10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2002

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. 000-10761

LTX Corporation

(Exact name of registrant as specified in its charter)

MASSACHUSETTS	04-2594045
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

University Avenue

Westwood, Massachusetts 02090

(781) 461-1000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.05 per share

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 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.    ¨

The aggregate market value of the Common Stock held by non-affiliates of the registrant on August 29, 2002 was $403,281,092

Number of shares outstanding of each of the issuer’s classes of Common Stock as of August 29, 2002:

Common Stock, Par Value $0.05 Per Share, 49,300,867 shares.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant’s Proxy Statement in connection with its 2002 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K Report. The Compensation Committee Report, Stock Performance Graph and Audit Committee Report of the Registrant’s Proxy Statement are expressly not incorporated herein by reference.

LTX CORPORATION

INDEX

		Page
PART I
Item 1.	Business Introduction	1
	Industry Overview	1
	Fusion®, the LTX Solution	2
	The LTX Business Strategy	4
	Fusion Overview	4
	Service	5
	Engineering and Product Development	6
	Sales and Distribution	6
	Strategic Alliances	6
	Customers	7
	Manufacturing and Supply	7
	Competition	8
	Backlog	8
	Proprietary Rights	8
	Employees	9
	Environmental Affairs	9
Item 2.	Properties	9
Item 3.	Legal Proceedings	9
Item 4.	Submission of Matters to a Vote of Security Holders	9
PART II
Item 5.	Market Value for the Registrant’s Common Stock and Related Security Holder Matters	10
Item 6.	Selected Consolidated Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	12

		Page
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	53
PART III
Item 10.	Directors and Executive Officers of The Registrant	53
Item 11.	Executive Compensation	53
Item 12.	Security Ownership of Certain Beneficial Owners and Management	53
Item 13.	Certain Relationships and Related Transactions	53
Item 14.	Controls and Procedures	53
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	53
	Financial Statements	53
	Schedules	53
	Exhibits	54
	Listing of Exhibits	54
	Reports on Form 8-K	56
	Exhibits	56
	Signatures	57
	Certifications	58

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PART I

Item 1.     Business Introduction

LTX Corporation (“LTX” or the “Company”) designs, manufactures, markets and services semiconductor test solutions. Semiconductor designers and manufacturers worldwide, such as Analog Devices, Infineon Technologies, National Semiconductor, Philips Semiconductor, STATS, STMicroelectronics and Texas Instruments, use semiconductor test equipment to test every device at two different stages during the manufacturing process. These devices are incorporated in a wide range of products, including mobile internet equipment such as 802.11 access points and interfaces, broadband access products such as cable modems and DSL modems, personal communication products such as cell phones and personal digital assistants, consumer products such as televisions, videogame systems, digital cameras and automobile electronics, and for power management in portable and automotive electronics. We provide test systems, global applications consulting, repair services and operational support to over 100 customers in more than 15 countries.

We offer our customers the LTX Fusion^® platform, which combines our enVision++ software with either our Fusion HF or Fusion CX configurations. We believe that Fusion is the first of a new class of test systems that can test system-on-a-chip, or SOC, devices in a single test step. With Fusion, we believe we have the leading test system capable of testing a broad range of analog, digital, and mixed signal (a combination of digital and analog) devices, and most importantly, SOC devices, on a single platform.

In late 1996, we changed our strategic focus to develop a solution for the testing needs of the then-emerging SOC market. Building on our twenty-year technological expertise in semiconductor test, we realigned our separate digital and mixed signal research and development organizations to work together to develop and deliver a single test platform incorporating our mixed signal test expertise with our extensive digital test technology and embedded memory test capability. We also restructured our operations and reorganized our management consistent with our new strategic focus. Our Fusion platform is the result of this change in strategy.

Industry Overview

The testing of devices is a critical step during the semiconductor production process. Typically, semiconductor companies test each device at two different stages during the manufacturing process to ensure its functional and electrical performance prior to shipment to the device user. These companies use semiconductor testing equipment to first test a device after it has been fabricated but before it has been packaged to eliminate non-functioning parts. Then, after the functioning devices are packaged, they are tested again to determine if they fully meet performance specifications. Testing is an important step in the manufacturing process because it allows devices to be fabricated at both maximum density and performance—a key to the competitiveness of semiconductor manufacturers. Shown below is a schematic depiction of the major steps in the semiconductor fabrication and test process.

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Three primary factors ultimately drive demand for semiconductor test equipment:

• increases in unit production of semiconductor devices;

• increases in the complexity and performance level of devices used in electronic products; and

• the emergence of next generation device technologies, such as SOC.

In recent years, increases in unit production resulted primarily from the proliferation of the personal computer and growth of the telecommunications industry. We expect that future unit production growth will be led by the mobile internet, broadband network access, the increased use of digital signal processing (DSP) devices, and power management applications. These increases in unit production in turn lead to a corresponding increase in the need for test equipment.

Furthermore, demand is increasing worldwide for smaller, more highly integrated electronic products. This has led to ever higher performance and more complex semiconductor devices, which, in turn, results in a corresponding increase in the demand for equally sophisticated test equipment.

Finally, the introduction and adoption of a new generation of end-user products requires the development of next generation device technologies. For example, access to information is migrating from the standalone desktop computer, which might be physically linked to a local network, to the seamless, virtual network of the internet, which is accessible from anywhere by a variety of new portable electronic communication products. A critical enabling technology for this network and multimedia convergence is SOC. SOC provides the benefits of lower cost, smaller size and higher performance by combining advanced digital, analog and embedded memory technologies on a single device. These discrete technologies were, until recently, available only on several separate semiconductor devices, each performing a specific function. By integrating these functions on a single device, SOC enables lower cost, smaller size, higher performance, and lower power consumption.

Although the SOC concept had been in development for several years, until recently manufacturers did not have an efficient and comprehensive method of testing these devices. Historically, device manufacturers used several narrowly focused testers, each designed to test only digital, only memory, or only mixed signal devices, but incapable of testing all three. SOC does not fit into any one of these categories because it represents the convergence of these three technologies and requires new testing technology.

The increases in unit production of devices, the increase in complexity of those devices, and, ultimately, the emergence of new semiconductor device technology have mandated changes in the design, architecture and complexity of such test equipment. Semiconductor device manufacturers must still be able to test the increasing volume and complexity of devices in a reliable, cost-effective, efficient and flexible manner. However, the increased pace of technological change, together with the large capital investments required to achieve economies of scale, are changing the nature and urgency of the challenges faced by device designers and manufacturers.

Designers and manufacturers historically have not been able to use their test floors at peak efficiency because they had to use several separate digital and mixed signal testers to perform all of their required testing. This increases their costs of ownership due to increased training requirements, greater floor space, decreased utilization and slower throughput. Furthermore, manufacturers cannot fully test new SOC designs because their current testing equipment does not include a sufficiently broad range of mixed signal instrumentation. Manufacturers are subject to further increased testing costs if their testing equipment lacks the flexibility and capacity to run parallel tests on multiple devices at one time, or multi-site testing. These problems are exacerbated when volume production of devices increases.

Fusion, the LTX Solution

Our solution is the Fusion test platform. Fusion tests new generations of highly-integrated mixed signal devices, advanced digital devices and, most importantly, SOC devices, which incorporate these technologies. The

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testing requirements of digital and mixed signal devices are essentially a subset of the testing requirements of SOC devices. The test requirements of all of these semiconductor devices are well within the range of Fusion’s capability. The Fusion single test platform allows our customers to use a single integrated hardware and software system to test all of these devices, rather than the multiple test systems typically required. By using a single testing platform, our customers are able to optimize their asset utilization, thereby increasing their manufacturing flexibility and lowering the overall cost of their testing processes.

Fusion is a unique solution to the SOC test challenge because it provides all of the following:

A single test platform.    Thoroughly testing an SOC device on more than one tester is either technically infeasible, because the device is not partitioned for its mixed signal, digital and embedded memory functions to operate independently from each other, or economically impractical due to the significantly more expensive cost of multiple testers and insertions required for comprehensive testing. Our Fusion test platform combines our test station hardware with our enVision++ software to provide a flexible, scalable test environment. By integrating the testing of mixed signal, digital and embedded memory functions, Fusion provides better test performance and lower cost of ownership for our customers. Our customers are also using Fusion to raise the utilization rates of their test floors in testing their digital and mixed signal devices. Not only have these customers selected Fusion as part of their SOC strategy, but they are also purchasing Fusion for capacity expansion on these traditional devices, eliminating the need for separate digital and mixed signal testers.

Multi-site test capability.    Multi-site testing, the parallel testing of more than one device (of the same type) on one testing machine at a given time, lowers the overall cost of testing devices by increasing the throughput of each testing machine. We designed Fusion to make multi-site testing easier for the test designer. Earlier generations of testing equipment required testing engineers to spend significant amounts of time writing specific software programs to run tests in parallel. Our enVision++ software allows testing engineers to expand single-site testing programs into multi-site testing programs with ease. Fusion’s hardware can be configured with a sufficient number of instruments to perform multi-site testing even on highly complex SOC devices. These features allow our customers to take advantage of the increased throughput offered by multi-site testing without sacrificing their ability to introduce new products to market quickly.

A full range of mixed signal instrumentation.    Testing different types of SOC input/output interfaces requires radio frequency (RF), digital signal processing (DSP), power, time measurement, and other instruments. Fusion provides customers with the broad range of mixed signal instrumentation necessary to test these devices to the customer’s desired specifications. Mixed signal test expertise is in short supply in the industry and one of our strengths in SOC testing is the depth of our mixed signal intellectual property, based on our heritage as a pioneer in this field.

Scalable performance.    Semiconductor devices, depending upon their application, require different levels of instrument performance for testing. For example, complex SOC devices require the advanced digital testing performance, including embedded memory testing, found in traditional high-end VLSI testers, whereas consumer-oriented digital and mixed signal devices typically have less stringent digital test requirements. The Fusion single platform offers different levels of test capability at different price points, providing our customers with the ability to match test performance exactly to their needs.

Easy-to-use software for test program development.    Our enVision++ software provides the customer’s test engineer with an expandable library of prepackaged, reusable test program modules and debugging tools, all accessible through an easy-to-use graphical user interface. In most other testers, test engineers can reuse test code only by cutting and pasting lines of program code. enVision++ encapsulates test techniques into software objects that are added to the library for reuse in subsequent test programs. The test engineer can use these software objects when designing new test programs simply by dragging them with a mouse into the program flow. The ease-of-use of our software accelerates our customers’ development process, which allows them to introduce their semiconductor devices to market more rapidly.

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The LTX Business Strategy

LTX’s objective is to be the leading supplier of semiconductor test equipment. Key elements of our strategy include:

Extend our technological lead in single platform testing.    We believe that a single test platform solution offers our customers the greatest flexibility in managing the utilization of their test assets, thereby decreasing the cost of test. We intend to continue to focus our resources on a single integrated hardware and software test platform solution by developing options and configurations that will extend Fusion’s reach to address cost-effectively the testing of semiconductor devices across a wider spectrum of performance and complexity requirements. Rather than diluting our resources with a multiple platform strategy, we believe our resources will provide a higher return on investment by focusing on a single test platform for advanced digital, mixed signal, and SOC devices.

Maintain our focus on the SOC test market.    We believe that the fastest growing segment of the semiconductor industry over the next several years will be SOC. We designed our Fusion test platform specifically to provide optimal test capability for this class of devices. Because SOC technology comprises digital, analog and mixed signal technologies, the ability to test all of these elements enables a test system to be used across a wide range of devices. We intend to maintain and enhance our SOC test position by continuing to concentrate our development efforts on advanced functions and options for Fusion.

Concentrate our sales, applications consulting, and service efforts on key accounts.    We recognize that large, diversified semiconductor device manufacturers, commonly referred to as IDMs, large offshore test and assembly companies and certain fabless semiconductor device designers purchase most of the world’s test equipment, and that the level of support we are able to provide to them has a direct impact on future business. We believe that focusing our sales and support resources on these key semiconductor companies is the most efficient way to maximize revenue. Therefore, we have organized our selling, field service, and field applications organizations around these key companies, and located these resources close to their facilities. This has helped us to increase our responsiveness to customers’ needs and develop collaborative relationships that help guide us in developing future applications and system options.

Further improve the flexibility of our business model.    In order to focus our resources on the development of Fusion, improve our responsiveness to customer needs, reduce fixed costs and working capital requirements, and manage the cyclicality of our industry more effectively, we have implemented a more flexible business model. With the completion of the transition of our assembly, system integration and testing operations to Jabil Circuit, substantially all of our manufacturing functions have been outsourced to third parties. We augment our focused internal development resources through our Open Platform Program and through strategic alliances with third party test technology providers such as StepTech, Inc. We engage contract employees to address periods of peak demand. Through our strategic alliances, we have implemented additional international distribution and sub-contracted repair and support functions. We intend to continue to identify and implement programs which enhance our ability to meet customers’ needs while reducing fixed costs.

Fusion Overview

Fusion offers a unique solution for testing the full spectrum of non-memory devices, consisting of SOC, mixed signal, and digital devices. The Fusion test platform provides customers with highly reliable test performance and cost-efficiency in their efforts to accelerate their time-to-market for SOC, mixed signal, and digital devices. The Fusion test platform combines our test station hardware with our enVision++ software and is available in Fusion HF and Fusion CX configurations. These configurations depend primarily on the digital complexity of the device to be tested.

enVision++

Our enVision++ software helps customers design device test programs faster and more efficiently by providing a customer’s test engineer with an expandable library of prepackaged, reusable test program

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modules and debugging tools, all accessible through an easy-to-use graphical user interface. In most other testers, test engineers can reuse test code only by cutting and pasting lines of program code. enVision++ software circumvents much of this laborious process by encapsulating test techniques into software objects that are added to the library for reuse in subsequent test programs. The test engineer can use these software objects when designing new test programs simply by dragging them with a mouse into the program flow.

Fusion HF

Our Fusion HF is one of the most advanced testers available. Before the advent of Fusion HF, semiconductor manufacturers required several narrowly focused testers, designed to test only digital, only memory, or only mixed signal devices, but not all three. Since the Fusion HF single platform can efficiently test complex devices ranging from mixed signal to digital to SOC, it eliminates the need for mutually exclusive testers. The Fusion HF test system offers the broadest range of leading-edge test capability in a single platform, including advanced mixed signal, high-speed digital, digital signal processing, RF wireless, embedded memory, power, and time measurement. This range of instrumentation on a single platform allows semiconductor manufacturers to optimize their asset utilization, thereby increasing their manufacturing flexibility and lowering the overall cost of their testing processes. Fusion’s modular, open architecture has been designed so that it can keep pace with today’s rapid changes in test technology. As new generations of devices require more advanced test capabilities, customers can easily upgrade their Fusion testers to accommodate these requirements. Our Open Platform Program encourages third party development of instrumentation for Fusion to augment our internal development, thereby increasing flexibility and scalability.

Fusion CX

In November 2001, we introduced the Fusion CX, which was jointly developed under our agreement with StepTech, Inc. The Fusion CX is a high-performance, lower cost Fusion system targeted primarily towards the testing of high-volume mixed signal devices. The mixed signal device technologies tested by Fusion CX are often the precursor to mixed signal technologies that will be incorporated into next generation SOC designs. Because Fusion CX uses the same enVision++ development software as Fusion HF, customers are able to upgrade their test capability to Fusion HF as the complexity of their next generation SOC devices require. The Fusion CX features up to 128 digital pins, mixed signal and RF test instruments, and power management test technology. Typical device types tested on Fusion CX include radio frequency/wireless such as 802.11b and power management.

Service

We consider service to be an important aspect of our business. Our worldwide service organization is capable of performing installations and all necessary maintenance of test systems sold by us, including routine servicing of components manufactured by third parties. We provide various parts and labor warranties on test systems or options designed and manufactured by us, and labor warranties on components that have been purchased from other manufacturers and incorporated into our test systems. We also provide training on the maintenance and operation of test systems we sell. Service revenue totaled $34.4 million, or 28.3% of net sales, in fiscal 2002, $37.3 million, or 11.3% of net sales, in fiscal 2001, and $32.0 million, or 10.5% of net sales, in fiscal 2000.

We offer a wide range of service contracts, which gives our customers the flexibility to select the maintenance program best suited to their needs. Customers may purchase service contracts which extend maintenance beyond the initial warranty provided. Many customers enter into annual or multiple-year service contracts over the life of the equipment. The pricing of contracts is based upon the level of service provided to the customer and the time period of the service contract. As the installed base of our test systems has grown, service revenues have been increasing on an annual basis. We believe that service revenues should be less affected by the cyclical nature of the semiconductor industry than sales of test equipment. We maintain service

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centers around the world, both directly and through strategic alliance partners who are located in Singapore, Japan, Korea and California.

Engineering and Product Development

The test equipment market is characterized by rapid technological change and new product introductions, as well as advancing industry standards. Our competitive position will depend upon our ability to successfully enhance the Fusion platform and develop new instrumentation, and to introduce these new products on a timely and cost-effective basis. We devote a significant portion of personnel and financial resources to the continued development of our single platform SOC capabilities, including embedded memory, digital and mixed signal core competencies. We also seek to maintain close relationships with our customers in order to be responsive to their product development and production needs. Our expenditures for engineering and product development were $71.1 million, $66.0 million, and $50.6 million, during fiscal 2002, 2001, and 2000, respectively.

Our engineering strategy is to focus on development of the Fusion single test platform. We also intend to develop our future test systems in an evolutionary manner so that they may be progressively upgraded. Together with our strategic alliances and our Open Platform Program (as described below) this approach preserves our customers’ substantial investments in our pre-existing test systems and programs, and, in general, helps us maintain market acceptance for our test systems. We work closely with our customers to define new product features and to identify emerging applications for our products.

Sales and Distribution

We sell our products primarily through a worldwide sales organization. Our sales organization is structured around key accounts, with a sales force of 26 people. We use a small number of independent sales representatives and distributors in certain other regions of the world.

Our sales to customers outside the United States are primarily denominated in United States dollars. Sales outside North America were 52%, 48%, and 62%, of total sales in fiscal 2002, 2001, and 2000, respectively.

Strategic Alliances

In October 2000 we made an equity investment in, and entered into a development agreement with, StepTech, Inc., an outsource technology provider to a broad range of semiconductor test equipment suppliers. Based in Hopkinton, Massachusetts, StepTech is privately held and specializes in the design and manufacture of cost-effective test instrument solutions targeted towards wireless and mixed-signal semiconductor devices. Under the development agreement, StepTech will provide LTX with test technology to broaden the reach of Fusion’s single platform, scalable architecture into the high volume, commodity semiconductor market. The Fusion CX is the first configuration jointly developed with StepTech. The agreement also grants LTX exclusive rights, for a three-year period, to certain StepTech technologies. In return, StepTech will receive royalties on technology they have developed for the Fusion platform.

In the first quarter of fiscal 2002, we launched our Open Platform Program, which offers third-party test technology companies standardized hardware and open software interfaces to our Fusion hardware and enVision++ operating system. The Open Platform Program was designed to facilitate third party development of instrumentation for our Fusion platform, thereby increasing the flexibility and scalability of Fusion for our customers. Open Platform also furthers our strategic goal of a flexible business model by enabling LTX’s internal Engineering and Product Development team to focus on core enhancements and instrumentation for Fusion without sacrificing the availability of a wide variety of instrumentation demanded by our customers. Current partners in the Open Platform Program include StepTech, LogicVision and GuideTech.

Finally, we have also established additional alliances that we believe will allow us to achieve our strategic goals of maintaining flexibility in our business model and expanding our ability to provide our customers

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throughout the world with local support. For example, DI Corporation, our partner in Korea, provides local sales and support to the Korean market resulting in improved communications for our customers and better market access for us. A subsidiary of Flextech Holdings, based in Singapore, provides board repair services for our customers, enabling quick repair turnarounds for our Asian customers and allowing us to focus on new product development.

Customers

Our customers include many of the world’s leading semiconductor device manufacturers. In fiscal year 2002, 2001 and 2000, Texas Instruments accounted for 45%, 26% and 19%, and Vitesse Semiconductor Corporation accounted for 11%, 22%, and 11% of net sales, respectively. In fiscal year 2001 and 2000, Philips Semiconductor accounted for 12% and 13% of net sales, respectively. In fiscal year 2001, Infineon Technologies accounted for 11% of net sales. Customers that have ordered Fusion products include the following:

ALi (formerly Acer Labs)	Hitachi	Qlogic
Agere Systems	Infineon Technologies	Samsung
Amkor	Maxim Integrated Devices	SPIL
AMS International	Motorola	STATS
Analog Devices	National Semiconductor	STMicroelectronics
ASAT	NEC	Texas Instruments
ASE	On Semiconductor	UTAC
Carsem	Philips Semiconductor	Vitesse Semiconductor

Because a relatively small number of semiconductor companies purchase most of the world’s semiconductor test equipment and we have concentrated our sales and support efforts on such key customers, we believe that sales to a limited number of customers will continue to account for a high percentage of net sales for the foreseeable future.

Manufacturing and Supply

We have completed the transition of our final assembly, system integration and testing operations to Jabil Circuit. We outsource certain components and subassemblies to contract manufacturers, including Sanmina, who provides us with certain subassemblies. We use standard components and prefabricated parts manufactured to our specifications. These components and subassemblies to produce testers in configurations specified by our customers. Most of the components for our products are available from a number of different suppliers; however, certain components are purchased from a single supplier or a limited group of suppliers. Although we believe that all single source components currently are available in adequate amounts, we cannot be certain that shortages will not develop in the future. We are dependent on two semiconductor device manufacturers, Vitesse Semiconductor and Maxtech Components, who are sole source suppliers of custom components for our products, although Vitesse has two separate manufacturing facilities capable of manufacturing our custom components. We have no written supply agreements with these sole source suppliers and purchase our custom components through individual purchase orders. We continuously evaluate sources for our custom components. We cannot assure you that such alternative sources will be qualified or available to us.

We are dependent on StepTech, Inc. to supply our Fusion CX. StepTech’s manufacturing facility is located in Hopkinton, Massachusetts.

Our facilities in Westwood, Massachusetts and San Jose, California perform final customer acceptance testing and research and development activities, which include assembly, system integration and testing for prototypes.

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Competition

Many other domestic and foreign companies participate in the markets for each of our products and the industry is highly competitive. We compete principally on the basis of performance, cost of test, reliability, customer service, applications support, price and ability to deliver our products on a timely basis. Our principal competitors in the market for test systems are Agilent Technologies, Credence Systems, Schlumberger Limited (NPTest Division), and Teradyne. Most of our major competitors are also suppliers of other types of automatic test equipment and have greater financial and other resources than we do. We expect our competitors to enhance their current products and they may introduce new products with comparable or better price and performance. In addition, new competitors, including semiconductor manufacturers themselves, may offer new technologies, which may in turn reduce the value of our product lines.

Backlog

At July 31, 2002, our backlog of unfilled orders for all products and services was $80 million, compared with $145.6 million at July 31, 2001. Historically, test systems generally ship within twelve months of receipt of a customer’s purchase order. While backlog is calculated on the basis of firm orders, orders may be subject to cancellation or delay by the customer with limited or no penalty. Our backlog at any particular date, therefore, is not necessarily indicative of actual sales which may be generated for any succeeding period. Historically, our backlog levels have fluctuated based upon the ordering patterns of our customers and changes in our manufacturing capacity.

The semiconductor industry and demand for semiconductor test equipment is highly cyclical. Customer delivery dates and order patterns typically get delayed and become less predictable when the semiconductor industry capacity exceeds demand for a sustained period of time. As part of our periodic review of backlog, we determined that recent business conditions indicate that the industry will continue to be in an excess capacity situation for the foreseeable future, which reduces our ability to rely on historical trends to accurately determine firm delivery dates for items remaining in our backlog. Based on this judgment, on July 31, 2002, we adjusted our backlog by $69 million. Although none of the $69 million reduction in backlog was due to customer cancellations, we believe that the limited visibility in the semiconductor capital equipment industry for a recovery in orders warranted this adjustment.

Proprietary Rights

The development of our products is largely based on proprietary information. We rely upon a combination of contract provisions, copyright, trademark and trade secret laws to protect our proprietary rights in products. We also have a policy of seeking U.S. patents on technology considered of particular strategic importance. Although we believe that the copyrights, trademarks and patents we own are of value, we believe that they will not determine our success, which depends principally upon our engineering, manufacturing, marketing and service skills. However, we intend to protect our rights when, in our view, these rights are infringed upon.

We license some software programs from third party developers and incorporate them in our products. Generally, these agreements grant us non-exclusive licenses with respect to the subject program and terminate only upon a material breach by us. We believe that such licenses are generally available on commercial terms from a number of licensors.

The use of patents to protect hardware and software has increased in the test equipment industry. We have at times been notified of claims that we may be infringing patents issued to others. Although there are no pending actions against us regarding any patents, no assurance can be given that infringement claims by third parties will not negatively impact our business and results of operations. As to any claims asserted against us, we may seek or be required to obtain a license under the third party’s intellectual property rights. There can be no assurance, however, that a license will be available under reasonable terms or at all. In addition, we could decide to resort to

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litigation to challenge such claims or a third party could resort to litigation to enforce such claims. Such litigation could be expensive and time consuming and could negatively impact our business and results of operations.

Employees

At July 31, 2002, we employed 776 employees and 56 temporary workers. On August 22, 2002, we had a reduction in force due to adverse business conditions, which impacted 83 employees and 11 temporary workers. None of our employees are represented by a labor union, and we have experienced no work stoppages. Many of our employees are highly skilled, and we believe our future success will depend in large part on our ability to attract and retain these employees. We consider relations with our employees to be good.

Environmental Affairs

Our manufacturing facilities are subject to numerous laws and regulations designed to protect the environment. We do not anticipate that compliance with these laws and regulations will have a material effect on our capital expenditures, earnings or competitive position.

Item 2.     Properties

All of our facilities are leased. We have achieved worldwide ISO 9001 certification at our facilities. We maintain our headquarters in Westwood, Massachusetts, where corporate administration, sales and customer support, engineering research and development and manufacturing are located in a 167,500 square foot facility under a lease, which expires in 2009. In May 1995, we subleased to a third party for a ten year term a 208,000 square foot facility in Westwood, Massachusetts, which we had leased until 2010. In fiscal year 2002, the Company and its landlord agreed to terminate this lease. We also maintain an additional development facility in a 71,000 square foot building in San Jose, California. Our lease of this facility expires in 2007. We also lease sales and customer support offices at various locations in the United States totaling approximately 40,000 square feet.

Our European headquarters is located in Woking, United Kingdom and our Asian headquarters is located in Singapore. We also maintain sales and support offices at other locations in Europe and in Asia. Office space leased in Asia and Europe totals approximately 113,816 square feet.

We believe that our existing facilities are adequate to meet our current and foreseeable future requirements.

Item 3.     Legal Proceedings

We have no material pending legal proceedings.

Item 4.     Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of stockholders during the fourth quarter of fiscal 2002.

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PART II

Item 5. Market Value for the Registrant’s Common Stock and Related Security Holder Matters Market Prices for Common Stock

Our common stock is quoted on the Nasdaq National Market under the symbol “LTXX”. The following table shows the high and low closing sale prices per share of our common stock, as reported on the Nasdaq National Market, for the periods indicated:

Period	High		Low
Fiscal Year Ended July 31, 2002
First Quarter	$	23.99	$	10.85
Second Quarter		25.03		17.56
Third Quarter		27.41		19.12
Fourth Quarter		22.48		8.40
Fiscal Year Ended July 31, 2001
First Quarter	$	26.13	$	12.25
Second Quarter		18.38		10.19
Third Quarter		27.25		13.69
Fourth Quarter		31.82		18.55
Fiscal Year Ended July 31, 2000
First Quarter	$	16.69	$	10.38
Second Quarter		33.13		15.94
Third Quarter		52.25		25.00
Fourth Quarter		48.63		20.63

We have never declared or paid any dividends on our common stock. We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings to fund the development and growth of our business. In addition, our credit agreement with a bank contains certain covenants that prohibit us from paying cash dividends.

As of August 29, 2002, we had approximately 1,036 stockholders of record of our common stock.

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Item 6.     Selected Consolidated Financial Data

The following table contains our selected consolidated financial data and is qualified by the more detailed consolidated financial statements and notes thereto included elsewhere in this report. The selected consolidated financial data for and as of the end of each of the five fiscal years in the period ended July 31, 2002 are derived from our audited consolidated financial statements.

	Fiscal Years ended July 31,
	2002			2001			2000			1999			1998
	(in thousands, except per share data and statistics)
Consolidated Statement of Operations Data:
Net sales	$	121,273		$	330,030		$	305,535		$	157,326		$	196,227
Cost of sales		96,006			177,034			161,078			93,451			127,837
Inventory related provision		42,200			12,800			—			—			40,718
Engineering and product development expenses		71,102			65,987			50,582			34,828			47,757
Selling, general and administrative expenses		28,337			37,029			38,477			31,517			50,772
Reorganization costs		—			1,200			—			—			6,272
Income (loss) from operations		(116,372	)		35,980			55,398			(2,470	)		(77,129	)
Net interest (expense) income		215			7,894			3,123			(941	)		(21	)
Gain on liquidation/sale of business units		—			—			—			3,786			—
Provision (benefit) for income taxes		33,723			13,163			(20,214	)		—			1,130
Net income (loss) before cumulative effect of change in accounting principle		(149,880	)		30,711			78,735			375			(78,280	)
Cumulative effect of change in accounting principle, net of applicable tax (a)		—			9,566			—			—			—
Net income (loss)	$	(149,880	)	$	21,145		$	78,735		$	375		$	(78,280	)
Net income (loss) per share:
Basic	$	(3.08	)	$	0.44		$	1.84		$	0.01		$	(2.15	)
Diluted	$	(3.08	)	$	0.43		$	1.70		$	0.01		$	(2.15	)
Weighted-average common shares used in computing net income (loss) per shares:
Basic		48,693			47,782			42,897			35,696			36,401
Diluted		48,693			49,634			46,201			36,958			36,401
Consolidated Balance Sheet Data:
Working capital	$	285,418		$	260,580		$	307,887		$	47,915		$	33,958
Property and equipment, net		76,171			66,739			38,125			31,942			35,427
Total assets		463,989			483,039			456,504			147,993			141,019
Total debt		168,222			24,177			26,108			27,477			25,476
Stockholders’ equity		225,533			369,269			339,676			58,928			55,950
Other Information (unaudited):
Current ratio		4.27			3.42			3.92			1.71			1.49
Asset turnover		0.26			0.68			0.67			1.06			1.39
Debt as a percentage of total capitalization		42.7	%		6.1	%		7.1	%		31.8	%		31.3	%
Additions to property and equipment (net)	$	26,460		$	47,333		$	17,850		$	9,636		$	8,795
Depreciation and amortization		17,025			14,139			10,613			11,291			12,510

(a) Effective August 1, 2000, the Company adopted Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”, (“SAB 101”) as amended. The Company has no proforma data for fiscal years prior to 2001 as the amounts are not readily determinable based on the nature of the revenue adjustments required by SAB 101.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this annual report on Form 10-K. This report contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. See “Business Risks”.

Overview

We design, manufacture, market and service semiconductor test solutions worldwide to leading companies in the semiconductor industry. Our Fusion semiconductor test equipment can test a broad range of analog, digital, mixed signal (a combination of analog and digital) and system-on-a-chip, or SOC, semiconductor devices, all on a single test platform.

In late 1996, we changed our strategic focus to develop a solution for the testing needs of the then-emerging SOC market. Building on our twenty-year technological expertise in semiconductor test, we realigned our separate digital and mixed signal research and development organizations to work together to develop and deliver a single test platform. We also restructured our operations and reorganized our management consistent with our new strategic focus. Our Fusion platform is the result of this change in strategy.

Industry Conditions and Outlook

We sell capital equipment and services to companies that design, manufacture, assemble or test semiconductor devices. The semiconductor industry is highly cyclical, causing in turn a cyclical impact on our financial results. As a capital equipment provider, our revenue is driven by the capital expenditure budgets and spending patterns of our customers, who often delay or accelerate purchases in reaction to variations in their business. The level of capital expenditures by these semiconductor companies depends on the current and anticipated market demand for semiconductor devices and the products that incorporate them. Therefore, demand for our semiconductor test equipment is dependent on growth in the semiconductor industry. In particular, three primary characteristics of the semiconductor industry drive the demand for semiconductor test equipment:

• increases in unit production of semiconductor devices;

• increases in the complexity of semiconductor devices used in electronic products; and

• the emergence of next generation device technologies, such as SOC.

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Our recent operating results have been negatively impacted by a severe industry-wide slowdown in the semiconductor industry, which began to affect the semiconductor test industry in fiscal 2001 and to impact us in the latter half of the second quarter of fiscal 2001. The following graph shows the sharp decline in the three-month moving average semiconductor test equipment orders and shipments from fiscal 1997 through fiscal 2002, as calculated by SEMI, an industry trade organization:

Despite this sharp decline in business activity for the semiconductor test market, we have continued to invest in the further development and enhancement of our Fusion platform. We believe that our competitive advantage in this industry is primarily driven by the ability of our Fusion platform to meet or exceed the highest technical specifications required for the testing of the most advanced semiconductor devices in a cost-efficient manner. Therefore, we have continued to invest significant amounts in engineering and product development in an effort to further differentiate the Fusion platform from the product offerings of our competitors. In fiscal 2002, engineering and product development expenses were $71.1 million, or 58.6% of net sales, as compared to $66.0 million, or 20.0% of net sales in fiscal 2001. Although our investment in engineering and product development has increased, we believe that our single-platform product strategy is a more cost-efficient means of focusing product research and development efforts, since we are able to avoid dilution of our development efforts across multiple product platforms.

Additionally, because in the past a high proportion of our costs have been fixed, we have been limited in our ability to reduce expenses and inventory purchases quickly in response to decreases in orders and revenues during cyclical downturns in the semiconductor industry. In order to continue our strategy of investing in product research and development during a downturn while mitigating the adverse effect on profitability, we have taken steps to transform certain historically fixed costs into variable costs. Over the past several years, we have increasingly transitioned the manufacture of certain components and subassemblies to contract manufacturers, thereby reducing our fixed manufacturing costs associated with direct labor and overhead. In fiscal 2002, we completed the transition of our final assembly, system integration and testing operations to Jabil Circuit, which will further reduce our fixed manufacturing costs. We believe that by transforming product manufacturing costs into variable costs this will in the future allow us to improve our performance during cyclical downturns while preserving our historic gross margins during cyclical upturns.

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Finally, we have also undertaken several additional cost reduction measures during this downturn to further mitigate the adverse effect of this cyclical downturn on our profitability. Our total worldwide headcount has been reduced from 840 employees and 79 temporary workers at the end of fiscal 2001 to 776 employees and 56 temporary workers at the end of fiscal 2002. On August 22, 2002, we further reduced our workforce due to adverse business conditions, which impacted 83 employees and 11 temporary workers. A $2.0 million severance charge will be recorded in our quarter ending October 31, 2002. In addition, we have instituted several other cost reduction measures, such as the suspension of 401(k) matching payments, a freeze in salary and wage increases and the strict oversight and reduction in discretionary travel and other overhead expenses. We believe that these reductions in operating costs have reduced our fixed costs while preserving our ability to fund critical product research and development efforts and continue to provide our customers with the levels of responsiveness and service they require.

Management believes that the Company’s financial results will continue to reflect the slow semiconductor equipment industry conditions for the near term. Until there is a substantial improvement in industry conditions, the sluggish industry conditions will continue to adversely affect the Company’s results of operations. The Company’s results of operations would be further adversely affected if it were to experience lower than anticipated order levels, cancellations of orders in backlog, extended customer delivery requirements or pricing pressure. At the current low levels of business, there is a higher likelihood that these types of changes in our customers’ requirements would adversely effect our results of operations because in any particular quarter a limited number of transactions accounts for an even greater portion of sales for the quarter.

We are also exposed to the risks associated with the current slowdown in the U.S. and global economies. Current and predicted decreases in consumer confidence, corporate profits and capital expenditures, and the lack of visibility regarding whether or when there will be a sustained recovery in the sale of electronic goods and information technology equipment underscores the need for caution in predicting growth in the semiconductor test equipment industry in general and in our revenues and profits specifically. Slow or negative growth in the domestic economy may continue to materially and adversely affect our business, financial condition and results of operations for the foreseeable future.

Critical Accounting Policies and the Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We based these estimates and assumptions on historical experience, and evaluate them on an on-going basis to ensure they remain reasonable under current conditions. Actual results could differ from those estimates. The items in our financial statements requiring significant estimates and judgments are as follows: revenue recognition, inventory reserve, warranty, impairment of long-lived assets, allowances for doubtful accounts and deferred taxes.

Revenue Recognition

The Company’s revenue recognition policy is described in Note 2, Summary of Significant Accounting Policies, contained in the Notes to Consolidated Financial Statements included in this report. We monitor the credit worthiness of our key customers and do not record revenue on sales if collection is not reasonably assured. Most of these conditions are subjective and actual results could vary from the estimated outcome, requiring future revisions to income from operations. In the future, if acceptance provisions significantly change, the timing of the revenue recognition could be affected.

Inventory Reserve

We sell capital equipment to companies that design, manufacture, assemble, and test semiconductor devices. We are exposed to a number of economic and industry factors that could result in portions of our inventory becoming either obsolete or in excess of anticipated usage. These factors include, but are not limited to, changes

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in our customers capital expenditures, technological changes in our markets, our ability to meet changing customer requirements, competitive pressures in products and prices, and the availability of key components from our suppliers. Our policy is to establish inventory reserves when conditions exist that suggest our inventory may be in excess of anticipated demand or is obsolete based upon our assumptions about future demand for our products or market conditions. We regularly evaluate the ability to realize the value of our inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage, estimated product end of life dates, estimated current and future market values and new product introductions. Purchasing and alternative usage options are also explored to mitigate inventory exposure. When recorded, our reserves are intended to reduce the carrying value of our inventory to its net realizable value. As of July 31, 2002, our inventory of $95.2 million is stated net of inventory reserves of $54.0 million. If actual demand for our products deteriorates or market conditions are less favorable than those that we project, additional inventory reserves may be required.

Warranty

Our products are sold with warranty provisions that require us to remedy deficiencies in quality or performance of our products over a specified period of time at no cost to our customers. Our policy is to establish warranty reserves at levels that represent our estimate of the costs that will be incurred to fulfill those warranty requirements at the time that revenue is recognized. We believe that our recorded liability at July 31, 2002 is adequate to cover our future cost of materials, labor and overhead for the servicing of our products sold through that date. If actual product failures, or material or service delivery costs differ from our estimates, our warranty liability would need to be revised accordingly.

Impairment of Long-Lived Assets

On an ongoing basis, we review the value and period of amortization or depreciation of long-lived assets. Included in long-lived assets is machinery, equipment, spare parts used for service, office furniture, office equipment and leasehold improvements. During the review, we reevaluate the significant assumptions used in determining the original cost of long-lived assets. Although the assumptions may vary from transaction to transaction, they generally include revenue growth, operating results, cash flows and other indicators of value. We then determine whether there has been a permanent impairment of the value of long-lived assets based upon events or circumstances that have occurred since acquisition. The extent of the impairment amount recognized is based upon a determination of the fair value of the impaired asset.

Allowance for Doubtful Accounts

A majority of our trade receivables are derived from sales to large multinational semiconductor manufacturers throughout the world. In order to monitor potential credit losses, we perform ongoing credit evaluations of our customers’ financial condition. An allowance for doubtful accounts is maintained for potential credit losses based upon assessment of the expected collectibility of all accounts receivable. The allowance for doubtful accounts is reviewed periodically to assess the adequacy of the allowances. In any circumstances in which we are aware of a customer’s inability to meet its financial obligations, we take a certain percentage of the accounts receivable balance as an allowance, which is based on the age of the receivables, the circumstances surrounding the customer’s financial situation and our historical experience. If circumstances change, and the financial condition of our customers were adversely effected resulting in their inability to meet their financial obligations to us, we may need to take additional allowances.

Taxes

The Company has deferred tax assets resulting from tax credit carryforwards, net operating losses and other deductible temporary differences, which will reduce taxable income in future periods. Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes” (“SFAS 109”) requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be

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realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the Company operates, length of carryback and carryforward periods, existing sales backlog and future sales projections. We had previously provided valuation allowances only for future tax benefits resulting from certain foreign losses and various state tax attributes. However, where there are cumulative losses in recent years, SFAS 109 creates a strong presumption that a valuation allowance is needed. This presumption can be overcome in very limited circumstances. As a result of our cumulative loss position at July 31, 2002 and the increased uncertainty relative to the timing of profitability in future periods, we concluded that it was appropriate and conservative to establish a valuation allowance for our entire net deferred tax assets. The Company established a full valuation allowance for our remaining deferred tax assets and recognized a $78.8 million non-cash charge during fiscal year 2002. As a result, the valuation allowance for deferred tax assets increased from $8.1 million at July 31, 2001, to $101.6 million at July 31, 2002. We expect to record a full valuation allowance on future tax benefits until we can sustain an appropriate level of profitability and until such time, we would not expect to recognize any significant tax benefits in our future results of operations.

Results of Operations

The following table sets forth for the periods indicated statements of operations data.

	Year Ended July 31,
	2002			2001			2000
	(in thousands, except per share data)
Net sales	$	121,273		$	330,030		$	305,535
Cost of sales		96,006			177,034			161,078
Inventory related provision		42,200			12,800			—
Gross profit (loss)		(16,933	)		140,196			144,457
Engineering and product development expenses		71,102			65,987			50,582
Selling, general and administrative expenses		28,337			37,029			38,477
Reorganization costs		—			1,200			—
Income (loss) from operations		(116,372	)		35,980			55,398
Interest expense		(6,833	)		(1,250	)		(2,065	)
Interest income		7,048			9,144			5,188
Income (loss) before income taxes		(116,157	)		43,874			58,521
Provision (benefit) for income taxes		33,723			13,163			(20,214	)
Net income (loss) before cumulative effect of change in accounting principle		(149,880	)		30,711			78,735
Cumulative effect of change in accounting principle, net of applicable tax		—			9,566			—
Net income (loss)	$	(149,880	)	$	21,145		$	78,735
Net income (loss) per share:
Basic	$	(3.08	)	$	0.44		$	1.84
Diluted	$	(3.08	)	$	0.43		$	1.70

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The following table sets forth for the periods indicated the principal items included in the Consolidated Statements of Operations as percentages of total net sales.

	Percentage of Net Sales Year Ended July 31,
	2002		2001		2000
Net sales	100.0	%	100.0	%	100.0	%
Cost of sales	79.2		53.6		52.7
Inventory related provision	34.8		3.9		0.0
Gross profit (loss)	(14.0	)	42.5		47.3
Engineering and product development expenses	58.6		20.0		16.6
Selling, general and administrative expenses	23.4		11.2		12.6
Reorganization costs	0.0		0.4		0.0
Income (loss) from operations	(96.0	)	10.9		18.1
Interest expense	(5.6	)	(0.4	)	(0.7	)
Interest income	5.8		2.8		1.7
Income (loss) before income taxes	(95.8	)	13.3		19.1
Provision (benefit) for income taxes	27.8		4.0		(6.6	)
Net income (loss) before cumulative effect of change in accounting principle	(123.6	)	9.3		25.7
Cumulative effect of change in accounting principle, net of tax	0.0		2.9		0.0
Net income (loss)	(123.6	)	6.4		25.7

Fiscal 2002 Compared to Fiscal 2001.

Net Sales.    Net sales consist of both semiconductor test equipment and related hardware and software support and maintenance services, net of returns and allowances. Net sales were $121.3 million in 2002 and $330.0 million in 2001. The net sales of $330.0 million in 2001 reflected the Company’s adoption of SAB 101. The decrease in sales of $208.7 million was the result of the continuing decline in demand for semiconductors, resulting in substantially reduced demand for semiconductor test equipment. Service revenue, consisting of sales of replacement and spare parts and labor charges, totaled $34.4 million, or 28.3% of net sales, in fiscal 2002 and $37.3 million, or 11.3% of net sales, in fiscal 2001. Geographically, sales to customers outside the United States were $63.5 million, or 52% of net sales, in fiscal 2002 and $157.7 million, or 48% of net sales, in fiscal 2001.

Cost of Sales.    Cost of sales consists of material, labor, depreciation and associated overhead. Cost of sales decreased by $81.0 million to $96.0 million in fiscal 2002 from $177.0 million in fiscal 2001. As a percentage of net sales, cost of sales was 79.2% of net sales in fiscal 2002 as compared to 53.6% in fiscal 2001. Cost of sales as a percentage of net sales increased year-over-year in fiscal 2002 primarily due to the sharp decline in revenue and difference in product mix, as the fixed cost components of our cost of sales did not decrease commensurate with our decease in net sales.

Inventory Related Provision.    During fiscal year 2002, we recorded a $42.2 million inventory related provision. Of the $42.2 million, $38.7 million of the provision relates to excess inventory principally due to the sharp decline in semiconductor test system orders during the current industry downcycle. The remaining $3.5 million relates to excess Delta/STE legacy product inventory that was previously transferred to our third party reseller of Delta/STE products, for which payment was contingent upon the third party’s ability to sell the inventory. A $12.8 million inventory related provision was charged to operations in fiscal 2001. This provision represented the inventory charge for non-Fusion components and subassemblies, and Delta/STE legacy products.

Engineering and Product Development Expenses.    Engineering and product development expenses were $71.1 million, or 58.6% of net sales, in fiscal 2002 as compared to $66.0 million, or 20.0% of net sales in fiscal

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2001. The increase in expenditures is principally a result of a higher level of development expenses to support new product features and emerging applications and is consistent with the Company’s strategy of extending our technological lead in single platform testing during the industry downturn.

Selling, General and Administrative Expenses.    Selling, general and administrative expenses were $28.3 million or 23.4% of net sales in fiscal 2002 as compared to $37.0 million, or 11.2% of net sales in fiscal 2001. The decrease in selling, general and administrative expenses of $8.7 million for fiscal 2002 was primarily due to the reduction of certain variable costs from reduced sales and other cost reduction measures.

Interest Expense.    Interest expense for fiscal year 2002 was $6.8 million as compared to $1.3 million for fiscal year 2001. The increase in expense is a result of accruing interest expense for the 4.25% Convertible Subordinated Notes.

Interest Income.    Interest income was $7.0 million for fiscal 2002 as compared to $9.1 million for fiscal 2001. Although the Company’s cash balance was higher for the year ended 2002 than for the year ended 2001, interest rates declined sharply during fiscal 2002.

Income Tax.    The Company had a tax provision of $33.7 million or 27.8% of net sales in fiscal year 2002. This provision was the result of providing a full valuation allowance for our deferred tax assets by recognizing a tax provision charge of $78.8 million in fiscal 2002. The Company had previously provided valuation allowances only for certain foreign losses and various state tax attributes. As a result of a review undertaken at July 31, 2002 and our cumulative loss position at that date, management concluded that it was appropriate to establish a full valuation allowance for its net deferred tax assets. The Company recorded a tax provision of $13.1 million in fiscal 2001 in accordance with SFAS 109 discussed in “Critical Accounting Policies and the Use of Estimates— Taxes”.

Cumulative Effect of an Accounting Change, Net of Applicable Tax.    In fiscal year 2001, a $9.6 million or 2.9% of net sales, was recognized relating to the cumulative effect of an accounting change as related to SAB 101.

Fiscal 2001 Compared to Fiscal 2000.

Net Sales.    Net sales consist of both semiconductor test equipment and related hardware and software support and maintenance services, net of returns and allowances. Net sales were $330.0 million in 2001 and $305.5 million in 2000. The net sales of $330.0 million in 2001 reflect the Company’s adoption of SAB 101. The increase in sales of $24.5 million was the result of stronger sales in the first half of fiscal year 2001. During the latter half of the second quarter of fiscal 2001 the semiconductor industry experienced an industry-wide slow down. Service revenue, consisting of sales of replacement and spare parts and labor charges, totaled $37.3 million, or 11.3% of net sales, in fiscal 2001 and $32.0 million, or 10.5% of net sales, in fiscal 2000. Geographically, sales to customers outside the United States were $157.7 million, or 48% of net sales, in fiscal 2001 and $189.2 million, or 62% of net sales, in fiscal 2000.

Cost of Sales.    Cost of sales consists of material, labor, depreciation and associated overhead. Cost of sales increased by $16.0 million to $177.0 million in fiscal 2001 from $161.1 million in fiscal 2000. As a percentage of net sales, cost of sales was 53.6% of net sales in fiscal 2001 as compared to 52.7% in fiscal 2000. The major reason for the year-to-year 0.9% decline in margin percentage relates to the 33.2% decline in revenue during the latter half of fiscal year 2001 from the first half of the year.

Inventory Related Provision.    A $12.8 million inventory related provision was charged to operations in fiscal 2001. The write down consisted of two categories. The first category was a $9.4 million inventory charge to cost of sales relating to non-Fusion components and subassemblies. Included in the $9.4 million write down was a provision of $2.5 million that related to Delta/STE inventory that was transferred to our third party reseller

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of Delta/STE products. The provision was established due to lack of demand for Delta/STE legacy products. The $6.9 million of the $9.4 million inventory charge was a write down of non-Fusion components included in LTX inventory that will have no usage over the next twelve to twenty-four months. As a result of the transition of the Company’s manufacturing operations to Jabil Circuit, the Company will have limited capacity over the next twelve to twenty-four months to convert non-Fusion inventory into finished product for resale. In addition, due to the current industry wide slowdown in the semiconductor industry, the Company anticipates a significant reduction in demand for non-Fusion products which may become technologically obsolete by our next generation Fusion products.

The second category was a $3.4 million charge, which represented a write down of Fusion product printed circuit boards. These boards will require a substantial amount of reworking to make them useable in active production with Jabil Circuit. We will have limited internal operations and capability to rework these boards during this transition.

Engineering and Product Development Expenses.    Engineering and product development expenses were $66.0 million, or 20.0% of net sales, in fiscal 2001 as compared to $50.6 million, or 16.6% of net sales in fiscal 2000. The increase in expenditures is principally a result of a higher level of development expenses and key account support costs for our Fusion product line.

Selling, General and Administrative Expenses.    Selling, general and administrative expenses were $37.0 million or 11.2% of net sales in fiscal 2001 as compared to $38.5 million, or 12.6% of net sales in fiscal 2000. The decrease in the selling, general and administrative expenses of $1.5 million for fiscal 2001 related to the reduction of certain variable costs from the reduced sales in the latter half of the fiscal year.

Interest Expense.    Interest expense for fiscal year 2001 was $1.3 million as compared to $2.1 million for fiscal year 2000. The increase in expense is a result of a decrease in outstanding bank loan balances with our domestic bank.

Interest Income.    Interest income was $9.1 million for fiscal 2001 as compared to $5.2 million for fiscal 2000. The increase in interest income occurred because of the increased earnings resulting from the investment in available for sale securities and the benefit of proceeds from the fiscal 2000 stock offerings for the entire year.

Income Tax.    The Company recorded a tax provision of $13.1 million in fiscal 2001 and a tax benefit of $20.2 million in fiscal 2000. The Company’s effective tax rate was 30% and (34.5%) in fiscal 2001 and fiscal 2000, respectively. The effective tax rate in each period differs from the statutory income tax rate primarily due to the generation of tax credits and change in the valuation allowance.

Cumulative Effect of an Accounting Change, Net of Applicable Tax.    In fiscal year 2001 a $9.6 million or 2.9% of net sales charge was recognized relating to the cumulative effect of an accounting change as related to SAB 101.

Industry Conditions.    Industry conditions weakened significantly during the second half of the fiscal year ending July 31, 2001. Management believes that slow semiconductor equipment industry conditions will continue for the near term. Until there is a substantial improvement in industry conditions, the sluggish industry conditions will continue to adversely affect the Company’s results of operations. The Company’s results of operations would be further adversely affected if it were to experience lower than anticipated order levels, cancellations of orders in backlog, extended customer delivery requirements or lower than anticipated margins due to unfavorable product mix. The Company has taken steps to reduce discretionary spending and capital expenditures.

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Liquidity and Capital Resources

At July 31, 2002, we had $217.2 million in cash equivalents and short term investments and working capital of $285.4 million as compared to $180.1 million in cash equivalents and short term investments and $260.6 million of working capital at July 31, 2001. The increase in cash equivalents and short term investments was due primarily to the receipt of $145.2 million of net proceeds from an offering of 4.25% Convertible Subordinated Notes, $2.2 million in employee capital contributions relating to our Employee Stock Purchase Plan and $3.5 million from the exercise of stock options. The increase in cash was offset by cash used in operations of $87.7 million and capital expenditures of $26.5 million.

Accounts receivable from trade customers were $19.3 million at July 31, 2002, as compared to $25.6 million at July 31, 2001. The decrease in accounts receivables was the result of cash collecting activities along with lower sales. The reserve for sales returns and doubtful accounts was $3.6 million, or 15.7% of gross accounts receivable on July 31, 2002 and $3.7 million, or 12.6% of gross accounts receivable, on July 31, 2001. The Company has an agreement with its commercial lender that allows the Company to sell certain of its accounts receivable to the lender without recourse. Sales under this agreement totaled $8.1 million for the fiscal year ended July 31, 2002. Accounts receivable from other sources increased $3.4 million to $10.3 million at July 31, 2002, as compared to $6.9 million at July 31, 2001. The increase was attributed to the sale of inventory at cost to our vendors.

Inventory decreased by $1.5 million to $95.2 million at July 31, 2002 as compared to $96.7 million at July 31, 2001. The decrease was primarily as a result of an inventory related provision of $42.2 million due to a severe drop in demand for semiconductor test equipment offset by additions to inventory to support current production and next generation product development during fiscal 2002.

Prepaid expense decreased by $28.3 million to $30.7 million at July 31, 2002, as compared to $59.0 million at July 31, 2001. The decrease was attributed to the receipt of inventory against prepayments. Inventory related deposits were $23.1 million as of July 31, 2002 and $43.9 million as of July 31, 2001.

Capital expenditures totaled $26.5 million in fiscal 2002 as compared to $47.3 million for fiscal year 2001. The principal reason for the $20.8 million decrease in expenditures relates to tight cost controls over capital spending due to the Company’s current revenue levels.

For fiscal year 2002, we received proceeds from capital lease financing of $1.7 million. For fiscal year 2002, we had no operating lease financing transactions. Operating lease payments in fiscal year 2002 for equipment leased in prior years totaled $10.7 million.

Other assets increased by $1.2 million to $15.2 million at July 31, 2002 as compared to $14.0 million at July 31, 2001. The increase is attributed to the costs to be amortized associated with the 4.25% Convertible Subordinated Notes offset by the write off of excess Delta/STE inventory that was previously transferred to our third party reseller of Delta/STE products.

During the quarter ended July 31, 2002, we renegotiated our domestic credit facility with our existing lender. The new facility is comprised of a working capital line of $20.0 million and an equipment financing facility of $5.0 million, which is secured by all assets and bears interest at the bank’s prime rate. The working capital line will be used to support working capital obligations, issuance of standby letters of credit, and foreign exchange transactions. The equipment financing facility will be used to support the purchase of fixed assets. The facility imposes certain financial and other covenants. Outstanding borrowings at July 31, 2002 were $14.9 million under the working capital credit facility and the interest rate was 4.75%. A second credit facility with another lender was established on April 30, 2001 as a revolving credit line for $30.0 million. This facility is secured by cash and bears interest (at our option) at either: (i) the greater of the federal funds rate plus 0.5% or the bank’s prime rate, in each case, minus 1.0% or (ii) LIBOR plus 0.4%. No amounts were outstanding under this line at July 31, 2002. We did use this line to support letters of credit, which totaled $2.0 million to a financial institution for leasing equipment and to a foreign vendor for inventory purchases at July 31, 2002.

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On August 8, 2001, we received net proceeds of $145.2 million from a private placement of 4.25% Convertible Subordinated Notes (“the Notes”) due 2006. The private placement was effected through a Rule 144A offering to qualified institutional buyers. Interest on the Notes is payable on February 15 and August 15 of each year, commencing February 15, 2002. The Notes are convertible into shares of our common stock at any time prior to the close of business on August 15, 2006, unless previously redeemed, at a conversion price of $29.04 per share, subject to certain adjustments. Prior to August 19, 2004, we may redeem any of the Notes at a certain redemption price, plus accrued interest, if the closing price of the common stock has exceeded 150% of the conversion price for at least 20 trading days in any consecutive 30-day trading period and certain other conditions are satisfied. On or after August 19, 2004, we may redeem any of the Notes at designated redemption prices, plus accrued interest. The Notes are unsecured and subordinated in right of payment in full to all existing and future senior indebtedness of the Company. Expenses associated with the offering of approximately $4.8 million are being amortized using the straight line method of depreciation, which approximates the effective interest method, over the term of the Notes.

The Company may from time to time seek to retire certain amounts, which may be material, of its outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors.

On August 22, 2002, we reduced our workforce by 94 employees due to adverse business conditions. A $2.0 million severance charge will be recorded in our quarter ending October 31, 2002. These reductions are expected to reduce operating costs by approximately $5.0 million annually. The Company expects that severance costs will be paid through August 2003.

We anticipate available cash balances and credit facilities will be adequate to fund our currently proposed operating activities for the next twelve months.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (the “FASB”) issued SFAS 141 “Business Combinations” and SFAS 142, “Goodwill and Other Intangible Assets”. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. SFAS 142 is effective for financial statements issued after July 31, 2002. The adoption of SFAS 141 had no impact on the Company’s financial position, results of operations or cash flows. The adoption of SFAS 142 on August 1, 2002 will not result in any material impact on the Company’s financial statements.

In July 2001, the FASB issued SFAS 143, “Accounting for Asset Retirement Obligations”. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. The Company does not expect that the adoption of this standard will result in any material impact on its financial statements at this time.

In October 2001, the FASB issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived asset and does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets. This Statement supersedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions of APB Opinion No. 30 “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a

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Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 with early adoption encouraged. The Company does not expect the adoption of this standard will result in any material impact on its financial statements at this time.

In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement rescinds the following pronouncements: FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, FASB Statement No. 44, “Accounting for Intangible Assets of Motor Carriers” and FASB Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements”. This Statement amends FASB Statement No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions. This Statement also makes technical corrections to other existing authoritative pronouncements to clarify meanings, or describe their applicability under changed conditions. The Company adopted SFAS 145 effective August 1, 2001.

SFAS 145 provides that gains and losses from the extinguishment of debt be reported in ordinary operations. Accordingly, the Company recorded the gain from its settlement of litigation with Ando Electric Co., Ltd. (Ando) in February 2002, (see Note 9 to the Consolidated Financial Statements), as a reduction in selling, general and administrative expense for 2002.

In July 2002, FASB issued SFAS 146, “Accounting for Cost Associated with Exit or Disposal Activities”. SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and nullifies Emerging Issues Task Force Issue No. 94-3. “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring)”. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe the adoption of this standard will result in any material impact on its financial statements at this time.

BUSINESS RISKS

This report includes or incorporates forward-looking statements that involve substantial risks and uncertainties and fall within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by our use of the words “believes,” “anticipates,” “plans,” “expects,” “may,” “will,” “would,” “intends,” “estimates,” and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements, particularly under the heading “Business Risks,” that we believe could cause our actual results to differ materially from the forward-looking statements that we make. We do not assume any obligation to update any forward-looking statement we make.

Our sole market is the highly cyclical semiconductor industry, which causes a cyclical impact on our financial results.

We sell capital equipment to companies that design, manufacture, assemble, and test semiconductor devices. The semiconductor industry is highly cyclical, causing in turn a cyclical impact on our financial results. Our recent operating results have been negatively impacted by an industry-wide slowdown in the semiconductor industry which began to impact us in the latter half of the second quarter of fiscal 2001. Any failure to expand in cycle upturns to meet customer demand and delivery requirements or contract in cycle downturns at a pace consistent with cycles in the industry could have an adverse effect on our business.

Any significant downturn in the markets for our customers’ semiconductor devices or in general economic conditions would likely result in a reduction in demand for our products and would hurt our business. Our

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revenue and operating results are currently being negatively impacted by a sudden and severe downturn that the semiconductor industry is currently experiencing. Downturns in the semiconductor test equipment industry have been characterized by diminished product demand, excess production capacity and accelerated erosion of selling prices. We believe the markets for newer generations of devices, including system-on-a-chip (“SOC”), will also experience similar characteristics. In the past, we have experienced delays in commitments, delays in collecting accounts receivable and significant declines in demand for our products during these downturns, and we cannot be certain that we will be able to maintain or exceed our current level of sales.

Additionally, as a capital equipment provider, our revenue is driven by the capital expenditure budgets and spending patterns of our customers who often delay or accelerate purchases in reaction to variations in their businesses. Because a high proportion of our costs are fixed, we are limited in our ability to reduce expenses and inventory purchases quickly in response to decreases in orders and revenues. In a contraction, we may not be able to reduce our significant fixed costs, such as continued investment in research and development and capital equipment requirements and materials purchases from our suppliers.

Our sales and operating results have fluctuated significantly from period to period, including from one quarter to another, and they may continue to do so.

Our quarterly and annual operating results are affected by a wide variety of factors that could adversely affect sales or profitability or lead to significant variability in our operating results or our stock price. This may be caused by a combination of factors, including the following:

• sales of a limited number of test systems account for a substantial portion of our net sales in any particular fiscal quarter, and a small number of transactions could therefore have a significant impact;

• order cancellations by customers;

• lower gross margins in any particular period due to changes in:

• our product mix,

• the configurations of test systems sold, or

• the customers to whom we sell these systems;

• the high selling prices of our test systems (which typically result in a long selling process); and

• changes in the timing of product orders due to:

• unexpected delays in the introduction of products by our customers,

• shorter than expected lifecycles of our customers’ semiconductor devices; or

• uncertain market acceptance of products developed by our customers.

We cannot predict the impact of these and other factors on our sales and operating results in any future period. Results of operations in any period, therefore, should not be considered indicative of the results to be expected for any future period. Because of this difficulty in predicting future performance, our operating results may fall below expectations of securities analysts or investors in some future quarter or quarters. Our failure to meet these expectations would likely adversely affect the market price of our common stock. A substantial amount of the shipments of our test systems for a particular quarter occur late in the quarter. Our shipment pattern exposes us to significant risks in the event of problems during the complex process of final integration, test and acceptance prior to shipment. If we were to experience problems of this type late in our quarter, shipments could be delayed and our operating results could fall below expectations.

We will depend on Jabil Circuit to produce and test our family of Fusion products, and any failures or other problems at or with Jabil could cause us to lose customers and revenues.

We have selected Jabil Circuit, Inc. to manufacture our Fusion HF test systems. If for any reason Jabil cannot provide us with these products and services in a timely fashion, or at all, whether due to labor shortage,

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slow down or stoppage, deteriorating financial or business conditions or any other reason, we would not be able to sell or ship our Fusion family of products to our customers. We have no written supply agreement with Jabil. We also may be unable to engage alternative production and testing services on a timely basis or upon terms favorable to us, if at all. We cannot assure you that this relationship with Jabil will result in a reduction of our fixed expenses.

If we are required for any reason to seek a new manufacturer of our test systems, a new manufacturer of our test systems may not be available and in any event, switching to a new manufacturer would require six months or more and would involve significant expense and disruption of our business. Our test systems are highly sophisticated and complex capital equipment, with many custom components, and require specific technical know-how and expertise. These factors could make it more difficult for us to find a new manufacturer of our test systems if our relationship with Jabil is terminated for any reason.

The market for semiconductor test equipment is highly concentrated, and we have limited opportunities to sell our products.

The semiconductor industry is highly concentrated, and a small number of semiconductor device manufacturers and contract test and assembly companies account for a substantial portion of the purchases of semiconductor test equipment generally, including our test equipment. Sales to our ten largest customers accounted for 85.6% of revenues in fiscal year 2002 and 87.4% of revenues in fiscal year 2001. Our customers may cancel orders with few or no penalties. If a major customer reduces orders for any reason, our revenues, operating results, and financial condition will be hurt. In addition, our ability to increase our sales will depend in part upon our ability to obtain orders from new customers. Semiconductor manufacturers select a particular vendor’s test system for testing the manufacturer’s new generations of devices and make substantial investments to develop related test program software and interfaces. Once a manufacturer has selected one test system vendor for a generation of devices, that manufacturer is more likely to purchase test systems from that vendor for that generation of devices, and, possibly, subsequent generations of devices as well.

We may not be able to deliver custom hardware options and software applications to satisfy specific customer needs in a timely manner.

We must develop and deliver customized hardware and software to meet our customers’ specific test requirements. Our test equipment may fail to meet our customers’ technical or cost requirements and may be replaced by competitive equipment or an alternative technology solution. Our inability to provide a test system that meets requested performance criteria when required by a device manufacturer would severely damage our reputation with that customer. This loss of reputation may make it substantially more difficult for us to sell test systems to that manufacturer for a number of years. We have, in the past, experienced delays in introducing some of our products and enhancements.

Our dependence on international sales and non-U.S. suppliers involves significant risk.

International sales have constituted a significant portion of our revenues in recent years, and we expect that this composition will continue. International sales accounted for 52% of our revenues for fiscal year 2002 and 48% for fiscal year 2001. In addition, we rely on Non-U.S. suppliers for several components of the equipment we sell. As a result, a major part of our revenues and the ability to manufacture our products are subject to the risks associated with international commerce. A reduction in revenues or a disruption or increase in the cost of our manufacturing materials could hurt our operating results. These international relationships make us particularly sensitive to changes in the countries from which we derive sales and obtain supplies. International sales and our relationships with suppliers may be hurt by many factors, including:

• changes in law or policy resulting in burdensome government controls, tariffs, restrictions, embargoes or export license requirements;

• political and economic instability in our target international markets;

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• longer payment cycles common in foreign markets;

• difficulties of staffing and managing our international operations;

• less favorable foreign intellectual property laws making it harder to protect our technology from appropriation by competitors; and

• difficulties collecting our accounts receivable because of the distance and different legal rules.

In the past, we have incurred expenses to meet new regulatory requirements in Europe, experienced periodic difficulties in obtaining timely payment from non-U.S. customers, and been affected by the recession in several Asian countries. Our foreign sales are typically invoiced and collected in U.S. dollars. A strengthening in the dollar relative to the currencies of those countries where we do business would increase the prices of our products as stated in those currencies and could hurt our sales in those countries. Significant fluctuations in the exchange rates between the U.S. dollar and foreign currencies could cause us to lower our prices and thus reduce our profitability. These fluctuations could also cause prospective customers to push out or delay orders because of the increased relative cost of our products. In the past, there have been significant fluctuations in the exchange rates between the dollar and the currencies of countries in which we do business.

Our future rate of growth is highly dependent on the growth of the SOC market.

In 1996, we refocused our business strategy on the development of our Fusion HF product, which is primarily targeted towards addressing the needs of the SOC market. If the SOC market fails to grow as we expect, our ability to sell our Fusion HF product will be hampered.

Our market is highly competitive, and we have limited resources to compete.

The test equipment industry is highly competitive in all areas of the world. Many other domestic and foreign companies participate in the markets for each of our products, and the industry is highly competitive. Our principal competitors in the market for semiconductor test equipment are Agilent Technologies, Credence Systems, Schlumberger Limited (NPTest Division), and Teradyne. Most of these major competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing, and customer support capabilities.

We expect our competitors to enhance their current products and to introduce new products with comparable or better price and performance. The introduction of competing products could hurt sales of our current and future products. In addition, new competitors, including semiconductor manufacturers themselves, may offer new testing technologies, which may in turn reduce the value of our product lines. Increased competition could lead to intensified price-based competition, which would hurt our business and results of operations. Unless we are able to invest significant financial resources in developing products and maintaining customer support centers worldwide, we may not be able to compete.

Development of our products requires significant lead-time, and we may fail to correctly anticipate the technical needs of our customers.

Our customers make decisions regarding purchases of our test equipment while their devices are still in development. Our test systems are used by our customers to develop, test and manufacture their new devices. We therefore must anticipate industry trends and develop products in advance of the commercialization of our customers’ devices, requiring us to make significant capital investments to develop new test equipment for our customers well before their devices are introduced. If our customers fail to introduce their devices in a timely manner or the market does not accept their devices, we may not recover our capital investment through sales in significant volume. In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not generate revenue in excess of the costs of development, and they may be quickly rendered obsolete by changing customer preferences or the

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introduction of products embodying new technologies or features by our competitors. Furthermore, if we were to make announcements of product delays, or if our competitors were to make announcements of new test systems, these announcements could cause our customers to defer or forego purchases of our existing test systems, which would also hurt our business.

Our success depends on attracting and retaining key personnel.

Our success will depend substantially upon the continued service of our executive officers and key personnel, none of whom are bound by an employment or non-competition agreement. Our success will depend on our ability to attract and retain highly qualified managers and technical, engineering, marketing, sales and support personnel. Competition for such specialized personnel is intense, and it may become more difficult for us to hire or retain them. Our volatile business cycles only aggravate this problem. Our layoffs in the last industry downturn could make it more difficult for us to hire or retain qualified personnel. Our business, financial condition and results of operations could be materially adversely affected by the loss of any of our key employees, by the failure of any key employee to perform in his or her current positions, or by our inability to attract and retain skilled employees.

Our dependence on subcontractors and sole source suppliers may prevent us from delivering an acceptable product on a timely basis.

We rely on StepTech, Inc. to manufacture our Fusion CX, as well as other subcontractors to manufacture many of the components and subassemblies for our products, and we rely on sole source suppliers for certain components. We may be required to qualify new or additional subcontractors and suppliers due to capacity constraints, competitive or quality concerns or other risks that may arise, including a result of a change in control of, or deterioration in the financial condition of, a supplier or subcontractor. The process of qualifying subcontractors and suppliers is a lengthy process. Our reliance on subcontractors gives us less control over the manufacturing process and exposes us to significant risks, especially inadequate capacity, late delivery, substandard quality, and high costs. In addition, the manufacture of certain of these components and subassemblies is an extremely complex process. If a supplier became unable to provide parts in the volumes needed or at an acceptable price, we would have to identify and qualify acceptable replacements from alternative sources of supply, or manufacture such components internally. We are dependent on two semiconductor device manufacturers, Vitesse Semiconductor and Maxtech Components. Each is a sole source supplier of components manufactured in accordance with our proprietary design and specifications. We have no written supply agreements with these sole source suppliers and purchase our custom components through individual purchase orders. Vitesse Semiconductor is also a Fusion customer.

Economic conditions in Asia may hurt our sales.

The semiconductor industry has been negatively impacted by the slowdown and instability in worldwide economies, including the United States and Asia. We cannot predict if or when these worldwide economics will rebound or whether the semiconductor industry will rebound if and when worldwide economies begin to upturn. The slowdown and instability may continue to worsen, which could have a material adverse impact on our financial position and results of operations.

We may not be able to protect our intellectual property rights.

Our success depends in part on our ability to obtain intellectual property rights and licenses and to preserve other intellectual property rights covering our products and development and testing tools. To that end, we have obtained certain domestic patents and may continue to seek patents on our inventions when appropriate. We have also obtained certain trademark registrations. To date, we have not sought patent protection in any countries other than the United States, which may impair our ability to protect our intellectual property in foreign jurisdictions.

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The process of seeking intellectual property protection can be time consuming and expensive. We cannot ensure that:

• patents will issue from currently pending or future applications;

• our existing patents or any new patents will be sufficient in scope or strength to provide meaningful protection or any commercial advantage to us;

• foreign intellectual property laws will protect our intellectual property rights; or

• others will not independently develop similar products, duplicate our products or design around our technology.

If we do not successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our operating results. We also rely on trade secrets, proprietary know-how and confidentiality provisions in agreements with employees and consultants to protect our intellectual property. Other parties may not comply with the terms of their agreements with us, and we may not be able to adequately enforce our rights against these people.

Third parties may claim we are infringing their intellectual property, and we could suffer significant litigation costs, licensing expenses or be prevented from selling our products.

Intellectual property rights are uncertain and involve complex legal and factual questions. We may be unknowingly infringing on the intellectual property rights of others and may be liable for that infringement, which could result in significant liability for us. If we do infringe the intellectual property rights of others, we could be forced to either seek a license to intellectual property rights of others or alter our products so that they no longer infringe the intellectual property rights of others. A license could be very expensive to obtain or may not be available at all. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical.

We are responsible for any patent litigation costs. If we were to become involved in a dispute regarding intellectual property, whether ours or that of another company, we may have to participate in legal proceedings. These types of proceedings may be costly and time consuming for us, even if we eventually prevail. If we do not prevail, we might be forced to pay significant damages, obtain licenses, modify our products or processes, stop making products or stop using processes.

Our stock price is volatile.

In the twelve-month period ending on July 31, 2002, our stock price ranged from a low of $8.05 to a high of $28.22. The price of our common stock has been and likely will continue to be subject to wide fluctuations in response to a number of events and factors, such as:

• quarterly variations in operating results;

• variances of our quarterly results of operations from securities analyst estimates;

• changes in financial estimates and recommendations by securities analysts;

• announcements of technological innovations, new products, or strategic alliances; and

• news reports relating to trends in our markets.

In addition, the stock market in general, and the market prices for semiconductor-related companies in particular, have experienced significant price and volume fluctuations that often have been unrelated to the operating performance of the companies affected by these fluctuations. These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating performance.

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Changes to financial accounting standards may affect our reported results of operations.

We prepare our financial statements to conform with generally accepted accounting principles. Generally accepted accounting principles are subject to interpretations by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies. A change in those policies can have a significant effect on our reported results and may even affect our reporting of transactions completed before a change is announced. Accounting rules affecting many aspects of our business, including rules relating to asset impairment, revenue recognition, employee stock purchase plans and stock option grants have recently been revised or are currently under review. Changes to those rules or current interpretation of those rules may have a material adverse effect on our reported financial results or on the way we conduct our business. For example, in the first quarter of fiscal 2001, we implemented SAB 101. Adoption of SAB 101 required us to restate our quarterly results for the three fiscal quarters ended July 31, 2001 (see Note 2 of the Notes to the Consolidated Financial Statements in this report for further discussion). In addition, the preparation of our financial statements in accordance with generally accepted accounting principles requires that we make estimates and assumptions that affect the recorded amounts of assets and liabilities, disclosure of those assets and liabilities at the date of the financial statements and the recorded amounts of expenses during the reporting period. A change in the facts and circumstance surrounding those estimates could result in a change to our estimates and could impact our future operating results.

Terrorist attacks and threats, and government responses thereto, may negatively impact all aspects of our operations, revenues, costs and stock price.

The terrorist attacks last year in the United States and the U.S. retaliation for these attacks and the resulting decline in consumer confidence has had a substantial adverse impact on the economy. If consumer confidence does not recover, our revenues and profitability may be adversely impacted.

In addition, any similar future events may disrupt our operations or those of our customers and suppliers. In addition, these events have had and may continue to have an adverse impact on the U.S. and world economy in general and consumer confidence and spending in particular, which could harm our sales. Any of these events could increase volatility in the U.S. and world financial markets, which could harm our stock price and may limit the capital resources available to us and our customers or suppliers. This could have a significant impact on our operating results, revenues and costs and may result in increased volatility in the market price of our common stock.

We have substantially increased our indebtedness.

On August 8, 2001, we completed a private placement of $150 million principal amount of 4.25% Convertible Subordinated Notes (the “Notes”) due 2006 and received net proceeds of $145.2 million. As a result, we have substantially increased our ratio of debt to total capitalization. We may incur substantial additional indebtedness in the future. The level of indebtedness, among other things, could

• make it difficult for us to make payments on our debt and other obligations;

• make it difficult for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;

• require the dedication of a substantial portion of any cash flow from operations to service for indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures;

• limit our flexibility in planning for, or reacting to changes in, its business and the industries in which we compete;

• place us at a possible competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resource; and

• make us more vulnerable in the event of a further downturn in our business.

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There can be no assurance that we will be able to meet our debt service obligations, including our obligations under the Notes.

We may not be able to satisfy a change in control offer.

The indenture governing the Notes contains provisions that apply to a change in control of LTX. If someone triggers a fundamental change as defined in the indenture, we may be required to offer to purchase the Notes with cash. If we have to make that offer, we cannot be sure that we will have enough funds to pay for all the Notes that the holders could tender.

LTX may not be able to pay its debt and other obligations.

If our cash flow is inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the Notes, or certain of our other obligations, we would be in default under the terms thereof, which could permit the holders of those obligations to accelerate their maturity and also could cause defaults under future indebtedness we may incur. Any such default could have a material adverse effect on our business, prospects, financial position and operating results. In addition, we cannot assure you that we would be able to repay amounts due in respect of the Notes if payment of those obligations were to be accelerated following the occurrence of any other event of default as defined in the instruments creating those obligations. Moreover, we cannot assure that we will have sufficient funds or will be able to arrange for financing to pay the principal amount of the Notes at the maturity.

We may need additional financing, which could be difficult to obtain.

We expect that our existing cash and marketable securities, the proceeds of the Notes offering in August 2001, and the proceeds from the bank financings, will be sufficient to meet our cash requirements to fund operations and expected capital expenditures for the foreseeable future. In the event, we may need to raise additional funds, we cannot be certain that we will be able to obtain such additional financing on favorable terms if at all. Further, if we issue additional equity securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. Future financings may place restrictions on how we operate our business. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products and services, take advantage of future opportunities, grow our business or respond to competitive pressures, which could seriously harm our business.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk

Financial instruments that potentially subject us to concentrations of credit-risk consist principally of investments in cash equivalents, short-term investments and trade receivables. We place our investments with high-quality financial institutions, limit the amount of credit exposure to any one institution and have established investment guidelines relative to diversification and maturities designed to maintain safety and liquidity.

Our primary exposures to market risks include fluctuations in interest rates on our short-term and long-term debt of approximately $168.2 million as of July 31, 2002, and in foreign currency exchange rates. We are subject to interest rate risk on our short-term borrowings under our credit facilities. Our short term bank debt bears interest at prime. Long term debt interest rates are fixed for the term of the notes.

Foreign Exchange Risk

Operating in international markets involves exposure to movements in currency exchange rates. Currency exchange rate movements typically also reflect economic growth, inflation, interest rates, government actions and other factors. We transact business in various foreign currencies and, accordingly, we are subject to exposure

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from adverse movements in foreign currency exchange rates. As currency exchange rates fluctuate, translation of the statements of operations of our international businesses into U.S. dollars may affect year-over-year comparability and could cause us to adjust our financing and operating strategies. To date, the effect of changes in foreign currency exchange rates on revenues and operating expenses have not been material. Substantially all of our revenues are invoiced and collected in U.S. dollars. Our trade receivables result primarily from sales to semiconductor manufacturers located in North America, Japan, the Pacific Rim and Europe. In fiscal 2002, our revenues derived from sales outside the United States constituted 52% of our total revenues. Accounts receivable in currencies other than U.S. dollars comprise 4.5% of the outstanding accounts receivable trade balance at July 31, 2002. Receivables are from major corporations or are supported by letters of credit. We maintain reserves for potential credit losses and such losses have been immaterial. Accounts payable in currencies other than U.S. dollars comprise 5.1% of the outstanding accounts payable balance at July 31, 2002.

Based on a hypothetical 10% adverse movement in foreign currency exchange rates, the potential losses in future earnings, fair value of risk-sensitive financial instruments, and cash flows are immaterial, although the actual effects may differ materially from the hypothetical analysis.

The Company accounts for its foreign currency forward contracts in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities measured at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedging relationship and, if it is, depending on the type of hedging relationship. At July 31, 2002, the Company held foreign currency forward contracts with notional values totaling approximately $3.6 million, which have maturities prior to December 16, 2002. The aggregate fair value of our forward foreign exchange contracts outstanding at July 31, 2002 was immaterial. The net fair value is computed by subtracting the value of the contracts using the year-end forward rate (the notional value) from the value of the forward contracts computed at the contracted exchange rates.

Interest Rate Risk

Historically, we have had no material interest rate risk associated with debt used to finance our operations due to limited borrowings. We manage our interest rate exposure using a mix of fixed and floating interest rate debt.

During the quarter ended July 31, 2002, we renegotiated our domestic credit facility with our existing lender. The new facility is comprised of a working capital line of $20.0 million and an equipment financing facility of $5.0 million, which is secured by all assets and bears interest at the bank’s prime rate. The purpose of the working capital line is to support working capital obligations, issuance of standby letters of credit, and foreign exchange transactions. The purpose of the equipment financing facility is to support the purchase of fixed assets. This credit facility is secured by all assets and bears interest at the bank’s prime rate. Outstanding borrowings at July 31, 2002 were $14.9 million under the working capital credit facility and the interest rate was 4.75%. Based on this balance, an immediate change of 1% in the interest rate would cause a change in interest expense of approximately $149,000 on an annual basis. A second credit facility with another lender was established on April 30, 2001 as a revolving credit line for $30.0 million. This facility is secured by cash and bears interest (at our option) at either: (i) the greater of the federal funds rate plus 0.5% or the bank’s prime rate, in each case, minus 1.0% or (ii) LIBOR plus 0.4%. On August 8, 2001, we received $145.2 million from a convertible subordinated note offering. Our objective in maintaining these variable rate borrowings is the flexibility obtained regarding early repayment without penalties and lower overall cost as compared with fixed-rate borrowings. We anticipate the cash flow from operations combined with available cash balance and credit facility enhancements will be adequate to fund our currently proposed operating activities for the next twelve months.

30

Item 8.     Financial Statements and Supplementary Data

LTX CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	July 31,
	2002			2001
ASSETS
Current assets:
Cash equivalents	$	144,467		$	141,096
Short term investments		72,691			39,013
Accounts receivable—trade, net of allowances of $3,579 and $3,659, respectively		19,308			25,649
Accounts receivable—other; net of allowances of $0 and $2,500, respectively		10,269			6,938
Inventories		95,152			96,695
Prepaid expense		30,694			58,975
Total current assets		372,581			368,366
Property and equipment, net		76,171			66,739
Deferred tax asset		—			33,896
Other assets		15,237			14,038
Total assets	$	463,989		$	483,039
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable	$	14,870		$	12,900
Current portion of long-term debt		2,059			5,293
Accounts payable		25,714			16,577
Deferred revenues and customer advances		5,229			37,840
Deferred gain on leased equipment		10,248			13,906
Accrued restructuring charges		225			1,713
Other accrued expenses		28,818			19,557
Total current liabilities		87,163			107,786
Long-term debt, less current portion.		151,293			5,984
Stockholders’ equity:
Common stock, $0.05 par value:
100,000,000 shares authorized; 51,732,462 and 50,903,326 shares issued; 49,184,962 and 48,355,826 shares outstanding, respectively.		2,599			2,557
Additional paid-in capital		414,829			409,065
Unrealized gain on marketable securities		891			553
Accumulated deficit		(181,025	)		(31,145	)
Less: Treasury stock (2,547,500 shares), at cost		(11,761	)		(11,761	)
Total stockholders’ equity		225,533			369,269
Total liabilities and stockholders’ equity	$	463,989		$	483,039

The accompanying notes are an integral part of these consolidated financial statements.

31

LTX CORPORATION CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

	Year ended July 31,
	2002			2001			2000
Net sales	$	121,273		$	330,030		$	305,535
Cost of sales		96,006			177,034			161,078
Inventory related provision		42,200			12,800			—
Gross profit (loss)		(16,933	)		140,196			144,457
Engineering and product development expenses		71,102			65,987			50,582
Selling, general and administrative expenses		28,337			37,029			38,477
Reorganization costs		—			1,200			—
Income (loss) from operations		(116,372	)		35,980			55,398
Other income (expense):
Interest expense		(6,833	)		(1,250	)		(2,065	)
Interest income		7,048			9,144			5,188
Income (loss) before income taxes		(116,157	)		43,874			58,521
Provision (benefit) for income taxes		33,723			13,163			(20,214	)
Income (loss) before cumulative effect of change in accounting Principle		(149,880	)		30,711			78,735
Cumulative effect of change in accounting principle, net of applicable tax		—			9,566			—
Net income (loss)	$	(149,880	)	$	21,145		$	78,735
Net income (loss) before cumulative effect of a change in accounting principle, per share:
Basic	$	(3.08	)	$	0.64		$	1.84
Diluted	$	(3.08	)	$	0.62		$	1.70
Cumulative effect of a change in accounting principle, net of applicable tax, per share:
Basic		—		$	(0.20	)		—
Diluted		—		$	(0.19	)		—
Net income (loss) per share:
Basic	$	(3.08	)	$	0.44		$	1.84
Diluted	$	(3.08	)	$	0.43		$	1.70
Weighted-average common shares used in computing net income (loss) per share:
Basic		48,693			47,782			42,897
Diluted		48,693			49,634			46,201
Comprehensive income:
Net income (loss)	$	(149,880	)	$	21,145		$	78,735
Unrealized gain on marketable securities		338			553			—
Comprehensive income (loss)	$	(149,542	)	$	21,698		$	78,735

The accompanying notes are an integral part of these consolidated financial statements.

32

LTX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

	For the Three Years Ended July 31, 2002
	Common Stock			Additional Paid-In Capital		Unrealized Gain On Marketable Securities		Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
	Shares	Amount
Balance at July 31, 1999	36,185,040	$	1,936	$	199,778	$	—	$	(131,025	)	$	(11,761	)	$	58,928
Common stock offerings	9,173,270		459		179,091		—		—			—			179,550
Exercise of stock options	1,701,796		85		5,268		—		—			—			5,353
Tax benefit from the exercise of stock options	—		—		8,211		—		—			—			8,211
Conversion of subordinated debentures to common stock	405,984		20		7,178		—		—			—			7,198
Issuance of shares, under employees’ stock purchase plan	117,650		18		1,683		—		—			—			1,701
Net income	—		—		—		—		78,735			—			78,735
Balance at July 31, 2000	47,583,740		2,518		401,209		—		(52,290	)		(11,761	)		339,676
Exercise of stock options	632,667		32		3,346		—		—			—			3,378
Issuance of shares under employees’ stock purchase plan	139,419		7		2,120		—		—			—			2,127
Tax benefit from the exercise of stock options	—		—		2,390		—		—			—			2,390
Other comprehensive income	—		—		—		553		—			—			553
Net income	—		—		—		—		21,145			—			21,145
Balance at July 31, 2001	48,355,826		2,557		409,065		553		(31,145	)		(11,761	)		369,269
Exercise of stock options	626,088		32		3,447		—		—			—			3,479
Issuance of shares under employees’ stock purchase plan	203,048		10		2,244		—		—			—			2,254
Unrealized gain on marketable securities	—		—		—		338		—			—			338
Stock based compensation	—		—		73		—		—			—			73
Net loss	—		—		—		—		(149,880	)		—			(149,880	)
Balance at July 31, 2002	49,184,962	$	2,599	$	414,829	$	891	$	(181,025	)	$	(11,761	)	$	225,533

The accompanying notes are an integral part of these consolidated financial statements.

33

LTX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year ended July 31,
	2002			2001			2000
Cash Flows from Operating Activities:
Net income (loss)	$	(149,880	)	$	21,145		$	78,735
Add (deduct) non-cash items:
Depreciation and amortization		17,025			14,139			10,613
Cumulative effect of a change in accounting principle		—			9,566			—
Deferred tax (benefit) expense		33,896			(567	)		(21,200	)
Charge for inventory related provision		42,200			12,800			—
Net gain from Ando settlement		(778	)		—			—
Translation (gain) loss		15			777			(239	)
(Increase) decrease in:
Accounts receivable		2,520			61,743			(36,876	)
Inventories		(28,206	)		(41,629	)		(37,079	)
Prepaid expenses		19,282			(48,789	)		(4,418	)
Other assets		866			743			(1,268	)
Increase (decrease) in:
Accounts payable		9,997			(25,994	)		5,526
Accrued expenses and restructuring charges		1,673			(2,134	)		2,371
Deferred revenues and customer advances		(36,279	)		12,606			5,446
Net cash provided by (used in) operating activities		(87,669	)		14,406			1,611
Cash Flows from Investing Activities:
Minority investment		—			(9,326	)		—
Expenditures for property and equipment		(26,460	)		(47,333	)		(17,850	)
Purchases of marketable securities		(60,241	)		(53,978	)		—
Proceeds from sale of marketable securities		26,563			14,965			—
Net cash used in investing activities		(60,138	)		(95,672	)		(17,850	)
Cash Flows from Financing Activities:
Proceeds from stock plans:
Employees’ stock purchase plan		2,254			2,127			1,701
Exercise of stock options		3,479			3,378			5,353
Proceeds of equity offerings		—			—			179,550
Advances of short-term notes payable, net		1,970			3,175			3,917
Proceeds from convertible subordinated notes		145,219			—			—
Proceeds from lease financing		1,744			12,496			12,744
Payments of long-term debt		(3,663	)		(5,111	)		(141	)
Net cash provided by financing activities		151,003			16,065			203,124
Effect of exchange rate changes on cash		175			(676	)		152
Net increase (decrease) in cash and equivalents		3,371			(65,877	)		187,037
Cash and equivalents at beginning of year		141,096			206,973			19,936
Cash and equivalents at end of year	$	144,467		$	141,096		$	206,973
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$	3,971		$	1,196		$	2,556
Income taxes	$	1,169		$	2,087		$	1,359

The accompanying notes are an integral part of these consolidated financial statements.

34

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    THE COMPANY

LTX Corporation (“LTX” or the “Company”) designs, manufactures, and markets automatic test equipment for the semiconductor industry that is used to test system-on-a-chip, digital, analog, and mixed signal (a combination of digital and analog) integrated circuits (“ICs”). The Company’s Fusion product is a single test platform that can be configured to test system-on-a-chip devices, digital VLSI devices including microprocessors and microcontrollers, and analog/mixed signal devices. The Company also sells hardware and software support and maintenance services for its test systems. The semiconductors tested by the Company’s systems are widely used in the computer, communications, automotive and consumer electronics industries. The Company markets its products worldwide to manufacturers of system-on-a-chip, digital, analog and mixed signal ICs. The Company is headquartered, and has development and manufacturing facilities, in Westwood, Massachusetts, a development facility in San Jose, California, and worldwide sales and service facilities to support its customer base.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned domestic subsidiaries and wholly owned foreign subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Preparation of Financial Statements and Use of Estimates

The accompanying financial statements have been prepared by the Company, and reflect all adjustments, which, in the opinion of management, are necessary for fair statement of the results. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting periods.

Foreign Currency Translation

The financial statements of the Company’s foreign subsidiaries are translated in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 52, “Foreign Currency Translation”. The Company’s functional currency is the U.S. dollar. Accordingly, the Company’s foreign subsidiaries translate monetary assets and liabilities at year-end exchange rates while non-monetary items are translated at historical rates. Income and expense accounts are translated at the average rates in effect during the year, except for sales, cost of sales and depreciation, which are primarily translated at historical rates. Net realized and unrealized gains and losses resulting from foreign currency remeasurement and transaction gains and losses were a loss of $15,000, a loss of $777,000, and a gain of $239,000 in fiscal 2002, 2001 and 2000, respectively. Transaction gains and losses are included in the consolidated results of operations.

The Company accounts for its foreign currency forward contracts in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities measured at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedging relationship and, if it is, depending on the type of hedging

35

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

relationship. At July 31, 2002, the Company held foreign currency forward contracts with notional values totaling approximately $3.6 million, which have maturities prior to December 16, 2002. The aggregate fair value of our forward foreign exchange contracts outstanding at July 31, 2002 was immaterial. The net fair value is computed by subtracting the value of the contracts using the year-end forward rate (the notional value) from the value of the forward contracts computed at the contracted exchange rates.

Revenue Recognition

The Company changed its revenue recognition policy effective August 1, 2000, based on guidance provided in SEC Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements.” The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price is fixed or determinable and collectibility is reasonably assured.

The Company derives revenues from three sources – equipment sales, spare parts and service contracts. SAB 101 has no effect on the Company’s revenue recognition policy for spare parts or service contracts. For equipment sales there are different revenue recognition points under SAB 101, which are described as follows:

Acceptance:    For equipment sales to a new customer, existing products with new specifications and/or a new product, revenue is recognized upon customer acceptance.

Shipment and acceptance:    Equipment sales to existing customers, who have purchased the same equipment with the same customer-specified provisions in the past, are accounted for as multiple-element arrangement sales. If a portion of the payment is linked to product acceptance which is 20% or less, the revenue is deferred on only the percentage holdback until payment is received or written evidence of acceptance is delivered to the Company. If the portion of the holdback is greater than 20%, the full value of the equipment is deferred until payment is received or written evidence of acceptance is delivered to the Company.

Revenue related to spare parts is recognized on shipment. Revenue related to maintenance and service contracts is recognized ratably over the duration of the contracts. Service revenue totaled $34.4 million, or 28.3% of net sales, in fiscal 2002, $37.3 million, or 11.3% of net sales, in fiscal 2001, and $32.0 million, or 10.5% of net sales, in fiscal 2000. Revenue from engineering contracts are recognized over the contract period on a percentage of completion basis.

In accordance with guidance provided in SAB 101, the Company recorded on July 31, 2001 a non-cash charge of $9.6 million (after reduction for income taxes of $4.1 million), or ($0.19) per diluted share, to reflect the cumulative effect of the accounting change as of August 1, 2000.

Prior to fiscal 2001, the revenue recognition policy was to recognize revenue at the time the customer takes title to the product, generally at the time of shipment. The Company has no proforma data for fiscal years 2000 as the amounts are not readily determinable based on the nature of the revenue adjustments required by SAB 101. The Company’s quarterly fiscal 2001 results have been restated in Note 11. Revenue related to maintenance and service contracts was recognized ratably over the duration of the contracts.

Engineering and Product Development Costs

The Company expenses all engineering, research and development costs as incurred. Expenses subject to capitalization in accordance with the SFAS 86, “Accounting for the Costs of Computer Software To Be Sold, Leased or Otherwise Marketed”, relating to certain software development costs, were insignificant.

Income Taxes

In accordance with SFAS 109, “Accounting for Income Taxes,” the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement bases

36

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and the tax bases of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. Research and development tax credits are recognized for financial reporting purposes to the extent that they can be used to reduce the tax provision.

Accounting for Stock-Based Compensation

The Company has elected to account for its stock-based compensation plans following Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees” and related interpretations rather than the alternative fair value accounting provided under SFAS 123, “Accounting for Stock-Based Compensation.”

Accounting for Impairment of Long-Lived Assets

In accordance with SFAS 121, “Accounting for Impairment of Long-Lived Assets,” the Company will record impairment losses on long-lived assets used in operations when indicators of impairment are present. On an on-going basis, management reviews the value and period of amortization or depreciation of long-lived assets. Included in the long-lived assets is machinery, equipment, spare parts used for service, office furniture, office equipment and leasehold improvements. During this review, the Company reevaluates the significant assumptions used in determining the original cost of long-lived assets. Although the assumptions may vary from transaction to transaction, they generally include revenue growth, operating results, cash flows and other indicators of value. Management then determines whether there has been a permanent impairment of the value of long-lived assets based upon events or circumstances that have occurred since acquisition. The extent of the impairment amount recognized is based upon a determination of the fair value of the impaired asset.

Product Warranty Costs

The Company’s products are sold with warranty provisions that require the Company to remedy deficiencies in quality or performance of its products over a specified period of time at no cost to its customers. The Company establishes warranty reserves at levels that represent an estimate of the cost that will be incurred to fulfill those warranty requirements at the time that revenue is recognized.

Comprehensive Income

Comprehensive income is comprised of two components, net income and other comprehensive income. Other comprehensive income consists of unrealized gains and losses on the Company’s short term investments.

Net Income (Loss) per Share

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted income (loss) per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income (loss) by the weighted average number of common shares and all dilutive securities outstanding.

37

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation between basic and diluted earnings per share is as follows:

	Fiscal Year Ended July 31,
	2002			2001		2000
	(in thousands, except per share data)
Net income (loss)	$	(149,880	)	$	21,145	$	78,735
Basic EPS
Basic common shares		48,693			47,782		42,897
Basic EPS	$	(3.08	)	$	0.44	$	1.84
Diluted EPS
Basic common shares		48,693			47,782		42,897
Plus: impact of stock options and warrants		—			1,852		3,304
Diluted common shares		48,693			49,634		46,201
Diluted EPS	$	(3.08	)	$	0.43	$	1.70

Options to purchase 753,550, 498,125, and 30,125 shares of common stock were outstanding during the years ended July 31, 2002, 2001, and 2000, respectively, but were not included in the year to date calculation of diluted shares because either the options’ exercise price was greater than the average market price of the common shares during those periods, or the effect of including the options would have been anti-dilutive.

Cash Equivalents and Short Term Investments

The Company considers all highly liquid investments that are readily convertible to cash and that have original maturity dates of three months or less to be cash equivalents. Cash equivalents consist primarily of repurchase agreements, commercial paper. Short term investments consist primarily of debt securities that are classified as available-for-sale in accordance with the SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities”.

At July 31, 2002, cash balances of approximately $2.0 million were restricted from withdrawal. These funds served as collateral supporting letters of credit issued to a financial institution for leasing equipment and to a foreign vendor for inventory purchases.

Fair Value of Financial Instruments

SFAS 107, “Disclosures About Fair Value of Financial Instruments”, requires that disclosure be made of estimates of the fair value of financial instruments. The carrying amounts of certain of the Company’s financial instruments including cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short maturities. In accordance with SFAS 115 short term investments are carried at fair value. The fair value of the Company’s notes payable and long-term liabilities is estimated based on quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. At July 31, 2002 and 2001, the carrying value of $14,870,000 and $12,900,000, respectively, for short-term bank debt and $3,352,000 and $11,277,000, respectively, for long-term debt, including current portion, approximates fair value.

As of July 31, 2002, the estimated fair value of the Company’s convertible subordinated notes was approximately $106.7 million compared to the carrying value of $150.0 million. The estimated fair value of the convertible subordinated notes is based on the quoted market price of the notes on July 31, 2002.

38

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Concentration of Credit Risk

Revenue from four customers accounted for 64%, 71%, and 49% of total revenues in fiscal 2002, 2001, and 2000, respectively. Accounts receivable from these customers amounted to approximately $10.7 million and $6.8 million at July 31, 2002 and 2001, respectively. Sales to customers outside the United States were $63.5 million, or 52% of net sales, in fiscal 2002, $157.7 million, or 48% of net sales, in fiscal 2001 and $189.2 million, or 62% of net sales, in fiscal 2000.

Financial instruments, which potentially subject the Company to concentrations of credit risk, are cash equivalents, short-term investments and accounts receivable. All of the Company’s cash equivalents and short-term investments are maintained by major financial institutions. Concentration of credit risk with respect to accounts receivable is limited to certain customers to whom the Company makes substantial sales. To reduce risk, the Company routinely assesses the financial strength of its customers. The Company does not require collateral, although the Company will obtain a letter of credit on sales to certain foreign customers. Write-offs related to accounts receivable have been within management’s expectations.

Inventories

Inventories are stated at the lower of cost or market, cost being determined on the first-in, first-out method, and include materials, labor and manufacturing overhead. Inventories consist of the following:

	As of July 31,
	2002		2001
	(in thousands)
Raw materials	$	41,710	$	48,602
Work-in-process		30,495		33,986
Finished goods		22,947		14,107
	$	95,152	$	96,695

The Company is dependent on two semiconductor device manufacturers who are sole source suppliers of custom components for the Company’s products.

Prepaid Expense

Certain amounts in the prepaid expense balance relate to inventory capacity purchases and payments for projects not completed. The amount of prepaid expense that relates to cash deposits with suppliers against inventory commitments totaled $23.1 million as of July 31, 2002 and $43.9 million as of July 31, 2001. The inventory against these deposits will be delivered to the Company during fiscal 2003. There are no other cash commitments to prepay inventory purchases as of July 31, 2002. The completion of prepaid projects is expected to occur during fiscal 2003. As of July 31, 2002 amounts related to payments for projects are refundable.

Property and Equipment

Property and equipment is recorded at cost. The Company provides for depreciation and amortization on the straight-line method. Charges are made to operating expenses in amounts that are sufficient to amortize the cost of the assets over their estimated useful lives. Machinery, equipment and internal manufactured systems include spare parts used for service and LTX test systems used for testing components, engineering and applications development. Internally manufactured equipment is recorded at cost and depreciated over 3 to 7 years. Repairs

39

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and maintenance costs that do not extend the lives of property and equipment are expensed as incurred. Property and equipment are summarized as follows:

	As of July 31,						Depreciable Life in Years
	2002			2001
	(in thousands)
Machinery, equipment and internal manufactured systems	$	165,519		$	138,278		3-7
Office furniture and equipment		8,278			16,036		3-7
Leasehold improvements		13,880			13,861		10 or term of lease
		187,677			168,175
Less: Accumulated depreciation and amortization		(111,506	)		(101,436	)
	$	76,171		$	66,739

At July 31, 2002 and 2001, included in machinery and equipment is equipment acquired under capital leases of $5.1 million and $3.0 million, respectively. Accumulated depreciation related to those assets of $277.0 and $0 at July 31, 2002 and 2001, respectively.

Deferred Gain on Leased Equipment

The deferred gain from the sale and leaseback of equipment is recognized ratably over the term of the lease.

Reclassifications

Prior year financial statements have been reclassified to conform to the 2002 presentation. The reclassification had no impact on earnings for the prior periods.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (the “FASB”) issued SFAS 141 “Business Combinations” and SFAS 142, “Goodwill and Other Intangible Assets”. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. SFAS 142 is effective for financial statements issued after July 31, 2002. The adoption of SFAS 141 had no impact on the Company’s financial position, results of operations or cash flows. The adoption of SFAS 142 on August 1, 2002 will not result in any material impact on the Company’s financial statements.

In July 2001, the FASB issued SFAS 143, “Accounting for Asset Retirement Obligations”. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002 with early adoption permitted. The Company does not expect that the adoption of this standard will result in any material impact on its financial statements at this time.

In October 2001, the FASB issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived

40

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

assets and does not apply to goodwill or intangible assets that are not being amortized and certain other long-lived assets. This Statement supersedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” and the accounting and reporting provisions of APB Opinion No. 30 “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 with early adoption encouraged. The Company does not expect the adoption of this standard will result in any material impact on its financial statements at this time.

In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. This statement rescinds the following pronouncements: FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, FASB Statement No. 44, “Accounting for Intangible Assets of Motor Carriers” and FASB Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements”. This Statement amends FASB Statement No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions. This Statement also makes technical corrections to other existing authoritative pronouncements to clarify meanings, or describe their applicability under changed conditions. The Company adopted SFAS 145 effective August 1, 2001.

SFAS 145 provides that gains and losses from the extinguishment of debt be reported in ordinary operations. Accordingly, the Company recorded the gain from its settlement of litigation with Ando Electric Co., Ltd. (Ando) in February 2002, as a reduction in selling, general and administrative expense (see Note 9).

In July 2002, FASB issued SFAS 146, “Accounting for Cost Associated with Exit or Disposal Activities”. SFAS 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and nullifies Emerging Issues Task Force Issue No. 94-3. “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring)”. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe the adoption of this standard will result in any material impact on its financial statements at this time.

3.    NOTES PAYABLE

During the quarter ended July 31, 2002, the Company renegotiated its domestic credit facility with its existing lender. The new facility is comprised of a working capital line of $20.0 million and an equipment financing facility of $5.0 million, which is secured by all assets of the Company and bears interest at the bank’s prime rate. The working capital line will be used to support working capital obligations, issuance of standby letters of credit, and foreign exchange transactions. The equipment financing facility will be used to support the purchase of fixed assets. The facility imposes certain financial and other covenants. Outstanding borrowings at July 31, 2002 and 2001 were $14.9 million and $12.9 million, respectively, under the working capital credit facility. The interest rate was 4.75% and 6.75% for July 31, 2002 and 2001, respectively.

A second credit facility with another lender was established on April 30, 2001 as a revolving credit line for $30.0 million. This facility is secured by cash and bears interest (at the Company’s option) at either: (i) the greater of the federal funds rate plus 0.5% or the bank’s prime rate, in each case, minus 1.0% or (ii) LIBOR plus 0.4%. No amounts were outstanding under the facility at July 31, 2002 or 2001. This line supported letters of credit which totaled $2.0 million to a financial institution for leasing equipment and to a foreign vendor for inventory purchases.

41

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4.    LONG-TERM DEBT

Long-term debt consists of the following:

	As of July 31,
	2002			2001
	(in thousands)
Convertible subordinated notes	$	150,000		$	8,000
Lease purchase obligations at various interest rates, net of deferred interest		3,352			3,277
		153,352			11,277
Less:    current portion		(2,059	)		(5,293	)
	$	151,293		$	5,984

The convertible subordinated note payable as of July 31, 2001 bore interest at 5.5% and required semiannual principle and interest payments of $2.0 million. In February, 2002, the Company and the note holder (Ando) entered into an agreement providing for the dismissal, with prejudice, of all claims filed under an arbitration proceeding with the American Arbitration Association in San Jose, California. Under the terms of this agreement, in lieu of cash, Ando agreed to forgive $6 million of debt, which was the remaining balance of the note (see Note 9).

On August 8, 2001, the Company received net proceeds of $145.2 million from a private placement of $150 million par, 4.25% Convertible Subordinated Notes (“the Notes”) due 2006. The private placement was effected through a Rule 144A offering to qualified institutional buyers. Interest on the Notes is payable on February 15 and August 15 of each year, commencing February 15, 2002. The Notes are convertible into shares of our common stock at any time prior to the close of business on August 15, 2006, unless previously redeemed, at a conversion price of $29.04 per share, subject to certain adjustments. Prior to August 19, 2004, the Company may redeem any of the Notes at a certain redemption price, plus accrued interest, if the closing price of the common stock has exceeded 150% of the conversion price for at least 20 trading days in any consecutive 30-day trading period and certain other conditions are satisfied. On or after August 19, 2004, the Company may redeem any of the Notes at designated redemption prices, plus accrued interest. The Notes are unsecured and subordinated in right of payment in full to all existing and future senior indebtedness of the Company. Expenses associated with the offering of approximately $4.8 million are being amortized using the straight line method of depreciation, which approximates the effective interest method, over the term of the Notes. At July 31, 2002, the Company has reserved 5,165,289 shares of common stock for issuance relating to the Notes.

Lease purchase obligations of $3,352,000 and $3,277,000 at July 31, 2002 and July 31, 2001 represent capital leases of equipment.

42

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    INCOME TAXES

The components of the provision (benefit) for income taxes consist of the following:

	Year ended July 31,
	2002			2001		2000
	(in thousands)
Currently payable:
Federal	$	—		$	6,727	$	986
State		178			176		—
Foreign		(698	)		1,361		—
Total current		(520	)		8,264		986
Deferred:
Federal		30,006			4,400		(18,853	)
State		4,237			499		(2,347	)
Foreign		—			—		—
Total deferred		34,243			4,899		(21,200	)
Total tax provision (benefit)	$	33,723		$	13,163	$	(20,214	)

Reconciliations of the U.S. federal statutory rate to the Company’s effective tax rate are as follows:

	Year ended July 31,
	2002		2001		2000
U.S. Federal statutory rate	(35.0	)%	35.0	%	35.0	%
State income taxes, net of Federal income tax effect	(1.3	)	3.3		5.0
Change in valuation allowance	67.9		(2.3	)	(65.4	)
Tax credits	(2.4	)	(4.0	)	(5.1	)
Extraterritorial income exclusion	(0.2	)	(2.0	)	0.0
Other, net	(0.0	)	0.0		(4.0	)
Effective tax rate	29.0	%	30.0	%	(34.5	)%

The temporary differences and carryforwards that created the deferred tax assets and (liabilities) as of July 31, 2002, and 2001 are as follows:

	As of July 31,
	2002			2001
	(in thousands)
Deferred tax assets:
Net operating loss and tax credit carryforwards	$	52,024		$	13,810
Tax credits		16,077			13,287
Inventory valuation reserves		21,588			4,475
Restructuring charges		90			5,805
Deferred revenue		5,190			8,620
Other		6,583			3,796
Total deferred tax assets, net		101,552			49,793
Valuation allowance		(101,552	)		(15,897	)
Net deferred tax assets	$	—		$	33,896

43

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Compliance with SFAS 109 requires the Company to periodically evaluate the necessity of establishing or increasing a valuation allowance for deferred tax assets depending on whether it is more likely than not that a related benefit will be recognized in future periods. Because of the cumulative loss position of the Company at July 31, 2002 and the uncertainty of the timing of profitability in future periods, the Company increased its valuation allowance to 100% in the fourth quarter of fiscal 2002.

As of July 31, 2002, the Company has federal net operating loss carryforwards of $127,969,000, which expire in 2019 to 2022, and tax credit carryforwards of $16,077,000 which expire from 2004 to 2022. These net operating loss carryforwards include deductions of approximately $23,155,000 related to certain stock option exercises. The tax benefit from the net operating loss carryforwards related to the exercise of stock options will be recorded as an increase to additional paid in capital as these NOLs are utilized. State tax credits and carryforwards of $6,994,000 at July 31, 2002 expire from 2003 to 2017.

6.    STOCKHOLDERS’ EQUITY

Rights Agreement

The Company has a Rights Agreement whereby each common stock shareholder has one common share purchase right for each share of common stock held. The rights will become exercisable only if a person or group acquires 15% or more of the Company’s common stock or announces a tender offer that would result in ownership of 15% or more of the common stock. Initially, each right will entitle a stockholder to buy one share of common stock of the Company at a purchase price of $45.00 per share, subject to significant adjustment depending on the occurrence thereafter of certain events. Before any person or group has acquired 15% or more of the common stock of the Company, the rights are redeemable by the Board of Directors at $0.001 per right. The rights expire on April 30, 2009 unless redeemed by the Company prior to that date.

7.    EMPLOYEE BENEFIT PLANS

Stock Option Plans

The Company has three stock option plans: the 2001 Stock Plan (“2001 Plan”), the 1999 Stock Plan (“1999 Plan”) and the 1995 LTX (Europe) Ltd. Approved Stock Option Plan (“U.K. Plan”). The 2001 Plan, 1999 Plan, and the U.K. Plan provide for the granting of options to employees to purchase shares of common stock at not less than 100% of the fair market value at the date of grant. The 2001 Plan and 1999 Plan also provide for the granting of options to an employee, director or consultant of the Company or its subsidiaries to purchase shares of common stock at prices to be determined by the Board of Directors. Compensation expense relating to shares granted under this plan at less than fair market value has been charged to operations over the applicable vesting period. Options under the plans are exercisable over vesting periods, which typically have been three to four years from the date of grant. The Company has reserved 6,875,000 shares of common stock for issuance under the stock option plans. At July 31, 2002, 1,452,500 shares were subject to future grant under the 2001 Plan, 284,100 shares were subject to future grant under the 1999 Plan and 11,432 shares were subject to future grant under the U.K. Plan.

Compensation Expense

SFAS 123 requires employee stock-based compensation to be either recorded or disclosed at its fair value. As permitted by SFAS 123, the Company has elected to continue to account for employee stock-based compensation under Accounting Principles Board Opinion No. 25. Had compensation costs for awards in fiscal 2002, 2001, and 2000 under the Company’s stock-based compensation plans been determined based on the fair

44

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

value at the grant dates consistent with the method set forth under SFAS 123, the effect on the Company’s net income (loss) and net income (loss) per share would have been as follows:

	Year ended July 31,
	2002			2001		2000
	(in thousands except per share)
Net income (loss):
As reported	$	(149,880	)	$	21,145	$	78,735
Pro forma		(167,161	)		11,482		73,915
Net income (loss) per share:
Basic
As reported		(3.08	)		0.44		1.84
Pro forma		(3.43	)		0.24		1.72
Diluted
As reported		(3.08	)		0.43		1.70
Pro forma		(3.43	)		0.23		1.60

The fair value of each option grant is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions.

	Year ended July 31,
	2002		2001		2000
Volatility	86	%	91	%	86	%
Dividend yield	0	%	0	%	0	%
Risk-free interest rate	4.75	%	4.65	%	6.15	%
Expected life of options	8.65	years	5.77	years	4.82	years

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

45

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock Option Activity

	2002				2001				2000
	Number of Shares		WeightedAverage ExercisePrice		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Options outstanding, beginning of year	5,708,135		$	11.01	3,825,080		$	7.01	5,295,555		$	4.74
Granted	2,012,750			12.63	2,681,000			14.69	300,900			24.58
Exercised	(626,088	)		5.56	(632,667	)		5.35	(1,701,796	)		3.16
Forfeited	(537,055	)		14.12	(165,278	)		11.75	(69,579	)		4.93
Options outstanding, end of year	6,557,742			12.00	5,708,135			11.01	3,825,080			7.01
Options exercisable	2,670,353			9.21	1,697,382			6.48	1,455,023			4.90
Options available for grant	1,748,032				1,030,926				1,338,087
Weighted average fair value of options granted during year			$	10.54			$	11.20			$	17.33

As of July 31, 2002, the status of the Company’s outstanding and exercisable options is as follows:

Options Outstanding			Options Exercisable
Range of Exercise Price ($)	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price ($)	Number Exercisable	Weighted Average Exercise Price ($)
0.00—4.63	746,451	5.5	3.02	685,201	2.93
4.64—9.25	1,242,338	6.1	7.81	1,242,338	7.81
9.26—13.88	3,031,850	8.6	12.22	373,836	13.20
13.89—18.50	1,041,703	8.0	15.55	249,753	15.82
18.51—23.13	295,500	8.3	21.23	40,000	21.19
23.14—27.75	48,000	9.0	26.05	—	—
27.76—32.38	16,500	5.2	28.34	4,125	28.34
32.39—37.00	38,200	7.3	33.63	21,550	33.63
37.01—41.63	37,500	7.6	37.75	20,625	37.75
41.64—46.25	59,700	7.6	46.25	32,925	46.25
	6,557,742	7.6	12.00	2,670,353	9.21

Employees’ Stock Purchase Plan

Under the Company’s Employee Stock Purchase Plan (“Purchase Plan”), eligible employees may contribute up to 15% of their annual compensation for the purchase of common stock of the Company up to $25,000 of fair market value of the stock per calendar year. The Purchase Plan limits the number of shares that can be issued over the term of the plan to 3,000,000 shares. At July 31, 2002, 828,853 shares were available for future issuance under this Purchase Plan.

Other Compensation Plans

The Company has established a Profit Sharing Bonus Plan, wherein a percentage of pretax profits are distributed semi-annually to all employees. Under the Profit Sharing Bonus Plan, the Company distributed to all

46

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

eligible employees approximately $0, $3,019,000, and $3,227,000, for fiscal years 2002, 2001, and 2000, respectively.

The Company has a 401(k) Growth and Investment Program (“401(k) Plan”). Eligible employees may make voluntary contributions to the 401(k) Plan through a salary reduction contract up to the statutory limit or 15% of their annual compensation. The Company matches employees’ voluntary contributions, up to certain prescribed limits. Company contributions vest at a rate of 20% per year. The Company suspended the match as of June of fiscal year 2001. The total charge to expense under this plan was approximately $0, $2,057,000, and $1,780,000, for fiscal 2002, 2001, and 2000, respectively.

8.    INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION

The Company operates predominantly in one industry segment: the design, manufacture and marketing of automated test equipment for the semiconductor industry that is used to test system-on-a-chip, digital, analog and mixed signal integrated circuits.

In fiscal year 2002, sales to two customers accounted for 45% and 11% of net sales, respectively. In fiscal year 2001, sales to three customers accounted for 26%, 22% and 12% of net sales, respectively. In fiscal year 2000, sales to three customers accounted for 19%, 13% and 11% of net sales, respectively. Sales to the top ten customers were 86%, 87% and 74%, of net sales in fiscal 2002, 2001, and 2000, respectively.

Service revenue, consisting of sales of replacement and spare parts and labor charges, totaled $34.4 million, or 28.3% of net sales, in fiscal 2002, $37.3 million, or 11.3% of net sales, in fiscal 2001, and $32.0 million, or 10.5% of net sales, in fiscal 2000.

The Company’s operations by geographic segment for the three years ended July 31, 2002 are summarized as follows:

	Year ended July 31,
	2002		2001		2000
	(in thousands)
Sales to unaffiliated customers:
United States	$	57,757	$	172,285	$	116,375
Taiwan		7,066		33,438		55,620
Japan		11,519		12,964		8,030
Singapore		30,560		65,927		67,545
All other countries		14,371		45,416		57,965
Total sales to unaffiliated customers	$	121,273	$	330,030	$	305,535
Long-lived assets:
United States	$	52,658	$	51,131	$	30,847
Taiwan		3,954		2,878		915
Japan		41		53		53
Singapore		12,540		6,968		3,290
All other countries		6,978		5,709		3,048
Total long-lived assets	$	76,171	$	66,739	$	31,942

Transfer prices on products sold to foreign subsidiaries are intended to produce profit margins that correspond to the subsidiary’s sales and support efforts. Sales to customers in North America are 100% within the United States.

47

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9.    COMMITMENTS AND LEGAL MATTERS

The Company has operating lease commitments for certain facilities and equipment and capital lease commitments for certain equipment. Minimum lease payments net of sublease proceeds under noncancelable leases at July 31, 2002, are as follows:

Year ended July 31,	Real Estate		Equipment		Total Operating Leases		Total Capital Leases
	(in thousands)
2003.	$	4,283	$	9,207	$	13,490	$	2,194
2004.		3,995		5,942		9,937		1,297
2005.		3,756		2,799		6,555		109
2006		3,628		2,443		6,071		—
2007		2,788		19		2,807		—
Thereafter		394		—		394		—
Total minimum lease payments	$	18,844	$	20,410	$	39,254		3,600
Less:    amount representing interest								248
Present value of total capital leases							$	3,352

Total rental expense for fiscal 2002, 2001, and 2000 was $15,468,871, $12,666,722, and $8,879,000, respectively.

The Company has an agreement with a bank to sell certain of its trade receivables without recourse. During fiscal year 2002, approximately $8.1 million of receivables were sold under this arrangement. The total amount available under the facility at July 31, 2002 was $10.2 million.

The Company had various commercial relationships with Ando Electric Co., Ltd. (Ando), a Japanese test equipment manufacturer, since 1993 when Ando was a subsidiary of NEC. In 1994, Ando loaned the Company $20 million, of which $6 million remained outstanding as of January 31, 2002. This indebtedness was scheduled to mature in July 2003. In 1998, the Company entered into a six year development, manufacturing and marketing agreement with Ando (the “Fusion Agreement”) pursuant to which the Company granted Ando exclusive rights to manufacture and sell Fusion in Japan, but retained exclusive rights to manufacture and sell Fusion to certain customers in Japan and to manufacture and sell Fusion outside of Japan. The Company also granted Ando a license to develop Fusion improvements for certain specific purposes, and, subject to certain conditions, a license to use, manufacture and sell these improvements in Japan. The Company was granted rights to use, improve and modify these Ando improvements outside Japan. Ando is required to pay quarterly royalties on sales of Fusion in Japan.

In fiscal 2002, Yokogawa Electric Corporation, a Japanese manufacturer of semiconductor test equipment, announced the acquisition of most of NEC’s interest in Ando. On May 18, 2001, the Company served Ando with a Demand for Arbitration pursuant to the Fusion Agreement. The Company asserted claims for breach of contract, breach of fiduciary duty, unfair competition and other claims arising out of Ando’s conduct. Ando filed an answer and counterclaims to the Company’s demand for arbitration.

In fiscal 2002, the Company and Ando Electric Co., Ltd. entered into an agreement providing for the dismissal, with prejudice, of all claims filed under the arbitration proceedings pending with the American Arbitration Association in San Jose, California. Under the terms of this agreement, Ando has forgiven certain

48

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

loan and other debt obligations totaling approximately $7 million and has agreed to certain continuing supply and support obligations for customers in Japan for a transition period. Except for these continuing obligations, the obligations of the parties under the Fusion Agreement and other related agreements have been terminated. In connection with the termination of obligations of the parties under the Fusion Agreement, Ando has also forgiven contractual obligations totaling $1.7 million. At the end of the transition period, the Company will continue to supply and support former Ando customers in Japan. An accrual of $7.9 million was recorded for anticipated expenses associated with this transition period.

10.    RESTRUCTURING AND INVENTORY CHARGES

During the fiscal year 2002, the Company recorded a $42.2 million inventory related provision. Of the $42.2 million, $38.7 million of the provision relates to excess inventory principally due to sharp decline in semiconductor test system orders. The remaining $3.5 million relates to excess inventory previously transferred to a third party reseller.

In fiscal 2001, the Company selected Jabil Circuit, Inc. to build its Fusion test systems. The manufacturing transition plan was implemented over the next 12 months and resulted in approximately a 15 percent reduction in permanent LTX employee headcount. In connection with this transition plan the Company recorded a $12.8 million inventory related provision and $1.2 million of reorganization costs in the fourth quarter of fiscal 2001.

The $12.8 million inventory related provision consisted of two categories. The first category was a $9.4 million inventory charge to cost of sales relating to non-Fusion components and subassemblies. Included in the $9.4 million write down was a provision for $2.5 million that related to Delta/STE inventory that was transferred to the Company’s third party reseller of Delta/STE products. The provision was established due to lack of demand for Delta/STE legacy products. The remaining $6.9 million of the $9.4 million inventory charge was a write down of non-Fusion components included in LTX inventory that was anticipated to have no usage over the following twenty-four months. As a result of the transition of the Company’s manufacturing operations to Jabil Circuit, the Company has limited capacity to convert non-Fusion inventory into finished product for resale. In addition, due to the semiconductor industry slowdown, the Company anticipated significant reduction in demand for non-Fusion products, which may become technologically obsolete by the Company’s next generation Fusion products.

The second category was a $3.4 million charge, which represented a write down of Fusion product printed circuit boards. These boards required substantial reworking to make them usable in active production with Jabil Circuit. The Company had limited internal operations and capability to rework these boards during the transition.

49

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The $1.2 million of reorganization costs represented employee separation costs which were accrued at July 31, 2001. The workforce reduction impacted 123 employees, of which 117 were in Production & Engineering and 6 were in administration. All amounts were paid in fiscal 2002.

Restructuring Cost

($000’s)

Charges: (See Note)	From the Pre-Fiscal 1996 Plan		From the Fiscal 2001 Plan
Employee separation cost	$	1,900	$	1,200
Termination of leases and other contractual obligations		12,500		—
Total	$	14,400	$	1,200

Restructuring Cost

($000’s)

Charges: (See Note)	From the Pre-Fiscal 1996 Plan	From the Fiscal 2001 Plan
Accrual balance at July 31, 2000	513	—
Restructuring reserve	—	1,200
Accrual balance at July 31, 2001	513	1,200
Cash charges	225	1,200
Accrual balance at July 31, 2002	228	—

50

LTX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.    QUARTERLY RESULTS OF OPERATIONS (unaudited)

	Year Ended July 31, 2002
	First Quarter			Second Quarter(1)			Third Quarter			Fourth Quarter(2)
	(In thousands, except per share data)
Net sales	$	33,003		$	27,585		$	28,055		$	32,630
Gross profit		9,613			(37,757	)		4,757			6,454
Net income (loss)		(9,397	)		(37,840	)		(12,328	)		(90,315	)
Net income (loss) per share:
Basic		(0.19	)		(0.78	)		(0.25	)		(1.84	)
Diluted		(0.19	)		(0.78	)		(0.25	)		(1.84	)
	Year Ended July 31, 2001
	First Quarter			Second Quarter(1)			Third Quarter			Fourth Quarter(2)
	(In thousands, except per share data)
Net sales as previously reported	$	101,647		$	104,662		$	65,596		$	65,551
Effect of change in accounting principle		(3,677	)		(4,774	)		1,025			—
As restated in first three quarters and reported in fourth quarter	$	97,970		$	99,888		$	66,621		$	65,551
Gross profit as previously reported	$	49,090		$	50,520		$	28,072		$	16,435
Effect of change in accounting principle		(2,188	)		(2,591	)		858			—
As restated in first three quarters and reported in fourth quarter	$	46,902		$	47,929		$	28,930		$	16,435
Net income/(loss) as previously reported	$	17,360		$	17,861		$	3,191		$	(4,958	)
Effect of change in accounting principle		(1,530	)		(1,814	)		601			—
Cumulative effect of change in accounting principle		(9,566	)		—			—			—
As restated in first three quarters and reported in fourth quarter	$	6,264		$	16,047		$	3,792		$	(4,958	)
Net income/(loss) per basic share
Earnings per share before cumulative effect of change in accounting principle as previously reported	$	0.36		$	0.38		$	0.07		$	(0.10	)
Effect of change in accounting principle		(0.03	)		(0.04	)		0.01			—
As restated in first three quarters and reported in fourth quarter		0.33			0.34			0.08			(0.10	)
Cumulative effect of change in accounting principle		(0.20	)		—			—			—
Earnings after cumulative effect of change in accounting principle	$	0.13		$	0.34		$	0.08		$	(0.10	)
Net income/(loss) per diluted share
Earnings per share before cumulative effect of change in accounting principle as previously reported	$	0.35		$	0.36		$	0.06		$	(0.10	)
Effect of change in accounting principle		(0.04	)		(0.04	)		0.01			—
As restated in first three quarters and reported in fourth quarter		0.31			0.32			0.07			(0.10	)
Cumulative effect of change in accounting principle		(0.19	)		—			—			—
Earnings after cumulative effect of change in accounting principle	$	0.12		$	0.32		$	0.07		$	(0.10	)

(1) Includes a provision for excess and obsolete inventory of $42.2 million.

(2) Includes a tax provision of $78.8 million related to an increase in the valuation allowance for deferred tax assets.

12.    SUBSEQUENT EVENT

On August 22, 2002, the Company reduced its workforce by 94 employees. A $2.0 million severance charge will be recorded in the Company’s quarter ending October 31, 2002.

51

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of LTX Corporation:

We have audited the accompanying consolidated balance sheet of LTX Corporation as of July 31, 2002, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 15(a) for the year ended July 31, 2002. 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 audit. The financial statements and schedule of LTX Corporation for the years ended July 31, 2001 and 2000, were audited by other auditors who have ceased operations and whose report dated August 27, 2001, expressed an unqualified opinion on those statements and included an explanatory paragraph that disclosed the change in the Company’s method of accounting for revenue recognition on certain product shipments through the adoption of Staff Accounting Bulletin No. 101 “Revenue Recognition in Financial Statements” discussed in Notes 2 and 11 to these financial statements.

We conducted our audit in accordance with auditing standards generally accepted in the 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 audit provides a reasonable basis for our opinion.

In our opinion, the 2002 consolidated financial statements referred to above present fairly, in all material respects the consolidated financial position of LTX Corporation at July 31, 2002, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the year ended July 31, 2002, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Boston, Massachusetts

August 26, 2002

52

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

On April 3, 2002, the Company filed a Current Report on Form 8-K reporting under Item 4—changes in Registrant’s Certifying Accountant that the Board of Directors replaced Arthur Andersen LLP as LTX’s independent public accountants and engaged Ernst & Young LLP to serve as LTX’s independent public accountants for its fiscal year ending July 31, 2002.

PART III

Items 10-13. Directors and Executive Officers of the Registrant, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management and Certain Relationships and Related Transactions

Information required under these Items is included in the Proxy Statement for the Annual Meeting of Stockholders to be held on December 10, 2002, under the headings “Certain Stockholders”, “Election of Directors,” and “Compensation of Executives,” which information is incorporated herein by reference. Such Proxy Statement shall be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company’s fiscal year, July 31, 2002.

Item 14.     Controls and Procedures

Not applicable.

PART IV

Item 15.     Exhibits, Financial Statement Schedules and Reports on Form 8-K

(A)    1.   Financial Statements

The following consolidated financial statements of the Company included in the Company’s Annual Report to Stockholders for the fiscal year ended July 31, 2002, are included in Item 8, herein.

Report of Independent Auditors

Consolidated Balance Sheets—July 31, 2002 and 2001

Consolidated Statements of Operations and Comprehensive Income for the years ended July 31, 2002, 2001 and 2000

Consolidated Statements of Stockholders’ Equity for the years ended July 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended July 31, 2002, 2001 and 2000

Notes to the Consolidated Financial Statements

(A)    2.   Schedules

Consolidated financial statement Schedule II for the Company is included in Item 15(d). All other schedules for which provision is made in the applicable security regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

53

(A)    3. Exhibits

Certain of the exhibits listed hereunder have previously been filed with the Commission as exhibits to the Company’s Registration Statement No. 2-75470 on Form S-1 filed December 23, 1981, as amended (the 1981 Registration Statement); to the Company’s Registration Statement No. 2-94218 on Form S-1 filed November 8, 1984, as amended (the 1984 Registration Statement); to the Company’s Registration Statement No. 33-35401 on Form S-4 filed June 26, 1990, as amended (the 1990 Registration Statement No. 1); to the Company’s Registration Statement No. 33-39610 on Form S-3 filed June 10, 1991, as amended (the 1991 Registration Statement No. 1); to the Company’s Amendment No. 1 to Registration Statement No. 33-62125 on Form S-3 filed September 11, 1995 (the 1995 Registration Statement No. 1); to the Company’s Form 8A/A filed September 30, 1993 amending the Company’s Registration Statement on Form 8-A filed November 24, 1982 (the 1993 8A/A); to the Company’s Current Reports on Form 8-K filed May 11, 1989 and April 3, 2002; the Company’s Annual Reports on Form 10-K for one of the years ended July 31, 2001, 1998, 1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987, 1986, 1985, 1984 and 1983; or the Company’s Quarterly Reports on 10-Q for one of the quarters ended October 31, 1997, January 31, 1998, April 30, 1998, January 31, 1999, October 31, 1999 and January 31, 2000, April 30, 2001 and January 31, 2002 and are hereby incorporated by reference. The location of each document so incorporated by reference is noted parenthetically.

(A)     Listing of Exhibits

(3) (A)	—Articles of Organization, as amended. (Exhibit 3.1 to the 1995 Registration Statement No. 1)
(3) (B)	—By-laws, as amended. (Exhibit 3(B) to the Quarterly Report on Form 10-Q for the quarter ended October 31, 1997)
(4) (C)	—Rights Agreement. (Exhibit I of the Registrant’s Current Report on Form 8-K, filed May 3, 1999)
(4) (D)	—Indenture dated as of August 8, 2001 between LTX Corporation and State Street Bank & Trust Company as Trustee (Exhibit 4(D) to the Annual Report on Form 10-K)
(4) (E)	—Registration Rights Agreement dated as of August 8, 2001 among LTX Corporation, Morgan Stanley & Co., Incorporated, Deutsche Banc Alex Brown and Needham & Company, Inc. (Exhibit (E) to the Annual Report on Form 10-K)
(10) (B)+	—1990 Stock Option Plan. (Exhibit 10(B) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 1998)
(10) (D)+	—1993 Employees’ Stock Purchase Plan. (Exhibit 10(D) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 1999)
(10) (E)+	—1983 Non-Qualified Stock Option Plan. (Exhibit 10(E) to the 1983 Annual Report on Form 10-K)
(10) (F)	—LTX Corporation 401(k) Adoption Agreement, Retirement Plan and Trust Agreement
(10) (I)	—Lease dated as of March 8, 1984 relating to land and building at McCandless Park, San Jose, California. (Exhibit 10(I) to the 1984 Registration statement)
(10) (J)	—Lease dated as of July 16, 1984 relating to Company’s administration facility on Rosemont Avenue, Westwood, Massachusetts. (Exhibit 10(J) to the 1984 Registration Statement)
(10) (K)	—Lease dated as of February 27, 1985 relating to land and building at McCandless Park, San Jose, California. (Exhibit 10(K) to the 1985 Annual Report on Form 10-K)
(10) (M)	—Lease dated as of November 26, 1980 relating to Company’s facility at 5 Rosemont Avenue, Westwood, Massachusetts, and Amendment dated as of April 29, 1982, and Third Amendment and Restatement of Lease dated April 29, 1982. (Exhibit10(M) to the 1993 Annual Report on Form 10-K)
(10) (M)(i)	—Fourth Amendment to Lease dated as of September 1, 1999 (Exhibit 10(M)(i) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2000)
(10) (R)*	—License and Development Agreement dated as of January 28, 1993 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(R) to the 1993 Annual Report on Form 10-K)

54

(10) (R)*	—License and Development Agreement dated as of January 28, 1993 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(R) to the 1993 Annual Report on Form 10-K)
(10) (S)*	—Distribution and Supply Agreement dated as of January 28, 1993 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(S) to the 1993 Annual Report on Form 10-K)
(10) (T)*	—Letter Agreement dated as of January 29, 1993 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(T) to the 1993 Annual Report on Form 10-K)
(10) (U)	—Amended and Restated Loan and Security Agreement dated as of July 24, 2002 and Loan Modification Agreement thereto between LTX Corporation and Silicon Valley Bank
(10) (V)	—Loan Agreement dated as of July 20, 1994 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(V) to the 1994 Annual Report on Form 10-K)
(10) (W)*	—Amendment No. 1 to License and Development Agreement dated as of July 20, 1994 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(W) to the 1994 Annual Report on Form 10-K)
(10) (X)	—Employment Agreement dated as of January 1, 1997 between LTX Corporation and Kenneth E. Daub. (Exhibit 10(X) to the 1997 Annual Report on Form 10-K)
(10) (Y)	—Form of Change of Control Agreement entered into with certain executive officers as of March 2, 1998 (Exhibit 10 (Y) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 1998)
(10) (AA)*	—Fusion Agreement dated as of April 24, 1998 between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10 (AA) to the Quarterly Report on Form 10-Q for the quarter ended April 30, 1998)
(10) (BB)	—Second Amendment to Loan Agreement between LTX Corporation and Ando Electric Co., Ltd. (Exhibit 10(BB) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 1999)
(10) (CC)	—1999 Stock Plan (Exhibit 10 (CC) to the Quarterly Report on Form 10-Q for the quarter ended October 31, 1999)
(10) (DD)	—Credit Agreement dated as of April 30, 2001 between LTX Corporation and Citizens Bank of Massachusetts (Exhibit 10 (EE) to the Quarterly Report on Form 10-Q for the quarter ended April 30, 2001)
(10) (FF)	—2001 Stock Plan (Exhibit 10(FF) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2002)
(10) (GG)	—Deferred Compensation Plan effective as of December 1, 2001 (Exhibit 10(GG) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2002)
(10) (M)(ii)	—Termination Agreement dated as of December 20, 2001 relating to Company’s facility at 5 Rosemont Avenue, Westwood, Massachusetts (Exhibit 10(M(ii) to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2002)
(16) (A)	—Letter dated April 3, 2002 from Arthur Andersen LLP (Exhibit 16 to the Current Report on Form 8-K filed April 3, 2002)
(22)	—Subsidiaries of Registrant
(23) (A)	—Consent of Ernst & Young LLP
(23) (B)	—Information regarding Consent of Arthur Andersen LLP

+ This exhibit is a compensatory plan or arrangement in which executive officers or directors of the Company participate.

* Confidential treatment requested as to certain portions thereof. The confidential portion has been omitted and filed separately with the Commission.

Pursuant to Item 601 of Regulation S-K, certain instruments with respect to long-term debt not exceeding 10% of the total assets of the Company and its subsidiaries on a consolidated basis are not filed herewith. The Company hereby agrees to furnish to the Commission a copy of each such instrument upon request.

55

Item 15(b).     Reports on Form 8-K

The Company did not file any reports on Form 8-K during the fourth quarter of fiscal 2002.

Item 15(c).     Exhibits

Exhibit 22—Subsidiaries of Registrant

Company
LTX (Europe) Limited	United Kingdom	100%
LTX International Inc., Domestic International Sales Corporation (DISC)	Delaware	100%
LTX (Deutschland) GmBH	West Germany	100%
LTX France S.A.	France	100%
LTX Test Systems Corporation	Delaware	100%
LTX (Italia) S.r.	Italy	100%
LTX (Foreign Sales Corporation) B.V.	The Netherlands	100%
LTX Asia International, Inc.	Delaware	100%
LTX Israel Limited	Israel	100%
LTX (Malaysia) SDN.BHD.	Malaysia	100%

The subsidiaries listed are all included in the consolidated financial statements of the Company.

Item 15(d)

SCHEDULE II

LTX CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

For Years Ended July 31, 2002, 2001 and 2000

(in thousands)

Description	Balance at beginning of period		Charged to expense		Amounts Written off			Balance at end of period
Reserve for sales returns, allowances and doubtful accounts
July 31, 2002	$	3,659	$	1,449	$	(1,529	)	$	3,579
July 31, 2001	$	3,648	$	2,857	$	(2,846	)	$	3,659
July 31, 2000	$	2,027	$	2,490	$	(869	)	$	3,648
Reserve for other accounts receivable
July 31, 2002	$	2,500	$	3,500	$	6,000		$	0
July 31, 2001	$	0	$	2,500	$	0		$	2,500
July 31, 2000	$	0	$	0	$	0		$	0
Accrued restructuring charges
July 31, 2002	$	1,713	$	0	$	(1,488	)	$	225
July 31, 2001	$	2,263	$	1,200	$	(1,750	)	$	1,713
July 31, 2000	$	2,263	$	0	$	0		$	2,263

56

SIGNATURES

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

LTX CORPORATION
By:	/s/    ROGER W. BLETHEN
	Roger W. Blethen Chairman of the Board and Chief Executive Officer

October 29, 2002

Pursuant to the requirements of the Securities and 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.

/s/    ROGER W. BLETHEN         Roger W. Blethen	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	October 29, 2002
/s/    MARK J. GALLENBERGER          Mark J. Gallenberger	Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)	October 29, 2002
/s/    DANIEL V. WALLACE          Daniel V. Wallace	Controller, (Principal Accounting Officer)	October 29, 2002
/s/    MARK S. AIN         Mark S. Ain	Director	October 29, 2002
/s/    ROBERT J. BOEHLKE          Robert J. Boehlke	Director	October 29, 2002
/s/    RICHARD S. HILL          Richard S. Hill	Director	October 29, 2002
/s/    STEPHEN M. JENNINGS          Stephen M. Jennings	Director	October 29, 2002
/s/    ROGER J. MAGGS          Roger J. Maggs	Director	October 29, 2002
/s/    ROBERT E. MOORE          Robert E. Moore	Director	October 29, 2002
/s/    SAMUEL RUBINOVITZ          Samuel Rubinovitz	Director	October 29, 2002

57

CERTIFICATIONS

I, Roger W. Blethen, certify that:

1. I have reviewed this annual report on Form 10-K of LTX Corporation;

2. Based on my knowledge, this annual 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 are made, not misleading with respect to the period covered by this annual report; and

3. Based on my knowledge, the financial statements and other financial information included in this annual 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 annual report.

October 29, 2002

/s/    ROGER W. BLETHEN        

Roger W. Blethen

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

I, Mark J. Gallenberger, certify that:

1. I have reviewed this annual report on Form 10-K of LTX Corporation;

2. Based on my knowledge, this annual 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 are made, not misleading with respect to the period covered by this annual report; and

3. Based on my knowledge, the financial statements and other financial information included in this annual 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 annual report.

October 29, 2002

/s/    MARK J. GALLENBERGER        

Mark J. Gallenberger

Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

58

EX-10.(F)

                                                                   Exhibit 10(F)

                      Prototype 401(k) Adoption Agreement,
                      Retirement Plan, and Trust Agreement

                                                     T. Rowe Price Trust Company














                                                            [T. Rowe Price Logo]



T. ROWE PRICE TRUST COMPANY
PROTOTYPE 401(k) ADOPTION AGREEMENT, RETIREMENT PLAN, AND
TRUST AGREEMENT

TABLE OF CONTENTS

I.       401 (k) Retirement Plan Adoption Agreement .........   1
II.      GUST Transition Optional Supplement ................  22
III.     EGTRRA Adoption Agreement ..........................  25
IV.      Prototype 401(k) Retirement Plan Document ..........  29
V.       EGTRRA Amendment ...................................  88
VI.      401(k) Retirement Plan Trust Agreement .............  92
VII.     IRS Opinion Letter ................................. 101






                            IMPORTANT INSTRUCTIONS:

  Sections I - III need to be completed, signed, and returned to T. Rowe
  Price. Please keep a copy of the sections that you return to T. Rowe Price.
               Sections IV - VII are for your reference and files.



                          T. ROWE PRICE TRUST COMPANY

                             401(k) RETIREMENT PLAN
                               ADOPTION AGREEMENT



Name of Employer: LTX Corporation


Address: LTX Park at University Avenue
         Westwood, Massachusetts 02090


Phone No: (781) 467-5327


Plan Contact: Jill Barres


                                       1



T. ROWE PRICE
TRUST COMPANY
401(k) RETIREMENT PLAN
ADOPTION AGREEMENT

This is the Adoption Agreement for defined contribution plan #001 of basic plan
document #03, which is a combined prototype section 401(k)/profit sharing
defined contribution plan. (Prior to the amendment and restatement of this plan
document and adoption agreement, the plan document was T. Rowe Price Trust
Company basic plan document #01.) This Adoption Agreement may be used only in
conjunction with basic plan document #03.

Note:  Before executing this Adoption Agreement, the Employer should consult
       with a tax adviser or attorney. This plan may not meet the Employer's
       requirements for continued plan qualification. In addition, failure to
       properly complete this Adoption Agreement may result in plan
       disqualification.

The Employer hereby establishes a section 401(k) plan and a trust for such plan
upon the respective terms and conditions contained in the section 401(k)
prototype plan #03 and the Trust Agreement to the plan and appoints as
Trustee(s) of such trust the person(s) who has(have) executed this Adoption
Agreement evidencing his/her/its/their acceptance of such appointment.

The Plan and Trust Agreement shall be supplemented and modified by the terms and
conditions contained in the Adoption Agreement and any supplements thereto and
shall be effective on the date(s) specified herein.

After the Employer has notified T. Rowe Price Trust Company it has adopted the
prototype plan, T. Rowe Price Trust Company will inform the Employer of any
amendments made to the prototype plan or the discontinuance or abandonment of
the prototype plan after T. Rowe Price Trust Company receives such notice and
until the earlier of (i) the date the Employer notifies T. Rowe Price Trust
Company it has ceased to use this prototype plan or (ii) the date the Plan's
asset records are not kept by T. Rowe Price Trust Company or any affiliate of T.
Rowe Price Trust Company.

1.       Plan Data.
         (Complete 1.1 or 1.2, and complete 1.3)

         1.1 New Plan.

             (a) Name of Plan:

                 ---------------------------------------------------------------
                 (Please print or type complete, legal name of the Plan)

             (b) Effective Date of the Plan:
                                             -----------------------------------
                                             (month/day/year)

             (c) Plan Year End:
                                ------------------------------------------------
                                (month/day)

         1.2 If this is an amendment of existing plan, complete the following:

             (a) Name of Existing Plan:
                 LTX Corporation Growth and Investment Program
                 ---------------------------------------------------------------
                 (Please print or type complete, legal name of the Plan)

             (b) Initial Effective Date of Plan:        10/01/1995
                                                 -------------------------------

             (c) Effective Date of Amended Plan (complete (1) or (2))

                 (1) If the plan is being amended and restated to
                 comply with GUST (the 1994-1998 laws - GATT, USERRA,
                 SBJPA, TRA'97 and IRSRRA - that require plan
                 amendments):

                 01/01/1997
                 ---------------------------------------------------------------
                 Effective Date of Amendment (month/day/year)

                 (If the Plan's initial effective date was on or before January
                 1, 1997, enter the first day of the Plan Year beginning in
                 1997. If the Plan's initial effective date was after December
                 31, 1996, enter the Plan's initial effective date.)

                                       2



          (2) If the Plan is not being amended to comply with GUST:

              ------------------------------------------------------------------
              Effective Date of Amendment (month/day/year)

              (Usually, this is the first day of the Plan Year in which the
              amendment is effective.)

Note: The provisions of a cash or deferred arrangement may be made effective as
      of the first day of the Plan Year in which the cash or deferred
      arrangement is adopted, but a salary deferral mechanism may not be adopted
      retroactively.

      (d) Plan Year End:    12/31
                         -------------------------------------------------------
                         (month/day)


1.3 Plan Number:    001
                 ---------------------------------------------------------------
                 (3 digits)

2. Employer Data.



         2.1 Employer:        LTX Corporation
                       ---------------------------------------------------------
                        (Print or type complete legal name of business)

             Employer shall also mean any Employer(s) associated with the
             Employer named above under section 414(b), 414(c) or 414(m) of the
             Code.
                   -------------------------------------------------------------



         2.2 Employer's Taxable Year End:   07/31
                                          --------------------------------------


         2.3 Employer's Tax ID #:   04-2594045
                                  ----------------------------------------------

         2.4 The Employer is: [X] a corporate entity.
                              [ ] a non-corporate entity.
                              [ ] a corporation electing Subchapter S treatment.

3. Crediting of Service.

     3.1  For purposes of determining eligibility to participate, Early
          Retirement Age (if applicable) and vesting, service shall be credited
          based on the following method (Choose (a) or (b)):

          (a) [X] Elapsed Time. Under this method, service is measured from
                  date of employment with the Employer to date of termination of
                  employment with the Employer and a period of service shall
                  include any period of severance of less than 12 consecutive
                  months. (Plan Section 1.19)

          (b) [ ] Hours of Service. Under this method, a year of service is a
                  12 consecutive month period during which the Employee
                  completes at least 1,000 Hours of Service. (Plan Section 1.30)
                  Complete (1) and (2).

               (1)  Hours of Service will be determined on the basis of the
                    method selected below. Only one method may be selected. The
                    method selected will be applied to all Employees.

                    (A) [ ] On the basis of actual hours for which an
                            Employee is paid or entitled to payment by the
                            Employer.

                    (B) [ ] On the basis of days worked for the Employer. An
                            Employee will be credited with ten Hours of Service
                            if under Plan Section 1.30 such Employee would be
                            credited with at least one Hour of Service during
                            the day.

                    (C) [ ] On the basis of weeks worked for the Employer. An
                            Employee will be credited with 45 Hours of Service
                            if under Plan Section 1.30 such Employee would be
                            credited with at least one Hour of Service during
                            the week.

                    (D) [ ] On the basis of semimonthly payroll periods worked
                            for the Employer. An Employee will be credited with
                            95 Hours of Service if under Plan Section 1.30 such
                            Employee would be credited with at least one Hour of
                            Service during the semimonthly payroll period.

                                       3



                 (E)[ ] On the basis of months worked for the Employer. An
                        Employee will be credited with 190 Hours of Service if
                        under Plan Section 1.30 such Employee would be credited
                        with at least one Hour of Service during the month.

               (2)  Twelve Consecutive Month Period.

                    (A) Vesting. For purposes of determining vesting, a Year of
                        Vesting Service is a Plan Year in which an Employee
                        completes at least 1,000 Hours of Service. (Plan Section
                        1.59)

                    (B) Eligibility. For purposes of determining eligibility to
                        participate in the Plan (Years of Eligibility Service),
                        the initial eligibility computation period is the twelve
                        consecutive month period beginning on the day an
                        Employee first performs an Hour of Service for the
                        Employer. (Plan Section 1.58) The following twelve
                        consecutive month periods shall begin on (choose one):

                        [ ] The first anniversary of the date an Employee
                            first performs an Hour of Service for the Employer.

                        [ ] The first day of each Plan Year beginning after
                            the date the Employee first performs

3.2 Service with predecessor Employer. (Plan Section 2.3) Complete (a) or (b)

Note: If this is a continuation of a predecessor plan, service under the
      predecessor plan must be counted.

      (a) [X] No credit will be given for service with a predecessor Employer.

      (b) [ ] Credit will be given for service with the following predecessor
              Employer(s):

Note:  If this is not a continuation of a predecessor plan, service with a
       predecessor employer must be limited as provided in accordance with the
       provisions of regulation section 1.401(a)(4)-5(a)(3).

4. Eligibility.

Note:  If the period of time selected is or includes a fractional year, an
       Employee will not be required to complete any specified number of Hours
       of Service to receive credit for such fractional year even if the
       Employer elected in Section 3 of this Adoption Agreement to credit
       service using the Hours of Service method.

4.1  Participation Requirements. All Employees shall be eligible to participate
     in this Plan in accordance with the provisions of Article II of the Plan,
     except the following (Plan Section 2.3):

     [ ] Employees who have not attained age _____ (cannot be later than 21);

     [ ] Employees who have not completed _____ months (not to exceed 12
         months) of service;

     [ ] Employees who have not completed one Year of Eligibility Service
         (Hours of Service method);

     [ ] Employees included in a unit of Employees covered by a collective
         bargaining agreement, if retirement benefits were the subject of good
         faith bargaining between the Employer and employee representatives.
         Employee representatives do not include any organization more than half
         of whose members are Employees who are owners, officers or executives
         of the Employer;

     [ ] Employees who are nonresident aliens and who receive no earned income
         from the Employer which constitutes income from sources within the
         United States;

     [ ] Employees included in the following job classifications:
         [ ] Hourly
         [ ] Employees; Salaried Employees;


                                       4



        [X] Leased Employees;

        [X] Other class or classes of Employees:

              Cooperative students and interns, and temporary or seasonal
              ------------------------------------------------------------------
              employees who are hired for less than a 12-month period
              ------------------------------------------------------------------

               (Note: that these classifications cannot be based on age or
               service and must be based on specific objective criteria that are
               not subject to Employer discretion. An exclusion of "part-time"
               Employees is not permissible.)

           [ ] Employees of the following Employers aggregated under section
               414(b), 414(c) or 414(m) of the Code:

            --------------------------------------------------------------------

            --------------------------------------------------------------------

            --------------------------------------------------------------------

     Note: If no entries are made above, all Employees shall be eligible to
           participate in the Plan on the earlier of the Effective Date or the
           Entry Date coincident with or next following the date of employment.

     4.2  The Entry Dates shall be (choose one): (Plan Section 1.25)

          (a)[ ] the first day of each Plan Year and the first day of the
                 seventh month in each Plan Year.

          (b)[ ] the first day of each Plan Year and the first day of each
                 quarter thereafter.

          (c)[ ] the first day of each Plan Year and the first day of each
                 month thereafter.

          (d)[X] the date on which the eligibility requirements of the Plan,
                 if any are applicable, are met.

5. Compensation. (Plan Section 1.13)

     Note: Do not complete this Section 5 of this Adoption Agreement if the Plan
           is intended to be a "safe harbor" cash or deferred arrangement. If
           the Plan is a "safe harbor" cash or deferred arrangement, check this
           box [ ] and complete Section 9 of this Adoption Agreement.

     5.1  Subject to the following provisions of this Section of the Adoption
          Agreement, for purposes of determining contributions and allocations
          to a Participant's Account, Compensation will mean a Participant's
          (choose one):

          (a)[X] W-2 earnings (including salary deferrals); or

          (b)[ ] Compensation as that term is defined in section 415 of the
                 Code; or

          (c)[ ] Wages as defined in section 3401(a) of the Code.

          For the Plan Year but excluding the following:

               Profit Sharing Bonus Plan payments
- --------------------------------------------------------------------------------

     Note: If this Plan has a Discretionary Profit Sharing Contribution
           allocation formula that is integrated with Social Security (Plan
           Section 5.1(b)), Compensation must be defined as W-2 earnings,
           compensation as defined in section 415 of the Code or wages as
           defined in section 3401(a) of the Code; no exclusions are allowed.

     5.2   Compensation for a Plan Year will mean

          (a)[X] Compensation paid to the Employee by the Employer during
                 the entire Plan Year.

          (b)[ ] Compensation paid to the Employee by the Employer only during
                 that portion of the Plan Year during which the Employee was
                 eligible to participate in the Plan.


                                       5


6. Participant Contributions.

     6.1.  Elective Deferrals. (Plan Section 3.2(b)) Complete (a) or (b).

          (a)[ ] Elective Deferrals are not permitted.

          (b)[X] A Participant may elect to defer an amount up to 15% of his
                 or her Compensation paid during a pay period.

     Notwithstanding the foregoing, Elective Deferrals made on behalf of a
     Participant for a Plan Year shall not exceed $________. (If the immediately
     preceding sentence is not completed, only the percentage limit will apply
     to Elective Deferrals.)

     6.2.  Employee After-Tax Contributions. (Plan Section 3.2(a)) Complete (a)
           or (b).

          (a)[X] Employee After-Tax Contributions are not permitted.

          (b)[ ] A Participant may make Employee After-Tax Contributions to
                 the Plan in an amount up to ____% of his or her Compensation
                 paid during a pay period.

     Notwithstanding the foregoing, Employee After-Tax Contribution made on
     behalf of a Participant for a Plan Year shall not exceed $______. (If the
     immediately preceding sentence is not completed, only the percentage limit
     will apply to Employee After-Tax Contributions.)

     Note: Even if this is a "safe harbor" cash or deferred arrangement,
           Employee After-Tax Contributions are always subject to the ACP Test.

     6.3   Combined Limits on Participant Contributions

           If the Employer elects 6.1(b) and 6.2(b), above, a Participant's
           aggregate Elective Deferrals and Employee After-Tax Contributions for
           a pay period may not exceed ____% of his or her Compensation paid
           during a pay period.

     Note: If the Plan is intended to qualify as a "safe harbor" cash or
           deferred arrangement, each Participant must be able to make Elective
           Deferrals in an amount that is at least sufficient for the
           Participant to receive the maximum amount of safe harbor matching
           contributions available under the Plan. For instance, if the Employer
           elects the Safe Harbor Matching Contribution in Section 9 of this
           Adoption Agreement, a Participant must have the ability to make
           Elective Deferrals up to at least 5% of Total Compensation as defined
           in Section 9.1 of this Adoption Agreement.

     6.4  Rollovers. (Plan Section 3.2(c)) Complete (a) or (b).

          (a)[ ] The Plan does not accept rollovers.

          (b)[X] The Plan accepts rollovers.

     6.5  Participant-Directed Plan-to-Plan Transfers. (Plan Section 3.2(d))
          Choose one.

          (a)[X] The Plan does not accept Participant-directed plan-to-plan
                 transfers.
          (b)[ ] The Plan accepts Participant-directed plan-to-plan transfers.

7. Employer Contributions.

   Do not complete this Section 7 of this Adoption Agreement if this Plan is
   intended to be a "safe harbor" cash or deferred arrangement. If this Plan is
   intended to be a "safe harbor" cash or deferred arrangement, check this box
   [ ] and complete Section 9 of this Adoption Agreement.

     7.1  Matching Contributions. (Plan Section 3.3(a))

          (a) Matching Contributions. Complete (1) or (2)

              (1)[X] shall be made to the Plan. The type of Matching
                     Contribution shall be (choose (A) or (B)):

                    (A)[ ] Mandatory (Complete (b)(1) and (d) below)

                    (B)[X] Discretionary (Complete (b)(2) and (d) below)


                                       6



     (2)[ ] shall not be made to Plan. (If this subparagraph (2) is elected, do
            not complete the following paragraphs (b), (c) or (d)).

(b) Matching Contribution Formula. (Complete (1) or (2))

     (1)  Mandatory Matching Contribution. (Complete (A) and/or (B). If both (A)
          and (B) are completed, complete (C).)

          (A)[ ] Match on Elective Deferrals. The Employer shall contribute
                 and allocate to each eligible Participant's Matching
                 Contributions subaccount an amount equal to ____% of the
                 Participant's Elective Deferrals up to ____% of the
                 Participant's Compensation.

                 Notwithstanding the foregoing, the Matching Contribution made
                 on behalf of an eligible Participant for the Plan Year with
                 respect to Elective Deferrals shall not exceed $____. (If the
                 immediately preceding sentence is not completed, only the
                 percentage limitation will apply to Matching Contributions.)

          (B)[ ] Match on Employee After-Tax Contributions. The Employer shall
                 contribute and allocate to each eligible Participant's Matching
                 Contribution subaccount an amount equal to ____% of the
                 Participant's Employee After-Tax Contributions up to ____% of
                 the Participant's Compensation.

                 Notwithstanding the foregoing, the Matching Contribution made
                 on behalf of an eligible Participant for the Plan Year with
                 respect to Employee After-Tax Contributions shall not exceed
                 $____. (If the immediately preceding sentence is not completed,
                 only the percentage limitation will apply to Matching
                 Contributions.)

          (C)[ ] Match on Elective Deferrals and Employee After-Tax
                 Contributions. If the Employer makes Matching Contributions
                 with respect to both Elective Deferrals and Employee After-Tax
                 Contributions, choose (i) or (ii).

                 (i) [ ] Matching Contributions shall be limited only as
                         provided in (A) and (B) above.

                 (ii)[ ] In addition to any limitations on Matching
                         Contributions described above, for purposes of
                         calculating such Matching Contributions, the total of
                         an eligible Participant's Elective Deferrals and
                         Employee After-Tax Contributions shall be treated as
                         not exceeding ____% of the Participant's Compensation.

                  Notwithstanding the foregoing, the Matching Contribution made
                  on behalf of an eligible Participant with respect to the
                  Participant's total Elective Deferrals and Employee After-Tax
                  Contributions for the Plan Year shall not exceed $____. (If
                  the immediately preceding sentence is not completed, only the
                  percentage limitation(s) will apply to Matching Contributions
                  made with respect to Elective Deferrals and Employee After-Tax
                  Contributions.)

     (2)  Discretionary Matching Contributions (Complete (A) and/or (B). If both
          (A) and (B) are completed, complete (C).)

          (A)[X] Discretionary Match on Elective Deferrals. The Employer may
                 make discretionary Matching Contributions from Plan Year to
                 Plan Year as it deems advisable. Such discretionary Matching
                 Contributions, if made, shall be equal to a specified
                 percentage of each eligible Participant's Elective Deferrals,
                 except that the Employer may establish a limit (expressed
                 either as a uniform dollar amount or percentage of
                 Compensation) on the amount of Elective Deferrals which shall
                 be matched.

          (B)[ ] Discretionary Match on Employee After-Tax Contributions. The
                 Employer may make discretionary Matching Contributions from
                 Plan Year to Plan Year as it deems advisable. Such
                 discretionary Matching Contributions, if made, shall be equal
                 to a specified percentage of each Participant's Employee
                 After-Tax Contributions, except that the Employer may establish
                 a limit (expressed either as a uniform dollar amount or
                 percentage of Compensation) on the amount of Employee After-Tax
                 Contributions which shall be matched.


                                       7



          (C)[ ] Discretionary Match on Elective Deferrals and Employee
                 After-Tax Contributions. If the Employer makes discretionary
                 Matching Contributions with respect to both Elective Deferrals
                 and Employee After-Tax Contributions, choose (i) or (ii).

               (i) [ ] Discretionary Matching Contributions shall be limited
                       only as provided in (A) and (B) above.

               (ii)[ ] In addition to any limitations on discretionary Matching
                       Contributions described above, for purposes of
                       calculating the amount of discretionary Matching
                       Contributions, such discretionary Matching Contributions,
                       if made, shall be equal to a specified percentage of the
                       total of a Participant's Elective Deferrals and Employee
                       After-Tax Contributions, which may be treated as not
                       exceeding a uniform dollar amount or percentage of
                       Compensation.

(c)  Eligibility for Matching Employer Contributions. A Participant shall be
     eligible to receive a Matching Contribution (whether mandatory or
     discretionary) for a Plan Year only if (choose one):

     (1)[ ] For a plan using the Hours of Service method of crediting service,
            (i) his employment with the Employer terminates during the Plan Year
            by reason of death, retirement on or after Early Retirement Age, if
            applicable, or Normal Retirement Age, or Total and Permanent
            Disability, or (ii) he completes at least 1,000 Hours of Service
            during the Plan Year and is employed by the Employer on the last day
            of the Plan Year.

     (2)[ ] For a plan using the Hours of Service method of crediting service,
            he completes at least 1,000 Hours of Service during the Plan Year.

     (3)[ ] For a plan using the Hours of Service method of crediting service,
            (i) his employment with the Employer terminates during the Plan Year
            by reason of death, retirement on or after Early Retirement Age, if
            applicable, or Normal Retirement Age, or Total and Permanent
            Disability, or (ii) he completes at least 1,000 Hours of Service
            during the Plan Year.

     (4)[ ] (i) His employment with the Employer terminates during the Plan
            Year by reason of death, retirement on or after Early Retirement
            Age, if applicable, or Normal Retirement Age, or Total and Permanent
            Disability, or (ii) he is employed by the Employer on the last day
            of the Plan Year.

     (5)[ ] He is employed by the Employer on the last day of the Plan Year.

     (6)[X] He was a Participant in the Plan at any time during the Plan Year.

Note: If the Employer selects (1), (4) or (5) above, the Employer may not make
      any Matching Contribution for a Plan Year until after the end of the Plan
      Year. If the Employer selects (2) or (3) above, the Employer may not make
      a Matching Contribution for a Plan Year until that Participant has
      satisfied the requirements of (2) or (3), as applicable, during such Plan
      Year.

     (d)  Period for Calculating Matching Contributions. For purposes of
          calculating the amount of Matching Contributions, such calculations
          shall be performed on the basis of a Participant's Elective Deferrals
          and/or Employee After-Tax Contributions made and Compensation paid
          (choose one):

          (1)[ ] During each payroll period.

          (2)[X] During the Plan Year (or, if 5.2(b) is elected above, during
                 that portion of the Plan Year during which the Participant was
                 eligible to participate in the Plan).

Note: If the Employer selects (2), the Employer may make Matching Contributions
      on a per payroll period basis. After the end of the Plan Year, the
      Employer must also perform the calculation on a Plan Year basis to
      determine if additional Matching Contributions must be made for the Plan
      Year.


                                       8



7.2  Discretionary Profit Sharing Contributions. (Plan Section 3.3(b))

     (a) Discretionary Profit Sharing Contributions (choose (1) or (2))

         (1)[ ] Shall not be made to the Plan.

         (2)[X] May be made to the Plan each Plan Year as determined by the
                Employer.

     Complete (b) and (c) only if the immediately preceding box is selected.

     (b) Eligibility for Discretionary Profit Sharing Contributions. A
         Participant shall be eligible to share in the allocation of
         Discretionary Profit Sharing Contributions for a Plan Year only if
         (choose one):

         (1)[ ] For a plan using the Hours of Service method of crediting
                service, (i) his employment with the Employer terminates during
                the Plan Year by reason of death, retirement on or after Early
                Retirement Age, if applicable, or Normal Retirement Age, or
                Total and Permanent Disability, or (ii) he completes at least
                1,000 Hours of Service during the Plan Year and is employed by
                the Employer on the last day of the Plan Year.

         (2)[ ] For a plan using the Hours of Service method of crediting
                service, he completes at least 1,000 Hours of Service during the
                Plan Year.

         (3)[ ] For a plan using the Hours of Service method of crediting
                service, (i) his employment with the Employer terminates during
                the Plan Year by reason of death, retirement on or after Early
                Retirement Age, if applicable, or Normal Retirement Age, or
                Total and Permanent Disability, or (ii) he completes at least
                1,000 Hours of Service during the Plan Year.

         (4)[ ] (i) His employment with the Employer terminates during the
                Plan Year by reason of death, retirement on or after Early
                Retirement Age, if applicable, or Normal Retirement Age, or
                Total and Permanent Disability, or (ii) he is employed by the
                Employer on the last day of the Plan Year.

         (5)[X] He is employed by the Employer on the last day of the Plan
                Year.

         (6)[ ] He was a Participant in the Plan at any time during the Plan
                Year.

Note: The Employer may not allocate any Discretionary Profit Sharing
      Contribution for a Plan Year until after the end of the Plan Year.

      (c) Allocation of Discretionary Profit Sharing Contributions. (Complete
          (1) or (2). If the Employer maintains any other plan in addition to
          this Plan, only one plan may provide for permitted disparity (i.e.,
          integration with Social Security).)

         (1)[X] Nonintegrated - Discretionary Profit Sharing Contributions for
                a Plan Year shall be allocated to the Discretionary Profit
                Sharing Contribution subaccount of all Participants eligible for
                an allocation of such contribution in the ratio in which each
                such eligible Participant's Compensation for such Plan Year
                bears to the Compensation of all such eligible Participants for
                such Plan Year.

         (2)[ ] Integrated - Discretionary Profit Sharing Contributions for a
                Plan Year shall be integrated with Social Security and allocated
                in accordance with the provisions of Plan Section 5.1(b). The
                Plan's Integration Level shall be (choose (A) or (B)):

            (A)[ ] The Social Security Taxable Wage Base.

            (B)[ ] ____% (not to exceed 100%) of the Social Security Taxable
                   Wage Base.

Note: If the Employer maintains any other plan in addition to this Plan, only
      one plan may be integrated with Social Security.

                                       9



8. ADP and ACP Nondiscrimination Testing.

   Note: This Section does not apply in any Plan Year the Plan is a safe harbor
         cash or deferred arrangement.

   8.1 First Plan Year

      (a) ADP Test - The plan document provides that for the first Plan Year the
          Plan permits any Participant to make Elective Deferrals, the prior
          year's ADP of Non-Highly Compensated Employees shall be 3% unless the
          Employer checks the box below. (Plan Section 3.6(a))

      [ ] If this box is checked, and if this is not a successor plan, for the
          first Plan Year this Plan permits any Participant to make Elective
          Deferrals, the ADP used in the ADP Test for Participants who are
          Non-Highly Compensated Employees shall be such first Plan Year's ADP
          of such Non-Highly Compensated Employees.

   Note: The Employer may not check this box if the Employer has elected Current
         Year Testing.

      (b) ACP Test - The plan document provides that for the first Plan Year the
          Plan permits any Participant to make Employee After-Tax Contributions
          or provides for Matching Contributions, the prior year's ACP of
          Non-Highly Compensated Employees shall be 3% unless the Employer
          checks the box below. (Plan Section 3.7(a))

      [ ] If this box is checked, and if this is not a successor plan, for the
          first Plan Year this Plan permits any Participant to make Employee
          After-Tax Contributions, or provides for Matching Contributions, or
          both, the ACP used in the ACP test for Participants who are Non-Highly
          Compensated Employees shall be such first Plan Year's ACP for such
          Non-Highly Compensated Employees.

   Note: The Employer may not check this box if the Employer has elected Current
         Year Testing.

   8.2 Current Year Testing. (Sections 3.6(a) and 3.7(a))

      [ ] If this box is checked, the Plan is using Current Year Testing for
          purposes of the ADP and ACP tests.

   Note: Once the Employer has elected Current Year Testing, the Employer cannot
         elect out of Current Year Testing unless (i) the Plan has been using
         Current Year Testing for the preceding five Plan Years or, if lesser,
         the number of Plan Years the Plan has been in existence, or (ii) the
         Plan otherwise meets one of the conditions specified in IRS Notice 98-1
         (or superceding guidance) for changing from Current Year Testing.

   8.3 Determining Highly Compensated Employees.

      (a) Top Paid Group Election. (Plan Section 1.29)

      [ ] In determining who is a Highly Compensated Employee, the Employer
          makes a top-paid group election by checking this box. The effect of
          this election is that an Employee (who is not a Five Percent Owner at
          any time during the determination year or the look-back year) with
          compensation in excess of $80,000 (as adjusted) for the look-back year
          is a Highly Compensated Employee only if the Employee was in the
          top-paid group for the look-back year.

      (b) Calendar Year Data Election. (Plan Section 1.29)

      [ ] In determining who is a Highly Compensated Employee (other than a
          Five Percent Owner), the Employer makes a calendar year data election
          by checking this box. The effect of this election is that the
          look-back year is the calendar year beginning with or within the
          look-back year.

   Note: If both of these elections are made, the look-back year in determining
         the top-paid group must be the calendar year beginning with or within
         the look-back year. If either election is made, the election(s) must
         apply consistently to the determination years of all plans of the
         Employer, except that (i) the consistency requirement does not apply to
         determination years beginning in 1997, and (ii) for determination years
         beginning in 1998 and 1999, satisfaction of the consistency requirement
         is determined without regard to any nonretirement plan of the Employer.


                                       10



   8.4 Testing Compensation. (Plan Section 3.1(j))

       For purposes of applying the ADP and ACP Tests, Testing Compensation will
       mean any definition of compensation permitted under section 414(s) of the
       Code and will mean (choose (a) or (b)):

       (a)[X] Testing Compensation paid to the Employee by the Employer during
              the entire Plan Year.

       (b)[ ] Testing Compensation paid to the Employee by the Employer only
              during that portion of the Plan Year during which the Employee was
              eligible to participate in the Plan.

9. Safe Harbor CODA Provisions.

   Note: Complete this Article if the Plan is intended to be a "safe harbor"
         cash or deferred arrangement.

   9.1 Compensation. Complete both (a) and (b) below. (Plan Section 1.52)

       For purposes of determining Safe Harbor Matching Contributions, Safe
       Harbor Nonelective Contributions and ACP Test Only Safe Harbor Matching
       Contributions, Total Compensation shall be used.

      (a) Total Compensation will mean a Participant's (choose one):

         (1)[ ] W-2 earnings (including salary deferrals).

         (2)[ ] Compensation as that term is defined in section 415 of the
                Code.

         (3)[ ] Wages as defined in section 3401(a) of the Code.

      (b) Total Compensation for a Plan Year will mean (choose one):

         (1)[ ] Total Compensation paid to the Employee by the Employer during
                the entire Plan Year.

         (2)[ ] Total Compensation paid to the Employee by the Employer only
                during that portion of the Plan Year during which the
                Participant was eligible to participate in the Plan.

   9.2 Type of Employer Safe Harbor Contribution. (Choose (a) or (b)) (Plan
       Section 4.2)

   Note: Formulas (a)(1) and (a)(2) automatically satisfy both the ADP and ACP
         Tests for a Plan Year if no other Matching Contributions are made
         during the Plan Year.

         Formula (b) (Safe Harbor Nonelective Contribution) automatically
         satisfies the ADP Test for a Plan Year. If the Employer would like to
         make a matching contribution in addition to the Safe Harbor Nonelective
         Contribution, the ACP Test Only Safe Harbor Matching Contribution
         automatically satisfies the ACP test for the Plan Year if no other
         matching contributions are made during the Plan Year.

         Regardless of what type of safe harbor contribution the Employer makes
         to the Plan, Employee After-Tax Contributions are always subject to the
         ACP Test. If the Employer makes any type of matching contributions in
         addition to matching contributions in formulas (a) or (b), the matching
         contributions are subject to the ACP Test using Current Year Testing.

         Safe Harbor Matching Contributions and Safe Harbor Nonelective
         Contributions are immediately nonforfeitable. ACP Test Only Safe Harbor
         Matching Contributions may be subject to a vesting schedule.

        (a) Safe Harbor Matching Contribution. (Choose (1) or (2))

         (1)[ ] Safe Harbor Basic Matching Contribution. The Employer shall
                contribute and allocate to each Participant's Safe Harbor
                Matching Contribution subaccount an amount equal to 100% of the
                Participant's Elective Deferrals up to 3% of the Participant's
                Total Compensation (as determined in accordance with Section
                9.1(a) above), plus 50% of the Participant's Elective Deferrals
                from 3% to 5% of the Participant's Total Compensation.

         (2)[ ] Safe Harbor Enhanced Matching Contribution. The Employer shall
                contribute and allocate to each Participant's Safe Harbor
                Matching Contribution subaccount an amount equal to ____% (must
                be at least 100%) of the Participant's Elective Deferrals up to
                ____% (must be at least 4% and cannot be more than 6%) of the
                Participant's Total Compensation.


                                       11



(b) Safe Harbor Nonelective Contribution. If the Employer selects (1), it may
elect (2).

         (1)[ ] Safe Harbor Nonelective Contribution. The Employer shall
                contribute and allocate to each Participant's Safe Harbor
                Nonelective Contribution subaccount an amount equal to 3% of the
                Participant's Total Compensation for the Plan Year, regardless
                of whether the Participant has made contributions to the Plan
                during such Plan Year.

         (2)    ACP Test Only Safe Harbor Matching Contribution. In addition to
                the Safe Harbor Nonelective Contribution, the Employer may elect
                to make the following ACP Test Only Safe Harbor Matching
                Contribution (which automatically satisfies only the ACP Test):

                [ ] The Employer shall contribute and allocate to each
                    Participant's ACP Test Only Safe Harbor Matching
                    Contribution subaccount an amount equal to ____% of the
                    Participant's Elective Deferrals up to ____% (cannot be more
                    than 6%) of the Participant's Total Compensation.

   9.3 Calculation of Safe Harbor Matching Contributions and ACP Test Only Safe
       Harbor Matching Contributions. For purposes of calculating the amount of
       Safe Harbor Matching Contributions and ACP Test Only Safe Harbor Matching
       Contributions, such calculations shall be performed on the basis of a
       Participant's Elective Deferrals made and Total Compensation paid (choose
       one):

       (a)[ ] During each payroll period.

       (b)[ ] During the Plan Year (or, if 9.1(b)(2) is elected above, during
              the portion of the Plan Year during which the Participant was
              eligible to participate in the Plan).

   Note: Safe Harbor Nonelective Contributions must be calculated on the basis
         of Total Compensation paid during the Plan Year (or, if 9.1(b)(2) is
         elected above, during that portion of the Plan Year during which the
         Participant was eligible to participate in the Plan).

10. Vesting and Forfeitures.

      10.1 Vesting of Certain Employer Contribution Accounts. (Plan Section 7.2)

           All Participant contribution subaccounts are 100% vested. Safe Harbor
           Matching Contribution and Safe Harbor Nonelective Contribution
           subaccounts are immediately 100% vested.

           Matching Contribution (including ACP Test Only Safe Harbor Matching
           Contribution) and Discretionary Profit Sharing Contribution
           subaccounts are vested in accordance with the following schedule.
           (Complete (a), (b) or (c)) If no schedule below is selected, a
           Participant shall be immediately 100% vested in all portions of his
           Account.

                                                                 Discretionary
                                                Matching        Profit Sharing
                                               Contributions     Contributions

           (a) 100% full and immediate              [ ]               [ ]
           (b) 5-year cliff (or graded)             [ ]               [ ]
               after 1 Year of Vesting Service         %                 %
               after 2 Years of Vesting Service        %                 %
               after 3 Years of Vesting Service        %                 %
               after 4 Years of Vesting Service        %                 %
               after 5 Years of Vesting Service     100%              100%


                                       12





                                                                   
(c)  7-year graded                                                  [X]     [X]
     after 1 Year of Vesting Service                                20%      20%
     after 2 Years of Vesting Service                               40%      40%
     (must be at least 20%) after 3 Years of Vesting Service        60%      60%
     (must be at least 40%) after 4 Years of Vesting Service        80%      80%
     (must be at least 60%) after 5 Years of Vesting Service       100%     100%
     (must be at least 80%) after 6 Years of Vesting Service       100%     100%
     after 7 Years of Vesting Service                              100%     100%


Note: For purposes of vesting, Matching Contributions includes ACP Test Only
      Safe Harbor Matching Contributions.

10.2 Forfeitures. Forfeitures shall be allocated in accordance with the
     provisions of Section 5.5 of the Plan. To the extent provided in such
     Section, forfeitures of unvested Employer Contributions shall be (choose
     (a) or (b)):

     (a)[X] used to reduce Matching Contributions and/or Safe Harbor
            Contributions.

     (b)[ ] allocated among other Participants in accordance with the provisions
            of Section 5.5(f) of the Plan.

11. Loans. (Plan Article VIII)

     11.1 [ ] will not be permitted.

     11.2 [X] will be permitted up to 50% (not more than 50%) of the
              Participant's vested account balance.

12. In-Service Withdrawals.

     12.1 Hardship Distributions (Plan Section 9.3)

          (a)  Hardship distributions

               (1)[ ] will not be permitted.

               (2)[X] will be permitted.

          (b)  Hardship distributions may be made from

               (1)[ ] Elective Deferral subaccounts only.

               (2)[X] Elective Deferral, vested Employer Matching Contribution
                    and vested Discretionary Profit Sharing Contribution
                    subaccounts.

Note: Hardship distributions of Qualified Non-Elective Contribution, Qualified
      Matching Contribution and Safe Harbor Contribution subaccounts are not
      allowed. For purposes of vesting, Matching Contributions includes ACP Test
      Only Safe Harbor Matching Contributions.

     12.2 Age 59 1/2. In-service distributions after age 59 1/2(Plan Section
          9.4)

          (a) [X] will not be permitted.

          (b) [ ] will be permitted.

     12.3 Retirement Age. In-service distributions to Participants who have
          reached Early or Normal Retirement Age (Plan Section 9.2)

     (a)[ ] shall not be permitted except to the extent hardship and/or age 59
          1/2 in-service distributions are elected above.

     (b)[X] shall be permitted on and after the date the Participant has reached
            age 65.0 (not less than 59  1/2).


                                       13



13.  Benefits.

     A Participant shall be 100% vested in his Account if he is employed by the
     Employer upon reaching Normal or Early Retirement Age under the Plan.

     13.1 Normal Retirement Age. (Choose (a) or (b)) (Plan Section 1.35)

          (a)  [x] The date on which a Participant reaches age ______ (not more
                   than 65 or less than 55). If no age is indicated, Normal
                   Retirement Age shall be 65.

          (b)  [ ] The later of the date a Participant reaches age ________ (not
                   more than 65) or the _____ (not more than 5th) anniversary of
                   the day the Participant commenced participation in the Plan.
                   (The participation commencement date is the first day of the
                   first Plan Year in which the Participant commenced
                   participation in the Plan.)

     13.2 Early Retirement Age. (Choose (a) or (b)) (Plan Section 1.16)

          (a)  [x] Early retirement will not be permitted under the Plan.

          (b)  [ ] The date on which a Participant reaches age ______ (not less
                   than 55) and completes ______ Years of Vesting Service (not
                   more than 15).

     13.3 Method of Distribution. (Plan Section 10.7)

          Subject to Article XI of the Plan, benefits under the Plan shall be
          paid under the following method or methods (Choose (a), (b), and/or
          (c)):

          (a)  [x] Single sum payment;

          (b)  [x] Periodic installments;

          (c)  [ ] A paid-up annuity contract.

     Note:  If this is a continuation of an existing plan, you may eliminate a
            form of benefit previously offered only in accordance with section
            411(d)(6) of the Code and the regulations thereunder.

     13.4 Required Beginning Date.

          The Plan provides that any Participant working for the Employer who
          reached age 70 1/2in years prior to 1997 (other than a Five Percent
          Owner) may elect to stop his minimum required distributions and
          restart distributions by the April 1 of the year after the year in
          which he retires from the Employer. When the Participant's benefits
          restart, there will be a new annuity starting date unless the
          following is elected (Plan Section 10.9(a)(vi)(B)(2)):

          [ ] There will not be a new annuity starting date when benefits
              restart after retirement.

14.  Top Heavy Provisions.

     In any Plan Year the Plan is determined to be top heavy, the following
     provisions shall become effective.

     14.1 Vesting. For any Plan Year in which this Plan is top heavy, the
          following minimum vesting schedule will automatically apply to the
          Plan (Choose (a), (b) or (c)) (Plan Section 12.4):

          (a)  [x]  Years of Vesting Service       Nonforfeitable Percentage
                          after 1 year               0%
                          after 2 years             20% (must be at least 20%)
                          after 3 years             40% (must be at least 40%)
                          after 4 years             60% (must be at least 60%)
                          after 5 years             80% (must be at least 80%)
                          after 6 years            100%


                                       14



          (b)[ ] Years of Vesting Service          Vested Percentage

                     1 year   _____%                 ________%

                     2 years  _____%                 ________%

                     3 years 100% 100%
________________________________________________________________________________

          (c)[ ] See vesting schedule selected in Section 10 of this Adoption
                 Agreement. (This option may be selected only if the vesting
                 schedule(s) selected in Section 10 of this Adoption Agreement
                 is(are) at least as rapid as one of the top-heavy vesting
                 schedules shown in (a) and (b) above.)

          If the vesting schedule under the Plan shifts in or out of the above
          schedule for any Plan Year because of the Plan's top heavy status,
          such shift is an amendment to the vesting schedule and the election in
          Section 7.4 of the Plan applies.

     14.2 Minimum Allocation. If the Participant also participates in another
          qualified defined contribution plan maintained by the Employer, the
          required minimum allocation shall be provided (Choose (a) or (b))
          (Plan Section 12.3(d)):

          (a)[X] under this Plan.

          (b)[ ] under the following qualified plan maintained by the Employer:

     ___________________________________________________________________________


15.  Allocation Limitation.

All Employers must complete Section 15.1 of this Adoption Agreement. If the
Employer maintains or ever maintained another qualified plan in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, the Employer may be required to complete Sections 15.2 and 15.3 of
this Adoption Agreement. If the Employer does not maintain and never maintained
any other qualified plan in which any Participant in this Plan is (or was) a
Participant or could become a Participant, the Employer must check this box [X]
and it need not complete Sections 15.2 and 15.3 of this Adoption Agreement.

     15.1 Annual Additions Compensation. For purposes of determining Annual
          Additions Limitations, Annual Additions Compensation shall be used.
          Annual Additions Compensation shall mean the following type of
          compensation paid to a Participant during the Plan Year (choose one)
          (Plan Section 6.1(a)):

          (a)[X] W-2 earnings (including salary deferrals).

          (b)[ ] Compensation as defined in section 415 of the Code.

          (c)[ ] Wages as defined in section 3401(a) of the Code.

     15.2 Multiple Defined Contribution Plans. If the Participant is covered
          under another qualified defined contribution plan maintained by the
          Employer other than a master or prototype plan (choose one) (Plan
          Section 6.3(g)):

          (a)[ ] The provisions of (a) through (f) of Section 6.3 of the Plan
                 will apply as if the other plan were a master or prototype
                 plan.

          (b)[ ] Provide below the method under which the plans will limit total
                 Annual Additions to the maximum permissible amount, and will
                 properly reduce any excess amounts, in a manner that precludes
                 Employer discretion.
     ___________________________________________________________________________

     ___________________________________________________________________________

     ___________________________________________________________________________

     ___________________________________________________________________________



                                       15



     15.3 Defined Benefit Plan. For Limitation Years beginning before January 1,
          2000, if the Participant is or has ever been a Participant in a
          defined benefit plan maintained by the Employer, the Employer must
          provide below the method it will use to satisfy the limitation for
          defined contribution plans in section 415(c) of the Code and, for
          Limitation Years beginning before January 1, 2000, the 1.0 limitation
          of section 415(e) of the Code, in a manner that precludes Employer
          discretion. (Plan Section 6.4)

          _________________________________________________________________

          _________________________________________________________________

          _________________________________________________________________

          _________________________________________________________________


16.  Employer Securities. (Plan Sections 1.1 and 5.6) (Choose 16.1 or 16.2)

     16.1[X] The Plan does not permit investment in qualifying employer
             securities, within the meaning of section 407(d)(5) of ERISA.

     16.2[ ] The Plan may invest in qualifying employer securities, within the
             meaning of section 407(d)(5) of ERISA. Unless otherwise limited by
             supplement to this Adoption Agreement, Accounts may be invested in
             qualifying employer securities in the same manner as other
             allowable Investment Options under the terms of the Plan and the
             Trust Agreement.

17.  Plan Administration. (Plan Article XIII)

     The Administrator of the Plan shall be (Choose 17.1, 17.2, 17.3 or 17.4):

     Note: Neither T. Rowe Price Trust Company nor any of its affiliates may be
     appointed Plan Administrator.

     17.1 [ ] The Trustee;

     17.2 [ ] The Employer;

     17.3 [X] Retirement Plan Committee;

     17.4 [ ] Other (complete the following).

              Name: ____________________________________________________________

              Address: _________________________________________________________

     Note: If no Plan Administrator is indicated above, the Employer shall be
           deemed the Plan Administrator.

17.  Supplements.

     If additional space is required to specify an elective feature under the
     Plan or to amend the Plan, please attach additional pages as needed. Each
     additional page must reference the Section of the Adoption Agreement or the
     Plan to which the amendment applies and must be signed by the Employer and
     Trustee(s). In addition, each supplemental page must be numbered, and the
     total number of pages in the Adoption Agreement and additional pages must
     be indicated in the last Section of the Adoption Agreement.


                                       16



18.  The Trustee(s).

     The Employer hereby appoints the following to serve as Trustee(s):

     Name: T. Rowe Price Trust Company
     ___________________________________________________________________________
     (Print or type complete legal name)

     Address:___________________________________________________________________


             ___________________________________________________________________


             _________________________________   _______________________________
             Witness                             Signature of Trustee

     Dated:___________________________   (If the Trustee is a business entity,
                                         the signa- ture must be that of an
                                         authorized individual for the business.
                                         Also, please print below the name and
                                         title of the authorized individual:

                                         ______________________________________)

     Name:______________________________________________________________________


     Address:___________________________________________________________________


             ___________________________________________________________________


             _________________________________   _______________________________
             Witness                             Signature of Trustee

     Dated:___________________________   (If the Trustee is a business entity,
                                         the signa- ture must be that of an
                                         authorized individual for the business.
                                         Also, please print below the name and
                                         title of the authorized individual:

                                         ______________________________________)


     Name:______________________________________________________________________


     Address:___________________________________________________________________


             ___________________________________________________________________


             _________________________________   _______________________________
             Witness                             Signature of Trustee

     Dated:___________________________   (If the Trustee is a business entity,
                                         the signa- ture must be that of an
                                         authorized individual for the business.
                                         Also, please print below the name and
                                         title of the authorized individual:

                                         ______________________________________)


                                       17



19.  Employer Signature.

     The Employer represents that the information in this Adoption Agreement
     shall become effective only when approved and countersigned by the
     Trustee(s). The right to reject this Adoption Agreement for any reason is
     reserved by the Trustee(s).

     Note: The Employer may rely on an opinion letter issued by the Internal
           Revenue Service as evidence that the Plan is qualified under Code
           section 401 only to the extent provided in Announcement 2001-77,
           2001-30 I.R.B. The Employer may not rely on the opinion letter in
           certain other circumstances or with respect to certain qualification
           requirements, which are specified in the opinion letter issued with
           respect to the plan and in Announcement 2001-77. In order to have
           reliance in such circumstances or with respect to such qualification
           requirements, application for a determination letter must be made to
           Employee Plans Determinations of the Internal Revenue Service.

     Employers with inquiries regarding the adoption of the prototype plan
     document, the sponsoring organization's intended meaning of any prototype
     plan document provision or the effect of the Opinion Letter should call:

               T. Rowe Price Trust Company
               100 East Pratt Street
               Baltimore, Maryland 21202
               (410) 345-4432

     This Adoption Agreement consists of a total of 27 pages, which consist of
     this Adoption Agreement and

     [x]  If this box is checked, the Optional Supplement to this Adoption
          Agreement. (The Optional Supplement may be used only by an Employer
          retroactively restating its plan for GUST. It may not be used after
          the GUST restatement period.)

     [x]  If this box is checked, supplemental page(s) consisting of 1 page(s).

     Also check one of the following:

     [ ]  Changes have been made to the plan document and/or trust agreement
          that are not included in a supplemental page.

     [x]  No changes have been made to the plan document and/or trust agreement
          that are not included in a supplemental page.

IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed by its duly authorized officers this ____ day of August, 2002.

             LTX Corporation
             -------------------------------------------------------------------
             Employer (Print or type complete legal name)



             By:
                ----------------------------------------------------------------
                Authorized Signature of Employer

                Mark J. Gallenberger, Vice President and Chief Financial Officer
                ----------------------------------------------------------------
                Name and Title (Please print or type)


                ----------------------------------------------------------------
                Date




                                       18



Duplicate Signature Page

If T. Rowe Price is your Trustee, please sign and return both sets of signature
pages. If T. Rowe Price is not your Trustee, please sign and return only one set
of signature pages.

18.  The Trustee(s).

     The Employer hereby appoints the following to serve as Trustee(s):

            T. Rowe Price Trust Company
     Name:______________________________________________________________________
          (Print or type complete legal name)

     Address:___________________________________________________________________


             ___________________________________________________________________


             _____________________________      ________________________________
             Witness                            Signature of Trustee

     Dated:_______________________________      (If the Trustee is a business
                                                entity, the signature must be
                                                that of an authorized individual
                                                for the business. Also, please
                                                print below the name and title
                                                of the authorized individual:

                                                _______________________________)


     Name:______________________________________________________________________

     Address:___________________________________________________________________


             ___________________________________________________________________


             _____________________________      ________________________________
             Witness                            Signature of Trustee

     Dated:_______________________________      (If the Trustee is a business
                                                entity, the signature must be
                                                that of an authorized individual
                                                for the business. Also, please
                                                print below the name and title
                                                of the authorized individual:

                                                _______________________________)


     Name:______________________________________________________________________

     Address:___________________________________________________________________


             ___________________________________________________________________


             _____________________________      ________________________________
             Witness                            Signature of Trustee

     Dated:_______________________________      (If the Trustee is a business
                                                entity, the signature must be
                                                that of an authorized individual
                                                for the business. Also, please
                                                print below the name and title
                                                of the authorized individual:

                                                _______________________________)


                                       19



Duplicate Signature Page

If T. Rowe Price is your Trustee, please sign and return both sets of signature
pages. If T. Rowe Price is not your Trustee, please sign and return only one set
of signature pages.

19.  Employer Signature.

     The Employer represents that the information in this Adoption Agreement
     shall become effective only when approved and countersigned by the
     Trustee(s). The right to reject this Adoption Agreement for any reason is
     reserved by the Trustee(s).

     Note: The Employer may rely on an opinion letter issued by the Internal
           Revenue Service as evidence that the Plan is qualified under Code
           section 401 only to the extent provided in Announcement 2001-77,
           2001-30 I.R.B. The Employer may not rely on the opinion letter in
           certain other circumstances or with respect to certain qualification
           requirements, which are specified in the opinion letter issued with
           respect to the plan and in Announcement 2001-77. In order to have
           reliance in such circumstances or with respect to such qualification
           requirements, application for a determination letter must be made to
           Employee Plans Determinations of the Internal Revenue Service.

     Employers with inquiries regarding the adoption of the prototype plan
     document, the sponsoring organization's intended meaning of any prototype
     plan document provision or the effect of the Opinion Letter should call:

               T. Rowe Price Trust Company
               100 East Pratt Street
               Baltimore, Maryland 21202
               (410) 345-4432

     This Adoption Agreement consists of a total of 27 pages, which consist of
     this Adoption Agreement and

     [x]  If this box is checked, the Optional Supplement to this Adoption
          Agreement. (The Optional Supplement may be used only by an Employer
          retroactively restating its plan for GUST. It may not be used after
          the GUST restatement period.)

     [x]  If this box is checked, supplemental page(s) consisting of 1 page(s).

     Also check one of the following:

     [ ]  Changes have been made to the plan document and/or trust agreement
          that are not included in a supplemental page.

     [x]  No changes have been made to the plan document and/or trust agreement
          that are not included in a supplemental page.

IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed by its duly authorized officers this ____ day of August, 2002.

             LTX Corporation
             -------------------------------------------------------------------
             Employer (Print or type complete legal name)



             By:
                ----------------------------------------------------------------
                Authorized Signature of Employer

                Mark J. Gallenberger, Vice President and Chief Financial Officer
                ----------------------------------------------------------------
                Name and Title (Please print or type)


                ----------------------------------------------------------------
                Date


                                       20











                      [THIS PAGE INTENTIONALLY LEFT BLANK]

















































                                       21



GUST TRANSITION OPTIONAL SUPPLEMENT
TO THE T. ROWE PRICE TRUST COMPANY
401(k) RETIREMENT PLAN ADOPTION AGREEMENT

(Defined Contribution Plan #001 of Basic Plan Document #03)

Instructions: Only an Employer that is retroactively restating its plan for GUST
needs to complete this Optional Supplement. If the Employer needs to use this
Optional Supplement to conform the plan document to the operation of the Plan,
complete all applicable sections below, execute this Optional Supplement and
check the first box at the end of section 19 of the Adoption Agreement.

1.  Family Aggregation

    The plan document provides that the family aggregation rules shall no longer
    apply in Plan Years beginning after December 31, 1996. If the Employer
    elects to continue to apply the family aggregation rules of sections
    401(a)(17)(A) and 414(q)(6) of the Code to conform this plan document to the
    operation of the Plan, check the box below and describe the last Plan Year
    the family aggregation rules will apply (Plan Sections 1.13(f) and 1.29):

    [ ]
          ----------------------------------------------------------------------


2.  Combined Plan Limit of Code Section 415(e)

    The plan document provides that the combined plan limit of Code Section
    415(e) shall no longer apply to Limitation Years beginning after December
    31, 1999. If the Employer desires to continue the combined plan limit of
    Code Section 415(e) after the Limitation Year beginning in 1999 in order to
    conform this plan document to the operation of the Plan, check the box below
    and describe the last Limitation Year the combined plan limit will apply
    (Plan Section 6.4):

    [ ]
          ----------------------------------------------------------------------


    Note: The last Limitation Year designated here also will apply for purposes
          of section 15.3 of the Adoption Agreement, if applicable.

    Note: Family aggregation and the combined plan limit may be extended only
          for a limited time. They may be extended only through years beginning
          before the date the Employer adopts its GUST-restated plan.

3.  Hardship distributions

    The plan document provides that a hardship distribution from a Participant's
    Elective Deferral subaccount after December 31, 1998, shall not qualify as
    an eligible rollover distribution. (Plan Section 10.7(b)(i))

    [ ]   By checking this box the Employer elects that a hardship distribution
          from a Participant's Elective Deferral subaccount in 1999 shall
          qualify as an eligible rollover distribution.

4.  Spousal Consent to Loans

    The plan document provides that for Plan Years beginning before January 1,
    2002 (or such earlier date the Employer elects below), a Participant's
    spouse must consent to a loan if any part of the Participant's account
    balance is used for security for a loan. For Plan Years beginning on and
    after January 1, 2002 (or such earlier date the Employer elects below), a
    spouse's consent to a loan will be required only if a part of the
    Participant's account balance that is subject to the qualified joint and
    survivor annuity requirements of the Retirement Equity Act of 1984 ("REACT")
    is used as security for the loan. (Plan Section 8.1(b)(ii))


                                       22



    If the Employer did not require spousal consent to loans (except to the
    extent required by REACT) at an earlier date and desires to conform this
    plan document to the operation of the Plan, check the applicable box below
    and insert the appropriate date the Plan first did not require spousal
    consent to loans:

    [x]   Plan Years beginning on and after January 1, 1997 (no earlier than
          1997 and no later than 2001).

    [ ]   _______________, ______ (If the first date the Plan did not require
          spousal consent to loans is not on the first day of a Plan Year,
          insert the actual date the Plan first did not require spousal consent
          to loans.)

5.  ADP and ACP Nondiscrimination Testing

    For Plan Years beginning after 1996, an Employer may elect to use current
    year or prior year data for Non-Highly Compensated Employees in performing
    the ADP and ACP Tests. In order to conform this plan document with the
    operation of the Plan for Plan Years beginning before the Employer adopts
    this prototype plan for its GUST-restated plan, the Employer must complete
    the following (Plan Sections 3.6(a) and 3.7(a)):

    Plan Year Begins           ADP Test                   ACP Test
    ----------------           --------                   --------

       January 1    , 1997     [ ]  Current Year Data     [ ]  Current Year Data
    ----------------           [x]  Prior Year Data       [x]  Prior Year Data

       January 1    , 1998     [ ]  Current Year Data     [ ]  Current Year Data
    ----------------           [x]  Prior Year Data       [x]  Prior Year Data

       January 1    , 1999     [ ]  Current Year Data     [ ]  Current Year Data
    ----------------           [x]  Prior Year Data       [x]  Prior Year Data

       January 1    , 2000     [x]  Current Year Data     [x]  Current Year Data
    ----------------           [ ]  Prior Year Data       [ ]  Prior Year Data

       January 1    , 2001     [ ]  Current Year Data     [ ]  Current Year Data
    ----------------           [x]  Prior Year Data       [x]  Prior Year Data

       January 1    , 2002     [ ]  Current Year Data     [ ]  Current Year Data
    ----------------           [x]  Prior Year Data       [x]  Prior Year Data


    Note: The Plan must use the same testing method for both the ADP Test and
          the ACP Test in any Plan Year beginning on or after the date the
          Employer adopts its GUST-restated prototype plan.

6.  Calendar Year Calculation Election

    [ ]   By checking this box, for the Plan Year beginning in 1997, the
          Employer makes the election to use the calendar year ending with or
          within the determination year to determine whether an Employee is a
          Highly Compensated Employee in the look-back year. (Plan Section 1.29)

    IN WITNESS WHEREOF, the Employer has caused this Optional Supplement to the
    Adoption Agreement to be executed by its duly authorized officer this ___
    day of August, 2002.


                LTX Corporation
                ----------------------------------------------------------------
                Name of Employer (Please print)



                By:
                ----------------------------------------------------------------
                Authorized Signature for Employer


                Mark J. Gallenberger, Vice President and Chief Financial Officer
                ----------------------------------------------------------------
                Name and Title (Please print)


                                       23


















                      [THIS PAGE INTENTIONALLY LEFT BLANK]

























                                       24




EGTRRA ADOPTION AGREEMENT
FOR THE 401(k) RETIREMENT PLAN
SPONSORED BY T. ROWE PRICE TRUST COMPANY

This EGTRRA Adoption Agreement is intended to be adopted with the T. Rowe Price
Trust Company 401(k) Retirement Plan Adoption Agreement for basic plan document
#03, which is a prototype profit sharing plan with a cash or deferred
arrangement, sponsored by T. Rowe Price Trust Company.

I.   Minimum Top-Heavy Benefits for Employees Also Covered Under Another Plan:

     The employer should describe below the extent, if any, to which the
     top-heavy minimum benefit requirement of section 416(c) of the Code shall
     be met in another plan. This should include the name of the other plan, the
     minimum benefit that will be provided under such other plan and the
     employees who will receive the minimum benefit under such other plan. (Plan
     Article XII and EGTRRA Amendment Article IV)


     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------

     ---------------------------------------------------------------------------


II.  VESTING OF EMPLOYER MATCHING CONTRIBUTIONS

     Note:   An employer must complete this Article II even if the vesting
             schedule for employer matching contributions is already at least as
             rapid as one of the vesting schedules shown below. (EGTRRA
             Amendment Article V)

     A.      Vesting Schedule for Employer Matching Contributions. (choose one
             and complete any blanks under "Nonforfeitable Percentage" in the
             option you select):

             Note: The selected vesting schedule will apply to all participants,
                   regardless of whether they have an hour of service after
                   2001, and will apply to all matching contributions,
                   regardless of when they were made.

             [ ]   Option 1.  A participant's accrued benefit derived from
                   employer matching contributions shall be fully and
                   immediately vested.

             [ ]   Option 2.  A participant's accrued benefit derived from
                   employer matching contributions shall vest according to the
                   following schedule:

                      Years of Vesting Service       Nonforfeitable Percentage

                            after 1 year                     _______%
                            after 2 years                    _______%
                            after 3 years                        100%


             [x]   Option 3. A participant's accrued benefit derived from
                   employer matching contributions shall vest according to the
                   following schedule:

                      Years of Vesting Service       Nonforfeitable Percentage
                            after 1 year              20%
                            after 2 years             40% (must be at least 20%)
                            after 3 years             60% (must be at least 40%)
                            after 4 years             80% (must be at least 60%)
                            after 5 years            100% (must be at least 80%)
                            after 6 years            100%


                                       25



      B.   Vesting Schedule for Other Employer Contributions.

           Check the following option if the vesting schedule selected in A
           above will apply to all employer contributions in the same manner the
           vesting schedule selected in A applies to employer matching
           contributions.

           [x]  The vesting schedule selected in A above will apply to all
                employer contributions.

III.  Rollovers From Other Plans (EGTRRA Amendment Article VII)

      A.   Rollovers. (Choose one)

           [ ]  1.  The plan does not accept any type of rollover. (If this
                    option is selected, skip to B below.)

           [x]  2.  The plan will accept participant rollover contributions
                    and/or direct rollovers of distributions made after December
                    31, 2001, from the types of plans specified below beginning
                    on the effective date specified in B, below. (Complete a, b
                    and c below)

           a.   Direct Rollovers. (rollovers made directly from another plan)
                (Choose i or ii)

                [ ]  i.  No, the plan will not accept a direct rollover
                         of an eligible rollover distribution from any type of
                         plan.

                [x] ii.  Yes, the plan will accept a direct rollover of an
                         eligible rollover distribution from (check each one
                         that applies):

                         [ ]  a qualified plan described in section 401(a) or
                              403(a) of the Code, including after-tax employee
                              contributions.

                         [x]  a qualified plan described in section 401(a) or
                              403(a) of the Code, excluding after-tax employee
                              contributions.

                         [ ]  an annuity contract described in section 403(b) of
                              the Code, excluding after-tax employee
                              contributions.

                         [x]  an eligible plan under section 457(b) of the Code
                              which is maintained by a state, a political
                              subdivision of a state, or any agency or
                              instrumentality of a state or political
                              subdivision of a state.

           b.   Indirect Rollovers. (participant rollover contributions from
                other plans) (choose i or ii)

                [x]  i.  No, the plan will not accept a participant indirect
                         rollover contribution of an eligible rollover
                         distribution from any type of plan.

                [ ] ii.  Yes, the plan will accept a participant indirect
                         rollover contribution of an eligible rollover
                         distribution from (check each one that applies):

                         [ ]  a qualified plan described in section 401(a) or
                              403(a) of the Code.

                         [ ]  an annuity contract described in section 403(b) of
                              the Code.

                         [ ]  an eligible plan under section 457(b) of the Code
                              which is maintained by a state, a political
                              subdivision of a state, or any agency or
                              instrumentality of a state or political
                              subdivision of a state.

                Note:  Under EGTRRA, indirect rollovers from a plan cannot
                       include after-tax employee contributions.

           c.   Participant Rollover Contributions from Traditional IRAs.

                The plan (choose one):

                [ ] will

                [x] will not

                                       26



               accept a participant rollover contribution of the portion of a
               distribution from an individual retirement account or annuity
               described in section 408(a) or 408(b) of the Code that is
               eligible to be rolled over and would otherwise be includible in
               gross income.

               Note: Under EGTRRA, contributory and conduit Traditional IRAs may
                     be rolled over to a qualified 401(a) plan; however,
                     nondeductible contributions and after-tax contributions in
                     a Traditional IRA are not eligible for rollover to a
                     qualified 401(a) plan.

     B.   Effective Date of Rollover Provision. The foregoing rollover
          election(s) shall be effective 01/01/2002 (enter a date no earlier
          than January 1, 2002).

IV.  CATCH-UP CONTRIBUTIONS (EGTRRA Amendment Article IX)

     A.   Eligibility to Make Catch-Up Contributions. (Choose one)

          [x]  Catch-up contributions shall not be permitted.

          [ ]  Catch-up contributions shall be permitted after
               ____________________ (insert a date no earlier than December 31,
               2001).

     B.   Catch-Up Contributions and Matching Contributions. Complete this
          section B only if catch-up contributions are permitted

          In determining the amount of a participant's employer matching
          contributions (choose one),

          [ ]  Catch-up contributions shall be counted.

          [ ]  Catch-up contributions shall not be counted.

V.   Distributions Upon Severance From Employment (EGTRRA Amendment Article XI)
     (Choose one)

     [ ]  The plan will not permit distributions upon a severance from
          employment.

     [x]  The plan will permit distributions upon a severance from employment
          regardless of when the severance from employment occurred.

     This EGTRRA Adoption Agreement consists of ___ pages, which consist of this
     EGTRRA Adoption Agreement and

     [ ]  If this box is checked, supplemental page(s) consisting of ___
          page(s).

IN WITNESS WHEREOF, the Employer has caused this EGTRRA Adoption Agreement to be
executed by its duly authorized officers this _____ day of August, 2002.



            LTX Corporation
            ----------------------------------------------------------------
            (Print Name of Employer)


            By:
                ------------------------------------------------------------
                Authorized Signature for Employer


                Mark J. Gallenberger, Vice President and Chief Financial Officer
                ----------------------------------------------------------------
                Name and Title (please print)


                                       27



                               Supplemental Page
                       TO THE T. ROWE PRICE TRUST COMPANY
                   401(k) RETIREMENT PLAN ADOPTION AGREEMENT

1.   Effective January 1, 2002, under Section 12.2 of the Adoption Agreement
     in-service distributions after age (Plan Section 9.4) will be permitted and
     Section 12.2 is amended to provide that the box opposite Section 12.2(b) is
     checked and the box opposite Section 12.2(a) is not checked.

2.   Effective January 1, 1997, a Participant may elect to defer an amount up to
     15% of his or her compensation paid during a pay period.

3.   Effective November 1, 2002, under Section 6.1(b) of the Adoption Agreement,
     a Participant may elect to defer an amount up to 20% of his or her
     compensation paid during a pay period.

4.   Effective January 1, 1997, as provided in Section 4.2 of the Adoption
     Agreement, the Entry Dates shall be the date on which the eligibility
     requirements of the Plan are met.

5.   Effective January 1, 2002, hardship withdrawals shall not be limited to 80%
     of a participant's account and shall be subject to the terms of the
     Adoption Agreement and the prototype plan.

IN WITNESS WHEREOF, the Employer has caused this Supplemental Page to be
executed by its duly authorized officers this __ day of August, 2002.


              LTX Corporation

              By:
                  --------------------------------------------------------------
                                (Authorized Signature of Employer)

                  Mark J. Gallenberger, Vice President & Chief Financial Officer
                  --------------------------------------------------------------
                  Name and Title (Please print or type)

                  --------------------------------------------------------------
                  Date


The Employer hereby appoints the following to serve as Trustee(s):


              Name:    T. Rowe Price Trust Company
                       ---------------------------------------------------------
              Address:
                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ---------------------------------------------------------

                       ----------------------------   --------------------------
                       Witness                        Signature of Trustee


              Dated:
                       ----------------------------   (If the Trustee is a
                                                      business entity, The
                                                      signature must be that of
                                                      an Authorized individual
                                                      for the business. Also,
                                                      please print below the
                                                      name and Title of the
                                                      authorized individual.)
                                                      --------------------------



                                      S-1



                          T. ROWE PRICE TRUST COMPANY
                                PROTOTYPE 401(k)
                                 RETIREMENT PLAN






































                                       29



TABLE OF CONTENTS
PLAN DOCUMENTS

ARTICLE  I - DEFINITIONS ...................................................  34
               1.1      ACCOUNT ............................................  34
               1.2      ACP TEST ONLY SAFE HARBOR MATCHING CONTRIBUTIONS ...  35
               1.3      ACP TEST ...........................................  35
               1.4      ADMINISTRATOR OR PLAN ADMINISTRATOR ................  35
               1.5      ADOPTION AGREEMENT .................................  35
               1.6      ADP TEST ...........................................  35
               1.7      AFFILIATED EMPLOYER ................................  35
               1.8      ANNUAL ADDITIONS ...................................  35
               1.9      BENEFITING .........................................  36
               1.10     BENEFICIARY ........................................  36
               1.11     BREAKS IN SERVICE ..................................  36
               1.12     CODE ...............................................  36
               1.13     COMPENSATION .......................................  36
               1.14     CURRENT YEAR TESTING ...............................  37
               1.15     DISCRETIONARY PROFIT SHARING .......................  37
               1.16     EARLY RETIREMENT AGE ...............................  37
               1.17     EARNED INCOME ......................................  37
               1.18     EFFECTIVE DATE .....................................  37
               1.19     ELAPSED TIME .......................................  37
               1.20     ELECTIVE DEFERRALS .................................  38
               1.21     EMPLOYEE ...........................................  38
               1.22     EMPLOYEE AFTER-TAX CONTRIBUTIONS ...................  38
               1.23     EMPLOYER ...........................................  38
               1.24     EMPLOYER CONTRIBUTION ACCOUNTS .....................  39
               1.25     ENTRY DATE .........................................  39
               1.26     ERISA ..............................................  39
               1.27     FAMILY MEMBER ......................................  39
               1.28     FIVE PERCENT OWNER .................................  39
               1.29     HIGHLY COMPENSATED EMPLOYEE ........................  39
               1.30     HOUR OF SERVICE ....................................  39
               1.31     INVESTMENT OPTIONS .................................  40
               1.32     LEASED EMPLOYEE ....................................  40
               1.33     MATCHING CONTRIBUTIONS .............................  41
               1.34     NON-HIGHLY COMPENSATED EMPLOYEE ....................  41
               1.35     NORMAL RETIREMENT AGE ..............................  41
               1.36     OPTIONAL SUPPLEMENT ................................  41
               1.37     OWNER-EMPLOYEE .....................................  41
               1.38     PARTICIPANT ........................................  41
               1.39     PARTICIPANT-DIRECTED TRANSFER ......................  41
               1.40     PLAN ...............................................  41
               1.41     PLAN YEAR ..........................................  41
               1.42     QUALIFIED MATCHING CONTRIBUTIONS ...................  41
               1.43     QUALIFIED NONELECTIVE CONTRIBUTIONS ................  41
               1.44     RETIREMENT .........................................  41
               1.45     ROLLOVER CONTRIBUTIONS .............................  41
               1.46     SAFE HARBOR CONTRIBUTIONS ..........................  41
               1.47     SAFE HARBOR MATCHING CONTRIBUTIONS .................  41
               1.48     SAFE HARBOR NONELECTIVE CONTRIBUTIONS ..............  41
               1.49     SECTION 415 COMPENSATION ...........................  42
               1.50     SELF-EMPLOYED INDIVIDUAL ...........................  42
               1.51     SPONSOR ............................................  42


                                       30


                                                                         
               1.52     TOTAL COMPENSATION ....................................... 42
               1.53     TOTAL AND PERMANENT DISABILITY ........................... 42
               1.54     TRUST OR TRUST FUND ...................................... 43
               1.55     TRUST AGREEMENT .......................................... 43
               1.56     TRUSTEE .................................................. 43
               1.57     VALUATION DATE ........................................... 43
               1.58     YEAR OF ELIGIBILITY SERVICE .............................. 43
               1.59     YEAR OF VESTING SERVICE .................................. 43

ARTICLE  II - ELIGIBILITY AND PARTICIPATION ...................................... 43
               2.1      ACTIVE PARTICIPATION ..................................... 43
               2.2      EXCLUSION OF CERTAIN EMPLOYEES ........................... 43
               2.3      PREDECESSOR EMPLOYERS .................................... 44
               2.4      RE-EMPLOYMENT ............................................ 44

ARTICLE  III - CONTRIBUTIONS ..................................................... 44
               3.1      DEFINITIONS .............................................. 44
               3.2      EMPLOYEE CONTRIBUTIONS ................................... 46
               3.3      EMPLOYER CONTRIBUTIONS ................................... 47
               3.4      CONTRIBUTION LIMITATION .................................. 47
               3.5      EXCESS ELECTIVE DEFERRALS ................................ 48
               3.6      ACTUAL DEFERRAL PERCENTAGE TEST .......................... 48
               3.7      AVERAGE CONTRIBUTION PERCENTAGE TEST ..................... 50
               3.8      MULTIPLE USE TEST ........................................ 51
               3.9      PREVENTION OR CURE OF ADP TEST FAILURES .................. 52
               3.10     PREVENTION OR CURE OF ACP TEST FAILURES .................. 52
               3.11     DISTRIBUTION OF EXCESS CONTRIBUTIONS TO CURE ADP TEST
                        FAILURE .................................................. 52
               3.12     QUALIFIED NONELECTIVE CONTRIBUTIONS TO PREVENT OR
                        CURE ADP AND/OR ACP TEST FAILURE ......................... 53
               3.13     QUALIFIED MATCHING CONTRIBUTION TO PREVENT OR CURE ADP
                        AND/OR ACP TEST FAILURE .................................. 53
               3.14     RECHARACTERIZATION OF EXCESS CONTRIBUTION TO CURE ADP
                        TEST FAILURE ............................................. 54
               3.15     SAFE HARBOR NONELECTIVE CONTRIBUTION TO PREVENT ADP
                        TEST FAILURE ............................................. 54
               3.16     ELECTIVE DEFERRALS TO CURE ACP TEST FAILURE .............. 54
               3.17     FORFEITURE AND/OR DISTRIBUTION OF EXCESS AGGREGATE
                        CONTRIBUTIONS TO CURE ACP TEST FAILURE ................... 54

ARTICLE  IV - SAFE HARBOR CODA ................................................... 55
               4.1      RULES OF APPLICATION ..................................... 55
               4.2      SAFE HARBOR CONTRIBUTIONS ................................ 55
               4.3      NOTICE REQUIREMENT ....................................... 55
               4.4      SPECIAL RULE ............................................. 56

ARTICLE  V - ALLOCATION OF FUNDS ................................................. 56
               5.1      ALLOCATION OF DISCRETIONARY PROFIT SHARING CONTRIBUTIONS . 56
               5.2      ALLOCATION OF NET EARNINGS OR LOSSES OF THE TRUST ........ 57
               5.3      VALUATIONS ............................................... 57
               5.4      ACCOUNTING FOR DISTRIBUTIONS ............................. 57
               5.5      ALLOCATION OF FORFEITURES ................................ 57
               5.6      INVESTMENT OF FUNDS ...................................... 58

 

                                       31



ARTICLE  VI - LIMITATION ON ALLOCATIONS ..................................... 58
               6.1      DEFINITIONS ......................................... 58
               6.2      PARTICIPANTS NOT COVERED UNDER OTHER PLANS .......... 60
               6.3      PARTICIPANTS COVERED UNDER OTHER DEFINED
                        CONTRIBUTION PLANS .................................. 61
               6.4      PARTICIPANTS COVERED UNDER BOTH DEFINED BENEFIT
                        AND DEFINED CONTRIBUTION PLANS ...................... 62

ARTICLE  VII - VESTING ...................................................... 62
               7.1      EMPLOYEE AFTER-TAX CONTRIBUTION, ELECTIVE DEFERRAL,
                        ROLLOVER CONTRIBUTION, PARTICIPANT-DIRECTED TRANSFER,
                        QUALIFIED NONELECTIVE CONTRIBUTION, QUALIFIED MATCHING
                        CONTRIBUTION, SAFE HARBOR MATCHING CONTRIBUTION AND
                        SAFE HARBOR NONELECTIVE CONTRIBUTION SUBACCOUNTS .... 62
               7.2      MATCHING CONTRIBUTION, DISCRETIONARY PROFIT SHARING
                        CONTRIBUTION AND ACP TEST ONLY SAFE HARBOR MATCHING
                        CONTRIBUTION SUBACCOUNTS ............................ 62
               7.3      DETERMINATION OF YEARS OF VESTING SERVICE ........... 63
               7.4      AMENDMENTS TO VESTING SCHEDULE ...................... 64
               7.5      FORFEITURE OF NONVESTED AMOUNTS ..................... 64
               7.6      REINSTATEMENT OF BENEFIT ............................ 65

ARTICLE  VIII - LOANS ....................................................... 65
               8.1      GENERAL PROVISIONS .................................. 65
               8.2      AMOUNT OF LOAN ...................................... 65
               8.3      MANNER OF MAKING LOANS .............................. 66
               8.4      TERM OF LOAN ........................................ 66
               8.5      SECURITY FOR LOAN ................................... 66
               8.6      SEGREGATED INVESTMENT ............................... 66
               8.7      REPAYMENT OF LOAN ................................... 66
               8.8      DEFAULT ON LOAN ..................................... 66

ARTICLE  IX - IN-SERVICE WITHDRAWALS ........................................ 66
               9.1      WITHDRAWAL OF EMPLOYEE AFTER-TAX CONTRIBUTIONS,
                        ROLLOVER CONTRIBUTIONS AND TRANSFER CONTRIBUTIONS ... 66
               9.2      WITHDRAWAL AFTER ATTAINMENT OF EARLY OR NORMAL
                        RETIREMENT AGE ...................................... 67
               9.3      HARDSHIP WITHDRAWALS ................................ 67
               9.4      AGE 59 1/2WITHDRAWALS ............................... 67
               9.5      MANNER OF MAKING WITHDRAWALS ........................ 67
               9.6      LIMITATIONS ON WITHDRAWALS .......................... 68
               9.7      SPECIAL CIRCUMSTANCES ............................... 68

ARTICLE  X - DISTRIBUTION PROVISIONS ........................................ 68
               10.1     RETIREMENT DISTRIBUTIONS ............................ 68
               10.2     DEATH BENEFITS ...................................... 68
               10.3     TOTAL AND PERMANENT DISABILITY BENEFITS ............. 70
               10.4     TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT, DEATH
                        OR TOTAL AND PERMANENT DISABILITY ................... 70
               10.5     COMMENCEMENT OF LIFETIME DISTRIBUTIONS .............. 70
               10.6     COMMENCEMENT OF DEATH BENEFITS ...................... 71
               10.7     METHODS OF DISTRIBUTIONS ............................ 72
               10.8     MISSING PARTICIPANTS AND BENEFICIARIES .............. 73
               10.9     MINIMUM REQUIRED DISTRIBUTIONS ...................... 73


                                       32


                                                                            
ARTICLE  XI - JOINT AND SURVIVOR ANNUITY REQUIREMENTS ............................ 76
               11.1     APPLICABILITY ............................................ 76
               11.2     DEFINITIONS .............................................. 76
               11.3     QUALIFIED JOINT AND SURVIVOR ANNUITY ..................... 77
               11.4     QUALIFIED PRERETIREMENT SURVIVOR ANNUITY ................. 77
               11.5     NOTICE REQUIREMENT ....................................... 77
               11.6     SPECIAL RULE FOR PROFIT SHARING PLANS .................... 79
               11.7     TRANSITIONAL RULES ....................................... 79

ARTICLE  XII - TOP HEAVY PROVISIONS .............................................. 80
               12.1     APPLICABILITY ............................................ 80
               12.2     DEFINITIONS .............................................. 80
               12.3     MINIMUM ALLOCATION ....................................... 82
               12.4     VESTING .................................................. 83

ARTICLE  XIII - ADMINISTRATION OF PLAN ........................................... 83
               13.1     DUTIES AND RESPONSIBILITY OF FIDUCIARIES; ALLOCATION OF
                        FIDUCIARY RESPONSIBILITY ................................. 83
               13.2     POWERS AND RESPONSIBILITIES OF THE PLAN ADMINISTRATOR .... 83
               13.3     ALLOCATION OF DUTIES AND RESPONSIBILITIES ................ 84
               13.4     APPOINTMENT OF THE PLAN ADMINISTRATOR .................... 84
               13.5     EXPENSES ................................................. 84
               13.6     LIABILITIES .............................................. 84
               13.7     CLAIMS PROCEDURE ......................................... 84

ARTICLE  XIV - AMENDMENT, TERMINATION AND MERGER ................................. 85
               14.1     AMENDMENT ................................................ 85
               14.2     PLAN TERMINATION; DISCONTINUANCE OF EMPLOYER
                        CONTRIBUTIONS ............................................ 86
               14.3     SUCCESSOR EMPLOYER ....................................... 86
               14.4     MERGER, CONSOLIDATION OR TRANSFER ........................ 86

ARTICLE  XV - MISCELLANEOUS PROVISIONS ........................................... 86
               15.1     EXCLUSIVE BENEFIT OF PARTICIPANTS AND BENEFICIARIES ...... 86
               15.2     NONGUARANTEE OF EMPLOYMENT ............................... 87
               15.3     RIGHTS TO TRUST ASSETS ................................... 87
               15.4     NONALIENATION OF BENEFITS ................................ 87
               15.5     GENDER ................................................... 87
               15.6     TITLES AND HEADINGS ...................................... 87
               15.7     FAILURE OF EMPLOYER'S PLAN TO QUALIFY .................... 87
               15.8     COMPLIANCE WITH LAWS, RULES AND REGULATIONS .............. 87
               15.9     MILITARY SERVICE ......................................... 87



                                       33



T. ROWE PRICE TRUST COMPANY
PROTOTYPE 401(k) RETIREMENT PLAN
DOCUMENT

This is an amendment and restatement of the T. Rowe Price Trust Company basic
plan document #03 profit sharing plan with a cash or deferred arrangement. This
amendment and restatement incorporates the provisions of the Uruguay Round
Agreements Act ("GATT"), the Uniformed Services Employment and Re-employment
Rights Act of 1994 ("USERRA"), the Small Business Job Protection Act of 1996
("SBJPA"), the Taxpayer Relief Act of 1997 ("TRA `97") and the Internal Revenue
Service Restructuring and Reform Act of 1998 ("IRSRRA"), these acts collectively
being referred to as "GUST." (Prior to this amendment and restatement, this
document was T. Rowe Price Trust Company basic plan document #01.)

ARTICLE I - DEFINITIONS

         1.1  Account. A separate Account with the following subaccounts shall
              be established and maintained for each Participant:

              (a)  ACP Test Only Safe Harbor Matching Contributions. An ACP Test
                   Only Safe Harbor Matching Contribution subaccount to which
                   shall be credited (or debited, as the case may be) (i) ACP
                   Test Only Safe Harbor Matching Contributions made to the Plan
                   on behalf of the Participant; (ii) the allocable expenses and
                   net earnings or net losses on the investment of the assets of
                   the sub-account; and (iii) distributions from such
                   subaccount.

              (b)  Discretionary Profit Sharing Contributions. A Discretionary
                   Profit Sharing Contribution subac-count to which shall be
                   credited (or debited, as the case may be) (i) the
                   Participant's share of Discretionary Profit Sharing
                   Contributions allocated under Section 5.1(b); (ii) the
                   allocable expenses and net earnings or net losses on the
                   investment of the assets of such subaccount; and (iii)
                   distributions from such subaccount.

              (c)  Elective Deferrals. An Elective Deferral subaccount to which
                   shall be credited (or debited, as the case may be) (i) the
                   Participant's Elective Deferrals made under this Plan; (ii)
                   the allocable expenses and net earnings or net losses on the
                   investment of the assets of the subaccount; and (iii)
                   distributions from such subaccount.

              (d)  Employee After-Tax Contributions. A nondeductible voluntary
                   contribution subaccount to which shall be credited (or
                   debited, as the case may be) (i) Employee After-Tax
                   Contributions made by the Participant to the Plan; (ii) the
                   allocable expenses and net earnings or net losses on the
                   investment of the assets of such subaccount; and (iii)
                   distributions from such subaccount.

              (e)  Matching Contributions. A Matching Contribution subaccount to
                   which shall be credited (or debited, as the case may be) (i)
                   Matching Contributions made by the Employer to the Plan on
                   behalf of the Participant; (ii) the allocable expenses and
                   net earnings or net losses on the investment of the assets of
                   such subaccount; and (iii) distributions from such
                   subaccount.

              (f)  Qualified Matching Contributions. A Qualified Matching
                   Contribution subaccount to which shall be credited (or
                   debited, as the case may be) (i) Qualified Matching
                   Contributions made to the Plan on behalf of the Participant;
                   (ii) the allocable expenses and net earnings or net losses on
                   the investment of assets in such subaccount; and (iii)
                   distributions from such subaccount.

              (g)  Qualified Nonelective Contributions. A Qualified Nonelective
                   Contribution subaccount to which shall be credited (or
                   debited, as the case may be) (i) Qualified Nonelective
                   Contributions made to the Plan on behalf of the Participant;
                   (ii) the allocable expenses and net earnings or net losses on
                   the investment of the assets of the subaccount; and (iii)
                   distributions from such subaccount.

              (h)  Participant-Directed Transfers. A Participant-Directed
                   Transfer subaccount to which shall be credited (or debited,
                   as the case may be) (i) plan-to-plan transfers made at the
                   request and on behalf of the Participant to the Plan; (ii)
                   the allocable expenses and net earnings or net losses on the
                   investment of the assets of the subaccount; and (iii)
                   distributions from such subaccount.


                                       34



              (i)  Rollover Contributions. A Rollover Contribution subaccount to
                   which shall be credited (or debited, as the case may be) (i)
                   Rollover Contributions made by the Participant to the Plan;
                   (ii) the allocable expenses and net earnings or net losses on
                   the investment of the assets of such subac-count; and (iii)
                   distributions from such subaccount.

              (j)  Safe Harbor Matching Contributions. A Safe Harbor Matching
                   Contribution subaccount to which shall be credited (or
                   debited, as the case may be) (i) Safe Harbor Matching
                   Contributions made to the Plan on behalf of the Participant;
                   (ii) the allocable expenses and net earnings or net losses on
                   the investment of the assets of such subaccount; and (iii)
                   distributions from such subaccount.

              (k)  Safe Harbor Nonelective Contributions. A Safe Harbor
                   Nonelective Contribution subaccount to which shall be
                   credited (or debited, as the case may be) (i) Safe Harbor
                   Nonelective Contributions made to the Plan on behalf of the
                   Participant; (ii) the allocable expenses and net earnings or
                   net losses on the investment of the assets of the subaccount;
                   and (iii) distributions from such subaccount.

              The Plan Administrator may also establish such other Accounts,
              subaccounts and segregated accounts as may be necessary to
              properly account for Plan assets.

         1.2  ACP Test Only Safe Harbor Matching Contributions. Contributions
              made by the Employer to the Plan and Trust as described in Section
              4.2 and in Section 9.2(b)(2) of the Adoption Agreement.

         1.3  ACP Test. The average contribution percentage test described in
              Section 3.7.

         1.4  Administrator or Plan Administrator. The person, persons or entity
              designated by the Employer in the Adoption Agreement to administer
              and operate the Plan within the meaning of section 3(16)(A) of
              ERISA. If no such designation is made, the Employer shall be the
              Plan Administrator.

         1.5  Adoption Agreement. The document executed by the Employer and the
              Trustee(s) by which the Employer adopts this Plan and the Trust
              Agreement forming a part thereof and wherein the Employer selects
              from the options contained therein certain provisions relating to
              the operation of the Plan. The Adoption Agreement shall be
              incorporated into and deemed a part of the Plan and the Trust
              Agreement.

         1.6  ADP Test. The actual deferral percentage test described in Section
              3.6.

         1.7  Affiliated Employer. The Employer and any trade or business which
              is a member of a controlled group of corporations (as defined in
              section 414(b) of the Code) which includes the Employer, any trade
              or business (whether or not incorporated) which is under common
              control (as defined in section 414(c) of the Code) with the
              Employer, any organization (whether or not incorporated) which is
              a member of an affiliated service group (as defined in section
              414(m) of the Code) which includes the Employer, and any other
              entity required to be aggregated with the Employer pursuant to
              regulations under section 414(o) of the Code.

         1.8  Annual Additions. Annual Additions for a Plan Year shall mean the
              sum of:

              (a)  Employer contributions;

              (b)  Employee contributions;

              (c)  Forfeitures;

              (d)  Amounts allocated, after March 31, 1984, to an individual
                   medical benefit account, as defined in section 415(l)(2) of
                   the Code, which is part of a pension or annuity plan
                   maintained by the Employer, are treated as Annual Additions
                   to a defined contribution plan. Also amounts derived from
                   contributions paid or accrued after December 31, 1985, in
                   taxable years ending after such date, which are attributable
                   to post-retirement medical benefits, allocated to the
                   separate account of a key employee, as defined in section
                   419A(d)(3) of the Code, or under a welfare benefit fund, as
                   defined in section 419(e) of the Code, maintained by the
                   Employer are treated as Annual Additions to a defined
                   contribution plan; and

              (e)  Allocations under a simplified employee pension.

              For this purpose, any excess amount applied under Section 6.2 or
              6.3 in the Plan Year to reduce Employer contributions will be
              considered Annual Additions for such Plan Year.


                                       35



         1.9  Benefiting. A Participant is treated as benefiting under the Plan
              for any Plan Year during which the Participant received or is
              deemed to receive an allocation in accordance with Section
              1.410(b)-3(a).

         1.10 Beneficiary. The person or persons so designated by the
              Participant to receive his benefits under the Plan in the event of
              his death, or if the Participant fails to make such a designation
              or the designated person(s) fail to survive the Participant, the
              person(s) determined in accordance with Section 10.2(c).

         1.11 Break in Service. A Break in Service shall be a Plan Year in which
              an Employee fails to complete more than 500 Hours of Service with
              the Employer; except that for purposes of determining Years of
              Eligibility Service, a Break in Service shall be the
              12-consecutive month period designated by the Employer in the
              Adoption Agreement for determining Years of Eligibility Service
              during which an Employee fails to complete more than 500 Hours of
              Service. If the Employer elects the Elapsed Time method of
              calculating service, a Break in Service shall be determined as
              described in the definition of Elapsed Time.

         1.12 Code. The Internal Revenue Code of 1986, as amended from time to
              time, and any successor statute.

         1.13 Compensation.

              (a)  Subject to the following provisions of this Section,
                   Compensation shall mean one of the following, as elected by
                   the Employer in the Adoption Agreement, paid during the
                   period elected by the Employer in the Adoption Agreement:

                   (i)    W-2 Earnings - Compensation is defined as wages within
                          the meaning of section 3401(a) of the Code and all
                          other payments of compensation 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 written statement under
                          sections 6041(d), 6051(a)(3) and 6052 of the
                          Code.Compensation must be determined without regard to
                          any rules under section 3401(a) of the Code that limit
                          the remuneration included in wages based on the nature
                          or location of employment or the services performed
                          (such as the exception for agricultural labor in
                          section 3401(a)(2) of the Code). Unless elected
                          otherwise by the Employer in the Adoption Agreement,
                          Compensation shall include any amount which is
                          contributed by the Employer pursuant to a salary
                          reduction agreement and which is not includible in the
                          gross income of the Employee under section 125,
                          402(e)(3), 402(h)(1)(B) or 403(b) of the Code, and,
                          for years beginning after December 31, 2000, elective
                          amounts that are not includible in the gross income of
                          the Employee under section 132(f)(4) of the Code.

                   (ii)   Section 415 Compensation as defined in Section 1.49.

                   (iii)  Section 3401(a) wages - Compensation is defined as
                          wages within the meaning of section 3401(a) of the
                          Code for purposes of income tax withholding at the
                          source but determined without regard to any rules that
                          limit the remuneration included in wages based on the
                          nature or location of the employment or the services
                          performed (such as the exemption for agricultural
                          labor in section 3401(a)(2) of the Code).

              (b)  Notwithstanding the foregoing provisions of subsection (a),
                   Compensation shall not include such amounts as the Employer
                   may elect to exclude in the Adoption Agreement.

              (c)  For any Self-Employed Individual covered under the Plan,
                   Compensation will mean Earned Income.

              (d)  Compensation shall include only that compensation which is
                   actually paid to the Participant during the Plan Year.

              (e)  For Plan Years beginning on and after January 1, 1989, and
                   before January 1, 1994, the annual Compensation of each
                   Participant taken into account under the Plan for any Plan
                   Year shall not exceed $200,000, as adjusted by the Secretary
                   of Treasury at the same time and in the same manner as under
                   section 415(d) of the Code.

              (f)  For Plan Years beginning on or after January 1, 1994, the
                   annual Compensation of each Employee taken into account under
                   the Plan shall not exceed the OBRA `93 annual compensation
                   limit. The OBRA `93 annual compensation limit is $200,000 as
                   adjusted by the Commissioner of the Internal Revenue Service
                   for increases in the cost of living in accordance with
                   section 401(a)(17)(B)


                                       36



              of the Code. The cost-of-living adjustment in effect for a
              calendar year applies to any period, not exceeding 12 months, over
              which Compensation is determined (determination period) beginning
              in such calendar year. If a determination period consists of fewer
              than 12 months, the OBRA `93 annual compensation limit will be
              multiplied by a fraction, the numerator of which is the number of
              months in the determination period, and the denominator of which
              is 12. If Compensation for any prior determination period is taken
              into account in determining an Employee's benefits accruing in the
              then current Plan Year, the Compensation for that prior
              determination period is subject to the OBRA `93 annual
              compensation limit in effect for that prior determination period.
              For this purpose, in determining allocations in Plan Years
              beginning on or after January 1, 1989, the OBRA `93 annual
              compensation limit is $200,000. In addition, in determining
              allocations in Plan Years beginning on or after January 1, 1994,
              the OBRA `93 annual compensation limit is $150,000, as adjusted.

              In determining the Compensation of a Participant for purposes of
              this limitation, the rules of section 414(q)(6) of the Code shall
              apply, except in applying such rules, the term "family" shall
              include only the spouse of the Participant and any lineal
              descendants of the Participant who have not attained age 19 before
              the close of the year. If, as a result of the application of such
              rules, the applicable annual compensation limitation is exceeded,
              then (except for purposes of determining the portion of
              Compensation up to the integration level if this Plan provides for
              permitted disparity) the limitation shall be prorated among the
              affected individuals in proportion to each such individual's
              Compensation as determined under this Section prior to the
              application of this limitation. This subsection shall be effective
              in Plan Years beginning after December 31, 1988, and before
              January 1, 1997, unless the Employer elects a later year than 1997
              in the Optional Supplement.

         1.14 Current Year Testing. Application of the ADP and ACP Tests using
              the current year's ADP and ACP, respectively, of Participants who
              are Highly Compensated Employees with the current year's ADP and
              ACP, respectively, of Participants who are Non-Highly Compensated
              Employees.

         1.15 Discretionary Profit Sharing Contributions. Contributions of the
              Employer to the Plan and Trust as described in Section 3.3(b) and
              the Adoption Agreement.

         1.16 Early Retirement Age. If the Employer elects in the Adoption
              Agreement, the date on which a Participant satisfies the age
              and/or service requirements specified by the Employer in the
              Adoption Agreement.

         1.17 Earned Income. The annual net earnings from self-employment in the
              trade or business with respect to which the Plan is established,
              provided that personal services of the individual are a material
              income-producing factor. Net earnings will be determined without
              regard to items not included in gross income and the deductions
              allocable to such items. Net earnings are reduced by contributions
              by the Employer to a qualified plan to the extent deductible under
              section 404 of the Code. Net earnings shall be determined with
              regard to the deduction allowed to the Employer by section 164(f)
              of the Code for taxable years beginning after December 31, 1989.

         1.18 Effective Date. Except as otherwise specified herein, the
              effective date of the Plan is the first day for which the Plan
              document is effective as specified in the Adoption Agreement. If
              the Employer is adopting this Plan as an amendment and restatement
              of an existing plan, the provisions of the existing plan shall
              apply prior to the effective date of the amendment and restatement
              unless an earlier date is specified herein. The effective date of
              the amendment and restatement shall be specified in the Adoption
              Agreement.

         1.19 Elapsed Time. If an Employer elects in the Adoption Agreement to
              use Elapsed Time for purposes of determining eligibility to
              participate, vesting and Early Retirement Age (if applicable), the
              following definitions shall replace the otherwise required Year of
              Eligibility Service, Year of Vesting Service and Break in Service
              definitions. For purposes of this Section, Hour of Service shall
              mean each hour for which an Employee is paid or entitled to
              payment for the performance of duties for the Employer.

              (a)  An Employee will receive credit for the aggregate of all time
                   period(s) commencing with the Employee's first day of
                   employment or reemployment with the Employer and ending on
                   the date a Break in Service begins. The first day of
                   employment or reemployment is the first day the Employee
                   performs an Hour of Service. An Employee will be credited
                   with a Year of Service for


                                       37



                   each completed 365 days of service with the Employer, which
                   service need not be consecutive, regardless of the number of
                   hours worked. An Employee will also receive credit for any
                   Period of Severance of less than 12 consecutive months.
                   Fractional periods of a year will be expressed in terms of
                   days.

              (b)  A Break in Service is a Period of Severance of at least 12
                   consecutive months. In the case of an individual who is
                   absent from work for maternity or paternity reasons, the 12
                   consecutive month period beginning on the first anniversary
                   of the first date of such absence shall not constitute a
                   Break in Service. For purposes of this subsection, an absence
                   from work for maternity or paternity reasons means an absence
                   (i) by reason of the pregnancy of the individual, (ii) by
                   reason of the birth of a child of the individual, (iii) by
                   reason of the placement of a child with the individual in
                   connection with the adoption of such child by such
                   individual, or (iv) for purposes of caring for such child for
                   a period beginning immediately following such birth or
                   placement.

              (c)  A Period of Severance is a continuous period of time during
                   which the Employee is not employed by the Employer. Such
                   period begins on the earlier of (i) the date on which the
                   Employee's employment with the Employer terminates by reason
                   of retirement, death, discharge or resignation, or (ii) the
                   first anniversary of the date on which the Employee was
                   absent from work with the Employer (with or without pay) for
                   any other reason, other than an approved leave of absence
                   granted in writing by the Employer, according to a uniform
                   rule applied without discrimination, provided the Employee
                   returns to the employ of the Employer upon completion of the
                   leave.

              (d)  If the Employer is a member of an affiliated service group
                   (under section 414(m) of the Code), a controlled group of
                   corporations (under section 414(b) of the Code), or a group
                   of trades or businesses under common control (under section
                   414(c) of the Code) or any other entity required to be
                   aggregated with the Employer pursuant to section 414(o) of
                   the Code and the regulations thereunder, service will be
                   credited for any employment for any period of time for any
                   other member of such group. Service will also be credited for
                   any individual required under section 414(n) or (o) of the
                   Code and the regulations thereunder to be considered an
                   Employee of any Employer aggregated under section 414(b), (c)
                   or (m) of the Code.

         1.20 Elective Deferrals. Any Employer contributions made to the Plan at
              the election of a Participant, in lieu of cash compensation,
              pursuant to a salary reduction agreement or other deferral
              mechanism. With respect to any taxable year, a Participant's
              Elective Deferrals are the sum of all such employer contributions
              made on behalf of such Participant pursuant to an election to
              defer under any qualified cash or deferred arrangement as
              described in section 401(k) of the Code, any salary reduction
              simplified employee pension described in section 408(k)(6) of the
              Code, any SIMPLE IRA plan described in section 408(p) of the Code,
              any eligible deferred compensation plan under section 457 of the
              Code, any plan as described in section 501(c)(18) of the Code and
              any employer contributions made on behalf of a Participant
              pursuant to a salary reduction agreement for the purchase of an
              annuity contract under section 403(b) of the Code. Elective
              Deferrals shall not include any deferrals properly distributed as
              excess Annual Additions.

         1.21 Employee. Any person, including a Self-Employed Individual,
              employed by the Employer maintaining the Plan or of any other
              employer required to be aggregated with such Employer under
              section 414(b), (c), (m) or (o) of the Code and including Leased
              Employees of such employers within the meaning of section
              414(n)(2) or (o) of the Code. Notwithstanding the foregoing, if
              such Leased Employees constitute twenty percent or less of the
              Employer's non-highly compensated work force within the meaning of
              section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall
              not include those Leased Employees covered by a plan described in
              section 414(n)(5) of the Code unless otherwise provided by the
              terms of the Plan.

         1.22 Employee After-Tax Contributions. Any contribution made to the
              Plan by or on behalf of a Participant that was included in the
              Participant's gross income in the year in which made as described
              in Section 3.2(a) and the Adoption Agreement.

         1.23 Employer. The entity that adopts the Plan by execution of an
              Adoption Agreement.


                                       38



         1.24 Employer Contribution Accounts. The portion of a Participant's
              Account consisting of his Employer Matching Contributions,
              Discretionary Profit Sharing Contributions, Qualified Nonelective
              Contributions, Qualified Matching Contributions, Safe Harbor
              Matching Contributions, Safe Harbor Nonelective Contributions and
              ACP Test Only Safe Harbor Matching Contributions subaccounts.

         1.25 Entry Date. The Effective Date shall be the first Entry Date;
              thereafter, Entry Dates shall be the dates specified in the
              Adoption Agreement.

         1.26 ERISA. The Employee Retirement Income Security Act of 1974, as
              amended.

         1.27 Family Member. An Employee's spouse and lineal ascendants or
              descendants and the spouses of such lineal ascendants or
              descendants.

         1.28 Five Percent Owner. Any person who owns (or is considered to own
              within the meaning of section 318 of the Code) more than 5% of the
              interests in the Employer.

         1.29 Highly Compensated Employee. For Plan Years beginning after
              December 31, 1996, the term Highly Compensated Employee means any
              Employee who during the Plan Year: (1) was a Five Percent Owner at
              any time during the Plan Year or the look-back year, or (2) for
              the look-back year had Section 415 Compensation from the Employer
              in excess of $80,000 (adjusted at the same time and in the same
              manner as under section 415(d) of the Code, except that the base
              period is the calendar quarter ending September 30, 1996) and, if
              the Employer so elects in the Adoption Agreement, was in the
              top-paid group (i.e., top 20% of Employees ranked by compensation)
              for the look-back year.

              For this purpose, the Plan Year of the Plan for which a
              determination is being made is called a determination year and the
              preceding 12-month period is called a look-back year. If the
              Employer so elects in the Adoption Agreement, the look-back year
              shall be the calendar year beginning with or within the look-back
              year.

              The determination of who is a highly compensated former employee
              is based on the rules applicable to determining highly compensated
              employee status as in effect for that determination year, in
              accordance with section 1.414(q)-1T, A-4 of the Temporary Income
              Tax Regulations and Notice 97-45.

              In determining whether an Employee is a Highly Compensated
              Employee for years beginning in 1997, (1) the amendments to Code
              Section 414(q) stated above are treated as having been in effect
              for the 1996 Plan Year, and (2) if the Employer so elects in the
              Optional Supplement, the look-back year shall be the calendar year
              ending with or within the determination year.

              Effective for Plan Years beginning before January 1, 1997, or such
              later year than 1997 that the Employer elects in the Optional
              Supplement, if an Employee is, during a determination year or
              look-back year, a Family Member of either a Five Percent Owner who
              is an active or former Employee or a Highly Compensated Employee
              who is one of the ten most Highly Compensated Employees ranked on
              the basis of compensation paid by the Employer during such year,
              then the Family Member and Five Percent Owner or top ten Highly
              Compensated Employee shall be aggregated. In such case, the Family
              Member and Five Percent Owner or top ten Highly Compensated
              Employee shall be treated as a single Employee receiving
              compensation and Plan contributions or benefits equal to the sum
              of such compensation and contributions or benefits of the Family
              Member and Five Percent Owner or top ten Highly Compensated
              Employee.

         1.30 Hour of Service.

              (a)  An Hour of Service shall mean and include each hour for which
                   an Employee is compensated by the Employer, or is entitled to
                   be so compensated, for services rendered by him to the
                   Employer. These hours will be credited to the Employee for
                   the computation period in which the duties are performed.

              (b)  An Hour of Service shall also mean and include each hour for
                   which an Employee is compensated by the Employer, or is
                   entitled to be so compensated, on account of a period of time
                   during which no services are rendered by him to the Employer
                   (regardless of whether the Employee shall have ceased to be
                   an Employee) due to vacation, holiday, illness, incapacity
                   (including disability), layoff, jury duty, military duty or
                   leave of absence. No more than 501 Hours of Service shall be
                   credited pursuant to this subsection (b) on account of any
                   single continuous period during which an Employee


                                       39



                   renders no services to the Employer (whether or not such
                   period occurs in a single computation period). Hours under
                   this Section will be calculated and credited pursuant to
                   section 2530.200b-2 of the Department of Labor Regulations
                   which is incorporated herein by this reference.

              (c)  An Hour of Service shall also mean and include each hour for
                   which back pay, without regard to mitigation of damages, has
                   been awarded or agreed to by the Employer. The same Hours of
                   Service shall not be credited both under subsection (a) or
                   subsection (b), whichever shall be applicable, and also under
                   this subsection (c). The hours will be credited to the
                   Employee 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 credited for employment with other
                   members of an affiliated service group (under section 414(m)
                   of the Code), a controlled group of corporations (under
                   section 414(b) of the Code), or a group of trades or
                   businesses under common control (under section 414(c) of the
                   Code), of which the adopting Employer is a member, and any
                   other entity required to be aggregated with the Employer
                   pursuant to section 414(o) of the Code and the regulations
                   thereunder.

                   Hours of Service will also be credited for any individual
                   considered an Employee under section 414(n) or 414(o) of the
                   Code, and regulations thereunder.

                   Solely for purposes of determining whether a Break in Service
                   for participation and vesting purposes has occurred in a
                   computation period, an individual who is absent from work for
                   maternity or paternity reasons shall receive credit for the
                   Hours of Service which would otherwise have been credited to
                   such individual but for such absence, or in any case in which
                   such hours cannot be determined, eight Hours of Service per
                   day of such absence. For purposes of this subsection, an
                   absence from work for maternity or paternity reasons means an
                   absence (i) by reason of the pregnancy of the individual,
                   (ii) by reason of a birth of a child of the individual, (iii)
                   by reason of the placement of a child with the individual in
                   connection with the adoption of such child by such
                   individual, or (iv) for purposes of caring for such child for
                   a period beginning immediately following such birth or
                   placement. The Hours of Service credited under this paragraph
                   shall be credited only (i) in the computation period in which
                   the absence begins if the crediting is necessary to prevent a
                   Break in Service in that period, or (ii) in all other cases,
                   in the following computation period.

                   Hours of Service will be determined on the basis of the
                   method selected in the Adoption Agreement.

              1.31 Investment Options. Any regulated investment company
                   registered under the Investment Company Act of 1940 the
                   investment adviser of which is T. Rowe Price Associates, Inc.
                   or any of its affiliates, any common trust funds or
                   collective investment funds of the Sponsor qualified under
                   sections 401 and 501 of the Code, and any other funding
                   vehicle (including, but not limited to, limited partnership
                   interests which receive investment advice from T. Rowe Price
                   Associates, Inc. or an affiliate) made available to the Plan
                   by T. Rowe Price Trust Company which the Employer selects
                   under the terms of the Plan.

              1.32 Leased Employee. A Leased Employee is any person (other than
                   an Employee of the recipient) who, pursuant to an agreement
                   between the recipient and any other person ("leasing
                   organization"), has performed services for the recipient (or
                   for the recipient and related persons determined in
                   accordance with section 414(n)(6) of the Code) on a
                   substantially full time basis for a period of at least one
                   year and such services are performed under primary direction
                   and control of the recipient.

                   Any Leased Employee shall be treated as an employee of the
                   recipient employer. However, contributions or benefits
                   provided by the leasing organization which are attributable
                   to service performed for the recipient employer shall be
                   treated as provided by the recipient employer. The preceding
                   sentence shall not apply to any Leased Employee if Leased
                   Employees do not constitute more than twenty percent of the
                   employer's non-highly compensated force and, if such leased
                   employee is covered by a money purchase pension plan
                   providing: (a) a nonintegrated employer contribution rate of
                   at least ten percent of compensation as defined in section
                   415(c)(3) of the Code, but including amounts contributed by
                   the employer pursuant to a salary reduction agreement which
                   are excludible from the employee's gross income under section
                   125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code, and, for
                   years beginning after December 31, 2000, elective amounts
                   that are not included in gross income of the Employee


                                       40



                   under section 132(f)(4) of the Code, (b) full and immediate
                   vesting, and (c) each employee of the leasing organization
                   (other than employees who perform substantially all of their
                   services for the leasing organization) immediately
                   participate in the Plan.

              1.33 Matching Contributions. A contribution by the Employer made
                   to this or any other defined contribution plan on behalf of a
                   Participant on account of a Participant's Elective Deferrals
                   or on account of a Participant's Employee After-Tax
                   Contributions under this or any other plan maintained by the
                   Employer as set forth in Section 3.3(a) and the Adoption
                   Agreement. Matching Contributions shall not include Qualified
                   Matching Contributions, Safe Harbor Matching Contributions or
                   ACP Test Only Safe Harbor Matching Contributions.

              1.34 Non-Highly Compensated Employee. An Employee of the Employer
                   who during the Plan Year is neither a Highly Compensated
                   Employee nor, for Plan Years beginning before January 1,
                   1997, a Family Member of a Highly Compensated Employee during
                   such Plan Year.

              1.35 Normal Retirement Age. The date on which a Participant
                   attains age 65 unless otherwise specified in the Adoption
                   Agreement. If the Employer enforces a mandatory retirement
                   age, the Normal Retirement Age is the lesser of that
                   mandatory age or the age specified in the Adoption Agreement.

              1.36 Optional Supplement. A supplement to the Adoption Agreement
                   that may be executed by the Employer at the time it is
                   retroactively restating its plan to comply with GUST.

              1.37 Owner-Employee. An individual who is sole proprietor, if the
                   Employer is a sole proprietorship, or a partner who owns more
                   than ten percent of either the capital or profits interests
                   of the partnership.

              1.38 Participant. A person who has met the eligibility
                   requirements as specified in the Adoption Agreement and whose
                   Account hereunder has been neither completely forfeited nor
                   completely distributed.

              1.39 Participant-Directed Transfer. A plan-to-plan transfer made
                   at the request of a Participant as described in Section
                   3.2(d).

              1.40 Plan. The retirement plan set forth herein and in the
                   Adoption Agreement as amended from time to time.

              1.41 Plan Year. The twelve consecutive month period designated by
                   the Employer in the Adoption Agreement.

              1.42 Qualified Matching Contributions. Contributions made by the
                   Employer as described in Section 3.13 and allocated to the
                   Participant's Account that are subject to the distribution
                   and nonforfeitability requirements of section 401(k) of the
                   Code when made.

              1.43 Qualified Nonelective Contributions. Contributions made by
                   the Employer as described in Section 3.12 and allocated to
                   the Participant's Account that the Participant may not elect
                   to receive in cash until distributed from the Plan; that are
                   nonforfeitable when made; and that are distributable only in
                   accordance with distribution provisions that are applicable
                   to Elective Deferrals and Qualified Matching Contributions.

              1.44 Retirement. Termination of a Participant's employment with
                   the Employer on or after the Participant's Early Retirement
                   Age or Normal Retirement Age.

              1.45 Rollover Contribution. A rollover contribution made to the
                   Plan by a Participant as described in Section 3.2(c).

              1.46 Safe Harbor Contributions. Safe Harbor Matching
                   Contributions, Safe Harbor Nonelective Contributions and ACP
                   Test Only Safe Harbor Matching Contributions.

              1.47 Safe Harbor Matching Contributions. Contributions of the
                   Employer to the Plan and Trust as described in Section 4.2
                   and in Section 9.2(a) of the Adoption Agreement. Safe Harbor
                   Matching Contributions do not include ACP Test Only Safe
                   Harbor Matching Contributions.

              1.48 Safe Harbor Nonelective Contributions. Contributions of the
                   Employer to the Plan and Trust as described in Section 4.2
                   and in Section 9.2(b)(1) of the Adoption Agreement.


                                       41



              1.49 Section 415 Compensation. A Participant's Earned Income,
                   wages, salaries and fees for professional services and other
                   amounts received (without regard to whether an amount is paid
                   in cash) or made available for personal services actually
                   rendered in the course of employment with the Employer
                   maintaining the Plan (including, but not limited to,
                   commissions paid salesmen, compensation for services on the
                   basis of a percentage of profits, commissions on insurance
                   premiums, tips, bonuses, fringe benefits and reimbursements
                   or other expense allowances under a nonaccountable plan (as
                   described in Treasury Regulation 1.62-2(c)), but excluding
                   the following:

                   (a)    Employer contributions to a plan of deferred
                          compensation which are not includible in the
                          Employee's gross income for the taxable year in which
                          contributed, or Employer contributions under a
                          simplified employee pension plan to the extent such
                          contributions are excluded from the Employee's gross
                          income, or any distributions from a plan of deferred
                          compensation;

                   (b)    Amounts realized from the exercise of a nonqualified
                          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;

                   (c)    Amounts realized from the sale, exchange or other
                          disposition of stock acquired under a qualified stock
                          option; and

                   (d)    Other amounts which received special tax benefits, or
                          contributions made by the Employer (whether or not
                          under a salary reduction agreement) towards the
                          purchase of an annuity contract described in section
                          403(b) of the Code (whether or not the contributions
                          are actually excludable from the gross income of the
                          Employee).

                   For Plan Years beginning after December 31, 1998, Section 415
                   Compensation for any Plan Year shall be limited as provided
                   in Section 1.13(f). Section 415 Compensation, (a) for years
                   beginning after December 31, 1997, shall include any elective
                   deferral (as defined in section 402(g)(3) of the Code), and
                   any amount which is contributed or deferred by the Employer
                   at the election of the Employee and which is not includible
                   in the gross income of the Employee by reason of section 125
                   or 457 of the Code, and (b) for years beginning after
                   December 31, 2000, shall include elective amounts that are
                   not included in the gross income of the Employee under
                   section 132(f)(4) of the Code.

              1.50 Self-Employed Individual. An individual who has Earned Income
                   for the taxable year from the trade, business or partnership
                   with respect to which the Plan is established; also, an
                   individual who would have had Earned Income but for the fact
                   the trade, business or partnership had no net profits for the
                   taxable year.

              1.51 Sponsor. The Sponsor of this prototype plan document is T.
                   Rowe Price Trust Company.

              1.52 Total Compensation. Subject to the following provisions of
                   this Section, for purposes of determining the amount of Safe
                   Harbor Contributions, Total Compensation shall mean one of
                   the following, as elected by the Employer in the Adoption
                   Agreement, paid during the period elected by the Employer in
                   the Adoption Agreement:

                   (a)    W-2 earnings as defined in Section 1.13(a)(i).

                   (b)    Section 415 Compensation as defined in Section
                          1.13(a)(ii).

                   (c)    Section 3401(a) wages as defined in Section
                          1.13(a)(iii).

                   For purposes of determining Total Compensation, W-2 earnings,
                   Section 415 Compensation and section 3401(a) wages shall be
                   determined in accordance with the provisions of subsections
                   (c) through (f) of Section 1.13 as if the term "Total
                   Compensation" were substituted for the term "Compensation" in
                   each place the term "Compensation" appears in such
                   subsections.

              1.53 Total and Permanent Disability. The inability of an Employee
                   while employed by the Employer to engage in any substantial
                   gainful activity by reason of any medically determinable
                   physical or mental impairment that can be expected to result
                   in death or to last for a continuous period of at least
                   twelve months.


                                       42



         1.54 Trust or Trust Fund. The fund maintained by the Trustee(s) for the
              investment of Plan assets in accordance with the terms and
              conditions of the Trust Agreement.

         1.55 Trust Agreement. The agreement between the Employer and the
              Trustee(s) under which the assets of the Plan are held,
              administered and managed. The provisions of the Trust Agreement
              shall be deemed a part of the Plan.

         1.56 Trustee. The individual or corporate Trustee or Trustees under the
              Trust Agreement as they may be constituted from time to time. Such
              Trustee or Trustees shall be named in and a party to the Adoption
              Agreement.

         1.57 Valuation Date. The last day of the Plan Year and such other dates
              as may be designated by the Plan Administrator from time to time.

         1.58 Year of Eligibility Service. Unless the Employer elects in the
              Adoption Agreement to credit service under the Elapsed Time
              method, a Year of Eligibility Service is an eligibility
              computation period during which an Employee completes at least
              1,000 Hours of Service. For this purpose, the initial eligibility
              computation period shall be the twelve consecutive month period
              beginning with the day the Employee first performs an Hour of
              Service for the Employer. The succeeding twelve consecutive month
              periods shall commence on one of the two following days as elected
              by the Employer in the Adoption Agreement:

              (a)  The first anniversary of the date the Employee first
                   completes an Hour of Service for the Employer; or

              (b)  The first day of each Plan Year beginning after the date on
                   which the Employee first completes an Hour of Service for the
                   Employer.

              If the Employer elects to credit service under the Elapsed Time
              method, see the definition of Elapsed Time for the applicable
              rules to calculate service.

         1.59 Year of Vesting Service. Unless the Employer elects in the
              Adoption Agreement to credit service under the Elapsed Time
              method, a Year of Vesting Service is a Plan Year during which an
              Employee completes at least 1,000 Hours of Service. If the
              Employer elects to credit service under the Elapsed Time method,
              see the definition of Elapsed Time for the applicable rules to
              calculate service.

ARTICLE II - ELIGIBILITY AND PARTICIPATION

         2.1  Active Participation. Subject to the following Sections of this
              Article II, each Employee shall be eligible to participate in the
              Plan on the Entry Date coincident with or next following the date
              on which such Employee satisfies the eligibility requirements set
              forth in the Adoption Agreement.

         2.2  Exclusion of Certain Employees. To the extent provided in the
              Adoption Agreement, the following Employees shall be excluded from
              participation in the Plan;

              (a)  Employees not meeting the age and service requirements,

              (b)  Employees who are included in a unit of Employees covered by
                   a collective bargaining agreement between employee
                   representatives and one or more Employers, if there is
                   evidence that retirement benefits were the subject of good
                   faith bargaining between such employee representatives and
                   such Employer or Employers. For this purpose, the term
                   "employee representatives" does not include any organization
                   where more than one half of the membership is comprised of
                   owners, officers and executives of the Employer,

              (c)  Employees who are nonresident aliens and who receive no
                   earned income from the Employer which constitutes income from
                   sources within the United States;

              (d)  Employees included in certain ineligible job classifications;

              (e)  Leased Employees; and

              (f)  Employees employed by certain members of the aggregated group
                   of employers including the Employer.


                                       43



              In the event an Employee who is not a member of the eligible class
              of Employees becomes a member of the eligible class, such Employee
              shall participate immediately if such Employee has satisfied the
              minimum age and service requirements set forth in the Adoption
              Agreement.

              In the event a Participant is no longer a member of an eligible
              class of Employees and becomes ineligible to participate, but has
              not incurred a Break in Service, such Employee shall participate
              immediately upon returning to an eligible class of Employees. If
              such Participant incurs a Break in Service, eligibility to
              participate will be determined under Section 2.4.

         2.3  Predecessor Employers. To the extent provided in the Adoption
              Agreement, service with a predecessor employer shall be deemed
              service with the Employer for purposes of this Plan. If this Plan
              is a continuation of a predecessor employer's plan, service with
              the predecessor employer may not be disregarded for purposes of
              this Plan.

         2.4  Re-employment.

              (a)  A former Participant shall become a Participant immediately
                   upon returning to the employ of the Employer if such former
                   Participant is a member of an eligible class of Employees and
                   had a non-forfeitable right to all or a portion of the
                   Participant's Account derived from Employer contributions at
                   the time of termination from service.

              (b)  A former Participant who did not have a nonforfeitable right
                   to any portion of his Account derived from Employer
                   contributions at the time of termination from service shall
                   be considered a new Employee for eligibility purposes if the
                   number of consecutive 1-year Breaks in Service equals or
                   exceeds the greater of five or the aggregate number of Years
                   of Eligibility Service before such Breaks in Service. If such
                   former Participant's Years of Eligibility Service prior to
                   termination from service may not be disregarded pursuant to
                   the preceding sentence, such former Participant shall
                   participate immediately upon re-employment if he is a member
                   of an eligible class of Employees.

ARTICLE III - CONTRIBUTIONS

         3.1  Definitions. For the purposes of this Article III, the following
              definitions shall apply:

              (a)  Actual Deferral Percentage. For a specified group of
                   Participants for a Plan Year, "Actual Deferral Percentage"
                   shall mean the average of the ratios (calculated separately
                   for each Participant in such group) of (i) the amount of
                   Employer deferral contributions actually paid over to the
                   Plan on behalf of such Participant for the Plan Year to (ii)
                   the Participant's Testing Compensation for such Plan Year.
                   Employer deferral contributions made on behalf of any
                   Participant shall include: (i) any Elective Deferrals made
                   pursuant to the Participant's deferral election (including
                   Excess Elective Deferrals of Highly Compensated Employees),
                   but excluding (A) Excess Elective Deferrals of Non-Highly
                   Compensated Employees that arise solely from Elective
                   Deferrals made under the Plan or plans of this Employer, and
                   (B) Elective Deferrals that are taken into account in the ACP
                   Test (provided the ADP Test is satisfied both with and
                   without exclusion of these Elective Deferrals); and (ii) at
                   the election of the Plan Administrator, Qualified Nonelective
                   Contributions and Qualified Matching Contributions taken into
                   account as Elective Deferrals. For purposes of computing
                   Actual Deferral Percentages, an Employee who would be a
                   Participant but for the failure to make Elective Deferrals
                   shall be treated as a Participant on whose behalf no Elective
                   Deferrals are made.

              (b)  Aggregate Limit. "Aggregate Limit" shall mean the sum of (i)
                   125% of the greater of the ADP of the Non-Highly Compensated
                   Employees for the prior Plan Year or the ACP of Non-Highly
                   Compensated Employees under the Plan subject to section
                   401(m) of the Code for the Plan Year beginning with or within
                   the prior Plan Year of the cash or deferred arrangement, and
                   (ii) the lesser of 200% or two plus the lesser of such ADP or
                   ACP. "Lesser" is substituted for "greater" in "(i)", above,
                   and "greater" is substituted for "lesser" after "two plus
                   the" in "(ii)" if it would result in a larger Aggregate
                   Limit. If the Employer has elected in the Adoption Agreement
                   to use Current Year Testing, then, in calculating the
                   Aggregate Limit for a particular Plan Year, the Non-Highly
                   Compensated Employees' ADP and ACP for that Plan Year,
                   instead of the prior Plan Year, is used.


                                       44



              (c)  Average Contribution Percentage. "Average Contribution
                   Percentage" is the average of the Contribution Percentages of
                   the eligible Participants in a group.

              (d)  Contribution Percentage. "Contribution Percentage" is the
                   ratio (expressed as a percentage) of an eligible
                   Participant's Contribution Percentage Amounts to such
                   eligible Participant's Testing Compensation for the Plan
                   Year.

              (e)  Contribution Percentage Amounts. "Contribution Percentage
                   Amounts" is the sum of the Employee After-Tax Contributions,
                   Matching Contributions and Qualified Matching Contributions
                   (to the extent not taken into account for purposes of the ADP
                   test) made under the Plan on behalf of the Participant for
                   the Plan Year. Such Contribution Percentage Amounts shall not
                   include Matching Contributions that are forfeited either to
                   correct Excess Aggregate Contributions or because the
                   contributions to which they relate are Excess Elective
                   Deferrals, Excess Contributions or Excess Aggregate
                   Contributions. The Plan Administrator may include Qualified
                   Nonelective Contributions in the Contribution Percentage
                   Amounts. The Plan Administrator also may elect to use
                   Elective Deferrals in Contribution Percentage Amounts 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.

              (f)  Deferral Percentage. "Deferral Percentage" with respect to
                   any Plan Year is the ratio (expressed as a percentage) of a
                   Participant's Elective Deferrals (and Qualified Nonelective
                   Contributions or Qualified Matching Contributions, or both,
                   if treated as Elective Deferrals for purposes of the ADP
                   Test) to such Participant's Testing Compensation.

              (g)  Excess Aggregate Contributions. With respect to any Plan
                   Year, "Excess Aggregate Contributions" shall mean the excess
                   of (i) the aggregate Contribution Percentage Amounts taken
                   into account in computing the numerator of the Contribution
                   Percentage actually made on behalf of Highly Compensated
                   Employees for such Plan Year, over (ii) the maximum
                   Contribution Percentage Amounts permitted by the ACP Test
                   (determined by hypothetically reducing contributions made on
                   behalf of Highly Compensated Employees in order of their
                   Contribution Percentages beginning with the highest of such
                   percentages).

              (h)  Excess Contribution. With respect to a Plan Year, "Excess
                   Contributions" shall mean the excess of (i) the aggregate
                   amount of Elective Deferrals and amounts treated as Elective
                   Deferrals actually taken into account in computing the ADP of
                   Highly Compensated Employees for such Plan Year, over (ii)
                   the maximum amount of such contributions permitted by the ADP
                   Test (determined by hypothetically reducing contributions
                   made on behalf of the Highly Compensated Employees in order
                   of the ADPs, beginning with the highest of such percentages).

              (i)  Excess Elective Deferrals. Those Elective Deferrals that are
                   includible in a Participant's gross income under section
                   402(g) of the Code to the extent such Participant's Elective
                   Deferrals for a taxable year exceed the dollar limitation
                   under such Code section. Excess Elective Deferrals shall be
                   treated as Annual Additions under the Plan, unless such
                   amounts are distributed no later than the first April 15
                   following the close of the Participant's taxable year in
                   which such Excess Elective Deferrals arose.

              (j)  Testing Compensation. "Testing Compensation" shall mean any
                   definition of compensation allowed under section 414(s) of
                   the Code and the regulations thereunder for that portion of
                   the Plan Year designated by the Employer in the ADP and ACP
                   Nondiscrimination Testing section of the Adoption Agreement.
                   Testing Compensation shall be determined in accordance with
                   the provisions of subsections (c) through (f) of Section 1.13
                   as if the term "Testing Compensation" were substituted for
                   the term "Compensation" in each place the term "Compensation"
                   appears in such subsections.


                                       45



         3.2  Employee Contributions.

              (a)  Employee After-Tax Contributions. To the extent provided in
                   the Adoption Agreement and subject to any other applicable
                   limitations in this Plan, a Participant may make voluntary
                   after-tax Employee contributions to the Plan through payroll
                   deduction or in any other manner acceptable to the Employer.
                   A Participant shall at all times have a nonforfeitable
                   interest in his Employee After-Tax Contributions subaccount.

              (b)  Elective Deferrals.

                   (i)    To the extent provided in the Adoption Agreement, a
                          Participant may make Elective Deferrals to the Trust
                          in amounts not to exceed the limitations specified in
                          the Adoption Agreement or any other limitations
                          specified in this Plan. A Participant's Elective
                          Deferrals shall be made by direct reduction of
                          Compensation, with such reduction to be accomplished
                          through regular payroll reduction.

                   (ii)   The Elective Deferrals of a Participant shall be
                          limited in accordance with the provisions of this
                          subsection and any other applicable provisions of the
                          Plan. No Participant shall be permitted to have
                          Elective Deferrals made under this Plan, or any other
                          qualified plan maintained by the Employer, during any
                          taxable year, in excess of the dollar limitation
                          contained in section 402(g) of the Code in effect at
                          the beginning of such taxable year.

                   (iii)  Participants may elect to commence Elective Deferrals
                          at least once each Plan Year during a period
                          established by the Employer. Such election may not be
                          made retroactively, and the election must remain in
                          effect until modified or terminated. Participants may
                          terminate the election or change the amounts
                          designated to be deducted at any time by the
                          submission of such change of designation to the Plan
                          Administrator. The Plan Administrator shall establish
                          a uniform date on which such changes shall be
                          effective.

                   (iv)   No contributions or benefits (other than Matching
                          Contributions, Safe Harbor Matching Contributions, ACP
                          Test Only Safe Harbor Matching Contributions or
                          Qualified Matching Contributions) may be conditioned
                          upon an Employee's Elective Deferrals.

              (c)  Rollovers. If the Employer elects in the Adoption Agreement,
                   a Participant, or an Employee who would otherwise be eligible
                   to participate in the Plan but for the failure to satisfy any
                   age or service condition for eligibility to participate, who
                   has participated in any other qualified plan described in
                   section 401(a) of the Code or in a qualified annuity plan
                   described in section 403(a) of the Code shall be permitted,
                   subject to the approval of the Plan Administrator, to make a
                   rollover (or direct rollover) contribution to the Plan of all
                   or part of an amount received by such individual that is
                   attributable to participation in such other plan (reduced by
                   any nondeductible voluntary contributions the Participant
                   made to the plan), provided that the rollover contribution
                   complies with all requirements of section 402(c), 403(a)(4)
                   or 408(d)(3)(A)(ii) of the Code, whichever is applicable.
                   Before approving such a rollover, the Plan Administrator may
                   request from the individual or the sponsor of such other plan
                   any documents that the Plan Administrator, in its discretion,
                   deems necessary to determine that such rollover meets the
                   preceding requirements.

              (d)  Participant-Directed Transfers. If the Employer elects in the
                   Adoption Agreement, the Plan may accept at the request of a
                   Participant (or an Employee who would otherwise be eligible
                   to participate in the Plan but for the failure to satisfy any
                   age or service condition for eligibility to participate),
                   subject to the approval of the Plan Administrator, a direct
                   transfer of funds from a plan which the Employer reasonably
                   believes to be qualified under section 401(a) of the Code.
                   Any such transfer shall be accounted for separately and shall
                   be nonforfeitable at all times. Distribution from such
                   Participant-Directed Transfer subaccount shall not be
                   available prior to the Participant's death, Total and
                   Permanent Disability, termination of employment with the
                   Employer or prior to Plan termination if such assets are
                   transferred (within the meaning of section 414(l) of the
                   Code) to this Plan from a money purchase pension plan
                   qualified under section 401(a) of the Code (other than any
                   portion of those assets attributable to nondeductible
                   voluntary contributions made to the plan).


                                       46



              (e)  Rollovers or Participant-Directed Transfers.

                   (i)    If a rollover contribution or a Participant-Directed
                          Transfer is made on behalf of an Employee who is not
                          yet eligible to participate in the Plan, his Rollover
                          or Participant-Directed Transfer subaccount shall
                          constitute his entire interest in the Plan, and he
                          shall not be considered a Participant for any other
                          purpose of the Plan until he meets the eligibility
                          requirements for participation.

                   (ii)   Unless otherwise approved by the Plan Administrator
                          and the Trustee, rollovers and Participant-Directed
                          Transfers shall be made in cash or cash equivalents.

         3.3  Employer Contributions.

              (a)  Matching Contributions. If the Employer elects in the
                   Adoption Agreement to make Matching Contributions, for each
                   Plan Year the Employer shall contribute to the Trust an
                   amount as shall be determined by the Employer in accordance
                   with the matching contribution formula specified in the
                   Adoption Agreement. Matching Contributions shall be made on
                   behalf of those Participants specified by the Employer in the
                   Adoption Agreement.

              (b)  Discretionary Profit Sharing Contributions. If the Employer
                   elects in the Adoption Agreement to make Discretionary Profit
                   Sharing Contributions, the Employer may contribute to the
                   Trust an amount as may be determined by the Employer for each
                   Plan Year. Subject to the minimum top-heavy allocation rules
                   of Section 12.3 and the exclusions specified in this
                   subsection, Discretionary Profit Sharing Contributions for a
                   Plan Year shall be allocated to the Accounts of those
                   Participants specified by the Employer in the Adoption
                   Agreement and shall be allocated to Participants in
                   accordance with the provisions of Section 7.1(b) and the
                   Adoption Agreement.

              (c)  Qualified Nonelective Contributions. In its discretion, the
                   Employer may make Qualified Nonelective Contributions as
                   described in Section 3.12.

              (d)  Qualified Matching Contributions. In its discretion, the
                   Employer may make Qualified Matching Contributions as
                   described in Section 3.13.

              (e)  Safe Harbor Matching Contributions. If the Employer elects in
                   the Adoption Agreement to make Safe Harbor Matching
                   Contributions, for each Plan Year the Employer shall
                   contribute to the Trust on behalf of each Participant who has
                   made Elective Deferrals during such Plan Year an amount as
                   determined in accordance with the Safe Harbor Matching
                   Contribution formula specified in the Adoption Agreement.

              (f)  Safe Harbor Nonelective Contributions. If the Employer elects
                   in the Adoption Agreement to make Safe Harbor Nonelective
                   Contributions, for each Plan Year the Employer shall
                   contribute to the Trust on behalf of each Participant an
                   amount equal to 3% of the Participant's Total Compensation,
                   as determined in accordance with the Safe Harbor CODA section
                   of the Adoption Agreement, for such Plan Year or, if the
                   Employer so elects in the Safe Harbor CODA section of the
                   Adoption Agreement, Total Compensation, as determined in
                   accordance with the Safe Harbor CODA section of the Adoption
                   Agreement, for such period of time during the Plan Year in
                   which the Participant was eligible to participate in the
                   Plan.

              (g)  ACP Test Only Safe Harbor Matching Contributions. If the
                   Employer elects in the Adoption Agreement to make ACP Test
                   Only Safe Harbor Matching Contributions, for each Plan Year
                   the Employer shall contribute to the Trust on behalf of each
                   Participant who has made Elective Deferrals during such Plan
                   Year an amount as determined by the Employer in accordance
                   with the ACP Test Only Safe Harbor Matching Contribution
                   formula specified in the Adoption Agreement.

         3.4  Contribution Limitation. All contributions to the Plan shall be
              made without regard to current or accumulated earnings and profits
              of the Employer for the taxable year(s) ending with or within the
              Plan Year. Notwithstanding the foregoing, the Plan shall be
              designed to qualify as a profit sharing plan for purposes of the
              Code. In no event shall any Employer contribution (plus any
              Elective Deferrals) exceed the maximum amount deductible from the
              Employer's income under section 404 of the Code or any amount
              allocated to the Account of a Participant exceed the maximum
              limitations under section 415 of the Code provided in Article VI.


                                       47



         3.5  Excess Elective Deferrals.

              (a)  General. A Participant may assign to this Plan any Excess
                   Elective Deferrals made during a taxable year of the
                   Participant by notifying the Plan Administrator on or before
                   March 1 following the close of the Participant's taxable year
                   of the Excess Elective Deferrals to be assigned to the Plan.
                   (A Participant is deemed to notify the Plan 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 this Employer.) Notwithstanding any other
                   provision of the Plan, Excess Elective Deferrals, plus any
                   income and minus any loss allocable thereto, shall be
                   distributed after the preceding taxable year and no later
                   than April 15 following the close of the preceding taxable
                   year to any Participant to whose Account Excess Elective
                   Deferrals were assigned for the preceding year and who claims
                   Excess Elective Deferrals for such taxable year.

              (b)  Calculation of Income or Loss. The income or loss allocable
                   to Excess Elective Deferrals is equal to the amount of income
                   or loss allocable to the Participant's Elective Deferral
                   subaccount for the taxable year multiplied by a fraction, the
                   numerator of which is such Participant's Excess Elective
                   Deferrals for the year and the denominator of which is the
                   sum of (i) the Participant's account balance attributable to
                   Elective Deferrals as of the beginning of the year and (ii)
                   the Participant's Elective Deferrals for the year.

              (c)  Tax Treatment. Excess Elective Deferrals that are distributed
                   after April 15 are includible in the Participant's gross
                   income in both the taxable year in which deferred and the
                   taxable year in which distributed.

              (d)  Forfeiture of Certain Matching Contributions. All Matching
                   Contributions (whether or not vested) that were made on
                   account of an Excess Elective Deferral that has been
                   distributed in accordance with this Section 3.5 shall be
                   forfeited before the last day of the twelve-month period
                   immediately following the close of the taxable year in which
                   such Excess Elective Deferrals were made.

         3.6  Actual Deferral Percentage Test.

              (a)  Prior Year Testing. The Actual Deferral Percentage
                   (hereinafter "ADP") for a Plan Year for Participants who are
                   Highly Compensated Employees for each Plan Year and the prior
                   year's ADP for Participants who were Non-Highly Compensated
                   Employees for the prior Plan Year must satisfy one of the
                   following tests:

                   (i)    The ADP for a Plan Year for Participants who are
                          Highly Compensated Employees for the Plan Year shall
                          not exceed the prior year's ADP for Participants who
                          were Non-Highly Compensated Employees for the prior
                          Plan Year multiplied by 1.25; or

                   (ii)   The ADP for a Plan Year for Participants who are
                          Highly Compensated Employees for the Plan Year shall
                          not exceed the prior year's ADP for Participants who
                          were Non-Highly Compensated Employees for the prior
                          Plan Year multiplied by 2.0, provided that the ADP for
                          Participants who were Highly Compensated Employees for
                          the Plan Year does not exceed the ADP for Participants
                          who were Non-Highly Compensated Employees in the prior
                          Plan Year by more than two percentage points.

                   For the first Plan Year the Plan permits any Participant to
                   make Elective Deferrals and this is not a successor plan, for
                   purposes of the foregoing tests, the prior year's ADP of
                   Non-Highly Compensated Employees shall be 3 percent unless
                   the Employer has elected in the Adoption Agreement to use the
                   Plan Year's ADP for these Participants.

                   Current Year Testing. If elected by the Employer in the
                   Adoption Agreement, the ADP tests in (i) and (ii), above,
                   will be applied by comparing the current Plan Year's ADP for
                   Participants who are Highly Compensated Employees with the
                   current Plan Year's ADP for Participants who are Non-Highly
                   Compensated Employees. Once made, this election can be undone
                   only if the Plan meets the requirements for changing to Prior
                   Year Testing set forth in Notice 98-1 (or superseding
                   guidance).

                   For Plan Years beginning before the Employer adopts this
                   document for its GUST-restated plan, the ADP Test in any such
                   Plan Year will be performed using Prior Year Testing or
                   Current Year Testing as the Employer elects in the Optional
                   Supplement.


                                       48



              (b)  Special Rules.

                   (i)    The Deferral Percentage for any Participant who is a
                          Highly Compensated Employee for the Plan Year, and who
                          is eligible to have Elective Deferrals (and Qualified
                          Nonelective Contributions or Qualified Matching
                          Contributions, or both, if treated as Elective
                          Deferrals for purposes of the ADP Test) allocated to
                          his or her Accounts under two or more cash or deferred
                          arrangements described in section 401(k) of the Code
                          that are maintained by the Employer, shall be
                          determined as if such Elective Deferrals (and, if
                          applicable, such Qualified Nonelective Contributions
                          or Qualified Matching Contributions, or both) were
                          made under a single arrangement. If a Highly
                          Compensated Employee participates in two or more cash
                          or deferred arrangements that have different plan
                          years, all cash or deferred arrangements ending with
                          or within the same calendar year shall be treated as a
                          single arrangement. Notwithstanding the foregoing,
                          certain plans shall be treated as separate if
                          mandatorily disaggregated under regulations under
                          section 401(k) of the Code.

                   (ii)   In the event that this Plan satisfies the requirements
                          of section 401(k), 401(a)(4) or 410(b) of the Code
                          only if aggregated with one or more other plans, or if
                          one or more other plans satisfy the requirements of
                          such sections of the Code only if aggregated with this
                          Plan, then this Section shall be applied by
                          determining the Deferral Percentage of Employees as if
                          all such plans were a single plan. Any adjustments to
                          the Non-Highly Compensated Employee ADP for the prior
                          year will be made in accordance with Notice 98-1 and
                          any superseding guidance, unless the Employer has
                          elected in the Adoption Agreement to use the Current
                          Year Testing method. Plans may be aggregated in order
                          to satisfy section 401(k) of the Code only if they
                          have the same plan year and use the same ADP testing
                          method.

                   (iii)  Effective for Plan Years beginning before January 1,
                          1997, for purposes of determining the Deferral
                          Percentage of a Participant who is a Five Percent
                          Owner or one of the ten most highly-paid Highly
                          Compensated Employees, the Elective Deferrals (and
                          Qualified Nonelective Contributions or Qualified
                          Matching Contributions, or both, if treated as
                          Elective Deferrals for purposes of the ADP Test) and
                          Testing Compensation of such Participant shall include
                          the Elective Deferrals (and, if applicable, Qualified
                          Nonelective Contributions and Qualified Matching
                          Contributions) and Testing Compensation for the Plan
                          Year of Family Members. Family Members, with respect
                          to such Highly Compensated Employees, shall be
                          disregarded as separate Employees in determining the
                          ADP both for Participants who are Non-Highly
                          Compensated Employees and for Participants who are
                          Highly Compensated Employees.

                   (iv)   For purposes of applying the ADP Test, Elective
                          Deferrals, Qualified Nonelective Contributions and
                          Qualified Matching Contributions must be made before
                          the last day of the twelve-month period immediately
                          following the Plan Year to which such contributions
                          relate.

                   (v)    The Employer shall maintain records sufficient to
                          demonstrate satisfaction of the ADP Test and the
                          amount of Qualified Nonelective Contributions or
                          Qualified Matching Contributions, or both, used in
                          such test.

                   (vi)   If the Employer elects to apply section 410(b)(4)(B)
                          of the Code in determining whether the Plan meets the
                          minimum coverage requirements of section 410(b)(1) of
                          the Code, the Employer may, in determining whether the
                          Plan satisfies the ADP Test, exclude from
                          consideration all eligible Employees (other than
                          Highly Compensated Employees) who have not met the
                          minimum age and service requirements of section
                          410(a)(1)(A) of the Code.

              (c)  Safe Harbor CODA.

                   (i)    If the Employer has elected in the Adoption Agreement
                          to make Safe Harbor Matching Contributions or Safe
                          Harbor Nonelective Contributions during a Plan Year,
                          the provisions of this Section 3.6 shall not apply.

                   (ii)   If the Employer suspends making Safe Harbor Matching
                          Contributions or Safe Harbor Nonelective Contributions
                          during a Plan Year, the provisions of this Section 3.6
                          shall apply using Current Year Testing.


                                       49



                   (iii)  If the Employer wants to maintain the option to amend
                          the Plan during a Plan Year to provide for Safe Harbor
                          Nonelective Contributions during such Plan Year, the
                          ADP and ACP Tests must be applied using Current Year
                          Testing during such Plan Year.

         3.7  Average Contribution Percentage Test.

              (a)  Prior Year Testing. The Average Contribution Percentage
                   (hereinafter "ACP") for a Plan Year for Participants who are
                   Highly Compensated Employees for each Plan Year and the prior
                   year's ACP for Participants who were Non-Highly Compensated
                   Employees for the prior Plan Year must satisfy one of the
                   following tests:

                   (i)    The ACP for a Plan Year for Participants who are
                          Highly Compensated Employees for the Plan Year shall
                          not exceed the prior year's ACP for Participants who
                          were Non-Highly Compensated Employees for the prior
                          Plan Year multiplied by 1.25; or

                   (ii)   The ACP for a Plan Year for Participants who are
                          Highly Compensated Employees for the Plan Year shall
                          not exceed the prior year's ACP for Participants who
                          were Non-Highly Compensated Employees for the prior
                          Plan Year multiplied by 2.0, provided that the ACP for
                          Participants who are Highly Compensated Employees does
                          not exceed the ACP for Participants who were
                          Non-Highly Compensated Employees in the prior Plan
                          Year by more than two percentage points.

              For the first Plan Year the Plan permits any Participant to make
              Employee After-Tax Contributions, provides for Matching
              Contributions, or both, and this is not a successor plan, for
              purposes of the foregoing tests, the prior year's ACP of
              Non-Highly Compensated Employees shall be 3 percent unless the
              Employer has elected in the Adoption Agreement to use the Plan
              Year's ACP for these Participants.

              Current Year Testing. If elected by the Employer in the Adoption
              Agreement, the ACP tests in (i) and (ii), above, will be applied
              by comparing the current Plan Year's ACP for Participants who are
              Highly Compensated Employees for each Plan Year with the current
              Plan Year's ACP for Participants who are Non-Highly Compensated
              Employees. Once made, this election can be undone only if the Plan
              meets the requirements for changing to Prior Year Testing set
              forth in Notice 98-1 (or superseding guidance).

              For Plan Years beginning before the Employer adopts this document
              for its GUST-restated plan, the ACP Test in any such Plan Year
              will be performed using Prior Year Testing or Current Year Testing
              as the Employer elects in the Optional Supplement.

              (b)  Special Rules.

                   (i)    For purposes of this Section, the Contribution
                          Percentage for any Participant who is a Highly
                          Compensated Employee and who is eligible to have
                          Contribution Percentage Amounts allocated to his or
                          her Account under two or more plans described in
                          section 401(a) of the Code or cash or deferred
                          arrangements described in section 401(k) of the Code
                          that are maintained by the Employer shall be
                          determined as if the total of such Contribution
                          Percentage Amounts were made under a single plan. If
                          Contribution Percentage Amounts are made on behalf of
                          a Highly Compensated Employee in two or more plans
                          that have different plan years, all such plans that
                          have plan years ending with or within the same
                          calendar year shall be treated as a single plan.
                          Notwithstanding the foregoing, certain plans shall be
                          treated as separate if mandatorily disaggre-gated
                          under regulations under section 410(b) of the Code.

                   (ii)   In the event that this Plan satisfies the requirements
                          of section 401(m), 401(a)(4) or 410(b) of the Code
                          only if aggregated with one or more other plans, or if
                          one or more other plans satisfy the requirements of
                          such sections of the Code only if aggregated with this
                          Plan, then this Section shall be applied by
                          determining the ACP of Employees as if all such plans
                          were a single plan. Any adjustments to the Non-Highly
                          Compensated Employee ACP for the prior year will be
                          made in accordance with Notice 98-1 and any
                          superseding guidance, unless the Employer has elected
                          in the Adoption Agreement to use the Current Year
                          Testing method. Plans may be aggregated in order to
                          satisfy section 401(m) of the Code only if they have
                          the same plan year and use the same ACP testing
                          method.


                                       50



                   (iii)  Effective for Plan Years beginning before January 1,
                          1997, for purposes of determining the Contribution
                          Percentage of a Participant who is a Five Percent
                          Owner or one of the ten most highly-paid Highly
                          Compensated Employees, the Contribution Percentage
                          Amounts and Testing Compensation of such Participant
                          shall include the Contribution Percentage Amounts and
                          Testing Compensation for the Plan Year of Family
                          Members. Family Members, with respect to Highly
                          Compensated Employees, shall be disregarded as
                          separate Employees in determining the Contribution
                          Percentage both for Participants who are Non-Highly
                          Compensated Employees and for Participants who are
                          Highly Compensated Employees.

                   (iv)   For purposes of applying the ACP Test, Employee
                          After-Tax Contributions are considered to have been
                          made in the Plan Year in which contributed to the
                          Trust. Qualified Matching Contributions and Qualified
                          Nonelective Contributions 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.

                   (v)    The Employer shall maintain records sufficient to
                          demonstrate satisfaction of the ACP test and the
                          amount of Qualified Nonelective Contributions or
                          Qualified Matching Contributions, or both, used in
                          such test.

                   (vi)   If the Employer elects to apply section 410(b)(4)(B)
                          of the Code in determining whether the Plan meets the
                          minimum coverage requirements of section 410(b)(1) of
                          the Code, the Employer may, in determining whether the
                          Plan satisfies the ACP Test, exclude from
                          consideration all eligible Employees (other than
                          Highly Compensated Employees) who have not met the
                          minimum age and service requirements of section
                          410(a)(1)(A) of the Code.

              (c)  Safe Harbor CODA.

                   (i)    If the Employer has elected in the Adoption Agreement
                          to make Safe Harbor Matching Contributions or ACP Test
                          Only Safe Harbor Matching Contributions during a Plan
                          Year, the provisions of this Section 3.7 shall apply
                          as follows:

                          (A)  If only Safe Harbor Matching Contributions (or
                               ACP Test Only Safe Harbor Matching Contributions)
                               or Elective Deferrals, or both, are allowed, the
                               provisions of this Section 3.7 shall not apply.

                          (B)  If Employee After-Tax Contributions are allowed
                               or if the Employer makes any type of matching
                               contribution other than Safe Harbor Matching
                               Contributions or ACP Test Only Safe Harbor
                               Matching Contributions under the Plan during a
                               Plan Year, the provisions of this Section 3.7
                               shall apply during such Plan Year using Current
                               Year Testing except that the Employer may elect
                               to disregard Safe Harbor Matching Contributions
                               and ACP Test Only Safe Harbor Matching
                               Contributions in performing such Current Year
                               Testing.

                   (ii)   If the Employer suspends making Safe Harbor Matching
                          Contributions or ACP Test Only Safe Harbor Matching
                          Contributions during a Plan Year, the provisions of
                          this Section 3.7 shall apply using Current Year
                          Testing.

                   (iii)  If the Employer wants to maintain the option to amend
                          the Plan during a Plan Year to provide for Safe Harbor
                          Nonelective Contributions during such Plan Year, the
                          ADP and ACP Tests must be applied using Current Year
                          Testing during such Plan Year.

         3.8  Multiple Use Test. If one or more Highly Compensated Employees
              participate in both a cash or deferred arrangement and a plan
              subject to the ACP Test maintained by the Employer and the sum of
              the ADP and ACP of those Highly Compensated Employees subject to
              either or both tests exceeds the Aggregate Limit, then the ADP or
              ACP, or both, of those Highly Compensated Employees who also
              participate in a cash or deferred arrangement will be reduced in
              the manner determined by the Plan Administrator so that the limit
              is not exceeded. The amount by which each Highly Compensated
              Employee's Deferral Percentage or Contribution Percentage Amount,
              or both, is reduced shall be treated as an Excess Aggregate
              Contribution. The ADP and ACP of the Highly Compensated Employees
              are determined after any corrections required to meet the ADP and
              ACP Tests. Impermissible multiple use does not occur if either the
              ADP or ACP of the Highly Compensated Employees does not exceed
              1.25 multiplied by the ADP and ACP of the Non-Highly Compensated
              Employees.


                                       51



         3.9  Prevention or Cure of ADP Test Failures. The Plan Administrator
              may, in its sole discretion, use any one or a combination of the
              following methods to prevent or cure any ADP Test failure in
              accordance with section 401(k) of the Code and the regulations
              thereunder:

              (a)  The Plan Administrator may refuse to accept any or all
                   prospective Elective Deferrals to be contributed by a Highly
                   Compensated Employee.

              (b)  The Plan Administrator may distribute any or all Excess
                   Contributions in accordance with the provisions of Section
                   3.11.

              (c)  The Employer may, in its sole discretion, elect to contribute
                   a Qualified Nonelective Contribution in accordance with the
                   provisions of Section 3.12.

              (d)  Subject to the requirements of Section 3.13, the Plan
                   Administrator may, in its sole discretion, elect to treat
                   Qualified Matching Contributions as if they were Elective
                   Deferrals for purposes of the ADP test.

              (e)  The Plan Administrator may recharacterize Excess
                   Contributions as Employee After-Tax Contributions in
                   accordance with the provisions of Section 3.14.

              (f)  The Employer may, in its sole discretion, elect to make a
                   Safe Harbor Nonelective Contribution in accordance with the
                   provisions of Section 3.15.

         3.10 Prevention or Cure of ACP Test Failures. The Plan Administrator
              may, in its sole discretion, use any one or a combination of the
              following methods to prevent or cure any ACP Test failure in
              accordance with section 401(m) of the Code and the regulations
              thereunder:

              (a)  The Plan Administrator may refuse to accept any or all
                   prospective Elective Deferrals or Employee After-Tax
                   Contributions, or both, to be contributed by a Highly
                   Compensated Employee.

              (b)  The Plan Administrator may elect to contribute a Qualified
                   Matching Contribution in accordance with the provisions of
                   Section 3.13.

              (c)  The Plan Administrator may forfeit, if forfeitable, or
                   distribute, if not forfeitable, Excess Aggregate
                   Contributions in accordance with Section 3.17.

              (d)  The Plan Administrator may elect to treat Qualified
                   Nonelective Contributions or Elective Deferrals, or both, as
                   if they were Matching Contributions in accordance with
                   Sections 3.12 and 3.16, respectively, subject to the
                   requirements of Section 3.1(e).

              (e)  If the Employer has elected the Safe Harbor CODA in the
                   Adoption Agreement for a Plan Year, and if Employee After-Tax
                   Contributions can be made to the Plan in such Plan Year, the
                   Plan Administrator may, in its sole discretion, use any one
                   or a combination of the following methods to prevent or cure
                   any ACP Test failure:

                   (i)    The Plan Administrator may refuse to accept any or all
                          prospective Employee After-Tax Contributions to be
                          contributed by a Highly Compensated Employee.

                   (ii)   The Plan Administrator may distribute Employee
                          After-Tax Contributions (and any income or loss
                          allocable thereto) that are Excess Aggregate
                          Contributions.

         3.11 Distribution of Excess Contributions to Cure ADP Test Failure.

              (a)  General Rule. Notwithstanding any other provision of this
                   Plan, Excess Contributions for a Plan Year, plus any income
                   and minus any loss allocable thereto, shall be distributed to
                   Participants to whose Accounts such Excess Contributions were
                   allocated for the preceding Plan Year no later than twelve
                   months following the last day of such preceding Plan Year.
                   Excess Contributions are allocated to the Highly Compensated
                   Employees with the largest amounts of Elective Deferrals and
                   amounts treated as Elective Deferrals taken into account in
                   calculating the ADP Test for the year in which the excess
                   arose, beginning with the Highly Compensated Employee with
                   the largest amount of such Elective Deferrals and amounts
                   treated as Elective Deferrals and continuing in descending
                   order until all Excess Contributions have been allocated. For
                   purposes of the preceding sentence, the "largest amount" is
                   determined after distribution of any Excess Elective
                   Deferrals. If such excess amounts are distributed more than 2
                   1/2months after the last day of the Plan Year in which such
                   excess amounts arose, a 10% excise tax on such amounts will
                   be imposed on the Employer.


                                       52



                   For Plan Years beginning before January 1, 1997, Excess
                   Contributions of a Participant who is subject to the Family
                   Member aggregation rules shall be allocated among the Family
                   Members of such Participant in proportion to the Elective
                   Deferrals (and amounts treated as Elective Deferrals) of each
                   Family Member that is combined to determine the combined ADP
                   of such Participant.

              (b)  Calculation of Income or Loss. The income or loss allocable
                   to Excess Contributions allocated to each Participant is
                   equal to the amount of income or loss allocable to the
                   Participant's Elective Deferral subaccount (and, if
                   applicable, the Qualified Nonelective Contribution subaccount
                   or the Qualified Matching Contribution subaccount, or both)
                   for the Plan Year multiplied by a fraction, the numerator of
                   which is such Participant's Excess Contributions for the Plan
                   Year and the denominator of which is the sum of (i) the
                   Participant's account balance attributable to Elective
                   Deferrals (and Qualified Nonelective Contributions or
                   Qualified Matching Contributions, or both, if any of such
                   contributions are included in the ADP Test) as of the
                   beginning of the Plan Year, and (ii) Elective Deferrals (and
                   Qualified Nonelective Contributions or Qualified Matching
                   Contributions, or both, if any such contributions are
                   included in the ADP Test).

              (c)  Method of Distribution. Excess Contributions shall be
                   distributed from the Participant's Elective Deferral
                   subaccount, Qualified Nonelective Contribution subaccount (if
                   applicable) or Qualified Matching Contribution subaccount (if
                   applicable), or any such subaccounts, in the manner
                   determined by the Plan Administrator.

              (d)  Forfeiture of Certain Matching Contributions. Any Matching
                   Contribution (whether or not vested) that was made on account
                   of an Excess Contribution that has been distributed in
                   accordance with this Section 3.11 shall be forfeited no later
                   than twelve months after the close of the Plan Year in which
                   such Excess Contribution occurred.

              (e)  Annual Additions. Excess Contributions shall be treated as
                   Annual Additions under the Plan.

         3.12 Qualified Nonelective Contributions to Prevent or Cure ADP and/or
              ACP Test Failure. The Employer may, in its sole discretion, elect
              to contribute a Qualified Nonelective Contribution in any amount
              to prevent or cure any ADP Test and/or ACP Test failure for a Plan
              Year within twelve months after the close of the Plan Year to
              which such contribution relates. Qualified Nonelective
              Contributions for a Plan Year shall be allocated only to the
              Accounts of Participants who are Non-Highly Compensated Employees
              in one of the following methods selected by the Plan
              Administrator:

              (a)  In the ratio in which each such Non-Highly Compensated
                   Employee's Compensation as defined in the Adoption Agreement
                   for the Plan Year for which the Qualified Nonelective
                   Contribution is being made bears to the total such
                   Compensation of all such Non-Highly Compensated Employees for
                   such Plan Year.

              (b)  Beginning with the Non-Highly Compensated Employee with the
                   lowest such Compensation for such Plan Year and continuing in
                   ascending order an amount no greater than the Maximum
                   Permissible Amount, as defined in Section 6.1(j), reduced by
                   any Annual Additions credited to such Non-Highly Compensated
                   Employee under this Plan or any other plan of the Employer as
                   if such amount of the Qualified Nonelective Contribution
                   allocated to such Non-Highly Compensated Employee were
                   included as an Annual Addition for such Plan Year.

         3.13 Qualified Matching Contribution to Prevent or Cure ADP and/or ACP
              Test Failure. The Employer may, in its sole discretion, elect to
              contribute a Qualified Matching Contribution in any amount to
              prevent or cure any ADP Test and/or ACP Test failure for a Plan
              Year within twelve months after the close of the Plan Year to
              which such contribution relates. Qualified Matching Contributions
              for a Plan Year shall be allocated to the Accounts of Participants
              who are Non-Highly Compensated Employees and who would be eligible
              for an allocation of Matching Contributions in accordance with
              Section 3.3(a) in accordance with one of the following methods:

              (a)  If the Employer makes Matching Contributions only on behalf
                   of Participants who make Elective Deferrals, in the ratio in
                   which the Elective Deferrals for such Plan Year of each
                   Participant who is a Non-Highly Compensated Employee and who
                   is eligible for a Matching Contribution for such Plan Year
                   bear to the total Elective Deferrals of all such Non-Highly
                   Compensated Employees for such Plan Year.


                                       53



              (b)  If the Employer makes Matching Contributions only on behalf
                   of Participants who make Employee After-Tax Contributions, in
                   the ratio in which the Employee After-Tax Contributions for
                   such Plan Year of each Participant who is a Non-Highly
                   Compensated Employee and who is eligible for a Matching
                   Contribution for such Plan Year bear to the total Employee
                   After-Tax Contributions of all such Non-Highly Compensated
                   Employees for such Plan Year.

              (c)  If the Employer makes Matching Contributions on behalf of
                   Participants who make Elective Deferrals or Employee
                   After-Tax Contributions, or both, in the ratio in which the
                   total Elective Deferrals and Employee After-Tax Contributions
                   for such Plan Year of each Participant who is a Non-Highly
                   Compensated Employee and is eligible for a Matching
                   Contribution for such Plan Year bear to the total Elective
                   Deferrals and Employee After-Tax Contributions of all such
                   Non-Highly Compensated Employees for such Plan Year.

         3.14 Recharacterization of Excess Contributions to Cure ADP Test
              Failure. If the Employer elects in the Adoption Agreement to allow
              Participants to make Employee After-Tax Contributions to the Plan,
              the Plan Administrator, in its sole discretion, may treat Excess
              Contributions allocated to a Highly Compensated Employee as an
              amount distributed to him or her and then contributed by him or
              her to the Plan as an Employee After-Tax Contribution.
              Recharacterized Excess Contributions will remain nonfor-feitable.
              Excess Contributions may not be recharacterized to the extent such
              amounts in combination with other Employee After-Tax Contributions
              made by that Employee would exceed any stated limit under the Plan
              on Employee After-Tax Contributions.

              Recharacterization must occur no later than 2 1/2months after the
              last day of the Plan Year in which such Excess Contributions arose
              and is deemed to occur no earlier than the date the last Highly
              Compensated Employee is informed in writing of the amount
              recharacterized and the consequences thereof. Recharacterized
              amounts will be taxable to the Participant for the Participant's
              taxable year in which the Participant would have received them in
              cash.

         3.15 Safe Harbor Nonelective Contribution to Prevent ADP Test Failure.
              The Employer may elect to make a Safe Harbor Nonelective
              Contribution during a Plan Year as described in Notice 2000-3 and
              any superceding guidance.

         3.16 Elective Deferrals to Cure ACP Test Failure. The Plan
              Administrator may, in its sole discretion, elect to treat Elective
              Deferrals as if they were Matching Contributions for a Plan Year
              as 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.

         3.17 Forfeiture and/or Distribution of Excess Aggregate Contributions
              to Cure ACP Test Failure. Notwithstanding any other provision of
              this Plan, Excess Aggregate Contributions for a Plan Year, plus
              any income and minus any loss allocable thereto, may be forfeited,
              if forfeitable, or if not forfeitable, distributed, no later than
              twelve months after the close of the Plan Year to which such
              contributions relate, to Participants to whose Accounts such
              Excess Aggregate Contributions were allocated for such Plan Year.
              Excess Aggregate Contributions are allocated to the Highly
              Compensated Employees with the largest Contribution Percentage
              Amounts taken into account in calculating the ACP Test for the
              Plan Year in which the excess arose, beginning with the Highly
              Compensated Employee 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. For
              Plan Years beginning before January 1, 1997, Excess Aggregate
              Contributions of a Participant who is subject to the Family Member
              aggregation rules shall be allocated among the Family Members of
              such Participant in proportion to the Matching Contributions (or
              amounts treated as Matching Contributions) of each Family Member
              that is combined to determine the combined ACP of such
              Participant. Excess Aggregate Contributions shall be forfeited, if
              forfeitable, or distributed, if not forfeitable, in the manner
              determined by the Plan Administrator from the Participant's
              Matching Contribution subaccount and/or Qualified Matching
              Contribution subaccount (and/or, if applicable, the Participant's
              Qualified Nonelective Contribution subaccount or Elective Deferral
              subaccount, or both).


                                       54



              If Excess Aggregate Contributions are distributed more than 2 1/2
              months after the last day of the Plan Year in which such excess
              amounts arose, a 10% excise tax will be imposed on the Employer
              maintaining the Plan with respect to those amounts. Excess
              Aggregate Contributions shall be treated as Annual Additions
              under the Plan.

              The income or loss allocable to Excess Aggregate Contributions
              allocated to a Participant is equal to the amount of income or
              loss allocable to the Participant's Employee After-Tax
              Contributions subaccount, Matching Contribution subaccount,
              Qualified Matching Contribution subaccount (if any, and if all
              amounts therein are not used in the ADP Test) and, if applicable,
              Qualified Nonelective Contribution subaccount and Elective
              Deferral subaccount for the Plan Year multiplied by a fraction,
              the numerator of which is such Participant's Excess Aggregate
              Contributions for the year and the denominator of which is the sum
              of (i) the Participant's account balance(s) attributable to
              Contribution Percentage Amounts as of the beginning of the Plan
              Year, and (ii) Contribution Percentage Amounts made during the
              Plan Year.

              Forfeitures of Excess Aggregate Contributions shall be reallocated
              to Participants' Accounts as described in Section 5.5.

              Any Matching Contribution (whether or not vested) that was made on
              account of an Excess Aggregate Contribution that has been
              distributed in accordance with this Section 3.17 shall be
              forfeited no later than twelve months after the close of the Plan
              Year in which such Excess Aggregate Contribution occurred.

ARTICLE IV - SAFE HARBOR CODA

         4.1  Rules of Application.

              (a)  Except as specifically provided in this Article, if the
                   Employer has elected the safe harbor CODA option in the
                   Adoption Agreement, the provisions of this Article IV shall
                   apply and any provisions relating to the ADP Test described
                   in Section 3.6 or the ACP Test described in Section 3.7 do
                   not apply. Notwithstanding the foregoing,

                   (i)    If the Employer has elected in the Adoption Agreement
                          to permit Employee After-Tax Contributions during a
                          Plan Year in which the Employer has elected the safe
                          harbor CODA, such Employee After-Tax Contributions
                          shall be subject to the ACP Test described in Section
                          3.7.

                   (ii)   If the Employer has elected in the Adoption Agreement
                          to make Safe Harbor Nonelective Contributions and
                          Matching Contributions, such Matching Contributions
                          shall be subject to the ACP Test described in Section
                          3.7.

              (b)  To the extent that any other provision of the Plan is
                   inconsistent with the provisions of this Article, the
                   provisions of this Article shall govern.

         4.2  Safe Harbor Contributions. If the Employer elects in the Adoption
              Agreement to make Safe Harbor Contributions, for each Plan Year
              the Employer shall contribute to the Trust an amount as shall be
              determined by the Employer in accordance with the Safe Harbor
              Contribution formula(s) specified in the Adoption Agreement. If
              the payroll period method is used to determine Safe Harbor
              Matching Contributions and/or ACP Test Only Safe Harbor Matching
              Contributions, such contributions made with respect to any Plan
              Year quarter beginning after May 1, 2000, must be contributed to
              the Plan by the last day of the following Plan Year quarter.

         4.3  Notice Requirement.

              (a)  At least 30 days, but not more than 90 days, before the
                   beginning of a Plan Year, the Employer will provide each
                   Participant a notice of the safe harbor matching and/or
                   nonelective contribution formula used under the Plan, how
                   such contributions are fully vested when made, how and when
                   to make salary deferral elections and how to obtain
                   additional information about the Plan, written in a manner
                   calculated to be understood by the average Participant. If an
                   Employee becomes a Participant after the 90th day before the
                   beginning of the Plan Year and does not receive the notice
                   for that reason, the notice must be provided no more than 90
                   days before the Employee becomes a Participant but no later
                   than the day the Employee becomes a Participant.


                                       55



              (b)  In addition to any other election periods provided under the
                   Plan, each Participant may make or modify a salary deferral
                   election during the 30-day period immediately following
                   receipt of the notice described in subsection (a) above.

         4.4  Special Rule. Notwithstanding the foregoing provisions of the
              Article, the provisions of Notice 98-52 and Notice 2000-3 (and any
              superceding guidance) shall govern the operation of a Plan that
              makes a safe harbor CODA election in the Adoption Agreement.

ARTICLE V - ALLOCATION OF FUNDS

         5.1  Allocation of Discretionary Profit Sharing Contributions.

              (a)  Definitions. For the purposes of this Section 5.1, the
                   following definitions shall apply.

                   (i)    Integration Level. The Social Security Taxable Wage
                          Base or such lesser percentage of the Social Security
                          Taxable Wage Base elected by the Employer in the
                          Adoption Agreement.

                   (ii)   Maximum Profit Sharing Disparity Rate. The lesser of:

                          (A)  2.7% (5.7% if the Plan is not Top-Heavy);

                          (B)  The applicable percentage determined in
                               accordance with the table below:

              If the Integration Level is


More Than         But Not More Than         The Applicable Percentage Is:

                                           Top-Heavy          Not Top-Heavy

     $0            20% of SSTWB               2.7%                5.7%
20% of SSTWB       80% of SSTWB               1.3%                4.3%
80% of SSTWB      100% of SSTWB               2.4%                5.4%

              If the Integration Level is equal to SSTWB, the applicable
              percentage is 2.7% (5.7% if the Plan is not Top-Heavy).

                   (iii)  SSTWB or Social Security Taxable Wage Base. The
                          contribution and benefit base in effect under section
                          230 of the Social Security Act on the first day of the
                          Plan Year.

              (b)  Formula. If the Employer elects in the Adoption Agreement to
                   make Discretionary Profit Sharing Contributions, all
                   Discretionary Profit Sharing Contributions it elects to make
                   for any Plan Year shall be allocated to the Account of each
                   Participant eligible for such an allocation, as designated by
                   the Employer in the Adoption Agreement, in the ratio that
                   such Participant's Compensation bears to the Compensation of
                   all such Participants. However, if the Discretionary Profit
                   Sharing Contribution formula selected in the Adoption
                   Agreement provides for allocations under the permitted
                   disparity rules, Discretionary Profit Sharing Contributions
                   for the Plan Year shall be allocated to the Accounts of
                   Participants eligible for such an allocation as follows:

                   If the Plan is Top-Heavy (as defined in Article XII) for the
                   Plan Year, begin at Step One; if the Plan is not Top-Heavy
                   for the Plan Year, begin at Step Three.

                   Step One. Contributions (and forfeitures, if applicable) will
                   be allocated to each eligible Participant's Discretionary
                   Profit Sharing Contributions subaccount in the ratio that
                   each eligible Participant's Compensation bears to all such
                   Participants' Compensation, but not in excess of 3% of each
                   Participant's Compensation.

                   Step Two. Any contributions (and forfeitures, if applicable)
                   remaining after the allocation in Step One will be allocated
                   to each eligible Participant's Discretionary Profit Sharing
                   Contributions subaccount in the ratio that each eligible
                   Participant's Compensation for the Plan Year in excess of the
                   Integration Level (hereinafter "Excess Compensation") bears
                   to the Excess Compensation of all such Participants, but not
                   in excess of 3% of Compensation.


                                       56



                   Step Three. Any contributions (and forfeitures, if
                   applicable) remaining after the allocation in Step Two if the
                   Plan is Top-Heavy will be allocated to each eligible
                   Participant's Discretionary Profit Sharing Contributions
                   subaccount in the ratio that the sum of each eligible
                   Participant's Compensation and Excess Compensation bears to
                   the sum of all such Participants' Compensation and Excess
                   Compensation, but not in excess of the Maximum Profit Sharing
                   Disparity Rate.

                   Step Four. Any remaining contributions (and forfeitures, if
                   applicable) will be allocated to each eligible Participant's
                   Discretionary Profit Sharing Contributions subaccount in the
                   ratio that each such Participant's Compensation for the Plan
                   Year bears to the total of all such Participants'
                   Compensation for that year.

              If the Employer maintains any other plan that provides for
              permitted disparity, and if any Participant in this Plan is
              eligible to participate in such other plan, this Plan may not
              provide for permitted disparity.

              Effective for Plan Years beginning on or after January 1, 1995,
              the cumulative permitted disparity limit for a Participant is 35
              total cumulative permitted disparity years. Total cumulative
              permitted disparity years means the number of years credited to
              the Participant for allocation or accrual purposes under this Plan
              or any other qualified plan or simplified employee pension plan
              (whether or not terminated) ever maintained by the Employer. For
              purposes of determining the Participant's cumulative permitted
              disparity limit, all years ending in the same calendar year are
              treated as the same year. If the Participant has not benefited
              under a defined benefit or target benefit plan for any year
              beginning on or after January 1, 1994, the Participant has no
              cumulative disparity limit.

         5.2  Allocation of Net Earnings or Losses of the Trust. Earnings,
              dividends, capital gain distributions, appreciation, depreciation,
              losses and accrued but unpaid interest and any other earnings or
              losses from assets in a specific Participant's Account or
              subaccount or in a segregated account under the Plan shall be
              allocated to such Account, subaccount, or segregated account.

         5.3  Valuations. In determining the earnings or losses of the Trust, as
              of each Valuation Date the Trust shall be valued in accordance
              with the provisions of the Trust Agreement.

         5.4  Accounting for Distributions. All distributions made to a
              Participant or his Beneficiary and any transfers to another
              qualified plan shall be charged to the appropriate subaccount of
              the Participant's Account as of the date of the distribution or
              transfer.

         5.5  Allocation of Forfeitures. Any forfeitures arising under the Plan,
              including forfeitures of Excess Aggregate Contributions, shall be
              allocated in the following order of priority as of the Plan Year
              in which forfeitures occur:

              (a)  First, forfeitures shall be used to the extent necessary to
                   restore a returning Participant's Account as provided in
                   Section 7.5 and to restore a formerly unlocatable
                   Participant's or Beneficiary's Account as provided in Section
                   7.6;

              (b)  Next, if the Employer so elects in the Adoption Agreement,
                   forfeitures shall be treated as an Employer contribution,
                   shall be used to reduce Matching Contributions and/or Safe
                   Harbor Contributions required under the Plan and shall be
                   allocated to the appropriate Matching Contribution
                   subaccounts, Safe Harbor Matching Contribution subaccounts,
                   Safe Harbor Nonelective Contribution subaccounts and/or ACP
                   Test Only Safe Harbor Matching Contribution subaccounts of
                   the Participants on whose behalf such contributions are to be
                   made;

              (c)  Next, forfeitures shall be treated as Employer contributions
                   and shall be allocated to Participants' Accounts to the
                   extent necessary to satisfy the minimum allocation provisions
                   of Section 12.3.

              (d)  Next, to the extent elected by the Plan Administrator,
                   forfeitures shall be treated as a Qualified Nonelective
                   Contribution or a Qualified Matching Contribution and shall
                   be allocated as provided in Sections 3.12 and 3.13,
                   respectively;

              (e)  Next, to the extent elected by the Plan Administrator,
                   forfeitures shall be used to pay reasonable costs of
                   administering the Plan;


                                       57



              (f)  Any remaining forfeitures shall be treated as Employer
                   contributions and shall be allocated as follows:

                   (i)    If the Employer has elected in the Adoption Agreement
                          that it may make Discretionary Profit Sharing
                          Contributions to the Plan, such forfeitures shall be
                          treated as Discretionary Profit Sharing Contributions
                          and allocated in accordance with the provisions of
                          Section 5.1(b);

                   (ii)   If the Employer has not elected in the Adoption
                          Agreement that it may make Discretionary Profit
                          Sharing Contributions to the Plan, such forfeitures
                          shall be allocated as follows:

                          (A)  In any Plan Year in which the Plan is not a safe
                               harbor cash or deferred arrangement, such
                               forfeiture shall be treated as Matching
                               Contributions and allocated to each Participant's
                               Matching Contribution subaccount in the ratio
                               that each Participant's Matching Contributions
                               for the Plan Year bear to the total of all
                               Participants' Matching Contributions for the Plan
                               Year.

                          (B)  In any Plan Year in which the Plan is a safe
                               harbor cash or deferred arrangement, such
                               forfeitures shall be treated as Discretionary
                               Profit Sharing Contributions and allocated to the
                               Account of each Participant in the ratio that
                               each Participant's Compensation for the Plan Year
                               bears to the Compensation of all such
                               Participants for the Plan Year.

         5.6  Investment of Funds.

              (a)  Investment Control. Subject to the provisions of subsection
                   (c) below, the management and control of the Trust shall be
                   vested in the Plan Administrator, and the Trustee shall be
                   subject to the directions of the Plan Administrator made in
                   accordance with the terms of the Plan and ERISA.

              (b)  Investment Limitations. The Trustee shall invest all funds
                   received from the Employer in the Investment Options in the
                   manner from time to time directed in writing by the Employer.

              (c)  Participant Directed Investments. Each Participant, subject
                   to such reasonable restrictions as the Employer, the Plan
                   Administrator or the Sponsor may impose for administrative
                   convenience, may direct the Plan Administrator on what
                   percentage of his or her Account will be invested in each
                   Investment Option. No person, including the Trustee and the
                   Employer, shall be responsible for any loss or for any breach
                   of fiduciary duty which results from a Participant's or
                   Beneficiary's exercise of investment control.

              (d)  Failure of a Participant to Make an Investment Election. If a
                   Participant does not make a designation of an Investment
                   Option, the Employer shall direct the Trustee to invest all
                   amounts held or received on account of such Participant in
                   the Investment Option(s) designated by the Employer.

              (e)  Employer Securities. If provided in the Adoption Agreement,
                   the Employer and/or Participants may direct that
                   contributions will be invested in qualifying employer
                   securities (within the meaning of section 407(d)(5) of
                   ERISA), subject to such restrictions as the Employer, the
                   Administrator or the Sponsor may impose for administrative
                   convenience or legal compliance.

ARTICLE VI - LIMITATION ON ALLOCATIONS

         6.1  Definitions. For purposes of this Article VI, the following
              definitions shall apply:

              (a)  Annual Additions Compensation shall mean one of the following
                   as elected by the Employer in the Adoption Agreement, paid
                   during the period elected by the Employer in the Adoption
                   Agreement:

                   (i)    W-2 earnings as defined in Section 1.13(a)(i).

                   (ii)   Section 415 Compensation as defined in Section
                          1.13(a)(ii).

                   (iii)  Section 3401(a) wages as defined in Section
                          1.13(a)(iii).

              For the purposes of determining Annual Additions Compensation, W-2
              earnings, section 415 Compensation and section 3401(a) wages shall
              be determined in accordance with the provisions of subsections (c)
              through (f) of Section 1.13 as if the term "Annual Additions
              Compensation" were substituted for the term "Compensation" in each
              place the term "Compensation" appears in such subsections.


                                       58



              (b)  Defined Benefit Fraction shall mean a fraction, the numerator
                   of which is the sum of the Participant's Projected Annual
                   Benefits under all defined benefit plans (whether or not
                   terminated) maintained by the Employer, and the denominator
                   of which is the lesser of 125% of the dollar limitation in
                   effect for the Limitation Year under section 415(b) and (d)
                   of the Code or 140% of the Highest Average Compensation
                   including any adjustments under section 415(b) of the Code.

              Notwithstanding the above, if the Participant was a Participant as
              of the first day of the first Limitation Year beginning after
              December 31, 1986, in one or more defined benefit plans maintained
              by the Employer which were in existence on May 6, 1986, the
              denominator of this fraction will not be less than 125% of the sum
              of the annual benefits under such plans which the Participant had
              accrued as of the close of the last Limitation Year beginning
              before January 1, 1987, disregarding any changes in the terms and
              conditions of the plan after May 5, 1986. The preceding sentence
              applies only if the defined benefit plans individually and in the
              aggregate satisfied the requirements of section 415 of the Code
              for all Limitation Years beginning before January 1, 1987.

              (c)  Defined Contribution Dollar Limitation shall mean $30,000, as
                   adjusted under section 415(d) of the Code.

              (d)  Defined Contribution Fraction shall mean a fraction, the
                   numerator of which is the sum of the Annual Additions to the
                   Participant's account under all defined contribution plans
                   (whether or not terminated) maintained by the Employer for
                   the current and all prior Limitation Years (including the
                   Annual Additions attributable to the Participant's
                   nondeductible employee contributions to all defined benefit
                   plans, whether or not terminated, maintained by the Employer
                   and the Annual Additions attributable to all welfare benefit
                   funds, individual medical accounts and simplified employee
                   pensions maintained by the Employer), and the denominator of
                   which is the sum of the maximum aggregate amount for the
                   current and all prior Limitation Years of service with the
                   Employer (regardless of whether a defined contribution plan
                   was maintained by the Employer). The maximum aggregate amount
                   in any Limitation Year is the lesser of 125% of the dollar
                   limitation determined under section 415(b) and (d) of the
                   Code in effect under section 415(c)(1)(A) of the Code or 35%
                   of the Participant's Annual Additions Compensation for such
                   year.

                   If the 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 this fraction will be adjusted if the sum of
                   this 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 (i) the excess
                   of the sum of the fractions over 1.0 times (ii) the
                   denominator of this fraction, will be permanently subtracted
                   from the numerator of this fraction. The adjustment is
                   calculated using the fractions as they would be computed as
                   of the end of the last Limitation Year beginning before
                   January 1, 1987, and disregarding any changes in the terms
                   and conditions of the plan made after May 5, 1986, but using
                   the section 415 limitation applicable to the first Limitation
                   Year beginning on or after January 1, 1987.

                   Annual Additions for any Limitation Year beginning before
                   January 1, 1987, shall not be recomputed to treat all
                   Employee After-Tax Contributions as an Annual Addition.

              (e)  Employer shall mean the Employer that adopts this Plan, and
                   all members of a controlled group of corporations (as defined
                   in section 414(b) of the Code as modified by section 415(h)
                   of the Code), all commonly controlled trades or businesses
                   (as defined in section 414(c) of the Code as modified by
                   section 415(h) of the Code) or affiliated service groups (as
                   defined in section 414(m) of the Code) of which the adopting
                   Employer is a part and any other entity required to be
                   aggregated with the Employer pursuant to regulations under
                   section 414(o) of the Code.

              (f)  Excess Amount shall mean the excess of the Participant's
                   Annual Additions for the Limitation Year over the Maximum
                   Permissible Amount.

              (g)  Highest Average Compensation shall mean the average Annual
                   Additions Compensation of a Participant for the three
                   consecutive years of service (as measured by the Limitation
                   Year) with the Employer that produces the highest average.


                                       59



              (h)  Limitation Year shall mean the Plan Year. All qualified plans
                   maintained by the Employer must use the same Limitation Year.
                   If the Limitation Year is amended to a different 12
                   consecutive month period, the new Limitation Year must begin
                   on a date within the Limitation Year in which the amendment
                   is made.

              (i)  Master or Prototype Plan shall mean a plan the form of which
                   is the subject of a favorable opinion letter from the
                   Internal Revenue Service.

              (j)  Maximum Permissible Amount. The maximum Annual Additions that
                   may be contributed or allocated to a Participant's Account
                   under this Plan for any Limitation Year shall not exceed the
                   lesser of:

                   (i)    The Defined Contribution Dollar Limitation; or

                   (ii)   Twenty-five percent of the Participant's Annual
                          Additions Compensation for the Limitation Year.

                   The Annual Additions Compensation limitation referred to in
                   (ii) above shall not apply to any contribution for medical
                   benefits (within the meaning of section 401(h) or 419A(f)(2)
                   of the Code) which is otherwise treated as an Annual Addition
                   under section 415(l)(1) or 419A(d)(2) of the Code.

                   If a short Limitation Year is created because of an amendment
                   changing the Limitation Year to a different 12 consecutive
                   month period, the Maximum Permissible Amount shall not exceed
                   the Defined Contribution Dollar Limitation, multiplied by the
                   following fraction:

                   Number of months in the short Limitation Year
                   ---------------------------------------------
                                      12

              (k)  Projected Annual Benefit shall mean the annual retirement
                   benefit (adjusted to an actuarially equivalent straight life
                   annuity if such benefit is expressed in a form other than a
                   straight life annuity or qualified joint and survivor
                   annuity) to which a Participant would be entitled under the
                   terms of the plan assuming:

                   (i)    the Participant will continue employment until the
                          normal retirement age under the plan (or current age
                          if later); and

                   (ii)   the Participant's compensation for the current
                          Limitation Year and all other relevant factors used to
                          determine benefits under the plan remain constant for
                          all future Limitation Years.

         6.2  Participants Not Covered Under Other Plans.

              (a)  If the Participant does not participate in, and has never
                   participated in another qualified plan maintained by the
                   Employer, or a welfare benefit fund (as defined in section
                   419(e) of the Code) maintained by the Employer or an
                   individual medical account (as defined in section 415(l)(2)
                   of the Code) maintained by the Employer, or a simplified
                   employee pension (as defined in Section 408(k) of the Code)
                   maintained by the Employer, which provides an Annual
                   Addition, the amount of Annual Additions which may be
                   credited to the Account of the Participant for any Limitation
                   Year shall not exceed the lesser of the Maximum Permissible
                   Amount or any other limitation contained in this Plan. If
                   contributions for and/or allocations to the Account of the
                   Participant would cause the Annual Additions for the
                   Limitation Year to exceed the Maximum Permissible Amount, the
                   amount contributed or allocated will be reduced to the extent
                   that the Annual Additions for the Limitation Year will equal
                   the Maximum Permissible Amount.

              (b)  Prior to determining a Participant's Annual Additions
                   Compensation for the Limitation Year, the Employer may
                   determine the Maximum Permissible Amount for the Participant
                   on the basis of a reasonable estimation of the Participant's
                   Annual Additions Compensation for the Limitation Year,
                   uniformly determined for all Participants similarly situated.

              (c)  As soon as is administratively feasible after the end of the
                   Limitation Year, the Maximum Permissible Amount for the
                   Limitation Year will be determined on the basis of the
                   Participant's Annual Additions Compensation for the
                   Limitation Year.


                                       60



              (d)  If, for any Limitation Year, the maximum Annual Additions is
                   exceeded by reason of allocation of forfeitures, a reasonable
                   error in estimating a Participant's Annual Additions
                   Compensation, a reasonable error in determining the amount of
                   Elective Deferrals or under other limited facts and
                   circumstances approved by the Internal Revenue Service, then,
                   any such excess shall be disposed of in the following order:

                   (i)    Any Employee After-Tax Contributions, and any income
                          attributable thereto, to the extent they would reduce
                          the Excess Amount, shall be returned to the
                          Participant;

                   (ii)   Any Elective Deferrals, and any income attributable
                          thereto, to the extent they would reduce the Excess
                          Amount, shall be returned to the Participant;

                   (iii)  If, after the application of paragraph (ii), 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 shall be used to
                          reduce Employer contributions (including any
                          allocation of forfeitures) for such Participant in the
                          next Limitation Year, and each succeeding Limitation
                          Year, if necessary;

                   (iv)   If, after the application of paragraph (ii), an Excess
                          Amount still exists and the Participant is not covered
                          by the Plan at the end of the Limitation Year, the
                          Excess Amount shall be held unallocated in a suspense
                          account. The suspense account shall be used to reduce
                          future Employer contributions for all remaining
                          Participants in the next Limitation Year, and each
                          succeeding Limitation Year if necessary;

                   (v)    If a suspense account is in existence at any time
                          during the Limitation Year pursuant to this Section,
                          amounts held in the suspense account may not be
                          distributed to the Participants or Beneficiaries. Any
                          balance which may be in the suspense account upon
                          termination of the Plan shall revert to the Employer.
                          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 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.

         6.3  Participants Covered Under Other Defined Contribution Plans.

              (a)  This Section applies if, in addition to this Plan, the
                   Participant is covered under another qualified master or
                   prototype defined contribution plan maintained by the
                   Employer, a welfare benefit fund (as defined in section
                   419(e) of the Code) maintained by the Employer, an individual
                   medical account (as defined in section 415(l)(2) of the Code)
                   maintained by the Employer or a simplified employee pension
                   (as defined in section 408(k) of the Code) maintained by the
                   Employer, that provides an Annual Addition during any
                   Limitation Year. The Annual Additions which may be credited
                   to the Account of a Participant under this Plan for any such
                   Limitation Year shall not exceed the Maximum Permissible
                   Amount reduced by the Annual Additions credited to the
                   account of the Participant under the other plans and welfare
                   benefit funds for the same Limitation Year. If the Annual
                   Additions with respect to the Participant under other defined
                   contribution plans and welfare funds maintained by the
                   Employer are less than the Maximum Permissible Amount and the
                   Employer contributions that would otherwise be contributed or
                   allocated to the Account of the Participant under this Plan
                   would cause the Annual Additions for the Limitation Year to
                   exceed the Maximum Permissible Amount, the amount contributed
                   or allocated will be reduced so that the Annual Additions
                   under all plans and funds for the Limitation Year shall equal
                   the Maximum Permissible Amount. If Annual Additions with
                   respect to the Participant under such other defined
                   contribution plans and welfare benefit funds in the aggregate
                   are equal to or greater than the Maximum Permissible Amount,
                   no amount will be contributed or allocated to the Account of
                   the Participant under this Plan for the Limitation Year.

              (b)  Prior to determining the Participant's Annual Additions
                   Compensation for the Limitation Year, the Employer may
                   determine the Maximum Permissible Amount for a Participant in
                   the manner described in Section 6.2(b).


                                       61



              (c)  As soon as administratively feasible after the end of the
                   Limitation Year, the Maximum Permissible Amount for the
                   Limitation Year shall be determined on the basis of the
                   Participant's Annual Additions Compensation for the
                   Limitation Year.

              (d)  If, pursuant to Section 6.3(a) or as a result of the
                   allocation of forfeitures, a Participant's Annual Additions
                   under this Plan and such other plans would result in an
                   Excess Amount for a Limitation Year, the Excess Amount shall
                   be deemed to consist of the Annual Additions last allocated,
                   except that Annual Additions attributable to a simplified
                   employer pension will be deemed to have been allocated first,
                   followed by annual additions to a welfare benefit fund or
                   individual medical account, regardless of the actual
                   allocation date.

              (e)  If an Excess Amount was allocated to a Participant on an
                   allocation date of this Plan which coincides with an
                   allocation date of another plan, the Excess Amount attributed
                   to this Plan will be the product of:

                   (i)    the total Excess Amount allocated as of such date,

                   (ii)   the ratio of (1) the Annual Additions allocated to the
                          Participant for the Limitation Year as of such date
                          under this Plan to (2) the total Annual Additions
                          allocated to the Participant for the Limitation Year
                          as of such date under this and all the other qualified
                          master or prototype defined contribution plans.

              (f)  Any Excess Amount attributed to this Plan shall be disposed
                   of in the manner described in Section 6.2(d).

              (g)  If the Participant is covered under another qualified defined
                   contribution plan maintained by the Employer which is not a
                   master or prototype plan, Annual Additions which may be
                   credited to the Participant's Account under this Plan for any
                   Limitation Year will be limited in accordance with
                   subsections (a) through (f) above as though the other plan
                   were a master or prototype plan unless the Employer provides
                   other limitations in the Adoption Agreement.

         6.4  Participants Covered Under Both Defined Benefit and Defined
              Contribution Plans. If the Employer maintains, or at any time
              maintained, a qualified defined benefit plan covering any
              Participant in this Plan, the sum of the Participant's Defined
              Benefit Fraction and Defined Contribution Fraction shall not
              exceed 1.0 in any Limitation Year. The Annual Additions which may
              be credited to the Account of a Participant under this Plan for
              any Limitation Year will be limited in accordance with the
              Adoption Agreement. Unless otherwise elected by the Employer in
              the Optional Supplement, this Section 6.4 shall not apply for
              Limitation Years beginning on or after January 1, 2000.

ARTICLE VII - VESTING

         7.1  Employee After-Tax Contribution, Elective Deferral, Rollover
              Contribution, Participant-Directed Transfer, Qualified Nonelective
              Contribution, Qualified Matching Contribution, Safe Harbor
              Matching Contribution and Safe Harbor Nonelective Contribution
              Subaccounts.

              A Participant's Employee After-Tax Contribution subaccount,
              Elective Deferral subaccount, Rollover Contribution subaccount,
              Participant-Directed Transfer subaccount, Qualified Nonelective
              Contribution subaccount, Qualified Matching Contribution
              subaccount, Safe Harbor Matching Contribution subaccount and Safe
              Harbor Nonelective Contribution subaccount shall be fully vested
              and nonforfeitable at all times.

         7.2  Matching Contribution, Discretionary Profit Sharing Contribution
              and ACP Test Only Safe Harbor Matching Contribution Subaccounts.

              (a)  General. Notwithstanding the vesting schedule selected by the
                   Employer in the Adoption Agreement, the Participant's
                   Matching Contribution subaccount, Discretionary Profit
                   Sharing Contribution subaccount and ACP Test Only Safe Harbor
                   Matching Contribution subaccount shall be fully vested and
                   nonforfeitable upon the Participant's death, Total and
                   Permanent Disability or attainment of Normal or Early
                   Retirement Age while employed by the Employer. In the absence
                   of any of the preceding events, and subject to the provisions
                   of Sections 3.5(d), 3.11(d), 3.17, 12.4 and 14.2(b), the
                   Participant's Matching Contribution subaccount, Discretionary
                   Profit Sharing Contribution subaccount and ACP Test Only Safe
                   Harbor Matching Contribution subaccount shall be vested in
                   accordance with the vesting schedule(s) specified in the
                   Adoption Agreement. The schedule(s) must be at least as
                   favorable to Participants as either schedule in (i) or (ii)
                   below. If no vesting


                                       62



               schedule is selected in the Adoption Agreement, a Participant
               shall be considered 100% vested all portions of his Account.

          (i)  Graduated vesting according to one of the following schedules:

               Years of Vesting Service                 Percent Vested

                   3 but less than 4                           20%
                   4 but less than 5                           40%
                   5 but less than 6                           60%
                   6 but less than 7                           80%
                   7 or more                                  100%

                                       OR

               Years of Vesting Service                 Percent Vested

                   5 or more                                  100%

          (ii) 100% full and immediate.

          For purposes of this Article, if the Employer elects in the Adoption
          Agreement to calculate service using the Elapsed Time method, "Year(s)
          of Service" as defined in Section 1.19 shall be substituted for
          "Year(s) of Vesting Service."

     (b)  In-Service Distributions When Not Fully Vested. If a distribution is
          made from a Participant's Matching Contribution subaccount,
          Discretionary Profit Sharing Contribution subaccount or ACP Test Only
          Safe Harbor Matching Contribution subaccount at a time when the
          Participant is not 100% vested in such subaccount and the
          Participant's employment with the Employer has not terminated, then

          (i)  A separate remainder subaccount will be established for the
               Participant's interest in such Matching Contribution,
               Discretionary Profit Sharing Contribution or ACP Test Only Safe
               Harbor Matching Contribution subaccount at the time of the
               distribution, and

          (ii) At any subsequent time, the Participant's vested portion of such
               separate subaccount will be equal to an amount "X" determined
               under the formula:

                              X = P(AB + (RxD)) - (RxD)

               where

               P  = the Participant's vested percentage determined under
                    subsection (a) at the relevant time.

               AB = the amount in such separate subaccount at the relevant time.

               R  = the ratio of AB to the amount in the subaccount after the
                    distribution.

               D  = the amount of the distribution.

7.3  Determination of Years of Vesting Service. For purposes of determining the
     vested and nonfor-feitable percentage of the Participant's Matching
     Contribution, Discretionary Profit Sharing Contribution and ACP Test Only
     Safe Harbor Matching Contribution subaccounts, except as provided in the
     following sentence, all of the Participant's Years of Vesting Service with
     the Employer or an Affiliated Employer shall be taken into account. In the
     case of a Participant who has five consecutive 1-year Breaks in Service,
     all Years of Vesting Service after such Breaks in Service shall be
     disregarded for purposes of determining the Participant's vested benefit
     derived from Employer contributions which accrued before such breaks, but
     both pre-break and post-break service shall count for purposes of
     determining the Participant's vested benefit derived from Employer
     contributions accruing after such breaks. If the Employer maintains the
     plan of a predecessor employer, Years of Vesting Service with such employer
     will be treated as service with the Employer.


                                       63



7.4  Amendments to Vesting Schedule.

     (a)  Participants' Election Rights. If the Plan's vesting schedule is
          amended, or the Plan is amended in any way that directly or indirectly
          affects the computation of a Participant's nonforfeitable percentage,
          each Participant with at least three years of service, whether or not
          consecutive, with the Employer may elect, within a reasonable period
          after the adoption of the amendment or change, to have the
          nonforfeitable percentage computed under the Plan without regard to
          such amendment or change. For any Participants who do not have at
          least one Hour of Service in any Plan Year beginning after December
          31, 1988, the preceding sentence shall be applied by substituting
          "five years of service" for "three years of service" where such
          language appears.

     (b)  Election Period. The period during which the election may be made
          shall commence with the date the amendment is adopted or deemed to be
          made and shall end on the latest of:

          (i)    60 days after the amendment is adopted;

          (ii)   60 days after the amendment becomes effective; or

          (iii)  60 days after the Participant is issued written notice of the
                 amendment by the Employer or Plan Administrator.

7.5  Forfeiture of Nonvested Amounts. For Plan Years beginning before 1985, any
     portion of a Participant's Account that is not vested shall be forfeited by
     him as of the last day of the Plan Year in which he incurs a Break in
     Service. For Plan Years beginning after 1984, any portion of a
     Participant's Account that is not vested shall be forfeited in accordance
     with the following rules:

     (a)  Distribution in Full. If a Participant's service with the Employer
          terminates and if the entire vested portion of the Participant's
          Account is distributed to him at any time before the end of the fifth
          Plan Year following the Plan Year in which his employment terminated,
          the remaining portion of the Participant's Account shall be forfeited
          as of the end of the Plan Year in which such distribution occurs, as
          long as the Participant has not resumed employment with the Employer
          by such date. However, if the Participant has no vested interest in
          his Account at the time of his termination of employment, the Plan
          Administrator nonetheless shall treat the Participant as if he had
          received a distribution on the date his employment terminated and
          shall forfeit the Participant's entire Account as soon as
          administratively feasible after the date his employment terminated. If
          the Participant returns as an Employee before the end of five
          consecutive Breaks in Service measured from the day immediately after
          the date of his distribution (or measured from the date his employment
          terminated in the case of a Participant who had no vested interest in
          his Account) then his unvested Account balance (determined as of the
          date of the distribution of his vested interest, unadjusted by
          subsequent gains and losses, or in the case of a Participant who had
          no vested interest in his Account, determined as of the date his
          employment terminated) shall be restored as of the end of the Plan
          Year in which he is reemployed. In such case, the Participant's
          Account shall be restored first out of the forfeitures for such Plan
          Year and, if such forfeitures are insufficient to restore such
          Account, the Employer shall make a special contribution to the Plan to
          the extent necessary so that the Participant's Account is fully
          restored.

     (b)  Partial or No Distributions. If a Participant's service with the
          Employer terminates and if part of his entire vested interest in his
          Account is distributed to him before he incurs five consecutive Breaks
          in Service, a separate remainder subaccount shall be established for
          that portion of the Participant's Account that is not vested. Such
          separate subaccount shall be forfeited at the earliest of (i) his date
          of death following termination of employment, or (ii) the end of the
          Plan Year in which the Participant incurs five consecutive Breaks in
          Service. If a Participant's service with the Employer terminates and
          if no part of his vested interest in his Account is distributed to him
          before he incurs five consecutive Breaks in Service, that portion of
          the Participant's Account that is not vested shall be forfeited at the
          earlier of (i) his date of death following termination of employment,
          or (ii) at the end of Plan Year in which the Participant incurs five
          consecutive Breaks in Service. If all or any portion of such a
          Participant's vested benefits are distributed before a forfeiture is
          permitted and if the Participant returns to work as an Employee after
          the distribution and before he incurs five consecutive Breaks in
          Service, his vested interest in such separate subaccount at any time
          shall be determined by applying the formula in Section 7.2(b)(ii).


                                       64



          (c)  No restoration made pursuant to subsection (a) or (b) shall be
               deemed to be Annual Additions for purposes of Article VI.

     7.6  Reinstatement of Benefit. If a vested benefit is forfeited because the
          Participant or Beneficiary cannot be found, such benefit (determined
          as of the date of forfeiture) will be reinstated if a claim is made by
          the Participant or Beneficiary, or if the Participant or Beneficiary
          is subsequently located by the Plan Administrator.

ARTICLE VIII - LOANS

     8.1  General Provisions.

          (a)  Eligibility for Loans. If the Employer so elects in the Adoption
               Agreement, loans shall be made available to any Participant or
               Beneficiary who is a party-in-interest (as defined in section
               3(14) of ERISA) on a reasonably equivalent basis. Loans will not
               be made to any shareholder-employee, Owner-Employee or
               Participant or Beneficiary who is not a party-in-interest (as
               defined in section 3(14) of ERISA). For purposes of this
               requirement, a shareholder-employee means an Employee or officer
               of an electing small business (subchapter S) corporation who owns
               (or is considered as owning within the meaning of section
               318(a)(1) of the Code) on any day during the taxable year of such
               corporation more than 5% of the outstanding stock of the
               corporation.

          (b)  Spousal Consent Rules.

               (i)  For Plan Years beginning before January 1, 2002 (or such
                    earlier date elected by the Employer in the Optional
                    Supplement), a Participant must obtain the consent of his or
                    her spouse, if any, to use the Account as security for a
                    loan. Spousal consent shall be obtained no earlier than the
                    beginning of the 90-day period that ends on the date on
                    which the loan is to be so secured. The consent must be in
                    writing, must acknowledge the effect of the loan and must be
                    witnessed by a Plan representative or notary public. Such
                    consent shall thereafter be binding with respect to the
                    consenting spouse or any subsequent spouse with respect to
                    that loan. A new consent shall be required if the Account is
                    used for renegotiation, extension, renewal or other revision
                    of the loan.

               (ii) Effective as of the first day of the Plan Year beginning on
                    or after January 1, 2002 (or such earlier date elected by
                    the Employer in the Optional Supplement), only if any
                    portion of a Participant's Account used as security for a
                    loan is subject to the joint and survivor annuity
                    requirements of Article XI, must the Participant obtain the
                    consent of his or her spouse, if any, to use such portion of
                    his or her Account as security for the loan. Spousal consent
                    shall be obtained no earlier than the beginning of the
                    90-day period that ends on the date on which the loan is to
                    be so secured. The consent must be in writing, must
                    acknowledge the effect of the loan, and must be witnessed by
                    a Plan representative or notary public. Such consent shall
                    thereafter be binding with respect to the consenting spouse
                    or any subsequent spouse with respect to that loan. A new
                    consent shall be required if the vested Account is used for
                    renegotiation, extension, renewal or other revision of the
                    loan.

               If a valid spousal consent has been obtained in accordance with
               subsection (b)(i) or (b)(ii), then, notwithstanding any other
               provision of this Plan, the portion of the Participant's vested
               Account used as a security interest held by the Plan by reason of
               a loan outstanding to the Participant shall be reduced by the
               amount of the outstanding loan for purposes of determining the
               amount of the Account payable at the time of death or
               distribution, but only if the reduction is used as repayment of
               the loan. If less than 100% of the Participant's vested Account
               (determined without regard to the preceding sentence) is payable
               to the Participant's surviving spouse, then the vested Account
               shall be adjusted by first reducing the vested Account by the
               amount of the security used as repayment of the loan, and then
               determining the benefit payable to the surviving spouse.

     8.2  Amount of Loan. Loans shall not be made available to Highly
          Compensated Employees in an amount greater than the amount made
          available to other Employees. Loans to any Participant or Beneficiary
          will not be made to the extent that such loan, when added to the
          outstanding balance of all other loans to the Participant or
          Beneficiary, would exceed the lesser of:


                                       65



          (a)  $50,000 reduced by the excess (if any) of the highest outstanding
               balance of loans during the one year period ending on the day
               before the loan is made, over the outstanding balance of loans
               from the Plan on the date the loan is made; or

          (b)  one-half of the vested Account of the Participant.

               For the purpose of the above limitation, all loans from all plans
               of the Employer and Affiliated Employers are aggregated.

     8.3  Manner of Making Loans. The Plan's loan program will be administered
          by the Plan Administrator. A request by a Participant for a loan shall
          be made to the Plan Administrator and shall specify the amount of the
          loan. The terms and conditions on which the Plan Administrator shall
          approve loans under the Plan shall be applied on a uniform and
          nondiscriminatory basis with respect to all Participants. If a
          Participant's request for a loan is approved by the Plan
          Administrator, the Plan Administrator shall furnish the Trustee with
          written instructions directing the Trustee to make the loan in a
          single sum payment of cash to the Participant. In making any loan
          payment under this Article, the Trustee shall be fully entitled to
          rely on the instructions furnished by the Plan Administrator and shall
          be under no duty to make any inquiry or investigation with respect
          thereto.

     8.4  Terms of Loan. Loans shall be made on such terms and subject to such
          limitations as the Plan Administrator may prescribe. Furthermore, any
          loan shall, by its terms, require that repayment (principal and
          interest) be amortized in level payments, not less frequently than
          quarterly, over a period not extending beyond five years from the date
          of the loan, unless such loan is used to acquire a dwelling unit
          which, within a reasonable time (determined at the time the loan is
          made), will be used as the principal residence of the Participant. The
          rate of interest to be charged shall be determined by the Plan
          Administrator.

     8.5  Security for Loan. Any loan to a Participant under the Plan shall be
          secured by the pledge of the Participant's vested interest in his
          Account. Such pledge shall be evidenced by a promissory note by the
          Participant which shall provide that, in the event of any default by
          the Participant on a loan repayment, the Plan Administrator shall be
          authorized (to the extent permitted by law) to take any and all other
          actions necessary and appropriate to enforce collection of the unpaid
          loan. An assignment or pledge of any portion of the Participant's
          interest in the Plan will be treated as a loan under this Article.

     8.6  Segregated Investment. Loans shall be considered a
          Participant-directed investment.

     8.7  Repayment of Loan. The Plan Administrator shall have the sole
          responsibility for ensuring that a Participant timely makes all loan
          payments and for notifying the Trustee in the event of any default by
          the Participant on the loan. Each loan payment shall be paid to the
          Trustee and shall be accompanied by instructions from the Plan
          Administrator that identify the Participant on whose behalf the loan
          payment is being made. Loan payments will be suspended under the Plan
          as permitted under the terms and conditions of the loan program and
          loan document.

     8.8  Default on Loan. In the event of a default by a Participant on a loan
          payment, all remaining payments on the loan shall be immediately due
          and payable. The Plan Administrator shall take any and all actions
          necessary and appropriate to enforce collection of the unpaid loan.
          However, attachment of the Participant's Account pledged as security
          will not occur until a distributable event occurs under the Plan.

ARTICLE IX - IN-SERVICE WITHDRAWALS

     9.1  Withdrawal of Employee After-Tax Contributions, Rollover Contributions
          and Participant-Directed Transfer Contributions. Subject to any other
          applicable requirements of this Plan, any Participant who has made
          Employee After-Tax Contributions, Rollover Contributions or a
          Participant-Directed Transfer may have paid to him as an in-service
          withdrawal all or any portion of the value of his Employee After-Tax
          Contribution subaccount, his Rollover Contributions subaccount or his
          Participant-Directed Transfer subaccount in a single sum payment. No
          forfeitures will occur solely as a result of withdrawals from such
          subaccounts.


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     9.2  Withdrawal After Attainment of Early or Normal Retirement Age. If
          elected by the Employer in the Section of the Adoption Agreement
          containing election options for in-service withdrawals upon attaining
          Early or Normal Retirement Age, a Participant shall be permitted to
          withdraw all or a portion of his vested Account on or after the
          attainment of age 59 1/2(or such later age designated by the Employer
          in such Section of the Adoption Agreement).

     9.3  Hardship Withdrawals.

          (a)  General Rule. If the Employer so elects in the Adoption
               Agreement, distribution in a single sum payment of Elective
               Deferrals (and earnings thereon accrued as of the later of
               December 31, 1988, and the end of the last Plan Year ending
               before July 1, 1989) and/or the vested portion of Matching
               Contribution and Discretionary Profit Sharing Contribution
               subaccounts, as elected by the Employer in the Adoption
               Agreement, may be made to a Participant in the event of hardship.

               (Hardship distributions may not be made from Safe Harbor
               Contribution subaccounts). For the purposes of this Section,
               hardship is defined as an immediate and heavy financial need of
               the Participant where such Participant lacks other available
               resources.

          (b)  Needs Considered Immediate and Heavy. The only financial needs
               considered immediate and heavy are the following:

               (i)  Expenses incurred or necessary for medical care (within the
                    meaning of section 213(d) of the Code) of the Employee, the
                    Employee's spouse, children or dependents (as described in
                    section 152 of the Code);

               (ii) Costs directly related to the purchase (excluding mortgage
                    payments) of a principal residence for the Employee;

               (iii) Payment of tuition, and related educational fees, and room
                    and board expenses, for the next twelve months of
                    post-secondary education for the Employee, the Employee's
                    spouse, children or dependents; or

               (iv) The need to prevent the eviction of the Employee from, or a
                    foreclosure on the mortgage of, the Employee's principal
                    residence.

          (c)  Necessary to Satisfy Need. A distribution will be considered as
               necessary to satisfy an immediate and heavy financial need of the
               Employee only if:

               (i)  The Employee has obtained all distributions, other than
                    hardship distributions, and all non-taxable loans under all
                    plans maintained by the Employer;

               (ii) All plans maintained by the Employer provide that the
                    Employee's Elective Deferrals (and Employee contributions)
                    will be suspended for twelve months after the receipt of the
                    hardship distribution;

               (iii) The distribution is not in excess of the amount of an
                    immediate and heavy financial need (including amounts
                    necessary to pay any federal, state or local income taxes or
                    penalties reasonably anticipated to result from the
                    distribution); and

               (iv) All plans maintained by the Employer provide that the
                    Employee may not make Elective Deferrals for the Employee's
                    taxable year immediately following the taxable year of the
                    hardship distribution in excess of the applicable limit
                    under section 402(g) of the Code for such taxable year less
                    the amount of such Employee's Elective Deferrals for the
                    taxable year of the hardship distribution.

     9.4  Age 59 1/2 Withdrawals. If elected by the Employer in the Adoption
          Agreement, a Participant shall be permitted to withdraw all or a
          portion of his vested Account balance on or after the attainment of
          age 59 1/2.

     9.5  Manner of Making Withdrawals. Any withdrawal by a Participant under
          the Plan shall be made only after the Participant files a request with
          the Plan Administrator specifying the nature of the withdrawal (and
          the reasons therefore, if a hardship withdrawal) and the amount of
          funds requested to be withdrawn and, if applicable, including the
          spousal consent required under Article XI. Upon approving any
          withdrawal, the Plan Administrator shall furnish the Trustee with
          written instructions directing the Trustee to make the withdrawal in a
          single sum payment of cash to the Participant; provided, however,


                                       67



          that in-service withdrawals after Early or Normal Retirement Age may
          be made in any form of distribution selected by the Employer in the
          Adoption Agreement. In making any withdrawal payment, the Trustee
          shall be fully entitled to rely on the instructions furnished by the
          Plan Administrator and shall be under no duty to make any inquiry or
          investigation with respect thereto.

     9.6  Limitations on Withdrawals. The Plan Administrator may prescribe
          uniform and nondiscriminatory rules and procedures limiting the number
          of times a Participant may make a withdrawal under the Plan during any
          Plan Year and the minimum amount a Participant may withdraw on any
          single occasion.

     9.7  Special Circumstances. Elective Deferral, Qualified Nonelective
          Contribution, Qualified Matching Contribution, Safe Harbor Matching
          Contribution and Safe Harbor Nonelective Contribution subac-counts may
          be distributed upon:

          (a)  Plan Termination. Termination of the Plan without the
               establishment of another defined contribution plan, other than an
               employee stock ownership plan (as defined in section 4975(e)(7)
               of the Code) or a simplified employee pension plan (as defined in
               section 408(k) of the Code) or a SIMPLE IRA plan (as defined in
               section 408(p) of the Code).

          (b)  Disposition of Assets. The disposition by a corporate Employer to
               an unrelated corporation of substantially all of the assets
               (within the meaning of section 409(d)(2) of the Code) used in a
               trade or business of such corporate Employer if such corporate
               Employer continues to maintain this Plan after the disposition,
               but only with respect to Employees who continue employment with
               the corporation acquiring such assets.

          (c)  Disposition of Subsidiary. The disposition by a corporate
               Employer to an unrelated entity of such corporate Employer's
               interest in a subsidiary (within the meaning of section 409(d)(3)
               of the Code) if such corporate Employer continues to maintain
               this Plan, but only with respect to Employees who continue
               employment with such subsidiary.

               Distributions that are triggered by any of the foregoing events
               must be made in a single sum payment.

ARTICLE X - DISTRIBUTION PROVISIONS

     10.1 Retirement Distributions. If a Participant's Normal or Early
          Retirement Date should occur prior to the termination of his
          employment with the Employer, all amounts then credited to such
          Participant's Account shall become 100% vested regardless of the
          number of the Participant's Years of Vesting Service. If a
          Participant's employment with the Employer is terminated on or after
          his Early or Normal Retirement Date, such termination shall be deemed
          "Retirement," and the Plan Administrator shall direct the Trustee to
          take such action as may be necessary to distribute to such
          Participant, in one of the methods provided in Section 10.7, the value
          of his Account.

          (a)  Deferred Retirement. If a Participant's employment continues
               after his Early or Normal Retirement Date, his participation in
               the Plan shall continue and, subject to Section 10.9, the
               distribution of his benefits shall be postponed until the earlier
               of (i) the date on which his Retirement becomes effective, or
               (ii) subject to applicable provisions of the Plan regarding
               in-service distribution, the date the Participant elects to
               receive his benefits.

          (b)  Participant Status After Retirement. Upon a Participant's
               Retirement, his participation as an active Participant hereunder
               shall cease, subject to his right to share in contributions made
               with respect to the Plan Year of his Retirement if he otherwise
               qualifies for such contributions in such Plan Year.

     10.2 Death Benefits. Upon the death of a Participant before Retirement or
          before other termination of employment with the Employer, all amounts
          then credited to his Account shall become 100% vested, regardless of
          the number of his Years of Vesting Service. The Plan Administrator
          shall direct the Trustee to distribute the value of the Participant's
          Account, in one of the methods provided in Section 10.7, and at the
          time provided in Section 10.6, to any surviving Beneficiary designated
          by the Participant in accordance with the provisions of subsection (c)
          below.


                                       68



(a)  Death of Former Employee. Upon the death of a former Employee before
     distribution of his vested interest in his Account has begun, the Trustee,
     in accordance with the instructions of the Plan Administrator and in
     accordance with the provisions of this Article, shall take such action as
     may be necessary to distribute his vested interest in his Account, in one
     of the methods provided in Section 10.7 hereof and commencing at such time
     provided in Section 10.6, to any surviving Beneficiary designated in
     accordance with the provisions of subsection (c) below. Upon the death of a
     former Participant after distribution of his benefits has begun and before
     the entire vested interest in his Account has been distributed to him, the
     Plan Administrator shall direct the Trustee to distribute the remaining
     portion of such interest to any surviving Beneficiary designated in
     accordance with the provisions of subsection (c) below at least as rapidly
     as under the method of distribution being used as of the date of his death.

(b)  Proof of Death. The Plan Administrator may require such proper proof of
     death and such evidence of the right of any person to receive payment of
     the vested interest of a deceased Participant or former Participant as it
     may deem desirable. The Plan Administrator's determination of death and of
     the right of any person to receive payment shall be conclusive.

(c)  Beneficiary Designation. Each Participant may designate one or more primary
     Beneficiaries and one or more secondary Beneficiaries by filing written
     notice with the Plan Administrator on a form acceptable to the Plan
     Administrator. However, in the case of a married Participant, the
     Participant shall be deemed to have designated his surviving spouse as his
     sole primary Beneficiary, notwithstanding any contrary written notice,
     unless such spouse filed a written voluntary consent with the Plan
     Administrator irrevocably consenting to the Participant's designation of a
     non-spouse Beneficiary, which consent shall be notarized or witnessed by
     the Plan Administrator, and shall acknowledge the effect of the
     Participant's designation of Beneficiary. A married Participant may not
     subsequently change the designated non-spouse Beneficiary unless his
     spouse's voluntary consent acknowledges that the spouse has a right to
     consent to a specific beneficiary and expressly permits designations by the
     Participant without further spousal consent or his spouse has filed a
     written consent with the Plan Administrator, irrevocably consenting to such
     change, which consent shall be notarized or witnessed by the Plan
     Administrator, and shall acknowledge the effect of the change. Subject to
     the two preceding sentences, a Participant may change any designated
     Beneficiary by filing written notice of the change with the Plan
     Administrator in the form prescribed by the Plan Administrator. If any
     Participant fails to designate a Beneficiary, or if his designated
     Beneficiary or Beneficiaries do not survive the Participant, the Plan
     Administrator shall designate a Beneficiary or Beneficiaries on his behalf,
     in the following order:

     (i)    The Participant's spouse, if living at the time of the Participant's
            death.

     (ii)   The Participant's issue, per stirpes.

     (iii)  The Participant's parents equally.

     (iv)   The estate of the Participant.

After a Participant's death, any actual Beneficiary of the deceased Participant
may designate one or more primary beneficiaries and one or more secondary
beneficiaries to receive the Beneficiary's interest in the Plan attributable to
the Participant's benefits after the Beneficiary's death, to the extent such
designation is not inconsistent with the Participant's beneficiary designation.
If the Beneficiary fails to designate a beneficiary or if none of his designated
beneficiaries survive him, the Plan Administrator shall, to the extent not
inconsistent with the Participant's beneficiary designation, designate a
beneficiary or beneficiaries on the Beneficiary's behalf, in the following
order:

     (i)    The Beneficiary's spouse, if living at the time of the Beneficiary's
            death.

     (ii)   The Beneficiary's issue, per stirpes.

     (iii)  The Beneficiary's parents equally.

     (iv)   The Beneficiary's estate.


                                       69



10.3 Total and Permanent Disability Benefits. If, prior to his Retirement or
     other termination of employment with the Employer, the Plan Administrator
     determines that a Participant has incurred a Total and Permanent
     Disability, the Participant shall be deemed to have retired by reason of
     Total and Permanent Disability, and his Account shall become 100% vested,
     regardless of the number of his Years of Vesting Service. The Plan
     Administrator shall determine the date as of which such Retirement shall
     become effective. The Trustee, in accordance with the instructions of the
     Plan Administrator and in accordance with the provisions of this Article,
     shall take such action as may be necessary to distribute the value of the
     Participant's Account(s) to the Participant commencing at such time, and in
     one of the methods, provided in Sections 10.5 and 10.7 hereof.

10.4 Termination of Employment Prior to Retirement, Death or Total and Permanent
     Disability. If a Participant's employment with the Employer terminates for
     any reason other than Retirement, Total and Permanent Disability or death,
     the Plan Administrator shall direct the Trustee to take such action as may
     be needed to distribute to such Participant the vested portion of his
     Account, as determined in accordance with Article VII. Such distribution
     shall be made commencing at such time, and in one of the methods, provided
     in Sections 10.5 and 10.7 hereof.

10.5 Commencement of Lifetime Distributions.

     (a)  Upon Retirement or Total and Permanent Disability. The distribution of
          benefits payable to a Participant who retires by reason of Retirement
          or Total and Permanent Disability shall commence as soon as is
          administratively feasible after a date on or after the Participant's
          Retirement as he elects, but in no event later than his required
          beginning date. Notwithstanding the foregoing provisions of this
          subsection (a), if such a Participant's total vested benefits do not
          exceed $5,000, his vested benefits shall be distributed to him in a
          single sum payment as soon as administratively feasible after his
          Retirement or termination of employment with the Employer by reason of
          Total and Permanent Disability.

     (b)  Distribution Upon Termination of Employment and Restrictions on
          Immediate Distribution. If the value of a Participant's vested account
          balance derived from Employer and Employee contributions exceeds
          $5,000, and the account balance is immediately distributable, the
          Participant and the Participant's spouse (or where either the
          Participant or the spouse has died, the survivor) must consent to any
          distribution of such account balance. The consent of the Participant
          and the Participant's spouse shall be obtained in writing within the
          90-day period ending on the annuity starting date. The annuity
          starting date is the first day of the first period for which an amount
          is paid as an annuity or any other form. The Plan Administrator shall
          notify the Participant and the Participant's spouse of the right to
          defer any distribution until the Participant's account balance is no
          longer immediately distributable. Such notification shall include a
          general description of the material features, and an explanation of
          the relative values, of the optional forms of benefit available under
          the Plan in a manner that would satisfy the notice requirements of
          section 417(a)(3) of the Code and shall be provided no less than 30
          days and no more than 90 days prior to the annuity starting date.
          However, distribution may commence less than 30 days after the notice
          described in the preceding sentence is given provided the Plan
          Administrator clearly informs the Participant that the Participant has
          a right to a period of at least 30 days after receiving the notice to
          consider the decision of whether to elect distribution (and, if
          applicable, a particular distribution option), and the Participant,
          after receiving the notice, affirmatively elects a distribution.

          Notwithstanding the foregoing, only the Participant need consent to
          the commencement of a distribution in the form of a qualified joint
          and survivor annuity while the account balance is immediately
          distributable. (Furthermore, if payment in the form of a qualified
          joint and survivor annuity is not required with respect to the
          Participant pursuant to Section 11.6 of the Plan, only the Participant
          need consent to the distribution of an account balance that is
          immediately distributable.) Neither the consent of the Participant nor
          the Participant's spouse shall be required to the extent that a
          distribution is required to satisfy section 401(a)(9) or 415 of the
          Code. In addition, upon termination of this Plan, if the Plan does not
          offer an annuity option (purchased from a commercial provider), the
          Participant's account balance will be distributed to the Participant
          or, if the Participant does not consent to an immediate distribution,
          transferred to another defined contribution plan (other than an
          employee stock ownership plan as defined in section 4975(e)(7) of the
          Code) within the same controlled group.


                                       70



          An account balance is immediately distributable if any part of the
          account balance could be distributed to the Participant (or surviving
          spouse) before the Participant attains (or would have attained if not
          deceased) the later of Normal Retirement Age or age 62.

          For purposes of determining the applicability of the foregoing consent
          requirements to distributions made before the first day of the first
          Plan Year beginning after December 31, 1988, the Participant's vested
          account balance shall not include amounts attributable to accumulated
          deductible employee contributions within the meaning of section
          72(o)(5)(B) of the Code.

     (c)  Force-Outs. Notwithstanding the foregoing provisions of subsections
          (a) and (b), a Participant's vested benefits shall be distributed to
          him in a single sum payment as soon as is administratively feasible
          after the date on which his employment with the Employer terminated if
          his vested benefits:

          (i)    for Plan Years beginning before August 6, 1997, do not exceed
                 $3,500 (or did not exceed $3,500 at the time of any prior
                 distribution),

          (ii)   for Plan Years beginning after August 5, 1997, and for a
                 distribution made prior to March 22, 1999, did not exceed
                 $5,000 (or did not exceed $5,000 at the time of any prior
                 distribution), and

          (iii)  for a distribution made after March 21, 1999, that either did
                 not exceed $5,000 or is a remaining payment under a selected
                 optional form of payment that did not exceed $5,000 at the time
                 the selected payment began.

          If a Participant would have received a distribution under the
          preceding sentence but for the fact that the Participant's vested
          Account exceeded $5,000 after the Participant's employment terminated
          and if at a later time such vested Account is reduced such that it is
          not greater than $5,000, the Plan Administrator may direct that the
          Participant will receive a distribution of such vested Account, and
          the nonvested portion will be forfeited. For the purposes hereof, if
          the value of a Participant's vested Account is zero, the Participant
          shall be deemed to have received a distribution of such Account.

     (d)  Statutory Requirements. Unless the Participant elects otherwise,
          distribution of his benefits shall commence during the sixty day
          period immediately following the end of the Plan Year in which occurs
          the latest of:

          (i)    the Participant's Normal Retirement Age,

          (ii)   the 10-year anniversary of the date on which the Participant
                 commenced participation in the Plan, and

          (iii)  the date the Participant's employment with the Employer
                 terminates.

          Notwithstanding the foregoing, the failure of a Participant (and
          spouse, if applicable) to consent to a distribution while a benefit is
          immediately distributable, as defined in subsection (b), shall be
          deemed to be an election to defer commencement of payment of any
          benefit sufficient to satisfy this Section.

     (e)  In-Service Distributions. The distribution of a Participant's vested
          benefits shall not commence prior to the time his employment with the
          Employer terminates, except in the following circumstances:

          (i)    Withdrawals made in accordance with the provisions of Article
                 IX,

          (ii)   Payments to an alternate payee pursuant to a qualified domestic
                 relations order as described in section 414(p) of the Code, or

          (iii)  Minimum required distributions made on and after his required
                 beginning date.

10.6 Commencement of Death Benefits.

     (a)  Subject to Section 10.9, if a Participant dies before his benefit
          payments have commenced, his death benefits, if any, shall be payable
          beginning at such reasonable time after the Participant's death as his
          Beneficiary elects, subject to and in accordance with the following
          provisions:


                                       71



          (i)    Non-Spouse Beneficiary. In the case of a Beneficiary other than
                 the Participant's surviving spouse, benefits must commence no
                 later than the December 31 that coincides with or immediately
                 follows the fifth anniversary of the Participant's death. If
                 the beginning date of such benefits is after the December 31
                 that coincides with or immediately follows the first
                 anniversary of the Participant's death, the Beneficiary's
                 entire interest in the Participant's death benefits must be
                 distributed no later than the December 31 that coincides with
                 or immediately follows the fifth anniversary of the
                 Participant's death.

          (ii)   Spouse Beneficiary. If the Participant's Beneficiary is the
                 Participant's surviving spouse, the surviving spouse may elect
                 to defer the commencement of benefits to the December 31 that
                 coincides with or immediately follows the later of (i) the
                 first anniversary of the Participant's death, or (ii) the date
                 on which the Participant would have attained age 70 1/2. If the
                 Participant's Beneficiary is his surviving spouse, and if his
                 surviving spouse dies after the Participant dies but prior to
                 the time the Participant's death benefits have commenced, the
                 provisions of this Section 10.6 shall apply as if the surviving
                 spouse were the Participant, except that the surviving spouse
                 of the deceased Participant's surviving spouse shall not
                 qualify as a surviving spouse.

          (iii)  Election Period. Any election made by a Beneficiary under this
                 Section must be made no later than the December 31 that
                 coincides with or immediately follows the first anniversary of
                 the Participant's death and must be irrevocable as of such
                 date, except that if the Participant's Beneficiary is the
                 Participant's surviving spouse, the surviving spouse may defer
                 making such election to the earlier of (i) the December 31 that
                 coincides with or immediately follows the fifth anniversary of
                 the Participant's death, or (ii) the last date on which the
                 surviving spouse could defer the commencement of benefits under
                 paragraph (ii). If a Beneficiary fails to make a proper
                 election hereunder, the Plan Administrator shall direct the
                 Trustee to distribute the Beneficiary's interest in the
                 Participant's death benefits in full no later than the December
                 31 that coincides with or immediately follows the fifth
                 anniversary of the Participant's death.

     (b)  If a Participant dies after distribution of his or her interest has
          begun, the remaining portion of such interest will continue to be
          distributed at least as rapidly as under the method of distribution
          being used before the Participant's death.

10.7 Methods of Distribution.

     (a)  General Rule. Subject to Article XI, all benefits shall be distributed
          in accordance with one of the following methods selected by the
          Employer in the Adoption Agreement as the Participant or Beneficiary,
          as the case may be, may elect during the 90-day period before the date
          benefits commence:

          (i)    In monthly, quarterly, semi-annual or annual installments over
                 a period certain not to exceed the life expectancy of the
                 Participant (or Beneficiary in the case of a Participant who
                 dies prior to the time his benefits commenced) or the joint and
                 last survivor life expectancy of the Participant and his
                 Beneficiary so that the amount distributed in each Plan Year
                 equals the amount determined by dividing the Participant's
                 vested account balance on the last day of the immediately
                 preceding Plan Year by the period certain determined in
                 accordance with this paragraph (i) which shall be reduced by
                 one for each Plan Year after the Plan Year in which the
                 Participant's benefits commence.

          (ii)   Payment to the Participant or Beneficiary in a single sum
                 payment.

          (iii)  A paid-up, nontransferable annuity contract (selected by the
                 Plan Administrator) for the life of the Participant (or
                 Beneficiary in the case of a Participant who dies prior to the
                 time his benefits commenced) or the joint life of the
                 Participant and the Participant's Beneficiary that complies
                 with the requirements of the Plan.

          Payment of benefits generally shall be in cash. To the extent a
          Participant's vested Account is invested in qualifying employer
          securities (within the meaning of section 407(d)(5) of ERISA) or in a
          regulated investment company registered under the Investment Company
          Act of 1940 whose investment adviser is T. Rowe Price Associates, Inc.
          or any affiliate thereof or any successor thereto, the Participant may
          elect to have such benefits distributed in-kind.


                                       72



     (b)  Direct Rollover. Notwithstanding any provision of the Plan to the
          contrary that would otherwise limit a distributee's election under
          this Article X, for all distributions made on or after January 1,
          1993, a distributee may elect, at the time and in the manner
          prescribed by the Plan Administrator, to have any portion of an
          eligible rollover distribution paid directly to an eligible retirement
          plan specified by the distributee in a direct rollover. For purposes
          of this subsection, the following definitions shall apply:

          (i)    An "eligible rollover distribution" is any distribution of all
                 or a portion of the balance to the credit of the distributee,
                 except that an eligible rollover distribution does not include:
                 any distribution that is one of a series of substantially equal
                 periodic payments (not less frequently than annually) made for
                 the life (or life expectancy) of the distributee or the joint
                 lives (or joint life expectancies) of the distributee and the
                 distributee's designated Beneficiary, or for a specified period
                 of ten years or more; any distribution to the extent such
                 distribution is required under section 401(a)(9) of the Code;
                 any hardship distribution described in section
                 401(k)(2)(B)(i)(IV) of the Code received after December 31,
                 1998 (or, if elected by the Employer in the Optional
                 Supplement, December 31, 1999); and the portion of any
                 distribution that is not includible in gross income (determined
                 without regard to the exclusion for net unrealized appreciation
                 with respect to employer securities).

          (ii)   An "eligible retirement plan" is an individual retirement
                 account described in section 408(a) of the Code, an individual
                 retirement annuity described in section 408(b) of the Code, an
                 annuity plan described in section 403(a) of the Code, or a
                 qualified trust described in section 401(a) of the Code, that
                 accepts the distributee's eligible rollover distribution.
                 However, in the case of an eligible rollover distribution to
                 the surviving spouse, an eligible retirement plan is an
                 individual retirement account or individual retirement annuity.

          (iii)  A "distributee" includes an Employee or former Employee. In
                 addition, the Employee's or former Employee's surviving spouse
                 and the Employee's or former Employee's spouse or former spouse
                 who is the alternate payee under a qualified domestic
                 retirement order, as described section 414(p) of the Code, are
                 distributees with regard to the interest of the spouse or
                 former spouse.

          (iv)   A "direct rollover" is a payment by the Plan to the eligible
                 retirement plan specified by the distributee.

10.8 Missing Participants and Beneficiaries. If the Plan Administrator is unable
     to locate a Participant or Beneficiary entitled to vested benefits
     hereunder after making reasonable efforts to do so, the Plan Administrator
     may direct the Trustee to forfeit such vested benefits or direct the
     Trustee to continue to hold such Participant's or Beneficiary's Account. If
     the vested benefits are forfeited and if the Participant or Beneficiary
     subsequently is found or makes a claim for the benefits, the vested
     benefits will be reinstated in accordance with the provisions of Section
     7.6.

10.9 Minimum Required Distributions. If the Participant's interest is to be
     distributed in other than a single sum before the required beginning date,
     the following minimum distribution rules, which shall be determined in
     accordance with proposed regulations under section 401(a)(9) of the Code,
     shall apply on or after the required beginning date notwithstanding any
     other provision of the Plan to the contrary:

     (a)  Definitions. For the purposes of this Section 10.9, the following
          definitions shall apply:

          (i)    Applicable Life Expectancy. The Life Expectancy (or joint and
                 last survivor expectancy) is calculated using the attained age
                 of the Participant (or Designated Beneficiary) as of the
                 Participant's (or Designated Beneficiary's) birthday in the
                 applicable calendar year reduced by one for each calendar year
                 which has elapsed since the date Life Expectancy was first
                 calculated. If Life Expectancy is being recalculated, the
                 Applicable Life Expectancy shall be the Life Expectancy as so
                 recalculated. The applicable calendar year shall be the first
                 Distribution Calendar Year, and if Life Expectancy is being
                 recalculated such succeeding calendar year(s). If annuity
                 payments commence in accordance with Section 10.9(c) before the
                 Required Beginning Date, the Applicable Calendar Year is the
                 year such payments commence. If distribution is in the form of
                 an immediate annuity purchased after the Participant's death
                 with the Participant's remaining interest, the Applicable
                 Calendar Year is the year of purchase.


                                       73



          (ii)   Designated Beneficiary. The individual who is designated as the
                 Beneficiary under the Plan on the Required Beginning Date in
                 accordance with section 401(a)(9) of the Code and the proposed
                 regulations thereunder.

          (iii)  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 pursuant to Section 10.6
                 above.

          (iv)   Life Expectancy. Life Expectancy and joint and last survivor
                 expectancy are computed by use of the expected return multiples
                 in Tables V and VI of section 1.72-9 of the Income Tax
                 Regulations. Unless otherwise elected by the Participant (or
                 spouse, in the case of distributions described in Section
                 10.6(b)(ii)) by the time distributions are required to begin,
                 Life Expectancies shall be recalculated annually. Such election
                 shall be irrevocable as to the Participant (or spouse) and
                 shall apply to all subsequent years. The Life Expectancy of a
                 non-spouse Beneficiary may not be recalculated.

          (v)    Participant's Benefit.

                 (A)  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 or forfeitures allocated to
                      the Account balance as of dates in the calendar year after
                      the Valuation Date and decreased by distributions made in
                      the valuation calendar year after the Valuation Date.

                 (B)  For purposes of subparagraph (A) above, if any portion of
                      the minimum distribution for the first Distribution
                      Calendar Year is made in the second Distribution Calendar
                      Year on or before the Required Beginning Date, the amount
                      of the minimum distribution made in the second
                      Distribution Calendar Year shall be treated as if it had
                      been made in the immediately preceding Distribution
                      Calendar Year.

          (vi)   Required Beginning Date.

                 (A)  General rule. The Required Beginning Date of a Participant
                      is the first day of April of the calendar year following
                      the later of the calendar year in which the Participant
                      attains age 70 1/2 or retires, except that benefit
                      distributions to a Five Percent Owner must commence by the
                      first day of April of the calendar year following the
                      calendar year in which the Five Percent Owner attains age
                      70 1/2.

                 (B)  Transitional rules. Notwithstanding the foregoing:

                      (1)  Any Participant attaining age 70 1/2 in 1996 may
                           elect by December 31, 1997, to defer distributions
                           until the calendar year following the calendar year
                           in which the Participant retires.

                      (2)  Any Participant attaining age 70 1/2 in years prior
                           to 1997 may elect to stop distributions and
                           recommence distributions by the April 1 of the
                           calendar year following the calendar year in which
                           the Participant retires. Unless the Employer elects
                           otherwise in the Adoption Agreement, there is a new
                           annuity starting date upon recommencement of
                           distributions.

                 (C)  Once distributions have begun to a Five Percent Owner
                      under this subsection, they must continue to be
                      distributed even if the Participant ceases to be a Five
                      Percent Owner in a subsequent year.

     (b)  Individual Account.

          (i)    If a Participant's benefit is to be distributed over (1) a
                 period not extending beyond the life expectancy of the
                 Participant or the joint life and last survivor expectancy of
                 the Participant and the Participant's Designated Beneficiary or
                 (2) a period not extending beyond the life


                                       74



                 expectancy of the Designated Beneficiary, the amount required
                 to be distributed for each calendar year, beginning with
                 distributions for the first Distribution Calendar Year, must at
                 least equal the quotient obtained by dividing the Participant's
                 benefit by the Applicable Life Expectancy.

          (ii)   For calendar years beginning before January 1, 1989, if the
                 Participant's spouse is not the Designated Beneficiary, the
                 method of distribution selected must assure that at least 50%
                 of the present value of the amount available for distribution
                 is paid within the life expectancy of the Participant.

          (iii)  For calendar years beginning after December 31, 1988, the
                 amount to be distributed each year, beginning with
                 distributions for the first Distribution Calendar Year shall
                 not be less than the quotient obtained by dividing the
                 Participant's benefit by the lesser of (1) the Applicable Life
                 Expectancy or (2) if the Participant's spouse is not the
                 Designated Beneficiary, the applicable divisor determined from
                 the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the
                 proposed regulations. Distributions after the death of the
                 Participant shall be distributed using the Applicable Life
                 Expectancy as the relevant divisor without regard to proposed
                 regulations section 1.401(a)(9)-2.

          (iv)   The minimum distribution required for the Participant's first
                 Distribution Calendar Year must be made on or before the
                 Participant's Required Beginning Date. The minimum distribution
                 for other calendar years, including the minimum distribution
                 for the Distribution Calendar Year in which the Employee's
                 Required Beginning Date occurs, must be made on or before
                 December 31 of the Distribution Calendar Year.

     (c)  Other Forms. If the Participant's benefit is distributed in the form
          of an annuity purchased from an insurance company, distributions
          thereunder shall be made in accordance with the requirements of
          section 401(a)(9) of the Code and the proposed regulations thereunder.

          For purposes of this Section 10.9, any amount paid to a child of the
          Participant will be treated as if it had been paid to the surviving
          spouse if the amount becomes payable to the surviving spouse when the
          child reaches the age of majority.

          For the purposes of this Section 10.9, distribution of a Participant's
          interest is considered to begin on the Participant's Required
          Beginning Date (or, if the last sentence of Section 10.6(a)(ii) is
          applicable, the date distribution is required to begin to the
          surviving spouse pursuant to the first sentence of Section
          10.6(a)(ii). If distribution in the form of an annuity irrevocably
          commences to the Participant before the Required Beginning Date, the
          date distribution is considered to begin is the date distribution
          actually commences.

     (d)  Transitional Rule.

          (i)    Notwithstanding the other requirements of this Section and
                 subject to the requirements of Article XI, distribution on
                 behalf of any Employee, including a Five-Percent Owner, may be
                 made in accordance with all of the following requirements
                 (regardless of when such distribution commences):

                 (A)  The distribution by the Plan is one which would not have
                      disqualified such Plan under section 401(a)(9) of the Code
                      as in effect prior to amendment by the Deficit Reduction
                      Act of 1984.

                 (B)  The distribution is in accordance with a method of
                      distribution designated by the Employee whose interest in
                      the Plan is being distributed or, if the Employee is
                      deceased, by a Beneficiary of such Employee.

                 (C)  Such designation was in writing, was signed by the
                      Employee or the Beneficiary, and was made before January
                      1, 1984.

                 (D)  The Employee had accrued a benefit under the Plan as of
                      December 31, 1983.


                                       75



                      (E)  The method of distribution designated by the Employee
                           or the Beneficiary specifies the time at which
                           distribution will commence, the period over which
                           distributions will be made, and in the case of any
                           distribution upon the Employee's death, the
                           Beneficiaries of the Employee listed in order
                           priority.

               (ii)   A distribution upon death will not be covered by this
                      transitional rule unless the information in the
                      designation contains the required information described
                      above with respect to the distributions to be made upon
                      the death of the Employee.

               (iii)  For any distribution which commences before January 1,
                      1984, but continues after December 31, 1983, the Employee
                      or the Beneficiary to whom such distribution is being
                      made, will be presumed to have designated the method of
                      distribution under which the distribution is being made if
                      the method of distribution was specified in writing and
                      the distribution satisfies the requirements in
                      subparagraphs (d)(i)(A) and (E).

               (iv)   If a designation is revoked, any subsequent distribution
                      must satisfy the requirements of section 401(a)(9) of the
                      Code and the proposed regulations thereunder. If a
                      designation is revoked subsequent to the date
                      distributions are required to begin, the Plan must
                      distribute, by the end of the calendar year following the
                      calendar year in which the revocation occurs, the total
                      amount not yet distributed which would have been required
                      to have been distributed to satisfy section 401(a)(9) of
                      the Code and the proposed regulations thereunder, but for
                      the Code section 242(b)(2) election. For calendar years
                      beginning after December 31, 1988, such distributions must
                      meet the minimum distribution incidental benefit
                      requirements in section 1.401(a)(9)-2 of the proposed
                      regulations. Any changes in the designation will be
                      considered to be a revocation of the designation. However,
                      the mere substitution or addition of another Beneficiary
                      (one not named in the designation) under the designation
                      will not be considered to be a revocation of the
                      designation, so long as such substitution or addition does
                      not alter the period over which distributions are to be
                      made under the designation, directly or indirectly (for
                      example, by altering the relevant measuring life). In the
                      case in which an amount is transferred or rolled over from
                      one plan to another plan, the rules in Q&A J-2 and Q&A J-3
                      of the proposed regulations shall apply.

ARTICLE XI - JOINT AND SURVIVOR ANNUITY REQUIREMENTS

          The provisions of this Article shall take precedence over any
          conflicting provisions of the Plan.

     11.1 Applicability.

          Except as provided with respect to certain profit sharing plans in
          Section 11.6 of this Article, the provisions of this Article shall
          apply to any Participant who is credited with at least one Hour of
          Service with the Employer on or after August 23, 1984, and such other
          Participants as provided in Section 11.7.

     11.2 Definitions.

     For the purposes of this Article XI, the following definitions shall apply:

          (a)  Annuity Starting Date. The first day of the first period for
               which an amount is paid as an annuity or any other form.

          (b)  Election Period. The period which begins on the first day of the
               Plan Year in which the Participant attains age 35 and ends on the
               date of the Participant's death. If a Participant separates from
               service prior to the first day of the Plan Year in which age 35
               is attained, with respect to the account balance as of the date
               of separation, the election period shall begin on the date of
               separation.

               A Participant who has not yet attained age 35 as of the end of
               any Plan Year may make a special qualified election to waive the
               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 the Participant attains age 35. Such election
               shall not be valid unless the Participant receives a written
               explanation of the Qualified Preretirement Survivor Annuity in
               such terms as are comparable to the explanation required under
               Section 11.5. Qualified Preretirement Survivor Annuity coverage
               will be automatically reinstated as of the first day of the Plan
               Year in which the Participant attains age 35. Any new waiver on
               or after such date shall be subject to the full requirements of
               this Article.


                                       76



     (c)  Earliest Retirement Age. The earliest date on which, under the Plan,
          the Participant could elect to receive retirement benefits.

     (d)  Qualified Election. A waiver of a Qualified Joint and Survivor Annuity
          or a Qualified Preretirement Survivor Annuity. Any waiver of a
          Qualified Joint and Survivor Annuity or a Qualified Preretirement
          Survivor Annuity shall not be effective unless: (i) the Participant's
          Spouse consents in writing to the election; (ii) the election
          designates a specific Beneficiary, including any class of
          Beneficiaries or any contingent Beneficiaries, which may not be
          changed without spousal consent (or the Spouse expressly permits
          designations by the Participant without any further spousal consent);
          (iii) the Spouse's consent acknowledges the effect of the election;
          and (iv) the Spouse's consent is witnessed by a Plan representative or
          notary public. Additionally, a Participant's waiver of the Qualified
          Joint and Survivor Annuity shall not be effective unless the election
          designates a form of benefit payment which may not be changed without
          spousal consent (or the Spouse expressly permits designations by the
          Participant without any further spousal consent). If it is established
          to the satisfaction of a Plan representative that there is no Spouse
          or that the Spouse cannot be located, a waiver will be deemed a
          qualified election.

          Any consent by a Spouse obtained under this provision (or
          establishment that the consent of a Spouse may not be obtained) shall
          be effective only with respect to such Spouse. A consent that permits
          designations by the Participant without any requirement of further
          consent by such Spouse 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
          waiver may be made by a Participant without the consent of the Spouse
          at any time before the commencement of benefits. The number of
          revocations shall not be limited. No consent obtained under this
          provision shall be valid unless the Participant has received notice as
          provided in Section 11.5 below.

     (e)  Qualified Joint and Survivor Annuity. An immediate nontransferable
          annuity for the life of the Participant with a survivor annuity for
          the life of the Spouse which is 50% of the amount of the annuity which
          is payable during the joint lives of the Participant and the Spouse
          and which is the amount of benefit which can be purchased with the
          Participant's vested Account balance.

     (f)  Qualified Preretirement Survivor Annuity. An immediate nontransferable
          annuity for the life of the Participant's surviving Spouse, in such
          amount as may be purchased with the Participant's vested Account
          balance.

     (g)  Spouse (surviving spouse). The spouse or surviving spouse of the
          Participant, provided that a former spouse will be treated as the
          spouse or surviving spouse (and a current spouse will not be treated
          as the spouse or surviving spouse to the extent provided) under a
          qualified domestic relations order as described in section 414(p) of
          the Code.

11.3 Qualified Joint and Survivor Annuity. Unless an optional form of benefit is
     selected pursuant to a Qualified Election within the 90-day period ending
     on the Annuity Starting Date, a married Participant's vested Account
     balance will be paid in the form of a Qualified Joint and Survivor Annuity
     and an unmarried Participant's vested Account balance will be paid in the
     form of a life annuity. The Participant may elect to have such annuity
     distributed upon attainment of the Earliest Retirement Age under the Plan.

11.4 Qualified Preretirement Survivor Annuity. Unless an optional form of
     benefit has been selected within the Election Period pursuant to a
     Qualified Election, if a Participant dies before his Annuity Starting Date,
     then the Participant's vested Account balance shall be applied toward the
     purchase of an annuity for the life of the surviving Spouse. The surviving
     Spouse may elect to have such annuity distributed immediately after the
     Participant's death.

11.5 Notice Requirements.

     (a)  In the case of a Qualified Joint and Survivor Annuity as described in
          Section 11.2(e), the Plan Administrator shall, no less than 30 days
          and no more than 90 days prior to the Annuity Starting Date, provide
          each Participant a written explanation of: (i) the terms and
          conditions of a Qualified Joint and Survivor Annuity; (ii) the
          Participant's right to make and the effect of an election to


                                       77



     waive the Qualified Joint and Survivor Annuity form of benefit; (iii) the
     rights of a Participant's Spouse; and (iv) the right to make, and the
     effect of, a revocation of a previous election to waive the Qualified Joint
     and Survivor Annuity. If a distribution is in a form other than a Qualified
     Joint and Survivor Annuity, such distribution may commence less than 30
     days after the notice required under this Section 11.5(a) is given,
     provided that:

     (i)    The Plan Administrator clearly informs the Participant that the
            Participant has a right to a period of at least 30 days after
            receiving the notice to consider the decision of whether or not to
            elect a distribution (and, if applicable, a particular distribution
            option);

     (ii)   The Participant has a right to revoke any affirmative distribution
            election at least until the Annuity Starting Date or, if later, at
            any time prior to the expiration of the 7-day period that begins the
            day after the notice is provided to the Participant; and

     (iii)  The Annuity Starting Date is a day after the date that the notice
            was provided to the Participant.

The Annuity Starting Date may be a date prior to the date the notice is provided
to the Participant if the distribution does not begin until at least 30 days
after such notice is provided, subject to the waiver of the 30-day period as
described in this Section 11.5(a).

(b)  In the case of a Qualified Preretirement Survivor Annuity as described in
     Section 11.4, the Plan Administrator shall provide each Participant within
     the applicable notice period a written explanation of the Qualified
     Preretirement Survivor Annuity in such terms and in such manner as would be
     comparable to the explanation provided for meeting the requirements of
     Section 11.5(a) applicable to a Qualified Joint and Survivor Annuity.

     The applicable notice period means with respect to a Participant, whichever
     of the following periods ends last:

     (i)    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,

     (ii)   a reasonable period ending after the individual becomes a
            Participant,

     (iii)  a reasonable period ending after notice is required because of the
            cessation of a benefit subsidy as described in subsection (c) below,

     (iv)   a reasonable period ending after this Article first applies to the
            Participant,

     (v)    a reasonable period after separation from service in the case of a
            Participant who separates before attaining age 35.

     For purposes of applying the preceding paragraph, a reasonable period
     ending after the enumerated events described in (ii), (iii) and (iv) 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. In the case
     of a Participant who separates from service before the Plan Year in which
     age 35 is attained, notice shall be provided within the two-year period
     beginning one year prior to separation and ending one year after
     separation. If such a Participant thereafter returns to employment with the
     Employer, the applicable period for such Participant shall be redetermined.

(c)  Notwithstanding the other requirements of this Section 11.5, the respective
     notices prescribed by this Section need not be given to a Participant if
     (i) the Plan "fully subsidizes" the costs of a Qualified Joint and Survivor
     Annuity or Qualified Preretirement Survivor Annuity and (ii) the Plan does
     not allow the Participant to waive the Qualified Joint and Survivor Annuity
     or Qualified Preretirement Survivor Annuity and does not allow a married
     Participant to designate a nonspouse Beneficiary. For purposes of this
     Section 11.5(c), a plan fully subsidizes the costs of a benefit if no
     increase in cost or decrease in benefits to the Participant may result from
     the Participant's failure to elect another benefit.

                                       78



     (d)  Notwithstanding the foregoing, a Participant's vested benefits shall
          not be distributed in the form of a Qualified Joint and Survivor
          Annuity or a Qualified Preretirement Survivor Annuity but shall be
          distributed to him in a single sum payment as soon as is
          administratively feasible after the date on which his employment
          terminated or the date of his death, respectively, if the value of his
          vested Account derived from Employer and Employee contributions does
          not exceed (or at the time of any prior distribution (i) in Plan Years
          beginning before August 6, 1997, did not exceed $3,500, or (ii) made
          during the period beginning on the first day of the Plan Year
          beginning after August 5, 1997, and ending on March 21, 1999, did not
          exceed) $5,000.

11.6 Special Rule for Profit Sharing Plans.

     (a)  This Section shall apply to a Participant in a profit sharing plan,
          and to any distribution, made on or after the first day of the first
          Plan Year beginning after December 31, 1988, from or under a separate
          account attributable solely to accumulated deductible employee
          contributions, as defined in section 72(o)(5) of the Code, and
          maintained on behalf of a Participant in a money purchase pension plan
          (including a target benefit plan) if the following conditions are
          satisfied: (i) the Participant cannot or does not elect payments in
          the form of a life annuity, and (ii) on the death of the Participant,
          the Participant's vested Account will be paid to the Participant's
          surviving Spouse, but if there is no surviving Spouse, or, if the
          surviving Spouse has already consented in a manner conforming to a
          qualified election, then to the Participant's designated Beneficiary.
          The surviving Spouse may elect to have distribution of the vested
          Account commence within the 90-day period following the date of the
          Participant's death. The Account balance shall be adjusted for gains
          or losses occurring after the Participant's death in accordance with
          the provisions of the Plan governing the adjustment of Account
          balances for other types of distributions. However, this Section 11.6
          shall not be operative with respect to the Participant if it is
          determined that this profit sharing plan is a direct or indirect
          transferee of a defined benefit plan, money purchase pension plan
          (including a target benefit plan), stock bonus or profit sharing plan
          which is subject to the survivor annuity requirement of sections
          401(a)(11) and 417 of the Code. The preceding sentence shall apply
          only with respect to asset transfers completed after December 31,
          1984, and if the transferred assets and income thereon are accounted
          for separately, then such sentence shall apply only with respect to
          the transferred assets (and income thereon). If this Section is
          operative, then except to the extent otherwise provided in Section
          11.7, the other provisions of this Article shall be inoperative.

     (b)  The Participant may waive the spousal death benefit described in this
          Section at any time provided that no such waiver shall be effective
          unless it satisfies the conditions that would apply to the
          Participant's waiver of the Qualified Preretirement Survivor Annuity.

     (c)  For purposes of this Section 11.6, vested Account balances shall mean,
          in the case of a money purchase pension plan or a target benefit plan,
          the Participant's separate Account attributable solely to accumulated
          deductible employee contributions within the meaning of section
          72(o)(5)(B) of the Code. In the case of a profit sharing plan, vested
          Account balance shall have the same meaning as otherwise provided in
          this plan document.

11.7 Transitional Rules.

     (a)  Any living Participant not receiving benefits on August 23, 1984, who
          would otherwise not receive the benefits prescribed by the previous
          Sections of this Article must be given the opportunity to elect to
          have the prior Sections of this Article apply if such Participant is
          credited with at least one Hour of Service under this Plan or a
          predecessor plan in a Plan Year beginning on or after January 1, 1976,
          and such Participant had at least 10 Years of Vesting Service when he
          or she separated from service.

     (b)  Any living Participant not receiving benefits on August 23, 1984, who
          was credited with at least one Hour of Service under this Plan or a
          predecessor plan on or after September 2, 1974, and who is not
          otherwise credited with any service in a Plan Year beginning on or
          after January 1, 1976, must be given the opportunity to have his or
          her benefits paid in accordance with Section 11.7(d) of this Article.

     (c)  The respective opportunities to elect (as described in subsections
          11.7(a) and (b) above) must be afforded to the appropriate
          Participants during the period commencing on August 23, 1984, and
          ending on the date benefits would otherwise commence to said
          Participants.


                                       79



          (d)  Any Participant who has elected pursuant to subsection 11.7(b) of
               this Article and any Participant who does not elect under
               subsection 11.7(a) or who meets the requirements of subsection
               11.7(a) except that such Participant does not have at least 10
               Years of Vesting Service when he or she separates from service,
               shall have his or her benefits distributed in accordance with all
               of the following requirements if benefits would have been payable
               in the form of a life annuity.

               (i)    Automatic joint and survivor annuity. If benefits in the
                      form of a life annuity become payable to a married
                      Participant who:

                      (1)  begins to receive payments under the Plan on or after
                           Normal Retirement Age; or

                      (2)  dies on or after Normal Retirement Age while still
                           working for the Employer; or

                      (3)  begins to receive payments on or after the qualified
                           early retirement age; or

                      (4)  separates from service on or after attaining Normal
                           Retirement Age (or the qualified early retirement
                           age) and after satisfying the eligibility
                           requirements for the payment of benefits under the
                           Plan and thereafter dies before beginning to receive
                           such benefits;

                      then such benefits will be received under this Plan in the
                      form of a Qualified Joint and Survivor Annuity, unless the
                      Participant has elected otherwise during the election
                      period. The election period must begin at least 6 months
                      before the Participant attains qualified early retirement
                      age and end not more than 90 days before the commencement
                      of benefits. Any election hereunder will be in writing and
                      may be changed by the Participant at any time.

               (ii)   Election of early survivor annuity. A Participant who is
                      employed after attaining the qualified early retirement
                      age will be given the opportunity to elect, during the
                      election period, to have a survivor annuity payable on
                      death. If the Participant elects the survivor annuity,
                      payments under such annuity must not be less than the
                      payments which would have been made to the spouse under
                      the Qualified Joint and Survivor Annuity if the
                      Participant had retired on the day before his or her
                      death. Any election under this provision will be in
                      writing and may be changed by the Participant at any time.
                      The election period begins on the later of (1) the 90th
                      day before the Participant attains the qualified early
                      retirement age, or (2) the date on which Participation
                      begins, and ends on the date the Participant terminates
                      employment.

               (iii)  Definitions. For purposes of this Section 11.7(d),
                      qualified early retirement age is the latest of:

                      (1)  the earliest date, under the Plan, on which the
                           Participant may elect to receive retirement benefits,

                      (2)  the first day of the 120th month beginning before the
                           Participant reaches Normal Retirement Age, or

                      (3)  the date the Participant begins participation in the
                           Plan.

ARTICLE XII - TOP HEAVY PROVISIONS

     12.1 Applicability. Notwithstanding any other provisions of the Plan or
          Adoption Agreement to the contrary, if for any Plan Year the Plan
          becomes a Top Heavy Plan, the requirements of this Article XII of the
          Plan shall be applied for such Plan Year.

     12.2 Definitions. The following terms shall have the following meanings in
          the determination of whether the Plan is a Top Heavy Plan:

          (a)  Determination Date. For the first Plan Year of the Plan, the last
               day of that Plan Year. For any Plan Year subsequent to the first
               Plan Year, the last day of the preceding Plan Year.

          (b)  Employer. The Employer which adopted this Plan and any other
               Employer some or all of whose Employees participate in this Plan
               or in a retirement plan which is aggregated with this Plan as
               part of a Permissive or Required Aggregation Group.

          (c)  Key Employee. Any Employee or former Employee (and the
               Beneficiaries of such Employee) who, at any time during the
               determination period, was an officer of the Employer if such
               individual's annual compensation exceeds 50% of the dollar
               limitation under section 415(b)(1)(A) of the Code,


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     an owner (or considered an owner under section 318 of the Code) of one of
     the ten largest interests in the Employer if such individual's compensation
     exceeds 100% of the dollar limitation under section 415(c)(1)(A) of the
     Code, a 5-percent owner of the Employer, or a 1-percent owner of the
     Employer who has annual compensation of more than $150,000. Annual
     compensation means Annual Additions Compensation as defined in Section
     6.1(a). The determination period is the Plan Year containing the
     Determination Date and the four preceding Plan Years.

     The determination of who is a Key Employee will be made in accordance with
     section 416(i)(1) of the Code and the regulations thereunder.

(d)  Non-Key Employee. Any Employee or former Employee (or any Beneficiary of
     such Employee) who is not considered to be a Key Employee.

(e)  Permissive Aggregation Group. The Required Aggregation Group of plans plus
     any other plan or plans of the Employer which, when considered as a group
     with the Required Aggregation Group, would continue to satisfy the
     requirements of sections 401(a)(4) and 410 of the Code.

(f)  Present Value. Present value shall be based on the interest and mortality
     rates specified in plan document.

(g)  Required Aggregation Group. (i) Each qualified 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 (ii) any other qualified plan of the Employer which
     enables a plan described in (i) to meet the requirements of section
     401(a)(4) or 410 of the Code.

(h)  Top Heavy Plan. For any Plan Year beginning after December 31, 1983, this
     Plan is Top Heavy if any of the following conditions exist:

     (i)    If the Top Heavy Ratio for this Plan exceeds 60% and this Plan is
            not part of any Required Aggregation Group or Permissive Aggregation
            Group of plans.

     (ii)   If this Plan is a part of a Required Aggregation Group of plans but
            not part of a Permissive Aggregation Group and the Top Heavy Ratio
            for the group of plans exceeds 60%.

     (iii)  If this Plan is a part of a Required Aggregation Group and part of a
            Permissive Aggregation Group of plans and the Top Heavy Ratio for
            the Permissive Aggregation Group exceeds 60%.

(i)  Top Heavy Ratio.

     (i)    If the Employer maintains one or more defined contribution plans
            (including any simplified employee pension plan) and the Employer
            has not maintained any defined benefit plan which during the 5-year
            period ending on the Determination Date(s) has or has had accrued
            benefits, the Top Heavy Ratio for this Plan alone or for the
            Required or Permissible Aggregation Group, as appropriate, is a
            fraction, the numerator of which is the sum of the account balances
            of all Key Employees as of the Determination Date(s) (including any
            part of any account balance distributed in the 5-year period ending
            on the Determination Date(s)), and the denominator of which is the
            sum of all account balances (including any part of any account
            balance distributed in the 5-year period ending on the Determination
            Date(s)), both computed in accordance with section 416 of the Code
            and the regulations thereunder. Both the numerator and denominator
            of the Top Heavy Ratio are increased to reflect any contribution not
            actually made as of the Determination Date, but which is required to
            be taken into account on that date under section 416 of the Code and
            the regulations thereunder.

     (ii)   If the Employer maintains one or more defined contribution plans
            (including any simplified employee pension plan) and the Employer
            maintains or has maintained one or more defined benefit plans which
            during the 5-year period ending on the Determination Date(s) has or
            has had any accrued benefits, the Top Heavy Ratio for any Required
            or Permissive Aggregation Group, as appropriate, is a fraction, the
            numerator of which is the sum of account balances under the
            aggregated defined contribution plan or plans for all Key Employees,
            determined in accordance with paragraph (i)(i) above, and the
            Present Value of accrued benefits under the aggregated defined
            benefit plan or plans for all Key Employees as of the Determination
            Date(s), and the denominator of which is the sum of the account
            balances under the aggregated defined


                                       81



                          contribution plan or plans for all Participants,
                          determined in accordance with paragraph (i)(i) above,
                          and the Present Value of accrued benefits under the
                          defined benefit plan or plans for all Participants as
                          of the Determination Date(s), all determined in
                          accordance with section 416 of the Code 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 of an accrued benefit made in the
                          five-year period ending on the Determination Date.

                   (iii)  For purposes of paragraphs (i)(i) and (i)(ii) above,
                          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 section 416 of the Code and the
                          regulations thereunder for the first and second plan
                          years of a defined benefit plan. The account balances
                          and accrued benefits of a Participant (A) who is not a
                          Key Employee but who was a Key Employee in a prior
                          year, or (B) who has not been credited with at least
                          one Hour of Service with any Employer maintaining the
                          Plan at any time during the 5-year period ending on
                          the Determination Date will be disregarded. The
                          calculation of the Top Heavy Ratio, and the extent to
                          which distributions, rollovers, nonde-ductible
                          employee contributions and transfers are taken into
                          account will be made in accordance with section 416(g)
                          of the Code and the regulations thereunder. When
                          aggregating plans, the value of account balances and
                          accrued benefits will be calculated with reference to
                          the Determination Dates that fall within the same
                          calendar year.

                   The accrued benefit of a Participant other than a Key
                   Employee shall be determined under (A) the method, if any,
                   that uniformly applies for accrual purposes under all defined
                   benefit plans maintained by the Employer, or (B) 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 section 411(b)(1)(C) of the Code.

         12.3 Minimum Allocation.

              (a)  Except as otherwise provided in subsections (c) and (d)
                   below, the Employer contributions and forfeitures allocated
                   on behalf of any Participant who is not a Key Employee shall
                   not be less than the lesser of three percent of such
                   Participant's Annual Additions Compensation or, in the case
                   where the Employer has no defined benefit plan which
                   designates this Plan to satisfy section 401 of the Code, the
                   largest percentage of Employer contributions and forfeitures,
                   as a percentage of the Key Employee's Annual Additions
                   Compensation, as limited by section 401(a)(17) of the Code,
                   allocated on behalf of any Key Employee for that year. The
                   minimum allocation is determined without regard to any Social
                   Security contribution. This minimum allocation shall be made
                   even though, under other plan provisions, the Participant
                   would not otherwise be entitled to receive an allocation, or
                   would have received a lesser allocation for the year because
                   of (i) the Participant's failure to complete 1,000 Hours of
                   Service (or any equivalent provided in the Plan), (ii) the
                   Participant's failure to make mandatory Employee
                   contributions to the Plan, or (iii) compensation less than a
                   stated amount. Neither Elective Deferrals, Matching
                   Contributions, Safe Harbor Matching Contributions nor ACP
                   Test Only Safe Harbor Matching Contributions may be taken
                   into account for the purpose of satisfying the minimum
                   Top-Heavy contribution requirements.

              (b)  For purposes of computing the minimum allocation, Annual
                   Additions Compensation will mean Annual Additions
                   Compensation as defined in Section 6.1(a) of the Plan, as
                   limited by section 401(a)(17) of the Code.

              (c)  The provision in (a) above shall not apply to any Participant
                   who was not employed by the Employer on the last day of the
                   Plan Year.

              (d)  The provision in (a) above shall not apply to any Participant
                   to the extent the Participant is covered under any other plan
                   or plans of the Employer and the Employer has provided in the
                   Adoption Agreement that the minimum allocation or benefit
                   requirement applicable to Top-Heavy plans will be met in the
                   other plan or plans.

              (e)  The minimum allocation or benefit requirement applicable to
                   Top-Heavy plans (to the extent required to be nonforfeitable
                   under section 416(b) of the Code) may not be forfeited under
                   section 411(a)(3)(B) or 411(a)(3)(D) of the Code.


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              (f)  If Employees are covered under both a Top-Heavy defined
                   benefit plan and defined contribution plan of the Employer,
                   the denominators of the defined benefit and defined
                   contribution fractions (as described in Section 6.1 of the
                   Plan) shall be computed by substituting a factor of 1.0 for
                   1.25. However, if the Top-Heavy Ratio does not exceed 90%,
                   the Employer may use a factor of 1.25 in the fractions
                   provided one of the following is used to satisfy the minimum
                   contribution requirements:

                   (i)    a minimum benefit of 3% per year of service (up to
                          30%) is provided in the defined benefit plan;

                   (ii)   a minimum contribution of 7 1/2% is provided in the
                          defined contribution plan; or

                   (iii)  a minimum contribution of 4% is provided in the
                          defined contribution plan and a minimum benefit of 3%
                          per year of service (up to 30%) is provided in the
                          defined benefit plan.

         12.4 Vesting. For any Plan Year in which this Plan is Top-Heavy, one of
              the minimum vesting schedules as elected by the Employer in the
              Adoption Agreement will automatically apply to the Plan. The
              minimum vesting schedule applies to all benefits within the
              meaning of section 411(a)(7) of the Code except those attributable
              to Employee contributions, including benefits accrued before the
              effective date of section 416 of the Code and benefits accrued
              before the Plan became Top-Heavy. Further, no decrease in a
              Participant's nonforfeitable percentage may occur in the event the
              Plan's status as Top-Heavy changes for any Plan Year. However,
              this Section does not apply to the account balances of any
              Employee who does not have an Hour of Service after the Plan has
              initially become Top-Heavy, and such Employee's account balance
              attributable to Employer contributions and forfeitures will be
              determined without regard to this Section.

ARTICLE XIII - ADMINISTRATION OF PLAN

         13.1 Duties and Responsibility of Fiduciaries; Allocation of Fiduciary
              Responsibility. A fiduciary to the Plan shall have only those
              specific powers, duties, responsibilities and obligations as are
              explicitly given him under the Plan and Trust Agreement. In
              general, the Employer shall have the sole responsibility for
              making contributions to the Plan required under Article III of the
              Plan, appointing the Trustee and the Plan Administrator, and
              determining the Investment Options available for investment under
              the Plan. The Plan Administrator shall have the sole
              responsibility for the administration of the Plan, as more fully
              described in Section 13.2. It is intended that each fiduciary
              shall not be responsible for any act or failure to act of another
              fiduciary. A fiduciary may serve in more than one fiduciary
              capacity with respect to the Plan. When T. Rowe Price Trust
              Company acts as Trustee of a plan, it acts solely as a directed
              trustee.

         13.2 Powers and Responsibilities of the Plan Administrator.

              (a)  Administration of the Plan. The Plan Administrator shall have
                   all powers necessary to administer the Plan and total
                   discretion in interpreting and applying the provisions of the
                   Plan, including, but not limited to, the power to construe
                   and interpret the Plan documents; to decide all questions
                   relating to an individual's eligibility to participate in the
                   Plan; to determine the amount, manner and timing of any
                   distribution of benefits or any withdrawal under the Plan; to
                   approve and ensure the repayment of any loan to a Participant
                   under the Plan; to resolve any claim for benefits; and to
                   appoint or employ advisors, including legal counsel, to
                   render advice with respect to any of the Plan Administrator's
                   responsibilities under the Plan. Any construction,
                   interpretation or application of the Plan by the Plan
                   Administrator shall be final, conclusive and binding. All
                   actions by the Plan Administrator shall be taken pursuant to
                   uniform standards applied to all persons similarly situated.
                   The Plan Administrator shall have no power to add to,
                   subtract from or modify any of the terms of the Plan, or to
                   change or add to any benefits provided by the Plan, or to
                   waive or fail to apply any requirements of eligibility for a
                   benefit under the Plan.

              (b)  Furnishing Trustee with Instructions. The Plan Administrator
                   shall be responsible for furnishing the Trustee with written
                   instructions regarding all contributions to the Trust, all
                   distributions to Participants and all loans to Participants.
                   In addition, the Plan Administrator shall be responsible for
                   furnishing the Trustee with any further information
                   respecting the Plan which the Trustee may request for the
                   performance of its duties or for the purpose of making any
                   returns to the Internal Revenue Service or Department of
                   Labor as may be required of the Trustee.


                                       83



              (c)  Application and Forms for Benefits. The Plan Administrator
                   may require a Participant or Beneficiary to complete and file
                   with it an application for a benefit and to furnish all
                   pertinent information requested by it. The Plan Administrator
                   may rely upon all such information so furnished to it,
                   including the Participant's or Beneficiary's current mailing
                   address.

         13.3 Allocation of Duties and Responsibilities. The Plan Administrator
              may by written instrument allocate among its members or Employees
              any of its duties and responsibilities not already allocated under
              the Plan or may designate persons other than members or Employees
              to carry out any of the Plan Administrator's duties and
              responsibilities under the Plan. Any such duties or
              responsibilities thus allocated must be described in the written
              instrument. Such person must acknowledge in writing his acceptance
              of the duties and responsibilities allocated to him.

         13.4 Appointment of the Plan Administrator. The Employer shall
              designate in the Adoption Agreement the Plan Administrator which
              shall administer the Employer's Plan. Such Plan Administrator may
              consist of an individual, a committee of two or more individuals,
              whether or not, in either such case, the individual or any of such
              individuals are Employees of the Employer, a consulting firm or
              other independent agent, the Trustee (with its written consent) or
              the Employer itself. Except as the Employer shall otherwise
              expressly determine, the Plan Administrator shall be charged with
              the full power and the responsibility for administering the Plan
              in all its details. If no Plan Administrator has been appointed by
              the Employer, or if the person designated as Plan Administrator by
              the Employer is not serving as such for any reason, the Employer
              shall be deemed to be the Plan Administrator of the Plan. The Plan
              Administrator may be removed by the Employer, or may resign by
              giving notice in writing to the Employer, and in the event of the
              removal, resignation or death, or other termination of service by
              the Plan Administrator, the Employer shall, as soon as
              practicable, appoint a successor Plan Administrator, such
              successor thereafter to have all of the rights, privileges, duties
              and obligations of the predecessor Plan Administrator.

         13.5 Expenses. All expenses of the Plan and Trust (including Trustee's
              fees) shall, unless paid by the Employer, be paid from the Trust.

         13.6 Liabilities. The Plan Administrator and each person to whom duties
              and responsibilities have been allocated pursuant to this Plan
              document may be indemnified and held harmless by the Employer with
              respect to any alleged breach of responsibilities performed or to
              be performed hereunder. The Employer and each Affiliated Employer
              shall indemnify and hold harmless the Sponsor against all claims,
              liabilities, fines and penalties and all expenses reasonably
              incurred by or imposed upon it (including, but not limited to,
              reasonable attorneys' fees) which arise as a result of actions or
              failure to act in connection with the operation and administration
              of the Plan.

         13.7 Claims Procedure.

              (a)  Filing a Claim. Any Participant or Beneficiary under the Plan
                   may file a written claim for a Plan benefit with the Plan
                   Administrator or with a person named by the Plan
                   Administrator to receive claims under the Plan. The Plan
                   Administrator shall have sole and total discretion in
                   resolving claims.

              (b)  Notice of Denial of Claim. In the event of a denial or
                   limitation of any benefit or payment due to or requested by
                   any Participant or Beneficiary under the Plan ("claimant"),
                   claimant shall be given a written notification containing
                   specific reasons for the denial or limitation of his benefit.
                   The written notification shall contain specific reference to
                   the pertinent Plan provisions on which the denial or
                   limitation of his benefit is based. In addition, it shall
                   contain a description of any other material or information
                   necessary for the claimant to perfect a claim and an
                   explanation of why such material or information is necessary.
                   The notification shall further provide appropriate
                   information as to the steps to be taken if the claimant
                   wishes to submit his claim for review. This written
                   notification shall be given to a claimant within 90 days
                   after receipt of his claim by the Plan Administrator unless
                   special circumstances require an extension of time for
                   processing the claim. If such an extension of time for
                   processing is required, written notice of the extension shall
                   be furnished to the claimant prior to the termination of said
                   90-day period, and such notice shall indicate the special
                   circumstances which make the postponement appropriate.


                                       84



              (c)  Right of Review. In the event of a denial or limitation of
                   his benefit, the claimant or his duly authorized
                   representative shall be permitted to review pertinent
                   documents and to submit to the Plan Administrator issues and
                   comments in writing. In addition, the claimant or his duly
                   authorized representative may make a written request for a
                   full and fair review of his claim and its denial by the Plan
                   Administrator; provided, however, that such written request
                   must be received by the Plan Administrator (or its delegate
                   to receive such requests) within 60 days after receipt by the
                   claimant of written notification of the denial or limitation
                   of the claim, or within 60 days after the claimant knew (or
                   should have known) of any other determination by the Plan
                   Administrator. The 60-day requirement may be waived by the
                   Plan Administrator in appropriate cases.

              (d)  Decision on Review. A decision shall be rendered by the Plan
                   Administrator within 60 days after the receipt of the request
                   for review, provided that where special circumstances require
                   an extension of time for processing the decision, it may be
                   postponed on written notice to the claimant (prior to the
                   expiration of the initial 60-day period) for an additional 60
                   days after the receipt of such request for review. Any
                   decision by the Plan Administrator shall be furnished to the
                   claimant in writing and shall set forth the specific reasons
                   for the decision and the specific Plan provisions on which
                   the decision is based.

              (e)  Court Action. No Participant or Beneficiary shall have the
                   right to seek judicial review of a denial of benefit, or to
                   bring any action in any court to enforce a claim for benefits
                   prior to filing a claim for benefits or exhausting his rights
                   to review under this Section 13.7.

ARTICLE XIV - AMENDMENT, TERMINATION AND MERGER

         14.1 Amendments.

              (a)  The Employer expressly recognizes the authority of the
                   Sponsor to amend this prototype plan and trust from time to
                   time, except with respect to elections of the Employer in the
                   Adoption Agreement and the Optional Supplement, and the
                   Employer shall be deemed to have consented to any such
                   amendment. The Employer shall receive a written instrument
                   indicating the amendment of the prototype plan and trust, and
                   such amendment shall become effective as of the effective
                   date of such instrument. No such amendment shall in any way
                   impair, reduce or affect any Participant's vested and
                   nonforfeitable rights in the Trust.

              (b)  The Employer may (i) change the choice of options in the
                   Adoption Agreement, (ii) add overriding language in the
                   Adoption Agreement when such language is necessary to (A)
                   satisfy section 415 or 416 of the Code because of the
                   required aggregation of multiple plans, or (B) preserve
                   benefits protected under section 411(d)(6) of the Code, and
                   (iii) add certain model amendments published by the Internal
                   Revenue Service which specifically provide that their
                   adoption will not cause the Plan to be treated as
                   individually designed. If the Plan is amended by the Employer
                   for any other reason, including a waiver of the minimum
                   funding requirement under section 412(d) of the Code, or if
                   the Plan fails to attain or retain qualification, the Plan
                   will no longer participate in this master or prototype plan
                   and will be considered an individually designed plan.

              (c)  No amendment to the Plan shall be effective to the extent
                   that it has the effect of decreasing a Participant's accrued
                   benefit. Notwithstanding the preceding sentence, a
                   Participant's Account may be reduced to the extent permitted
                   under section 412(c)(8) of the Code. For purposes of this
                   subsection, a Plan amendment which has the effect of
                   decreasing a Participant's Account with respect to benefits
                   attributable to service before the amendment shall be treated
                   as reducing an accrued benefit. Furthermore, if the vesting
                   schedule of the Plan is amended, 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
                   nonforfeitable percentage (determined as of such date) of
                   such Employee's right to his Account will not be less than
                   his percentage computed under the Plan without regard to such
                   amendment. No amendment to the Plan shall be effective to
                   eliminate or restrict an optional form of benefit. The
                   preceding sentence shall not apply to a Plan amendment that
                   eliminates or restricts the ability of a Participant to
                   receive payment of his or her Account balance under a
                   particular optional form of benefit if the amendment
                   satisfies the conditions in (i) and (ii) below:


                                       85



                   (i)    The amendment provides a single-sum distribution form
                          that is otherwise identical to the optional form of
                          benefit eliminated or restricted. For purposes of this
                          condition (i), a single-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 Participant) except
                          with respect to the timing of payments after
                          commencement.

                   (ii)   The amendment is not effective unless the amendment
                          provides that the amendment shall not apply to any
                          distribution with an annuity starting date earlier
                          than the earlier of: (A) the 90th day after the date
                          the Participant receiving the distribution has been
                          furnished a 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 the amendment is
                          adopted.

                   In addition, the Employer may amend the Plan to eliminate or
                   restrict optional forms of benefit for in-kind distributions
                   and/or elective transfers in accordance with section
                   411(d)(6) of the Code and the regulations thereunder.

         14.2 Plan Termination; Discontinuance of Employer Contributions.

              (a)  The Employer may terminate the Plan at any time in whole or
                   in part. In the event of the dissolution, merger,
                   consolidation or reorganization of the Employer, the Plan
                   shall automatically terminate and the Trust shall be
                   liquidated as provided in subsection (b) below unless the
                   Plan is continued by a successor Employer in accordance with
                   Section 14.3.

              (b)  Upon the complete or partial termination of the Plan or the
                   complete discontinuance of Employer contributions under the
                   Plan, the Account balances of all Participants affected
                   thereby shall become fully vested and nonforfeitable, and,
                   after taking all steps necessary to ensure qualification of
                   the Plan upon termination, the Plan Administrator shall
                   direct the Trustee to distribute assets remaining in the
                   Trust, after payment of any expenses properly chargeable
                   thereto, to Participants or their Beneficiaries.

         14.3 Successor Employer. In the event of the dissolution, merger,
              consolidation or reorganization of the Employer, provision may be
              made by which the Plan and Trust shall be continued by the
              successor employer, in which case such successor employer shall be
              substituted for the Employer under the Plan. The substitution of
              the successor employer shall constitute an assumption of Plan
              liabilities by the successor employer, and the successor employer
              shall have all powers, duties and responsibilities of the Employer
              under the Plan.

         14.4 Merger, Consolidation or Transfer. In the event of a merger or
              consolidation of the Plan with, or transfer of assets or
              liabilities of the Plan to, any other plan, the transaction shall
              be structured so that each Participant would (if the Plan then
              terminated) receive a benefit immediately after the merger,
              consolidation or transfer which is equal to or greater than the
              benefit the Participant would have been entitled to receive
              immediately before the merger, consolidation or transfer (if this
              Plan had then terminated).

ARTICLE XV - MISCELLANEOUS PROVISIONS

         15.1 Exclusive Benefit of Participants and Beneficiaries.

              (a)  All assets of the Trust shall be retained for the exclusive
                   benefit of Participants and their Beneficiaries and shall be
                   used only to pay benefits to such persons or to pay
                   reasonable fees and expenses of the Trust and of the
                   administration of the Plan. The assets of the Trust shall not
                   revert to the benefit of the Employer, except as otherwise
                   specifically provided in subsection (b).

              (b)  Contributions to the Trust under this Plan are subject to the
                   following conditions:

                   (i)    If a contribution or any part thereof is made to the
                          Trust by the Employer under a mistake of fact, such
                          contribution or part thereof shall be returned to the
                          Employer within one year after the date the
                          contribution is made;

                   (ii)   In the event that the Commissioner of Internal Revenue
                          determines that the Plan is not initially qualified
                          under the Code, any contribution made incident to that
                          initial qualification by the Employer must be returned
                          to the Employer within one year after the date the
                          initial


                                       86



                          qualification is denied, but only if the application
                          for the qualification is made by the time prescribed
                          by law for filing the Employer's return for the
                          taxable year in which the Plan is adopted, or such
                          later date as the Secretary of the Treasury may
                          prescribe; and

                   (iii)  Contributions to the Trust are specifically
                          conditioned on their deductibility under the Code and,
                          to the extent a deduction is disallowed for any such
                          contribution, such amount (to the extent so
                          disallowed) shall be returned to the Employer within
                          one year after the date of the disallowance of the
                          deduction.

         15.2 Nonguarantee of Employment. Nothing contained in this Plan shall
              be construed as a contract of employment between the Employer and
              any Employee, or as a right of any Employee to be continued in the
              employment of the Employer, or as a limitation of the right of the
              Employer to discharge any of its Employees, with or without cause.

         15.3 Rights to Trust Assets. No Employee, Participant or Beneficiary
              shall have any right to, or interest in, any assets of the trust
              upon termination of employment or otherwise, except as provided
              under the Plan. All payments of benefits under the Plan shall be
              made solely out of the assets of the Trust.

         15.4 Nonalienation of Benefits. Except as provided under Article VIII
              of the Plan with respect to Plan loans, benefits payable under the
              Plan shall not be subject in any manner to anticipation,
              alienation, sale, transfer, assignment, pledge, encumbrance,
              charge, garnishment, execution or levy of any kind, voluntary or
              involuntary; provided, however, that the Plan Administrator shall
              not be precluded from complying with a qualified domestic
              relations order described in section 414(p) of the Code, or any
              domestic relations order entered before January 1, 1985. Any
              attempt to anticipate, alienate, sell, transfer, assign, pledge,
              encumber, charge or otherwise dispose of any right to benefits
              payable hereunder shall be void. The Trust shall not in any manner
              be liable for, or subject to, the debts, contracts, liabilities,
              engagements or torts of any person entitled to benefits hereunder.

         15.5 Gender. The use of the masculine pronoun shall extend to and
              include the feminine gender, and the use of the feminine pronoun
              shall extend to and include the masculine gender, wherever
              appropriate; the use of the singular shall include the plural, and
              the use of the plural shall include the singular, wherever
              appropriate.

         15.6 Titles and Headings. The titles or headings of the respective
              Articles and Sections are inserted merely for convenience and
              shall be given no legal effect.

         15.7 Failure of Employer's Plan to Qualify. If the Employer's Plan
              fails to attain or retain qualification, such Plan will no longer
              participate in this prototype plan and will be considered an
              individually designed plan.

         15.8 Compliance with Laws, Rules and Regulations. If any of the
              provisions of this Plan or of the Trust Agreement are at any time
              in any way inconsistent with any laws of the United States of
              America or the laws of any state if not preempted by ERISA, or any
              regulations of the Internal Revenue Service, U.S. Department of
              Labor, or any other Federal or state regulatory authority, in a
              manner that adversely affects the qualified status of the Plan
              under section 401(a) of the Code or the tax-exempt status of the
              Trust under section 501(a) of the Code, or may result in any civil
              penalties under ERISA or any other law, then the Employer, the
              Plan Administrator and the Trustee shall comply with the
              requirements of such laws or regulations, rather than with the
              provisions of the Plan and Trust which are inconsistent therewith.
              The Employer, the Plan Administrator and the Trustee shall incur
              no liability for following such laws, rules or regulations.

         15.9 Military Service. Notwithstanding any provision of the Plan to the
              contrary, contributions, benefits and service credit with respect
              to qualified military service will be provided in accordance with
              section 414(u) of the Code.


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EGTRRA AMENDMENT TO THE
T. ROWE PRICE TRUST COMPANY
PROTOTYPE 401(k) RETIREMENT PLAN

PREAMBLE

         1.   Adoption and effective date of amendment. This amendment of the T.
              Rowe Price Trust Company Prototype 401(k) Retirement Plan basic
              plan document #03 ("plan") is adopted to reflect certain
              provisions of the Economic Growth and Tax Relief Reconciliation
              Act of 2001 ("EGTRRA"). This amendment is intended as good faith
              compliance with the requirements of EGTRRA and is to be construed
              in accordance with EGTRRA and guidance issued thereunder. Except
              as otherwise provided, this amendment shall be effective as of the
              first day of the first plan year beginning after December 31,
              2001, but shall not apply to taxable, plan or limitation years
              beginning after December 31, 2010.

         2.   Supersession of inconsistent provisions. This amendment shall
              supersede the provisions of the plan to the extent those
              provisions are inconsistent with the provisions of this amendment.

ARTICLE I - PLAN LOANS FOR OWNER-EMPLOYEES AND SHAREHOLDER EMPLOYEES

         Effective for plan loans made after December 31, 2001, plan provisions
         prohibiting loans to any owner-employee or shareholder-employee shall
         cease to apply.

ARTICLE II - LIMITATIONS ON CONTRIBUTIONS

         2.1. Effective date. This article shall be effective for limitation
              years beginning after December 31, 2001.

         2.2. Maximum annual addition. Except to the extent permitted under
              article IX of this amendment and section 414(v) of the Code, if
              applicable, the annual addition that may be contributed or
              allocated to a participant's account under the plan for any
              limitation year shall not exceed the lesser of:

              (a)  $40,000, as adjusted for increases in the cost-of-living
                   under section 415(d) of the Code, or

              (b)  100 percent of the participant's compensation, within the
                   meaning of section 415(c)(3) of the Code, for the limitation
                   year.

              The compensation limit referred to in (b) shall not apply to any
              contribution for medical benefits after separation from service
              (within the meaning of section 401(h) or section 419A(f)(2) of the
              Code) which is otherwise treated as an annual addition.

ARTICLE III - INCREASE IN COMPENSATION LIMIT

         The annual compensation of each participant taken into account in
         determining allocations for any plan year beginning after December 31,
         2001, shall not exceed $200,000, as adjusted for cost-of-living
         increases in accordance with section 401(a)(17)(B) of the Code. 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.

ARTICLE IV - MODIFICATION OF TOP-HEAVY RULES

         4.1. Effective date. This article shall apply for purposes of
              determining whether the plan is a top-heavy plan under section
              416(g) of the Code for plan years beginning after December 31,
              2001, and whether the plan satisfies the minimum benefits
              requirements of section 416(c) of the Code for such years. This
              section amends Article XII of the plan.

         4.2. 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 section 416(i)(1) of the
                   Code 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 section 415(c)(3)


                                       88



                   of the Code. The determination of who is a key employee will
                   be made in accordance with section 416(i)(1) of the Code and
                   the applicable regulations and other guidance of general
                   applicability issued thereunder.

              (b)  Determination of present values and amounts. This section
                   4.2(b) shall apply for purposes of determining the present
                   values of accrued benefits and the amounts of account
                   balances of employees as of the determination date.

                   (i)    Distributions during 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 shall be increased by the
                          distributions made with respect to the employee under
                          the plan and any plan aggregated with the plan under
                          section 416(g)(2) of the Code during the 1-year period
                          ending on the determination date. The preceding
                          sentence shall also apply to distributions under a
                          terminated plan which, had it not been terminated,
                          would have been aggregated with the plan under section
                          416(g)(2)(A)(i) of the Code. In the case of a
                          distribution made for a reason other than separation
                          from service, death or disability, this provision
                          shall be applied by substituting "5-year period" for
                          "1-year period."

                   (ii)   Employees not performing services during year ending
                          on the determination date. The accrued benefits and
                          accounts of any individual who has not performed
                          services for the employer during the 1-year period
                          ending on the determination date shall not be taken
                          into account.

         4.3. Minimum benefits.

              (a)  Matching contributions. Employer matching contributions shall
                   be taken into account for purposes of satisfying the minimum
                   contribution requirements of section 416(c)(2) of the Code
                   and the plan. The preceding sentence shall apply with respect
                   to matching contributions under the plan or, if the plan
                   provides that the minimum contribution requirement shall be
                   met in another plan, under such other plan. Employer matching
                   contributions that are used to satisfy the minimum
                   contribution requirements shall be treated as matching
                   contributions for purposes of the actual contribution
                   percentage test and other requirements of section 401(m) of
                   the Code.

              (b)  Contributions under other plans. The employer may provide in
                   the EGTRRA Adoption Agreement that the minimum benefit
                   requirement shall be met in another plan (including another
                   plan that consists solely of a cash or deferred arrangement
                   which meets the requirements of section 401(k)(12) of the
                   Code and matching contributions with respect to which the
                   requirements of section 401(m)(11) of the Code are met).

         4.4  Exception to top-heavy rules. The top-heavy requirements of
              section 416 of the Code and Article XII of the plan shall not
              apply in any year beginning after December 31, 2001, in which the
              plan consists solely of a cash or deferred arrangement which meets
              the requirements of section 401(k)(12) of the Code and matching
              contributions with respect to which the requirements of section
              401(m)(11) of the Code are met.

ARTICLE V - VESTING OF EMPLOYER MATCHING CONTRIBUTIONS

         5.1. Applicability. This article shall apply to all participants with
              accrued benefits derived from employer matching contributions.

         5.2. Vesting schedule. A participant's accrued benefit derived from
              employer matching contributions shall vest as provided by the
              employer in the EGTRRA Adoption Agreement. If the vesting schedule
              for employer matching contributions in Option 3 of Article II.A of
              the EGTRRA Adoption Agreement is elected, the election in the
              section of the plan that provides for the election of the former
              vesting schedule under 411(a)(10) of the Code shall apply. If
              elected by the Employer in the EGTRRA Adoption Agreement, the
              vesting schedule elected in the EGTRRA Adoption Agreement shall
              apply to all employer contributions.

ARTICLE VI - DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS

         6.1. Effective date. This article shall apply to distributions made
              after December 31, 2001.


                                       89



         6.2. Modification of definition of eligible retirement plan. For
              purposes of the direct rollover provisions in Article X of the
              plan, an eligible retirement plan shall also mean an annuity
              contract described in section 403(b) of the Code and an eligible
              plan under section 457(b) of the Code that 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
              that agrees to separately account for amounts transferred into
              such plan from this plan. The definition of eligible retirement
              plan shall 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 relations order as defined in section
              414(p) of the Code.

         6.3. Modification of definition of eligible rollover distribution to
              exclude hardship distributions. For purposes of the direct
              rollover provisions in Article X of the plan, any amount that is
              distributed on account of hardship shall 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.

         6.4. Modification of definition of eligible rollover distribution to
              include after-tax employee contributions. For purposes of the
              direct rollover provisions in Article X of the plan, a portion of
              a distribution shall not fail to be an eligible rollover
              distribution merely because the portion consists of after-tax
              employee contributions which are not includible in gross income.
              However, such portion may be transferred only to an individual
              retirement account or annuity described in section 408(a) or (b)
              of the Code or to a qualified defined contribution plan described
              in section 401(a) or 403(a) of the Code 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.

ARTICLE VII - ROLLOVERS FROM OTHER PLANS

         If elected by the employer in the EGTRAA Adoption Agreement, the plan
         will accept participant rollover contributions and/or direct rollovers
         of distributions made after December 31, 2001, from the types of plans
         specified in the EGTRAA Adoption Agreement, beginning on the effective
         date specified in the EGTRAA Adoption Agreement.

ARTICLE VIII - REPEAL OF MULTIPLE USE TEST

         The multiple use test described in Treasury Regulation section
         1.401(m)-2 and Article III of the plan shall not apply for plan years
         beginning after December 31, 2001.

ARTICLE IX - CATCH-UP CONTRIBUTIONS

         If elected by the employer in the EGTRRA Adoption Agreement, all
         employees who are eligible to make elective deferrals under this plan
         and who have attained age 50 before the close of the plan year shall be
         eligible to make catch-up contributions in accordance with, and subject
         to the limitations of, section 414(v) of the Code. Such catch-up
         contributions shall not be taken into account for purposes of the
         provisions of the plan implementing the required limitations of
         sections 402(g) and 415 of the Code. The plan shall not be treated as
         failing to satisfy the provisions of the plan implementing the
         requirements of section 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or
         416 of the Code, as applicable, by reason of the making of such
         catch-up contributions. If elected by the Employer in the EGTRRA
         Adoption Agreement, such catch-up contributions shall be counted in
         determining the amount of a participant's employer matching
         contributions.

ARTICLE X - SUSPENSION PERIOD AND CODE SECTION 402(g) LIMIT FOLLOWING HARDSHIP
DISTRIBUTION

         10.1 Suspension period. A participant who receives a distribution of
              elective deferrals after December 31, 2001, on account of hardship
              shall 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 shall 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.

         10.2 Elimination of reduced Code section 402(g) limit after suspension
              period ends. With respect to hardship distributions made after
              December 31, 2001, the post-hardship suspension contribution limit
              in Treasury regulation section 1.401(k)-1(d)(2)(iv)(B)(3) is
              eliminated.


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ARTICLE XI - DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT

         11.1.  Effective date. If elected by the employer in the EGTRAA
                Adoption Agreement, this section shall apply for distributions
                and severances from employment occurring after the date
                specified in the EGTRAA Adoption Agreement.

         11.2.  New distributable event. A participant's elective deferrals,
                qualified nonelective contributions, qualified matching
                contributions and earnings attributable to these contributions
                shall be distributed on account of the participant's severance
                from employment. However, such a distribution shall be subject
                to the other provisions of the plan regarding distributions,
                other than provisions that require a separation from service
                before such amounts may be distributed.


                                       91



401(k) RETIREMENT PLAN
TRUST AGREEMENT

The Employer has established a Plan to provide retirement, death and disability
benefits for eligible Employees and their Beneficiaries pursuant to section 401
of the Internal Revenue Code of 1986, as amended. As part of the Plan, the
Employer has requested such person or persons (individual, corporate, or other
entity), as may be designated in the Adoption Agreement, to serve as Trustee
pursuant to the Trust established for the investment of contributions under the
Plan upon the terms and conditions set forth in this Trust Agreement.

Unless the context of this Trust Agreement clearly indicates otherwise, the
terms defined in Article I of the Plan entered into by the Employer, of which
this Trust Agreement forms a part, shall, when used herein, have the same
meaning as in said Plan.

ARTICLE I - THE TRUST FUND

         1.1  Establishment of Trust Fund. The Employer hereby establishes with
              the Trustee a trust fund consisting of such sums of U. S. currency
              and such other property acceptable to the Trustee as shall from
              time to time be paid to the Trustee pursuant to this Trust
              Agreement. All such money and property, together with all
              investments and reinvestments made therewith and proceeds thereof,
              less any payments or distributions made by the Trustee pursuant to
              the terms of this Trust Agreement, are referred to as the Trust
              Fund. The Trustee hereby accepts the Trust Fund and agrees to hold
              it in accordance with the express provisions of this instrument
              and the requirements of law.

         1.2  Named Fiduciary. The Administrator, as set forth in the Adoption
              Agreement, shall have exclusive authority with respect to the
              management and control of the Trust Fund in accordance with the
              Plan and this Trust Agreement and shall be acting as a "Named
              Fiduciary" of the Plan in the performance of such activities. The
              term "Named Fiduciary," as used throughout this Trust Agreement,
              is deemed to refer to the Named Fiduciary of the Plan, as set
              forth in this Section 1.2, and its duly authorized
              representatives.

         1.3  Nature of Trustee's Duties. In performing its duties hereunder,
              the Trustee shall serve solely in the capacity of a directed
              trustee within the meaning of section 403(a)(1) of ERISA. The
              Trustee shall not be deemed to be the "administrator" as defined
              in ERISA section 3(16)(A), the "plan sponsor" as defined in ERISA
              section 3(16)(B), or a trustee with discretion to perform more
              than the express ministerial duties pursuant to the terms of this
              Trust Agreement.

         1.4  Limitation of Trustee's Duties. The Trustee shall have no duty to:
              (a) determine or enforce payment of any contribution due under the
              Plan; (b) inquire whether any contribution made to the Trust Fund
              is in accordance with the terms of the Plan or law; (c) determine
              the adequacy of the funding policy adopted by the Employer or the
              Named Fiduciary; (d) inquire as to the propriety of any investment
              or distribution made under the Plan; or (e) ensure the tax
              qualified status of the Plan under the Code.

ARTICLE II - ACCOUNTS

         2.1  Establishing Accounts. The Trustee shall open and maintain, as
              part of the Trust Fund, Participant accounts for such individuals
              as the Administrator shall, from time to time, give written notice
              to the Trustee as being Participants in the Plan. At the direction
              of the Administrator, the Trustee shall also open and maintain
              such other accounts as may be appropriate or desirable to aid in
              the administration of the Plan. A separate account shall be
              maintained for each Participant and shall be credited with the
              contributions made and any forfeitures allocated to each such
              Participant pursuant to the Plan (and all earnings thereon).

         2.2  Charges Against Accounts. Upon receipt of written instructions
              from the Administrator, the Trustee shall charge the appropriate
              account of the Participant for any withdrawals or distributions
              made under the Plan and any forfeiture of unvested interests
              attributable to Employer contributions which may be required under
              the Plan. The Administrator will give written instructions to the
              Trustee specifying the manner in which Employer contributions and
              any forfeiture of the nonvested portion of accounts, as allocated
              by the Administrator in accordance with the provisions of the
              Plan, are to be credited to the various accounts maintained for
              Participants.


                                       92



         2.3  Receipt of Contributions. The Trustee shall accept and hold in the
              Trust Fund contributions made by the Employer and Participants
              under the Plan. The Administrator shall give written instructions
              to the Trustee specifying the specific Participants' accounts to
              which contributions are to be credited, the amount of each such
              credit which is attributable to Employer contributions and the
              amount, if any, which is attributable to the Participants'
              required or voluntary contributions. If written instructions are
              not received by the Trustee, or if such instructions are received
              but are deemed by the Trustee to be unclear, upon notice to the
              Employer, the Trustee shall hold such contribution in cash,
              without liability for rising security prices or distributions
              made, pending receipt by it from the Administrator of written
              instructions or other clarification. If any contributions or
              earnings are less than any minimum which the then current
              prospectus for the Investment Options require, the Trustee may
              hold the specified portion of contribution or earnings in cash,
              without interest, until such time as the proper amount has been
              contributed or earned so that the investment in the Investment
              Options required under the Plan may be made.

ARTICLE III - INVESTMENT OF THE TRUST FUND

         3.1  Investment of the Trust Fund - In General. The Named Fiduciary
              shall be solely responsible for directing the Trustee as to the
              investment and disposition of the Trust Fund and shall have
              responsibility for the overall diversification of the Trust Fund.
              The Trustee shall invest and reinvest the Trust Fund only as
              directed and the Trustee is specifically prohibited from having or
              exercising any discretion with respect to the investment of the
              Trust Fund.

         3.2  Investment Powers of the Trustee. Subject to the limitations of
              Section 3.1, the Trustee shall invest and reinvest the Trust Fund
              as directed, free from any limitations imposed by state law on
              investments of trust funds and without distinction between income
              and principal, in any investment approved by the Named Fiduciary,
              including equity or debt securities, insurance policies and
              contracts, savings and time deposits, investment contracts issued
              by a bank, insurance company or other financial or similar
              institution, short-term instruments of deposit, registered
              investment companies (including any investment company, the
              advisor of which is an affiliate of the Trustee), investment
              partnerships or other pooled investments funds, common, collective
              or group trust funds (including any such fund held or maintained
              by the Trustee or an affiliate of the Trustee) for commingling
              assets of participating trusts, including but not limited to
              assets of retirement plans which are qualified under section
              401(a) of the Code (the instrument of trust creating any such
              qualified common, collective or group trust fund, to the extent of
              the Trust Fund's equitable share thereof, being adopted hereby).
              The Trustee shall have the power to hold all or a portion of the
              Trust Fund uninvested pending receipt of clear and proper
              investment directions or pending receipt of a contribution amount
              which is necessary to carry out an investment direction.

         3.3  Investment Options. At the direction of the Named Fiduciary, the
              Trustee shall establish one or more separate Investment Options
              within the Trust Fund. Investment Options shall be established by
              direct investment or through the medium of a bank, trust fund,
              insurance contract or regulated investment company, as the Named
              Fiduciary shall direct. Each Investment Option shall be held and
              administered as part of the Trust Fund, but shall be separately
              invested and accounted for on behalf of each Participant's Plan
              account. To the extent authorized by the Plan and conditioned on
              the Trustee's acceptance of such property pursuant to Section 1.1
              hereof, the Named Fiduciary may direct the Trustee to establish
              one or more Investment Options all or a portion of the assets of
              which shall be invested in qualifying employer securities within
              the meaning of section 407(d)(5) of ERISA ("Qualifying Employer
              Securities"). Any such direction shall be deemed to include a
              certification by the Named Fiduciary that the acquisition and
              holding of such Qualifying Employer Securities by the Plan does
              not constitute a prohibited transaction under section 406 of ERISA
              or section 4975 of the Code. The Employer shall be solely
              responsible for complying with any securities laws that may apply
              to Qualifying Employer Securities held in the Trust Fund.

         3.4  Participant Instructions. The Named Fiduciary's investment
              direction to the Trustee may represent the aggregate of investment
              instructions of Participants with respect to the assets in each
              Participant's Plan account. All references in this Trust Agreement
              to directions or instructions provided by the Named Fiduciary
              shall be deemed to include Participant instructions that are
              provided to the Named Fiduciary or its agent and delivered by the
              Named Fiduciary or its agent to the Trustee. The Named


                                       93



              Fiduciary shall have the duty to select and monitor all Investment
              Options or other investment media made available to Participants
              under the Plan. The Named Fiduciary or its agent shall ensure that
              all Participants who are entitled to direct the investment of
              assets in their Plan accounts previously received or receive a
              copy of all material describing such Investment Options that is
              required by law. If a Participant fails to direct the investment
              of assets in the Participant's Plan accounts as permitted by the
              Plan, the Named Fiduciary shall direct the Trustee as to the
              investment of such assets.

         3.5  Appointment of Investment Manager. The Named Fiduciary may appoint
              one or more investment managers, as defined in section 3(38) of
              ERISA ("Investment Manager") to manage, acquire and dispose of all
              or a portion of the Trust Fund or an Investment Option. The Named
              Fiduciary shall provide the Trustee with written notice of the
              appointment of each Investment Manager and of the termination of
              such appointment and direct the segregation of that portion of the
              Trust Fund to be managed by the Investment Manager. The Named
              Fiduciary also shall provide the Trustee with a copy of the
              investment management agreement and an acknowledgement by the
              Investment Manager that it is a fiduciary with respect to the Plan
              within the meaning of section 3(21)(A) of ERISA. The Trustee shall
              be entitled to rely on such documents until otherwise notified in
              writing by the Named Fiduciary. The Trustee shall invest and
              reinvest such portion of the Trust Fund under the management of
              the Investment Manager as directed by the Investment Manager. The
              Trustee shall be entitled to conclusively rely upon the valuation
              of any securities or other property held in any portion of the
              Trust Fund that is provided to it by such Investment Manager for
              all purposes under this Trust Agreement.

         3.6  Plan Loans. If provided in Article VIII of the Plan, and subject
              to the limitations set forth therein, the Trustee shall invest
              assets of the Trust Fund in loans to Participants or
              Beneficiaries. Any such direction shall be deemed to include a
              certification by the Named Fiduciary that such loan is in
              accordance with provisions of the Plan and ERISA and does not
              constitute a "prohibited transaction" under ERISA. The Trustee
              shall accept as collateral for each Participant loan only the
              appropriate amount of the Participant's Plan account designated by
              the Plan or established policies. The Trustee shall invest all
              loan repayments in accordance with the directions of the Named
              Fiduciary and shall make distributions of defaulted loans as
              directed by the Named Fiduciary.

         3.7  Investment and Insurance Contracts. In the event that insurance
              policies or contracts or investment contracts issued by a bank,
              insurance company or other financial or similar institution
              (including structured or synthetic investment contracts) are held
              in the Trust Fund at the direction of the Named Fiduciary or an
              Investment Manager ("Contracts"), the Trustee shall not be liable
              for the refusal or inability of any insurance company, bank or
              other financial institution to issue, change, pay proceeds or make
              payments due under any Contract; for the form, terms, genuineness,
              validity or sufficiency of any Contract; or for any delay in
              payment or proceeds due under any Contract. The Trustee shall not
              be responsible for the valuation of any Contract and the Trustee
              shall be entitled to conclusively rely upon such valuation
              provided by the issuer of the Contract for all purposes under this
              Trust Agreement. The Trustee shall not be responsible for
              evaluating or monitoring the financial condition or status of any
              financial institution or insurance company issuing any such
              Contract which the Named Fiduciary or an Investment Manager
              directs the Trustee to hold or to purchase with the Trust Fund.

         3.8  Trustee's Duty and Responsibility with Respect to the Trust Fund.
              The Trustee shall have no duty to question any action or direction
              of the Employer, the Named Fiduciary, an Investment Manager or a
              Participant (pursuant to the provisions of Section 6.3) or the
              failure of the Employer, the Named Fiduciary, an Investment
              Manager or a Participant to give directions, or to review the
              securities or other investments which are held pursuant to
              directions of the Employer, the Named Fiduciary, an Investment
              Manager or a Participant as to the investment, reinvestment,
              retention or disposition of any such assets. The Trustee shall not
              have any responsibility for diversification of such assets, for
              any loss to or depreciation of such assets resulting from the
              purchase, retention or sale of assets in accordance with the
              direction of the Employer, the Named Fiduciary, an Investment
              Manager or a Participant. The Trustee shall not be responsible for
              any investment action taken or omitted by the Trustee in
              accordance with any direction of the Employer, the Named
              Fiduciary, an Investment Manager or Participant; any investment
              inaction in the absence of an investment direction from the
              Employer, the Named Fiduciary, an Investment Manager or
              Participant; or any investment action taken by the Trustee
              pursuant to an order to purchase or sell securities placed by the
              Employer, the Named Fiduciary, an Investment Manager or
              Participant directly with a broker, dealer or issuer.


                                       94



         3.9  Knowledge of the Trustee. When the Trustee is subject to the
              direction of the Employer, the Named Fiduciary, or an Investment
              Manager in performing its duties under this Trust Agreement, the
              Trustee's responsibilities will be limited to certain ministerial
              duties with respect to the portion of the Trust Fund subject to
              such direction, which duties do not involve the exercise of any
              discretionary authority to manage or control Trust Fund assets and
              which duties will be performed in the normal course of business by
              employees of the Trustee, its affiliates or agents who are
              unfamiliar with investment management ("Ministerial Duties").
              Except as required by section 403(a)(1) of ERISA, the Trustee is
              not undertaking any duty or obligation, express or implied, to
              review, and will not be deemed to have reviewed, any transaction
              involving the investment of the Trust Fund which it is directed to
              perform by the Employer, the Named Fiduciary or an Investment
              Manager except to the extent necessary to perform these
              Ministerial Duties in accordance with such direction.

ARTICLE IV - OTHER MINISTERIAL DUTIES OF THE TRUSTEE

         4.1  Other Ministerial Duties of the Trustee. The Trustee is authorized
              and empowered with respect to the Trust Fund to perform the
              following Ministerial Duties necessary to effectuate the
              instructions and directions of the Named Fiduciary, the Plan
              Administrator, an Investment Manager or a Participant:

              a)   To make, execute, acknowledge and deliver any and all
                   documents of transfer and conveyance and any and all other
                   instruments that may be necessary or appropriate to carry out
                   the powers herein granted.

              b)   To register any investment held by it in the name of the
                   Trustee or in the name of any custodian or its nominee, with
                   or without words indicating that such securities are held in
                   a fiduciary capacity, but the books and records of the
                   Trustee shall at all times show that all such investments are
                   part of the Trust Fund.

              c)   To hold or to appoint an agent or custodian to hold any
                   property hereunder in bearer form or in its own name or the
                   name of its nominee and to deposit or arrange for the deposit
                   of any securities or other property in a securities
                   depository or clearing agency; provided, however, that the
                   Trustee may not serve as custodian or appoint or terminate a
                   custodian for any plan assets, as defined in ERISA and the
                   regulations thereunder, which are managed by an affiliate of
                   the Trustee. Any agent or custodian so appointed shall be
                   paid fees as mutually agreed upon by the Employer and the
                   agent or custodian and paid in the same manner as other
                   expenses of the Trust Fund. The Trustee shall not hold any
                   property or securities hereunder in the same account as any
                   individual property of the Trustee.

              d)   To retain custody of original executed documents evidencing
                   loans to Participants made after the effective date of this
                   Trust Agreement and, to the extent provided to the Trustee by
                   the Employer, original executed documents evidencing
                   outstanding loans to Participants made prior to the effective
                   date of this Trust Agreement.

              e)   To employ suitable agents, counsel, financial consultants,
                   valuation experts or other professionals (who may also be
                   agents, counsel, consultants or experts for the Employer or
                   the Named Fiduciary) and to pay their reasonable expenses and
                   compensation out of the Trust Fund.

              f)   To trade all securities held in the Trust Fund as soon as
                   possible after an order is received and processed by the
                   Trustee or its agent in accordance with directions of the
                   Employer, the Named Fiduciary or an Investment Manager,
                   taking into account any trade delays which may occur due to
                   stock market constraints or the liquidity of the security.

                   Each and all of the foregoing powers may be exercised without
                   a court order or approval.

         4.2  Valuation of Trust Fund. The Trustee, as of the Valuation Date set
              forth in the Plan and at such other time or times as is necessary
              or as the Trustee and the Named Fiduciary agree, shall determine
              the net worth of the assets of the Trust Fund. The valuation shall
              be based upon valuations provided by Investment Managers, trustees
              of common trust funds, sponsors of registered investment
              companies, records of securities exchanges or valuation services,
              market data providers or qualified appraisers. Notwithstanding the
              foregoing, the Trustee shall not be responsible for providing the
              value of any Contracts, as described in Section 3.7, or for any
              asset which is not liquid or not publicly traded, the value of
              which shall be provided by the Named Fiduciary. The Trustee may
              obtain the opinions of qualified appraisers, as necessary in the
              discretion of the Trustee, to determine the fair market value of


                                       95



              Qualifying Employer Securities, the fees of which appraiser shall,
              unless paid by the Employer, be paid from the Trust Fund.

         4.3  Trust Records. The Trustee shall keep accurate and detailed
              records of all receipts, investments, disbursements and other
              transactions required to be performed hereunder with respect to
              the Trust Fund. The Trustee agrees to treat as confidential all
              records and other information relative to the Trust Fund. The
              Trustee shall not disclose such records and other information to
              third parties except to the extent required by law or as requested
              in writing by the Employer. The Trustee agrees to permit the
              Employer to inspect the records of the Trust Fund maintained by
              the Trustee during regular business hours and to permit the
              Employer to audit the same upon the giving of reasonable notice to
              the Trustee. The Trustee further agrees that it will provide the
              Employer with information and records that the Employer may
              reasonably require in order to perform audits of such records.

         4.4  Confidentiality/Security of Records. Trustee and Employer agree to
              treat as confidential and use only in connection with this Trust
              Agreement all Plan data, records, computer programs and software,
              reports and other documents, which are furnished to the other
              under this Trust Agreement. Trustee and Employer will protect the
              security of such records and will not disclose such records or
              other information to third parties except as required by law or
              when requested to do so by the other; provided, however, that the
              Trustee and Employer may disclose such records or information to
              its agents in the course of performing its duties under this Trust
              Agreement or to take other reasonable actions required by the
              Employer with respect to the Plan.

         4.5  Accounting. Within 90 days after the close of the Plan's fiscal
              year or such other period as the Employer and the Trustee may
              agree, and within 90 days after the resignation or removal of the
              Trustee, as provided herein, the Trustee shall file with the
              Employer a written account setting forth all investments,
              receipts, disbursement and other transactions effected by it
              during such fiscal year or during the period from the close of the
              last fiscal year to the date of such resignation or removal.
              Unless the Employer files written objections to such account with
              the Trustee within 180 days after the filing of such account with
              the Employer, the accounting shall be deemed to be approved and
              the Trustee shall, to the maximum extent permitted by applicable
              law, be released and forever discharged from all liability for
              further accountability to the Employer for the accuracy of such
              accounting and for the propriety of all acts and the transactions
              of the Trustee reflected in such account. If written objections
              are specified and the matters in controversy cannot be settled
              between the Employer and the Trustee, the Trustee may apply for a
              judicial settlement of the account, the costs of such settlement
              being allowed as an expense of the Trust Fund. The only necessary
              party thereto in addition to the Trustee shall be the Employer.

         4.6  Distributions and Other Payments. As provided in the Plan, the
              Trustee shall make payment to such persons, including the
              Employer, the Trustee, the Named Fiduciary, the Plan recordkeeper
              and Participants, as the Named Fiduciary may direct from time to
              time. The Named Fiduciary shall be responsible for insuring that
              any distribution or other payment from the Trust Fund conforms to
              the provisions of the Plan and ERISA. Excluding those fees and
              expenses set forth in a separate fee schedule and the Plan's
              recordkeeping agreement, which may be paid from the Trust Fund if
              not paid directly by the Employer, the Named Fiduciary may direct
              the Trustee to pay fees or expenses relating to the administration
              of the Plan or Trust Fund by submitting to the Trustee all
              expenses to be charged to the Trust Fund. Each submission also
              shall include a certification executed by the Named Fiduciary that
              all such expenses are proper and reasonable. Notwithstanding any
              other provisions of this Trust Agreement, the Trustee may
              condition any distribution or other payment of Trust Fund assets
              upon receipt of satisfactory assurances that the approval of
              appropriate governmental agencies or other authorities has been
              secured and that all notice and other procedures required by
              applicable law have been satisfied. The Trustee shall be entitled
              to rely conclusively upon the Named Fiduciary's directions and
              shall not be liable for any distribution or other payment made in
              reliance upon the Named Fiduciary's directions.

         4.7  Limitation of Duties. The Trustee is a party to this Trust
              Agreement solely for the purposes set forth herein and neither the
              Trustee nor any of its officers, directors, employees or agents
              shall have any duties or obligations with respect to the Trust
              Fund, except as expressly set forth herein. To the extent not
              prohibited by ERISA, the Trustee shall not be responsible in any
              way for any action or omission of the Employer or the Named
              Fiduciary with respect to the performance of their respective
              duties and


                                       96



              obligations set forth in this Trust Agreement and in the Plan. The
              Trustee may rely upon such information, direction, action or
              inaction of the Employer or the Named Fiduciary as being proper
              under the Plan or the Trust Agreement and is not required to
              inquire into the propriety of any such information, direction,
              action or inaction.

ARTICLE V - DUTIES OF THE EMPLOYER

         5.1  Duties of the Employer. In addition to any duties of the Employer
              otherwise prescribed in this Trust Agreement, the Employer,
              individually or through the Named Fiduciary, shall be responsible
              for performing the following functions with respect to the Trust
              Fund:

              a)   Transmitting all Trust Fund contributions made by or on
                   behalf of each Participant to the Trustee at such times and
                   in such manner as is mutually agreed between the Employer and
                   the Trustee;

              b)   Providing the Trustee with such information and data relevant
                   to the Plan as is necessary for the Trustee to properly
                   perform its duties hereunder;

              c)   Providing to the Trustee, on a timely basis, a copy of the
                   Plan including all amendments and restatements, and a copy of
                   the Plan's determination letter from the Internal Revenue
                   Service;

              d)   Determining that the contributions made by or on the behalf
                   of each Participant are in accordance with any applicable
                   federal and state law and regulations;

              e)   Assuring that the Plan maintains qualified status under
                   section 401(a) of the Code at all times while any Plan assets
                   are held in the Trust Fund;

              f)   Providing the Trustee with the value of any Contracts;

              g)   Determining the suitability of and selecting every investment
                   offered as an option under the Plan, including but not
                   limited to Qualifying Employer Securities;

              h)   Determining that loans to Participants are made and
                   administered in accordance with the Plan, ERISA and the Code;

              i)   Determining that all payments, including distributions to
                   Participants, are reasonable, proper and in accordance with
                   the Plan, ERISA and the Code;

              j)   Determining whether any domestic relations order is
                   "qualified" in accordance with section 414(p) of the Code and
                   directing the Trustee as to how to effect any such order; and

              k)   Ensuring that a Participant who makes a required or voluntary
                   contribution has previously received or receives a copy of
                   the then current prospectus relating to the Investment
                   Option(s) to which such contribution is invested.

              l)   Meeting any U.S. securities laws that may apply with respect
                   to offering Qualifying Employer Securities as an investment
                   option under the Plan. This includes, but is not limited to,
                   registering such stock with the Securities and Exchange
                   Commission ("SEC") and other government agencies, filing
                   reports with the SEC and other government agencies, and
                   preparing prospectuses, proxy solicitations and other similar
                   materials.

ARTICLE VI - VOTING, TENDER AND SIMILAR RIGHTS

         6.1  General Provisions. Except to the extent otherwise provided in
              Section 6.3 of this Trust Agreement, the Named Fiduciary (or the
              Investment Manager with respect to assets under its management)
              shall direct the Trustee as to the manner in which it shall; (i)
              vote in person or by proxy, general or special, any securities
              held in the Trust Fund; (ii) exercise conversion privileges,
              subscription rights and other options; and (iii) participate in or
              dissent from reorganizations, tender offers or other changes in
              property rights.

         6.2  Receipt of Notices. Upon receipt, the Trustee shall transmit to
              the Named Fiduciary (or to the Investment Manager with the respect
              to assets under its management) all notices of conversion,
              redemption, tender, exchange, subscription, class action, claim in
              insolvency proceedings or other rights or powers relating to any
              investment in the Trust Fund, which notices are received by the
              Trustee from its agents or custodian, from issuers of securities
              and from the party (or its agents) extending such


                                       97



              rights. The Trustee shall have no obligation to determine the
              existence of any conversion, redemption, tender, exchange,
              subscription, class action, claim in insolvency proceedings or
              other right or power relating to any investments in the Trust
              Fund.

         6.3  Qualifying Employer Securities. If provided in Article V of the
              Plan, the Trustee shall exercise all voting or tender offer rights
              with respect to any Qualifying Employer Securities in the Trust
              Fund which are allocated to the Plan accounts of Participants in
              accordance with instructions from Participants. Each Participant
              shall be a named fiduciary within the meaning of section 403(a)(1)
              of ERISA for the purpose of directing the voting and tendering of
              Qualifying Employer Securities allocated to his Plan account. Each
              Participant may direct the Trustee, confidentially, how to vote or
              whether or not to tender the Qualifying Employer Securities
              representing shares allocated to his Plan account. Upon timely
              receipt of direction, the Trustee shall vote or tender all such
              shares of Qualifying Employer Securities as directed by the
              Participants. The Employer shall direct the Trustee as to voting
              of shares of Qualifying Employer Securities for which no
              Participant direction is received. The Trustee shall use
              reasonable procedures to inform Participants as to what action
              will be taken in the absence of such affirmative instructions. In
              the case of a tender offer or other right or option with respect
              to Qualifying Employer Securities, a Participant who does not
              issue valid directions to the Trustee to sell, offer to sell,
              exchange or otherwise dispose of such Qualifying Employer
              Securities shall be deemed to have directed the Trustee that such
              shares allocated to his Participant Account remain invested in
              Qualifying Employer Securities. The Employer shall provide the
              Trustee with all information and assistance that the Trustee may
              reasonably request in order for the Trustee to perform its duties
              hereunder.

              Notwithstanding the foregoing, the Trustee shall follow any
              directions of the Employer or Participants in the performance of
              these functions only to the extent that following such directions
              would not violate the provisions of ERISA.

ARTICLE VII - RESIGNATION OR REMOVAL OF TRUSTEE

         7.1  Resignation or Removal of Trustee. The Trustee may resign at any
              time upon 60 days' prior written notice to the Employer and the
              Employer may remove the Trustee at anytime upon 60 days' prior
              written notice to the Trustee. If mutually agreed upon between the
              parties, the 60 days' notice may be waived or reduced. Upon
              resignation or removal of the Trustee, the Employer shall appoint
              a successor trustee. Upon receipt by the Trustee of written
              acceptance of such appointment by the successor trustee, the
              Trustee shall transfer and pay over to the successor the Trust
              Fund and all records (or copies) pertaining thereto. The Trustee
              is authorized, however, to reserve such sum of money or property
              as it may deem advisable for payment of any liabilities
              constituting a charge against the Trust Fund or against the
              Trustee, with any balance of such reserve remaining after payment
              of all such items to be paid over to the successor trustee. Upon
              the transfer and payment over the assets of the Trust Fund and
              upon the settlement or approval of the account for the Trustee
              pursuant to Section 4.5 herein, the Trustee shall be released and
              discharged from any and all claims, demands, duties and
              obligations arising out of the Trust Fund and its management
              thereof.

         7.2  Employer's Failure to Appoint Successor Trustee. If the Employer
              has not appointed a successor trustee which has accepted such
              appointment as of the effective date of the Trustee's resignation
              or removal, the Trustee shall have the right to apply to a court
              of competent jurisdiction for the appointment of such successor or
              for a determination of its rights and obligations, the costs of
              such action, unless paid by the Employer, being paid from the
              Trust Fund.

ARTICLE VIII - AMENDMENT AND TERMINATION OF THE TRUST AGREEMENT

         8.1  Amendment. As provided in Article XIV of the Plan, and subject to
              the limitations set forth therein, the Plan and Trust Agreement
              may be amended at any time, in whole or in part by the Employer.
              No such amendment shall make it possible for any part of the
              corpus or income of the Trust Fund to be used or diverted to
              purposes other than the exclusive benefit of Participants and
              their Beneficiaries and defraying reasonable expenses of
              administering the Plan and trust created under this Trust
              Agreement.

         8.2  Termination. As provided in Article XIV of the Plan, and subject
              to the limitations set forth therein, this Trust Agreement and the
              trust created hereunder shall terminate upon the termination of
              the Plan, unless expressly extended by the Employer. The trust
              also shall terminate upon the dissolution or liquidation of the
              Employer where no successor has elected to continue the Plan and
              this Trust Agreement.


                                       98



              Termination of the trust shall be effected by distribution of all
              Trust Fund assets to the Participants or other persons entitled
              thereto pursuant to the direction of the Named Fiduciary, subject
              to the Trustee's right to reserve funds as provided in Section 7.1
              hereof. Upon the completion of such distribution, the Trustee
              shall be relieved from all further liability with respect to all
              amounts so paid.

ARTICLE IX - MISCELLANEOUS

         9.1  Written Instruction. Any direction of the Employer or the Named
              Fiduciary pursuant to any provisions of this Trust Agreement shall
              be set forth in writing from the Employer or the Named Fiduciary
              to the Trustee and the Trustee shall be fully protected in relying
              upon such written direction of the Employer or Named Fiduciary.
              For purposes of this Section 9.1, written instructions shall
              include the electronic or telephonic transmission of information
              or data as mutually agreed upon by the Trustee and the Employer.
              The Trustee shall be fully protected in relying upon any
              communication that the Trustee reasonably believes to have been
              given by the Employer or the Named Fiduciary or their duly
              authorized representatives, or any individual having apparent
              authority as such. The Trustee shall receive all directions or
              instructions in writing provided that the Trustee may accept oral
              directions for purchases or sales from the Named Fiduciary via
              telephone or other electronic procedures as agreed to between the
              Employer and the recordkeeper for the Plan.

         9.2  Indemnification and Hold Harmless. The Employer shall indemnify
              and hold harmless the Trustee (including its employees,
              representatives and agents) from and against any liability, loss
              or expense (including reasonable attorneys' fees) arising out of:
              (a) the Trustee's performance of its duties or responsibilities
              under this Trust Agreement, except to the extent that such loss or
              expense arises from the Trustee's own willful misconduct or gross
              negligence, (b) any action taken by the Trustee in accordance with
              the direction or instructions of the Employer, the Named
              Fiduciary, an Investment Manager, or a Participant or (c) any
              matter relating to the Plan for which the Trustee has no
              responsibility, control or liability under this Trust Agreement,
              and (d) the failure of the Named Fiduciary or the Employer
              (including its employees, representatives and agents) to perform
              its duties under this Trust Agreement or with respect to the Plan;
              provided, however, that this Section 9.2 shall not be construed to
              relieve the Trustee from responsibility or liability for any duty
              imposed upon directed trustees under section 403(a)(1) of ERISA.

         9.3  Trustee's Fees, Expenses and Taxes. The Trustee shall give 90 days
              advance written notice to the Employer whenever its fees are
              changed. Such fees, any taxes of any kind whatsoever which may be
              levied or assessed upon the Trust Fund, and any expenses incurred
              by the Trustee in the performance of its duties hereunder,
              including fees for legal services rendered to the Trustee, shall,
              unless paid by the Employer, be paid from the Trust Fund in the
              manner provided for in the Plan.

         9.4  Merger, Consolidation or Transfer. As provided in Article XIV of
              the Plan, and subject to the limitations set forth therein, in the
              event of the merger, consolidation or transfer of any portion of
              the Trust Fund to a trust fund held under any other plan, the
              Trustee shall dispose of all or part, as the case may be, of the
              Trust Fund, in accordance with the written directions of the Named
              Fiduciary, subject to the right of the Trustee to reserve funds as
              provided in Section 7.1 hereof.

         9.5  Conflict with the Plan. In the event of any conflict between the
              provisions of the Plan and this Trust Agreement with respect to
              the rights or obligations of the Trustee, the provisions of this
              Trust Agreement shall prevail.

         9.6  Severability. If any provision of this Trust Agreement is held
              invalid or unenforceable, such invalidity or unenforceability
              shall not affect any other provisions, and this Trust Agreement
              shall be construed and enforced as if such provision had not been
              included.

         9.7  Surviving Sections. Notwithstanding any Sections of this Trust
              Agreement to the contrary, Sections 7.1, 7.2, 8.2, 9.2 and 9.3
              shall survive the termination of this Trust Agreement.

         9.8  Law Governing. This Trust Agreement shall be administered,
              construed and enforced according to the laws of the state where
              the Trustee has its principal place of business and applicable
              federal law.

         9.9  Predecessor and Successor Trustees. The Trustee shall not be
              responsible and shall have no liability for the acts or omissions
              of any of its predecessors or successors.

                                       98



         9.10 Successors and Assigns. This Trust Agreement shall be binding upon
              the successors and assigns of the parties hereto.

         9.11 Amendments. As provided in Article XIV of the Plan and subject to
              the limitations set forth therein, the Plan and Trust Agreements
              may be amended at any time, in whole or in part, by the Employer.
              No amendment to the Plan or Trust Agreement shall place any
              greater burden on the Trustee without the Trustee's written
              consent.

         9.12 Multiple Trustees. In the event that there shall be 2 or more
              Trustees serving hereunder, any action taken or decision made by
              any such Trustees may be taken or made by a majority of them with
              the same effect as if all had joined therein, if there be more
              than 2, or unanimously if there be 2.


                                       100



                                                                                     
Internal Revenue Service                                                        Department of the Treasury
Plan Description: Prototype Non-standardized Profit Sharing Plan with CODA
FFN: 50336500003-001   Case: 200001532    EIN: 52-1309931                       Washington, DC 20224
Letter Serial No: K372181a


                    T ROWE PRICE TRUST CO                                       Contact Person: Ms. Arrington 50-00197

                    100 EAST PRATT STREET                                       Telephone Number: (202) 283-8811

                    BALTIMORE, MD 21202                                         In Reference to: T:EP:RA:T4

                                                                                Date: 02/27/2002



Dear Applicant:

In our opinion, the form of the plan identified above is acceptable under
section 401 of the Internal Revenue Code for use by employers for the benefit of
their employees. This opinion relates only to the acceptability of the form of
the plan under the Internal Revenue Code. It is not an opinion of the effect of
other Federal or local statutes.

You must furnish a copy of this letter to each employer who adopts this plan.
You are also required to send a copy of the approved form of the plan, any
approved amendments and related documents to Employee Plans Determinations in
Cincinnati at the address specified in section 9.11 of Rev. Proc. 2000-20,
2000-6 I.R.D. 553.

This letter considers the changes in qualifications requirements made by the
Uruguay Round Agreements Act (GATT), Pub. L. 103-465, the Small Business Job
Protection Act of 1996, Pub. L. 104-188, the Uniformed Services Employment and
Reemployment Rights Act of 1994, Pub. L. 103-553, the Taxpayer Relief Act of
1997, Pub. L. 105-34, the Internal Revenue Service Restructuring and Reform Act
of 1998, Pub. L. 105-206 and the Community Renewal Tax Relief Act of 2000, Pub.
L. 106-554. These laws are referred to collectively as GUST.

Our opinion on the acceptability of the form of the plan is not a ruling or
determination as to whether an employer's plan qualifies under Code section
401(a). However, an employer that adopts this plan may rely on this letter with
respect to the qualification of its plan under Code section 401(a), as provided
for in Announcement 2001-77, 2001-30 I.R.B. and outlined below. The terms of the
plan must be followed in operation.

Except as provided below, our opinion does not apply with respect to the
requirements of: (a) Code sections 401(a)(4), 401(a)(26), 401(a), 410(b) and
434(s). Our opinion does not apply for purposes of Code section 401(a)(10)(B)
and section 401(a)(16). If an employer ever maintained another qualified plan
for one or more employees who are covered by this plan. For this purpose, the
employer will not be considered to have maintained another plan merely because
the employer has maintained another defined contribution plan(s), provided such
other plan(s) has been terminated prior to the effective date of this plan and
no annual additions have been credited to the account of any participant under
such other plan(s) as of any date within the limitation year of this plan.
Likewise, if this plan is first effective on or after the effective date of the
repeal of Code section 415(e), the employer will not be considered to have
maintained another plan merely because the employer has maintained a defined
benefit plan(s), provided the defined benefit plan(s) has been terminated prior
to the effective date of this plan. Our opinion also does not apply for purposes
of Code section 401(a)(16) if, after December 31, 1985, the employer maintains a
welfare benefit fund defined in Code section 419(e), which provides
postretirement medical benefits allocated to separate accounts for key employees
as defined in Code section 419A(d)(3).

Our opinion applies with respect to the requirements of Code section 410(b) if
100 percent of all nonexcludable employees benefit under the plan. Employers
that elect a safe harbor allocation formula and a safe harbor compensation
definition can also rely on an opinion letter with respect to the
nondiscriminatory amounts requirement under sections 401(a)(4) and the
requirement of sections 401(k) and 401(m) (except where the plan is a safe
harbor plan under section 401(k)(12) that provides for the safe harbor
contribution to be made under another plan).

                                       101



T ROWE PRICE TRUST CO
FFN: 50336500003-001
Page 2



An employer that elects to continue to apply the pre-GUST family aggregation
rules in years beginning after December 31, 1996, or the combined plan limit of
section 415(e) in years beginning after December 31, 1999, will not be able to
rely on the opinion letter without a determination letter. The employer may
request a determination letter by filing an application with Employee Plans
Determinations on Form 5307, Application for Determination for Adopters of
Master or Prototype or Volume Submitter Plans.

If you, the matter or prototype sponsor, have any questions concerning the IRS
processing of this case, please call the above telephone number. This number is
only for use of the sponsor. Individual participants and/or adopting employers
with questions concerning the plan should contact the master or prototype
sponsor. The plan's adoption agreement must include the sponsor's address and
telephone number for inquiries by adopting employers.

If you write to the IRS regarding this plan, please provide your telephone
number and the most convenient time for us to call in case we need more
information. Whether you call or write, please refer to the Letter Serial Number
and File Folder Number shown in the heading of this letter.

You should keep this letter as a permanent record. Please notify us if you
modify or discontinue sponsorship of this plan.


                              Sincerely yours,


                              /s/ Paul T. Shultz

                              Director
                              Employee Plans Rulings & Agreements



                                       102



                          T. ROWE PRICE TRUST COMPANY

                             401(k) RETIREMENT PLAN
                               ADOPTION AGREEMENT

Name of Employer:_______________________________________________________________

Address:         _______________________________________________________________

                 _______________________________________________________________

Phone No:        _______________________________________________________________

Plan Contact:    _______________________________________________________________


                                       103



T. ROWE PRICE
TRUST COMPANY
401(k) RETIREMENT PLAN
ADOPTION AGREEMENT

This is the Adoption Agreement for defined contribution plan #001 of basic plan
document #03, which is a combined prototype section 401(k)/profit sharing
defined contribution plan. (Prior to the amendment and restatement of this plan
document and adoption agreement, the plan document was T. Rowe Price Trust
Company basic plan document #01.) This Adoption Agreement may be used only in
conjunction with basic plan document #03.

Note:  Before executing this Adoption Agreement, the Employer should consult
       with a tax adviser or attorney. This plan may not meet the Employer's
       requirements for continued plan qualification. In addition, failure to
       properly complete this Adoption Agreement may result in plan
       disqualification.

The Employer hereby establishes a section 401(k) plan and a trust for such plan
upon the respective terms and conditions contained in the section 401(k)
prototype plan #03 and the Trust Agreement to the plan and appoints as
Trustee(s) of such trust the person(s) who has(have) executed this Adoption
Agreement evidencing his/her/its/their acceptance of such appointment.

The Plan and Trust Agreement shall be supplemented and modified by the terms and
conditions contained in the Adoption Agreement and any supplements thereto and
shall be effective on the date(s) specified herein.

After the Employer has notified T. Rowe Price Trust Company it has adopted the
prototype plan, T. Rowe Price Trust Company will inform the Employer of any
amendments made to the prototype plan or the discontinuance or abandonment of
the prototype plan after T. Rowe Price Trust Company receives such notice and
until the earlier of (i) the date the Employer notifies T. Rowe Price Trust
Company it has ceased to use this prototype plan or (ii) the date the Plan's
asset records are not kept by T. Rowe Price Trust Company or any affiliate of T.
Rowe Price Trust Company.

1.     Plan Data.
       (Complete 1.1 or 1.2, and complete 1.3)

       1.1    New Plan.
              (a)    Name of Plan:

                     -----------------------------------------------------------
                     (Please print or type complete, legal name of the Plan)

              (b)    Effective Date of the Plan:
                                                --------------------------------
                                                (month/day/year)

              (c)    Plan Year End:
                                   ---------------------------------------------
                                   (month/day)

       1.2    If this is an amendment of existing plan, complete the following:
              (a)    Name of Existing Plan:

                     -----------------------------------------------------------
                     (Please print or type complete, legal name of the Plan)

              (b)    Initial Effective Date of Plan:

                     -----------------------------------------------------------

              (c)    Effective Date of Amended Plan (complete (1) or (2))

                     (1)    If the plan is being amended and restated to comply
                            with GUST (the 1994-1998 laws - GATT, USERRA, SBJPA,
                            TRA'97 and IRSRRA - that require plan amendments):

                            ----------------------------------------------------
                            Effective Date of Amendment (month/day/year)


                                       104



1.24   Employer Contribution Accounts. The portion of a Participant's Account
       consisting of his Employer Matching Contributions, Discretionary Profit
       Sharing Contributions, Qualified Nonelective Contributions, Qualified
       Matching Contributions, Safe Harbor Matching Contributions, Safe Harbor
       Nonelective Contributions and ACP Test Only Safe Harbor Matching
       Contributions subaccounts.

1.25   Entry Date. The Effective Date shall be the first Entry Date; thereafter,
       Entry Dates shall be the dates specified in the Adoption Agreement.

1.26   ERISA. The Employee Retirement Income Security Act of 1974, as amended.

1.27   Family Member. An Employee's spouse and lineal ascendants or descendants
       and the spouses of such lineal ascendants or descendants.

1.28   Five Percent Owner. Any person who owns (or is considered to own within
       the meaning of section 318 of the Code) more than 5% of the interests in
       the Employer.

1.29   Highly Compensated Employee. For Plan Years beginning after December 31,
       1996, the term Highly Compensated Employee means any Employee who during
       the Plan Year: (1) was a Five Percent Owner at any time during the Plan
       Year or the look-back year, or (2) for the look-back year had Section 415
       Compensation from the Employer in excess of $80,000 (adjusted at the same
       time and in the same manner as under section 415(d) of the Code, except
       that the base period is the calendar quarter ending September 30, 1996)
       and, if the Employer so elects in the Adoption Agreement, was in the
       top-paid group (i.e., top 20% of Employees ranked by compensation) for
       the look-back year.

       For this purpose, the Plan Year of the Plan for which a determination is
       being made is called a determination year and the preceding 12-month
       period is called a look-back year. If the Employer so elects in the
       Adoption Agreement, the look-back year shall be the calendar year
       beginning with or within the look-back year.

       The determination of who is a highly compensated former employee is based
       on the rules applicable to determining highly compensated employee status
       as in effect for that determination year, in accordance with section
       1.414(q)-1T, A-4 of the Temporary Income Tax Regulations and Notice
       97-45.

       In determining whether an Employee is a Highly Compensated Employee for
       years beginning in 1997, (1) the amendments to Code Section 414(q) stated
       above are treated as having been in effect for the 1996 Plan Year, and
       (2) if the Employer so elects in the Optional Supplement, the look-back
       year shall be the calendar year ending with or within the determination
       year.

       Effective for Plan Years beginning before January 1, 1997, or such later
       year than 1997 that the Employer elects in the Optional Supplement, if an
       Employee is, during a determination year or look-back year, a Family
       Member of either a Five Percent Owner who is an active or former Employee
       or a Highly Compensated Employee who is one of the ten most Highly
       Compensated Employees ranked on the basis of compensation paid by the
       Employer during such year, then the Family Member and Five Percent Owner
       or top ten Highly Compensated Employee shall be aggregated. In such case,
       the Family Member and Five Percent Owner or top ten Highly Compensated
       Employee shall be treated as a single Employee receiving compensation and
       Plan contributions or benefits equal to the sum of such compensation and
       contributions or benefits of the Family Member and Five Percent Owner or
       top ten Highly Compensated Employee.

1.30   Hour of Service.

       (a)    An Hour of Service shall mean and include each hour for which an
              Employee is compensated by the Employer, or is entitled to be so
              compensated, for services rendered by him to the Employer. These
              hours will be credited to the Employee for the computation period
              in which the duties are performed.

       (b)    An Hour of Service shall also mean and include each hour for which
              an Employee is compensated by the Employer, or is entitled to be
              so compensated, on account of a period of time during which no
              services are rendered by him to the Employer (regardless of
              whether the Employee shall have ceased to be an Employee) due to
              vacation, holiday, illness, incapacity (including disability),
              layoff, jury duty, military duty or leave of absence. No more than
              501 Hours of Service shall be credited pursuant to this subsection
              (b) on account of any single continuous period during which an
              Employee

                                      105


                                       105



              renders no services to the Employer (whether or not such period
              occurs in a single computation period). Hours under this Section
              will be calculated and credited pursuant to section 2530.200b-2 of
              the Department of Labor Regulations which is incorporated herein
              by this reference.

       (c)    An Hour of Service shall also mean and include each hour for which
              back pay, without regard to mitigation of damages, has been
              awarded or agreed to by the Employer. The same Hours of Service
              shall not be credited both under subsection (a) or subsection (b),
              whichever shall be applicable, and also under this subsection (c).
              The hours will be credited to the Employee 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 credited for employment with other
              members of an affiliated service group (under section 414(m) of
              the Code), a controlled group of corporations (under section
              414(b) of the Code), or a group of trades or businesses under
              common control (under section 414(c) of the Code), of which the
              adopting Employer is a member, and any other entity required to be
              aggregated with the Employer pursuant to section 414(o) of the
              Code and the regulations thereunder.

              Hours of Service will also be credited for any individual
              considered an Employee under section 414(n) or 414(o) of the Code,
              and regulations thereunder.

              Solely for purposes of determining whether a Break in Service for
              participation and vesting purposes has occurred in a computation
              period, an individual who is absent from work for maternity or
              paternity reasons shall receive credit for the Hours of Service
              which would otherwise have been credited to such individual but
              for such absence, or in any case in which such hours cannot be
              determined, eight Hours of Service per day of such absence. For
              purposes of this subsection, an absence from work for maternity or
              paternity reasons means an absence (i) by reason of the pregnancy
              of the individual, (ii) by reason of a birth of a child of the
              individual, (iii) by reason of the placement of a child with the
              individual in connection with the adoption of such child by such
              individual, or (iv) for purposes of caring for such child for a
              period beginning immediately following such birth or placement.
              The Hours of Service credited under this paragraph shall be
              credited only (i) in the computation period in which the absence
              begins if the crediting is necessary to prevent a Break in Service
              in that period, or (ii) in all other cases, in the following
              computation period.

              Hours of Service will be determined on the basis of the method
              selected in the Adoption Agreement.

1.31   Investment Options. Any regulated investment company registered under the
       Investment Company Act of 1940 the investment adviser of which is T. Rowe
       Price Associates, Inc. or any of its affiliates, any common trust funds
       or collective investment funds of the Sponsor qualified under sections
       401 and 501 of the Code, and any other funding vehicle (including, but
       not limited to, limited partnership interests which receive investment
       advice from T. Rowe Price Associates, Inc. or an affiliate) made
       available to the Plan by T. Rowe Price Trust Company which the Employer
       selects under the terms of the Plan.

1.32   Leased Employee. For Plan Years beginning on and after January 1, 1997, a
       Leased Employee is any person (other than an Employee of the recipient)
       who, pursuant to an agreement between the recipient and any other person
       ("leasing organization"), has performed services for the recipient (or
       for the recipient and related persons determined in accordance with
       section 414(n)(6) of the Code) on a substantially full time basis for a
       period of at least one year and such services are performed under primary
       direction and control of the recipient.

       Any Leased Employee shall be treated as an employee of the recipient
       employer. However, contributions or benefits provided by the leasing
       organization which are attributable to service performed for the
       recipient employer shall be treated as provided by the recipient
       employer. The preceding sentence shall not apply to any Leased Employee
       if Leased Employees do not constitute more than twenty percent of the
       employer's non-highly compensated force and, if such leased employee is
       covered by a money purchase pension plan providing: (a) a nonintegrated
       employer contribution rate of at least ten percent of compensation as
       defined in section 415(c)(3) of the Code, but including amounts
       contributed by the employer pursuant to a salary reduction agreement
       which are excludible from the employee's gross income under section 125,
       402(e)(3), 402(h)(1)(B) or 403(b) of the Code, and, for years beginning
       after December 31, 2000, elective amounts that are not included in gross
       income of the Employee


                                       106



              (iii)  Effective for Plan Years beginning before January 1, 1997,
                     for purposes of determining the Contribution Percentage of
                     a Participant who is a Five Percent Owner or one of the ten
                     most highly-paid Highly Compensated Employees, the
                     Contribution Percentage Amounts and Testing Compensation of
                     such Participant shall include the Contribution Percentage
                     Amounts and Testing Compensation for the Plan Year of
                     Family Members. Family Members, with respect to Highly
                     Compensated Employees, shall be disregarded as separate
                     Employees in determining the Contribution Percentage both
                     for Participants who are Non-Highly Compensated Employees
                     and for Participants who are Highly Compensated Employees.

              (iv)   For purposes of applying the ACP Test, Employee After-Tax
                     Contributions are considered to have been made in the Plan
                     Year in which contributed to the Trust. Qualified Matching
                     Contributions and Qualified Nonelective Contributions 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.

              (v)    The Employer shall maintain records sufficient to
                     demonstrate satisfaction of the ACP test and the amount of
                     Qualified Nonelective Contributions or Qualified Matching
                     Contributions, or both, used in such test.

              (vi)   If the Employer elects to apply section 410(b)(4)(B) of the
                     Code in determining whether the Plan meets the minimum
                     coverage requirements of section 410(b)(1) of the Code, the
                     Employer may, in determining whether the Plan satisfies the
                     ACP Test, exclude from consideration all eligible Employees
                     (other than Highly Compensated Employees) who have not met
                     the minimum age and service requirements of section
                     410(a)(1)(A) of the Code.

       (c)    Safe Harbor CODA.

              (i)    If the Employer has elected in the Adoption Agreement to
                     make Safe Harbor Matching Contributions or ACP Test Only
                     Safe Harbor Matching Contributions during a Plan Year, the
                     provisions of this Section 3.7 shall apply as follows:

                     (A)    If only Safe Harbor Matching Contributions (or ACP
                            Test Only Safe Harbor Matching Contributions) or
                            Elective Deferrals, or both, are allowed, the
                            provisions of this Section 3.7 shall not apply.

                     (B)    If Employee After-Tax Contributions are allowed or
                            if the Employer makes any type of matching
                            contribution other than Safe Harbor Matching
                            Contributions or ACP Test Only Safe Harbor Matching
                            Contributions under the Plan during a Plan Year, the
                            provisions of this Section 3.7 shall apply during
                            such Plan Year using Current Year Testing except
                            that the Employer may elect to disregard Safe Harbor
                            Matching Contributions and ACP Test Only Safe Harbor
                            Matching Contributions in performing such Current
                            Year Testing.

              (ii)   If the Employer suspends making Safe Harbor Matching
                     Contributions or ACP Test Only Safe Harbor Matching
                     Contributions during a Plan Year, the provisions of this
                     Section 3.7 shall apply using Current Year Testing.

              (iii)  If the Employer wants to maintain the option to amend the
                     Plan during a Plan Year to provide for Safe Harbor
                     Nonelective Contributions during such Plan Year, the ADP
                     and ACP Tests must be applied using Current Year Testing
                     during such Plan Year.

3.8    Multiple Use Test. If one or more Highly Compensated Employees
       participate in both a cash or deferred arrangement and a plan subject to
       the ACP Test maintained by the Employer and the sum of the ADP and ACP of
       those Highly Compensated Employees subject to either or both tests
       exceeds the Aggregate Limit, then the ADP or ACP, or both, of those
       Highly Compensated Employees who also participate in a cash or deferred
       arrangement will be reduced in the manner determined by the Plan
       Administrator so that the limit is not exceeded. The amount by which each
       Highly Compensated Employee's Deferral Percentage or Contribution
       Percentage Amount, or both, is reduced shall be treated as an Excess
       Aggregate Contribution. The ADP and ACP of the Highly Compensated
       Employees are determined after any corrections required to meet the ADP
       and ACP Tests. Impermissible multiple use does not occur if either the
       ADP or ACP of the Highly Compensated Employees does not exceed 1.25
       multiplied by the ADP and ACP of the Non-Highly Compensated Employees.


                                       107



3.9  Prevention or Cure of ADP Test Failures. The Plan Administrator may, in its
     sole discretion, use any one or a combination of the following methods to
     prevent or cure any ADP Test failure in accordance with section 401(k) of
     the Code and the regulations thereunder:

     (a)  The Plan Administrator may refuse to accept any or all prospective
          Elective Deferrals to be contributed by a Highly Compensated Employee.

     (b)  The Plan Administrator may distribute any or all Excess Contributions
          in accordance with the provisions of Section 3.11.

     (c)  The Employer may, in its sole discretion, elect to contribute a
          Qualified Nonelective Contribution in accordance with the provisions
          of Section 3.12.

     (d)  Subject to the requirements of Section 3.13, the Plan Administrator
          may, in its sole discretion, elect to treat Qualified Matching
          Contributions as if they were Elective Deferrals for purposes of the
          ADP test.

     (e)  The Plan Administrator may recharacterize Excess Contributions as
          Employee After-Tax Contributions in accordance with the provisions of
          Section 3.14.

     (f)  The Employer may, in its sole discretion, elect to make a Safe Harbor
          Nonelective Contribution in accordance with the provisions of Section
          3.15.

3.10 Prevention or Cure of ACP Test Failures. The Plan Administrator may, in its
     sole discretion, use any one or a combination of the following methods to
     prevent or cure any ACP Test failure in accordance with section 401(m) of
     the Code and the regulations thereunder:

     (a)  The Plan Administrator may refuse to accept any or all prospective
          Elective Deferrals or Employee After-Tax Contributions, or both, to be
          contributed by a Highly Compensated Employee.

     (b)  The Plan Administrator may elect to contribute a Qualified Matching
          Contribution in accordance with the provisions of Section 3.13.

     (c)  The Plan Administrator may forfeit, if forfeitable, or distribute, if
          not forfeitable, Excess Aggregate Contributions in accordance with
          Section 3.17.

     (d)  The Plan Administrator may elect to treat Qualified Nonelective
          Contributions or Elective Deferrals, or both, as if they were Matching
          Contributions in accordance with Sections 3.12 and 3.16, respectively,
          subject to the requirements of Section 3.1(e).

     (e)  If the Employer has elected the Safe Harbor CODA in the Adoption
          Agreement for a Plan Year, and if Employee After-Tax Contributions can
          be made to the Plan in such Plan Year, the Plan Administrator may, in
          its sole discretion, use any one or a combination of the following
          methods to prevent or cure any ACP Test failure:

     (i)  The Plan Administrator may refuse to accept any or all prospective
          Employee After-Tax Contributions to be contributed by a Highly
          Compensated Employee.

     (ii) The Plan Administrator may distribute Employee After-Tax Contributions
          (and any income or loss allocable thereto) that are Excess Aggregate
          Contributions.

3.11 Distribution of Excess Contributions to Cure ADP Test Failure.

     (a)  General Rule. Notwithstanding any other provision of this Plan, Excess
          Contributions for a Plan Year, plus any income and minus any loss
          allocable thereto, shall be distributed to Participants to whose
          Accounts such Excess Contributions were allocated for the preceding
          Plan Year no later than twelve months following the last day of such
          preceding Plan Year. For Plan Years beginning on and after January 1,
          1997, Excess Contributions are allocated to the Highly Compensated
          Employees with the largest amounts of Elective Deferrals and amounts
          treated as Elective Deferrals taken into account in calculating the
          ADP Test for the year in which the excess arose, beginning with the
          Highly Compensated Employee with the largest amount of such Elective
          Deferrals and amounts treated as Elective Deferrals and continuing in
          descending order until all Excess Contributions have been allocated.
          For purposes of the preceding sentence, the "largest amount" is
          determined after distribution of any Excess Elective Deferrals. If
          such excess amounts are distributed more than 2 1/2months after the
          last day of the Plan Year in which such excess amounts arose, a 10%
          excise tax on such amounts will be imposed on the Employer.

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     For Plan Years beginning before January 1, 1997, Excess Contributions of a
     Participant who is subject to the Family Member aggregation rules shall be
     allocated among the Family Members of such Participant in proportion to the
     Elective Deferrals (and amounts treated as Elective Deferrals) of each
     Family Member that is combined to determine the combined ADP of such
     Participant.

     (b)  Calculation of Income or Loss. The income or loss allocable to Excess
          Contributions allocated to each Participant is equal to the amount of
          income or loss allocable to the Participant's Elective Deferral
          subaccount (and, if applicable, the Qualified Nonelective Contribution
          subaccount or the Qualified Matching Contribution subaccount, or both)
          for the Plan Year multiplied by a fraction, the numerator of which is
          such Participant's Excess Contributions for the Plan Year and the
          denominator of which is the sum of (i) the Participant's account
          balance attributable to Elective Deferrals (and Qualified Nonelective
          Contributions or Qualified Matching Contributions, or both, if any of
          such contributions are included in the ADP Test) as of the beginning
          of the Plan Year, and (ii) Elective Deferrals (and Qualified
          Nonelective Contributions or Qualified Matching Contributions, or
          both, if any such contributions are included in the ADP Test).

     (c)  Method of Distribution. Excess Contributions shall be distributed from
          the Participant's Elective Deferral subaccount, Qualified Nonelective
          Contribution subaccount (if applicable) or Qualified Matching
          Contribution subaccount (if applicable), or any such subaccounts, in
          the manner determined by the Plan Administrator.

     (d)  Forfeiture of Certain Matching Contributions. Any Matching
          Contribution (whether or not vested) that was made on account of an
          Excess Contribution that has been distributed in accordance with this
          Section 3.11 shall be forfeited no later than twelve months after the
          close of the Plan Year in which such Excess Contribution occurred.

     (e)  Annual  Additions.  Excess  Contributions  shall be  treated as Annual
          Additions under the Plan.

3.12 Qualified Nonelective Contributions to Prevent or Cure ADP and/or ACP Test
     Failure. The Employer may, in its sole discretion, elect to contribute a
     Qualified Nonelective Contribution in any amount to prevent or cure any ADP
     Test and/or ACP Test failure for a Plan Year within twelve months after the
     close of the Plan Year to which such contribution relates. Qualified
     Nonelective Contributions for a Plan Year shall be allocated only to the
     Accounts of Participants who are Non-Highly Compensated Employees in one of
     the following methods selected by the Plan Administrator:

     (a)  In the ratio in which each such Non-Highly Compensated Employee's
          Compensation as defined in the Adoption Agreement for the Plan Year
          for which the Qualified Nonelective Contribution is being made bears
          to the total such Compensation of all such Non-Highly Compensated
          Employees for such Plan Year.

     (b)  Beginning with the Non-Highly Compensated Employee with the lowest
          such Compensation for such Plan Year and continuing in ascending order
          an amount no greater than the Maximum Permissible Amount, as defined
          in Section 6.1(j), reduced by any Annual Additions credited to such
          Non-Highly Compensated Employee under this Plan or any other plan of
          the Employer as if such amount of the Qualified Nonelective
          Contribution allocated to such Non-Highly Compensated Employee were
          included as an Annual Addition for such Plan Year.

3.13 Qualified Matching Contribution to Prevent or Cure ADP and/or ACP Test
     Failure. The Employer may, in its sole discretion, elect to contribute a
     Qualified Matching Contribution in any amount to prevent or cure any ADP
     Test and/or ACP Test failure for a Plan Year within twelve months after the
     close of the Plan Year to which such contribution relates. Qualified
     Matching Contributions for a Plan Year shall be allocated to the Accounts
     of Participants who are Non-Highly Compensated Employees and who would be
     eligible for an allocation of Matching Contributions in accordance with
     Section 3.3(a) in accordance with one of the following methods:

(a)  If the Employer makes Matching Contributions only on behalf of Participants
     who make Elective Deferrals, in the ratio in which the Elective Deferrals
     for such Plan Year of each Participant who is a Non-Highly Compensated
     Employee and who is eligible for a Matching Contribution for such Plan Year
     bear to the total Elective Deferrals of all such Non-Highly Compensated
     Employees for such Plan Year.

                                       109



     (b)   If the Employer makes Matching Contributions only on behalf of
           Participants who make Employee After-Tax Contributions, in the ratio
           in which the Employee After-Tax Contributions for such Plan Year of
           each Participant who is a Non-Highly Compensated Employee and who is
           eligible for a Matching Contribution for such Plan Year bear to the
           total Employee After-Tax Contributions of all such Non-Highly
           Compensated Employees for such Plan Year.

     (c)   If the Employer makes Matching Contributions on behalf of
           Participants who make Elective Deferrals or Employee After-Tax
           Contributions, or both, in the ratio in which the total Elective
           Deferrals and Employee After-Tax Contributions for such Plan Year of
           each Participant who is a Non-Highly Compensated Employee and is
           eligible for a Matching Contribution for such Plan Year bear to the
           total Elective Deferrals and Employee After-Tax Contributions of all
           such Non-Highly Compensated Employees for such Plan Year.

3.14 Recharacterization of Excess Contributions to Cure ADP Test Failure. If the
     Employer elects in the Adoption Agreement to allow Participants to make
     Employee After-Tax Contributions to the Plan, the Plan Administrator, in
     its sole discretion, may treat Excess Contributions allocated to a Highly
     Compensated Employee as an amount distributed to him or her and then
     contributed by him or her to the Plan as an Employee After-Tax
     Contribution. Recharacterized Excess Contributions will remain
     nonfor-feitable. Excess Contributions may not be recharacterized to the
     extent such amounts in combination with other Employee After-Tax
     Contributions made by that Employee would exceed any stated limit under the
     Plan on Employee After-Tax Contributions.

     Recharacterization must occur no later than 2 1/2months after the last day
     of the Plan Year in which such Excess Contributions arose and is deemed to
     occur no earlier than the date the last Highly Compensated Employee is
     informed in writing of the amount recharacterized and the consequences
     thereof. Recharacterized amounts will be taxable to the Participant for the
     Participant's taxable year in which the Participant would have received
     them in cash.

3.15 Safe Harbor Nonelective Contribution to Prevent ADP Test Failure. The
     Employer may elect to make a Safe Harbor Nonelective Contribution during a
     Plan Year as described in Notice 2000-3 and any superceding guidance.

3.16 Elective Deferrals to Cure ACP Test Failure. The Plan Administrator may, in
     its sole discretion, elect to treat Elective Deferrals as if they were
     Matching Contributions for a Plan Year as 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.

3.17 Forfeiture and/or Distribution of Excess Aggregate Contributions to Cure
     ACP Test Failure. Notwithstanding any other provision of this Plan, Excess
     Aggregate Contributions for a Plan Year, plus any income and minus any loss
     allocable thereto, may be forfeited, if forfeitable, or if not forfeitable,
     distributed, no later than twelve months after the close of the Plan Year
     to which such contributions relate, to Participants to whose Accounts such
     Excess Aggregate Contributions were allocated for such Plan Year. For Plan
     Years beginning on and after January 1, 1997, Excess Aggregate
     Contributions are allocated to the Highly Compensated Employees with the
     largest Contribution Percentage Amounts taken into account in calculating
     the ACP Test for the Plan Year in which the excess arose, beginning with
     the Highly Compensated Employee 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. For Plan Years beginning before
     January 1, 1997, Excess Aggregate Contributions of a Participant who is
     subject to the Family Member aggregation rules shall be allocated among the
     Family Members of such Participant in proportion to the Matching
     Contributions (or amounts treated as Matching Contributions) of each Family
     Member that is combined to determine the combined ACP of such Participant.
     Excess Aggregate Contributions shall be forfeited, if forfeitable, or
     distributed, if not forfeitable, in the manner determined by the Plan
     Administrator from the Participant's Matching Contribution subaccount
     and/or Qualified Matching Contribution subaccount (and/or, if applicable,
     the Participant's Qualified Nonelective Contribution subaccount or Elective
     Deferral subaccount, or both).

                                       110



       (b)    Direct Rollover. Notwithstanding any provision of the Plan to the
              contrary that would otherwise limit a distributee's election under
              this Article X, for all distributions made on or after January 1,
              1993, a distributee may elect, at the time and in the manner
              prescribed by the Plan Administrator, to have any portion of an
              eligible rollover distribution paid directly to an eligible
              retirement plan specified by the distributee in a direct rollover.
              For purposes of this subsection, the following definitions shall
              apply:

              (i)    An "eligible rollover distribution" is any distribution of
                     all or a portion of the balance to the credit of the
                     distributee, except that an eligible rollover distribution
                     does not include: any distribution that is one of a series
                     of substantially equal periodic payments (not less
                     frequently than annually) made for the life (or life
                     expectancy) of the distributee or the joint lives (or joint
                     life expectancies) of the distributee and the distributee's
                     designated Beneficiary, or for a specified period of ten
                     years or more; any distribution to the extent such
                     distribution is required under section 401(a)(9) of the
                     Code; any hardship distribution described in section
                     401(k)(2)(B)(i)(IV) of the Code received after December 31,
                     1998 (or, if elected by the Employer in the Optional
                     Supplement, December 31, 1999); and the portion of any
                     distribution that is not includible in gross income
                     (determined without regard to the exclusion for net
                     unrealized appreciation with respect to employer
                     securities).

              (ii)   An "eligible retirement plan" is an individual retirement
                     account described in section 408(a) of the Code, an
                     individual retirement annuity described in section 408(b)
                     of the Code, an annuity plan described in section 403(a) of
                     the Code, or a qualified trust described in section 401(a)
                     of the Code, that accepts the distributee's eligible
                     rollover distribution. However, in the case of an eligible
                     rollover distribution to the surviving spouse, an eligible
                     retirement plan is an individual retirement account or
                     individual retirement annuity.

              (iii)  A "distributee" includes an Employee or former Employee. In
                     addition, the Employee's or former Employee's surviving
                     spouse and the Employee's or former Employee's spouse or
                     former spouse who is the alternate payee under a qualified
                     domestic retirement order, as described section 414(p) of
                     the Code, are distributees with regard to the interest of
                     the spouse or former spouse.

              (iv)   A "direct rollover" is a payment by the Plan to the
                     eligible retirement plan specified by the distributee.

10.8   Missing Participants and Beneficiaries. If the Plan Administrator is
       unable to locate a Participant or Beneficiary entitled to vested benefits
       hereunder after making reasonable efforts to do so, the Plan
       Administrator may direct the Trustee to forfeit such vested benefits or
       direct the Trustee to continue to hold such Participant's or
       Beneficiary's Account. If the vested benefits are forfeited and if the
       Participant or Beneficiary subsequently is found or makes a claim for the
       benefits, the vested benefits will be reinstated in accordance with the
       provisions of Section 7.6.

10.9   Minimum Required Distributions. If the Participant's interest is to be
       distributed in other than a single sum before the required beginning
       date, the following minimum distribution rules, which shall be determined
       in accordance with proposed regulations under section 401(a)(9) of the
       Code, shall apply on or after the required beginning date notwithstanding
       any other provision of the Plan to the contrary:

       (a)    Definitions. For the purposes of this Section 10.9, the following
              definitions shall apply:

              (i)    Applicable Life Expectancy. The Life Expectancy (or joint
                     and last survivor expectancy) is calculated using the
                     attained age of the Participant (or Designated Beneficiary)
                     as of the Participant's (or Designated Beneficiary's)
                     birthday in the applicable calendar year reduced by one for
                     each calendar year which has elapsed since the date Life
                     Expectancy was first calculated. If Life Expectancy is
                     being recalculated, the Applicable Life Expectancy shall be
                     the Life Expectancy as so recalculated. The applicable
                     calendar year shall be the first Distribution Calendar
                     Year, and if Life Expectancy is being recalculated such
                     succeeding calendar year(s). If annuity payments commence
                     in accordance with Section 10.9(c) before the Required
                     Beginning Date, the Applicable Calendar Year is the year
                     such payments commence. If distribution is in the form of
                     an immediate annuity purchased after the Participant's
                     death with the Participant's remaining interest, the
                     Applicable Calendar Year is the year of purchase.


                                       111



              (ii)   Designated Beneficiary. The individual who is designated as
                     the Beneficiary under the Plan on the Required Beginning
                     Date in accordance with section 401(a)(9) of the Code and
                     the proposed regulations thereunder.

              (iii)  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 pursuant to Section
                     10.6 above.

              (iv)   Life Expectancy. Life Expectancy and joint and last
                     survivor expectancy are computed by use of the expected
                     return multiples in Tables V and VI of section 1.72-9 of
                     the Income Tax Regulations. Unless otherwise elected by the
                     Participant (or spouse, in the case of distributions
                     described in Section 10.6(b)(ii)) by the time distributions
                     are required to begin, Life Expectancies shall be
                     recalculated annually. Such election shall be irrevocable
                     as to the Participant (or spouse) and shall apply to all
                     subsequent years. The Life Expectancy of a non-spouse
                     Beneficiary may not be recalculated.

              (v)    Participant's Benefit.

                     (A)    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 or
                            forfeitures allocated to the Account balance as of
                            dates in the calendar year after the Valuation Date
                            and decreased by distributions made in the valuation
                            calendar year after the Valuation Date.

                     (B)    For purposes of subparagraph (A) above, if any
                            portion of the minimum distribution for the first
                            Distribution Calendar Year is made in the second
                            Distribution Calendar Year on or before the Required
                            Beginning Date, the amount of the minimum
                            distribution made in the second Distribution
                            Calendar Year shall be treated as if it had been
                            made in the immediately preceding Distribution
                            Calendar Year.

              (vi)   Required Beginning Date.

                     (A)    General rule. For calendar years beginning after
                            December 31, 1996, the Required Beginning Date of a
                            Participant is the first day of April of the
                            calendar year following the later of the calendar
                            year in which the Participant attains age 70 1/2or
                            retires, except that benefit distributions to a Five
                            Percent Owner must commence by the first day of
                            April of the calendar year following the calendar
                            year in which the Five Percent Owner attains age 70
                            1/2.

                     (B)    Transitional rules. Notwithstanding the foregoing:

                            (1)    Any Participant attaining age 70 1/2in 1996
                                   may elect by December 31, 1997, to defer
                                   distributions until the calendar year
                                   following the calendar year in which the
                                   Participant retires.

                            (2)    Any Participant attaining age 70 1/2in years
                                   prior to 1997 may elect to stop distributions
                                   and recommence distributions by the April 1
                                   of the calendar year following the calendar
                                   year in which the Participant retires. Unless
                                   the Employer elects otherwise in the Adoption
                                   Agreement, there is a new annuity starting
                                   date upon recommencement of distributions.

                     (C)    Once distributions have begun to a Five Percent
                            Owner under this subsection, they must continue to
                            be distributed even if the Participant ceases to be
                            a Five Percent Owner in a subsequent year.

       (b)    Individual Account.

              (i)    If a Participant's benefit is to be distributed over (1) a
                     period not extending beyond the life expectancy of the
                     Participant or the joint life and last survivor expectancy
                     of the Participant and the Participant's Designated
                     Beneficiary or (2) a period not extending beyond the life


                                       112



                     qualification is denied, but only if the application for
                     the qualification is made by the time prescribed by law for
                     filing the Employer's return for the taxable year in which
                     the Plan is adopted, or such later date as the Secretary of
                     the Treasury may prescribe; and

              (iii)  Contributions to the Trust are specifically conditioned on
                     their deductibility under the Code and, to the extent a
                     deduction is disallowed for any such contribution, such
                     amount (to the extent so disallowed) shall be returned to
                     the Employer within one year after the date of the
                     disallowance of the deduction.

15.2   Nonguarantee of Employment. Nothing contained in this Plan shall be
       construed as a contract of employment between the Employer and any
       Employee, or as a right of any Employee to be continued in the employment
       of the Employer, or as a limitation of the right of the Employer to
       discharge any of its Employees, with or without cause.

15.3   Rights to Trust Assets. No Employee, Participant or Beneficiary shall
       have any right to, or interest in, any assets of the trust upon
       termination of employment or otherwise, except as provided under the
       Plan. All payments of benefits under the Plan shall be made solely out of
       the assets of the Trust.

15.4   Nonalienation of Benefits. Except as provided under Article VIII of the
       Plan with respect to Plan loans, benefits payable under the Plan shall
       not be subject in any manner to anticipation, alienation, sale, transfer,
       assignment, pledge, encumbrance, charge, garnishment, execution or levy
       of any kind, voluntary or involuntary; provided, however, that the Plan
       Administrator shall not be precluded from complying with a qualified
       domestic relations order described in section 414(p) of the Code, or any
       domestic relations order entered before January 1, 1985. Any attempt to
       anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
       otherwise dispose of any right to benefits payable hereunder shall be
       void. The Trust shall not in any manner be liable for, or subject to, the
       debts, contracts, liabilities, engagements or torts of any person
       entitled to benefits hereunder.

15.5   Gender. The use of the masculine pronoun shall extend to and include the
       feminine gender, and the use of the feminine pronoun shall extend to and
       include the masculine gender, wherever appropriate; the use of the
       singular shall include the plural, and the use of the plural shall
       include the singular, wherever appropriate.

15.6   Titles and Headings. The titles or headings of the respective Articles
       and Sections are inserted merely for convenience and shall be given no
       legal effect.

15.7   Failure of Employer's Plan to Qualify. If the Employer's Plan fails to
       attain or retain qualification, such Plan will no longer participate in
       this prototype plan and will be considered an individually designed plan.

15.8   Compliance with Laws, Rules and Regulations. If any of the provisions of
       this Plan or of the Trust Agreement are at any time in any way
       inconsistent with any laws of the United States of America or the laws of
       any state if not preempted by ERISA, or any regulations of the Internal
       Revenue Service, U.S. Department of Labor, or any other Federal or state
       regulatory authority, in a manner that adversely affects the qualified
       status of the Plan under section 401(a) of the Code or the tax-exempt
       status of the Trust under section 501(a) of the Code, or may result in
       any civil penalties under ERISA or any other law, then the Employer, the
       Plan Administrator and the Trustee shall comply with the requirements of
       such laws or regulations, rather than with the provisions of the Plan and
       Trust which are inconsistent therewith. The Employer, the Plan
       Administrator and the Trustee shall incur no liability for following such
       laws, rules or regulations.

15.9   Military Service. Notwithstanding any 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 section 414(u) of the Code.


                                       113



EGTRRA AMENDMENT TO THE
T. ROWE PRICE TRUST COMPANY
PROTOTYPE 401(k) RETIREMENT PLAN

PREAMBLE

     1.   Adoption and effective date of amendment. This amendment of the T.
          Rowe Price Trust Company Prototype 401(k) Retirement Plan basic plan
          document #03 ("plan") is adopted to reflect certain provisions of the
          Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA").
          This amendment is intended as good faith compliance with the
          requirements of EGTRRA and is to be construed in accordance with
          EGTRRA and guidance issued thereunder. Except as otherwise provided,
          this amendment shall be effective as of the first day of the first
          plan year beginning after December 31, 2001, but shall not apply to
          taxable, plan or limitation years beginning after December 31, 2010.

     2.   Supersession of inconsistent provisions. This amendment shall
          supersede the provisions of the plan to the extent those provisions
          are inconsistent with the provisions of this amendment.

ARTICLE I - PLAN LOANS FOR OWNER-EMPLOYEES AND SHAREHOLDER EMPLOYEES

     Effective for plan loans made after December 31, 2001, plan provisions
     prohibiting loans to any owner-employee or shareholder-employee shall cease
     to apply.

ARTICLE II - LIMITATIONS ON CONTRIBUTIONS

     2.1. Effective date. This article shall be effective for limitation years
          beginning after December 31, 2001.

     2.2. Maximum annual addition. Except to the extent permitted under article
          IX of this amendment and section 414(v) of the Code, if applicable,
          the annual addition that may be contributed or allocated to a
          participant's account under the plan for any limitation year shall not
          exceed the lesser of:

          (a)  $40,000, as adjusted for increases in the cost-of-living under
               section 415(d) of the Code, or

          (b)  100 percent of the participant's compensation, within the meaning
               of section 415(c)(3) of the Code, for the limitation year.

          The compensation limit referred to in (b) shall not apply to any
          contribution for medical benefits after separation from service
          (within the meaning of section 401(h) or section 419A(f)(2) of the
          Code) which is otherwise treated as an annual addition.

ARTICLE III - INCREASE IN COMPENSATION LIMIT

     The annual compensation of each participant taken into account in
     determining allocations for any plan year beginning after December 31,
     2001, shall not exceed $200,000, as adjusted for cost-of-living increases
     in accordance with section 401(a)(17)(B) of the Code. 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.

ARTICLE IV - MODIFICATION OF TOP-HEAVY RULES

     4.1. Effective date. This article shall apply for purposes of determining
          whether the plan is a top-heavy plan under section 416(g) of the Code
          for plan years beginning after December 31, 2001, and whether the plan
          satisfies the minimum benefits requirements of section 416(c) of the
          Code for such years. This section amends Article XII of the plan.

     4.2. 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 section 416(i)(1) of the Code 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 section
               415(c)(3)

                                       114

EX-10.(U)

                                                                  Exhibit 10.(u)


                              AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT

         This  AMENDED  AND  RESTATED   LOAN  AND   SECURITY   AGREEMENT   (this
"Agreement")  dated  as of  July  24,  2002,  between  SILICON  VALLEY  BANK,  a
California  chartered  bank, with its principal place of business at 3003 Tasman
Drive,  Santa Clara,  California 95054 and with a loan production office located
at One  Newton  Executive  Park,  Suite 200,  2221  Washington  Street,  Newton,
Massachusetts  02462,  doing  business  under  the name  "Silicon  Valley  East"
("Bank")  and LTX  CORPORATION,  a  Massachusetts  corporation  with  its  chief
executive   office  located  at  LTX  Park  at  University   Avenue,   Westwood,
Massachusetts 02090 ("Borrower"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:

         1      ACCOUNTING AND OTHER TERMS

         Accounting  terms not  defined  in this  Agreement  shall be  construed
following GAAP. Calculations and determinations must be made following GAAP. The
term  "financial  statements"  includes  the  notes  and  schedules.  The  terms
"including"  and  "includes"   always  mean  "including  (or  includes)  without
limitation," in this or any Loan Document.  Capitalized  terms in this Agreement
shall have the meanings set forth in Section 13.

         2      LOAN AND TERMS OF PAYMENT

         2.1    Promise to Pay.  Borrower hereby unconditionally promises to pay
Bank the unpaid  principal  amount of all Credit  Extensions and interest on the
unpaid principal  amount of the Credit  Extensions as and when due in accordance
with this Agreement.

         2.1.1  Revolving Advances.

         (a)    Availability.  Bank shall make  Advances not  exceeding  (i) the
Committed  Revolving  Line minus (ii) the amount of all  outstanding  Letters of
Credit (including drawn but unreimbursed Letters of Credit),  minus (iii) the FX
Reserve, and minus (iv) the aggregate  outstanding  Advances hereunder.  Amounts
borrowed under this Section may be repaid and reborrowed during the term of this
Agreement.

         (b)    Borrowing Procedure.  To obtain an Advance, Borrower must notify
Bank by facsimile or telephone by 3:00 p.m. Eastern time on the Business Day the
Advance is to be made.  If such  notification  is by  telephone,  Borrower  must
promptly   confirm  the   notification   by   delivering  to  Bank  a  completed
Payment/Advance  Form in the form  attached  as  Exhibit  B. Bank  shall  credit
Advances  to  Borrower's  deposit  account.  Bank may make  Advances  under this
Agreement  based  on  instructions  from  a  Responsible  Officer  or his or her
designee  or  without  instructions  if  the  Advances  are  necessary  to  meet
Obligations  which have become due. Bank may rely on any telephone  notice given
by a person whom Bank  believes is a Responsible  Officer or designee.  Borrower
shall indemnify Bank for any loss Bank suffers due to such reliance.

         (c)    Termination;  Repayment. The Committed Revolving Line terminates
on the Revolving  Maturity Date,  when the principal  amount of all Advances and
the unpaid interest thereon, shall be immediately due and payable.

         2.1.2  Letters of Credit.

         (a)    Bank shall issue or have issued Letters of Credit for Borrower's
account  not  exceeding  (i)  the  Committed   Revolving  Line  minus  (ii)  the
outstanding  principal  balance of any  Advances,  minus (iii) the amount of all
Letters of Credit (including drawn but unreimbursed Letters of Credit),  plus an
amount equal to any Letter of Credit  Reserves.  The face amount of  outstanding
Letters of Credit  (including drawn but  unreimbursed  Letters of Credit and any
Letter of Credit Reserve) may not exceed  $10,000,000.00.  Each Letter of Credit
shall have an expiry  date no later than 180 days after the  Revolving  Maturity
Date provided  Borrower's  Letter of Credit  reimbursement  obligation  shall be
secured  by cash on terms  acceptable  to Bank on and  after  (i) the  Revolving
Maturity Date if the term of this Agreement is not extended by Bank, or (ii) the
occurrence of an Event of Default hereunder.  All Letters of Credit shall be, in
form and  substance,  acceptable  to Bank in its sole  discretion  and  shall be
subject to the terms and conditions of



Bank's form of standard  Application  and Letter of Credit  Agreement.  Borrower
agrees to execute any further  documentation  in connection  with the Letters of
Credit as Bank may reasonably request.

         (b)    The  obligation of Borrower to  immediately  reimburse  Bank for
drawings  made under  Letters of Credit  shall be  absolute,  unconditional  and
irrevocable,  and shall be performed  strictly in  accordance  with the terms of
this Agreement and such Letters of Credit,  under all circumstances  whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.

         (c)    Borrower may request that Bank issue a Letter of Credit  payable
in a currency other than United States Dollars.  If a demand for payment is made
under any such  Letter of Credit,  Bank shall treat such demand as an Advance to
Borrower of the  equivalent of the amount thereof (plus cable charges) in United
States  currency  at the then  prevailing  rate of  exchange  in San  Francisco,
California,  for sales of that other  currency for cable transfer to the country
of which it is the currency.

         (d)    Upon the issuance of any letter of credit  payable in a currency
other than United  States  Dollars,  Bank shall create a reserve (the "Letter of
Credit  Reserve")  under the  Committed  Revolving  Line for  letters  of credit
against  fluctuations  in currency  exchange  rates,  in an amount  equal to ten
percent  (10%) of the face amount of such  letter of credit.  The amount of such
reserve may be amended by Bank from time to time to account for  fluctuations in
the exchange rate. The availability of funds under the Committed  Revolving Line
shall be  reduced by the amount of such  reserve  for so long as such  letter of
credit remains outstanding.

         2.1.3  Foreign Exchange  Sublimit.  If there is availability  under the
Committed  Revolving Line, then Borrower may enter in foreign  exchange  forward
contracts with the Bank under which Borrower commits to purchase from or sell to
Bank a set  amount of  foreign  currency  more than one  business  day after the
contract  date (the "FX  Forward  Contract").  Bank shall  subtract  10% of each
outstanding FX Forward  Contract from the foreign  exchange  sublimit which is a
maximum of $5,000,000 (the "FX Reserve").  The total FX Forward Contracts at any
one  time may not  exceed  10  times  the  amount  of the FX  Reserve.  Bank may
terminate the FX Forward Contracts if an Event of Default occurs.

         2.1.4  Term Loan.

         (a)    Bank shall  advance,  on behalf of Borrower,  an amount equal to
the Term Loan, on or before ten (10) days from the Closing Date.

         (b)    Borrower shall pay (a)  forty-eight  (48) equal  installments of
principal  each in the  amount  of  $104,166.67  plus (b)  monthly  payments  of
interest  (the "Term Loan  Payment").  Each Term Loan  Payment is payable on the
Payment  Date of each month during the term of the Term Loan.  Borrower's  final
Term Loan Payment, due on Term Loan Maturity Date, shall include all outstanding
Term Loan principal and accrued interest.

         2.1.5  Undisbursed Credit Extensions. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if there has been a
material  adverse  change  in  the  general  affairs,  management,   results  of
operation,  condition  (financial  or  otherwise)  or the prospects of Borrower,
whether or not arising from transactions in the ordinary course of business,  or
there has been any material  adverse  deviation by Borrower from the most recent
business  plan of  Borrower  presented  to and  accepted  by Bank  prior  to the
execution of this Agreement.

         2.2    Interest Rate; Payments.

         (a)    Interest  Rate.  The principal  amounts  outstanding  hereunder,
including all amounts  outstanding  under the Committed  Revolving  Line and the
Term Loan,  shall accrue  interest at a per annum rate equal to the Bank's Prime
Rate.  After an Event of  Default,  Obligations  shall  bear  interest  at three
percent (3.0%) above the rate effective immediately before the Event of Default.
The applicable interest rate hereunder shall increase or decrease when the Prime
Rate changes. Interest is computed on the basis of a 360 day year for the actual
number of days elapsed.

                                       2




         (b)    Payments. Interest is payable on the Payment Date of each month.
Bank may debit any of Borrower's deposit accounts including Account Number
__________ for principal and interest payments or any amounts Borrower owes
Bank. Bank shall promptly notify Borrower when it debits Borrower's accounts.
These debits are not a set-off. Payments received after 12:00 noon Eastern time
are considered received at the opening of business on the next Business Day.
When a payment is due on a day that is not a Business Day, the payment is due
the next Business Day and additional fees or interest, as applicable, shall
continue to accrue.

         2.3    Fees. Borrower shall pay to Bank:


         (a)    Revolving Facility Fee. A fully earned, non-refundable facility
fee of $70,312.00 due on the Closing Date;


         (b)    Letter of Credit Fee. The Borrower shall pay the Bank's
customary fees and expenses for the issuance of Letters of Credit, including,
without limitation, a Letter of Credit Fee of forty basis points (0.40%) per
annum of the face amount of each Letter of Credit issued, upon the issuance or
renewal of such Letter of Credit by the Bank; and

         (c)    Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.

         3      CONDITIONS OF LOANS

         3.1    Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

         (a)    this Agreement;

         (b)    a certificate of the Clerk of Borrower with respect to articles,
bylaws, incumbency and resolutions authorizing the execution and delivery of
this Agreement;

         (c)    payment of the fees and Bank Expenses then due specified in
Section 2.4 hereof;

         (d)    Certificate of Good Standing/Legal Existence; and

         (e)    such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.

         3.2    Conditions Precedent to all Credit Extensions.  Bank's
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:

         (a)    timely receipt of any Payment/Advance Form; and

         (b)    the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true.

         4      CREATION OF SECURITY INTEREST

         4.1    Grant of Security Interest. Borrower hereby grants Bank, to
secure the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a


                                       3



continuing  security  interest  in, and  pledges  and  assigns to the Bank,  the
Collateral,  wherever  located,  whether  now  owned or  hereafter  acquired  or
arising, and all proceeds and products thereof. Borrower warrants and represents
that the security  interest  granted herein shall be a first  priority  security
interest  in the  Collateral.  Bank may  place a "hold" on any  deposit  account
pledged as Collateral.

Except as noted on the Perfection  Certificate,  Borrower is not a party to, nor
is bound by, any license or other  agreement  with respect to which the Borrower
is the licensee that prohibits or otherwise  restricts  Borrower from granting a
security  interest in  Borrower's  interest in such  license or agreement or any
other property.  Without prior consent from Bank, Borrower shall not enter into,
or become bound by, any such license or agreement which is reasonably  likely to
have a material impact on Borrower's business or financial  condition.  Borrower
shall take such steps as Bank  requests  to obtain the consent of, or waiver by,
any  person  whose  consent  or waiver is  necessary  for all such  licenses  or
contract  rights  to be  deemed  "Collateral"  and for  Bank to have a  security
interest in it that might otherwise be restricted or prohibited by law or by the
terms of any such license or agreement,  whether now existing or entered into in
the future.

Borrower  agrees that any  disposition  of the  Collateral  in violation of this
Agreement,  by  either  the  Borrower  or any other  Person,  shall be deemed to
violate the rights of the Bank under the Code. If the  Agreement is  terminated,
Bank's  lien and  security  interest  in the  Collateral  shall  continue  until
Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire
a commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower  of the brief  details  thereof and grant to Bank in such  writing a
security  interest  therein and in the proceeds  thereof,  all upon the terms of
this  Agreement,  with such writing to be in form and substance  satisfactory to
Bank.

         5 REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants as follows:

         5.1 Due Organization and Authorization. Borrower and each Subsidiary is
duly  existing and in good  standing in its state of formation and qualified and
licensed  to do  business  in, and in good  standing  in, any state in which the
conduct  of its  business  or its  ownership  of  property  requires  that it be
qualified  except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. In connection with this Agreement, the Borrower
delivered  to the  Bank  a  certificate  signed  by the  Borrower  and  entitled
"Perfection Certificate". The Borrower represents and warrants to the Bank that:
(a)  the  Borrower's  exact  legal  name  is that  indicated  on the  Perfection
Certificate  and on the  signature  page  hereof;  and  (b) the  Borrower  is an
organization of the type, and is organized in the jurisdiction, set forth in the
Perfection Certificate; and (c) the Perfection Certificate accurately sets forth
the Borrower's  organizational  identification  number or accurately states that
the Borrower has none; and (d) the Perfection  Certificate accurately sets forth
the  Borrower's  place of business,  or, if more than one,  its chief  executive
office as well as the Borrower's mailing address if different, and (e) all other
information set forth on the Perfection  Certificate  pertaining to the Borrower
is accurate and complete.  If the Borrower  does not now have an  organizational
identification  number,  but later obtains one,  Borrower shall forthwith notify
the Bank of such organizational identification number.

         The execution, delivery and performance of the Loan Documents have been
duly authorized,  and do not conflict with Borrower's  organizational documents,
nor  constitute  an event of  default  under  any  material  agreement  by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default  could  reasonably be expected to cause a
Material Adverse Change.

         5.2  Collateral.  Borrower  has good title to the  Collateral,  free of
Liens except  Permitted Liens.  Borrower has no deposit account,  other than the
deposit  accounts  with Bank and deposit  accounts  described in the  Perfection
Certificate delivered to the Bank in connection herewith.  The Accounts are bona
fide,  existing  obligations,  and the service or property has been performed or
delivered  to the  account  debtor or its agent for  immediate  shipment  to and
unconditional  acceptance by the account  debtor.  The  Collateral is not in the
possession of any third party bailee (such as a warehouse);  provided,  however,
Borrower may keep up to $15,000,000  of Inventory with a third party bailee.  In
the event that  Borrower,  after the date hereof,  intends to store or otherwise
deliver any portion of the  Collateral  to a bailee,  then  Borrower  will first
receive the written consent of Bank and such bailee must  acknowledge in writing
that


                                       4


the bailee is holding such  Collateral for the benefit of Bank. All Inventory is
in all material  respects of good and  marketable  quality,  free from  material
defects.

         5.3 Litigation.  Except as shown in the Perfection  Certificate,  there
are no  actions  or  proceedings  pending  or, to the  knowledge  of  Borrower's
Responsible  Officers,  threatened by or against  Borrower or any  Subsidiary in
which an adverse  decision  could  reasonably  be  expected  to cause a Material
Adverse Change.

         5.4 No Material  Deviation in Financial  Statements.  All  consolidated
financial  statements for Borrower and any  Subsidiary  delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's  consolidated results of operations.  There has not been any material
deterioration in Borrower's  consolidated  financial condition since the date of
the most recent financial statements submitted to Bank.

         5.5 Solvency. Borrower is able to pay its debts (including trade debts)
as they mature.

         5.6 Regulatory Compliance. Borrower is not an "investment company" or a
company  "controlled"  by an "investment  company" under the Investment  Company
Act.  Borrower is not engaged as one of its  important  activities  in extending
credit for margin stock (under  Regulations T and U of the Federal Reserve Board
of Governors).  Borrower has complied in all material  respects with the Federal
Fair Labor  Standards  Act.  Borrower has not violated any laws,  ordinances  or
rules,  the violation of which could  reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's  properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous  substance  other than legally.  Borrower and each  Subsidiary has
timely filed all required tax returns and paid,  or made  adequate  provision to
pay,  all  material  taxes,  except  those  being  contested  in good faith with
adequate  reserves  under GAAP.  Borrower and each  Subsidiary  has obtained all
consents,  approvals and  authorizations  of, made all  declarations  or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as  currently  conducted  except where the failure to make
such declarations,  notices or filings would not reasonably be expected to cause
a Material Adverse Change.

         5.7 Subsidiaries.   Except as disclosed in the Perfection  Certificate,
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.

         5.8 Full  Disclosure.  No  written  representation,  warranty  or other
statement  of Borrower in any  certificate  or written  statement  given to Bank
contains any untrue  statement  of a material  fact or omits to state a material
fact  necessary  to  make  the  statements  contained  in  the  certificates  or
statements not misleading.

         6   AFFIRMATIVE COVENANTS

         Borrower shall do all of the following:

         6.1 Government  Compliance.   Borrower  shall  maintain  its  and  all
Subsidiaries' legal existence and good standing in its jurisdiction of formation
and  maintain  qualification  in each  jurisdiction  in which the  failure to so
qualify  would  reasonably  be  expected  to have a material  adverse  effect on
Borrower's  business  or  operations.  borrower  shall  comply,  and  have  each
Subsidiary  comply,  with all laws,  ordinances  and  regulations to which it is
subject,  noncompliance  with  which  could have a  material  adverse  effect on
Borrower's  business or  operations  or be expected to cause a Material  Adverse
Change.

         6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

             (a) Borrower shall deliver to Bank:  (i) as soon as available,  but
no later than forty five (45) days after the last day of each quarter, a company
prepared  consolidated  balance sheet and income statement  covering  Borrower's
consolidated  operations  during the period,  in a form  acceptable  to Bank and
certified by a Responsible Officer: (ii) as soon as available, but no later than
ninety (90) days after the end of Borrower's fiscal year,  audited  consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on


                                       5



the financial statements from an independent certified public accounting firm
acceptable to Bank; (iii) within five (5) days of filing, copies of all
statements, reports and notices made available to Borrower's security holders or
to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; (iv) a prompt report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of Five Hundred
Thousand Dollars ($500,000.00) or more; and (v) budgets, sales projections,
operating plans or other financial information Bank requests.

          (b) Together with the quarterly and annual financial statements to be
     delivered hereunder, Borrower shall deliver to Bank a Compliance
     Certificate signed by a Responsible Officer in the form of Exhibit C.

     6.3 Inventory. Borrower shall keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its account debtors shall follow Borrower's customary practices as they
exist at the Closing Date.

     6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments (other
than taxes and assessments which Borrower is contesting in good faith, with
adequate reserves maintained in accordance with GAAP) and will deliver to Bank,
on demand, appropriate certificates attesting to such payments.

     6.5 Insurance. Borrower shall keep its business and the Collateral insured
for risks and in amounts, standard for Borrower's industry, and as Bank may
reasonably request in Bank's reasonable discretion. Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender's loss payable endorsement showing Bank as
an additional loss payee and all liability policies shall show the Bank as an
additional insured and all policies shall provide that the insurer must give
Bank at least twenty (20) days notice before canceling its policy. At Bank's
request, Borrower shall deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy shall, at Bank's option, be
payable to Bank on account of the Obligations. If Borrower fails to obtain
insurance as required under Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons and the Bank, Bank may make all or
part of such payment or obtain such insurance policies required in Section 6.5,
and take any action under the policies Bank deems prudent.

     6.6 Operating Account. Borrower shall have an operating account with Bank.


     6.7 Financial Covenants. Borrower shall maintain as of the last day of each
quarter:


          (a) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at
     least 1.50 to 1.0.

          (b) Tangible Net Worth. A Tangible Net Worth of at least (i) Four
     Hundred Million Dollars ($400,000,000.00) plus (ii) seventy five percent
     (75%) of the sum of (A) the Borrower's net income earned, as determined in
     accordance with GAAP, consistently applied, for each quarter and (B) all
     net proceeds received by the Borrower as the result of any (1) issuance of
     equity by the Borrower or (2) additional Subordinated Debt incurred by the
     Borrower.

     6.8 Further Assurances. Borrower shall execute any further instruments and
take further action as Bank reasonably requests to perfect or continue Bank's
security interest in the Collateral or to effect the purposes of this Agreement.

7    NEGATIVE COVENANTS

     Borrower shall not do any of the following without the Bank's prior written
consent which shall not be unreasonably withheld.

     7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the


                                       6



ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.


     7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto,
or have a material change in its senior management. Borrower shall not, without
at least thirty (30) days prior written notice to Bank: (i) relocate its chief
executive office, or add any new offices or business locations (unless such new
offices or business locations contain less than Fifty Thousand Dollars
($50,000.00) in Borrower's assets or property), or (ii) change its jurisdiction
of organization, or (iii) change its organizational structure or type, or (iv)
change its legal name, or (v) change any organizational number (if any) assigned
by its jurisdiction of organization.

     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person . Notwithstanding the foregoing, the
Borrower's Subsidiaries may merge or consolidate with other Subsidiaries of the
Borrower, provided that a Subsidiary of Borrower is the surviving legal entity.

     7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
or permit any Subsidiary to do so, other than Permitted Indebtedness.

     7.5 Encumbrance. Create, incur, or allow any Lien on any of its property,
or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.

     7.6 Distributions; Investments. (i) Directly or indirectly acquire or own
any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or (iii) redeem, retire or
purchase any capital stock, except for repurchases of stock from former
employees or directors of Borrower under the terms of applicable repurchase
agreements in an aggregate amount not to exceed $50,000.00 in the aggregate in
any fiscal year, provided that no Event of Default has occurred, is continuing
or would exist after giving effect to the repurchases.

     7.7 Transactions with Affiliates. Directly or indirectly enter or permit
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.

     7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without Bank's prior written
consent.

     7.9 Ratification of Negative Pledge Agreement. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of April 21, 2001 between Borrower and Bank
regarding Borrower's Intellectual Property, and acknowledges, confirms and
agrees that said Negative Pledge Agreement shall remain in full force and effect
and all terms thereof are specifically incorporated herein by reference.

     7.10 Compliance. Become an "investment company" or a company controlled by
an "investment company", under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.


                                       7



8    EVENTS OF DEFAULT


     Any one of the following is an Event of Default:

     8.1 Payment Default. Borrower fails to pay any of the Obligations within
three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension shall be
made during the cure period);

     8.2 Covenant Default. Borrower does not perform any obligation in Section 6
or violates any covenant in Section 7 or does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within ten
(10) days after it occurs, or if the default cannot be cured within ten (10)
days or cannot be cured after Borrower's attempts in the ten (10) day period,
and the default may be cured within a reasonable time, then Borrower shall have
additional time, (of not more than thirty (30) days) to attempt to cure the
default. Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain. During the additional period
the failure to cure the default is not an Event of Default (but no Credit
Extensions shall be made during the cure period);

     8.3 Material Adverse Change. A Material Adverse Change occurs;


     8.4 AR Purchase Agreement. A default occurs under the AR Purchase
Agreement;


     8.5 Attachment. (i) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (ii) the service of
process upon the Borrower seeking to attach, by trustee or similar process any
funds of the Borrower on deposit with the Bank; (iii) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (iv) a judgment or other claim becomes a Lien on a material portion of
Borrower's assets; or (v) a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within ten (10)
days after Borrower receives notice. These are not Events of Default if stayed
or if a bond is posted pending contest by Borrower (but no Credit Extensions
shall be made during the cure period);

     8.6 Insolvency. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);

     8.7 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of Five Hundred Thousand Dollars
($500,000.00) or that could result in a Material Adverse Change;

     8.8 Judgments. If a final judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000.00) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of thirty (30) days (provided that
no Credit Extensions will be made prior to the satisfaction or stay of such
judgment);

     8.9 Misrepresentations. If Borrower or any Person acting for Borrower makes
any material misrepresentation or material misstatement now or later in any
warranty or representation in this Agreement or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document.

9    BANK'S RIGHTS AND REMEDIES

     9.1 Rights and Remedies. When an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:


                                       8



          (a) Declare all Obligations immediately due and payable (but if an
     Event of Default described in Section 8.6 occurs all Obligations are
     immediately due and payable without any action by Bank);

          (b) Stop advancing money or extending credit for Borrower's benefit
     under this Agreement or under any other agreement between Borrower and
     Bank;

          (c) Settle or adjust disputes and claims directly with account debtors
     for amounts, on terms and in any order that Bank considers advisable;

          (d) Make any payments and do any acts it considers necessary or
     reasonable to protect its security interest in the Collateral. Borrower
     shall assemble the Collateral if Bank requests and make it available as
     Bank designates. Bank may enter premises where the Collateral is located,
     take and maintain possession of any part of the Collateral, and pay,
     purchase, contest, or compromise any Lien which appears to be prior or
     superior to its security interest and pay all expenses incurred. Borrower
     grants Bank a license to enter and occupy any of its premises, without
     charge, to exercise any of Bank's rights or remedies;

          (e) Apply to the Obligations any (i) balances and deposits of Borrower
     it holds, or (ii) any amount held by Bank owing to or for the credit or the
     account of Borrower;

          (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
     for sale, advertise for sale, and sell the Collateral; and

          (g) Dispose of the Collateral according to the Code.

     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.

     9.3 Accounts Collection. In the event that an Event of Default occurs and
is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
Account. After the occurrence of an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.

     9.4 Bank Expenses. Any amounts paid by Bank as provided herein are Bank
Expenses and are immediately due and payable, and shall bear interest at the
then applicable rate and be secured by the Collateral. No payments by Bank shall
be deemed an agreement to make similar payments in the future or Bank's waiver
of any Event of Default.

     9.5 Bank's Liability for Collateral. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or


                                       9



default of any carrier, warehouseman, bailee, or other person. Borrower bears
all risk of loss, damage or destruction of the Collateral.

     9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements are cumulative. Bank has all rights
and remedies provided under the Code, by law, or in equity. Bank's exercise of
one right or remedy is not an election, and Bank's waiver of any Event of
Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.

     9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

10   NOTICES

     All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.

                  If to Borrower:   LTX Corporation
                                    LTX Corporation at University Avenue
                                    Westwood, Massachusetts 02090
                                    Attn: Chief Financial Officer
                                    FAX: (781) 329-8836

                  with a copy to:   LTX Corporation
                                    LTX Corporation at University Avenue
                                    Westwood, Massachusetts 02090
                                    Attn: General Counsel
                                    FAX: (781) 329-8836

                  If to Bank:       Silicon Valley Bank
                                    One Newton Executive Park, Suite 200
                                    2221 Washington Street
                                    Newton, Massachusetts  02462
                                    Attn: Ms. Pamela Braren
                                    Fax:  (617) 969-4395

                  with a copy to:   Riemer & Braunstein LLP
                                    Three Center Plaza
                                    Boston, Massachusetts 02108
                                    Attn: David A. Ephraim, Esquire
                                    FAX: (617) 880-3456


11   CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

     Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE


                                       10



BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK
DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12   GENERAL PROVISIONS

     12.1 Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or Obligations under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.

     12.2 Indemnification. Borrower hereby indemnifies, defends and holds the
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.

     12.3 Right of Set-Off. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

     12.4 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

     12.5 Severability of Provision. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

     12.6 Amended and Restated Agreement. This Agreement shall amend and restate
in its entirety a certain Loan and Security Agreement dated as of October 1,
1999 between Borrower and Bank, as amended by a certain Loan Modification
Agreement dated October 30, 2000, as further amended by a certain Second Loan
Modification Agreement dated December 29, 2000, as further amended by a certain
Third Loan Modification Agreement dated April 21, 2001, as further amended by a
certain Loan Modification Agreement dated April 17, 2002.

     12.7 Amendments in Writing; Integration. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.


                                       11




     12.8 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.

     12.9 Survival. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

     12.10 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.

13   DEFINITIONS

     13.1 Definitions.

     "Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.

     "Advance" or "Advances" is a loan advance (or advances) under the Committed
Revolving Line.

     "Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.

     "A/R Purchase Agreement" means that certain Non-Recourse Receivables
Purchase Agreement by and between Bank and Borrower dated as of January 31,
2002, as amended to date, whereby the Bank has agreed to make advances not to
exceed $15,000,000.00 for factoring of certain of Borrower's accounts
receivable.

     "Bank Expenses" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

     "Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.

     "Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.

     "Closing Date" is the date of this Agreement.

     "Code" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.


                                       12



     "Collateral" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on Exhibit A.

     "Committed Revolving Line" is an Advance or Advances of up to Twenty
Million Dollars ($20,000,000.00).

     "Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

     "Credit Extension" is each Advance, Letter of Credit, Term Loan, Exchange
Contract or any other extension of credit by Bank for Borrower's benefit.

     "Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, which shall include, without
limitation, all obligations and liabilities of Borrower to Bank.

     "Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

     "ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.

     "GAAP" is generally accepted accounting principles.

     "Indebtedness" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

     "Insolvency Proceeding" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

     "Intellectual Property" is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.

     "Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

     "Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.


                                       13



     "Letter of Credit" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.

     "Letter of Credit Reserve" has the meaning set forth in Section 2.1.2.

     "Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

     "Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower and any other present or future agreement
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.

     "Material Adverse Change " is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; (ii) a material adverse change in the business, operations, or
condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iv) Bank determines, based upon information available to it and in its
reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during
the next succeeding financial reporting period.

     "Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit,
obligations and liabilities under the AR Purchase Agreement, cash management
services, and foreign exchange contracts, if any, and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.

     "Payment Date" is the first day of each month.

     "Permitted Indebtedness" is:


          (a) Borrower's indebtedness to Bank under this Agreement or the Loan
     Documents;

          (b) Indebtedness existing on the Closing Date and shown on the
     Perfection Certificate;

          (c) Subordinated Debt;

          (d) Indebtedness to trade creditors incurred in the ordinary course of
     business;

          (e) Indebtedness secured by Permitted Liens (including, without
     limitation, indebtedness arising out of capital lease transaction incurred
     in the ordinary course of Borrower's business); and

          (f) Extensions, refinancings, modifications, amendments and
     restatements of any items of Permitted Indebtedness (a) through (e) above,
     provided that the principal amount thereof is not increased or the terms
     thereof are not modified to impose more burdensome terms upon Borrower or
     its Subsidiary, as the case may be.

     "Permitted Investments" are:

          (a) Investments shown on the Perfection Certificate and existing on
     the Closing Date;

          (b) (i) marketable direct obligations issued or unconditionally
     guaranteed by the United States or its agency or any State maturing within
     1 year from its acquisition, (ii) commercial paper maturing no more than 1
     year after its creation and having the highest rating from either Standard
     & Poor's Corporation or Moody's Investors Service, Inc., (iii) Bank's
     certificates of deposit issued maturing no more than 1 year after issue
     (iv) money market accounts, or (v) certificates of deposit, eurodollar time
     deposits, commercial paper or any other obligations of (A) the Bank, or (B)
     any other bank or trust company organized or licensed to conduct a banking
     business under the laws of the United States or any State thereof which has
     (or which is a subsidiary


                                       14



     of a bank holding company which has) publicly traded debt securities rated
     A or higher by Standard & Poors Corporation or A-2 or higher by Moody's
     Investors Service, Inc.; and

          (c) Investments consisting of the endorsement of negotiable
     instruments for deposit or collection or similar transactions in the
     ordinary course of Borrower.

     "Permitted Liens" are:

          (a) Liens existing on the Closing Date and shown on the Perfection
     Certificate or arising under this Agreement or other Loan Documents;

          (b) Liens for taxes, fees, assessments or other government charges or
     levies, either not delinquent or being contested in good faith and for
     which Borrower maintains adequate reserves on its Books, if they have no
     priority over any of Bank's security interests;

          (c) Purchase money Liens (i) on Equipment acquired or held by Borrower
     or its Subsidiaries incurred for financing the acquisition of the
     Equipment, or (ii) existing on equipment when acquired, if the Lien is
     confined to the property and improvements and the proceeds of the
     equipment;

          (d) Leases or subleases and licenses or sublicenses granted in the
     ordinary course of Borrower's business, if the leases, subleases, licenses
     and sublicenses permit granting Bank a security interest; and

          (e) Liens incurred in the extension, renewal or refinancing of the
     indebtedness secured by Liens described in (a) through (c), but any
     extension, renewal or replacement Lien must be limited to the property
     encumbered by the existing Lien and the principal amount of the
     indebtedness may not increase. "Person" is any individual, sole
     proprietorship, partnership, limited liability company, joint venture,
     company, trust, unincorporated organization, association, corporation,
     institution, public benefit corporation, firm, joint stock company, estate,
     entity or government agency.

     "Prime Rate" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.

     "Quick Assets" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.

     "Responsible Officer" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.

     "Revolving Maturity Date" is 364 days from the Closing Date.

     "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
debt to Bank (pursuant to a subordination agreement entered into between (or the
benefit of) the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.

     "Subsidiary" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than 50% of
the voting stock or other equity interests is owned or controlled, directly or
indirectly, by the Person or one or more Affiliates of the Person.

     "Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (i) any amounts attributable to (a)
goodwill, (b) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, minus (ii) Total Liabilities, plus (iii) Subordinated
Debt.

     "Term Loan" a loan of Five Million Dollars $5,000,000.00.


                                       15



     "Term Loan Maturity Date" is July 24, 2006.

     "Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.

                            [signature page follows]


                                       16



     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.

BORROWER:

LTX CORPORATION

By_________________________________________

Name:______________________________________

Title:_______________________________________



BANK:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST


By_________________________________________

Name:______________________________________

Title:_______________________________________


SILICON VALLEY BANK


By_________________________________________

Name:______________________________________

Title:_________________________________________
     (Signed in Santa Clara County, California)





                                       17



                                    EXHIBIT A

     The Collateral consists of all right, title and interest of Borrower in and
to the following:

     All goods, equipment, inventory, contract rights or rights to payment of
money, license agreements, franchise agreements, general intangibles (including
payment intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

     All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

     The Collateral does not include:

     1.   Any copyright rights, copyright applications, copyright registrations
          and like protections in each work of authorship and derivative work,
          whether published or unpublished, now owned or later acquired; any
          patents, trademarks, service marks and applications therefor; any
          trade secret rights, including any rights to unpatented inventions,
          now owned or hereafter acquired. Notwithstanding the foregoing, the
          Collateral shall include all accounts, license and royalty fees and
          other revenues, proceeds, or income arising out of or relating to any
          of the foregoing intellectual property. To the extent a court of
          competent jurisdiction holds that a security interest in any
          Intellectual Property is necessary to have a security interest in any
          accounts, license and royalty fees and other revenues, proceeds, or
          income arising out of or relating to any of the foregoing Intellectual
          Property, then the Collateral shall, effective as of the Closing Date,
          include the Intellectual Property, to the extent necessary to permit
          perfection of the Bank's security interest in such accounts, license
          and royalty fees and other revenues, proceeds, or income arising out
          of or relating to any of the Intellectual Property.

     2.   Account Number LGP1 maintained by State Street Bank and Trust as
          custodian, which account has been pledged to Citizens Bank of
          Massachusetts.



                                       18



                                    EXHIBIT B

                        Loan Payment/Advance Request Form

                 DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.

Fax To:  (617) 969-5965                        Date:____________________________


LOAN PAYMENT:

                     Sample documents Client Name (Borrower)
________________________________________________________________________________

From Account #___________________________ To Account #__________________________
                 (Deposit Account #)                        (Loan Account #)

Principal $____________________ and/or Interest $_______________________________

All Borrower's representation and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:

Authorized Signature:_____________________________Phone Number:_________________

________________________________________________________________________________

LOAN ADVANCE:

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

From Account #___________________________  To Account #_________________________
                    (Loan Account #)                       (Deposit Account #)
Amount of Advance $______________________

All Borrower's representation and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:

Authorized Signature:____________________________Phone Number:__________________

________________________________________________________________________________

OUTGOING WIRE REQUEST

Complete only if all or a portion of funds from the loan advance above are to be
wired.
Deadline for same day processing is 3:00pm, E.S.T.

Beneficiary Name:_______________________________  Amount of Wire: $_____________

Beneficiary Bank:_______________________________  Account Number:  _____________

City and Sate:___________________________________

Beneficiary Bank                                 Beneficiary Bank Code
   Transit (ABA) #: __ __ __ __ __ __ __ __       (Swift, Sort, Chip, etc.):

                                         (For International Wire Only)
Intermediary Bank:_______________________________Transit (ABA) #:_______________

For Further Credit to:__________________________________________________________

Special Instruction:____________________________________________________________

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

                                               2nd Signature
Authorized Signature:__________________________(If Required):___________________

Print Name/Title:________________________Print Name/Title:______________________

Telephone # ____________________________Telephone #_____________________________

                                       19



                                    EXHIBIT C
                             COMPLIANCE CERTIFICATE

TO:        SILICON VALLEY BANK

FROM:      LTX CORPORATION

     The undersigned authorized officer of LTX CORPORATION certifies that under
the terms and conditions of the Amended and Restated Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached
are the required documents supporting the certification. The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.

     Please indicate compliance status by circling Yes/No under "Complies"
column.

Reporting Covenant                  Required                    Complies
- ------------------                  --------                    --------

Quarterly financial           Quarterly within 45 days          Yes   No
statements with CC            FYE within 90 days                Yes   No
Annual (CPA Audited)

Financial Covenant                   Required         Actual    Complies
- ------------------                   --------         ------    --------

Maintain on a Quarterly Basis:
 Minimum Quick Ratio                 1.5:1.0        _____:1.0   Yes   No
 Minimum Tangible Net Worth          $*            $_______     Yes   No

* See Section 6.7 of the Agreement

Comments Regarding Exceptions: See Attached

                                             Bank Use Only
Sincerely,                                   Received By:______________________
_____________________________________                     AUTHORIZED SIGNER
SIGNATURE
                                             Date:______________________________
_____________________________________
TITLE                                        Verified:__________________________
                                                         AUTHORIZED SIGNER
_____________________________________
DATE                                         Date:______________________________


                                       20



                           LOAN MODIFICATION AGREEMENT

         This Loan Modification Agreement is entered into as of October 17,
2002, effective as of July 31, 2002, by and between LTX Corporation (the
"Borrower") and Silicon Valley Bank, a California-chartered bank doing business
in Massachusetts under the name "Silicon Valley East" ("Bank").

1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, an Amended and Restated Loan and Security Agreement, dated July 24,
2002, as amended or modified from time to time, (the "Loan Agreement"). The Loan
Agreement provided for, among other things, a Committed Revolving Line in the
original principal amount of Twenty Million Dollars ($20,000,000) and a Term
Loan in the original principal amount of Five Million Dollars ($5,000,000).
Defined terms used but not otherwise defined herein shall have the same meanings
as set forth in the Loan Agreement.

Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Obligations."

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement.

Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the "Security Documents". Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".

3.  DESCRIPTION OF CHANGE IN TERMS.

    A. Modification(s) to Loan Agreement.

       1. Sub Section (a) under Section 2.1.4 entitled "Term Loan" is hereby
          amended to read as follows:

          (a) Bank shall advance on behalf of Borrower an amount equal to the
              Term Loan, on or prior to January 31, 2003.

        2. Sub Section (b) under Section 6.7 entitled "Financial Covenants"
           is hereby amended to read as follows:

         (b) Tangible Net Worth. Effective as of July 31, 2002 and for all
            fiscal quarters thereafter, (i) A Tangible Net Worth of at least
            Three Hundred Million Dollars ($300,000,000) which may decrease up
            to a maximum of $40,000,000 in the event that Borrower repurchases
            its convertible debentures or other securities. In such event,
            Tangible Net Worth shall decrease on a dollar for dollar basis up to
            an aggregate of $40,000,000 based on the actual amount repurchased
            by the Borrower as of the end of each applicable quarter and
            increase by (ii) 75% of the sum of (a) Borrowers net income earned
            as determined in accordance with GAAP, consistently applied for each
            quarter and (b) all net proceeds received by the Borrower as a
            result of any (1) issuance of equity by the Borrower or (2)
            additional Subordinated Debt incurred by the Borrower.

        3.  Notwithstanding anything to the contrary contained under Section 7
            of the Loan Agreement, Bank hereby consents to Borrower's buyback in
            an amount not to exceed $40,000,000 of convertible debentures or
            other securities (the "Transaction"). Bank's consent to the
            foregoing shall in no way shall be deemed as Bank's waiver to any
            other term or condition under the Loan Agreement.

         4. The following defined term under Section 13.1 entitled "Definitions"
            is hereby amended to read as follows:



      "Term Loan Maturity Date" is 48 months from the date of the Term Loan
      advance, however not to exceed January 31, 2007.

3. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
   necessary to reflect the changes described above.

4. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
   defenses against paying the Obligations.

5. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
   existing Obligations, Bank is relying upon Borrower's representations,
   warranties, and agreements, as set forth in the Existing Loan Documents.
   Except as expressly modified pursuant to this Loan Modification Agreement,
   the terms of the Existing Loan Documents remain unchanged and in full force
   and effect. Bank's agreement to modifications to the existing Obligations
   pursuant to this Loan Modification Agreement in no way shall obligate Bank to
   make any future modifications to the Obligations. Nothing in this Loan
   Modification Agreement shall constitute a satisfaction of the Obligations. It
   is the intention of Bank and Borrower to retain as liable parties all makers
   and endorsers of Existing Loan Documents, unless the party is expressly
   released by Bank in writing. Unless expressly released herein, no maker,
   endorser, or guarantor will be released by virtue of this Loan Modification
   Agreement. The terms of this Paragraph apply not only to this Loan
   Modification Agreement, but also to all subsequent loan modification
   agreements.

6. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
   properties, unconditionally, the non-exclusive jurisdiction of any state or
   federal court of competent jurisdiction in the Commonwealth of Massachusetts
   in any action, suit, or proceeding of any kind against it which arises out of
   or by reason of this Loan Modification Agreement; provided, however, that if
   for any reason Bank cannot avail itself of the courts of the Commonwealth of
   Massachusetts, then venue shall lie in Santa Clara County, California.

7. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
   only when it shall have been executed by Borrower and Bank (provided,
   however, in no event shall this Loan Modification Agreement become effective
   until signed by an officer of Bank in California).

   This Loan Modification Agreement is executed as of the date first written
above.

BORROWER:                           BANK:

LTX CORPORATION                     SILICON VALLEY BANK, doing
                                    business as SILICON VALLEY EAST

By:                                 By:
   -----------------------------       -------------------------------

Name:                               Name:
     ---------------------------          ----------------------------

Title:                              Title:
      --------------------------          ----------------------------

                                    SILICON VALLEY BANK

                                    By:
                                       -------------------------------

                                    Name:
                                         -----------------------------

                                    Title:
                                          ----------------------------
                                     (Signed at Santa Clara County, CA)

                                       2

EX-22

                                                                      Exhibit 22

                           Subsidiaries of Registrant
                                                                                                  
Company
LTX (Europe) Limited..........................................................    United Kingdom         100%
LTX International Inc., Domestic International Sales Corporation (DISC).......    Delaware               100%
LTX (Deutschland) GmBH........................................................    West Germany           100%
LTX France S.A................................................................    France                 100%
LTX Test Systems Corporation..................................................    Delaware               100%
LTX (Italia) S.r..............................................................    Italy                  100%
LTX (Foreign Sales Corporation) B.V...........................................    The Netherlands        100%
LTX Asia International, Inc...................................................    Delaware               100%
LTX Israel Limited............................................................    Israel                 100%
LTX (Malaysia) SDN.BHD........................................................    Malaysia               100%





     The subsidiaries listed are all included in the consolidated financial
statements of the Company.

EX-23.(A)

                                                                   Exhibit 23(A)



                         CONSENT OF INDEPENDENT AUDITORS

         We  consent to the  incorporation  of our  report by  reference  in the
registration  statements on Form S-8 (File No. 2-77475,  File No. 2-90698,  File
No. 33-7018, File No. 33-14179,  File No. 33-32140,  File No. 33-32141, File No.
33-33614,  File No.  33-38674,  File No. 33-38675,  File No. 33-51683,  File No.
33-51685,  File No.  33-57457,  File No. 33-57459,  File No. 33-65245,  File No.
33-65247, File No. 333- 48363, File No. 333-48341,  File No. 333-71455, File No.
333-30972,  File No.  333-54230 and File No.  333-75734)  pertaining to the 2001
Stock Plan,  1999 Stock Plan,  1993  Employees'  Stock Purchase  Plan,  1995 LTX
(Europe) Ltd. Approved Stock Option Plan, 1990 Stock Option Plan, 1990 Incentive
Stock Option Plan,  1990 Employees'  Stock Purchase Plan, 1983 Employees'  Stock
Purchase Plan,  1983  Non-Qualified  Stock Option Plan, and 1981 Incentive Stock
Option Plan of LTX Corporation of our report dated August 26, 2002, with respect
to the  consolidated  financial  statements  and  schedule  of  LTX  Corporation
included in the Annual Report (Form 10-K) for the year ended July 31, 2002.

                                                               Ernst & Young LLP

Boston, Massachusetts
October 25, 2002

EX-23.(B)

                                                                   Exhibit 23(B)



              INFORMATION REGARDING CONSENT OF ARTHUR ANDERSEN LLP

As previously  disclosed in the Company's  Form 8-K filed on April 3, 2002,  the
Company replaced Arthur Andersen LLP as its independent  public  accountants and
announced  that the Company had appointed  Ernst & Young LLP as its  independent
public accountants.

After reasonable  efforts,  the Company was unable to obtain the written consent
of Arthur  Andersen LLP to  incorporate  by reference  its report dated July 31,
2002.

The absence of this consent may limit recovery against Arthur Andersen LLP under
Section 11 of the  Securities  Act.  In  addition,  as a practical  matter,  the
ability of Andersen to satisfy any claims  (including claims arising from Arthur
Andersen  LLP's  provision  of  auditing  and other  services to the Company and
Arthur  Andersen  LLP's  other  clients)  may be  limited  due to recent  events
regarding Arthur Andersen LLP,  including  without  limitation its conviction on
federal  obstruction of justice  charges  arising from the federal  government's
investigation of Enron Corp.