan. Distribution to
                  the Beneficiary of a Beneficiary must begin no later than the
                  date distribution would have been made to the Participant's
                  Beneficiary. The Administrator's determination under this
                  paragraph will be final and will be applied in a
                  non-discriminatory manner that does not discriminate in favor
                  of HCEs.

5.3      DISABILITY BENEFITS
         Unless a cash-out occurs under Section 5.5, and except as otherwise
         provided in Section 5.16 regarding the distribution of benefits that
         remain subject to the Qualified Joint and Survivor Annuity requirements
         of Code ss.401(a)(11), the Disability benefit a Participant is entitled
         to receive under Section 4.4 will be distributed as follows:

         (a)      FORMS OF DISTRIBUTION: A Participant can elect to have his or
                  her benefit distributed as follows: (1) in one lump sum
                  payment; or (2) in substantially equal monthly, quarterly,
                  semi-annual or annual cash installments over a period certain
                  that does not extend beyond the Participant's life, or beyond
                  the lives of the Participant and his or her designated
                  Beneficiary (or beyond the life expectancy of the Participant
                  or the joint and last survivor expectancy of the Participant
                  and his or her designated Beneficiary), which will either be
                  paid from the Plan or paid by a nontransferable immediate or
                  deferred annuity selected by the Trustee which provides for
                  the installment payments.

         (b)      TIME OF DISTRIBUTION: Distribution will begin within an
                  administratively reasonable time after the date on which a
                  Participant who suffers a Disability terminates employment
                  with the Employer on account of the Disability. However,
                  distribution must begin under this Section no later than the
                  Participant's Required Beginning Date.

                                     - 45 -


<PAGE>

5.4      BENEFIT UPON TERMINATION
         Unless a cash-out occurs under Section 5.5, and except as otherwise
         provided in Section 5.16 regarding the distribution of benefits that
         remain subject to the Qualified Joint and Survivor Annuity requirements
         of Code ss.401(a)(11), the benefit a Terminated Participant is entitled
         to receive under Section 4.5 will be distributed as follows:

         (a)      FORMS OF DISTRIBUTION: A Terminated Participant can elect to
                  have his or her benefit distributed as follows: (1) in one
                  lump sum payment; or (2) in substantially equal monthly,
                  quarterly, semi-annual or annual cash installments over a
                  period certain that does not extend beyond the Participant's
                  life, or beyond the lives of the Participant and his or her
                  designated Beneficiary (or beyond the life expectancy of the
                  Participant or the joint and last survivor expectancy of the
                  Participant and his or her designated Beneficiary), which will
                  either be paid from the Plan or paid by a nontransferable
                  immediate or deferred annuity selected by the Trustee which
                  provides for the installment payments.

         (b)      TIME OF DISTRIBUTION: Distribution will begin under this
                  Section within an administratively reasonable time after
                  Termination of Employment occurs, but in no event later than
                  the earlier to occur of (1) the date the Terminated
                  Participant reaches Normal Retirement Age, or (2) the Required
                  Beginning Date.

5.5      CASH-OUT OF BENEFITS
         The Administrator, without the consent of the Participant, may
         distribute a Participant's Vested Aggregate Account balance in a lump
         sum any time after a Participant terminates employment, subject to the
         following provisions:

         (a)      GENERAL RULE: The Administrator can only make distribution
                  under this Section (1) with regard to distributions made for
                  Plan Years beginning prior to August 6, 1997, if the
                  Participant's Vested Aggregate Account balance (determined
                  before taking into account the Participant's Rollover Account
                  and Voluntary Employee Contribution Account) on the date he or
                  she terminates employment with the Employer does not exceed,
                  or at the time of any prior distribution did not exceed,
                  $3,500 (or such lesser amount as may be designated by the
                  Administrator); and (2) for Plan Years beginning on or after
                  August 6, 1997, if a Participant's Vested Aggregate Account
                  balance (determined before taking into account the
                  Participant's Rollover Account and Voluntary Employee
                  Contribution Account) on the date he or she terminates
                  employment with the Employer does not exceed, or at the time
                  of any prior distribution did not exceed, $5,000 (or such
                  lesser amount as may be designated by the Administrator). Any
                  such distribution will be made as soon as administratively
                  feasible after the date the Participant terminates employment,
                  and any portion of the Participant's Account which is not
                  Vested will be treated as a Forfeiture.

         (b)      LATER DISTRIBUTION IF ACCOUNT FALLS TO $5,000: With regard to
                  distributions made for Plan Years beginning on or after
                  October 17, 2000, if a Participant would have received a
                  distribution under paragraph (a) but for the fact that the
                  Participant's Vested Aggregate Account (determined before
                  taking into account the Participant's Rollover Account and
                  Voluntary Employee Contribution Account) exceeded $5,000 (or
                  such lesser amount as may be designated by the Administrator)
                  when the Participant terminated employment, and if at a later
                  time the Participant's Vested Aggregate Account (determined
                  before taking into account the Participant's Rollover Account


                                     - 46 -


<PAGE>

                  and Voluntary Employee Contribution Account) is reduced to an
                  amount not greater than $5,000 (or such lesser amount as may
                  be designated by the Administrator), the Administrator may
                  distribute such remaining amount in a lump sum without the
                  Participant's consent as soon as administratively feasible
                  after the date the Participant terminates employment with the
                  Employer, and any portion of the Participant's Account which
                  is not Vested will be treated as a Forfeiture.

         (c)      DEEMED DISTRIBUTION: If a Participant's Vested Interest in his
                  or her Participant's Account is zero on the date the
                  Participant terminates employment, the Participant will be
                  deemed to have received a distribution of such Vested Interest
                  on the date of termination.

         (d)      FORM OF DISTRIBUTION: If the whereabouts of a terminated
                  Participant are known, distribution under this Section will be
                  made in the form of a lump sum cash payment unless such
                  Participant elects a direct rollover under Section 5.14. If
                  the whereabouts of a terminated Participant are not known, the
                  provisions of Section 5.13 will apply.

5.6      RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS
         If a Participant's Vested Aggregate Account balance exceeds the amount
         set forth in paragraph (a) of this Section and is immediately
         distributable, such account can only be distributed in accordance with
         the following provisions:

         (a)      GENERAL RULE: If a Participant's Vested Aggregate Account
                  (determined before taking into account the Participant's
                  Rollover Account and Voluntary Employee Contribution Account)
                  exceeds $5,000, and if such amount is immediately
                  distributable, the Participant must consent to any
                  distribution of such amount. Any portion of the Participant's
                  Account which is not Vested will be treated as a Forfeiture.
                  If less than the entire Vested Aggregate Account balance is
                  distributed, the part of the non-Vested portion that will be
                  treated as a Forfeiture is the total non-Vested portion
                  multiplied by a fraction, the numerator of which is the amount
                  of the distribution attributable to Employer contributions and
                  the denominator of which is the total value of the Vested
                  Interest in the Participant's Account.

         (b)      TRANSITION RULE: Notwithstanding paragraph (a), with regard to
                  distributions made before October 17, 2000, if a Participant's
                  Vested Aggregate Account balance (determined before taking
                  into account the Rollover Account and Voluntary Employee
                  Contribution Account) (1) exceeded $3,500 (or exceeded $3,500
                  at the time of any prior distribution) for Plan Years
                  beginning before August 6, 1997, or (2) exceeded $5,000 (or
                  exceeded $5,000 at the time of any prior distribution) for
                  Plan Years beginning on or after August 6, 1997 and for a
                  distribution made before October 17, 2000; or (3) either
                  exceeded $5,000 or was a remaining payment under a selected
                  optional form of payment that exceeded $5,000 at the time the
                  selected payment began for Plan Years beginning after August
                  5, 1997 and for a distribution made on or after October 17,
                  2000, and if the account balance is immediately distributable,
                  then the Participant and the Participant's Spouse (or where
                  either one has died, the survivor) must consent to any
                  distribution of such account.

         (c)      DEFINITION OF IMMEDIATELY DISTRIBUTABLE: A Participant's
                  benefit is immediately distributable if any part of the
                  benefit could be distributed to the Participant (or the
                  Participant's surviving Spouse) before the Participant reaches
                  (or would have reached if not deceased) the later of his or
                  her Normal Retirement Age or Age 62.

                                     - 47 -


<PAGE>

         (d)      GENERAL CONSENT REQUIREMENT: The consent of the Participant to
                  any benefit that is immediately distributable must be obtained
                  in writing within the 90-day period ending on the Annuity
                  Starting Date. However, the Participant will not be required
                  to consent to a distribution that is required by Code
                  ss.401(a)(9) or ss.415.

         (e)      NOTIFICATION REQUIREMENTS: The Administrator must notify the
                  Participant of the right to defer any distribution until the
                  benefit is no longer immediately distributable. Notification
                  will include a general explanation of the material features
                  and relative values of the optional forms of benefit available
                  under the Plan in a manner that would satisfy the notice
                  requirements of Code ss.417(a)(3); and will be provided no
                  less than 30 days or more than 90 days prior to the Annuity
                  Starting Date.

         (f)      WAIVER OF 30-DAY REQUIREMENT: For Plan Years beginning on or
                  after January 1, 1997, distribution of a Participant's benefit
                  may begin less than 30 days after the notice in paragraph (e)
                  is given, provided (1) the Administrator clearly informs the
                  Participant that the Participant has a right to a period of at
                  least 30 days after receiving notice to consider the decision
                  of whether or not to elect a distribution; (2) the
                  Participant, after receiving the notice, affirmatively elects
                  a distribution or a particular distribution option.

         (g)      CONSENT NOT NEEDED ON PLAN TERMINATION: If upon Plan
                  termination neither the Employer nor an Affiliated Employer
                  maintains another defined contribution plan other than an
                  employee stock ownership plan (ESOP) as defined in Code
                  ss.4975(e)(7), the Participant's benefit will, without the
                  Participant's consent, be distributed to the Participant. If
                  the Employer or an Affiliated Employer maintains another
                  defined contribution plan other than an ESOP, the
                  Participant's benefit will, without the Participant's consent,
                  be transferred to the other plan if the Participant does not
                  consent to an immediate distribution under this Section.

5.7      RESTORATION OF FORFEITED ACCOUNT BALANCE
         If a Participant who does not have a 100% Vested Interest in his or her
         Participant's Account terminates employment with the Employer and
         receives (or is deemed to have received) a distribution of such Vested
         Interest from the Plan, and such Participant is subsequently rehired by
         the Employer, his or her Participant's Account upon such reemployment
         will be administered in accordance with the following provisions:

         (a)      REEMPLOYMENT BEFORE FIVE CONSECUTIVE BREAKS IN SERVICE: If a
                  terminated Participant is reemployed before incurring five
                  consecutive Breaks in Service, such Participant's Account
                  balance will be restored in accordance with the following:

                  (1)      PARTIALLY VESTED PARTICIPANTS: If upon termination of
                           employment a Participant has at least a partially
                           Vested Participant's Account, then upon reemployment
                           by the Employer prior to incurring five consecutive
                           Breaks in Service, such Participant's Account balance
                           will be restored to the amount on the date of
                           distribution if the Participant repays to the Plan
                           the full amount of the distribution which was
                           attributable to Employer contributions. Repayment
                           must be made before the earlier of five years after
                           the first date on which the Participant is
                           subsequently re-employed by the Employer or the date
                           on which the Participant incurs five consecutive
                           Breaks in Service following the date of distribution.

                  (2)      NON-VESTED PARTICIPANTS: If upon termination of
                           employment a Participant's Vested Interest in his or
                           her Participant's Account is zero, such Participant
                           is deemed to have received a distribution of such
                           Vested Interest before the date he or she incurs five
                           consecutive Breaks in Service, and upon re-employment
                           with the Employer prior to incurring five consecutive
                           Breaks in Service, such Participant's Account balance
                           attributable to Employer contributions will be
                           restored to the amount on the date of the deemed
                           distribution.

                                     - 48 -


<PAGE>

                  (3)      SOURCE OF FUNDS: The Administrator, on a case-by-case
                           basis, may elect to restore a Participant's Account
                           balance under this Section by the use of Forfeitures,
                           by the use of earnings from non-segregated Trust Fund
                           accounts, by the use of Employer contributions, or by
                           the use of any combination thereof.

         (b)      REEMPLOYMENT AFTER FIVE CONSECUTIVE BREAKS IN SERVICE: If a
                  terminated Participant is reemployed by the Employer after
                  incurring five consecutive Breaks in Service, that portion, if
                  any, of his or her Participant's Account which was (or was
                  deemed to be) a Forfeiture will be permanently forfeited under
                  the terms of this Plan.

5.8      SPOUSAL CONSENT REQUIREMENTS
         A surviving Spouse's election not to receive a death benefit under
         Section 5.2 will not be effective unless (1) the election is in
         writing; (2) the election designates a specific Beneficiary or form of
         benefit which may not be changed without spousal consent (or the
         Spouse's consent expressly permits designations by the Participant
         without any requirement of further spousal consent); and (3) the
         Spouse's consent acknowledges the effect of the election and is
         witnessed by the Administrator or a notary public.

5.9      APPLICATION OF CODE SS.401(A)(9) REQUIREMENTS
         All distributions made under the terms of the Plan will be determined
         and made in accordance with the regulations issued under Code
         ss.401(a)(9), including the minimum distribution incidental benefit
         requirement of regulation ss.1.401(a)(9)-2, and any provisions in this
         Plan which reflect Code ss.401(a)(9) will override any distribution
         options which are inconsistent with such Code section and regulations.
         If Participant's Vested Aggregate Account is paid in a form that is
         based on life expectancies through other than the purchase of an
         immediate annuity, the joint life expectancies of the Participant and
         his or her Spouse will only be recalculated annually if the Participant
         elects the recalculation method of determining life expectancy. In the
         case of any other Beneficiary, life expectancy will be calculated at
         the time payment first commences, and payments for any 12-consecutive
         month period will be based on such life expectancy minus the number of
         whole years passed since distribution first commenced.

5.10     STATUTORY COMMENCEMENT OF BENEFITS
         Unless a Participant otherwise elects, distribution of his or her
         benefit must begin no later than the 60th day after the latest of the
         close of the Plan Year in which the Participant (1) reaches the earlier
         of Age 65 or Normal Retirement Age; (2) reaches the 10th anniversary of
         the year the Participant commenced Plan participation; or (3)
         terminates service with the Employer. However, the failure of a
         Participant to consent to a distribution while a benefit is immediately
         distributable within the meaning of Section 5.6 will be deemed to be an
         election to defer commencement of payment of any benefit sufficient to
         satisfy this Section. If this Plan provides for early retirement, a
         Participant who satisfies the service requirement for early retirement
         prior to Termination of Employment will be entitled to receive his or
         her Vested Aggregate Account, if any, upon satisfaction of the age
         requirement for early retirement.

5.11     SEGREGATION OF BENEFIT BEFORE DISTRIBUTION
         With respect to that portion of a Participant's Vested Aggregate
         Account which the Participant is not permitted to self-direct under
         Section 7.15, as of the Valuation Date coinciding with or next
         following the date a Participant terminates employment with the
         Employer for any reason, the Administrator will, until a distribution
         is made to the Participant or the Participant's Beneficiary under the


                                     - 49 -


<PAGE>

         Plan, direct the Trustee in a uniform nondiscriminatory manner to
         either (1) invest such Vested Aggregate Account determined as of such
         Valuation Date in a separate interest bearing account; or (2) leave
         such Vested Aggregate Account as part of the general Trust Fund, in
         which case such account will share in the allocation of earnings and
         losses under Section 3.3(a).

5.12     DISTRIBUTION IN EVENT OF INCAPACITY
         If any person who is entitled to receive a distribution of benefits
         (the "Payee") suffers from a Disability or is under a legal incapacity,
         payments may be made in one or more of the following ways as directed
         by the Administrator: (a) to the Payee directly; (b) to the guardian or
         legal representative of the Payee's person or estate; (c) to a relative
         of the Payee, to be expended for the Payee's benefit; or (d) to the
         custodian of the Payee under any Uniform Transfers to Minors Act or
         under any Uniform Gifts To Minors Act. The Administrator's
         determination of the minority or incapacity of any payee will be final.

5.13     MISSING PARTICIPANTS AND UNCLAIMED BENEFITS
         Neither the Trustee nor the Administrator will be required to search
         for or ascertain the whereabouts of any Participant or Beneficiary.
         With respect to a Participant or Beneficiary who has not claimed any
         benefit (the "missing payee") to which such missing payee is entitled,
         and with respect to any Participant or Beneficiary who has not
         satisfied the administrative requirements for benefit payment, the
         following provisions will apply:

         (a)      ATTEMPT TO CONTACT AND FORFEITURE OF BENEFIT: The
                  Administrator will notify a missing payee that he or she is
                  entitled to a distribution under the Plan, by certified or
                  registered mail addressed to the missing payee's last known
                  address. The Administrator, in its sole discretion, may also
                  utilize other methods of locating a missing payee, including
                  letter forwarding programs offered by the Internal Revenue
                  Service or the Social Security Administration, or internet or
                  other search services offered by the Pension Benefit Guaranty
                  Corporation (PBGC) if such services are made available to
                  defined contributions plans; or by placing public notices in a
                  local newspaper. If a missing payee fails to make his or her
                  whereabouts known in writing to the Trustee or Administrator
                  or otherwise fails to claim a benefit, or the administrative
                  requirements for benefit payment for any payee are not
                  satisfied, upon the earlier to occur of (1) the later of the
                  date the Plan is terminated or discontinued or six months from
                  the date the notice was mailed or (2) the date which is two
                  years from the date the notice was mailed, the Administrator
                  may, but will not be required to, treat the payee's benefit as
                  a forfeiture, subject to paragraphs (b) and (c) below.

         (b)      ALTERNATIVE METHODS TO FORFEITURE: In lieu of Forfeiture under
                  paragraph (a), the Administrator may elect one the following
                  alternatives described below:

                  (1)      DIRECT ROLLOVER TO IRA: If a Participant's Vested
                           Aggregate Account balance (determined before taking
                           into account his or her Rollover Account and
                           Voluntary Employee Contribution Account) on the date
                           he or she terminated employment with the Employer
                           does not exceed $5,000 (or such lesser amount as may
                           be designated by the Administrator), the
                           Administrator may elect to make distribution
                           hereunder in the form of a direct rollover to an
                           individual retirement account (IRA) if the IRA can be
                           established by the Administrator at a qualified
                           financial institution. In establishing the IRA on
                           behalf of the Participant or other payee, the


                                     - 50 -


<PAGE>

                           Administrator will select an IRA trustee, custodian
                           or issuer unrelated to the Employer or the
                           Administrator and will make the initial investment
                           choices for the IRA. The default direct rollover will
                           occur not less than 30 days and not more than 90 days
                           after the Code ss.402(f) notice with the explanation
                           of the default direct rollover is provided to the
                           Participant or other payee.

                  (2)      ESCHEAT TO THE STATE: The Administrator may elect to
                           escheat the payee's benefit to the state in which the
                           Sponsor's principal place of business is located.

                  (3)      OTHER METHODS OF DISTRIBUTION: The Administrator may
                           elect to distribute a payee's benefit by any other
                           method approved by the United States Department of
                           the Treasury and/or by the United States Department
                           of Labor.

         (c)      CONDITIONS FOR RESTORATION OF FORFEITED BENEFIT: If a payee
                  whose benefit has been forfeited under paragraph (a) is
                  located, or if a payee whose benefit has been forfeited under
                  paragraph (a) for failure to satisfy the administrative
                  requirements for benefit payment subsequently satisfies the
                  administrative requirements for benefit payment and claims his
                  or her benefit, and if the Plan has not terminated (or if the
                  Plan has, all benefits have not yet been paid), then the
                  benefit will be restored. The Administrator, on a case-by-case
                  basis, may elect to restore the benefit by the use of either
                  earnings from non-segregated Trust Fund assets, or Employer
                  contributions, or any combination thereof. However, if such
                  missing payee has not been located by the time the Plan
                  terminates and all benefits are distributed, the Forfeiture of
                  such unpaid benefit will be irrevocable.

5.14     DIRECT ROLLOVERS
         A distributee may elect to have all or any portion of an eligible
         rollover distribution paid directly to an eligible retirement plan
         specified by the distributee in a direct rollover, which is a payment
         by the Plan to the eligible retirement plan specified by the
         distributee.

         (a)      ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover
                  distribution is 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 (1) 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 for the
                  joint lives (or joint life expectancies) of the distributee
                  and the distributee's designated beneficiary, or for a
                  specified period of ten years or more; (2) any distribution to
                  the extent such distribution is required under Code
                  ss.401(a)(9); (3) the portion of any distribution that is not
                  includible in gross income (determined without regard to the
                  exclusion for net unrealized appreciation on Employer
                  securities); and (4) the portion of any distribution made on
                  or after January 1, 2000 which is attributable to a hardship
                  distribution described in Code ss.401(k)(2)(B)(i)(IV).

         (b)      ELIGIBLE RETIREMENT PLAN: An eligible retirement plan is an
                  individual retirement account described in Code ss.408(a), an
                  individual retirement annuity described in Code ss.408(b), an
                  annuity plan described in Code ss.403(a), or a qualified trust
                  described in Code ss.401(a), that accepts the distributee's
                  eligible rollover distribution. However, in the case of an
                  eligible rollover distribution to the surviving Spouse, an
                  eligible retirement plan is an individual retirement account
                  or individual retirement annuity.

         (c)      DEFINITION OF DISTRIBUTEE: For purposes of this Section, a
                  distributee includes an Employee or former Employee. In
                  addition, an Employee's or former Employee's surviving Spouse
                  and an Employee's or former Employee's Spouse or former Spouse
                  who is the alternate payee under a qualified domestic
                  relations order as defined in Code ss.414(p), are distributees
                  with regard to the interest of the Spouse or former Spouse.

5.15     DISTRIBUTION OF PROPERTY
         The determination to pay all or a part of a lump sum in property will
         be made by the Administrator in its sole discretion applied in a
         non-discriminatory manner that does not discriminate in favor of Highly
         Compensated Employees; except that if this is an amended or restated


                                     - 51 -


<PAGE>

         Plan, the payee will have the right to elect a full or partial
         distribution in property within the period described in Section
         9.1(a)(2) if the Plan as in effect one day prior to this amendment or
         restatement provided for a property distribution at the payee's option.

5.16     DISTRIBUTIONS SUBJECT TO CODE SS.401(A)(11) REQUIREMENTS
         Unless a cash-out occurs under Section 5.5 or unless otherwise elected
         under paragraph (c) below, upon distribution of a Participant's Vested
         Aggregate Account for any reason, any portion thereof which was
         transferred to this Plan in a trustee to trustee transfer from a money
         purchase plan, a target benefit plan, a defined benefit plan, or a
         profit sharing plan which was subject to requirements of Code
         ss.401(a)(11) at the time of the transfer, or any portion thereof which
         is to be distributed in an optional form protected under this Plan and
         which is subject to the requirements of Code ss.401(a)(11), will be
         distributed in accordance with the following provisions:

         (a)      DISTRIBUTIONS OTHER THAN DEATH: Any portion of a Participant's
                  benefit which is distributed under Sections 5.1, 5.3 or 5.4
                  and which is subject to the requirements of this Section will
                  be distributed as a Qualified Joint and Survivor Annuity if
                  the Participant is married on the Annuity Starting Date and
                  has not died before such date. If the Participant is unmarried
                  on the Annuity Starting Date and has not died before such
                  date, any such portion of the Participant's benefit will be
                  distributed as a life annuity. If a Participant elects not to
                  receive the annuity of form of payment described above, any
                  portion of the Participant's benefit that is subject to the
                  requirements of this Section will be distributed in the manner
                  described in Sections 5.1, 5.3 or 5.4 of the Plan, as
                  applicable.

         (b)      DISTRIBUTIONS UPON DEATH: Notwithstanding any other
                  Beneficiary designation made by a Participant, if a
                  Participant is married on the date of his or her death and
                  dies before the Annuity Starting Date, the Participant's
                  surviving Spouse will, with respect to any portion of a
                  deceased Participant's benefit which is subject to the
                  requirements of this Section, receive a minimum death benefit
                  as a Qualified Preretirement Survivor Annuity unless such
                  annuity has been waived under paragraph (c) below, in which
                  event any such death benefit will be distributed to the
                  surviving Spouse in the manner described in Section 5.2. Any
                  portion of a deceased Participant's death benefit which a
                  non-Spouse Beneficiary is entitled to receive under Section
                  4.3 and which is subject to the requirements of this Section
                  will be distributed in the manner described in Section 5.2(c).

         (c)      SPOUSAL CONSENT REQUIRED TO WAIVE QJSA AND QPSA REQUIREMENTS:
                  A married Participant's election not to receive a Qualified
                  Joint and Survivor Annuity (QJSA) or a Qualified
                  Pre-retirement Survivor Annuity (QPSA) as set forth in
                  paragraph (a) above, or an unmarried Participant's election
                  not to receive a life annuity as set forth in paragraph (a)
                  above, must be made in accordance with the following
                  provisions:

                  (1)      ELECTION NOT TO RECEIVE A QJSA: A Participant's
                           election not to receive a Qualified Joint and
                           Survivor Annuity or a life annuity as set forth in
                           paragraph (a) must be in writing and must be made
                           during the 90-day period ending on the Annuity
                           Starting Date. Such election may be revoked in
                           writing and a new election made at any time and any
                           number of times during the election period.

                  (2)      ELECTION NOT TO RECEIVE A QPSA: A Participant's
                           election not to receive a Qualified Preretirement
                           Survivor Annuity as set forth in subparagraph (2)
                           must be in writing and must be made during an
                           election period beginning on the first day of the
                           Plan Year in which the Participant reaches Age 35 and
                           ending on the date of his or her death. The election


                                     - 52 -


<PAGE>

                           may be revoked in writing and a new election made at
                           any time and any number of times during the election
                           period. A Terminated Participant's election period
                           concerning his or her Vested Aggregate Account before
                           his or her termination will not begin later than such
                           date. Notwithstanding the foregoing, if the
                           Participant has not completed a Beneficiary
                           designation form specifying the time or form of
                           payment, the surviving Spouse may waive the Qualified
                           Preretirement Survivor Annuity.

                  (3)      SPECIAL PRE-AGE 35 QPSA ELECTION: A Participant who
                           has not yet reached Age 35 as of the end of any
                           current Plan Year may make a special election not to
                           receive a Qualified Preretirement Survivor Annuity
                           for the period beginning on the date of such election
                           and ending on the first day of the Plan Year in which
                           such Participant reaches Age 35. This election will
                           not be valid unless the Participant receives the same
                           written explanation of the Qualified Preretirement
                           Survivor Annuity as described in subparagraph (4).
                           Qualified Preretirement Survivor Annuity coverage
                           will be automatically reinstated as of the first day
                           of the Plan Year in which the Participant reaches Age
                           35. Any new election on or after such date will be
                           subject to the full requirements of this Section.

                  (4)      REQUIRED WRITTEN EXPLANATION: In connection with an
                           election not to receive a QJSA, the Administrator
                           will, no less than 30 days and no more than 90 days
                           prior to the Annuity Starting Date, provide the
                           Participant with a written explanation of the terms
                           and conditions of the QJSA; the Participant's right
                           to make (and the effect of) an election to waive the
                           QJSA; the rights of the Participant's Spouse; and the
                           right of the Participant to revoke such election (and
                           the effect thereof). In connection with an election
                           not to receive a QPSA, the Administrator will provide
                           each Participant within the Applicable Period as
                           defined in subparagraph (3) with a written
                           explanation of the QPSA in such terms and in such
                           manner as would be comparable to the written
                           explanation applicable to a QJSA as set forth in this
                           paragraph.

                  (5)      APPLICABLE PERIOD: The Applicable Period for a
                           Participant is whichever of the following periods
                           ends last: (1) the period beginning with the first
                           day of the Plan Year in which the Participant attains
                           Age 32 and ending with the close of the Plan Year
                           preceding the Plan Year in which the Participant
                           attains Age 35; (2) a reasonable period after the
                           individual becomes a Participant; (3) a reasonable
                           period ending after Code ss.401(a)(11) applies to the
                           Participant; or (4) a reasonable period ending after
                           Code ss.417(a)(5) ceases to apply to the Participant.
                           A reasonable period is the end of the two-year period
                           beginning one year prior to the date the applicable
                           event occurs, and ending one year after that date.

                  (6)      PARTICIPANTS WHO TERMINATE BEFORE AGE 35: In the case
                           of a Participant who separates from service before
                           the Plan Year in which the Participant reaches Age
                           35, the notice under subparagraph (4) will be
                           provided within the two year period beginning one
                           year prior to separation from service and ending one
                           year after such separation. If such Participant
                           thereafter returns to employment with the Employer,
                           the Applicable Period for such Participant will be
                           redetermined.

                  (7)      ELECTIONS MUST HAVE SPOUSAL CONSENT: A Participant's
                           election not to receive a Qualified Joint and
                           Survivor Annuity or a Participant's election not to
                           receive a Qualified Preretirement Survivor Annuity
                           will not be effective (1) unless the Participant's
                           Spouse consents in writing to the election; (2)


                                     - 53 -


<PAGE>

                           unless the election designates a specific Beneficiary
                           (or form of benefit) which may not be changed without
                           spousal consent (or the consent of the Spouse
                           expressly permits designations by the Participant
                           without any requirement of further spousal consent);
                           and (3) unless the Spouse's consent acknowledges the
                           effect of the election and is witnessed by the
                           Administrator or a notary public.

                  (8)      ADDITIONAL REQUIREMENTS FOR SPOUSAL CONSENT: A
                           Spouse's consent will not be required if there is no
                           Spouse or if the Spouse cannot be located, or if
                           there are other circumstances present which preclude
                           the necessity of such Spouse's consent. Any consent
                           by a Participant's Spouse (or establishment that
                           consent cannot be obtained) will be effective only
                           with respect to such Spouse. A consent that permits
                           designations by the Participant without any
                           requirement of further spousal consent must
                           acknowledge that the Spouse has the right to limit
                           consent to a specific Beneficiary, and a specific
                           form of benefit where applicable, and that the Spouse
                           voluntarily elects to relinquish either or both of
                           such rights. A revocation of a prior election may be
                           made by a Participant without the Spouse's consent at
                           any time before benefits begin. No consent obtained
                           under subparagraph (7) will be valid unless the
                           Participant has received notice as provided in
                           subparagraph (4).

         (d)      SPOUSAL CONSENT REQUIRED FOR IMMEDIATELY DISTRIBUTABLE
                  BENEFITS: Notwithstanding Section 5.6, a Participant's Spouse
                  must give written consent as set forth in paragraph (c) above
                  to the distribution of any portion of a Participant's Vested
                  Aggregate Account balance which is immediately distributable
                  and which at the time of distribution is subject to the
                  Qualified Joint and Survivor Annuity and Qualified
                  Preretirement Survivor Annuity requirements of Code
                  ss.401(a)(11), subject to the following provisions:

                  (1)      GENERAL REQUIREMENT: The consent of the Participant
                           and the Participant's Spouse (or where either the
                           Participant or the Participant's Spouse has died, the
                           survivor) must be obtained in writing within the
                           90-day period ending on the Annuity Starting Date.
                           However, (1) only the Participant need consent to the
                           distribution of a QJSA while the benefit is
                           immediately distributable; and (2) neither the
                           Participant nor the Participant's Spouse will be
                           required to consent to a distribution that is
                           required by Code ss.401(a)(9) or ss.415.

                  (2)      NOTIFICATION REQUIREMENTS: The Administrator must
                           notify the Participant and the Participant's Spouse
                           of the right to defer any such distribution until the
                           benefit is no longer immediately distributable. The
                           content of the notification must comply with all of
                           the requirements in Section 5.6(e), and must be
                           provided no less than 30 days or more than 90 days
                           prior to the Annuity Starting Date.

                  (3)      CONSENT NOT NEEDED ON PLAN TERMINATION: If this Plan
                           upon termination does not offer an annuity option
                           (purchased from a commercial provider), and neither
                           the Employer nor an Affiliated Employer maintains
                           another defined contribution plan other than an
                           employee stock ownership plan (ESOP) as defined in
                           Code ss.4975(e)(7), then such portion of the
                           Participant's benefit will, without the Participant's
                           consent, be distributed to the Participant. If the
                           Employer or an Affiliated Employer maintains another
                           defined contribution plan other than an ESOP, such
                           portion of the Participant's benefit will, without
                           the Participant's consent, be transferred to the
                           other plan if the Participant does not consent to an
                           immediate distribution as described in Section 5.6 of
                           the Plan.

                                     - 54 -


<PAGE>

5.17     FINANCIAL HARDSHIP DISTRIBUTIONS
         Subject to any rules or procedures that may be established by the
         Administrator under paragraph (g) below, a Participant who is still an
         Employee may withdraw up to 100% of his or her Elective Deferral
         Account (excluding any earnings allocated thereto) because of financial
         hardship. If permitted by the rules and procedures, such Participant
         may also withdraw up to 100% of the Vested Interest in his or her
         Matching Contribution Account and/or Non-Elective Contribution Account
         because of financial hardship. Unless modified by the rules and
         procedures, hardship distributions will be made in accordance with the
         following provisions:

         (a)      AMOUNT AND FORM OF DISTRIBUTION: The maximum amount
                  distributable will be based on the Participant's Account
                  balance as of the Valuation Date immediately preceding the
                  date of the request, and the amount actually distributed
                  cannot exceed the amount required to relieve the financial
                  hardship, including amounts necessary to pay any federal,
                  state or local income taxes or penalties reasonably
                  anticipated to result from the distribution. Distribution will
                  only be made to the Participant in one lump sum. The
                  Administrator, on a uniform nondiscriminatory basis, will
                  determine from which account any distribution hereunder will
                  be made.

         (b)      DEFINITION OF FINANCIAL HARDSHIP: Financial hardship means an
                  immediate and heavy financial need that the Participant lacks
                  available resources to satisfy. Only the following financial
                  needs will be considered immediate and heavy: (1) payment of
                  medical expenses within the meaning of Code ss.213(d) that are
                  incurred by the Participant, his or her Spouse or his or her
                  children; (2) the purchase (excluding mortgage payments) of a
                  principal residence for the Participant; (3) payment of
                  tuition and related educational fees for the next 12 months of
                  post-secondary education for the Participant, the
                  Participant's Spouse or the Participant's children; (4) the
                  need to prevent the eviction of the Participant from his or
                  her principal residence or foreclosure on the mortgage of the
                  Participant's principal residence; (5) payment of funeral
                  expenses for a member of the Participant's family; or (6) any
                  other immediate and heavy financial need of the Participant
                  that the Administrator determines on the basis of all relevant
                  facts and circumstances cannot be satisfied from other
                  resources reasonably available to the Participant.

         (c)      PARTICIPANT'S WRITTEN REPRESENTATIONS: Except as otherwise
                  provided in paragraph (d) below, a hardship distribution can
                  only be made to the extent a Participant's financial hardship
                  cannot be satisfied from other resources reasonably available
                  to the Participant, as determined by the Administrator on the
                  basis of all relevant facts and circumstances. However, the
                  Administrator may treat a distribution as necessary to satisfy
                  a financial hardship if the Administrator, in the absence of
                  actual knowledge to the contrary, elects to rely upon the
                  Participant's written representation that the financial
                  hardship cannot be relieved (1) through reimbursement or
                  compensation by insurance or otherwise; (2) by liquidation of
                  the Participant's assets, to the extent such liquidation would
                  not itself cause a financial hardship; (3) by cessation of the
                  Participant's Elective Deferrals or Voluntary Employee
                  Contributions to the Plan; or (4) by other distributions or
                  nontaxable (at the time of the loan) loans from any other
                  Employer-maintained plans or from any other employer, or by
                  borrowing from commercial sources on reasonable commercial
                  terms.

         (d)      SAFE HARBOR DEEMED DISTRIBUTIONS: With respect to a
                  distribution made for one of the reasons in paragraph (b)(1),
                  (2), (3) or (4), if the Administrator does not elect to rely
                  upon a Participant's written representation as set forth in
                  paragraph (c), or if the Administrator offers to rely upon a
                  Participant written representation and the Participant fails
                  to provide such written representation, then any such
                  distribution will be deemed to be necessary to satisfy a


                                     - 55 -


<PAGE>

                  financial hardship if the Participant has obtained all
                  distributions (other than financial hardship distributions)
                  and all nontaxable loans currently available under all plans
                  maintained by the Employer. Furthermore, if the Administrator
                  offers to rely on the written representation requirements of
                  paragraph (c) but the Participant elects not to comply with
                  such written requirements, and if any portion of the amount
                  distributed is from the Participant's Elective Deferral
                  Account, then the Participant cannot make Elective Deferrals
                  and Voluntary Employee Contributions to this Plan or any other
                  plan maintained by the Employer for at least 12 months after
                  receipt of the distribution; and for the Participant's taxable
                  year immediately following the taxable year of the hardship
                  distribution, the Participant cannot make Elective Deferrals
                  to this Plan or any other plan maintained by the Employer in
                  excess of the applicable limit under Code ss.402(g)(5) for
                  such taxable year, minus the amount of such Participant's
                  Elective Deferrals made for the taxable year in which the
                  financial hardship distribution was made.

         (e)      ORDER OF DISTRIBUTION: If hardship distributions are permitted
                  to be made from a Participant's Matching Contribution Account
                  and/or Non-Elective Contribution Account as well as from his
                  or her Elective Deferral Account, the Administrator will
                  determine the portion (including zero) of the distribution
                  that will be made from each such account, provided that any
                  such determination is made in a uniform nondiscriminatory
                  manner.

         (f)      RESTRICTION ON CERTAIN TRANSFERRED ASSETS: Notwithstanding any
                  provision in this Section, no hardship distribution can be
                  made with respect to benefits attributable to assets
                  (including post-transfer earnings thereon) and liabilities
                  that are transferred, within the meaning of Code ss.414(l), to
                  this Plan from a money purchase pension plan or target benefit
                  pension plan qualified under Code ss.401(a) (other than any
                  portion of those assets and liabilities that are attributable
                  to Voluntary Employee Contributions).

         (g)      ESTABLISHMENT OF ADMINISTRATIVE PROCEDURES: The Administrator
                  may, in a separate written document, establish rules or
                  procedures regarding hardship distributions under this
                  Section. Such separate written document, when properly
                  executed, will be deemed incorporated in this Plan. The rules
                  or procedures set forth therein may be modified or amended by
                  the Administrator without the necessity of amending this
                  Section of the Plan, but any such modifications must be
                  communicated to Participants in the manner described in
                  Section 8.9. Notwithstanding the foregoing, (1) a summary plan
                  description or summary of material modifications thereto in
                  which the rules or procedures regarding the making of hardship
                  distributions are described will be considered a separate
                  written document sufficient to satisfy the requirements
                  (including the execution requirement) of this paragraph; and
                  (2) any such rules or procedures that are established under
                  this paragraph must be applied in a uniform nondiscriminatory
                  manner.

5.18     IN-SERVICE DISTRIBUTIONS
         Except as may otherwise be permitted under Section 4.2, no
         distributions are permitted before a Participant terminates employment
         with the Employer.

5.19     DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS
         Elective Deferrals that exceed the Code ss.402(g)(5) dollar limitation
         will be deemed Excess Elective Deferrals, and all Excess Elective
         Deferrals, plus any income and minus any loss allocable thereto, will
         be distributed no later than April 15th to any Participant to whose
         account Excess Elective Deferrals were allocated for the preceding year
         and who claims Excess Elective Deferrals for such taxable year.
         Distribution of Excess Elective Deferrals will be made in accordance
         with the following provisions:

                                     - 56 -


<PAGE>

         (a)      ASSIGNMENT OF EXCESS ELECTIVE DEFERRALS: A Participant may
                  assign to this Plan any Excess Elective Deferrals made during
                  a taxable year of the Participant by notifying the
                  Administrator on or before April 15th of the amount of the
                  Excess Elective Deferrals to be assigned to the Plan. A
                  Participant will be deemed to notify the Administrator of any
                  Excess Elective Deferrals that arise by taking into account
                  only those Elective Deferrals made to this Plan and any other
                  plans of the Employer.

         (b)      TREATMENT AS ANNUAL ADDITIONS: Excess Elective Deferrals will
                  be treated as Annual Additions under Section 6.1 of the Plan
                  unless such amounts are distributed no later than the first
                  April 15th following the close of the Participant's taxable
                  year. Excess Elective Deferrals that are distributed after
                  April 15th are includible in the Participant's gross income in
                  the taxable year in which deferred and the taxable year in
                  which distributed.

         (c)      DETERMINATION OF INCOME OR LOSS: Excess Elective Deferrals
                  will be adjusted for any income or loss up to the end of the
                  Participant's taxable year and, at the discretion of the
                  Administrator, may be adjusted for income or loss up to the
                  date of distribution. The period between the end of the
                  Participant's taxable year and the date of distribution will
                  be referred to as the gap period, and any income earned
                  therein will be allocated at the discretion of the
                  Administrator applied consistently to all Participants and to
                  all corrective distributions for the taxable year. The income
                  or loss allocable to a Participant's Excess Elective Deferrals
                  will be the amount determined by either the method in
                  subparagraph (1) or subparagraph (2) below plus, if applicable
                  the amount determined in subparagraph (3) below:

                  (1)      The amount determined by multiplying the income or
                           loss allocable to the Participant's Elective
                           Deferrals for the taxable year (and the gap period)
                           by a fraction, the numerator of which is the
                           Participant's Excess Elective Deferrals for the year
                           and the denominator of which is (A) the Participant's
                           Elective Deferral Account balance as of the beginning
                           of the Participant's taxable year plus any Elective
                           Deferrals allocated to the Participant's Elective
                           Deferral Account during such taxable year and the gap
                           period, or (B) solely with respect to taxable years
                           beginning before January 1, 1992, the Participant's
                           Elective Deferral Account balance as of the end of
                           the Participant's taxable year, reduced by any gain
                           and increased by any loss allocable thereto during
                           the taxable year; or

                  (2)      The amount determined by any reasonable method of
                           allocating income or loss to Excess Elective
                           Deferrals for the taxable year and for the gap period
                           provided the method used is the same method used by
                           this Plan for allocating income or losses to
                           Participant's Accounts; and

                  (3)      10% of the amount determined under (1) multiplied by
                           the number of whole months between the end of the
                           Participant's taxable year and the distribution date,
                           counting the month of distribution if it occurs after
                           the 15th of such month.

         (d)      SOURCE OF DISTRIBUTION: Distribution of Excess Elective
                  Deferrals will be taken from a Participant's investment
                  options based on rules established by the Administrator.

5.20     DISTRIBUTION OF EXCESS CONTRIBUTIONS
         Excess Contributions, plus any income and minus any loss allocable
         thereto, will be distributed no later than the last day of each Plan
         Year to Participants to whose accounts such Excess Contributions were
         allocated for the preceding Plan Year. The amount of Excess
         Contributions to be distributed to a Participant under this Section
         will be reduced by any Excess Elective Deferrals previously distributed


                                     - 57 -


<PAGE>

         to the Participant under Section 5.19 for the Participant's taxable
         year ending with or within the Plan Year. Distribution of Excess
         Contributions will be made in accordance with the following provisions:

         (a)      ALLOCATION TO HIGHLY COMPENSATED EMPLOYEES: Excess
                  Contributions will be allocated to the Highly Compensated
                  Employees with the largest amounts of Employer contributions
                  taken into account in calculating the ADP Test for the year in
                  which the Excess Contributions arose, beginning with the HCE
                  with the largest amount of such Employer contributions and
                  continuing in descending order until all the Excess
                  Contributions have been allocated. For purposes of the
                  preceding sentence, the "largest amount" is determined after
                  distribution of any Excess Deferrals. If excess amounts are
                  distributed more than 2 1/2 months after the last day of the
                  Plan Year in which they arose, a 10% excise tax will be
                  imposed on the Employer. Excess Contributions will be treated
                  as Annual Additions pursuant to Section 6.1.

         (b)      DETERMINATION OF INCOME OR LOSS: Excess Contributions will be
                  adjusted for any income or loss up to the end of the Plan Year
                  and, at the discretion of the Administrator, may be adjusted
                  for income or loss up to the date of distribution. The period,
                  if any, between the end of the Plan Year and the date of
                  distribution will be referred to as gap period, and any income
                  earned therein will be allocated at the Administrator's
                  discretion applied consistently to all Participants and to all
                  corrective distributions made for the Plan Year. The income or
                  loss allocable to each Participant's Excess Contributions will
                  be the amount determined by either the method in subparagraph
                  (1) or subparagraph (2) plus, if applicable, the amount
                  determined under subparagraph (3), as follows:

                  (1)      The amount determined by multiplying the income or
                           loss allocable to the Participant's Elective
                           Deferrals (and, if applicable, QNECs or QMACs, or
                           both) for the Plan Year (and the gap period, if
                           applicable) by a fraction, the numerator of which is
                           the Participant's Excess Contributions for the year
                           and the denominator of which is (A) the Participant's
                           Elective Deferral Account balance (and QNECs or
                           QMACs, or both, if any of such contributions are used
                           in the ADP test) as of the beginning of the Plan Year
                           plus any Elective Deferrals (and QNECs or QMACs, or
                           both, if any of such contributions are included in
                           the ADP test) allocated to the Participant during
                           such Plan Year and the gap period, if applicable, or
                           (B) solely with respect to Plan Years beginning
                           before January 1, 1992, the Participant's Elective
                           Deferral Account balance (and QNECs or QMACs or both,
                           if any such contributions are included in the ADP
                           Test) as of the end of the Plan Year reduced by any
                           gain and increased by any loss allocable thereto
                           during the Plan Year; or

                  (2)      The amount determined by any reasonable method of
                           allocating income or loss to the Participant's
                           Elective Deferrals (and if applicable, QNECs or
                           QMACS, or both) for the Plan Year and for the gap
                           period provided the method used is the same method
                           used for allocating income or losses to Participants'
                           Accounts; and

                  (3)      10% of the amount determined under (1) multiplied by
                           the number of whole months between the end of the
                           Plan Year and the distribution date, counting the
                           month of distribution if it occurs after the 15th of
                           such month.

         (c)      ACCOUNTING FOR EXCESS CONTRIBUTIONS: Excess Contributions will
                  be distributed from the Participant's Elective Deferral
                  Account and Qualified Matching Contribution Account in
                  proportion to the Participant's Elective Deferrals and
                  Qualified Matching Contributions (to the extent used in the


                                     - 58 -


<PAGE>

                  ADP Test) for the Plan Year. Excess Contributions will be
                  distributed from the Participant's Qualified Non-Elective
                  Contribution Account only to the extent the Excess
                  Contributions exceed the balance in the Participant's Elective
                  Deferral Account and Qualified Matching Contribution Account.

         (d)      SOURCE OF DISTRIBUTION: Distribution of Excess Contributions
                  will be taken from a Participant's investment options based on
                  rules established by the Administrator.

5.21     DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS
         All Excess Aggregate Contributions (plus any income and minus any loss
         allocable thereto) which are not Vested will be used to reduce Employer
         contributions for the current Plan Year or a future Plan Year. All
         Excess Aggregate Contributions (plus any income and minus any loss
         allocable thereto) which are Vested will be distributed no later than
         the last day of each Plan Year to Participants to whose Accounts Excess
         Aggregate Contributions were allocated for the preceding Plan Year.
         Distribution of Excess Aggregate Contributions will be made in
         accordance with the following provisions:

         (a)      ALLOCATION TO HIGHLY COMPENSATED EMPLOYEES: Excess Aggregate
                  Contributions will be allocated to the HCEs with the largest
                  Contribution Percentage Amounts taken into account in
                  calculating the ACP Test for the year in which the Excess
                  Aggregate Contributions arose, beginning with the HCE with the
                  largest amount of such Contribution Percentage Amounts and
                  continuing in descending order until all the Excess Aggregate
                  Contributions have been allocated. For purposes of the
                  preceding sentence, the "largest amount" is determined after
                  distribution of any Excess Contributions.

         (b)      EXCISE TAX ON CERTAIN DISTRIBUTIONS: If Excess Aggregate
                  Contributions are distributed more than 2 1/2 months after the
                  last day of the Plan Year in which they arose, a 10% excise
                  tax will be imposed on the Employer with respect to those
                  amounts.

         (c)      TREATMENT AS ANNUAL ADDITIONS: Excess Aggregate Contributions
                  will be treated as Annual Additions under Section 6.1.

         (d)      FORFEITURE OF CERTAIN MATCHING CONTRIBUTIONS: Matching
                  Contributions made on behalf of an Employee which are
                  attributable to Excess Elective Deferrals and Excess
                  Contributions will be treated as Forfeitures and will be used
                  in the manner described in Section 3.4(c).

         (e)      DETERMINATION OF INCOME: Excess Aggregate Contributions will
                  be adjusted for any income or loss up to the end of the Plan
                  Year and, at the discretion of the Administrator, may be
                  adjusted for income or loss up to the date of distribution.
                  The period between the end of the Plan Year and the date of
                  distribution will be referred to as the gap period, and any
                  income earned during the gap period will be allocated at the
                  discretion of the Administrator applied consistently to all
                  Participants and to all corrective distributions for the Plan
                  Year. The income or loss allocable to a Participant's Excess
                  Aggregate Contributions will be the amount determined by
                  either the method in subparagraph (1) or subparagraph (2)
                  plus, if applicable, the amount determined under subparagraph
                  (3):

                  (1)      The amount determined by multiplying the income or
                           loss allocable to the Participant's Voluntary
                           Employee Contributions, Matching Contributions (if
                           not used in the ADP Test), Qualified Non-Elective
                           Contributions and, to the extent applicable, Elective
                           Deferrals for the Plan Year (and the gap period, if
                           applicable) by a fraction, the numerator of which is


                                     - 59 -


<PAGE>

                           such Participant's Excess Aggregate Contributions for
                           the year and the denominator of which is (A) the
                           Participant's Account balance(s) attributable to
                           Contribution Percentage Amounts as of the beginning
                           of the Plan Year, plus any additional amounts
                           attributable to Contribution Percentage Amounts
                           allocated to the Participant during such Plan Year
                           and the gap period, if applicable, or (B) solely with
                           respect to Plan Years beginning before January 1,
                           1992, the Participant's Account balance attributable
                           to Contribution Percentage Amounts as of the end of
                           the Plan Year, reduced by any gain and increased by
                           any loss allocable thereto during the Plan Year; or

                  (2)      The amount determined by any reasonable method of
                           allocating income or loss to the Participant's
                           Voluntary Contributions, Matching Contributions and
                           Qualified Non-Elective Contribution for the Plan Year
                           and for the gap period, if applicable, provided the
                           method used is the same one used for allocating
                           income or losses to Participants' Accounts; and

                  (3)      10% of the amount determined under (1) multiplied by
                           the number of whole months between the end of the
                           Plan Year and the distribution date, counting the
                           month of distribution if it occurs after the 15th of
                           such month.

         (f)      ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS: Excess
                  Aggregate Contributions will be forfeited if forfeitable, or
                  will be distributed on a pro-rata basis from the Participant's
                  Voluntary Employee Contribution Account, Matching Contribution
                  Account and Qualified Matching Contribution Account, and if
                  applicable, from the Qualified Non-Elective Contribution
                  Account or Elective Deferral Account, or from both.

         (g)      SOURCE OF DISTRIBUTION: Distribution of Excess Aggregate
                  Contributions will be taken from a Participant's investment
                  options based on rules established by the Administrator.

5.22     ELIMINATION OF CERTAIN FORMS OF PAYMENT
         The form or forms of distribution described in Section 5.1, 5.3 and 5.4
         are intended to satisfy the requirements of regulation ss.1.411(d)-4,
         Q&A-2(e). Accordingly, the form or forms of distribution described
         therein are intended to be the only form or forms of distribution
         permitted under this Plan, and subject to the provisions of Section
         9.1(a)(2), any other form of distribution permitted by the Plan on
         December 31, 2002 is eliminated.

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<PAGE>

                                    ARTICLE 6
                             CODE SS.415 LIMITATIONS

6.1      MAXIMUM ANNUAL ADDITION
         The maximum Annual Addition as defined in paragraph (c) below made to a
         Participant's various accounts maintained under the Plan for any
         Limitation Year beginning after December 31, 1986 will not exceed the
         lesser of the Dollar Limitation set forth in paragraph (a) or the
         Compensation Limitation set forth in paragraph (b), as follows:

         (a)      DOLLAR LIMITATION: For Limitation Years beginning after
                  December 31, 1994, the Dollar Limitation is $30,000 as
                  annually adjusted pursuant to Code ss.415(d).

         (b)      COMPENSATION LIMITATION: The Compensation Limitation is equal
                  to 25% of the Participant's Section 415 Compensation for the
                  Limitation Year. This limitation will not apply to any
                  contribution made for medical benefits within the meaning of
                  Code ss.419A(f)(2) after separation from service which is
                  otherwise treated as an Annual Addition or to any amount
                  treated as an Annual Addition under Code ss.415(l)(1).

         (c)      ANNUAL ADDITIONS: The term Annual Additions means the sum of
                  the following amounts credited to a Participant's Account for
                  the Limitation Year: (1) Employer contributions; (2) Employee
                  contributions; (3) Forfeitures; (4) amounts allocated after
                  March 31, 1984 to an individual medical account, as defined in
                  Code ss.415(l)(2), which is part of a pension or annuity plan
                  maintained by the Employer; and (5) amounts derived from
                  contributions paid or accrued after December 31, 1985, in
                  taxable years ending after such date, attributable to
                  post-retirement medical benefits, allocated to the separate
                  account of a key employee, as defined in Code ss.419A(d)(3),
                  under a welfare fund, as defined in Code ss.419(e), maintained
                  by the Employer. Annual Additions do not include a
                  Participant's rollovers, loan repayments, repayments of prior
                  Plan distributions or prior distributions of mandatory
                  contributions, direct transfers of contributions from another
                  plan to this Plan, deductible contributions to a SEP, or
                  voluntary deductible contributions.

6.2      ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION
         In applying the limitation on Annual Additions set forth in Section
         6.1, the following adjustments must be made to the limitation:

         (a)      SHORT LIMITATION YEAR: In a Limitation Year of less than 12
                  months, the Defined Contribution Dollar Limitation in Section
                  6.1(a) will be adjusted by multiplying it by the ratio that
                  the number of months in the short Limitation Year bears to 12.

         (b)      MULTIPLE DEFINED CONTRIBUTION PLANS: If a Participant
                  participates in multiple defined contribution plans sponsored
                  by the Employer which have different Anniversary Dates, the
                  maximum Annual Addition in this Plan for the Limitation Year
                  will be reduced by the Annual Additions credited to the
                  Participant's accounts in the other defined contribution plans
                  in the Limitation Year. If a Participant participates in
                  multiple defined contribution plans sponsored by the Employer
                  which have the same Anniversary Date, (1) if only one of the
                  plans is subject to Code ss.412, Annual Additions will first
                  be credited to the Participant's account in the plan subject
                  to Code ss.412; and (2) if more than one of the plans is


                                     - 61 -


<PAGE>

                  subject to Code ss.412, the maximum Annual Addition in this
                  Plan for a given Limitation Year will be equal to the product
                  of the maximum Annual Addition for such Limitation Year minus
                  any other Annual Additions previously credited to the
                  Participant's account under clause (1), multiplied by the
                  ratio the Annual Additions which would be credited to a
                  Participant's accounts hereunder without regard to the
                  limitations in Section 6.1 bears to the Annual Additions for
                  all plans described in this clause (2).

6.3      MULTIPLE PLANS AND MULTIPLE EMPLOYERS
         All defined benefit plans (whether terminated or not) of the Employer
         will be treated as one defined benefit plan, and all defined
         contribution plans (whether terminated or not) of the Employer will be
         treated as one defined contribution plan. In addition, all Affiliated
         Employers will be considered a single employer.

6.4      ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
         If for any Limitation Year the Annual Additions allocated to a
         Participant's Account exceeds the maximum amount permitted under
         Section 6.1 above because of an allocation of Forfeitures, a reasonable
         error in estimating a Participant's Compensation, a reasonable error in
         determining the amount of elective contributions (within the meaning of
         Code ss.402(g)(3)), or because of other limited facts and circumstances
         that the Commissioner finds justify the availability of the rules set
         forth in this Section, then such Participant's Account will be adjusted
         in accordance with the following provisions in order to reduce the
         excess Annual Additions:

         (a)      RETURN OF EMPLOYEE CONTRIBUTIONS: First, Voluntary Employee
                  Contributions, if any, and second, the amount of elective
                  deferrals and corresponding Employer matching contributions,
                  if any, to the extent that they would reduce the excess
                  amount, will be calculated. Such elective deferrals and
                  Voluntary Employee Contributions plus attributable earnings,
                  will be returned to the Participant. Any Employer matching
                  contribution amount will be applied as described in (b) or (c)
                  below, depending on whether the Participant is covered by the
                  Plan at the end of the Limitation Year.

         (b)      EXCESS USED TO REDUCE EMPLOYER CONTRIBUTIONS IF PARTICIPANT IS
                  STILL COVERED BY THE PLAN: If, after the application of
                  paragraph (a), an excess amount still exists and the
                  Participant is covered by the Plan at the end of the
                  Limitation Year, the excess amount in the Participant's
                  Account plus applicable earnings thereon, if any, will be used
                  to reduce Employer contributions (including any allocation of
                  Forfeitures) for such Participant in the next Limitation Year,
                  and in each succeeding Limitation Year if necessary.

         (c)      EXCESS USED TO REDUCE EMPLOYER CONTRIBUTIONS IF PARTICIPANT IS
                  NOT COVERED BY THE PLAN: If, after the application of
                  paragraph (a), an excess amount still exists and the
                  Participant is not covered by the Plan at the end of a
                  Limitation Year, the excess amount, plus applicable earnings
                  thereon, if any, will be held unallocated in a suspense
                  account. The suspense account will be applied to reduce future
                  Employer contributions (including the allocation of any
                  Forfeitures) for all remaining Participants in the next
                  Limitation Year, and in each succeeding Limitation Year if
                  necessary.

         (d)      SUSPENSE ACCOUNT: If a suspense account is in existence at any
                  time during a Limitation Year pursuant to this Section, such
                  suspense account will not participate in the allocation of the
                  Trust's investment gains and losses. If a suspense account is
                  in existence at any time during a particular Limitation Year,
                  all amounts in the suspense account must be allocated and
                  reallocated to Participants' Accounts before any Employer
                  Contributions or any Employee contributions may be made to the
                  Plan for that Limitation Year. Excess amounts may not be
                  distributed to Participants or former Participants.

6.5      MULTIPLE PLAN REDUCTION
         For Limitation Years beginning before January 1, 2000, if an Employee
         is, or has been, a Participant in one or more Employer-sponsored
         defined benefit plans and in one or more Employer-sponsored defined
         contribution plans, the sum of the defined benefit plan fraction and
         the defined contribution plan fraction for any Limitation Year may not
         exceed 1.0, determined in accordance with the following provisions:

                                     - 62 -


<PAGE>

         (a)      DEFINED BENEFIT FRACTION: The defined benefit fraction has as
                  its numerator the Participant's Projected Annual Benefits
                  determined as of the close of the Limitation Year and has as
                  its denominator the lesser of 125% of the dollar limitation
                  for the Limitation Year determined under Code ss.415(b) and
                  ss.415(d), or 140% of the amount which may be taken into
                  account under Code ss.415(b)(1)(B) for such Limitation Year.
                  However, with respect to anyone who was a Participant as of
                  the first day of the first Limitation Year beginning after
                  December 31, 1987, in one or more defined benefit plans
                  maintained by the Employer which were in existence on May 6,
                  1986, the denominator of the defined benefit fraction will not
                  be less than 125% of the Current Accrued Benefit.

         (b)      DEFINITIONS: The term Projected Annual Benefits means the
                  annual benefits payable to a Participant under all defined
                  benefit plans (whether terminated or not) of the Employer as
                  determined under regulation ss.1.415-7(b)(3); and the term
                  Current Accrued Benefit means a Participant's accrued benefit
                  under a defined benefit plan, determined as if the Participant
                  had separated from service as of the close of the last
                  Limitation Year beginning before January 1, 1987, when
                  expressed as an annual benefit within the meaning of Code
                  ss.415(b)(2). In determining a Participant's Current Accrued
                  Benefit, the Administrator will disregard any changes to the
                  Plan after May 5, 1986, and any cost of living adjustment
                  after May 5, 1986. The Current Accrued Benefit will only be
                  used as set forth above if the defined benefit plans
                  individually and in the aggregate satisfied the requirements
                  of Code ss.415 for all Limitation Years beginning before
                  January 1, 1987.

         (c)      DEFINED CONTRIBUTION FRACTION: The defined contribution
                  fraction has as its numerator the sum of the Annual Additions
                  to the Participant's Account under all the defined
                  contribution plans (whether terminated or not) maintained by
                  the Employer for the current Limitation Year and all prior
                  Limitation Years (including the Annual Additions attributable
                  to the Participant's non-deductible contributions to all
                  Employer maintained defined benefit plans, whether terminated
                  or not, and the Annual Additions attributable to all welfare
                  benefit funds, as defined in Code ss.419(e), and individual
                  medical accounts, as defined in Code ss.415(l)(2) maintained
                  by the Employer), and has as its denominator the sum of the
                  maximum aggregate amounts for the current Limitation Year and
                  all prior Limitation Years the Employee was employed by the
                  Employer (regardless of whether a defined contribution plan
                  was maintained by the Employer). The maximum permissible
                  aggregate amount in any Limitation Year is the lesser of (1)
                  125% of the dollar limitation in effect in Code
                  ss.415(c)(1)(A) for such Limitation Year determined without
                  regard to Code ss.415(c)(6) and adjusted per regulation
                  ss.1.415-7(d)(1) and Notice 83-10, or (2) 35% of the
                  Participant's Section 415 Compensation.

         (d)      TRANSITION RULE FOR DENOMINATOR: For defined contribution
                  plans in effect on or before July 1, 1982, the Administrator
                  may elect for any Limitation Year ending after December 31,
                  1982 that the denominator be the product of the denominator
                  for the Limitation Year ending in 1982 determined under the
                  law in effect for such Limitation Year, multiplied by the
                  Transition Fraction, which is a fraction which has as its
                  numerator the lesser of $51,875 or 1.4 multiplied by 25% of
                  the Participant's Section 415 Compensation for the Plan Year
                  ending in 1981, and which has as its denominator the lesser of
                  $41,500 or 25% of the Participant's Section 415 Compensation
                  for the Plan Year ending in 1981. In any Top Heavy Limitation
                  Year, $41,500 will be substituted for $51,875 in determining
                  the Transition Fraction unless the Extra Minimum Allocation is
                  being provided in Section 3.5. In a Super Top Heavy Plan Year,
                  $41,500 will always be substituted for $51,875.

                                     - 63 -


<PAGE>

         (e)      ADJUSTMENT OF FRACTION: If an Employee was a Participant as of
                  the end of the first day of the first Limitation Year
                  beginning after December 31, 1986 in one or more defined
                  contribution plans maintained by the Employer which were in
                  existence on May 6, 1986, the numerator of the defined
                  contribution fraction will be adjusted if the sum of such
                  defined contribution fraction and the defined benefit fraction
                  would otherwise exceed 1.0 under the terms of this Plan. Under
                  the adjustment, an amount equal to the product of the excess
                  of the sum of the defined benefit fraction and the defined
                  contribution fraction over 1.0 multiplied by the denominator
                  of the defined contribution fraction will be permanently
                  subtracted from the numerator of the defined contribution
                  fraction. The adjustment will be calculated using the
                  fractions as they would be computed as of the end of the last
                  Limitation Year beginning before January 1, 1987, disregarding
                  any changes in the terms and conditions of the Plan made after
                  May 5, 1986, but using the Code ss.415 limitation applicable
                  to the first Limitation Year beginning on or after January 1,
                  1987.

         (f)      TOP HEAVY ADJUSTMENTS: In any Top Heavy Limitation Year, 100%
                  will be substituted for 125% in paragraphs (a) and (c) unless
                  an eligible Non-Key Employee (1) is being provided a 7.5%
                  allocation under Section 3.5(d); or (2) is being provided a
                  retirement benefit under a defined benefit plan equal to 3% of
                  average monthly Code ss.415 Compensation. However, in any
                  Super Top Heavy Limitation Year (which means the Top Heavy
                  Ratio exceeds 90% for that Limitation Year), 100% will be
                  substituted for 125% in any event. If the 100% limitation is
                  exceeded for any Participant in any Limitation Year, then (1)
                  the Participant's accrued benefit in the defined benefit plan
                  will not be increased; (2) no Annual Additions may be credited
                  to the Participant's accounts under this Plan; and (3) the
                  Participant may not make any contributions, whether voluntary
                  or mandatory, to this Plan or any other Employer-sponsored
                  qualified plan.

                                     - 64 -


<PAGE>

                                    ARTICLE 7
                              DUTIES OF THE TRUSTEE

7.1      APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION
         The Plan will have one or more individual Trustees, a corporate Trustee
         or any combination thereof appointed as follows:

         (a)      APPOINTMENT OF TRUSTEE: Each Trustee will be appointed by the
                  Sponsor and will serve until its successor has been named or
                  until such Trustee's resignation, death, incapacity, or
                  removal, in which event the Employer will name a successor
                  Trustee. The term Trustee will include the original and any
                  successor Trustees.

         (b)      RESIGNATION OF TRUSTEE: A Trustee may resign by giving 30 days
                  written notice in advance to the Sponsor, unless such notice
                  is waived by the Sponsor. The Sponsor may remove a Trustee any
                  time, with or without cause, by giving written notice of the
                  removal to the Trustee. Unless waived in writing by the
                  Sponsor, if any Trustee who is an Employee, a Self-Employed
                  Individual or an Owner-Employee resigns or terminates
                  employment with, or ownership of, the Sponsor or an Adopting
                  Employer for any reason, such termination will constitute an
                  immediate resignation as a Trustee of the Plan.

         (c)      SUCCESSOR TRUSTEE: Each successor Trustee will succeed to
                  title to the Trust by filing a written acceptance of
                  appointment with the former Trustee and the Sponsor. The
                  former Trustee, upon receipt of such acceptance, will execute
                  all documents and perform all acts necessary to vest the Trust
                  Fund's title of record in any successor Trustee. No successor
                  Trustee will be personally liable for any act or failure to
                  act of any predecessor Trustee.

         (d)      MERGER OF CORPORATE TRUSTEE: If any corporate Trustee, before
                  or after qualification, changes its name, consolidates or
                  merges with another corporation, or otherwise reorganizes, any
                  resulting corporation which succeeds to the fiduciary business
                  of such Trustee will become a Trustee hereunder in lieu of
                  such corporate Trustee.

7.2      INVESTMENT ALTERNATIVES OF THE TRUSTEE
         The Trustees will implement an investment program based on the
         Employer's investment objectives and the Employee Retirement Income
         Security Act. In addition to powers given by law, the Trustees may
         engage in the following investment activities on behalf of the Trust:

         (a)      PROPERTY: The Trustee may invest assets in any form of
                  property, including common and preferred stocks, exchange
                  covered call options, bonds, money market instruments, mutual
                  funds, savings accounts, certificates of deposit, Treasury
                  bills, insurance policies and contracts, or in any other
                  property, real or personal, foreign or domestic, having a
                  ready market including securities issued by an institutional
                  Trustee and/or affiliate of the institutional Trustee. An
                  institutional Trustee may invest in its own deposits if such
                  deposits bear a reasonable interest rate. The Trustee may
                  retain, manage, operate, repair, improve and mortgage or lease
                  for any period on such terms as it deems proper any real
                  estate or personal property held by the Trustee, including the
                  power to demolish any building or other improvements in whole
                  or part. The Trustee may erect buildings or other
                  improvements, make leases that extend beyond the term of this
                  Trust, and foreclose, extend, renew, assign, release or
                  partially release and discharge mortgages or other liens.

         (b)      POOLED FUNDS AND COMMON TRUSTS: If the Sponsor maintains more
                  than one qualified retirement plan, the assets of two or more
                  of such plans may be maintained by the Trustee in a single
                  trust established by the Sponsor. In addition, the Trustee may
                  transfer any Trust assets to a collective trust established to
                  permit the pooling of funds of separate pension and


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                  profit-sharing trusts provided the Internal Revenue Service
                  has ruled such collective trust to be qualified under Code
                  ss.401(a) and exempt under Code ss.501(a) (or under the
                  applicable corresponding provision of any other Revenue Act)
                  or to any other common, collective, or commingled trust fund
                  which has been or may hereafter be established and maintained
                  by the Trustee and/or affiliates of an institutional Trustee.
                  Such commingling of assets of the Fund with assets of other
                  qualified trusts is specifically authorized, and to the extent
                  of the investment of the Trust Fund in such a group or
                  collective trust, the terms of the instrument establishing the
                  group or collective trust will be a part hereof as though set
                  forth herein.

         (c)      EMPLOYER STOCK: The Trustee may invest assets in the common
                  stock, debt obligations, or any other security issued by the
                  Employer within the limitations provided under ERISA ss.406,
                  ss.407 and ss.408 if such investment does not constitute a
                  prohibited transaction under Code ss.4975. Any such investment
                  will only be made upon written direction of the Employer,
                  which will be solely responsible for its propriety.

         (d)      CASH RESERVES: The Trustee may retain in cash such Trust Fund
                  assets as the Trustee may deem advisable to satisfy the
                  liquidity needs of the Plan and to deposit any cash held in
                  the Trust Fund in a bank account without liability for the
                  highest rate of interest available. If a bank is acting as
                  Trustee, such Trustee is specifically given authority to
                  invest in deposits of such Trustee. The Trustee may also hold
                  cash un-invested at any time and from time to time and in such
                  amount or to such extent as the Trustee deems prudent, and the
                  Trustee will not be liable for any losses that may be incurred
                  as the result of the failure to invest same, except to the
                  extent provided herein or in ERISA.

         (e)      REORGANIZATIONS, RECAPITALIZATIONS, CONSOLIDATIONS, SALES OR
                  MERGERS: The Trustee may join in or oppose the reorganization,
                  recapitalization, consolidation, sale or merger of
                  corporations or properties, upon such terms as the Trustee
                  deems wise.

         (f)      REGISTRATION OF SECURITIES: The Trustee may cause any
                  securities or other property to be registered in the Trustee's
                  own name or in the name of the Trustee's nominee or nominees,
                  and may hold any investments in bearer form, but the records
                  of the Trustee will at all times show all such investments as
                  part of the Trust Fund.

         (g)      PROXIES: The Trustee may vote proxies and if appropriate pass
                  them on to any investment manager which may have directed the
                  investment in the equity giving rise to the proxy.

         (h)      OWNERSHIP RIGHTS: The Trustee may exercise all ownership
                  rights with respect to any assets held in the Trust Fund.

         (i)      OTHER INVESTMENTS: The Trustee may accept and retain for such
                  time as the Trustee deems advisable any securities or other
                  property received or acquired as Trustee, whether or not such
                  securities or property would normally be purchased as
                  investments hereunder.

         (j)      KEY MAN INSURANCE: The Trustee, with the consent of the
                  Administrator, may purchase insurance Policies on the life of
                  any Participant whose employment is deemed to be key to the
                  Employer's financial success. Such key man Policies will be
                  deemed to be an investment of the Trust Fund and will be
                  payable to the Trust Fund as the beneficiary thereof. The
                  Trustee may exercise any and all rights granted under such
                  Policies. Neither the Trustee, Employer, Administrator, nor
                  any Fiduciary will be responsible for the validity of any


                                     - 66 -


<PAGE>

                  Policy or the failure of any insurer to make payments
                  thereunder, or for the action of any person which delays
                  payment or renders a Policy void in whole or in part. No
                  insurer that issues a Policy will be deemed a party to this
                  Plan for any purpose or to be responsible for its validity;
                  nor will it be required to look into the terms of the Plan nor
                  to question any action of the Trustee. The obligations of the
                  insurer will be determined solely by the Policy's terms and
                  any other written agreements between it and the Trustee. The
                  insurer will act only at the written direction of the Trustee,
                  and will be discharged from all liability with respect to any
                  amount paid to the Trustee. The insurer will not be obligated
                  to see that any money paid by it to the Trustee or any other
                  person is properly distributed or applied.

         (k)      LOANS TO THE TRUST: The Trustee may borrow or raise money for
                  purposes of the Plan in such amounts, and upon such terms and
                  conditions, as the Trustee deems advisable; and for any sum so
                  borrowed, the Trustee may issue a promissory note as Trustee,
                  and secure repayment of the loan by pledging all, or any part,
                  of the Trust Fund as collateral. No person lending money to
                  the Trustee will be bound to see to the application of the
                  money lent or to inquire into the validity or propriety of any
                  borrowing.

         (l)      AGREEMENTS WITH BANKS: The Trustee may with the consent of the
                  Sponsor and upon such terms as they deem necessary, enter into
                  an agreement with a bank or trust company providing for the
                  deposit of all or part of the Trust assets with such bank or
                  trust company, and the appointment of such bank or trust
                  company as the agent or custodian of the Trustees for
                  investment purposes, with such discretion in investing and
                  reinvesting the funds of the Trust as the Trustees deem it
                  necessary or desirable to delegate.

         (m)      LITIGATION: The Trustee may begin, maintain, or defend any
                  litigation necessary in connection with the administration of
                  the Plan, except that the Trustee will not be obliged or
                  required to do so unless indemnified to its satisfaction.

         (n)      CLAIMS, DEBTS OR DAMAGES: The Trustee may settle, compromise,
                  or submit to arbitration any claims, debts, or damages due or
                  owing to or from the Plan.

         (o)      MARGIN ACCOUNTS, OPTIONS AND COMMODITIES TRADING: The Trustee
                  may engage in the following activities: borrowing on margin,
                  buying options, writing covered options, options
                  spreads/straddles, and future/commodities trading.

         (p)      MISCELLANEOUS: The Trustee may do all such acts (including,
                  but not limited to, margin trading and futures and commodities
                  trading) and exercise all such rights, although not
                  specifically mentioned herein, as the Trustee deems necessary.
                  The Trustee will not be restricted to securities or other
                  property of the character expressly authorized by applicable
                  law for trust investments, provided the Trustee discharges its
                  duties with the care, skill, prudence, and diligence, under
                  the circumstances then prevailing, that a prudent person
                  acting in a like capacity and familiar with such matters would
                  use in the conduct of an enterprise of similar character and
                  with similar aims by diversifying the investments to minimize
                  the risks of large losses unless under the circumstances it is
                  clearly prudent not to do so.

7.3      VALUATION OF THE TRUST FUND
         On each Valuation Date, the Trustee will determine the net worth of the
         Trust Fund. The fair market value of securities listed on a registered
         stock exchange will be the prices at which they were last traded on
         such exchange preceding the close of business on the Valuation Date. If
         the securities were not traded on the Valuation Date, or if the
         exchange on which they are traded was not open for business on the
         Valuation Date, then the securities will be valued at the prices at


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         which they were last traded prior to the Valuation Date. Any unlisted
         security will be valued at its bid price next preceding the close of
         business on the Valuation Date, which bid price will be obtained from a
         registered broker or an investment banker. To determine the fair market
         value of assets other than securities for which trading or bid prices
         can be obtained, the Trustee may use any reasonable method to determine
         the value of such assets, or may elect to employ one or more appraisers
         for that purpose and rely on the values established by such appraiser
         or appraisers.

7.4      COMPENSATION AND EXPENSES
         The Trustee, either from the Trust Fund or from the Employer, will be
         reimbursed for all of its expenses and will be paid reasonable
         compensation as agreed upon from time to time with the Employer; but no
         person who receives full-time pay from the Employer will receive any
         fees for services to the Plan as Trustee or in any other capacity.
         Expenses will be paid by each Adopting Employer in the ratio that each
         Adopting Employer's Participants' Accounts bears to the total of all
         the Participants' Accounts maintained by this Plan.

7.5      PAYMENTS FROM THE TRUST FUND
         The Trustee will pay Plan benefits and other payments as the
         Administrator directs, and except as provided by ERISA, the Trustee
         will not be responsible for the propriety of such payments. Any payment
         made to a Participant, or a Participant's legal representative or
         Beneficiary in accordance with the terms of the Plan will, to the
         extent of such payment, be in full satisfaction of all claims arising
         against the Trust, the Trustee, the Employer, and the Administrator.
         Any payment or distribution made from the Trust is contingent on the
         recipient executing a receipt and release acceptable to the Trustee,
         Administrator, or Employer.

7.6      PAYMENT OF TAXES
         The Trustee will pay all taxes of the Trust Fund, including property,
         income, transfer and other taxes which may be levied or assessed upon
         or in respect of the Trust Fund or any money, property or securities
         forming a part of the Trust Fund. The Trustee may withhold from
         distributions to any payee such sum as the Trustee may reasonably
         estimate as necessary to cover federal and state taxes for which the
         Trustee may be liable, which are, or may be, assessed with regard to
         the amount distributable to such payee. Prior to making any payment,
         the Trustee may require such releases or other documents from any
         lawful taxing authority and may require such indemnity from any payee
         or distributee as the Trustee deems necessary.

7.7      ACCOUNTS, RECORDS AND REPORTS
         The Trustee will keep accurate records reflecting its administration of
         the Trust Fund and will make them available to the Administrator for
         review and audit. At the request of the Administrator, the Trustee
         will, within 90 days of such request, file with the Administrator an
         accounting of its administration of the Trust Fund during such period
         or periods as the Administrator determines. The Administrator will
         review the accounting and notify the Trustee within 90 days if the
         report is disapproved, providing the Trustee with a written description
         of the items in question. The Trustee will have 60 days to provide the
         Administrator with a written explanation of the items in question. If
         the Administrator again disapproves of the report, the Trustee will
         file its accounting in a court of competent jurisdiction for audit and
         adjudication.

7.8      EMPLOYMENT OF AGENTS AND COUNSEL
         The Trustee may employ such agents, counsel, consultants, or service
         companies as it deems necessary and may pay their reasonable expenses
         and compensation. The Trustee will not be liable for any action taken
         or omitted by the Trustee in good faith pursuant to the advice of such
         agents and counsel. Any agent, counsel, consultant, service company
         and/or its successors will exercise no discretionary authority over
         investments or the disposition of Trust assets, and their services and
         duties will be ministerial only and will be to provide the Plan with
         those things required by law or by the terms of the Plan without in any


                                     - 68 -


<PAGE>

         way exercising any fiduciary authority or responsibility under the
         Plan. The duties of a third party administrator will be to safe-keep
         the individual records for all Participants and to prepare all required
         actuarial services and disclosure forms under the supervision of the
         Administrator and any Fiduciaries of the Plan. It is expressly stated
         that the third party administrator's services are only ministerial in
         nature and that under no circumstances will such third party
         administrator exercise any discretionary authority whatsoever over Plan
         Participants, Plan investments, or Plan benefits.

7.9      DIVISION OF DUTIES AND INDEMNIFICATION
         The division of duties and the indemnification of the Trustee of this
         Plan will be governed by the following provisions:

         (a)      NO GUARANTEE AGAINST LOSS: The Trustee will have the authority
                  and discretion to manage and control the Trust Fund to the
                  extent provided in this instrument, but does not guarantee the
                  Fund in any manner against investment loss or depreciation in
                  asset value, or guarantee the adequacy of the Fund to meet and
                  discharge all or any liabilities of the Plan. Furthermore, the
                  Trustee will not be liable for the making, retention or sale
                  of any investment or reinvestment made by it, as herein
                  provided, or for any loss to or diminution of the Fund, or for
                  any other loss or damage which may result from the discharge
                  of its duties hereunder, except to the extent it is judicially
                  determined that the Trustee failed to exercise the care,
                  skill, prudence and diligence under the circumstances then
                  prevailing that a prudent person acting in a like capacity and
                  familiar with such matters would use in the conduct of an
                  enterprise of like character and like aims.

         (b)      REPRESENTATIONS OF THE SPONSOR: The Sponsor warrants that all
                  directions issued to the Trustee by it or the Plan
                  Administrator will be in accordance with the terms of the Plan
                  and not contrary to the provisions of the Employee Retirement
                  Income Security Act of 1974 and the regulations issued
                  thereunder.

         (c)      DIRECTIONS BY OTHERS: The Trustee will not be answerable for
                  any action taken pursuant to any direction, consent,
                  certificate, or other paper or document on the belief that the
                  same is genuine and signed by the proper person. All
                  directions by the Employer, a Participant or the Plan
                  Administrator will be in writing. The Plan Administrator will
                  deliver to the Trustee certificates evidencing the individual
                  or individuals authorized to act as the Administrator and will
                  deliver to the Trustee specimens of their signatures.

         (d)      DUTIES AND OBLIGATIONS LIMITED BY THE PLAN: The duties and
                  obligations of the Trustee will be limited to those expressly
                  imposed upon it by this Plan or subsequently agreed upon by
                  the parties. Responsibility for administrative duties required
                  under the Plan or applicable law not expressly imposed upon or
                  agreed to by the Trustee, will rest solely with the Sponsor
                  and with the Administrator.

         (e)      INDEMNIFICATION OF TRUSTEE: The Trustee will be indemnified
                  and saved harmless by the Employer against any and all
                  liability to which the Trustee may be subjected, including all
                  expenses reasonably incurred in its defense, for any action or
                  failure to act resulting from compliance with the Employer's
                  instructions, the Employer's employees or agents, the
                  Administrator, or any other Plan Fiduciary, and for any
                  liability arising from the actions or non-actions of any
                  predecessor Trustees or Plan Fiduciary.

         (f)      TRUSTEE NOT RESPONSIBLE FOR APPLICATION OF PAYMENTS: The
                  Trustee will not be responsible in any way for the application
                  of any payments it is directed to make or for the adequacy of
                  the Fund to meet and discharge any and all liabilities under
                  the Plan.

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<PAGE>

         (g)      MULTIPLE TRUSTEES: If more than one Trustee is appointed, any
                  single Trustee may act independently in undertaking any act
                  and/or transaction on behalf of the Trust unless the Trustees
                  have agreed by a majority vote that a particular action,
                  including signing documents or checks, must be approved by a
                  majority vote before it can be undertaken.

         (h)      LIMITATION OF LIABILITY: No Trustee will be liable for the act
                  of any other Trustee or Fiduciary unless the Trustee has
                  knowledge of such act.

         (i)      TRUSTEE AS PARTICIPANT OR BENEFICIARY: Trustee will not be
                  prevented from receiving any benefits to which it may be
                  entitled as a Participant or Beneficiary in the Plan, so long
                  as the benefits are computed and paid on a basis that is
                  consistent with the terms of the Plan as applied to all other
                  Participants and Beneficiaries.

         (j)      NO SELF-DEALING: The Trustee will not (1) deal with the assets
                  of the Trust Fund in its own interest or for its own account;
                  (2) in its individual or in any other capacity, act in any
                  transaction involving the Trust Fund on behalf of a party (or
                  represent a party) whose interests are adverse to the
                  interests of the Plan, or its Participants or Beneficiaries;
                  or (3) receive any consideration for its own personal accounts
                  from any party dealing with the Plan in connection with a
                  transaction involving assets of the Trust Fund.

7.10     APPOINTMENT OF INVESTMENT MANAGER
         The Trustee, if so directed by the Sponsor, will appoint an Investment
         Manager to manage and control the investment of all or any portion of
         the Trust Fund. Each Investment Manager will be either (a) an
         investment advisor registered under the Investment Advisors Act of
         1940; (b) a bank as defined in that Act; or (c) an insurance company
         qualified to manage, acquire or dispose of any asset of the Trust under
         the laws of more than one state. An Investment Manager must acknowledge
         in writing that it is a Fiduciary. The Sponsor will enter into an
         agreement with an Investment Manager specifying the duties and
         compensation of the Investment Manager and further specifying any other
         terms and conditions under which the Investment Manager will be
         retained. The Trustee will not be liable for any act or omission of an
         Investment Manager, and will not be liable for following the advice of
         an Investment Manager with respect to any duties delegated by the
         Sponsor to the Investment Manager. The Sponsor will determine the
         portion of the Trust Fund to be invested by an Investment Manager and
         will establish investment objectives and guidelines for the Investment
         Manager to follow.

7.11     ASSIGNMENT AND ALIENATION OF BENEFITS
         Except as may otherwise be permitted under Code ss.401(a)(13)(C)
         effective August 5, 1997, or as may otherwise be permitted under a
         Qualified Domestic Relations Order as provided in Section 8.11, or as
         otherwise be permitted under Section 7.14 if loans to Participants are
         permitted, no right or claim to, or interest in, any part of the Trust
         Fund, or any payment therefrom, will be assignable, transferable, or
         subject to sale, mortgage, pledge, hypothecation, commutation,
         anticipation, garnishment, attachment, execution, or levy of any kind,
         and the Trustees will not recognize any attempt to assign, transfer,
         sell, mortgage, pledge, hypothecate, commute, or anticipate the same,
         except to the extent required by law.

7.12     EXCLUSIVE BENEFIT RULE
         All contributions made by an Employer (whether or not the Employer is
         an Affiliated Employer with one or more other Adopting Employers) to
         the Trust Fund will be used for the exclusive benefit of all
         Participants and their Beneficiaries and will not be used for nor
         diverted to any other purpose except the payment of the costs of
         maintaining the Plan.

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7.13     PURCHASE OF INSURANCE
         Subject to any rules or procedures that may be established by the
         Administrator under paragraph (k) below, the Trustee may purchase life
         insurance Policies on the life of a Participant and/or the
         Participant's Spouse in accordance with the following provisions:

         (a)      OWNERSHIP OF POLICIES: All life insurance Policies will be
                  vested exclusively in the Trustee and will be payable to the
                  Trustee, subject to the rights of the Beneficiaries hereunder
                  unless the Trustee permits the designation of a named
                  beneficiary other than the Trustee. However, notwithstanding
                  the foregoing, no Trustee who is also a Participant may,
                  except in a fiduciary capacity, exercise any ownership rights
                  with respect to any Policy insuring the life of such Trustee
                  in his or her capacity as a Participant.

         (b)      PRIMARY LIMIT ON PREMIUMS: At the direction of the
                  Administrator, the Trustee will purchase Policies on the life
                  of the Participant, provided that the aggregate premiums on
                  ordinary life insurance Policies must be less than 50% of the
                  Participant's Account balance; (2) the aggregate premiums on
                  term life insurance Policies, universal life insurance
                  Policies and all other life insurance Policies which are not
                  ordinary life insurance Policies must be less than 25% of the
                  Participant's Account balance; and (3) the sum of one-half of
                  the premiums on ordinary life insurance Policies and the total
                  of all other life insurance premiums cannot exceed 25% of the
                  Participant's Account balance. For purposes of this Section,
                  an ordinary life insurance Policy is an insurance policy that
                  has a non-decreasing death benefit and also has a
                  non-increasing premium.

         (c)      ALTERNATE LIMIT ON PREMIUMS: Notwithstanding paragraph (a), a
                  Participant may elect that up to 100% of his or her Rollover
                  Account, and up to 100% of the portion of his or her Vested
                  Participant's Account that has accumulated in the Plan for at
                  least 2 years, be used to purchase Policies on the life of the
                  Participant's life, the life of the Participant's Spouse,
                  and/or the joint lives of the Participant and the
                  Participant's Spouse. Likewise, a Participant who has
                  participated in the Plan for at least 5 years may elect that
                  up to 100% of his or her Rollover Account, and up to 100% of
                  his or her Vested Participant's Account balance, be used to
                  purchase Policies on the life of the Participant, the life of
                  the Participant's Spouse, and/or the joint lives of the
                  Participant and his or her Spouse.

         (d)      PAYMENT OF PREMIUMS: If Employer contributions are inadequate
                  to pay all premiums on Policies, the Trustees may, at the
                  direction of the Plan Administrator, utilize other amounts
                  remaining in the Trust Fund to pay the premiums, allow the
                  Policies to lapse, reduce the Policies to a level at which
                  they may be maintained, or borrow against the Policies on a
                  prorated basis if borrowing does not discriminate in favor of
                  Policies issued on the lives of officers,
                  Shareholder-Employees and/or Highly Compensated Employees.

         (e)      PAYMENT OF PREMIUMS FROM LOANS: The Trustees may pay premiums
                  when due from the loan values of the Policies themselves if
                  (1) any such loan is made against all of the Policies in
                  proportion to their respective cash surrender values, and (2)
                  all such loans are repaid in proportion to the cash surrender
                  value of such Policies.

         (f)      POLICY DIVIDENDS: Any insurer payments that are paid to the
                  Trustee on account of experience credits, dividends, or
                  surrender or cancellation credits, will be applied by the
                  Employer within the current or next succeeding Plan Year
                  toward premiums due.

         (g)      CONFLICT WITH PLAN: Subject to the provisions of paragraph (j)
                  below, if the provisions of any insurance Policy purchased
                  hereunder conflict with the terms of this Plan, the provisions
                  of the Plan will control.

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<PAGE>

         (h)      DISPOSITION OF POLICIES UPON TERMINATION: If a Terminated
                  Participant's Vested Interest equals or exceeds the cash
                  surrender value of any Policies issued on his life, the
                  Trustee, with the consent of both the Administrator and the
                  Terminated Participant, will transfer such Policies to the
                  Terminated Participant, together with any restrictions the
                  Administrator may impose concerning the Terminated
                  Participant's right to surrender, assign, or otherwise realize
                  cash on such Policies prior to his Normal Retirement Date. If
                  the Terminated Participant's Vested Interest in his
                  Participant's Account is less than the cash surrender values
                  of such Policies, the Administrator may permit him to pay the
                  Trustee the sum required to make distribution equal to the
                  value of the Policies being assigned or transferred, or the
                  Trustee may borrow the cash surrender values of the Policies
                  from the insurer and then assign the Policies to the
                  Terminated Participant.

         (i)      DISPOSITION OF POLICIES AT RETIREMENT: When a Participant
                  retires, the Trustee, at the direction of the Administrator,
                  must, with respect to any Policies purchased on the life of
                  such Participant under paragraph (b), either (1) transfer them
                  to the Participant, (2) with the Participant's consent, borrow
                  their cash surrender values and transfer them to the
                  Participant subject to the loan, or (3) surrender them for
                  their cash surrender values. If options (2) or (3) are
                  elected, the cash surrender values will be added to the
                  Participant's Account for distribution in accordance with
                  Section 5.1.

         (j)      FIDUCIARIES AND INSURERS PROTECTED: Neither the Trustee,
                  Employer, Administrator, nor any Fiduciary will be responsible
                  for the validity of any Policy or the failure of any insurer
                  to make payments thereunder, or for the action of any person
                  which may delay payment or render a Policy void in whole or in
                  part. No insurer which issues a Policy will be deemed a party
                  to this Plan for any purpose or to be responsible for its
                  validity; nor will it be required to look into the terms of
                  the Plan nor to question any action of the Trustee. The
                  obligations of the insurer will be determined solely by the
                  Policy's terms and any other written agreements between it and
                  the Trustee. The insurer will act only at the written
                  direction of the Trustee, and will be discharged from all
                  liability with respect to any amount paid to the Trustee. The
                  insurer will not be obligated to see that any money paid by it
                  to the Trustee or any other person is properly distributed or
                  applied.

         (k)      ESTABLISHMENT OF ADMINISTRATIVE PROCEDURES: The Administrator
                  may in a separate written document establish rules or
                  procedures regarding the conditions under which Policies can
                  be purchased by the Trustee. Such separate written document,
                  when properly executed, will be deemed incorporated in this
                  Plan. The rules or procedures therein may be modified or
                  amended by the Administrator without the necessity of amending
                  this Section, but any such modifications must be communicated
                  to Participants in the manner described in Section 8.9.
                  Notwithstanding the foregoing, (1) a summary plan description
                  or summary of material modifications thereto in which the
                  rules or procedures regarding the purchase of insurance
                  Policies is described will be considered a separate written
                  document sufficient to satisfy the requirements (including the
                  execution requirement) of this paragraph; and (2) any rules or
                  procedures established under this paragraph must be applied by
                  the Administrator in a uniform nondiscriminatory manner.

7.14     LOANS TO PARTICIPANTS
         Subject to any rules or procedures set forth in a written loan policy
         that may be established by the Administrator under paragraph (m) below,
         the Trustee may permit loans to be made from the Trust Fund to
         Participants and Beneficiaries, and subject to any such rules or
         procedures, all loans will be made in accordance with the following
         provisions:

                                     - 72 -


<PAGE>

         (a)      LOANS MUST BE NONDISCRIMINATORY: The Administrator will have
                  the sole right to approve or disapprove a loan application,
                  but loans will be made available to all Participants on a
                  reasonably equivalent basis. Loans will not be made available
                  to HCEs in an amount greater than the amount made available to
                  other Employees.

         (b)      LOANS TO OWNER-EMPLOYEES OR SHAREHOLDER-EMPLOYEES: No loan
                  will be made to or continued in effect for a Participant who
                  is or who becomes an Owner-Employee or a Shareholder-Employee
                  except to the extent any such loan is treated as a prohibited
                  transaction (if required) under Code ss.4975 or other
                  applicable Code provision.

         (c)      WRITTEN LOAN AGREEMENT: All loans must be evidenced by a
                  legally enforceable agreement (which may include more than one
                  document) set forth in writing or in such other form as may be
                  approved by the Internal Revenue Service, and the terms of
                  such agreement must specify the amount and term of the loan,
                  and the repayment schedule.

         (d)      MINIMUM PERMITTED LOAN AMOUNT: The Administrator, as part of
                  the written loan policy, may set a minimum permitted loan
                  amount not to exceed $1,000.

         (e)      MAXIMUM PERMITTED LOAN AMOUNT: No loan, when added to the
                  outstanding balance of all other loans to the Participant,
                  will exceed the lesser of (1) $50,000 reduced by the excess,
                  if any, of the Participant's highest outstanding balance of
                  loans during the 1-year period ending on the day before the
                  loan was made, over the Participant's outstanding balance of
                  loans on the day the loan was made; or (2) one-half of the
                  Participant's Vested Aggregate Account. However,
                  notwithstanding the limitation in (2), the Administrator may,
                  as part of a written loan policy, permit a Participant whose
                  Vested Aggregate Account balance is $20,000 or less to borrow
                  an amount that does not exceed the lesser of $10,000 or 100%
                  of the Participant's Vested Aggregate Account balance if
                  adequate security is provided on the loan amount in excess of
                  that determined in (2) above.

         (f)      AGGREGATION OF PLANS: In applying the limitations in paragraph
                  (e) above, all loans from all plans of the Employer and
                  Affiliated Employers will be aggregated. An assignment or
                  pledge of any portion of the Participant's Vested Aggregate
                  Account balance, and a loan, pledge, or assignment with
                  respect to any insurance contract purchased by the Plan, will
                  be treated as a loan under the terms of this Section.

         (g)      LOANS MUST BEAR REASONABLE INTEREST: Any loan must bear
                  interest at a rate reasonable at the time of application,
                  considering the purpose of the loan and the rate being charged
                  by representative commercial banks in the local area for a
                  similar loan, unless the Administrator sets forth a different
                  method for determining loan interest rates in its loan
                  procedures such as using the prime rate or some other rate
                  based on the prime rate. The loan agreement will also provide
                  for the payment of principal and interest not less frequently
                  than quarterly. Such interest will be credited either directly
                  to the Participant's Account, or in the alternative to the
                  general Trust Fund, as set forth in the loan policy.

         (h)      LOANS MUST BE SECURED: If a Participant's loan application is
                  approved by the Administrator, such Participant will be
                  required to execute a note, a loan agreement and an assignment
                  of his or her Vested Aggregate Account as collateral for the
                  loan. The Administrator, on a nondiscriminatory basis, may
                  permit a Participant to pledge outside security in lieu of
                  pledging his or her Vested Aggregate Account as collateral.

         (i)      TERMS OF REPAYMENT: The term of a loan will not exceed five
                  years except, if permitted by the loan policy, in the case of
                  a loan made for the purpose of acquiring any house, apartment,
                  condominium, or mobile home (not used on a transient basis)
                  which is used or is to be used within a reasonable time as the


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                  principal residence of the Participant. The term of a loan
                  will be determined by the Administrator considering the
                  maturity dates quoted by representative commercial banks in
                  the local area for a similar loan.

         (j)      SUSPENSION OF INSTALLMENT PAYMENTS: The loan policy may
                  provide that loan installment payments will be suspended as
                  permitted under Code ss.414(u)(4) effective December 12, 1994.
                  The loan policy may also provide that installment payments
                  will be suspended for a period not longer than one year in
                  which the Participant is on a leave of absence, either without
                  pay or at a rate of pay (after income and employment tax
                  withholding) that is less than the amount of the installment
                  payments required under the terms of the loan. However, even
                  if installments payment are suspended due to a leave of
                  absence, the loan must still be repaid by the latest date
                  permitted under the original terms of the loan and the
                  installments due after the leave ends (or, if earlier, after
                  the first year of the leave) must not be less than those
                  required under the original terms of the loan.

         (k)      LOANS MAY BE LIMITED TO HARDSHIP: The loan policy may provide
                  that loans will only be made to Participants who have a
                  financial hardship and lack available resources to satisfy the
                  hardship. The loan policy will set forth the criteria for
                  financial hardship.

         (l)      CONTRIBUTIONS THAT CAN BE LOANED: As part of the loan policy,
                  the Administrator may limit loans to a Participant's balance
                  in a specified account or accounts.

         (m)      ESTABLISHMENT OF ADMINISTRATIVE PROCEDURES: The Administrator
                  may, in a separate written loan policy, establish rules or
                  procedures regarding the conditions under which the Trustee
                  can make loans to Participants. Such separate written
                  document, when properly executed, will be deemed incorporated
                  in this Plan. The rules or procedures therein may be modified
                  or amended by the Administrator without the necessity of
                  amending this Section, but any such modifications must be
                  communicated to Participants in the manner described in
                  Section 8.9. Notwithstanding the foregoing, (1) a summary plan
                  description or summary of material modifications thereto in
                  which the rules or procedures regarding loans to Participants
                  are described will be considered a separate written document
                  sufficient to satisfy the requirements (including the
                  execution requirement) of this paragraph; and (2) any rules or
                  procedures established hereunder must be applied by the
                  Administrator in a uniform nondiscriminatory manner.

7.15     DIRECTED INVESTMENT ACCOUNTS
         Subject to any rules or procedures that may be established by the
         Administrator under paragraph (h) below, the Trustee may permit
         Participants to direct the investment of one or more of their accounts,
         and subject to any such rules or procedures, investment directives will
         be given in accordance with the following provisions:

         (a)      ACCOUNTS THAT CAN BE DIRECTED: The Administrator will
                  designate which accounts a Participant or other payee can
                  direct, and whether the Participant or payee can direct all or
                  only a portion of each such account. Any such designation can
                  be changed by the Administrator from time to time by
                  communicating new procedures to the Participants.

         (b)      INVESTMENT FUNDS: Any amount a Participant or other payee
                  directs will be put into a segregated investment selected by
                  the Participant; or alternative investment funds established
                  by the Trustee as part of the overall Trust Fund. Such
                  alternative investment funds will be under the full control
                  and management of the Trustee. Alternatively, if investments
                  outside the Trustee's control are allowed, Participants and


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                  other payees may not direct that investments be made in
                  collectibles, other than U.S. Government gold and silver
                  coins. The Administrator or Trustee will have the authority to
                  refuse any investment directed by the Participant or other
                  payee if that investment would be administratively burdensome,
                  or if for any reason the Administrator or Trustee believes
                  such investment would or might constitute a prohibited
                  transaction as defined in ERISA ss.406 or Code ss.4975. In the
                  event a Participant or other payee fails to make a timely
                  investment election, at the Administrator's discretion either
                  no election will be deemed to have been made or the
                  Participant or other payee will be considered to have made an
                  election to invest 100% of his or her account in an investment
                  option, the primary objective of which is the preservation of
                  principal, until such time as an investment decision by the
                  Participant or other payee becomes effective.

         (c)      INVESTMENT DESIGNATION FORM: A Participant's investment
                  direction will be made in a form acceptable to, and in
                  accordance with procedures established by, the Administrator.
                  Unless changed by procedures established by the Administrator
                  and communicated to Participants and other payees, (1) a
                  Participant or other payee may change an investment election
                  by filing a new investment designation form with the
                  Administrator or the Administrator's designee; (2) any change
                  will be effective no later than the first day of the next
                  investment election period; and (3) investment election
                  periods will be established at the discretion of the
                  Administrator but in any event will occur no less frequently
                  than once in every 12-month period or, at the discretion of
                  the Administrator and the Trustee, once in every 3-month or
                  6-month period or at such other more frequent time which is
                  uniformly available as determined and promulgated by the
                  Administrator and the Trustee.

         (d)      TRANSFERS BETWEEN FUNDS: Unless changed by procedures
                  established by the Administrator and communicated to
                  Participants and other payees, if multiple investment fund
                  options are made available, a Participant or other payee may
                  elect to transfer all or part of his or her Account in one or
                  more of the investment funds from one investment fund to
                  another investment fund by filing an investment designation
                  form with the Administrator or with the Administrator's
                  designee within a reasonable administrative period prior to
                  the next period for which investment options may be elected to
                  be transferred. The funds will be transferred by the Trustee
                  or the Administrator's designee as soon as practicable prior
                  to, or by the start of, the new election period. If made
                  available, telephone or other electronic or computer transfers
                  will be permitted under uniform procedures approved adopted by
                  the Administrator and agreed to by the Trustee.

         (e)      ADMINISTRATOR RESPONSIBILITY: Either the Administrator or the
                  Administrator's designee will be responsible when transmitting
                  Employer and Employee contributions or other Trust Fund assets
                  to indicate the dollar amount which is to be credited to each
                  investment fund on behalf of each Participant or other payee.

         (f)      NO ADMINISTRATOR LIABILITY: Except as otherwise provided
                  herein, neither the Trustee, nor the Administrator, nor the
                  Employer, nor any Fiduciary of the Plan will be liable to the
                  Participant or other payee (or to his or her Beneficiaries)
                  for any loss resulting from action taken under this Section at
                  the direction of the Participant or other payee.

         (g)      CHARGES AND FEES: Any charge or fee which may be imposed by
                  the Trustee or by any broker, investment advisor, or
                  otherwise, including legal fees, incurred in connection with a
                  Participant's direction under this Section of any Plan account
                  maintained on the Participant's behalf may be charged to and
                  paid from the assets of such account.

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<PAGE>

         (h)      ESTABLISHMENT OF ADMINISTRATIVE PROCEDURES: All investment
                  designations made by Participants are to be made subject to
                  and in accordance with such rules or procedures as the
                  Administrator may adopt. At the discretion of the
                  Administrator and the Trustee, such rules or procedures will
                  permit sufficient selection among investment alternatives to
                  satisfy the provisions of DOL Regulation ss.2550.404(c)-1.
                  Such rules or procedures, when properly executed in a written
                  document, will be deemed incorporated in this Plan. The rules
                  or procedures therein may be modified or amended by the
                  Administrator without the necessity of amending this Section,
                  but any such modifications must be communicated to
                  Participants in the manner described in Section 8.9.
                  Notwithstanding the foregoing, (1) a summary plan description
                  or summary of material modifications thereto in which the
                  rules or procedures regarding investment designations are
                  described will be considered a separate written document
                  sufficient to satisfy the requirements (including the
                  execution requirement) of this paragraph; and (2) any rules or
                  procedures established under this paragraph must be applied in
                  a uniform nondiscriminatory manner.

7.16     SUPERSEDING TRUST OR CUSTODIAL AGREEMENT
         If any assets of the Plan are invested in a separate trust or custodial
         account maintained by a Trustee or custodian, the provisions of such
         separate trust or custodial agreement will supersede all provisions of
         this Article 7 except Sections 7.11, 7.12, 7.13 and 7.14. In addition,
         in the absence of a specific provision in such separate trust or
         custodial agreement regarding the valuation of securities held by the
         Trust Fund, Section 7.3 will not be superseded by any such separate
         trust or custodial account. If such separate trust or custodial account
         should for any reason fail, be found invalid or terminate prior to the
         termination of this Plan and the distribution of all the assets hereof,
         this Article 7 will be deemed to have again become effective
         immediately prior to such failure, invalidity or termination.

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                                   ARTICLE 8
                           DUTIES OF THE ADMINISTRATOR

8.1      APPOINTMENT, RESIGNATION, REMOVAL AND SUCCESSION
         Each Administrator appointed by the Sponsor will continue until his or
         her death, resignation, or removal at any time, with or without cause,
         by the Sponsor, and any Administrator may resign by giving 30 days
         written notice to the Sponsor. If an Administrator dies, resigns, or is
         removed by the Sponsor, such Administrator's successor will be
         appointed as promptly as possible, and such appointment will become
         effective upon its acceptance in writing by such successor
         Administrator. Pending the appointment and acceptance of any successor
         Administrator, any then acting or remaining Administrator will have
         full power to act.

8.2      POWERS AND DUTIES OF THE ADMINISTRATOR
         The powers and duties of the Administrator will include (a) appointing
         the Plan's attorney, accountant, actuary, or any other party needed to
         administer the Plan; (b) directing the Trustees with respect to
         payments from the Trust Fund; (c) deciding if an applicant is entitled
         to a benefit from the Plan, which will be paid only if the
         Administrator in its sole discretion decides that the applicant is
         entitled to it; (d) communicating with Employees regarding their
         participation and benefits, including the administration of all claims
         procedures; (e) filing any returns and reports with the Internal
         Revenue Service, Department of Labor, or any other governmental agency;
         (f) reviewing and approving any financial reports, investment reviews,
         or other reports prepared by any party under (a) above; (g)
         establishing a funding policy and investment objectives consistent with
         the purposes of the Plan and the Employee Retirement Income Security
         Act of 1974; (h) construing and resolving any question of Plan
         interpretation; and (i) making any findings of fact the Administrator
         deems necessary to proper Plan administration.

8.3      APPOINTMENT OF ADMINISTRATIVE COMMITTEE
         The Employer may elect to appoint one or more members to an
         Administrative/Advisory Committee (to be known as the "Committee"), to
         which the Sponsor may elect to delegate certain of its responsibilities
         as Plan Administrator. Members of the Committee need not be
         Participants or Beneficiaries, and officers and directors of the
         Sponsor will not be precluded from serving as members. A member will
         serve until his or her resignation, death, or disability, or until
         removed by the Sponsor. In the event of any vacancy arising by reason
         of the death, disability, removal, or resignation of a member of the
         Committee, the Sponsor may, but is not required to, appoint a successor
         to serve in his or her place. The Committee will select a chairman and
         a secretary from among its members. Members of the Committee will serve
         in such capacity without compensation. The Committee will act by
         majority vote.

8.4      FINALITY OF ADMINISTRATIVE DECISIONS
         The Administrator's interpretation of Plan provisions, and any findings
         of fact, including eligibility to participate and eligibility for
         benefits, are final and will not be subject to "de novo" review unless
         shown to be arbitrary and capricious.

8.5      MULTIPLE ADMINISTRATORS
         If there is more than one Administrator, the Administrators may
         delegate specific responsibilities among themselves, including the
         authority to execute documents unless the Sponsor revokes such
         delegation. The Sponsor and Trustee will be notified in writing of any
         such delegation of responsibilities, and the Trustee thereafter may
         rely upon any documents executed by the appropriate Administrator.

8.6      COMPENSATION AND EXPENSES
         The Administrator, the Committee and any party appointed by the
         Administrator under Section 8.7 may receive such compensation as agreed
         upon by the Sponsor, provided that any person who already receives
         full-time pay from the Employer may not receive any fees for services


                                     - 77 -


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         to the Plan as Administrator or in any other capacity. The Sponsor will
         pay all "settlor" expenses (as described in DOL Advisory Opinion
         2001-01-A) incurred by the Administrator, the Committee or any party
         appointed under Section 8.7 in the performance of their duties. The
         Sponsor may, but is not required to pay, all "non-settlor" expenses
         incurred by the Administrator, the Committee, or any party appointed
         under Section 8.7 in the performance of their duties. Any "non-settlor"
         expenses incurred by the Administrator, the Committee or any party
         appointed under Section 8.7 that the Sponsor elects not to pay will be
         reimbursed from Trust Fund assets. Any expenses paid from the Trust
         Fund will be charged to each Adopting Employer in the ratio that each
         Adopting Employer's Participants' Accounts bears to the total of all
         the Participants' Accounts maintained by this Plan, or in any other
         reasonable method elected by the Administrator.

8.7      APPOINTMENT OF AGENTS AND COUNSEL
         The Administrator (or Committee) may appoint such actuaries,
         accountants, custodians, counsel, agents, consultants, and other
         persons the Administrator (or Committee) deems necessary to the
         administration and operation of the Plan. The actions of any such third
         parties will be subject to the limitations described in Section 7.8 of
         the Plan; and no such third parties will be given any authority or
         discretion concerning the management and operation of the Plan that
         would cause them to become Fiduciaries of the Plan.

8.8      CORRECTING ADMINISTRATIVE ERRORS
         The Administrator may take such steps as it considers necessary and
         appropriate in its discretion to remedy administrative or operational
         errors. Such steps may include, but will not be limited to the
         following: (a) taking any action required under the employee plans
         compliance resolution system of the Internal Revenue Service, any asset
         management or fiduciary conduct error correction program available
         through the Internal Revenue Service, United States Department of Labor
         or other governmental administrative agency; (b) a reallocation of Plan
         assets; (c) adjustments in amounts of future payments to Participants,
         Beneficiaries or Alternate Payees; and (d) institution and prosecution
         of actions to recover benefit payments made in error or on the basis of
         incorrect or incomplete information.

8.9      PROMULGATING NOTICES AND PROCEDURES
         The Sponsor and Administrator are given the power and responsibility to
         promulgate certain written notices, policies and/or procedures under
         the terms of the Plan and disseminate same to the Participants, and the
         Administrator may satisfy such responsibility by the preparation of any
         such notice, policy and/or procedure in a written form which can be
         published and communicated to a Participant in one or more of the
         following ways: (a) by distribution in hard copy; (b) through
         distribution of a summary plan description or summary of material
         modifications thereto which sets forth the policy or procedure with
         respect to a right, benefit or feature offered under the Plan; (c) by
         e-mail, either to a Participant's personal e-mail address or his or her
         Employer-maintained e-mail address; and (d) by publication on a
         web-site accessible by the Participant, provided the Participant is
         notified of the web-site publication. Any notice, policy and/or
         procedure provided through an electronic medium will only be valid if
         the electronic medium which is used is reasonably designed to provide
         the notice, policy and/or procedure in a manner no less understandable
         to the Participant than a written document, and under such medium, at
         the time the notice, policy and/or procedure is provided, the Employee
         may request and receive the notice, policy and/or procedure on a
         written paper document at no charge.

8.10     CLAIMS PROCEDURES
         The procedures in this Section will be the sole and exclusive remedy
         for an Employee, Participant or Beneficiary ("Claimant") to make a
         claim for benefits under the Plan. These procedures will be
         administered and interpreted in a manner consistent with the
         requirements of ERISA ss.503 and the regulations thereunder. Any


                                     - 78 -


<PAGE>

         electronic notices provided by the Administrator will comply with the
         standards imposed under regulations issued by the Department of Labor.
         All claims determinations made by the Administrator (and when
         applicable by the Committee if one has been appointed under Section
         8.3) and will be made in accordance with the provisions of this Section
         and the Plan, and will be applied consistently to similarly situated
         Claimants. For purposes of this Section 8.10, if a Committee has not
         been appointed under Section 8.3, any reference to Committee will be
         considered a reference to the Administrator.

         (a)      WRITTEN CLAIM: A Claimant, or the Claimant's duly authorized
                  representative, may file a claim for a benefit to which the
                  Claimant believes that he or she is entitled under the Plan.
                  Any such claim must be filed in writing with the
                  Administrator.

         (b)      DENIAL OF CLAIM: The Administrator, in its sole and complete
                  discretion, will make all initial determinations as to the
                  right of any person to benefits. If the claim is denied in
                  whole or in part, the Administrator will send the Claimant a
                  written or electronic notice, informing the Claimant of the
                  denial. The notice must be written in a manner calculated to
                  be understood by the Claimant and must contain the following
                  information: the specific reason(s) for the denial; a specific
                  reference to pertinent Plan provisions on which the denial is
                  based; if additional material or information is necessary for
                  the Claimant to perfect the claim, a description of such
                  material or information and an explanation of why such
                  material or information is necessary; and an explanation of
                  the Plan's claim review (i.e., appeal) procedures, the time
                  limits applicable to such procedures, and the Claimant's right
                  to request arbitration if the claim denial is upheld in whole
                  or in part on appeal. Written or electronic notice of the
                  denial will be given within a reasonable period of time (but
                  no later than 90 days) from the date the Administrator
                  receives the claim, unless special circumstances require an
                  extension of time for processing the claim. In no event may
                  the extension exceed 90 days from the end of the initial
                  90-day period. If an extension is necessary, prior to the
                  expiration of the initial 90-day period, the Administrator
                  will send the Claimant a written notice, indicating the
                  special circumstances requiring an extension and the date by
                  which the Administrator expects to render a decision.

         (c)      REQUEST FOR APPEAL: If the Administrator denies a claim in
                  whole or in part, the Claimant may elect to appeal the denial.
                  If the Claimant does not appeal the denial pursuant to the
                  procedures set forth herein, the denial will be final, binding
                  and unappealable. A written request for appeal must be filed
                  by the Claimant (or the Claimant's duly authorized
                  representative) with the Committee within 60 days after the
                  date on which the Claimant receives the Administrator's notice
                  of denial. If a request for appeal is timely filed, the
                  Claimant will be afforded a full and fair review of the claim
                  and the denial. As part of this review, the Claimant may
                  submit written comments, documents, records, and other
                  information relating to the claim, and the review will take
                  into account all such comments, documents, records, or other
                  information submitted by the Claimant, without regard to
                  whether such information was submitted or considered in the
                  Administrator's initial benefit determination. The Claimant
                  also may obtain, free of charge and upon request, records and
                  other information relevant to the claim, without regard to
                  whether such information was relied upon by the Administrator
                  in making the initial benefit determination.

         (d)      REVIEW OF APPEAL: The Committee will determine, in its sole
                  and complete discretion, whether to uphold all or a portion of
                  the initial claim denial. If, on appeal, the Committee
                  determines that all or a portion of the initial denial should


                                     - 79 -


<PAGE>

                  be upheld, the Committee will send the Claimant a written or
                  electronic notice informing the Claimant of its decision to
                  uphold all or a portion of the initial denial, written in a
                  manner calculated to be understood by the Claimant and
                  containing the following information: the specific reason(s)
                  for the denial; a specific reference to pertinent Plan
                  provisions on which the denial is based; a statement that the
                  Claimant is entitled to receive, upon request and free of
                  charge, reasonable access to and copies of all documents and
                  other information relevant to the claim; and an explanation of
                  the Claimant's right to request arbitration and the applicable
                  time limits for doing so. Written or electronic notice will be
                  given within a reasonable period of time (but no later than 60
                  days) from the date the Committee receives the request for
                  appeal, unless special circumstances require an extension of
                  time for reviewing the claim, but in no event may the
                  extension exceed 60 days from the end of the initial 60-day
                  period. If an extension is necessary, prior to the expiration
                  of the initial 60-day period, the Committee will send the
                  Claimant a written notice, indicating the special
                  circumstances requiring an extension and the date by which the
                  Committee expects to render a decision.

         (e)      ALTERNATIVE TIME FOR AN APPEAL TO BE DECIDED: Notwithstanding
                  paragraph (d), if the Committee holds regularly scheduled
                  meetings on a quarterly or more frequent basis, the Committee
                  may make its determination of the claim on appeal at its next
                  regularly scheduled meeting if the Committee receives the
                  written request for appeal more than 30 days prior to its next
                  regularly scheduled meeting or at the regularly scheduled
                  meeting immediately following the next regularly scheduled
                  meeting if the Committee receives the written request for
                  appeal within 30 days of the next regularly scheduled meeting.
                  If special circumstances require an extension, the decision
                  may be postponed to the third regularly scheduled meeting
                  following the Committee's receipt of the written request for
                  appeal if, prior to the expiration of the initial time period
                  for review, the Claimant is provided with written notice,
                  indicating the special circumstances requiring an extension
                  and the date by which the Committee expects to render a
                  decision. If the extension is required because the Claimant
                  has not provided information that is necessary to decide the
                  claim, the Committee may suspend the review period from the
                  date on which notice of the extension is sent to the Claimant
                  until the date on which the Claimant responds to the request
                  for additional information.

         (f)      RIGHT OF ARBITRATION: If a Claimant wishes to contest a final
                  decision of the Committee, the Claimant may request
                  arbitration. If the Claimant does not request arbitration
                  pursuant to the procedures herein, the decision of the
                  Committee will be final, binding and unappealable. A written
                  request for arbitration must be filed by the Claimant (or the
                  Claimant's authorized representative) with the Committee
                  within 15 days after the date the Claimant receives the
                  written decision of the Committee. If a request for
                  arbitration is timely filed, the Claimant and the Committee
                  will each name an arbitrator within 20 days after the
                  Committee receives the Claimant's written request for
                  arbitration. The two arbitrators will jointly name a third
                  arbitrator within 15 days after their appointment. If either
                  party fails to select an arbitrator within the 20 day period,
                  or if the two arbitrators fail to select a third arbitrator
                  within 15 days after their appointment, then the presiding
                  judge of the county court (or its equivalent) in the county in
                  which the principal office of the Sponsor is located will
                  appoint such other arbitrator or arbitrators. The arbitrators
                  will render a decision within 60 days after their appointment


                                     - 80 -


<PAGE>

                  and will conduct all proceedings pursuant to the laws of the
                  state in which the Sponsor's principal place of business is
                  located and the then current Rules of the American Arbitration
                  Association governing commercial transactions, to the extent
                  that such rules are not inconsistent with applicable state
                  law. The cost of the arbitration procedure will be borne by
                  the losing party or, if the decision is not clearly in favor
                  of one party or the other, in the manner determined by the
                  arbitrators. The arbitration proceeding provided for in this
                  Section will be the sole and exclusive remedy of a Claimant to
                  contest decisions of the Committee under this Plan, and the
                  arbitrators' decision will be final, binding and unappealable.

8.11     QUALIFIED DOMESTIC RELATIONS ORDERS
         A Qualified Domestic Relations Order, or QDRO, is a signed domestic
         relations order issued by a State Court that creates, recognizes or
         assigns to an alternate payee(s) the right to receive all or part of a
         Participant's Plan benefit. An alternate payee is a Spouse, former
         Spouse, child, or other dependent of a Participant who is treated as a
         Beneficiary under the Plan as a result of the QDRO. The Administrator
         may establish QDRO procedures, but in the absence of such procedures,
         the Administrator will determine if a domestic relations order is a
         Qualified Domestic Relations Order in accordance with the following
         provisions:

         (a)      ADMINISTRATOR'S DETERMINATION: Promptly upon receipt of a
                  domestic relations order, the Administrator will notify the
                  Participant and any alternate payee(s) named in the order of
                  such receipt, and will include a copy of this Section. Within
                  a reasonable time after receipt of the order, the
                  Administrator will make a determination as to whether or not
                  the order is a QDRO as defined in Code ss.414(p) and will
                  promptly notify the Participant and any alternate payee(s) in
                  writing of the determination.

         (b)      SPECIFIC REQUIREMENTS OF QDRO: In order for a domestic
                  relations order to be a Qualified Domestic Relations Order, it
                  must specifically state all of the following: (1) the name and
                  last known mailing address (if any) of the Participant and
                  each alternate payee covered by the order; (2) the dollar
                  amount or percentage of the benefit to be paid to each
                  alternate payee, or the manner in which the amount or
                  percentage will be determined; (3) the number of payments or
                  period for which the order applies; and (4) the name of the
                  plan to which the order applies. The domestic relations order
                  will not be deemed a Qualified Domestic Relations Order if it
                  requires the Plan to provide any type or form of benefit, or
                  any option not already provided for in the Plan, or increased
                  benefits, or benefits in excess of the Participant's Vested
                  Interest, or payment of benefits to an alternate payee
                  required to be paid to another alternate payee under another
                  QDRO.

         (c)      DISPUTED ORDERS: If there is a question as to whether or not a
                  domestic relations order is a Qualified Domestic Relations
                  Order, there will be a delay in any payout to any payee
                  including the Participant, until the status is resolved. In
                  such event, the Administrator will segregate the amount that
                  would have been payable to the alternate payee(s) if the order
                  had been deemed a QDRO. If the order is not determined to be a
                  QDRO, or the status is not resolved (for example, it has been
                  sent back to the Court for clarification or modification)
                  within 18 months beginning with the date the first payment
                  would have to be made under the order, the Administrator will
                  pay the segregated amounts plus interest to the person(s) who
                  would have been entitled to the benefits had there been no
                  order. If a determination as to the Qualified status of the
                  order is made after the 18-month period, then the order will
                  only be applied on a prospective basis. If the order is
                  determined to be a QDRO, the Participant and alternate
                  payee(s) will again be notified promptly after such
                  determination. Once an order is deemed a QDRO, the
                  Administrator will pay to the alternate payee(s) all the
                  amounts due under the QDRO, including segregated amounts plus
                  interest that may have accrued during a dispute as to the
                  order's qualification.

         (d)      PAYMENT PRIOR TO TERMINATION OF EMPLOYMENT: A QDRO may provide
                  for the payment of benefits to an alternate payee prior to the
                  time a Participant has terminated employment. Further, such
                  payment can be made even if the affected Participant has not
                  yet reached the Earliest Retirement Age, which is the earlier
                  of (1) the date on which the Participant is entitled to a
                  distribution under this Plan, or (2) the later of the date the
                  Participant attains age 50 or the earliest date on which the
                  Participant could receive benefits hereunder if the
                  Participant terminated employment with the Employer.

                                     - 81 -


<PAGE>

         (e)      EFFECT OF QDRO ON SURVIVOR ANNUITY REQUIREMENTS:
                  Notwithstanding Sections 5.1, 5.2, 5.3 and 5.4 to the
                  contrary, a Participant's benefits which are payable in the
                  form of a Qualified Joint and Survivor Annuity or in the form
                  of a Qualified Preretirement Survivor Annuity need not be paid
                  in such form if such payment is inconsistent with, or has been
                  modified by, the terms of a Qualified Domestic Relations
                  Order.

                                     - 82 -


<PAGE>

                                    ARTICLE 9
                        AMENDMENT, TERMINATION AND MERGER

9.1      AMENDMENT OF THE PLAN
         The Sponsor, or, if there is no Sponsor, the Trustee, will have the
         right to amend the Plan at any time subject to the following
         provisions:

         (a)      GENERAL REQUIREMENTS: Amendments must be in writing and cannot
                  (1) increase the responsibilities of the Trustee or
                  Administrator without written consent; (2) deprive any
                  Participant or Beneficiary of benefits to which he or she is
                  entitled; (3) decrease the amount of any Participant's Account
                  except as permitted under Code ss.412(c)(8); (4) permit any
                  part of the Trust to be used for or diverted to purposes other
                  than the exclusive benefit of the Participants or their
                  Beneficiaries except as required to pay taxes and
                  administration expenses, or cause or permit any portion of the
                  Trust Fund to revert to or become the property of the
                  Employer; or (5) have the effect of eliminating or restricting
                  the ability of a Participant or other payee to receive payment
                  of his or her Account balance or benefit entitlement under a
                  particular optional form of benefit provided under the Plan
                  unless the provisions of subparagraphs (1) and (2) below are
                  satisfied:

                  (1)      LUMP SUM REQUIREMENT: The amendment provides a lump
                           sum distribution form that is otherwise identical to
                           the optional form of benefit that is restricted or
                           eliminated. For this purpose, a lump sum distribution
                           form is otherwise identical only if it is identical
                           in all respects to the eliminated or restricted
                           optional form of benefit (or would be identical
                           except that it provides greater rights to the payee)
                           except with respect to the timing of payments after
                           commencement.

                  (2)      EFFECTIVE DATE: The amendment cannot apply to any
                           distribution with an Annuity Starting Date which is
                           earlier than the earlier of (A) the 90th day after a
                           Participant has been furnished with a summary plan
                           description or other summary that reflects the
                           amendment and that satisfies the ERISA requirements
                           at 29 CFR 2520.104b-3 relating to a summary of
                           material modifications; or (B) the first day of the
                           second Plan Year following the Plan Year in which
                           this amended Plan is adopted.

         (b)      CERTAIN CORRECTIVE AMENDMENTS: For purposes of satisfying the
                  minimum coverage requirements of Code ss.410(b), the
                  nondiscriminatory amount requirement of regulation
                  ss.1.401(a)(4)-1(b)(2), or the nondiscriminatory plan
                  amendment requirement of regulation ss.1.401(a)(4)-1(b)(4), a
                  corrective amendment may retroactively increase allocations
                  for Employees who benefited under the Plan during the Plan
                  Year being corrected, or may grant allocations to Employees
                  who did not benefit under the Plan during the Plan Year being
                  corrected. In addition, to satisfy the nondiscriminatory
                  current availability requirement of regulation
                  ss.1.401(a)(4)-4(b) for benefits, rights or features, a
                  corrective amendment may make a benefit, right or feature
                  available to Employees to whom it was previously not
                  available. A corrective amendment will not be taken into
                  account prior to the date of its adoption unless the amendment
                  satisfies the applicable requirements of regulation
                  ss.1.401(a)(4)-11(g)(3)(ii) through (vii), including the
                  requirement that, in order to be effective for the preceding
                  Plan Year, such amendment must be adopted by the 15th day of
                  the 10th month after the close of the preceding Plan Year.

9.2      TERMINATION OF PLAN BY SPONSOR
         The Sponsor at any time can terminate the Plan and Trust in whole or in
         part in accordance with the following provisions:

                                     - 83 -


<PAGE>

         (a)      TERMINATION OF PLAN: The Sponsor can terminate the Plan and
                  Trust by filing written notice thereof with the Administrator
                  and Trustee and by completely discontinuing contributions to
                  the Plan. Upon any such termination, the Trustee will continue
                  to administer the Trust until distribution has been made to
                  the Participants and other payees, which distribution must
                  occur as soon as administratively feasible after the
                  termination of the Plan, and must be made in accordance with
                  the provisions of Article 5 of the Plan, including Section
                  5.6(g) where applicable. However, the Administrator may elect
                  not to distribute the Accounts of Participants and other
                  payees upon termination of the Plan but instead to transfer
                  the entire Trust Fund assets and liabilities attributable to
                  this terminated Plan to another qualified plan maintained by
                  the Employer or its successor.

         (b)      VESTING REQUIREMENT: Upon complete termination of the Plan, or
                  upon a complete discontinuance of contributions, all
                  Participants who are affected by the termination, all
                  Participants who have not incurred a Termination of
                  Employment, and all Participants who have incurred a
                  Termination of Employment but have not incurred a 5-year Break
                  in Service will have a 100% Vested Interest in their unpaid
                  Participant's Accounts. Upon partial termination of the Plan
                  only those Participants who have incurred a Termination of
                  Employment on account of the event which caused the partial
                  termination but have not incurred a 5-year Break in Service
                  will automatically have a 100% Vested Interest in their unpaid
                  Participant's Accounts to the date of partial termination.

         (c)      DISCONTINUANCE OF CONTRIBUTIONS ONLY: The Sponsor may elect at
                  any time to completely discontinue contributions to the Plan
                  but continue the Plan in operation in all other respects, in
                  which event the Trustee will continue to administer the Trust
                  until eventual full distribution of all benefits has been made
                  to the Participants and other payees in accordance with
                  Article 5 after their death, retirement, Disability or
                  Termination of Employment. Any such discontinuance of
                  contributions without an additional notice of termination from
                  the Sponsor to the Administrator and Trustee will not
                  constitute a termination of the Plan.

9.3      TERMINATION OF PARTICIPATION BY ADOPTING EMPLOYER
         Any Adopting Employer may by written resolution terminate participation
         in the Plan at any time by notification to the Sponsor, the
         Administrator, and the Trustee. Such Adopting Employer may thereupon
         request a transfer of Trust Fund assets attributable to its Employees
         from this Plan to any successor qualified retirement plan maintained by
         the Adopting Employer or its successor. The Administrator may, however,
         refuse to make such transfer if in its considered opinion such transfer
         would operate to the detriment of any Participant, jeopardize the
         continued qualification of the Plan, or if such transfer does not
         comply with any requirements of the Internal Revenue Service. If no
         transfer is made, the provisions in the definition of Adopting Employer
         in Article 1 will apply with respect to the payment of benefits for
         Employees of such Adopting Employer.

9.4      MERGER OR CONSOLIDATION
         This Plan and Trust may not be merged or consolidated with, nor may any
         of its assets or liabilities be transferred to, any other plan, unless
         the benefits payable to each Participant if the Plan was terminated
         immediately after such merger, consolidation or transfer would be equal
         to or greater than the benefits such Participant would have been
         entitled to if this Plan had been terminated immediately before such
         merger, consolidation or transfer.

                                     - 84 -


<PAGE>

                                   ARTICLE 10
                            MISCELLANEOUS PROVISIONS

10.1     NO CONTRACT OF EMPLOYMENT
         Except as otherwise provided by law, neither the establishment of this
         Plan, nor any modification hereto, nor the creation of any fund or
         account, nor the payment of any benefits, will be construed as giving
         any Participant or other person any legal or equitable rights against
         the Employer, any officer or Employee thereof, or the Trustee, except
         as herein provided; and the terms of employment of any Participant will
         not be modified or affected by this Plan.

10.2     TITLE TO ASSETS
         No Participant or Beneficiary will have any right to, or any interest
         in, any assets of the Trust upon separation from service with the
         Employer, Affiliated Employer, or Adopting Employer, except as
         otherwise provided by the terms of the Plan.

10.3     QUALIFIED MILITARY SERVICE
         Notwithstanding any other provision of the Plan to the contrary,
         effective December 12, 1994, contributions, benefits and service credit
         with respect to qualified military service will be provided in
         accordance with the requirements of Code ss.414(u).

10.4     BONDING OF FIDUCIARIES
         Fiduciaries of this Plan will have only those duties that are
         specifically given to the Fiduciaries under the terms of this Plan. In
         addition, every Fiduciary other than a bank, an insurance company, or a
         Fiduciary of an Employer which has no common-law employees, will be
         bonded in an amount not less than 10% of the amount of funds under such
         Fiduciary's supervision, but such bond will not be less than $1,000 or
         more than $500,000. The bond will provide protection to the Plan
         against any loss for acts of fraud or dishonesty by a Fiduciary acting
         alone or in concert with others. The cost of such bond will be an
         expense of either the Employer or the Trust, at the election of the
         Employer.

10.5     SEVERABILITY OF PROVISIONS
         If any Plan provision is held invalid or unenforceable, such invalidity
         or unenforceability will not affect any other provision of this Plan,
         and this Plan will be construed and enforced as if such provision had
         not been included.

10.6     GENDER AND NUMBER
         Words used in the masculine gender will be construed as though they
         were also used in the feminine or neuter gender where applicable, and
         words used in the singular will be construed as though they were also
         used in the plural where applicable.

10.7     HEADINGS AND SUBHEADINGS
         Headings and subheadings are inserted for convenience of reference.
         They constitute no part of this Plan and are not to be considered in
         its construction.

10.8     LEGAL ACTION
         In any claim, suit or proceeding concerning the Plan and/or Trust which
         is brought against the Trustee or Administrator, the Plan and Trust
         will be construed and enforced according to the laws of the state in
         which the Employer maintains its principal place of business, to the
         extent that it is not preempted by ERISA; and unless otherwise
         prohibited by law, either the Employer or the Trust, in the sole
         discretion of the Employer, will reimburse the Trustee and/or
         Administrator for all costs, attorneys fees and other expenses
         associated with any such claim, suit or proceeding.

                                     - 85 -


<PAGE>

10.9     QUALIFIED PLAN STATUS
         This Plan and the related Trust Agreement are intended to be a
         qualified retirement plan under the provisions of Code ss.401(a) and
         ss.501(a).

10.10    MAILING OF NOTICES TO ADMINISTRATOR, EMPLOYER OR TRUSTEE
         Any notices, documents or forms required to be given to or filed with
         the Administrator, the Employer or the Committee will be hand delivered
         or mailed by first class mail, postage prepaid, to the Committee or
         Employer at the Employer's principal place of business. Any notices,
         documents or forms required to be given to or filed with the Trustee
         will be hand delivered or mailed by first class mail, postage prepaid,
         to the Trustee at its principal place of business.

10.11    PARTICIPANT NOTICES AND WAIVERS OF NOTICES TO PARTICIPANTS
         Whenever written notice is required to be given under the terms of this
         Plan, such notice will be deemed to be given on the date that such
         written notice is either hand delivered to the recipient or deposited
         at a United States Postal Service Station, first class mail, postage
         paid. Notice may be waived by any party otherwise entitled to receive
         written notice concerning any matter under the terms of this Plan.

10.12    NO DUPLICATION OF BENEFITS
         There will be no duplication of benefits under the Plan because of
         employment by more than one participating employer.

10.13    EVIDENCE FURNISHED CONCLUSIVE
         Anyone required to give evidence under the terms of the Plan may do so
         by certificate, affidavit, document or other information which the
         person to act in reliance may consider pertinent, reliable and genuine,
         and to have been signed, made or presented by the proper party or
         parties. The Fiduciaries under the Plan will be fully protected in
         acting and relying upon any evidence described under this Section.

10.14    RELEASE OF CLAIMS
         Any payment to any Participant or Beneficiary, his or her legal
         representative, or to any guardian or committee appointed for such
         Participant or Beneficiary, will, to the extent thereof, be in full
         satisfaction of all claims hereunder against the Administrator and the
         Trustee, either of whom may require such Participant, legal
         representative, Beneficiary, guardian or committee, as a condition
         precedent to such payment, to execute a receipt and release thereof in
         such form as determined by the Administrator or the Trustee.

10.15    MULTIPLE COPIES OF PLAN AND/OR TRUST
         This Plan and the related Trust Agreement may be executed in any number
         of counterparts, each of which will be deemed an original, but all of
         which will constitute one and the same Agreement or Trust Agreement, as
         the case may be, and will be binding on the respective successors and
         assigns of the Employer and all other parties.

10.16    LIMITATION OF LIABILITY AND INDEMNIFICATION
         In addition to and in furtherance of any other limitations provided in
         the Plan, and to the extent permitted by applicable law, the Employer
         will indemnify and hold harmless its board of directors (collectively
         and individually), if any, the Administrative/Advisory Committee
         (collectively and individually), if any, and its officers, partners who
         serve as a Trustee, Employees, and agents against and with respect to
         any and all expenses, losses, liabilities, costs, and claims, including
         legal fees to defend against such liabilities and claims, arising out
         of their good-faith discharge of responsibilities under or incident to
         the Plan, excepting only expenses and liabilities resulting from
         willful misconduct. This indemnity will not preclude such further


                                     - 86 -


<PAGE>

         indemnities as may be available under insurance purchased by the
         Employer or as may be provided by the Employer under any by-law,
         agreement, vote of shareholders or disinterested directors, or
         otherwise, as such indemnities are permitted under state law. Payments
         with respect to any indemnity and payment of expenses or fees under
         this Section will be made only from assets of the Employer, and will
         not be made directly or indirectly from assets of the Trust Fund.

                                     - 87 -


<PAGE>

         IN WITNESS WHEREOF, this Plan and Trust have been executed by the
Employer and the Trustees as of the day, month and year set forth on page 1 of
this Agreement.



                                 HOT TOPIC, INC.


                                 By___________________________________________



                                 TRUSTEES


                                 _____________________________________________
                                 James McGinty


                                 _____________________________________________
                                 Elizabeth McLaughlin


                                 _____________________________________________
                                 Jane Cruz


                                 _____________________________________________
                                 Gerald Cook


                                 _____________________________________________
                                 George Wehlitz


                                     - 88 -


<PAGE>



                      CERTIFICATE OF CORPORATE RESOLUTIONS

                                       OF

                                 HOT TOPIC, INC.



The undersigned Secretary of the above named corporation certifies that the
following resolutions were adopted by the board of directors on the date set
forth below.

                  RESOLVED, that the Hot Topic, Inc. 401(k) Profit Sharing Plan,
                  as amended and restated effective January 1, 2003, a copy of
                  which is attached hereto, is hereby adopted;

                  RESOLVED, that the amendment regarding minimum distribution
                  requirements under Internal Revenue Service final regulations
                  under Code ss.401(a)(9) and Internal Revenue Service
                  Announcement 2002-29, a copy of which is attached hereto, is
                  hereby adopted;

                  RESOLVED, that the "Good Faith" amendment to the Plan for
                  conformance with EGTRRA, a copy of which is attached hereto,
                  is hereby adopted;

                  RESOLVED, that the amendment to increase the maximum Elective
                  Deferral amount, a copy of which is attached hereto, is hereby
                  adopted;

                  RESOLVED, that an authorized representative should deliver an
                  executed copy of the Plan to the trustees named therein; and

                  RESOLVED, that an authorized representative should take any
                  and all steps necessary to effectuate the foregoing
                  resolutions.


THIS CERTIFICATE is executed this __________ day of _________________________,
200____.



                                   _____________________________________________
                                   Corporate Secretary



<PAGE>


                             PARTICIPANT LOAN POLICY

                                 HOT TOPIC, INC.
                           401(K) PROFIT SHARING PLAN
                                  (the "Plan")

     The Administrator for the Plan hereby adopts this loan policy pursuant to
     the terms of the Plan:

A.   LOAN REQUEST

     A Participant's request for a Plan loan will be made in the manner
     specified by the Trustee and/or Plan Administrator. Any Plan Participant
     may obtain a loan from the Plan. For purposes of this loan policy, the term
     "Participant" means any Participant who is an Employee of an Adopting
     Employer and any former Participant who is an Employee of an Affiliated
     Employer.

B.   SOURCE OF LOAN AMOUNT

     A Participant may borrow funds from the following sources: a Participant's
     voluntary contributions, rollover contributions, or other transferred
     monies for which an account balance is maintained and/or a Participant's
     vested account balance.

C.   PARTICIPANT FEES

     1.   LOAN PROCESSING FEES: No loan processing fees will be charged to the
          Participant for the initiation of each loan or refinancing or
          replacement of a loan.

     2.   LOAN MAINTENANCE FEES: No annual maintenance fee for the loan will be
          charged to the Participant.

D.   LIMITATIONS ON LOAN AMOUNT / PURPOSE OF LOAN

     1.   LOAN AMOUNT: No loan amount may exceed the lesser of (a) or (b)
          following, from all Plans of the Employer and any Affiliated Employer:

          (a)  50% of the sum of (i) a Participant's vested account plus (ii) a
               Participant's voluntary contributions, rollover contributions, or
               other transferred or segregated monies for which an account
               balance is maintained; both as reflected by the books and records
               of the Plan at the end of the most recent computation period for
               which an accounting has been completed.

          (b)  $50,000 reduced by the excess, if any, of the Participant's
               highest outstanding balance of loans during the 1-year period
               ending the day before the loan was made, over the Participant's
               outstanding balance of loans on the day the loan was made.

     A Participant may not request a loan for less than $1,000.

2.   PURPOSE OF LOAN: A loan may be made to a Participant for any purpose.

                                    Page -1-


<PAGE>

E.   TERMS OF LOAN

     1.   SECURITY FOR LOAN: A Participant must secure each loan with an
          irrevocable pledge and assignment of the sum of a Participant's
          voluntary contributions, rollover contributions, or other transferred
          or segregated monies for which an account balance is maintained, plus
          a Participant's vested account balance; both as reflected by the books
          and records of the Plan at the end of the most recent computation
          period for which an accounting has been completed. In addition, other
          security or substitute collateral acceptable to the Administrator will
          also be permitted for a loan.

     2.   SOURCE OF LOAN: If a loan is secured by and obtained from more than
          one Participant-directed investment account for which an account
          balance is maintained under the Plan, the source of the loan will be
          in proportion to the respective Participant-directed accounts of the
          Participant unless otherwise directed by election of the Participant
          and approved by the Administrator.

     3.   TERM OF LOAN REPAYMENT: The term of repayment may not be greater than
          five years.

          PARTICIPANTS SHOULD NOTE THAT THE LAW MAY TREAT THE AMOUNT OF ANY LOAN
          THAT IS NOT REPAID WITHIN FIVE YEARS AFTER THE DATE OF THE LOAN AS A
          TAXABLE DISTRIBUTION ON THE LAST DAY OF THE FIVE-YEAR PERIOD OR, IF
          SOONER, AT THE TIME THE LOAN IS IN DEFAULT. IF A PARTICIPANT EXTENDS A
          LOAN HAVING A TERM OF FIVE YEARS OR LESS BEYOND FIVE YEARS, THE
          BALANCE OF THE LOAN AT THE TIME OF THE EXTENSION MAY BE A TAXABLE
          DISTRIBUTION.

     4.   LOAN DOCUMENTATION AND LOAN INTEREST RATE: Every loan will be
          documented with a promissory note signed by the Participant for the
          face amount of the loan, with an interest rate established at the
          inception of the loan set as determined by the Administrator on the
          basis of relevant factors including but not limited to the rates
          charged by commercial U.S. banks available within a reasonable
          geographic vicinity for loans of similar duration and security level.
          The rate of interest on the loan will be fixed and will not change for
          the duration of the loan repayment period.

     5.   ALLOCATION OF LOAN INTEREST: If the Participant's loan is secured by
          an account balance which is a Participant-directed investment,
          interest will be credited directly to such Participant-directed
          investment account. If the Participant's loan is not secured by an
          account balance which is a Participant-directed investment, then
          interest repayments for any Participant loan will be credited directly
          to the Participant's account.

     6.   LOAN REPAYMENT: The loan must provide for repayment on a level
          amortization schedule by regular payroll deduction repayments (not
          less than quarterly) as of each payroll withholding period. If a
          Participant revokes his or her payroll deduction election, the entire
          unpaid principal sum, accrued interest and all other amounts due under
          the loan will become due and payable. If a Participant ceases
          employment with an Adopting Employer but continues employment with an
          Affiliated Employer who is not an Adopting Employer, payroll
          withholding for loan repayments will continue from such Affiliated
          Employer.

     7.   TERMINATION OF EMPLOYMENT: If a Participant who is employed by an
          Adopting Employer or an Affiliated Employer terminates employment with
          an outstanding loan, the entire unpaid principal sum, accrued interest
          and all other amounts due under the loan will become due and payable.

     8.   EARLY REPAYMENT: Early repayment of the outstanding loan may be made
          at any time in either full or partial repayments of the outstanding
          loan balance.

                                    Page -2-


<PAGE>

     9.   APPROVED LEAVE OF ABSENCE: Suspension of loan repayments during an
          approved leave of absence is permitted for a period not exceeding one
          (1) year which occurs during an approved leave of absence either
          without pay from the Adopting Employer or an Affiliated Employer at a
          rate of pay (after income and employment tax withholding) that is less
          than the amount of the installment repayments required under the terms
          of the loan. In no event may the suspension of repayments cause the
          term of the loan to exceed five years from the original date of the
          loan.

     10.  REPAYMENT SUSPENSION WHILE ON QUALIFIED MILITARY SERVICE: Suspension
          of loan repayments during leave due to qualified military service will
          be as permitted under Section 414(u)(4) of the Internal Revenue Code.

F.   NEW LOANS, REPLACEMENT (REFINANCED) LOANS

     1.   ADDITIONAL LOAN OR REPLACEMENT LOAN: A Participant may, subject to D.
          above and F.2. and F.3. below, elect to receive a new additional loan
          in addition to an existing loan, or a replacement loan of an existing
          loan, provided that no more than two loans are issued in any calendar
          year.

          NOTE: IF THE AMOUNT OF THE REPLACEMENT LOAN EXCEEDS THE OUTSTANDING
          BALANCE OF THE PRIOR EXISTING LOAN, OR THE TERM OF THE REPLACEMENT
          LOAN EXCEEDS THE REMAINING TERM OF THE PRIOR EXISTING LOAN, IRS
          REGULATIONS MAY REQUIRE THAT THE MAXIMUM LOAN LIMITS BE COMPUTED
          APPLYING THE SUM OF THE AMOUNT OF THE REPLACEMENT LOAN PLUS THE
          OUTSTANDING BALANCE OF THE PRIOR EXISTING LOAN. ANY LOAN IN EXCESS OF
          SUCH LIMIT MAY BE CONSIDERED A DEEMED DISTRIBUTION. SEE 3. BELOW. THE
          MAXIMUM LOAN LIMITS FOR TWO SEPARATE LOANS DO NOT REQUIRE SUCH
          CALCULATION.

     2.   REPLACEMENT LOAN AVAILABILITY: A replacement loan will be permitted
          regardless of the applicable interest rate on either the existing loan
          or the new refinanced loan.

          The Administrator will permit the refinancing of an existing loan only
          under the following conditions: (a) the remaining number of repayments
          on the existing loan is at least the equivalent of six months of
          payments; (b) the existing loan has been in effect for at least six
          months; (c) the minimum reduction in the amount of each periodic
          repayment is (or could be, if the number of repayments were to be the
          same as was remaining on the prior loan) at least the equivalent of
          $20 per month; and (d) a loan may be refinanced a maximum of two
          times.

     3.   REPLACEMENT LOAN RULES: The following rules will apply to a
          replacement loan:

          (a)  If the amount of the replacement loan is the same as the
               outstanding loan balance of the prior existing loan, and the
               amortization period of the replacement loan is equal to or less
               than the remaining repayment period for the outstanding loan
               balance of the prior existing loan, then the repayment amount of
               the replacement loan will be determined based on the applicable
               interest rate and amount of the replacement loan/outstanding loan
               balance. In such event the maximum loan amount will be determined
               as in D1.

          (b)  If either (i) the amount of the replacement loan is the same as
               the outstanding loan balance of the prior existing loan and the
               amortization period of the replacement loan is greater than the
               remaining repayment period for the outstanding loan balance of
               the prior existing loan, or (ii) the amount of the replacement
               loan exceeds the outstanding loan balance of the prior existing
               loan, then the repayment amount of the replacement loan will be
               determined based on the applicable interest rate and amount of
               the replacement loan. In such event the maximum loan will be
               determined as in D1. provided the provisions of Q&A-20(a)(2) of


                                    Page -3-


<PAGE>

               IRS proposed regulations under IRC Section 72(p) issued in 2000
               are satisfied. Otherwise, the maximum loan amount will be
               determined by applying the SUM of the amount of the replacement
               loan plus the outstanding balance of the prior existing loan to
               the maximum limits in D1.

G.   SPOUSAL CONSENT FOR LOAN

     If the portion of the Participant's assets which is used to secure the loan
     is subject to the Qualified Joint and Survivor rules regarding benefit
     distributions, any loan pledge or agreement will be signed by the
     Participant and consented to by the eligible Spouse of a Participant who is
     or was an Employee of an Adopting Employer within the 90-day period ending
     on the date of the inception of the loan.

     In addition, if the portion of the Participant's assets which is used to
     secure the loan is not subject to the Qualified Joint and Survivor rules
     regarding benefit distributions, the Administrator may in its discretion
     applied on a consistent basis (after taking into account the amount of the
     required loan repayment and the Employee's net after-tax take home pay)
     determine that the eligible Spouse of a Participant who is or was an
     Employee of an Adopting Employer must consent to any loan within the 90-day
     period ending on the date of the inception of the loan.

H.   REPAYMENT OF LOANS AND DEFAULT ON LOANS

     1.   REQUIRED REPAYMENT OF LOANS

          (a)  If a Participant has an outstanding balance remaining on a loan
               and the Participant (or the Participant's spouse or beneficiary)
               is entitled to a payment from the Trust Fund before the loan is
               repaid in full, the Trustee will offset at the time of
               distribution the unpaid loan balance (including accrued interest)
               from the total amount otherwise due.

          (b)  In the event of the failure of a Participant to repay the loan in
               a timely manner, the Administrator may charge the Participant's
               account balance or other benefit with expenses directly related
               to the implementation, administration and collection of the loan.

     2.   DEFAULT ON LOANS

          (a)  A loan will be considered in default if any scheduled repayment
               remains unpaid as of the end of the "cure period". For these
               purposes the "cure period" will end on the last day of the
               calendar quarter following the calendar quarter in which the
               required repayment(s) was/were due, or such later date if
               permitted by Internal Revenue Service rules and regulations.

          (b)  After default occurs, if a distribution to the Participant

               (1)  is currently permissible under the Plan, the vested amount
                    of the Participant's account balance will be reduced or
                    offset by the outstanding principal and interest of the
                    defaulted loan. In such event the loan will be considered to
                    have been repaid and the amount of such reduction or offset
                    will be deemed to have been distributed from the Plan; or

               (2)  is not currently permissible under the Plan, the entire
                    outstanding balance of the loan will be treated as a deemed
                    distribution. A deemed distribution is treated as a
                    distribution to the Participant only for certain tax
                    purposes (income, premature distribution penalty, etc.) and
                    is not a distribution of the account or accrued benefit.
                    Pending final disposition of the note, the Participant
                    remains obligated to repay the outstanding balance of the
                    defaulted loan including any unpaid principal and accrued
                    interest to the date of repayment in full.

                                    Page -4-


<PAGE>

              If the Participant's vested account balance is less than the loan
              amount due in (1) or (2) above, the Administrator will take any
              steps necessary to collect the balance due directly from the
              Participant. However, no foreclosure on the promissory note or
              attachment of the vested account balance will occur until a
              distributable event occurs in the Plan.



By_________________________________________          Dated______________________
         PLAN ADMINISTRATOR

                                    Page -5-


<PAGE>

                       EGTRRA "GOOD FAITH" PLAN AMENDMENT
         FOR DEFINED CONTRIBUTION PLANS WHICH INCLUDE 401(k) PROVISIONS

              PER IRS NOTICES 2001-42, 2001-56, AND 2001-57 AND THE
        JOB CREATION AND WORKER ASSISTANCE ACT OF 2002 (THE 2002 TAX ACT)


NAME OF PLAN: Hot Topic, Inc. 401(k) Profit Sharing Plan (the "Plan")

PLAN SPONSOR: Hot Topic, Inc. (the "Sponsor")

THIS AMENDMENT is adopted by the Sponsor to reflect certain provisions of the
Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), is
intended as good faith compliance with the requirements of EGTRRA, and is to be
construed in accordance with EGTRRA and guidance issued thereunder, including
IRS Notices 2001-42, 2001-56, and 2001-57, and with the Job Creation and Worker
Assistance Act of 2002 (the 2002 Tax Act). This amendment will supersede the
provisions of the Plan to the extent they are inconsistent with the provisions
of this amendment, and except as otherwise indicated, is effective as of the
first day of the first Plan Year beginning after December 31, 2001.

o    SS.611(b) AND SS.632 OF EGTRRA - LIMITATIONS ON CONTRIBUTIONS

     MAXIMUM ANNUAL ADDITION: Except to the extent permitted under this
     amendment which provides for catch-up contributions under EGTRRA ss.631 and
     Code ss.414(v), if applicable, the Annual Addition that may be contributed
     or allocated to a Participant's Account under the Plan for any Limitation
     Year will not exceed the lesser of (a) $40,000, as adjusted for increases
     in the cost-of-living under Code ss.415(d), or (b) 100 percent of the
     Participant's Compensation, within the meaning of Code ss.415(c)(3), for
     the Limitation Year. The Compensation limit referred to in (b) will not
     apply to any contribution for medical benefits after separation from
     service (within the meaning of Code ss.401(h) or Code ss.419A(f)(2)) which
     is otherwise treated as an Annual Addition.

o    SS.611(c) OF EGTRRA - INCREASE IN COMPENSATION LIMIT

     The annual Compensation of each Participant used in determining allocations
     (including Top-Heavy Minimum Allocations) will not exceed $200,000 as
     adjusted for cost-of-living increases under Code ss.401(a)(17)(B). Annual
     Compensation means Compensation during the plan year or such other
     consecutive 12-month period over which Compensation is otherwise determined
     under the Plan (the determination period). The cost-of-living adjustment in
     effect for a calendar year applies to annual Compensation for the
     determination period that begins with or within such calendar year.

o    SS.612 OF EGTRRA - PLAN LOANS FOR OWNER-EMPLOYEES / SHAREHOLDER EMPLOYEES

     Effective for Plan loans made after December 31, 2001, Plan provisions
     prohibiting or otherwise restricting loans to any Owner-Employee or
     Shareholder-Employee will cease to apply.

o    SS.613 OF EGTRRA - MODIFICATION OF TOP-HEAVY RULES

     1.  EFFECTIVE DATE: This section will apply for purposes of determining
         whether the Plan is a Top-Heavy Plan under Code ss.416(g) for Plan
         Years beginning after December 31, 2001, and whether the Plan satisfies
         the minimum benefits requirements of Code ss.416(c) for such years.
         This section amends the sections of the Plan that include Top-Heavy
         provisions.



<PAGE>

     2.  DETERMINATION OF TOP-HEAVY STATUS:

         (a)  KEY EMPLOYEE: Key Employee means any employee or former Employee
              (including any deceased Employee) who at any time during the Plan
              Year that includes the determination date was an officer of the
              Employer having annual Compensation greater than $130,000 (as
              adjusted under Code ss.416(i)(1) for Plan Years beginning after
              December 31, 2002), a 5-percent owner of the Employer, or a
              1-percent owner of the Employer having annual Compensation of more
              than $150,000. For this purpose, annual Compensation means
              Compensation within the meaning of Code ss.415(c)(3). The
              determination of who is a Key Employee will be made in accordance
              with Code ss.416(i)(1) and the applicable regulations and other
              guidance of general applicability issued thereunder.

         (b)  DETERMINATION OF PRESENT VALUES AND AMOUNTS: This section 2 will
              apply for purposes of determining the present values of accrued
              benefits and the amounts of Account balances of Employees as of
              the determination date.

              (1) DISTRIBUTIONS DURING THE YEAR ENDING ON THE DETERMINATION
                  DATE: The present values of accrued benefits and the amounts
                  of Account balances of an Employee as of the determination
                  date will be increased by the distributions made with respect
                  to the Employee under the Plan and any Plan aggregated with
                  the Plan under Code ss.416(g)(2) during the 1-year period
                  ending on the determination date. The preceding sentence will
                  also apply to distributions under a terminated Plan which had
                  it not been terminated would have been aggregated with the
                  Plan under Code ss.416(g)(2)(A)(i). In the case of a
                  distribution made for a reason other than severance from
                  employment, death, or disability, this provision will apply by
                  substituting "5-year period" for "1-year period."

              (2) EMPLOYEES NOT PERFORMING SERVICES DURING THE YEAR ENDING ON
                  THE DETERMINATION DATE: The accrued benefits and the amounts
                  of Account balances of any individual who has not performed
                  services for the Employer during the 1-year period ending on
                  the determination date will not be taken into account.

     3.  MINIMUM BENEFITS

         (a)  MATCHING CONTRIBUTIONS: Employer Matching Contributions will be
              taken into account for purposes of satisfying the minimum
              contribution requirements of Code ss.416(c)(2). The preceding
              sentence will apply with respect to Matching Contributions under
              the Plan or, if the Plan provides that the minimum contribution
              requirement will be met in another Plan, such other Plan. Matching
              Contributions that are used to satisfy the minimum contribution
              requirements will be treated as Matching Contributions for
              purposes of the actual contribution percentage test and other
              requirements of Code ss.401(m).

         (b)  CONTRIBUTIONS UNDER OTHER PLANS: The Sponsor may provide that the
              minimum benefit requirement will be met in another Plan
              (including one that consists solely of a cash or deferred
              arrangement which meets the requirements of Code ss.401(k)(12)
              and Matching Contributions with respect to which the requirements
              of Code ss.401(m)(11) are met).



<PAGE>

o    SS.631 OF EGTRRA - CATCH-UP CONTRIBUTIONS

     All Employees eligible to make Elective Deferrals under this Plan and who
     have attained age 50 before the close of the Plan Year will be eligible to
     make catch-up contributions in accordance with, and subject to the
     limitations of, Code ss.414(v) and the 2002 Tax Act. Such catch-up
     contributions will not be taken into account for purposes of the provisions
     of the Plan implementing the required limitations of Code ss.402(g) and
     ss.415. The Plan will not be treated as failing to satisfy the provisions
     of the Plan implementing the requirements of Code ss.401(k)(3),
     ss.401(k)(11), ss.401(k)(12), ss.410(b), or ss.416, as applicable, by
     reason of the making of such catch-up contributions.

     In accordance with the 2002 Tax Act, (a) the amount of catch-up
     contributions that a Participant may exclude from income is limited to the
     catch-up contribution limit, which will apply on an aggregate basis to all
     plans of the Employer and the group of Affiliated Employers of which the
     Employer is a part (except that for this purpose an Affiliated Employer
     will not include a trade or business which is acquired as part of an asset
     or stock acquisition, merger, or similar Code ss.410(b)(6)(C) transaction
     involving a change in the employer of the employees of a trade or business,
     during the period beginning on the date of the transaction and ending on
     the last day of the first Plan Year beginning after the date of the
     transaction); and (b) a Participant who attains Age 50 during a Plan Year
     will be considered to be Age 50 on the first day of the Plan Year. Catch-up
     contributions will apply to contributions on or after January 1, 2002.

o    SS.641, SS.642 AND SS.643 OF EGTRRA - DIRECT ROLLOVERS OF PLAN
     DISTRIBUTIONS

     1.  EFFECTIVE DATE: This section will apply to distributions made after
         December 31, 2001.

     2.  MODIFICATION OF DEFINITION OF ELIGIBLE RETIREMENT PLAN: For purposes of
         the Direct Rollover section of the Plan, an eligible retirement plan
         will also mean an annuity contract described in Code ss.403(b) and an
         eligible plan under Code ss.457(b) which is maintained by a state,
         political subdivision of a state, or any agency or instrumentality of a
         state or political subdivision of a state and which agrees to
         separately account for amounts transferred into such plan from this
         Plan. The definition of eligible retirement plan will also apply in the
         case of a distribution to a surviving spouse, or to a spouse or former
         spouse who is the alternate payee under a qualified domestic relation
         order, as defined in Code ss.414(p).

     3.  MODIFICATION OF DEFINITION OF ELIGIBLE ROLLOVER DISTRIBUTION TO INCLUDE
         AFTER-TAX EMPLOYEE CONTRIBUTIONS: For purposes of the Direct Rollover
         provisions of the Plan, a portion of a distribution will not fail to be
         an eligible rollover distribution merely because the portion consists
         of after-tax or non-deductible Employee contributions which are not
         includible in gross income. However, such portion may be paid only to
         an individual retirement account or annuity described in Code ss.408(a)
         or (b), or to a qualified defined contribution plan described in Code
         ss.401(a) or ss.403(a) that agrees to separately account for amounts so
         transferred, including separately accounting for the portion of such
         distribution which is includible in gross income and the portion of
         such distribution which is not so includible. In accordance with the
         2002 Tax Act, when a distribution includes after-tax Employee
         contributions which are not includible in gross income, the amount that
         is rolled over will first be attributed to amounts includible in gross
         income.

     4.  MODIFICATION OF THE DEFINITION OF ELIGIBLE ROLLOVER DISTRIBUTION TO
         EXCLUDE HARDSHIP DISTRIBUTIONS: For purposes of the Direct Rollover
         provisions of the Plan, any amount distributed on account of hardship
         will not be an eligible Rollover distribution and the distributee may
         not elect to have any portion of such a distribution paid directly to
         an eligible retirement plan.



<PAGE>

     5.  ADDITIONAL TYPES OF ROLLOVERS ACCEPTED PURSUANT TO EGTRRA SS.641,
         SS.642 AND SS.643

         (a)  DIRECT ROLLOVERS OR PARTICIPANT ROLLOVER CONTRIBUTIONS FROM OTHER
              PLANS: The Plan will accept a direct rollover of an eligible
              rollover distribution of a Participant contribution of an eligible
              rollover distribution from the following: (1) a qualified Plan
              described in IRC Section 401(a) or 403(a), excluding after-tax
              Employee Contributions; (2) an annuity contract described in IRC
              Section 403(b), excluding after-tax Employee Contributions; and(3)
              an eligible Plan under IRC Section 457(b) which is maintained by a
              state, political subdivision of a state, or any agency or
              instrumentality of a state or political subdivision of a state.

         (b)  PARTICIPANT ROLLOVER CONTRIBUTIONS FROM IRAS: The Plan will accept
              a Participant rollover contribution of the portion of a
              distribution from an individual retirement account or annuity
              described in Code ss.408(a) or ss.408(b) that is eligible to be
              rolled over and would otherwise be includible in gross income.

     6.  EFFECTIVE DATE OF DIRECT ROLLOVER AND PARTICIPANT ROLLOVER CONTRIBUTION
         PROVISIONS: This section will be effective January 1, 2002 for
         rollovers to and from the Plan.

o    SS.646 OF EGTRRA - DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT

     1.  EFFECTIVE DATE: This section will apply for distributions and severance
         from employment occurring after January 1, 2002 regardless of when the
         severance from employment occurred.

     2.  NEW DISTRIBUTABLE EVENT: A Participant's Elective Deferrals, Qualified
         Non-Elective Contributions, Qualified Matching Contributions, and
         earnings attributable to these contributions will be distributed on
         account of the Participant's severance from employment. However, such a
         distribution will be subject to the other provisions of the Plan
         regarding distributions, other than provisions that require a severance
         from employment before such amounts may be distributed.

o    SS.648 OF EGTRRA - ROLLOVERS DISREGARDED IN INVOLUNTARY CASH-OUTS

     For purposes of the Plan provisions that provide for the involuntary
     distribution of vested Accrued Benefits of $5,000 or less, the value of a
     Participant's nonforfeitable Account balance shall be determined without
     regard to that portion of the Account balance that is attributable to
     Rollover Contributions (and earnings allocable thereto) within the meaning
     of Code ss.402(c), ss.403(a)(4), ss.403(b)(8), ss.408(d)(3)(A)(ii), and
     ss.457(e)(16). If the value of the Participant's non-forfeitable Account
     balance as so determined is $5,000 or less, the Participant's entire
     non-forfeitable Account balance shall be considered immediately
     distributable. This election shall apply with respect to distributions made
     on or after January 1, 2002 with respect to Participants who separated from
     service with the Employer or an Affiliated Employer on or after January 1,
     2002.

o    SS.666 OF EGTRRA - REPEAL OF MULTIPLE USE TEST

     The multiple use test described in Treasury Regulation Code ss.1.401(m)-2
     and in the Plan will not apply for Plan Years beginning after December 31,
     2001.



<PAGE>

o    SS.636(a) OF EGTRRA - SUSPENSION PERIOD FOLLOWING HARDSHIP DISTRIBUTION

     A Participant who receives a distribution of Elective Deferrals after
     December 31, 2001 on account of hardship will be prohibited from making
     Elective Deferrals and Employee contributions under this and all other
     Plans of the Employer for 6 months after receipt of the distribution. A
     Participant who receives a distribution of Elective Deferrals in calendar
     year 2001 on account of hardship will be prohibited from making Elective
     Deferrals and Employee contributions under this and all other Plans of the
     Employer for the period specified in the provisions of the Plan relating to
     suspension of Elective Deferrals that were in effect prior to this
     amendment.

     In addition, the following phrase at the end of Section 5.17(d) is hereby
     deleted:

     " ; and for the Participant's taxable year immediately following the
     taxable year of the hardship distribution, the Participant cannot make
     Elective Deferrals to this Plan or any other plan maintained by the
     Employer in excess of the applicable limit under Code ss.402(g)(5) for such
     taxable year, minus the amount of such Participant's Elective Deferrals
     made for the taxable year in which the financial hardship distribution was
     made"


                                                     HOT TOPIC, INC.


                                                     By_________________________


                                                     Date_______________________



<PAGE>


           AMENDMENT TO INCREASE THE MAXIMUM ELECTIVE DEFERRAL AMOUNT


NAME OF PLAN:     Hot Topic, Inc. 401(k) Profit Sharing Plan (the "Plan")

PLAN SPONSOR:     Hot Topic, Inc. (the "Sponsor")


THIS AMENDMENT is hereby adopted by the Sponsor in order to increase the maximum
allowable Elective Deferral contributions under the Plan to up to 100% of each
Eligible Participant's Compensation. Accordingly, the following amendment shall
be effective for the Plan Year which begins in 2002:

SECTION 3.1(a)(1) IS HEREBY AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:
-----------------------------------------------------------------------

(1)      DEFERRAL PERCENTAGE: For each contribution period, a Participant may
         elect that up to 100% of his or her Compensation received during the
         contribution period be withheld as an Elective Deferral, inclusive of
         any other amounts allocated to such Participant and counted under Code
         ss.415(c) and ss.ss.611(b) and 632 of the Economic Growth and Tax
         Relief Reconciliation Act (EGTRRA), to the maximum dollar amount
         permitted under Code ss.402(g). Elective Deferrals may be made in whole
         percentages (or if permitted by the Administrator, in fractional
         percentages) of Compensation or in specific dollar amounts as
         designated by the Participant. The Administrator will have the right to
         direct that such percentages of Compensation be rounded to the next
         highest or lowest dollar. Furthermore, on a uniform nondiscriminatory
         basis, the Administrator may permit a Participant to identify separate
         components of the Participant's Compensation (such as base salary,
         bonuses, etc.) and to specify that a different percentage (or dollar
         amount) apply to each such component.

SECTION 3.1(a)(5) IS HEREBY AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:
-----------------------------------------------------------------------

(5)      PARTICIPANT ELECTION TO DEFER UP TO 100% OF COMPENSATION: On a uniform
         nondiscriminatory basis, the Administrator may permit a Participant
         whose Salary Deferral Agreement has not authorized the Employer to
         withhold at the maximum rate permitted under subparagraph (1) above to
         increase the total amount withheld for a Plan Year to the maximum rate
         permitted under subparagraph (1), in which event the Participant may
         authorize the Employer to withhold a supplemental amount up to 100% of
         his or her eligible Compensation for one or more pay periods. In no
         event can the sum of the amount withheld under the Salary Deferral
         Agreement plus the supplemental withholding exceed the lesser of (A)
         the maximum amount permitted under subparagraph (1) above; or (B) the
         maximum dollar amount permitted for that Plan Year under Code
         ss.402(g)(5); or (C) 100% of the Participant's Code ss.415 Compensation
         for that Plan Year.

SECTION 1.16(a)(2) IS HEREBY AMENDED IN ITS ENTIRETY TO READ AS FOLLOWS:
------------------------------------------------------------------------

(2)      TREATMENT OF ELECTIVE DEFERRALS: For purposes of this paragraph (a),
         Employer contribution amounts made pursuant to a salary reduction
         agreement which are not currently includible in the gross income of an
         Employee by reason of Code ss.125, ss.402(e)(3), ss.402(h)(1)(B), or
         ss.403(b) will be included in determining Compensation. In addition, if
         elected by the Administrator on a non-discriminatory basis,
         Compensation will also include elective amounts not includible in the
         gross income of the Employee by reason of Code ss.132(f)(4), beginning
         with the Plan Year elected by the Administrator but not earlier than
         the Plan Year beginning on or after January 1, 1998.



<PAGE>




                                                     HOT TOPIC, INC.


                                                     By_________________________


                                                     Date_______________________





<PAGE>

                        FINAL CODE SS.401(a)(9) AMENDMENT
                   REGARDING MINIMUM DISTRIBUTION REQUIREMENTS


NAME OF PLAN:     Hot Topic, Inc. 401(k) Profit Sharing Plan (the "Plan")

PLAN SPONSOR:     Hot Topic, Inc. (the "Sponsor")

THIS AMENDMENT is hereby adopted by the Sponsor to permit the Plan to make
required minimum distributions in accordance with final Internal Revenue Service
regulations under Code ss.401(a)(9) effective no later than for calendar years
which begin in 2003 in accordance with Rev. Proc. 2002-29.

SECTION 1. GENERAL RULES

1.1.   EFFECTIVE DATE. The provisions of this amendment will apply for purposes
       of determining required minimum distributions for calendar years
       beginning with the 2002 calendar year.

1.2.   COORDINATION WITH MINIMUM DISTRIBUTION REQUIREMENTS PREVIOUSLY IN EFFECT.
       Required minimum distributions for calendar 2002 will be determined as
       follows: If the total amount of 2002 required minimum distributions under
       the Plan made to a distributee for calendar 2002 (a) equals or exceeds
       the required minimum distributions determined under this amendment, then
       no additional distributions will be required to be made for 2002 on or
       after such date to the distribute; or (b) is less than the amount
       determined under this amendment, then required minimum distributions for
       2002 on and after such date will be determined so that the total amount
       of required minimum distributions for 2002 made to the distributee will
       be the amount determined under this amendment.

1.3.   PRECEDENCE. The requirements of this amendment will take precedence over
       any inconsistent provisions of the Plan and any prior amendments thereto.

1.4.   REQUIREMENTS OF INTERNAL REVENUE SERVICE REGULATIONS INCORPORATED. All
       distributions required under this amendment will be determined and made
       in accordance with the Internal Revenue Service regulations under Code
       ss.401(a)(9).

1.5.   TEFRA SS.242(B)(2) ELECTIONS. Notwithstanding the other provisions of
       this amendment, distributions may be made under a designation made before
       January 1, 1984, in accordance with ss.242(b)(2) of the Tax Equity and
       Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that
       relate to ss.242(b)(2) of TEFRA.

SECTION 2. TIME AND MANNER OF DISTRIBUTION

2.1.   REQUIRED BEGINNING DATE. The Participant's entire interest will be
       distributed, or begin to be distributed, to the Participant no later than
       the Participant's Required Beginning Date.

2.2.   DEATH OF PARTICIPANT BEFORE DISTRIBUTION BEGIN. If the Participant dies
       before distributions begin, his or her entire interest will be
       distributed, or begin to be distributed, no later than as follows:

       (a)    If the Participant's surviving Spouse is the Participant's sole
              designated Beneficiary, then subject to section 2.2 (e) below
              distributions to the surviving Spouse will begin by December 31 of
              the calendar year immediately following the calendar year in which
              the Participant died, or by December 31 of the calendar year in
              which the Participant would have attained age 70 1/2, if later.

                                    Page -1-


<PAGE>

       (b)    If the Participant's surviving Spouse is not the Participant's
              sole designated Beneficiary, then subject to section 2.2(e) below
              distributions to the designated Beneficiary will begin by December
              31 of the calendar year immediately following the calendar year in
              which the Participant died.

       (c)    If there is no designated Beneficiary as of September 30 of the
              year following the year of the Participant's death, the
              Participant's entire interest will be distributed by December 31
              of the calendar year containing the fifth anniversary of the
              Participant's death.

       (d)    If the Participant's surviving Spouse is the Participant's sole
              designated Beneficiary and the surviving Spouse dies after the
              Participant but before distributions to the surviving Spouse
              begin, this section 2.2, other than section 2.2(a), will apply as
              if the surviving Spouse were the Participant.

       (e)    If the Participant dies before distributions begin and there is a
              designated Beneficiary, distribution to the designated
              Beneficiary is not required to begin by the date specified in
              sections 2.2(a) or (b) above if the Participant's entire interest
              is distributed to the designated Beneficiary by December 31 of
              the calendar year containing the fifth anniversary of the
              Participant's death. In addition, a designated Beneficiary who is
              receiving payments under this 5-year rule may make a new election
              to receive payments under the life expectancy rule until December
              31, 2003, provided that all amounts that would have been required
              to be distributed under the life expectancy rule for all
              distribution calendar years before 2004 are distributed by the
              earlier of December 31, 2003 or the end of the 5-year period.

       For purposes of this section 2.2 and section 4, unless section 2.2(d)
       applies, distributions are considered to begin on the Participant's
       Required Beginning Date. If section 2.2(d) applies, distributions are
       considered to begin on the date distributions are required to begin to
       the surviving Spouse under section 2.2(a). If distributions under an
       annuity purchased from an insurance company irrevocably commence to the
       Participant before the Participant's Required Beginning Date (or to the
       Participant's surviving Spouse before the date distributions are
       required to begin to the surviving Spouse under section 2.2(a)), the
       date distributions are considered to begin is the date distributions
       actually commence.

2.3.   FORMS OF DISTRIBUTION. Unless the Participant's interest is distributed
       in the form of an annuity purchased from an insurance company or in a
       single sum on or before the Required Beginning Date, as of the first
       distribution calendar year distributions will be made in accordance with
       sections 3 and 4 of this amendment. If the Participant's interest is
       distributed in the form of an annuity purchased from an insurance
       company, distributions thereunder will be made in accordance with the
       requirements of Code ss.401(a)(9) and the IRS regulations.

SECTION 3. REQUIRED MINIMUM DISTRIBUTIONS DURING PARTICIPANT'S LIFETIME

3.1.   AMOUNT OF REQUIRED MINIMUM DISTRIBUTION FOR EACH DISTRIBUTION CALENDAR
       YEAR. During the Participant's lifetime, the minimum amount that will be
       distributed each distribution calendar year is the lesser of (a) the
       quotient obtained by dividing the Participant's account balance by the
       distribution period in the Uniform Lifetime Table in ss.1.401(a)(9)-9 of
       the IRS regulations using the Participant's age as of his or her birthday
       in the distribution calendar year; or (b) if the Participant's sole
       designated Beneficiary for the distribution calendar year is the
       Participant's Spouse, the quotient obtained by dividing the Participant's
       account balance by the number in the Joint and Last Survivor Table in
       ss.1.401(a)(9)-9 of the IRS regulations using the Participant's and
       Spouse's attained ages as of the Participant's and Spouse's birthdays in
       the distribution calendar year.

                                    Page -2-


<PAGE>

3.2.   LIFETIME REQUIRED MINIMUM DISTRIBUTIONS CONTINUE THROUGH YEAR OF
       PARTICIPANT'S DEATH. Required minimum distributions will be determined
       under this section 3 beginning with the first distribution calendar year
       and up to and including the distribution calendar year that includes the
       Participant's date of death.

SECTION 4. REQUIRED MINIMUM DISTRIBUTIONS AFTER PARTICIPANT'S DEATH

4.1.   DEATH ON OR AFTER DATE DISTRIBUTIONS BEGIN

       (a)    PARTICIPANT SURVIVED BY DESIGNATED BENEFICIARY. If the Participant
              dies on or after the date distributions begin and there is a
              designated Beneficiary, the minimum amount that will be
              distributed for each distribution calendar year after the year of
              the Participant's death is the quotient obtained by dividing the
              Participant's account balance by the longer of the remaining life
              expectancy of the Participant or the remaining life expectancy of
              the Participant's designated Beneficiary, determined as follows:
              (1) the Participant's remaining life expectancy is calculated
              using the age of the Participant in the year of death, reduced by
              one for each subsequent year; (2) if the Participant's surviving
              Spouse is the sole designated Beneficiary, the remaining life
              expectancy of the surviving Spouse is calculated for each
              distribution calendar year after the year of the Participant's
              death using the surviving Spouse's age as of the Spouse's birthday
              in that year. For distribution calendar years after the year of
              the surviving Spouse's death, the remaining life expectancy of the
              surviving Spouse is calculated using the age of the surviving
              Spouse as of the Spouse's birthday in the calendar year of the
              Spouse's death, reduced by one for each subsequent calendar year;
              and (3) if the Participant's surviving Spouse is not the
              Participant's sole designated Beneficiary, the designated
              Beneficiary's remaining life expectancy is calculated using the
              age of the Beneficiary in the year following the year of the
              Participant's death, reduced by one for each subsequent year.

       (b)    NO DESIGNATED BENEFICIARY. If the Participant dies on or after the
              date distributions begin and there is no designated Beneficiary as
              of September 30 of the year after the year of the Participant's
              death, the minimum amount that will be distributed for each
              distribution calendar year after the year of the Participant's
              death is the quotient obtained by dividing the Participant's
              account balance by the Participant's remaining life expectancy
              calculated using the age of the Participant in the year of death,
              reduced by one each subsequent year.

4.2.   DEATH BEFORE DATE DISTRIBUTIONS BEGIN

       (a)    PARTICIPANT SURVIVED BY DESIGNATED BENEFICIARY. If the Participant
              dies before the date distributions begin and there is a designated
              Beneficiary, the minimum amount that will be distributed for each
              distribution calendar year after the year of the Participant's
              death is the quotient obtained by dividing the Participant's
              account balance by the remaining life expectancy of the
              Participant's designated Beneficiary, as determined in section
              4.1.

       (b)    NO DESIGNATED BENEFICIARY. If the Participant dies before
              distributions begin and there is no designated Beneficiary as of
              September 30 of the year following the year of the Participant's
              death, distribution of the Participant's entire interest will be
              completed by December 31 of the calendar year containing the 5th
              anniversary of the Participant's death.

       (c)    DEATH OF SURVIVING SPOUSE BEFORE DISTRIBUTIONS TO SURVIVING SPOUSE
              ARE REQUIRED TO BEGIN. If the Participant dies before the date
              distributions begin, the Participant's surviving Spouse is the
              Participant's sole designated Beneficiary, and the surviving
              Spouse dies before distributions are required to begin to the
              surviving Spouse under section 2.2(a), this section 4.2 will apply
              as if the surviving Spouse were the Participant.

                                    Page -3-


<PAGE>

SECTION 5. DEFINITIONS

5.1.   DESIGNATED BENEFICIARY. The Beneficiary designated by the Participant is
       the designated Beneficiary under Code ss.401(a)(9) and ss.1.401(a)(9)-1,
       Q&A-4 of the IRS regulations.

5.2.   DISTRIBUTION CALENDAR YEAR. A calendar year for which a minimum
       distribution is required. For distributions beginning before the
       Participant's death, the first distribution calendar year is the calendar
       year immediately preceding the calendar year which contains the
       Participant's Required Beginning Date. For distributions beginning after
       the Participant's death, the first distribution calendar year is the
       calendar year in which distributions are required to begin under section
       2.2. The required minimum distribution for the Participant's first
       distribution calendar year will be made on or before the Participant's
       Required Beginning Date. The required minimum distribution for other
       distribution calendar years, including the required minimum distribution
       for the distribution calendar year in which the Participant's Required
       Beginning Date occurs, will be made on or before December 31 of that
       distribution calendar year.

5.3.   LIFE EXPECTANCY. Life expectancy as computed by use of the Single Life
       Table in ss.1.401(a)(9)-9 of the IRS regulations.

5.4.   PARTICIPANT'S ACCOUNT BALANCE. For purposes of determining minimum
       distributions the Account balance as of the last Valuation Date in the
       calendar year immediately preceding the distribution calendar year
       (valuation calendar year) increased by the amount of any contributions
       made and allocated or forfeitures allocated to the Account balance as of
       dates in the valuation calendar year after the Valuation Date and
       decreased by distributions made in the valuation calendar year after the
       Valuation Date. The Account balance for the valuation calendar year
       includes any amounts rolled over or transferred to the Plan either in the
       valuation calendar year or in the distribution calendar year if
       distributed or transferred in the valuation calendar year.


                                                     HOT TOPIC, INC.


                                                     By_________________________


                                                     Date_______________________

                                    Page -4-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>8
<FILENAME>hottopic_10kex21.txt
<TEXT>
<PAGE>
                                                                      EXHIBIT 21

                                 HOT TOPIC, INC.

                              LIST OF SUBSIDIARIES


ENTITY                             ENTITY TYPE      STATE/PLACE OF INCORPORATION
------                             -----------      ----------------------------

Hot Topic Administration, Inc.     Corporation      California

Hot Topic Merchandising, Inc.      Corporation      California

hottopic.com, Inc.                 Corporation      California

Hot Topic Tennessee, Inc.          Corporation      California

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>hottopic_10kex23-1.txt
<TEXT>
<PAGE>
                                                                    EXHIBIT 23.1


            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


     We consent to the incorporation by reference in the following Registration
Statements:

     (1)  Registration Statement (Form S-8 No. 333-13875) pertaining to the
          Non-Plan Stock Options, 1996 Equity Incentive Plan, 1996 Non-Employee
          Directors' Stock Option Plan and Employee Stock Purchase Plan,

     (2)  Registration Statement (Form S-8 No. 333-43992) pertaining to the 1996
          Equity Incentive Plan,

     (3)  Registration Statement (Form S-8 No. 333-58173) pertaining to the
          Non-Plan Stock Options, 1996 Equity Incentive Plan, as amended, and
          1996 Non-Employee Directors' Stock Option Plan, as amended, and

     (4)  Registration Statement (Form S-8 No. 333-108324) pertaining to the
          1996 Equity Incentive Plan, as amended

     of our reports dated March 11, 2005, with respect to the consolidated
     financial statements of Hot Topic, Inc., Hot Topic, Inc. management's
     assessment of the effectiveness of internal control over financial
     reporting, and the effectiveness of internal control over financial
     reporting of Hot Topic, Inc., included in this Annual Report (Form 10-K) of
     Hot Topic, Inc. for the year ended January 29, 2005.


Los Angeles, California
April 11, 2005

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>10
<FILENAME>hottopic_10kex31-1.txt
<TEXT>
<PAGE>
                                  EXHIBIT 31.1

                                  CERTIFICATION

     I, Elizabeth McLaughlin, certify that:

1.   I have reviewed this annual report on Form 10-K of Hot Topic, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
     financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Designed such internal control over financial reporting, or caused
          such internal control over financial reporting to be designed under
          our supervision, to provide reasonable assurance regarding the
          reliability of financial reporting and the preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date:  April 13, 2005


/s/ Elizabeth McLaughlin
Elizabeth McLaughlin
Chief Executive Officer
(Principal Executive Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>11
<FILENAME>hottopic_10kex31-2.txt
<TEXT>
<PAGE>
                                  EXHIBIT 31.2

                                  CERTIFICATION

     I, James McGinty, certify that:

1.   I have reviewed this annual report on Form 10-K of Hot Topic, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
     financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   Designed such internal control over financial reporting, or caused
          such internal control over financial reporting to be designed under
          our supervision, to provide reasonable assurance regarding the
          reliability of financial reporting and the preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter (the registrant's fourth fiscal quarter in
          the case of an annual report) that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date:  April 13, 2005


/s/ James McGinty
James McGinty
Chief Financial Officer
(Principal Financial Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>12
<FILENAME>hottopic_10kex32-1.txt
<TEXT>
<PAGE>

                                  EXHIBIT 32.1

Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. ss. 1350, as adopted).

I, Elizabeth McLaughlin, Chief Executive Officer of Hot Topic, Inc., certify
that:

1. I have reviewed this annual report on Form 10-K of Hot Topic, Inc.;

2. Based on my knowledge, this annual report fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended; and

3. Based on my knowledge, the financial statements, and other information
included in this annual report, fairly present in all material respects the
financial condition and results of operations of the registrant as of, and for,
the periods presented in this annual report.

Date: April 13, 2005

                                           /s/ Elizabeth McLaughlin
                                           ------------------------

                                           Elizabeth McLaughlin
                                           Chief Executive Officer
                                           (Principal Executive Officer)

A signed original of this written statement required by Section 906 has been
provided to Hot Topic, Inc. and will be retained by Hot Topic, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.

This certification "accompanies" the Form 10-K, is not deemed filed with the SEC
and is not to be incorporated by reference into any filing of the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing.


I, James McGinty, Chief Financial Officer of Hot Topic, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Hot Topic, Inc.;

2. Based on my knowledge, this annual report fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended; and

3. Based on my knowledge, the financial statements, and other information
included in this annual report, fairly present in all material respects the
financial condition and results of operations of the registrant as of, and for,
the periods presented in this annual report.

Date: April 13, 2005

                                           /s/ James McGinty
                                           ------------------------

                                           James McGinty
                                           Chief Financial Officer
                                           (Principal Financial Officer)

A signed original of this written statement required by Section 906 has been
provided to Hot Topic, Inc. and will be retained by Hot Topic, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.

This certification "accompanies" the Form 10-K, is not deemed filed with the SEC
and is not to be incorporated by reference into any filing of the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing.

</TEXT>
</DOCUMENT>
</SUBMISSION>
