-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ADIOVzfQ22mCAY55mTprjtDeBYuuGuNyV2xsHgpcXBhs0tHCxCbWMYdUS2kxDbSI fDNIky4yxSuiFJ7n5B8Dtg== 0000912057-02-031515.txt : 20020813 0000912057-02-031515.hdr.sgml : 20020813 20020813151129 ACCESSION NUMBER: 0000912057-02-031515 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIQUINT SEMICONDUCTOR INC CENTRAL INDEX KEY: 0000913885 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 953654013 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22660 FILM NUMBER: 02729429 BUSINESS ADDRESS: STREET 1: 2300 NE BROOKWOOD PARKWAY CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036159000 MAIL ADDRESS: STREET 1: 2300 NE BROOKWOOD PARKWAY CITY: HILLSBORO STATE: OR ZIP: 97124 10-Q 1 a2086235z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2002

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM TO

Commission File Number 0-22660

TRIQUINT SEMICONDUCTOR, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware		95-3654013
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

2300 NE Brookwood Parkway
Hillsboro, OR 97124
(Address of Principal Executive Offices) (Zip Code)

(503) 615-9000
(Registrant's Telephone Number, Including Area Code)

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 ý No o

As of July 31, 2002, there were 132,072,010 shares of the registrant's common stock outstanding.

TRIQUINT SEMICONDUCTOR, INC.

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Statements of Operations—Three and six months ended June 30, 2002 and 2001	3
	Condensed Consolidated Balance Sheets—June 30, 2002 and December 31, 2001	4
	Condensed Consolidated Statements of Cash Flows—Six months ended June 30, 2002 and 2001	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Qualitative and Quantitative Disclosures about Market and Interest Rate Risk	32
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 4.	Submission of Matters to a Vote of Security Holders	33
Item 6.	Exhibits and Reports on Form 8-K	34
SIGNATURES		35

PART I—FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)

			Three Months Ended						Six Months Ended
			June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001
Revenues			$	61,232		$	79,481		$	123,583		$	188,711
Cost of goods sold				38,916			51,321			80,210			109,492

		Gross profit		22,316			28,160			43,373			79,219
Operating expenses:
	Research, development and engineering			12,201			12,393			25,441			23,830
	Selling, general and administrative			10,671			11,161			21,358			23,903

		Total operating expenses		22,872			23,554			46,799			47,733

		Income (loss) from operations		(556	)		4,606			(3,426	)		31,486

Other income (expense):
	Interest income			3,007			7,790			6,073			16,973
	Interest expense			(3,259	)		(3,801	)		(6,598	)		(7,628	)
	Other, net			4,130			(1,025	)		4,537			(1,026	)

		Total other income, net		3,878			2,964			4,012			8,319

		Income before income tax		3,322			7,570			586			39,805
Income tax expense				899			2,865			351			13,056

		Net income	$	2,423		$	4,705		$	235		$	26,749

Per share data:
		Basic	$	0.02		$	0.04		$	0.00		$	0.21

		Weighted-average common shares		131,656,161			129,414,101			131,470,021			129,247,214

		Diluted	$	0.02		$	0.03		$	0.00		$	0.20

		Weighted-average common and common equivalent shares		134,843,992			135,723,492			134,891,614			135,950,876

See notes to Condensed Consolidated Financial Statements.

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

			June 30, 2002			December 31, 2001(1)
Assets
Current assets:
	Cash and cash equivalents		$	292,603		$	261,728
	Investments in marketable securities			165,008			246,775
	Accounts receivable, net			33,028			34,532
	Inventories, net			29,851			34,836
	Deferred income taxes			11,359			11,359
	Other current assets			58,201			12,623

		Total current assets		590,050			601,853

Long-term investments in marketable securities				104,954			73,028
Property, plant and equipment, net				225,092			214,402
Deferred income taxes				23,761			23,761
Other investment				73,617			73,617
Restricted long-term assets				14,547			14,547
Other non-current assets, net				21,191			19,665

		Total assets	$	1,053,212		$	1,020,873

Liabilities and Stockholders' Equity
Current liabilities:
	Current installments of capital lease and installment note obligations		$	754		$	1,580
	Accounts payable and accrued expenses			79,501			39,660

		Total current liabilities		80,255			41,240
Long-term debt, less current installments				284,500			296,859

		Total liabilities		364,755			338,099

Stockholders' equity:
	Common stock			457,495			451,834
	Accumulated other comprehensive income			245			458
	Unearned ESOP compensation			(390	)		(390	)
	Retained earnings			231,107			230,872

		Total stockholders' equity		688,457			682,774

		Total liabilities and stockholders' equity	$	1,053,212		$	1,020,873

(1): The information in this column was derived from the Company's audited financial statements as of December 31, 2001.

See notes to Condensed Consolidated Financial Statements.

TRIQUINT SEMICONDUCTOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

				Six Months Ended						Three Months Ended
				June 30, 2002			June 30, 2001			June 30, 2002			March 31, 2002
Cash flows from operating activities:
	Net income			$	235		$	26,749		$	2,423		$	(2,188	)
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			17,374			13,702			9,022			8,352
		Deferred income taxes			—			3,690			—			—
		Income tax benefit of stock option exercises			980			6,062			638			342
		Adjustment to conform year end of pooled entity			—			39,099			—			—
		Loss (gain) on disposal of assets			391			(758	)		6			385
		Gain on extinguishment of debt			(2,298	)		—			(2,298	)		—
		Loss on investments			3,242			1,308			3,242			—
		Unrealized gain on forward contract			(4,570	)		—			(4,570	)		—
		Changes in assets and liabilities:
		Decrease in:
			Accounts receivable		1,504			31,609			1,155			349
			Inventories		4,985			3,463			(1,425	)		6,410
			Prepaid expenses and other assets		4,618			(3,759	)		4,058			560
		Decrease in:
			Accounts payable and accrued expenses		(5,159	)		(9,557	)		3,933			(9,092	)

		Net cash provided by operating activities			21,302			111,608			16,184			5,118
Cash flows from investing activities:
	Purchase of available-for-sale investments				(233,681	)		(304,586	)		(78,171	)		(155,510	)
	Maturity/sale of available-for-sale investments				283,314			408,306			121,126			162,188
	Decrease in restricted long-term assets				—			38,250			—			—
	Advances to or investment in other companies				(5,996	)		(1,000	)		(827	)		(5,169	)
	Acquisition costs				(427	)		—			(427	)		—
	Capital expenditures				(27,699	)		(108,938	)		(12,859	)		(14,840	)
	Proceeds from sale of assets				—			1,377			—			—

		Net cash provided by investing activities			15,511			33,409			28,842			(13,331	)
Cash flows from financing activities:
	Principal payments under capital lease obligations				(1,185	)		(1,349	)		(315	)		(870	)
	Purchase of common stock for treasury				—			(9,778	)		—			—
	Repurchase of convertible subordinated notes				(9,435	)		—			(9,435	)		—
	Issuance of common stock, net				4,682			6,342			3,924			758

		Net cash used in financing activities			(5,938	)		(4,785	)		(5,826	)		(112	)
		Net increase in cash and cash equivalents			30,875			140,232			39,200			(8,325	)
Cash and cash equivalents at the beginning of the period					261,728			163,747			253,403			261,728

Cash and cash equivalents at the end of the period				$	292,603		$	303,979		$	292,603		$	253,403

See notes to Condensed Consolidated Financial Statements.

TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. However, certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of management, the statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. These condensed consolidated financial statements should be read in conjunction with the audited financial statements of TriQuint Semiconductor, Inc. (the "Company") for the fiscal year ended December 31, 2001, as included in the Company's 2001 Annual Report on Form 10-K as filed with the SEC on March 27, 2002.

The Company's fiscal quarters end on the Saturday nearest the end of the calendar quarter. For convenience, the Company has indicated that its second quarter ended on June 30. The Company's fiscal year ends on December 31.

Certain prior period amounts have been reclassified to conform to the current period presentation.

2. Business Combination

On July 19, 2001, Sawtek became a wholly owned subsidiary of the Company. The Company issued approximately 48.8 million shares of common stock in exchange for all the outstanding common stock of Sawtek. Additionally, outstanding options to purchase Sawtek common stock were exchanged for approximately 2.6 million options to purchase the Company's common stock. The transaction was accounted for as a pooling-of-interests transaction and qualified as a tax-free exchange of shares.

All financial information set forth in this document has been restated to include the historical information of Sawtek.

3. Net Income Per Share

Earnings per share is presented as basic and diluted net income per share. Basic net income per share is net income available to common stockholders divided by the weighted-average number of common shares outstanding. Diluted net income per share is similar to basic except that the denominator includes potential common shares that, had they been issued, would have had a dilutive effect.

The following is a reconciliation of the basic and diluted earnings per share (in thousands, except per share amounts):

		Three Months Ended June 30,
		Three Months Ended June 30,				Six Months Ended June 30,
						Six Months Ended June 30,
								2001
		2002		2001		2002		2001
Income available to stockholders		$	2,423	$	4,705	$	235	$	26,749

Shares for basic earnings per share:
	Weighted-average common shares		131,656		129,414		131,470		129,247
Effect of dilutive securities:
	Stock options		3,188		6,310		3,422		6,704

Shares for dilutive earnings per share:			134,844		135,724		134,892		135,951

Per share data:
	Basic	$	0.02	$	0.04	$	0.00	$	0.21

	Diluted	$	0.02	$	0.03	$	0.00	$	0.20

Stock options and other exercisable convertible securities totaling approximately 15,757 and 14,888 shares for the three and six months ended June 30, 2002 and 10,816 and 8,943 shares for the three and six months ended June 30, 2001 were not included in the diluted net income per share calculations, because to do so would have been antidilutive.

4. Income Taxes

Deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

The provision for income taxes has been recorded based on the current estimate of the Company's annual effective tax rate. For periods of income reported, this rate differs from the federal statutory rate primarily because of tax exempt income earned by the Costa Rican facility, which currently operates in a free trade zone, tax exempt interest income earned on certain cash and investment items within the Company's portfolio and tax credits, which are offset by state taxes and other items.

5. Investments in Marketable Securities

The Company classifies its investments in marketable securities as available-for-sale in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). Investments in marketable securities are comprised of U.S. treasury securities and obligations of U.S. government agencies, municipal notes and bonds, corporate debt securities and other investments. Investments are recorded at fair value. Unrealized gains and losses, net of tax, on investments are reported as a separate component of stockholders' equity.

6. Investments in Other Companies

The Company has made several investments in small, privately held technology companies in which the Company holds less than 20% of the capital stock and does not influence control. The Company accounts for these investments using the cost method. The Company monitors these investments for impairment and makes appropriate reductions in carrying value when a permanent decline is evident. During the three months ended June 30, 2002, the Company recorded an impairment of the value of one of these investments of $3.3 million based on a subsequent round of financing.

7. Inventories

Inventories, net of reserves of $19.0 million and $20.2 million as of June 30, 2002 and December 31, 2001, respectively, are stated at the lower of cost or market and consist of (in thousands):

		June 30, 2002		December 31, 2001
Raw material		$	12,141	$	18,824
Work in progress			8,742		8,729
Finished goods			8,968		7,283

	Total inventories, net	$	29,851	$	34,836

8. Convertible Subordinated Notes

During the second quarter of 2002, the Company repurchased $12.0 million principal amount of its convertible subordinated notes at the then current market prices. This resulted in a gain of $2.3 million, net of deferred financing fees.

9. Stockholders' Equity

Components of stockholders' equity (in thousands, except per share amounts):

		June 30, 2002			December 31, 2001
Common stock, $.001 par value, 600,000 shares authorized, 132,044 and 131,141 outstanding at June 30, 2002 and December 31, 2001, respectively		$	132		$	131
Additional paid-in capital		$	457,363		$	451,703

10. Supplemental Cash Flow Information

		Six Months Ended
		June 30, 2002		June 30, 2001
		(in thousands)
Cash transactions:
	Cash paid for interest	$	6,057	$	7,077
	Cash paid for income taxes	$	785	$	11,523

11. Comprehensive Income

The components of comprehensive income, net of tax, are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002			2001
Net income	$	2,423	$	4,705	$	235		$	26,749
Change in net unrealized gain (loss) on available-for-sale investments		874		422		(213	)		198

Comprehensive income	$	3,297	$	5,127	$	22		$	26,947

12. Foreign Currency Exchange Contract

In connection with the Company's commitment to acquire Infineon Technologies AG's ("Infineon") gallium arsenide semiconductor business ("Infineon's GaAs Business"), the Company entered into a forward currency exchange contract on April 30, 2002 for delivery of EUR 50.0 million on July 1, 2002 at an exchange rate of $.90 to EUR 1.0.

On June 30, 2002, the Company recorded an unrealized gain on the forward currency transaction of $4.6 million.

13. Special Purpose Entity—Off-Balance Sheet Financing

In August 2000, the Company acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87 million. The acquisition was financed by a special purpose entity ("SPE") sponsored by a financial institution in which the Company contributed $73 million and a lender contributed $14 million. The portion contributed by the lender is 97% collateralized by the Company through pledged investment securities and appears on the Company's balance sheet as "Restricted Long-Term Assets". The portion contributed by the Company appears on the Company's balance sheet as "Other Investment". The SPE is not consolidated in the Company's financial statements and the Company has accounted for the arrangement as an operating lease. The Company is required to make lease payments through August 2005 or purchase the property. If the Company elects to purchase the property, the Company will assign the pledged securities to the lender and incur some incidental cash expenditures to obtain title to the property. The Company may also renew the lease for an additional four-year period in August 2005. The lease is secured by the value of the property as well as the pledged investment securities. Restrictive covenants are also included in this financing arrangement which require the Company to maintain (a) a quick ratio of not less that 1.25 to 1.00, (b) tangible net worth not less than the sum of $425 million and (c) a maximum leverage ratio not greater than 0.50. As of June 30, 2002, the Company was in compliance with these restrictive covenants.

14. Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations", which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 is required to be adopted for fiscal years beginning after June 15, 2002. The Company will adopt SFAS 143 on January 1, 2003.

In April 2002, the FASB issued Statement No. 145 ("SFAS 145"), "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections". SFAS 145 rescinds Statement No. 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. Upon adoption of SFAS 145, companies will be required to apply the criteria in 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", in determining the classification of gains and losses resulting from the extinguishment of debt. Additionally, SFAS 145 amends Statement No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. SFAS 145 will be effective for fiscal years beginning after May 15, 2002 with early adoption of the provisions related to the rescission of Statement No. 4 encouraged. The Company has adopted SFAS 145 as of January 1, 2002.

In July 2002, the FASB issued FASB Statement No. 146 ("SFAS 146"), "Accounting for Costs Associated with Exit or Disposal Activities", which changes the way a company will report the expenses related to restructuring. SFAS 146 is required to be adopted for exit or disposal activities initiated after December 31, 2002.

15. Subsequent Events

On July 1, 2002, the Company closed the acquisition of Infineon's GaAs Business. The Company added approximately 60 employees as part of the acquisition. The acquisition will be accounted for as a purchase transaction. At the closing date, the Company paid Infineon EUR 50.0 million ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR 5.0 million ($4.5 million at forward contract rate of $.9000/EUR1.00) is held in a one year warranty escrow. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR 74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR 124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in funded liabilities acquired ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price.

On July 1, 2002, the Company closed the acquisition of a portion of the assets of IBM's wireless phone chipset business. The Company added 9 employees as part of the acquisition. The acquisition will be accounted for as a purchase transaction. At the closing date, the Company made an initial payment of approximately $21.8 million to IBM for the related assets. Subsequent adjustments contingent upon business volumes measured over the next 18 months could increase the final aggregate purchase price up to $40.0 million.

On July 12, 2002, the Company invested $11 million in a private technology company in the wireless communications business. In addition, the Company sold certain assets valued at $3 million to this company. The Company received a secured convertible promissory note in the amount of $14 million bearing interest at a rate of 8% and stock warrants.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Report on Form 10-Q. The discussion in this Report contains both historical information and forward-looking statements. A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking results discussed below, including, but not limited to, those related to operating results; demand for integrated circuits and the electronic products into which they are manufactured, including wireless phones; investments in new facilities; sales to a limited number of customers; new competitive technologies; growth and diversification of our markets; startup of new facilities; transition of manufacturing processes from four-inch to six-inch wafers; integration of our acquisitions of Sawtek Inc. (Sawtek), Infineon's GaAs business, IBM's wireless phone chipset business, investments in other closely held companies and integration of any future acquisitions. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "anticipates", "intends", "plans", "thinks", "believes", "estimates", "predicts", "potential", "continue", "our future success depends", "seek to continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In addition, historical information should not be considered an indicator of future performance. Factors that could cause or contribute to these differences include, but are not limited to, the risks discussed in the section of this report titled "Factors Affecting Future Operating Results". These factors may cause our actual results to differ materially from any forward-looking statement.

We are a leading supplier of high-performance components and modules for communications applications. We design, develop, manufacture and market a broad range of high-performance integrated circuits, bandpass filters, resonators, oscillators and other products for communications markets. The specific applications served by our products in these communication markets include wireless phones, base stations, optical networks and broadband and microwave with a specific focus on radio frequency (RF), analog and mixed-signal applications. Our components and modules are incorporated into a variety of communications products, including wireless phones and pagers, base stations for wireless communications, digital microwave communication systems, fiber optic telecommunications equipment, satellite communications systems, data and wireless local area networking products, broadband access systems and aerospace applications. We provide customers with standard and custom products as well as foundry services.

Our products are designed on various wafer substrates such as gallium arsenide (GaAs), silicon germanium (SiGe) and quartz, using a variety of devices including Pseudomorphic High Electron Mobility Transistor (pHEMT), Heterojunction Bipolar Transistor (HBT), Heterostructure Field Effect Transistor (HFET), Metal Semiconductor Field Effect Transistor (MESFET) and Surface Acoustic Wave (SAW). Using these materials, devices and our proprietary technology, our products can overcome the performance barriers of competing devices in a variety of applications and offer other key advantages such as steeper selectivity, lower distortion, reduced size and weight and more precise frequency control. For example, GaAs has inherent physical properties that allow its electrons to move up to five times faster than those of silicon. This higher electron mobility permits the manufacture of GaAs integrated circuits that operate at much higher speeds than silicon devices, or operate at the same speeds with reduced power consumption. We sell our products worldwide to end-user customers, including Agere Systems Inc., The Boeing Company, Ericsson Inc., Kyocera, LG Group, Motorola, Inc., Nokia Corporation, Northrop Grumman Corporation, Nortel Networks Corporation, Raytheon Company and Samsung Microelectronics.

In the United States, we have design and manufacturing facilities in Oregon, Texas and Florida and a design facility in New England. We also have an assembly facility in Costa Rica and design centers in Taiwan and Germany. We own and operate our own wafer fabrication and product test facilities and use

our proprietary processes to produce RF, analog and mixed-signal components and modules cost-effectively in high volumes. We believe that control of these manufacturing processes provides us with a reliable source of supply, greater opportunities to enhance quality, reliability and manufacturing efficiency. In addition, control of our manufacturing process and our combined research and design capabilities assist us to develop new processes and products and to be more responsive to customer requirements. We have also established a strategic foundry business serving leading communications companies.

We are incorporated under the laws of the State of Delaware. Our principal executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124 and our telephone number at that location is (503) 615-9000.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We review our estimates, including, but not limited to, allowance for doubtful accounts, sales returns reserves, inventory reserves, income tax valuation and warranty reserves on a regular basis and make adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed regularly and adjustments are made as information is available. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

We recognize revenues on standard products upon shipment of product with provisions established for estimated customer and distributor product returns. Generally, we ship products FOB shipping point. We recognize revenues on certain foundry and customer-specific products based on certain design, manufacturing and other milestones. We recognize revenues on cost-plus contracts as work is performed. Revenues from customers who have acceptance criteria are not recognized until all acceptance criteria are satisfied.

We state our inventories at the lower of cost or market. We use a standard cost methodology to determine our cost basis for our inventories. This methodology approximates actual cost on a first-in, first-out basis. Our accounts receivables represent those amounts which have been billed to our customers but not yet collected. We establish an allowance for doubtful accounts for the portion of those accounts which we determine may become uncollectible.

We record a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion of the amount may not be realized. During 2001, we determined it to be more likely than not that a portion of our deferred tax asset would not be realized, and therefore, recorded a valuation allowance for that amount. We evaluate the need for valuation allowance on a regular basis and adjust as needed. These adjustments will have an impact on our financial statements in the periods in which they are recorded.

We have made several investments in small, privately held technology companies in which we hold less than 20% of the capital stock. We account for these investments using the cost method. We monitor these investments for impairment and make appropriate reductions in carrying value when a permanent decline is evident.

Our cash investment portfolio, both restricted and unrestricted portions, are classified as available-for-sale securities and are comprised of highly-rated, short and medium-term investments, such as U.S. treasury securities and obligations of U.S. government agencies, corporate debt securities and similar low risk investments. Although we manage investments under an investment policy, economic, market and other events may affect our investees, which we cannot control. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for trading purposes.

Acquisitions

Merger with Sawtek Inc.

On July 19, 2001, Sawtek became a wholly owned subsidiary of TriQuint. We issued approximately 48.8 million shares of common stock in exchange for all the outstanding common stock of Sawtek. Additionally, outstanding options to purchase Sawtek common stock were exchanged for approximately 2.6 million options to purchase our common stock. The transaction was accounted for as a pooling-of-interests transaction and qualified as a tax-free exchange of shares.

All financial information set forth in this document has been restated to include the historical information of Sawtek.

Acquisition of Infineon's GaAs Business

On July 1, 2002, we closed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. The acquisition will be accounted for as a purchase transaction. At the closing date, we paid Infineon EUR 50.0 million ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR 5.0 million ($4.5 million at forward contract rate of $.9000/EUR1.00) is held in a one year warranty escrow. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR 74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR 124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR5.5 million less EUR1.5 million in funded liabilities acquired ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price.

Acquisition of a portion of the assets of IBM's wireless phone chipset business

On July 1, 2002, we closed the acquisition of a portion of the assets of IBM's wireless phone chipset business. We added 9 employees as part of the acquisition. The acquisition will be accounted for as a purchase transaction. At the closing date, we paid $21.8 million to IBM for the related assets. Subsequent adjustments contingent upon business volumes could increase the final aggregate purchase price up to $40.0 million.

Results of Operations

The following table sets forth the results of our operations expressed as a percentage of revenues. Our historical operating results are not necessarily indicative of the results for any future period.

			Three Months Ended				Six Months Ended
			June 30, 2002		June 30, 2001		June 30, 2002		June 30, 2001
Revenues			100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold			63.6		64.6		64.9		58.0

	Gross profit		36.4		35.4		35.1		42.0
Operating expenses:
	Research, development and engineering		19.9		15.6		20.6		12.6
	Selling, general and administrative		17.4		14.0		17.3		12.7

		Total operating expenses	37.3		29.6		37.9		25.3

		Income (loss) from operations	(0.9	)	5.8		(2.8	)	16.7
Other income, net			6.3		3.7		3.3		4.4

		Income before income tax	5.4		9.5		0.5		21.1
Income tax expense			1.4		3.6		0.3		6.9

		Net income	4.0	%	5.9	%	0.2	%	14.2	%

Revenues

We derive revenues from the sale of standard and customer-specific products and services. Our revenues also include non-recurring engineering revenues relating to the development of customer-specific products. For the three months ended June 30, 2002, revenues were $61.2 million, a decrease of 23.0% from the $79.5 million reported for the three months ended June 30, 2001. For the six months ended June 30, 2002, revenues were $123.6 million, a decrease of 34.5% from the $188.7 million reported for the three months ended June 30, 2001. The decrease in revenues for the three months and six months ended June 30, 2002 reflected decreased revenues from our optical networking components and semiconductor products for wireless phones, offset in part by increases in our filter business, particularly duplexers, RF filters and IF filters for GSM and CDMA phones and increases in our broadband and microwave business, particularly in defense related products. We expect revenues for the three months ended September 30, 2002 to be higher than the three months ended June 30, 2002, primarily from revenue to be generated from the Infineon and IBM businesses we acquired in July 2002.

Domestic revenues for the three and six months ended June 30, 2002 decreased to $28.9 million and $57.3 million, respectively, from $46.3 million and $109.7 million for the three and six months ended June 30, 2001, respectively. International revenues for the three and six months ended June 30, 2002 decreased to $32.3 million and $66.3 million, respectively, from $33.2 million and $79.1 million for the three and six months ended June 30, 2001.

Gross Profit

Gross profit is equal to revenues less cost of goods sold. Cost of goods sold includes all direct material, labor and overhead expenses and certain production costs related to nonrecurring engineering revenues. In general, gross profit generated from the sale of customer-specific products and from non-recurring engineering revenues is typically higher than gross profit generated from the sale of standard products. For the three months ended June 30, 2002, gross profit was $22.3 million, a decrease of 20.9% from the $28.2 million reported for the three months ended June 30, 2001. For the six months ended June 30, 2002, gross profit was $43.4 million, a decrease of 45.2% from the $79.2 million reported for the six months

ended June 30, 2001. The decrease in gross profit was attributable to the decreased demand for our products and underutiliziation of our fabrication facilities.

The operation of our own wafer fabrication facilities entails a high degree of fixed costs and requires an adequate volume of production and sales to be profitable. During periods of decreased demand, as we have experienced recently, high fixed wafer fabrication costs have a materially adverse effect on our operating results. We expect gross profit to continue to be affected by decreased absorption of fixed overhead costs associated with decreased demand and production volume, which will continue to affect our results of operations for as long as demand continues at existing, or lower levels.

Additionally, we have at various times in the past experienced lower than expected production yields, which have delayed shipments of a given product and adversely affected gross profits. There can be no assurance that we will be able to maintain acceptable production yields in the future and, to the extent that we do not achieve acceptable production yields, our operating results would be materially adversely affected.

Research, Development and Engineering

Research, development and engineering expenses include the costs incurred in the design of new products, as well as ongoing product research and development expenses. Research, development and engineering expenses for the three months ended June 30, 2002 decreased to $12.2 million from $12.4 million for the three months ended June 30, 2001. As a percentage of revenues for the three months ended June 30, 2002, research, development and engineering expenses increased to 19.9% from 15.6% for the three months ended June 30, 2001. For the six months ended June 30, 2002, research, development and engineering expenses increased to $25.4 million from $23.8 million for the six months ended June 30, 2001. As a percentage of revenues for the six months ended June 30, 2002, research, development and engineering expenses increased to 20.6% from 12.6% for the six months ended June 30, 2001. The decrease in research, development and engineering expenses for the three month period ended June 30, 2002 was primarily due to a reduction of our engineering costs and capacity associated with our optical networking products. The increase in research, development and engineering expenses for the six month period ended June 30, 2002 was primarily due to the engineering and requalification costs associated with the start up and move from our Dallas facility to our Richardson facility and other costs associated with the increased investment in wireless, broadband and microwave products and technologies. We are committed to substantial investments in research, development and engineering and expect these expenses will continue to increase in the future. In addition, we expect these expenses will increase in the three months ended September 30, 2002 compared to the three months ended June 30, 2002 due to added costs associated with the acquisition of the Infineon and IBM businesses in July 2002. We also expect to record a charge estimated in the range of $5 million to $10 million during the three months ended September 30, 2002 for the write-off of acquired in-process research and development from these businesses

Selling, General and Administrative

Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, start-up costs for our recent move to our Richardson facility and other corporate administrative expenses. Selling, general and administrative expenses for the three and six months ended June 30, 2002 decreased to $10.7 million and $21.4 million, respectively, from $11.2 million and $23.9 for the three and six months ended June 30, 2001, respectively. This decrease was predominantly due to the reduced selling expense associated with reduced revenues offset by start-up costs for our move to our Richardson facility. Selling, general and administrative expenses as a percentage of revenues for the three and six months ended June 30, 2002 increased to 17.4% and 17.3%, respectively, from 14.0% and 12.7% for the three and six months ended June 30, 2001, respectively. In addition, we expect these expenses will increase in the three months ended September 30, 2002 compared to the three months ended June 30, 2002 due to added costs associated with the acquisition of the Infineon and IBM businesses in July 2002.

Other Income, Net

Other income, net includes interest income, interest expense and other expenses. Other income, net for the three months ended June 30, 2002 increased to $3.9 million from $3.0 million for the three months ended June 30, 2001. Other income, net for the six months ended June 30, 2002 decreased to $4.0 million from $8.3 million for the six months ended June 30, 2001. The decrease in other income, net for the comparative three month and six month periods ended June 30, 2002 and June 30, 2001, respectively, resulted primarily from decreased interest income on investments, which was attributable to lower interest rates, a lower level of investments due to our recent capital expenditures, our investment in our Richardson facility and the repurchase of a portion of our convertible subordinated notes. This decrease was offset in the three months ended June 30, 2002 by a $4.6 million unrealized gain on a forward currency contract, a $2.3 million gain on the repurchase of a portion of our convertible subordinated notes, offset by a $3.3 million impairment of one of our equity investments.

Income Tax Expense

We recorded an income tax expense of $899,000 and $351,000 for the three and six months ended June 30, 2002, respectively, compared to the income tax expense of $2.9 million and $13.1 million recorded in the three and six months ended June 30, 2001, respectively. The decrease in income tax expense was attributable to our decreased income before income tax.

We recorded our provision for income taxes based on the current estimate of our annual effective tax rate of 60.0%. Our estimated effective tax rate differs from the federal statutory rate primarily because of tax exempt income of our Costa Rican facility, which currently operates in a free trade zone, tax exempt interest income earned on certain cash and investment items within our portfolio and tax credits, which were offset by state taxes and other items.

Liquidity and Capital Resources

As of June 30, 2002, we had cash, cash equivalents and short-term investments of $457.6 million. In addition, we had $105.0 million of investments in long-term marketable securities, which are investments in high-grade securities whose initial maturity is one year to 18 months. As of June 30, 2002, working capital declined to $509.8 million from $560.6 million as of December 31, 2001. The decrease in working capital was attributable to the repurchase of convertible debt, purchases of equipment and investments in long-term marketable securities.

For the six months ended June 30, 2002 and June 30, 2001, cash provided by operating activities was $21.3 million and $111.6 million, respectively. Cash provided by operating activities for the three months ended June 30, 2002 was mainly due to depreciation and amortization, reduction of inventory, loss on investments and reduction of prepaid and other assets, which was offset by a gain on extinguishment of debt, the unrealized gain on a forward contract and the reduction of accounts payable and accrued expenses. For the six months ended June 30, 2001, cash provided by operating activities was primarily due to net income, adjustment to conform year end of pooled entity, increase tax benefit from stock option exercises, decease of accounts receivable and depreciation and amortization, offset by increases in prepaid and other assets and decreases in accounts payable and accrued expenses.

For the six months ended June 30, 2002, cash provided by investing activities was $15.5 million which comprised mainly net sales/maturity of investments, offset by purchases of capital equipment and advances to or investments in other companies. For the six months ended June 30, 2001, cash provided by investing activities was $33.4 million, which was due to the net maturity and sale of investments and a decrease in restricted investments, offset by capital expenditures.

For the six months ended June 30, 2002, cash used in financing activities was $5.9 million. For the six months ended June 30, 2001, cash used in financing activities was $4.8 million. The cash used in financing activities for the six months ended June 30, 2002 was from principal payments on capital leases and the

repurchase of convertible subordinated notes, offset by the proceeds from the issuance of common stock. The cash used in financing activities for the six months ended June 30, 2001 was primarily due to the purchase of treasury stock and principal payments on capital leases, offset by the proceeds from the issuance of common stock.

In August 2000, we acquired our 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87.0 million. The acquisition was completed through a financing arrangement in which we contributed $73.0 million and a lender contributed $14.0 million. The portion contributed by the lender is 97% collateralized by us through pledged investment securities and appears on our balance sheet as "Restricted Long-Term Investments". The portion we contributed appears on our balance sheet as "Other Investment". The financing qualifies for accounting treatment as an operating lease. We are required to either make lease payments through August 2005 or purchase the property. If we elect to purchase the property, we will assign the pledged securities to the lender and incur some incidental cash expenditures to obtain title to the property. We may also renew the lease for an additional four-year period in August 2005. The lease is secured by the value of the property as well as the pledged investment securities. Restrictive covenants are also included in this financing arrangement which requires us to maintain (a) a quick ratio of not less than 1.25 to 1.00, (b) tangible net worth not less than the sum of $425.0 million and (c) a maximum leverage ratio not greater than .50. As of June 30, 2002, we were in compliance with these restrictive covenants.

In February and March 2000, we completed a private placement of $345.0 million (net proceeds of $333.9 million) of 4% convertible subordinated notes due 2007. The notes are unsecured obligations, are initially convertible into our common stock at a conversion price of $67.80 per share and are subordinated to all of our present and future senior indebtedness. To date, we have repurchased approximately $60.5 million of the 4% convertible subordinated notes due 2007. We are currently evaluating opportunities to repurchase additional portions of the debt and may from time to time repurchase portions of the debt. We have, in prior periods, completed public offerings of our common stock in order to fund our operating and capital needs. In addition, we have funded our operations to date through other private sales of equity, borrowings, equipment leases and cash flow from operations.

On July 1, 2002, we closed the acquisition of Infineon's GaAs Business. We added approximately 60 employees as part of the acquisition. The acquisition will be accounted for as a purchase transaction. At the closing date, we paid Infineon EUR 50.0 million ($45.0 million at forward contract rate of $.9000/EUR1.00), of which EUR 5.0 million ($4.5 million at forward contract rate of $.9000/EUR1.00) is held in a one year warranty escrow. Pursuant to the purchase agreement, Infineon may earn up to an additional EUR 74.0 million over a 24-month period based upon revenues generated by the acquired business, for an aggregate purchase price of EUR 124.0 million. Subsequent to the close of the acquisition, certain fixed assets were also purchased for EUR 4.0 million ($4.0 million at various spot rates). There are also various other guarantees and contingencies which could affect the amount of the final purchase price.

We believe that our current cash, cash equivalent and short-term investments balances, together with cash anticipated to be generated from operations and any financing arrangements we may enter into, will satisfy our projected working capital and capital expenditure requirements and possible future acquisitions, at a minimum, through the next 12 months. However, we may be required to finance any additional requirements through additional equity, debt financings or credit facilities. We may not be able to obtain additional financings or credit facilities, or if these funds are available, they may not be available on satisfactory terms.

Recent Accounting Pronouncements

See Note 1 of the Notes to Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Factors Affecting Future Operating Results

An investment in our common stock is extremely risky. You should carefully consider the following risk factors and other information in this Quarterly Report on Form 10-Q and the Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 27, 2002 before investing in our common stock. Our business and the results of operations could be seriously harmed by any of the following risks. The trading price of our common stock could decline due to any of these risks and you may lose part or all of your investment.

Our operating results may fluctuate substantially, which may cause our stock price to fall.

Our quarterly and annual results of operations have varied in the past and may vary significantly in the future due to a number of factors including, but not limited to, the following:

•: cancellation or delay of customer orders or shipments;
•: our success in achieving design wins in which our products are designed into those of our customers;
•: market acceptance of our products and those of our customers;
•: variability of the life cycles of our customers' products;
•: variations in manufacturing yields;
•: timing of announcements and introduction of new products by us and our competitors;
•: changes in the mix of products we sell;
•: declining average sales prices for our products;
•: ability to integrate existing and newly developed technologies;
•: changes in manufacturing capacity and variations in the utilization of that capacity;
•: variations in operating expenses;
•: the long sales cycles associated with our customer-specific products;
•: the timing and level of product and process development costs;
•: performance of vendors and subcontractors;
•: realization of research and development efforts;
•: variations in raw material quality and costs;
•: delays in new process qualification or delays in transferring processes;
•: the cyclicality of the semiconductor and electronic communications component industries;
•: the timing and level of nonrecurring engineering revenues and expenses relating to customer-specific products;
•: our ability to successfully integrate the operations of acquired businesses and to retain the customers of acquired businesses; and
•: significant changes in our and our customers' inventory levels.

We expect that our operating results will continue to fluctuate in the future as a result of these and other factors. Any unfavorable changes in these or other factors could cause our results of operations to suffer as they have in the past. Due to potential fluctuations, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of our future performance.

Additionally, if our operating results are not within the market's expectations, then our stock price may fall. The public stock markets have experienced, and are currently experiencing, extreme price and trading volume volatility, particularly in high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to or disproportionately impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common stock.

We may face challenges with our integration of Infineon's GaAs business and the acquired assets of IBM's wireless phone chipset business and, as a result, may not realize the expected benefits of those acquisitions.

On July 1, 2002, we completed the acquisition of Infineon's GaAs semiconductor business and a portion of the assets of IBM's wireless phone chipset business.

The challenges involved in integrating these businesses include:

•: realization of expected benefits from the acquisitions such as increased business in Europe;
•: fulfilment of the supply agreement between Infineon and us until we are able to produce the products within our existing facilities;
•: retention of existing partners and customers;
•: transfer and integration of Infineon's process and technologies into our Oregon facility;
•: redesign of Infineon products to allow for manufacture in our Oregon facility;
•: integration and retention of Infineon's and IBM's employees into the TriQuint culture;
•: incremental costs associated with a foreign subsidiary such as taxes, duties, and employee benefits;
•: significant management attention and financial resources in assimilating these businesses; and
•: increased complexity of our corporate structure requiring additional resources for such responsibilities as tax planning, foreign currency management and risk management.

We face continuing challenges in integrating Sawtek and, as a result, may not realize the expected benefits of the acquisition of Sawtek.

Integrating the operations, systems and personnel of TriQuint and Sawtek, as with all mergers of companies, is a complex process and we are uncertain that the integration will be completed in a timely manner or will achieve the anticipated benefits of the merger. The continuing challenges involved in this integration include:

•: coordinating research and development activities to enhance introduction of new products, services and technologies;
•: combining product and service offerings and marketing efforts effectively and quickly;
•: integrating and training sales forces on the expanded product and service offerings;
•: offering integrated products and services of TriQuint and Sawtek to each other's customers and partners; and

•: developing, maintaining and combining uniform standards, controls, procedures and policies.

We may not succeed in addressing these risks or any other problems encountered in connection with the merger. The diversion of the attention of our management and any difficulties encountered in the process of combining the companies could cause the disruption of, or a loss of momentum in, the activities of our business. We cannot assure you that TriQuint and Sawtek can be successfully integrated in a timely manner or at all or that any of the anticipated benefits will be realized. Further, we cannot assure you that our growth rate will equal the historical growth rates of either company.

If investors or financial or industry analysts do not think our integration of our acquisitions are proceeding as anticipated or that the benefits of the acquisitions are not going to be realized, the market price of our common stock may decline.

The market price of our common stock may decline if:

•: the integration of Sawtek and the IBM and Infineon businesses are not completed in a timely and efficient manner;
•: our assumptions about Sawtek's business model and operations and those of the IBM and Infineon businesses, considered on a stand-alone basis and their role in our business model, such as our ability to introduce new products incorporating acquired technology;
•: the effect of the acquisitions on our financial results is not consistent with the expectations of financial or industry analysts; or
•: following the acquisitions, our stockholders that hold relatively larger interests in our company may decide to dispose of their shares because the results of the acquisitions are not consistent with their expectations.

We are currently undergoing a management transition.

We recently announced the appointment of Ralph Quinsey as our President and Chief Executive Officer. Steven J. Sharp, our former President and Chief Executive Officer who announced his intent to reduce his involvement in the day-to-day management of our company in October 2001, remains our working Chairman of the Board and will focus on new technologies and strategic growth opportunities. In addition, we recently announced a corporate reorganization of our company into four business units, each of which is managed by an Office of the President. Our success will depend, in part, on our ability to manage this management transition and reorganization and on the ability of our executive officers to operate effectively, both independently and as a group. The manner in which the new management team conducts the business of our company, and the direction in which the new management team moves the business, may differ from the manner and direction in which the former management has directed our company in the past. If we fail to manage this management transition effectively, our operating results could be negatively affected.

Our operating results may suffer due to fluctuations in demand for semiconductors and electronic communications components.

From time to time, the wireless phone, base station, optical network, broadband and microwave markets have experienced significant downturns and wide fluctuations in product supply and demand, often in connection with, or in anticipation of, maturing product cycles, capital spending cycles and declines in general economic conditions. The cyclical nature of these markets has led to significant imbalances in demand, inventory levels and production capacity. It has also accelerated the decrease of average selling prices per unit. We have experienced, and may experience again, periodic fluctuations in our financial results because of these or other industry-wide conditions. We expect that the current decline in demand for wireless, base station, optical network and broadband and microwave components, including

ours, could last throughout 2002, if not longer. For example, if demand for communications applications were to decrease substantially, demand for the integrated circuits and SAW filter components in these applications would also decline, which would negatively affect our operating results.

We depend on the continued growth of communications markets.

We derive all of our product revenues from sales of products for electronic communication applications. These markets are characterized by the following:

•: intense competition;
•: rapid technological change; and
•: short product life cycles, especially in the wireless market.

Recently, the electronic communications markets have reversed their previous pattern of growth. These markets may not resume historical growth rates. Additionally, if these markets do not recover and demand for electronic communications applications continues to decline, our operating results could suffer.

Products for electronic communications applications are often based on industry standards, which are continually evolving. Our future success will depend, in part, upon our ability to successfully develop and introduce new products based on emerging industry standards, which could render our existing products unmarketable or obsolete. If communications markets evolve to new standards, we may be unable to successfully design and manufacture new products that address the needs of our customers or that will meet with substantial market acceptance.

We face risks from the failures in our manufacturing processes, the maintenance of our fabrication facilities and the processes of our vendors.

The fabrication of integrated circuits, particularly those made of GaAs, is a highly complex and precise process. Our integrated circuits are currently manufactured on wafers made of GaAs and SiGe. Our SiGe products are currently manufactured externally by Atmel, our strategic partner in the development of these products and by IBM. Our SAW filters are currently manufactured primarily on quartz wafers. During manufacturing, each wafer is processed to contain numerous integrated circuits or SAW filters. We may reject or be unable to sell a substantial percentage of wafers or the components on a given wafer because of:

•: minute impurities;
•: difficulties in the fabrication process, such as failure of special equipment, operator error or power outages;
•: defects in the masks used to print circuits on a wafer;
•: electrical performance;
•: wafer breakage; or
•: other factors.

We refer to the proportion of final components that have been processed, assembled and tested relative to the gross number of components that could be constructed from the raw materials as our manufacturing yield. Compared to the manufacture of silicon integrated circuits, GaAs technology is less mature and more difficult to design and manufacture within specifications in large volume. In addition, the more brittle nature of GaAs wafers can result in lower manufacturing yields than with silicon wafers. We have in the past experienced lower than expected manufacturing yields, which have delayed product

shipments and negatively impacted our results of operations. We may experience difficulty maintaining acceptable manufacturing yields in the future.

In addition, the maintenance of our fabrication facilities and our assembly facility are subject to risks, including:

•: the demands of managing and coordinating workflow between geographically separate production facilities;
•: disruption of production in one of our facilities as a result of a slowdown or shutdown in our other facility; and
•: higher operating costs from managing geographically separate manufacturing facilities.

We depend on certain vendors for components, equipment and services. We maintain stringent policies regarding qualification of these vendors. However, if these vendors' processes vary in reliability or quality, they could negatively affect our products, and thereby, our results of operations.

Some of our manufacturing facilities are located in areas prone to natural disasters.

We have a SAW manufacturing and assembly facility located in Apopka, Florida. We also have an assembly facility for SAW products in San Jose, Costa Rica. Hurricanes, tropical storms, flooding, tornadoes and other natural disasters are common events for the southeastern part of the United States and in Central America. Additionally, mud slides, earthquakes and volcanic eruptions could also affect our Costa Rican facility. Any disruptions from these or other events would have a material adverse impact on our operations and financial results.

Although we have manufacturing and assembly capabilities for our Sawtek products in both Apopka and San Jose, we are only capable of fabricating wafers for those products in our Apopka facility. As a result, any disruption to our Apopka facility would have a material adverse impact on our operations and financial results.

A disruption in our Costa Rican operations would have an adverse impact on our operating results.

Operating a facility in Costa Rica presents risks of disruption such as government intervention, currency fluctuations, labor disputes, limited supplies of labor, power interruption or war. Any such disruptions could have a material adverse effect on our business, results of operations and financial condition.

We expect our Costa Rican operations to continue to account for a significant proportion of our SAW operations in the future.

We face risks from changes in tax regulations.

We are subject to taxation in many different countries and localities worldwide. In some jurisdictions, we have employed specific business strategies to minimize our tax exposure. To the extent the tax laws and regulations in these various countries and localities could change, our tax liability in general could increase or our tax saving strategies could be threatened. Such changes could have a material adverse effect on our operations and financial results.

For example, our subsidiary in Costa Rica operates in a free trade zone. We expect to receive a 100% exemption from Costa Rican income taxes through 2003 and a 50% exemption through 2007. The Costa Rican government continues to review its policy on granting tax exemptions to companies located in free trade zones and it may change our tax status or minimize our benefit at any time. Any adverse change in the tax structure for our Costa Rican subsidiary made by the Costa Rican government would have a negative impact on our net income.

A change in our Costa Rican subsidiary's favorable tax status would have an adverse impact on our operating results.

Our subsidiary in Costa Rica operates in a free trade zone. We expect to receive a 100% exemption from Costa Rican income taxes through 2003 and a 50% exemption through 2007. The Costa Rican government continues to review its policy on granting tax exemptions to companies located in free trade zones and it may change our tax status or minimize our benefit at any time. Any adverse change in the tax structure for our Costa Rican subsidiary made by the Costa Rican government would have a negative impact on our net income.

Our business may be adversely affected by acts of terrorism.

Acts of terrorism could interrupt or restrict our business in several ways. We rely extensively on the use of air transportation to move our inventory to and from our vendors and to ship finished products to our customers. If terrorist acts cause air transportation to be grounded or interrupted, our business would be similarly adversely impacted.

In addition, acts of terrorism could cause existing export regulations to be changed, which could limit the extent to which we are allowed to export our products. To the extent that acts of terrorism also reduce customer confidence and create general economic weakness, our business would also be adversely affected.

If we fail to sell a high volume of products, our operating results will be harmed.

Because large portions of our manufacturing costs are relatively fixed, our manufacturing volumes are critical to our operating results. If we fail to achieve acceptable manufacturing volumes or experience product shipment delays, our results of operations could be harmed. During periods of decreased demand, as we are currently experiencing, our high fixed manufacturing costs negatively effect our results of operations. We base our expense levels in part on our expectations of future orders and these expense levels are predominantly fixed in the short-term. However, if the rate of growth of demand decreases from past levels, as we are currently experiencing, we will not be able to grow our revenue. If we receive fewer customer orders than expected or if our customers delay or cancel orders, we may not be able to reduce our manufacturing costs in the short-term and our operating results would be harmed.

If we do not sell our customer-specific products in large volumes, our operating results may be harmed.

We manufacture a substantial portion of our products to address the needs of individual customers. Frequent product introductions by systems manufacturers make our future success dependent on our ability to select development projects, which will result in sufficient volumes to enable us to achieve manufacturing efficiencies. Because customer-specific products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in volume and may impair our ability to cover our fixed manufacturing costs. Furthermore, if customers cancel or delay orders for these customer-specific products, our inventory of these products may become unmarketable or obsolete, which would negatively affect our operating results.

In addition, if we experience delays in completing designs, if we fail to obtain development contracts from customers whose products are successful or if we fail to have our product designed into the next generation product of existing volume production customers, our revenues could be harmed.

Our operating results could be harmed if we lose access to sole or limited sources of materials, equipment or services.

We currently obtain some components, equipment and services for our products from limited or single sources, such as certain ceramic and plastic packages and chemicals. We purchase these components,

equipment and services on a purchase order basis, do not carry significant inventories of components and do not have any long-term supply contracts with these vendors. Our requirements are relatively small compared to silicon semiconductor manufacturers. Because we often do not account for a significant part of our vendors' business, we may not have access to sufficient capacity from these vendors in periods of high demand. If we were to change any of our sole or limited source vendors, we would be required to requalify each new vendor. Requalification could prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these vendors may negatively affect our production if the components, equipment or services vary in reliability or quality. If we are unable to obtain timely deliveries of sufficient quantities of acceptable quality or if the prices increase, our results of operations could be harmed.

Our operating results could be harmed if our subcontractors and partners are unable to fulfill our requirements.

We currently utilize subcontractors for the majority of our integrated circuit assemblies. IBM and Atmel manufacture all of our SiGe products. Infineon continues to manufacture our products acquired from them while we transfer the manufacturing processes to our Oregon facility. Infineon will also continue to provide assembly and test services for an indeterminant period of time after the transfer of manufacturing processes. There are certain risks associated with dependence on third party providers, such as minimal control over delivery scheduling, adequate capacity during demand peaks, warranty issues and protection of intellectual property. Additionally, if these subcontractors are unable to meet our needs, it could prevent or delay production shipments that could negatively affect our results of operations. If we were to change any of our subcontractors, we would be required to requalify each new subcontractor, which could also prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these subcontractors may negatively affect our production if the services vary in reliability or quality. If we are unable to obtain timely service of acceptable quality or if the prices increase, our results of operations could be harmed.

If our products fail to perform or meet customer requirements, we could incur significant additional costs.

The fabrication of GaAs and SiGe integrated circuits, SAW filters and the modules containing these components is a highly complex and precise process. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to rework or replace the products. GaAs and SiGe integrated circuits and SAW filters may contain undetected defects or failures that only become evident after we commence volume shipments. We have experienced product quality, performance or reliability problems from time to time. Defects or failures may occur in the future. If failures or defects occur, we could:

•: lose revenue;
•: incur increased costs such as warranty expense and costs associated with customer support;
•: experience delays, cancellations or rescheduling of orders for our products; or
•: experience increased product returns or discounts.

Our operating results may suffer as a result of the conversion of our manufacturing processes from four-inch wafer production to six-inch wafer production.

We have converted a portion of our existing Hillsboro facility to accommodate equipment that uses six-inch (150-millimeter) wafer production. Some of our production has been converted to six-inch wafers and some has yet to be converted from four-inch wafers. We have very limited experience processing six-inch wafers in our fabrication facilities. Our inexperience may result in lower yields and higher unit

production costs. We may be required to redesign our processes and procedures substantially to accommodate the larger wafers. As a result, converting to six-inch wafer production may take longer than planned, could interrupt production of integrated circuits from four-inch wafers and could harm our results of operations. If we fail to successfully transition the remaining products on four-inch wafers to six-inch wafers or our manufacturing yields decline, our relationships with our customers may be harmed.

Increases in our manufacturing capacity may adversely affect our operating results if the current economic downturn continues for an extended period of time.

We are currently in the process of converting our existing Hillsboro facility from four-inch wafer production to six-inch wafer production and have recently expanded the capacity of our Texas operations with the transition to the Richardson facility.

These increases in capacity will directly relate to significant increases in fixed costs and operating expenses. These increased costs could have an adverse effect on our results of operations during the current economic downturn. If this economic downturn were to continue for an extended period of time, the decreased levels of demand and production in conjunction with these increased expense levels will have an adverse effect on our business, financial condition and results of operations.

We may face fines or our facilities could be closed if we fail to comply with environmental regulations.

Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our manufacturing process. For our manufacturing facilities located in Hillsboro, Richardson, Apopka and San Jose, Costa Rica, we provide our own manufacturing waste treatment and contract for disposal of some materials. We are required to report usage of environmentally hazardous materials.

The failure to comply with present or future regulations could result in fines being imposed on us and we could be required to suspend production or cease our operations. These regulations could require us to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Any failure by us to control the use of, or to adequately restrict the discharge of, hazardous substances could subject us to future liabilities and harm our results of operations.

Our business will be impacted if systems manufacturers do not use components made of GaAs, or other alternative materials we utilize.

Silicon semiconductor technologies are the dominant process technologies for integrated circuits and the performance of silicon integrated circuits continues to improve. Recently, we introduced SiGe components jointly developed and manufactured with Atmel Corporation and acquired the SiGe wireless chipset business of IBM. Although we have designed and manufactured GaAs products, have begun production of SiGe products developed jointly and manufactured by Atmel, and have acquired SiGe products manufactured by IBM, system designers may be reluctant to adopt our products because of:

•: their unfamiliarity with designing systems with our products;
•: their concerns related to manufacturing costs and yields;
•: their unfamiliarity with our design and manufacturing processes; and
•: uncertainties about the relative cost effectiveness of our products compared to high-performance silicon components.

Systems manufacturers may not use GaAs components because the production of GaAs integrated circuits has been, and continues to be, more costly than the production of silicon devices. Systems manufacturers may not use our SiGe components because this is a newly introduced process. Systems manufacturers may be reluctant to rely on a technology that is new to us and not widely understood.

Systems manufacturers may also be reluctant to rely on a jointly produced product because future supplies may depend on our continued good relationships with Atmel and IBM. As a result, we must offer devices that provide superior performance to that of traditional silicon-based devices.

In addition, customers may be reluctant to rely on a smaller company like us for critical components. We cannot be certain that additional systems manufacturers will design our products into their systems or that the companies that have utilized our products will continue to do so in the future. If our products fail to achieve market acceptance, our results of operations would suffer.

New competitive products and technologies have been announced which could reduce demand for our SAW filter products.

Recently, products have been introduced that may have some application in certain GSM phones, which, if proven successful, could impact sales of GSM IF filters for wireless phones. Several companies recently announced a new product based on a direct conversion concept that could potentially eliminate a SAW IF filter in certain CDMA phones. If these products are successful in the market, it could reduce or eliminate demand for our IF filters for CDMA phones and our revenues would be harmed if we do not introduce competitive or alternative products. SAW IF filters accounted for approximately 8% of our revenues in 2001. Any development of a cost-effective and reliable technology that replaces SAW filtering technology or reduces the need for SAW filtering technology could have a material adverse effect on our business, financial condition and results of operations.

A decline either in the growth of wireless communications or in the continued acceptance of CDMA technology would have an adverse impact on us.

Our products for CDMA-based systems, including filters for base stations and receivers and power amplifiers for wireless phones, accounted for approximately 22% of our revenues for 2001. CDMA technology is relatively new to the marketplace and there can be no assurance that emerging markets will adopt this technology. Our business and financial results would be adversely impacted if CDMA technology does not continue to gain acceptance.

Our business may be adversely impacted if we fail to successfully introduce new products or to gain our customers' acceptance of those new products.

The markets for electronic communications applications in which we participate are subject to intense competition, rapid technological change and short product life cycles. It is critical for companies such as ours to continually and quickly develop new products to meet the changing needs of these markets. If we fail to develop new products to meet our customers' needs on a timely basis, we will not be able to effectively compete in these markets.

For example, we announced our intention to develop and market RF front-end modules for wireless phones at cost-effective prices. We will also need to continue to expand our wireless applications into CDMA and GSM applications. If we fail to design and produce these products in a manner acceptable to our customers or have incorrectly anticipated our customers' demand for these types of products, our operating results could be harmed.

We have substantial indebtedness.

In February and March 2000, we sold $345.0 million of convertible subordinated notes in a private placement to qualified institutional buyers due in 2007. Although we repurchased $48.5 million and $12.0 million of these notes in 2001 and 2002, respectively, we have $284.5 million of indebtedness

remaining. Our other indebtedness is for operating and capital leases. We may incur substantial additional indebtedness in the future. The level of our indebtedness, among other things, could:

•: make it difficult for us to make payments on the notes and leases;
•: make it difficult for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;
•: require us to dedicate a substantial portion of our expected cash flow from operations to service our indebtedness, which would reduce the amount of our expected cash flow available for other purposes, including working capital and capital expenditures;
•: limit our flexibility in planning for or reacting to, changes in our business; and
•: make us more vulnerable in the event of a downturn in our business.

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

We may not be able to pay our 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 our other obligations, we would be in default under the terms thereof. Default under the indenture would permit the holders of the notes to accelerate the maturity of the notes and could cause defaults under future indebtedness we may incur. Any such default could have a material adverse effect on our business, prospects, financial condition and operating results. In addition, we can not assure you that we would be able to repay amounts due in respect of the notes if payment of the notes were to be accelerated following the occurrence of an event of default as defined in the indenture.

Customers may delay or cancel orders due to regulatory delays.

The increasing significance of electronic communications has increased pressure on regulatory bodies worldwide to adopt new standards for electronic communications, generally following extensive investigation of and deliberation over competing technologies. The delays inherent in the regulatory approval process may in the future cause the cancellation, postponement or rescheduling of the installation of communications systems by our customers. These delays have in the past had, and may in the future have, a negative effect on our sales and our results of operations.

Our revenues are at risk if we do not introduce new products and/or decrease costs.

Historically, the average selling prices of some of our products have decreased over the products' lives and we expect them to continue to do so. To offset these decreases, we rely primarily on achieving yield improvements and other cost reductions for existing products and on introducing new products that can often be sold at higher average selling prices. Selling prices for our SAW products have declined due to competitive pricing pressures and to the use of newer surface mount package devices that are smaller and less expensive than previous generation filters. For example, we have experienced declines in average selling prices for filters for base stations due to the use of surface mount packages. We believe our future success depends, in part, on our timely development and introduction of new products that compete effectively on the basis of price and performance and adequately address customer requirements. The success of new product and process introductions depends on several factors, including:

•: proper selection of products and processes;
•: successful and timely completion of product and process development and commercialization;
•: market acceptance of our or our customers' new products;
•: achievement of acceptable manufacturing yields; and
•: our ability to offer new products at competitive prices.

Our product and process development efforts may not be successful and our new products or processes may not achieve market acceptance. To the extent that our cost reductions and new product introductions do not occur in a timely manner, our results of operations could suffer.

We must improve our products and processes to remain competitive.

If technologies or standards supported by our or our customers' products become obsolete or fail to gain widespread commercial acceptance, our results of operations may be materially impacted. Because of continual improvements in semiconductor technology, including those in high-performance silicon technologies such as complementary metal oxide semiconductor (CMOS), where substantially more resources are invested than in GaAs, SiGe or SAW products, we believe that our future success will depend, in part, on our ability to continue to improve our product and process technologies. We must also develop new technologies in a timely manner. In addition, we must adapt our products and processes to technological changes and to support emerging and established industry standards. We have and must continue to perform significant research and development into advanced material development such as indium phosphide (InP), gallium nitride (GaN), silicon carbide (SiC) and SiGe to compete with future technologies of our competitors. For example, we recently announced that we have entered into agreements with Atmel and IBM to fabricate portions of our proposed SiGe products. These research and development efforts may not be accepted by our customers, and therefore may not go into full production in the future. We may not be able to improve our existing products and process technologies, develop new technologies in a timely manner or effectively support industry standards. If we fail to do so, our customers may select another GaAs, SiGe or SAW product or move to an alternative technology.

Our results of operations may suffer if we do not compete successfully.

The markets for our products are characterized by price competition, rapid technological change, short product life cycles and heightened global competition. Many of our competitors have significantly greater financial technical, manufacturing and marketing resources. Due to the increasing requirements for high-speed, high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new competitors to our target markets and from their internal operations of some companies producing products similar to ours for the internal requirements.

For our integrated circuit devices, we compete primarily with both manufacturers of high-performance silicon integrated circuits as well as manufacturers of GaAs integrated circuits. Our silicon-based competitors include companies such as Applied Micro Circuits Corporation, Maxim Integrated Products Inc., Motorola, Philips and STMicroelectronics N.V. Our GaAs-based competitors include companies such as Anadigics Inc., Fujitsu Microelectronics, Inc., Infineon Technologies AG, Raytheon, RF Micro Devices, Skyworks Solutions, Inc. and Vitesse Semiconductor Corp. For our SAW devices, our competitors include companies such as CTS Wireless Components, Micro Networks, Phonon, RF Monolithics, Vectron, EPCOS AG, Shales, Fujitsu, Murata and Toyocom. Competition could also come from companies ahead of us in developing alternative technologies such as SiGe and InP integrated circuits and digital filtering and direct conversion devices.

Competition from existing or potential competitors may increase due to a number of factors including, but not limited to, the following:

•: offering of new or emerging technologies in integrated circuit design using alternative materials such as SiGe or InP;
•: offering of new or emerging technologies such as digital filtering or direct conversion as alternatives to SAW filters;
•: mergers and acquisitions;
•: longer operating histories and presence in key markets;

•: development of strategic relationships;
•: access to a wider customer base; and
•: access to greater financial, technical, manufacturing and marketing resources.

Additionally, manufacturers of high-performance silicon integrated circuits have achieved greater market acceptance of their existing products and technologies in some applications.

We compete with both GaAs and silicon suppliers in all of our target markets. In microwave and millimeter wave applications, our competition is primarily from a limited number of GaAs suppliers, which are in the process of expanding their product offerings to address commercial applications other than aerospace.

Our prospective customers are typically systems designers and manufacturers that are considering the use of GaAs or SiGe integrated circuits or SAW filters, as the case may be, for their high-performance systems. Competition is primarily based on performance elements such as speed, complexity and power dissipation, as well as price, product quality and ability to deliver products in a timely fashion. Due to the proprietary nature of our products, competition occurs almost exclusively at the system design stage. As a result, a design win by our competitors or by us typically limits further competition with respect to manufacturing a given design.

If we fail to integrate any future acquisitions or successfully invest in privately held companies, our business will be harmed.

We face risks from any future acquisitions, including the following:

•: we may fail to merge and coordinate the operations and personnel of newly acquired companies with our existing business;
•: additional complexity may affect our flexibility and ability to respond quickly to market and management issues;
•: we may experience difficulties integrating our financial and operating systems;
•: we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management and financial reporting;
•: our ongoing business may be disrupted or receive insufficient management attention;
•: we may not cost-effectively and rapidly incorporate the technologies we acquire;
•: we may not be able to recognize the cost savings or other financial benefits we anticipated;
•: we may not be able to retain the existing customers of newly acquired operations;
•: our corporate culture may clash with that of the acquired businesses; and
•: we may incur unknown liabilities associated with acquired businesses.

We face risks from equity investments in privately held companies, such as:

•: we may not realize the expected benefits associated with the investment;
•: we may need to provide additional funding to support the privately held company; or
•: if their value decreases, we may realize losses on our holdings.

We may not successfully address these risks or any other problems that arise in connection with future acquisitions or equity investments in privately held companies.

We will continue to evaluate strategic opportunities available to us and we may pursue product, technology or business acquisitions or investments in strategic partners. In addition, in connection with any future acquisitions, we may issue equity securities that could dilute the percentage ownership of our existing stockholders, we may incur additional debt and we may be required to amortize expenses related

to other intangible assets or record impairment of goodwill that may negatively affect our results of operations.

If we do not hire and retain key employees, our business will suffer.

Our future success depends in large part on the continued service of our key technical, marketing and management personnel. We also depend on our ability to continue to identify, attract and retain qualified technical employees, particularly highly skilled design, process and test engineers involved in the manufacture and development of our products and processes. We must also recruit and train employees to manufacture our products without a substantial reduction in manufacturing yields. There are many other semiconductor companies located in the communities near our facilities and it may become increasingly difficult for us to attract and retain those employees. The competition for these employees is intense, and the loss of key employees could negatively affect us.

Our business may be harmed if we fail to protect our proprietary technology.

We rely on a combination of patents, trademarks, copyrights, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We currently have patents granted and pending in the United States and elsewhere and intend to seek further international and United States patents on our technology. We cannot be certain that patents will be issued from any of our pending applications or that patents will be issued in all countries where our products can be sold or that any claims allowed from pending applications or will be of sufficient scope or strength to provide meaningful protection or any commercial advantage. Our competitors may also be able to design around our patents. The laws of some countries in which our products are, or may be developed, manufactured or sold, may not protect our products or intellectual property rights to the same extent as do the laws of the United States, increasing the possibility of piracy of our technology and products. Although we intend to vigorously defend our intellectual property rights, we may not be able to prevent misappropriation of our technology. Our competitors may also independently develop technologies that are substantially equivalent or superior to our technology.

Our ability to produce our products may suffer if someone claims we infringe on their intellectual property.

The integrated circuit and SAW device industries are characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in significant and often protracted and expensive litigation. If it is necessary or desirable, we may seek licenses under such patents or other intellectual property rights. However, we cannot be certain that licenses will be offered or that we would find the terms of licenses that are offered acceptable or commercially reasonable. Our failure to obtain a license from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacture of products. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation by or against us could result in significant expense and divert the efforts of our technical personnel and management, whether or not the litigation results in a favorable determination. In the event of an adverse result in any litigation, we could be required to:

•: pay substantial damages;
•: indemnify our customers;
•: stop the manufacture, use and sale of the infringing products;
•: expend significant resources to develop non-infringing technology;
•: discontinue the use of certain processes; or
•: obtain licenses to the technology.

We may be unsuccessful in developing non-infringing products or negotiating licenses upon reasonable terms, or at all. These problems might not be resolved in time to avoid harming our results of operations. If any third party makes a successful claim against our customers or us and a license is not made available to us on commercially reasonable terms, our business could be harmed.

Our business may suffer due to risks associated with international sales.

Our sales outside of the United States were 53% and 43% of revenues for the three and six months ended June 30, 2002 and 44% of revenues in 2001. We face inherent risks from these sales, including:

•: imposition of government controls;
•: currency exchange fluctuations;
•: longer payment cycles and difficulties related to the collection of receivables from international customers;
•: reduced protection for intellectual property rights in some countries;
•: unfavorable tax consequences;
•: difficulty obtaining distribution and support;
•: political instability; and
•: tariffs and other trade barriers.

In addition, due to the technological advantages provided by GaAs integrated circuits in many military applications, the Office of Export Administration of the U.S. Department of Commerce must license all of our sales outside of North America. We are also required to obtain licenses from that agency for sales of our SAW products to customers in certain countries. If we fail to obtain these licenses or experience delays in obtaining these licenses in the future, our results of operations could be harmed. Also, because all of our foreign sales are denominated in U.S. dollars, increases in the value of the dollar would increase the price in local currencies of our products and make our products less price competitive.

We may be subject to a securities class action suit if our stock price falls.

Following periods of volatility in the market price of a company's stock, some stockholders may file securities class action litigation. For example, in 1994, a stockholder class action lawsuit was filed against us, our underwriters and some of our officers, directors and investors, which alleged that we, our underwriters and certain of our officers, directors and investors intentionally misled the investing public regarding our financial prospects. We settled the action and recorded a special charge of $1.4 million associated with the settlement of this lawsuit and related legal expenses, net of accruals, in 1998. Any future securities class action litigation could be expensive and divert our management's attention and harm our business, regardless of its merits.

Our stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders from reselling our common stock at a profit.

The securities markets have experienced significant price and volume fluctuations and the market prices of the securities of semiconductor companies have been especially volatile. The market price of our common stock may experience significant fluctuations in the future. For example, our common stock price has fluctuated from a high of approximately $25.01 to a low of approximately $6.05 during the 52 weeks ended June 30, 2002. This market volatility, as well as general economic, market or political conditions could reduce the market price of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our common stock could decrease significantly.

Our certificate of incorporation and bylaws include anti-takeover provisions, which may deter or prevent a takeover attempt.

Some provisions of our certificate of incorporation and bylaws and provisions of Delaware law may deter or prevent a takeover attempt, including a takeover that might result in a premium over the market price for our common stock. These provisions include:

Cumulative voting. Our stockholders are entitled to cumulate their votes for directors. This may limit the ability of the stockholders to remove a director other than for cause.

Stockholder proposals and nominations. Our stockholders must give advance notice, generally 120 days prior to the relevant meeting, to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action.

Stockholder rights plan. We may trigger our stockholder rights plan in the event our board of directors does not agree to an acquisition proposal. The rights plan may make it more difficult and costly to acquire our company.

Preferred stock. Our certificate of incorporation authorizes our board of directors to issue up to five million shares of preferred stock and to determine what rights, preferences and privileges such shares have. No action by our stockholders is necessary before our board of directors can issue the preferred stock. Our board of directors could use the preferred stock to make it more difficult and costly to acquire our company.

Delaware anti-takeover statute. The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it harder for our company to be acquired without the consent of our board of directors and management.

ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
MARKET AND INTEREST RATE RISK

We are exposed to minimal market risks. We manage the sensitivity of our results of operations to these risks by maintaining an investment policy which allows only highly-rated securities. Our investments, both restricted and unrestricted, are classified as available-for-sale securities and are comprised of highly-rated, short and medium-term investments, such as U.S. government agencies, corporate debt securities and other such low risk investments. Although we manage investments under an investment policy, economic, market and other events may occur to our investees, which we cannot control. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for trading purposes. We are exposed to currency exchange fluctuations, as we sell our products internationally and have an operation in Costa Rica. We manage the sensitivity of our international sales, purchases of raw materials and equipment and our Costa Rican operation by denominating most transactions in U.S. dollars. We have engaged in limited foreign currency hedging transactions, principally to lock in the cost of purchase commitments that are not denominated in U.S. dollars. At June 30, 2002, we had an open commitment to purchase EUR 50.0 million at a fixed exchange rate of $.90 per EUR 1.00. We settled this commitment on July 1, 2002.

Our convertible subordinated notes due 2007 have a fixed interest rate of 4%. Consequently, we do not have significant cash flow exposure on our long-term debt. However, the fair value of the convertible subordinated notes is subject to significant fluctuations due to their convertibility into shares of our stock and other market conditions.

We are exposed to interest rate risk if we use additional financing to fund capital expenditures. The interest rate that we may be able to obtain on financings will depend on market conditions at that time and may differ from the rates we have secured in the past.

PART II—OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

From time to time we are involved in judicial and administrative proceedings incidental to our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.

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

On May 22, 2002, we held our Annual Meeting of Stockholders in Apopka, Florida. We solicited votes by proxy pursuant to proxy solicitation materials first distributed to our stockholders on or about April 17, 2002. The following is a brief description of the matters voted on at the meeting and a statement of the number of votes cast for and against and the number of abstentions:

1.: Election of Francisco Alvarez, Dr. Paul A. Gary, Charles Scott Gibson, Nicolas Kauser, Steven P. Miller, Dr. Walden C. Rhines, Steven J. Sharp, Edward F. Tuck and Willis C. Young as directors of the Company until the next Annual Meeting of Stockholders or until their successors are elected.

Nominee	In Favor	Withheld
Francisco Alvarez	115,321,067	1,328,302
Dr. Paul A. Gary	115,135,889	1,513,480
Charles Scott Gibson	115,168,595	1,480,774
Nicolas Kauser	115,151,954	1,497,415
Steven P. Miller	115,003,832	1,645,537
Dr. Walden C. Rhines	115,128,325	1,521,044
Steven J. Sharp	114,750,997	1,898,372
Edward F. Tuck	115,250,403	1,398,966
Willis C. Young	115,282,265	1,367,104

2.: The ratification of the appointment of KPMG LLP as independent accountants of the Company for the fiscal year ending December 31, 2002:

For		Against		Abstain
111,389,368		5,117,382		142,619

3.: The amendment of the 1996 Stock Incentive Program to increase the aggregate number of shares of the TriQuint's common stock that may be issued thereunder by 6,500,000:

For		Against		Abstain
79,326,688		36,910,525		412,156

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a): Exhibits

10.22		1998 Nonstatutory Stock Option Plan and form of agreement thereunder
10.33		Sawtek Inc. Employee Stock Ownership and 401(k) Plan
10.40		Amended Sale and Transfer Agreement between Infineon Technologies AG, Infineon Technologies North America Corp., TriQuint Semiconductor, Inc. and TriQuint GmbH dated as of April 29, 2002(1)
10.40.1		Interim Supply Agreement by and between and Infineon Technologies AG dated July 1, 2002(1)
10.40.2		Side Letter to the Interim Supply Agreement dated July 1, 2002(1)
10.40.3		Cooperation Agreement by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.4		Transition Services Agreement by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.5		Basic Supply Agreement Relating to the Supply of Highly Reliable Semiconductor Products and Assignment of Customer Contracts by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.6		Backend Foundry Agreement by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.7		Side Letter to Backend Foundry Agreement dated July 1, 2002(1)
10.40.8		Interim Lease Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002(1)
10.41		Letter Agreement dated June 28, 2002 between Registrant and Ralph Quinsey
99.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)

Incorporated by reference to our Report on Form 8-K (File No. 000-22660) filed with the Securities and Exchange Commission on July 15, 2002.

(b): Reports on Form 8-K

We filed a Report on Form 8-K (File No. 000-22660) with the Securities and Exchange Commission on May 6, 2002 to announce that we and Infineon Technologies AG signed a definitive agreement pursuant to which we intended to acquire Infineon's gallium arsenide semiconductor business.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		TriQuint Semiconductor, Inc.

Dated: August 13, 2002		/s/ Ralph Quinsey
		RALPH QUINSEY
		President and Chief Executive Officer (Principal Executive Officer)
Dated: August 13, 2002		/s/ Raymond A. Link
		RAYMOND A. LINK
		Vice President, Finance and Administration, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

Exhibit No.		Description
10.22		1998 Nonstatutory Stock Option Plan and form of agreement thereunder
10.33		Sawteck Inc. Employee Stock Ownership and 401(k) Plan
10.41		Amended Sale and Transfer Agreement between Infineon Technologies AG, Infineon Technologies North America Corp., TriQuint Semiconductor, Inc. and TriQuint GmbH dated as of April 29, 2002(1)
10.40.1		Interim Supply Agreement by and between and Infineon Technologies AG dated July 1, 2002(1)
10.40.2		Side Letter to the Interim Supply Agreement dated July 1, 2002(1)
10.40.3		Cooperation Agreement by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.4		Transition Services Agreement by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.5		Basic Supply Agreement Relating to the Supply of Highly Reliable Semiconductor Products and Assignment of Customer Contracts by and between TriQuint Seminconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.6		Backend Foundry Agreement by and between TriQuint Semiconductor, Inc. and Infineon Technologies AG dated July 1, 2002(1)
10.40.7		Side Letter to Backend Foundry Agreement dated July 1, 2002(1)
10.40.8		Interim Lease Agreement by and between Registrant and Infineon Technologies AG dated July 1, 2002(1)
10.41		Letter Agreement dated June 28, 2002 between Registrant and Ralph Quinsey
99.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1): Incorporated by reference to our Report on Form 8-K (File No. 000-22660) filed with the Securities and Exchange Commission on July 15, 2002.

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TRIQUINT SEMICONDUCTOR, INC. INDEX
PART I—FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS
TRIQUINT SEMICONDUCTOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) (Unaudited)
TRIQUINT SEMICONDUCTOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
TRIQUINT SEMICONDUCTOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
TRIQUINT SEMICONDUCTOR, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3: QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE RISK
PART II—OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-10.22 3 a2086235zex-10_22.htm EXHIBIT 10.22
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EXHIBIT 10.22

TRIQUINT SEMICONDUCTOR, INC.
1998 NONSTATUTORY STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE MARCH 2002)

1. Purposes of the Plan. The purposes of this 1998 Nonstatutory Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and to promote the success of the Company's business.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Administrator" shall mean the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.

(b) "Applicable Laws" means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options are, or will be, granted under the Plan.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(e) "Common Stock" shall mean the Common Stock of the Company.

(f) "Company" shall mean TriQuint Semiconductor, Inc., a Delaware corporation.

(g) "Committee" shall mean a Committee appointed by the Board of Directors in accordance with Section 4 of the Plan.

(h) "Consultant" shall mean any person who is engaged by the Company or any Parent or Subsidiary to render consulting services and is compensated for such consulting services; provided that the term Consultant shall not include directors who are not compensated for their services; or are paid only a director's fee by the Company.

(i) "Director" shall mean a member of the Board.

(j) "Continuous Status as an Employee or Consultant" shall mean the absence of any interruption or termination of service as an Employee or Consultant.

(k) "Employee" shall mean any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company.

(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

(m) "Officer" shall mean a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

(n) "Option" shall mean a nonstatutory stock option granted pursuant to the Plan, that is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(o) "Optioned Stock" shall mean the Common Stock subject to an Option.

(p) "Optionee" shall mean an Employee or Consultant who holds an outstanding Option.

(q) "Parent" shall mean a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code.

(r) "Plan" shall mean this 1998 Nonstatutory Stock Option Plan.

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

(t) "Share" shall mean a share of the Common Stock, as adjusted in accordance with Section 10 of the Plan.

(u) "Subsidiary" shall mean a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the Plan, the maximum aggregate number of shares under the Plan is 3,000,000 shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. Notwithstanding the above, however, if Shares are issued upon exercise of an Option and later repurchased by the Company, such Shares shall not become available for future grant or sale under the Plan.

4. Administration of the Plan.

(a) Administration. The Plan shall be administered by (i) the Board or (ii) a Committee, which committee shall be constituted to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan, the Administrator shall have the authority, in its discretion: (i) to determine, upon review of relevant information and in accordance with Section 7 of the Plan, the fair market value of the Common Stock; (ii) to determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 7 of the Plan; (iii) to determine the Employees or Consultants to whom, and the time or times at which, Options shall be granted and the number of shares to be represented by each Option; (iv) to interpret the Plan; (v) to prescribe, amend and rescind rules and regulations relating to the Plan; (vi) to determine the terms and provisions of each Option granted (which need not be identical) and, with the consent of the holder thereof, modify or amend each Option; (vii) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted by the Administrator; (viii) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the amount required to be withheld; (ix) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted; provided, however, that the Administrator must seek the prior consent of the Board of Directors and stockholders of the Company to effect such action; and (x) to make all other determinations deemed necessary or advisable for the administration of the Plan.

(c) Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options granted under the Plan.

5. Eligibility.

(a) Options may be granted to Employees and Consultants only; provided, however, that notwithstanding anything to the contrary contained in the Plan, Options may not be granted to Officers and Directors.

(b) Neither the Plan nor any Option shall confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in

any way with the Optionee's right or the Company's right to terminate such employment or consulting relationship at any time with or without cause.

6. Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 12 of the Plan.

7. Exercise Price and Consideration of Shares.

(a) The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Administrator, but in no event shall it be (i) less than 100% of the fair market value per Share on the date of grant.

(b) The fair market value shall be determined by the Administrator; provided, however, in the event that the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its fair market value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or in the event that the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the fair market value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable.

(c) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Board and may consist entirely of:

(i) cash,

(ii) check,

(iii) promissory note,

(iv) other Shares of Common Stock which (i) either have been owned by the Optionee for more than six (6) months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (ii) have a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which said option shall be exercised,

(v) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price, or

(vi) any combination of such methods of payment.

In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.

8. Options.

(a) Term of Option. The term of each Option shall be stated in the Option Agreement.

(b) Exercise of Option.

(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, including performance criteria with respect to the Company and/or the Optionee, and shall be permissible under the terms of the Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 7(c) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, which issuance shall be made as soon as is practicable, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(ii) Termination of Status as an Employee or Consultant. Unless otherwise provided by the Administrator, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant, such Optionee may, but only within three (3) months after the date of such termination (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that the Optionee was entitled to exercise it as of the date of such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of such termination, or if the Optionee does not exercise such Option (which the Optionee was entitled to exercise) within the time specified herein, the Option shall terminate.

(iii) Disability of Optionee. Notwithstanding the provisions of Section 8(b)(ii) above, unless otherwise provided by the Administrator, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his or her total and permanent disability (as defined in Section 22(e)(3) of the Code), the Optionee may, but only within six (6) months from the date of such termination (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent the Optionee was entitled to exercise it at the date of such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of termination, or if the Optionee does not exercise such Option (which the Optionee was entitled to exercise) within the time specified herein, the Option shall terminate.

(iv) Death of Optionee. In the event of the death of an Optionee:

(1) during the term of the Option, where the Optionee is at the time of his or her death an Employee or Consultant of the Company and where such Optionee shall have been in Continuous Status as an Employee or Consultant since the date of grant of the Option, the Option may be exercised, at any time within one (1) year following the date of death, by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, to the extent that he and she was entitled to exercise it at the date of death; or

(2) within three (3) months after the termination of Continuous Status as an Employee or Consultant for any reason other than for cause or a voluntary termination initiated by the Optionee, the Option may be exercised, at any time within one (1) year following the date of death, by the Optionee's estate or by a person who acquired the

right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of termination.

(v) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

9. Non-Transferability of Options. During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee's guardian, legal representative or permitted transferees. Except as specified below, no Option shall be assignable or transferable by the Optionee except by will or by the laws of descent and distribution. At the sole discretion of the Administrator, and subject to such terms and conditions as the Administrator deems advisable, the Administrator may allow, by means of a writing to the Optionee, for all or part of a vested NonStatutory Stock Option to be assigned or transferred, including by means of sale, during an Optionee's lifetime to a member of the Optionee's immediate family or to a trust, LLC or partnership for the benefit of any one or more members of such Optionee's immediate family. "Immediate family" as used herein means the spouse, lineal descendants, father, mother, brothers and sisters of the Optionee. In such case, the transferee shall receive and hold the Option subject to the provisions of this Section 9, and there shall be no further assignation or transfer of the Option. The terms of Options granted hereunder shall be binding upon the transferees, purchasers, executors, administrators, heirs, successors and assigns of the Optionee.

10. Adjustments Upon Changes in Capitalization or Merger. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

In the event of the proposed dissolution or liquidation of the Company, the Board shall notify the holder of an Option at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option will terminate immediately prior to the consummation of such proposed action.

In the event of a merger of the Company with or into another corporation, or the sale of all or substantially all of the Company's assets, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Board determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Optionee shall have the right to exercise the Option as to all of the Optioned Stock, including as to Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice, and the Option will terminate upon the expiration of such

period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or asset sale, the option confers the right to purchase, for each Share of Optioned Stock subject to the Option immediately prior to the merger or asset sale, the consideration (whether stock, cash, or other securities or property) received in the merger or asset sale by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

11. Time of Granting Options. The date of grant of an Option shall be the date on which the Administrator makes the determination granting such Option. Notice of the determination shall be given to each Employee or Consultant to whom an Option is granted within a reasonable time after the date of such grant.

12. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company.

13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may require the person exercising such Option or making such purchase to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

14. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

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EXHIBIT 10.22

EX-10.33 4 a2086235zex-10_33.htm EXHIBIT 10.33
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EXHIBIT 10.33

SAWTEK INC.
EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN

PREPARED BY:

DEAN, MEAD, EGERTON, BLOODWORTH, CAPOUANO & BOZARTH, P.A.,
800 North Magnolia Avenue
Suite 1500
Orlando, Florida 32803

[UPDATED FOR ALL AMENDMENTS THROUGH DECEMBER 20, 2001]

TABLE OF CONTENTS

			Page
BACKGROUND INFORMATION			1
ARTICLE I DEFINITIONS			1
ARTICLE II ELIGIBILITY			11
	2.1	CONDITIONS OF ELIGIBILITY	11
	2.2	EFFECTIVE DATE OF PARTICIPATION	11
	2.3	TERMINATION OF ELIGIBILITY	12
	2.4	OMISSION OF ELIGIBLE EMPLOYEE	12
	2.5	INCLUSION OF INELIGIBLE EMPLOYEE	12
ARTICLE III CONTRIBUTION AND ALLOCATION			13
	3.1	FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION	13
	3.2	PARTICIPANT'S SALARY REDUCTION ELECTION	14
	3.3	TIME OF PAYMENT OF CONTRIBUTIONS	17
	3.4	ACCOUNTING AND ALLOCATION	17
	3.5	AVERAGE DEFERRAL PERCENTAGE TESTS	21
	3.6	ADJUSTMENT TO AVERAGE DEFERRAL PERCENTAGE TESTS	23
	3.7	AVERAGE CONTRIBUTION PERCENTAGE TESTS	25
	3.8	ADJUSTMENT TO AVERAGE CONTRIBUTION PERCENTAGE TESTS	27
	3.9	MAXIMUM ANNUAL ADDITIONS	28
	3.10	ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS	30
	3.11	TRANSFERS FROM QUALIFIED PLANS	30
	3.12	PARTICIPANT'S QUALIFIED DIRECTED INVESTMENT ACCOUNT	31
	3.13	DIRECTED INVESTMENT ACCOUNT	32
	3.14	VOTING COMPANY STOCK	32
	3.15	UNIFORMED SERVICES EMPLOYMENT AND RE-EMPLOYMENT RIGHTS ACT	33
ARTICLE IV VALUATIONS			33
	4.1	VALUATION OF THE TRUST FUND	33
ARTICLE V FUNDING AND INVESTMENT POLICY			33
	5.1	INVESTMENT POLICY	33
	5.2	EMPLOYER SECURITIES	34
	5.3	APPLICATION OF CASH	34
	5.4	TRANSACTIONS INVOLVING COMPANY STOCK	34
	5.5	LOANS TO THE TRUST	35
ARTICLE VI DETERMINATION AND DISTRIBUTION OF BENEFITS			36
	6.1	DETERMINATION OF BENEFITS UPON RETIREMENT	36
	6.2	DETERMINATION OF BENEFITS UPON DEATH	37
	6.3	DETERMINATION OF BENEFITS IN EVENT OF DISABILITY	37
	6.4	DETERMINATION OF BENEFITS UPON TERMINATION	38
	6.5	DETERMINATION OF BENEFITS AT AGE 59¹/2	40
	6.6	DISTRIBUTION OF BENEFITS	40
	6.7	DISTRIBUTION OF BENEFITS UPON DEATH	43
	6.8	HOW ESOP BENEFITS WILL BE DISTRIBUTED	44
	6.9	IN SERVICE DISTRIBUTION	45
	6.10	TIME OF SEGREGATION OR DISTRIBUTION	45
	6.11	DISTRIBUTION FOR MINOR BENEFICIARY	45
	6.12	LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN	46
	6.13	LIMITATIONS ON BENEFITS AND DISTRIBUTIONS	46
	6.14	DISTRIBUTION OF DEFERRAL ACCOUNT UPON HARDSHIP	46
	6.15	DIRECT ROLLOVERS	47

	6.16	LOANS TO PARTICIPANTS	47
	6.17	PUT OPTION	49
	6.18	NONTERMINABLE PROTECTIONS AND RIGHTS	50
ARTICLE VII TOP HEAVY RULES			51
	7.1	DEFINITIONS	51
	7.2	TOP HEAVY PLAN REQUIREMENTS	53
	7.3	DETERMINATION OF TOP HEAVY STATUS	53
	7.4	REQUIRED MINIMUM ALLOCATIONS	54
	7.5	TOP HEAVY VESTING SCHEDULE	55
ARTICLE VIII ADMINISTRATION			55
	8.1	POWERS AND RESPONSIBILITIES OF THE EMPLOYER	55
	8.2	ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY	55
	8.3	ALLOCATION AND DELEGATION OF RESPONSIBILITIES	56
	8.4	POWERS, DUTIES AND RESPONSIBILITIES	56
	8.5	RECORDS AND REPORTS	57
	8.6	ANNUAL REPORT	57
	8.7	APPOINTMENT OF ADVISERS	57
	8.8	INFORMATION FROM EMPLOYER	57
	8.9	PAYMENT OF EXPENSES	57
	8.10	MAJORITY ACTIONS	58
	8.11	CLAIMS PROCEDURE	58
	8.12	CLAIMS REVIEW PROCEDURE	59
ARTICLE IX AMENDMENT, TERMINATION, AND MERGERS			59
	9.1	AMENDMENT	59
	9.2	TERMINATION	59
	9.3	MERGER OR CONSOLIDATION	60
ARTICLE X MISCELLANEOUS			60
	10.1	PARTICIPANT'S RIGHTS	60
	10.2	ALIENATION	60
	10.3	CONSTRUCTION OF AGREEMENT	61
	10.4	GENDER AND NUMBER	61
	10.5	LEGAL ACTION	61
	10.6	PROHIBITION AGAINST DIVERSION OF FUNDS OR FORFEITURE FOR CAUSE	61
	10.7	BONDING	61
	10.8	EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE	62
	10.9	RECEIPT AND RELEASE FOR PAYMENTS	62
	10.10	ACTION BY THE EMPLOYER	62
	10.11	NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY	62
	10.12	HEADINGS	62
	10.13	UNIFORMITY	62
APPENDIX
	A	PARTICIPATION IN TRIQUINT PROFIT SHARING PROGRAM	64

SAWTEK INC.
EMPLOYEE STOCK OWNERSHIP AND 401(k) PLAN

This Plan document represents a restatement of the Employee Stock Ownership and 401(k) Plan of Sawtek Inc., a Florida corporation (the "Employer"), and includes all amendments made to the Plan through December 20, 2001.

BACKGROUND INFORMATION

A. Effective October 1, 1980, the Employer adopted the predecessor of the Sawtek Inc. Code § 401(k) Profit Sharing Plan and Trust Agreement (the "401(k) Plan").

B. The 401(k) Plan was amended and restated effective October 1, 1987, and February 15, 1996, and also was amended from time to time in the interim. The pre-tax salary deferral feature was added effective October 1, 1991.

C. Effective October 1, 1990, the Employer adopted the Employee Stock Ownership Plan and Trust Agreement for Employees of Sawtek Inc. (the "ESOP") in order to enable the Eligible Employees of the Employer to acquire a proprietary interest in the common stock of the Employer.

D. The ESOP was amended on three occasions since its original effective date, and then was amended and restated effective February 15, 1996.

E. On July 16, 1997, the 401(k) Plan was merged into the ESOP, creating this Plan. At that time, an Employer matching provision was added. The Plan was further amended in response to the favorable determination letter issued by the IRS to the Plan on January 27, 1999, and then again on August 31, 1999, July 25, 2000, November 3, 2000, July 19, 2001, November 28, 2001 and December 20, 2001.

F. Amounts contributed under the Plan will be held and invested, and then distributed, by the Trustee. The Trustee shall act in accordance with the terms of a separate Trust Agreement between the Employer and the Trustee, which Trust Agreement shall be known as the Sawtek Inc. Employee Stock Ownership and 401(k) Trust (the "Trust"). The Trust implements and forms a part of the Plan. The provisions of, and the benefits under, the Plan are subject to the terms and provisions of the Trust.

ARTICLE I
DEFINITIONS

1.1 "Act" means the Employee Retirement Income Security Act of 1974, as amended.

1.2 "Actual Contribution Percentage" means, with respect to a Participant, the percentage obtained (calculated to the nearest one hundredth of one percent) by dividing the Matching Contribution allocated to such Participant for the Plan Year by his or her Compensation for the same Plan Year. For purposes of this computation, a Participant's Compensation shall include only such items as are paid after the Participant's Plan entry date specified in Section 2.2.

1.3 "Actual Deferral Percentage" means, with respect to a Participant, the percentage obtained (calculated to the nearest one hundredth of one percent) by dividing the Participant's Deferred Compensation for the Plan Year by his or her Compensation for the same Plan Year. Deferred Compensation allocated to the Participant's Deferral Account of each Non-Highly Compensated Participant shall be reduced by Excess Deferred Compensation to the extent such excess amounts are made under the Plan or any other plan maintained by the Employer. For purposes of this computation, a Participant's Compensation shall include only such items as are paid after the Participant's Plan entry date specified in Section 2.2.

1.4 "Administrator" means the Employer, unless a person or committee of persons is designated by the Employer pursuant to Article VIII to administer the Plan on behalf of the Employer. Until such

time as the Board of Directors of the Employer provides otherwise, the President and Chief Financial Officer of the Employer are appointed to administer the Plan on behalf of the Employer.

1.5 "Affiliated Employer" means the Employer and any of the following entities:

(a) Any corporation which is a member of a "controlled group of corporations" (as that phrase is defined in Code § 414(b)), which group includes the Employer;

(b) Any trade or business (whether or not incorporated, and including a sole proprietorship, partnership, estate and trust) which is under "common control" (as that phrase is defined in Code § 414(c)) with the Employer;

(c) Any entity (whether or not incorporated) which is a member of an "affiliated service group" (as that phrase is defined in Code § 414(m)), which group includes the Employer; and

(d) Any entity required to be aggregated with the Employer pursuant to Regulations promulgated pursuant to Code § 414(o).

1.6 "Aggregate Account" means, with respect to each Participant, the value of all accounts (including the Participant's Deferral Account, Participant's Profit Sharing Account, Participant's ESOP Account, Participant's Matching Account and Participant's Rollover Account) maintained on behalf of a Participant, whether attributable to Employer or Employee contributions. A Participant's ESOP Account is comprised of his or her Participant's Company Stock Account, Participant's ESOP Investment Account, and Participant's Qualified Directed Investment Account.

1.7 "Agreement" or "Plan" shall mean this instrument, including all amendments or restatements hereof.

1.8 "Anniversary Date" means September 30.

1.9 "Average Contribution Percentage" means, with respect to a specified group of Participants for a Plan Year, the average (calculated to the nearest one hundredth of one percent) of the Actual Contribution Percentages of the Participants in such specified group for the Plan Year.

1.10 "Average Deferral Percentage" means, with respect to a specified group of Participants for a Plan Year, the average (calculated to the nearest one hundredth of one percent) of the Actual Deferral Percentages of the Participants in such specified group for the Plan Year.

1.11 "Beneficiary" means the person or entity to whom the share of a deceased Participant's Aggregate Account is payable, subject to the restrictions of Section 6.2.

1.12 "Business Day" means any day on which the Federal Reserve and New York Stock Exchange are both open for business.

1.13 "Code" means the Internal Revenue Code of 1986, as amended or replaced from time to time.

1.14 "Company Stock" means common stock issued by the Employer (or by a corporation which is a member of the controlled group of corporations of which the Employer is a member) which is readily tradeable on an established securities market.

1.15 "Compensation" means, with respect to any Participant, such Participant's wages for the Plan Year within the meaning of Code § 3401(a) (for the 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.

For purposes of this Section 1.15, the determination of Compensation shall be made by including salary reduction contributions made on behalf of a Participant to a plan maintained by the Employer pursuant to Code §§ 125 or 401(k). However, for purposes of applying Section 3.9 for Plan Years beginning prior to December 31, 1997, Compensation shall not include, or shall be net of, salary reduction contributions made on behalf of a Participant to a plan maintained by the Employer pursuant to Code §§ 125 or 401(k).

For purposes of allocations made pursuant to Section 3.4, Compensation shall not include any income realized or recognized relating to the exercise of any incentive stock option or non-qualified stock option granted to the Participant by the Employer, or relating to the purchase of Company Stock pursuant to an employee stock purchase plan maintained by the Employer. Furthermore, Compensation shall not include any moving allowances or tuition reimbursements paid by the Employer.

Compensation in excess of $150,000 ($200,000 for Plan Years beginning after December 31, 2001, or such other amount as the Secretary of the Treasury may designate from time to time pursuant to Code § 401(a)(17)(B)) shall be disregarded regardless of whether the Plan is a Top Heavy Plan. If a determination period consists of fewer than 12 months, the foregoing annual Compensation limit shall 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.

Effective for Participants that enter the Plan on and after July 16, 1997, Compensation for a Participant's Plan Year of entry shall mean Compensation actually paid after the Participant enters the Plan pursuant to Article II. However, see Section 7.4 for the definition of Compensation in the event a minimum allocation is required for any Top Heavy Plan Year.

For Plan Years beginning prior to December 31, 1996, in determining the Compensation of an Employee, the family attribution rules of Code §§401(a)(17) and 414(q)(6) (as modified by Code § 401(a)(17)) shall apply.

1.16 "Current Obligations" means principal and interest obligations arising from an extension of credit to the Trust which are payable in cash within one year from the date an Employer Contribution is due.

1.17 "Deferred Compensation" means that portion of a Participant's Compensation which has been deferred pursuant to Section 3.2, and has been allocated to the Participant's Deferral Account.

1.18 "Determination Year" means the Plan Year for which testing is being performed to determine if an Employee is a Highly Compensated Employee.

1.19 "Direct Rollover" means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee in accordance with Section 6.15.

1.20 "Distributee" means an Employee or former Employee. In addition, an Employee's or former Employee's surviving spouse and an Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code §414(p), shall be Distributees with regard to the interest of the spouse or former spouse.

1.21 "Eligible Employee" means any Employee who is not otherwise described in this Section and has satisfied the age provisions of Section 2.1.

Employees who are Leased Employees, or who are nonresident aliens who do not receive any earned income (as defined in Code § 911(d)(2) from the Employer which constitutes United States source income (as defined in Code § 861(a)(3)), shall not be eligible to participate in this Plan.

Employees of Affiliated Employers shall become Eligible Employees only upon satisfaction of the age requirement of Section 2.1 and the adoption of this Plan by the Affiliated Employer, which adoption must be approved by the Board of Directors of Sawtek Inc.

Notwithstanding the foregoing paragraph or any other provision of the Plan, any Employee of the Employer who had entered the Plan and become a Participant in the Plan in accordance with Article II prior to the "Effective Time" (as defined in the Agreement and Plan of Reorganization by and among TriQuint Semiconductor, Inc., Timber Acquisition Corp. and Sawtek Inc. dated as of May 15, 2001, as amended) shall continue to be an Eligible Employee and shall continue to be a Participant so long as such Employee remains an Employee of Sawtek Inc., TriQuint Semiconductor, Inc. or any Affiliated Employer of Sawtek Inc., other than a foreign affiliate thereof. Such Employee's Compensation, Hours of Service and Years of Service shall include his aggregate Compensation from, and Hours of Service

and Years of Service with, Sawtek Inc., TriQuint Semiconductor, Inc., or any Affiliated Employer thereof.

Employees who were employed by TriQuint Semiconductor, Inc., or any Affiliated Employer of TriQuint Semiconductor, Inc. (other than Sawtek Inc.) prior to the Effective Time shall not become an Eligible Employee and shall not become a Participant in the Plan, unless approved by the Administrator in accordance with a non-discriminatory policy, consistently applied.

Employees hired after the Effective Time shall be Eligible Employees and shall participate in the Plan only if they otherwise are not excluded as Eligible Employees by this Section 1.21 and only if they are employed by Sawtek Inc. or are working in the Sawtek Inc. business unit.

Employees who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the Employer shall not be eligible to participate in this Plan if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and the Employer, unless such collective bargaining agreement requires the covered employees to participate in this Plan.

1.22 "Eligible Retirement Plan" means (i) an individual retirement account described in Code § 408(a), (ii) an individual retirement annuity described in Code § 408(b), (iii) an annuity plan described in Code § 403(a), (iv) a qualified trust described in Code § 401(a), (v) an eligible deferred compensation plan described in Code §457(b) which is maintained by an eligible employer described in Code §457(e)(1)(A) (i.e., a state or political subdivision of a state or any agency or instrumentality of a state or political subdivision of a state), or (vi) an annuity contract described in Code §403(b) that accepts the Distributee's Eligible Rollover Distribution. The foregoing definition of Eligible Retirement Plan shall apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is an "alternate payee" under a "qualified domestic relations order" as defined in Code §414(p).

1.23 "Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include (i) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's Beneficiary, or for a specified period of ten years or more, (ii) any distribution to the extent such distribution is required under Code § 401(a)(9), (iii) the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities), and (iv) any amount that is distributed on account of hardship pursuant to Section 6.14 below.

1.24 "Employee" means any person who is employed by the Employer, or Affiliated Employer, but excludes any person who is employed as an independent contractor.

The term "Employee" shall include any Leased Employee, unless such Leased Employee is covered by a plan described in Code § 414(n)(5) and Leased Employees do not constitute more than 20% of the Employer's Non-Highly Compensated Employees.

1.25 "Employer" means Sawtek Inc., a Florida corporation, any subsidiary or parent of such corporation which adopts the Plan with the approval of the Board of Directors of Sawtek Inc., any successor which shall maintain this Plan, and any other employer permitted by the Employer to adopt this Plan.

1.26 "ESOP" means an employee stock ownership plan that meets the requirements of Code § 4975(e)(7) and Regulation § 54.4975-11.

1.27 "ESOP Contribution" means the Employer's contribution to the Plan, made pursuant to Section 3.1(a) and allocated to the Participants' ESOP Accounts.

1.28 "Excess Deferred Compensation" means, with respect to the taxable year of a Participant, the excess of such Participant's Deferred Compensation under this Plan plus the elective deferrals

described in Section 3.2(f) and Regulation § 1.402(g)-1(b), actually made on behalf of such Participant for such taxable year, over the dollar limitation provided for in Code § 402(g), which is incorporated herein by reference. For purposes of Code § 415, pursuant to Regulation § 1.415-6(b)(1), Excess Deferred Compensation shall be treated as an "annual addition" unless distributed pursuant to Section 3.2(f). Excess Deferred Compensation shall be included in an Employee's Deferred Compensation for purposes of the Actual Deferral Percentage test and Average Deferral Percentage test, unless such excess relates to a deferral made by a Non-Highly Compensated Participant under this or any other qualified retirement plan of the Employer.

1.29 "Excess Elective Contributions" means, with respect to a Plan Year, the excess of Deferred Compensation made pursuant to Section 3.2 on behalf of a Highly Compensated Participant for such Plan Year, over the maximum amount of such contributions permitted under Section 3.5(a) and Code § 401(k)(3). Excess Elective Contributions shall be treated as "annual additions" pursuant to Section 3.9 and Code § 415.

1.30 "Excess Matching Contributions" means, with respect to a Plan Year, the excess of Employer Matching Contributions made pursuant to Section 3.1(c) on behalf of a Highly Compensated Participant for such Plan Year, over the maximum amount of such Employer Matching Contributions permitted under the limitations of Section 3.7 and Code § 401(m). Excess Matching Contributions shall be attributed to individual Highly Compensated Participants in accordance with Section 3.8(a).

1.31 "Exempt Loan" means a loan made to the Trust by a disqualified person or a loan to the Plan which is guaranteed by a disqualified person and which satisfies the requirements of § 2550.408b-3 of the Department of Labor Regulations, Regulation § 54.4975-7(b) and Section 5.5 hereof.

1.32 "Family Member" means, with respect to an affected Participant, such Participant's spouse, lineal descendants and ascendants and their spouses, all as described in Code § 414(q)(6)(B). The family aggregation provisions no longer apply in Plan Years beginning on and after October 1, 1997.

1.33 "Fiduciary" means any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets; (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan or has any authority or responsibility to do so; or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan. Such definition includes, but is not limited to, the Trustee, the Employer and its representative body, and the Administrator.

1.34 "Fiscal Year" means the Employer's accounting year of 12 months commencing on October 1 of each year and ending the following September 30.

1.35 "Forfeiture" means that portion of a Participant's ESOP Account, Participant's Matching Account or Participant's Profit Sharing Account that is not Vested, and occurs on the earlier of:

(a) The distribution of the entire Vested portion of a Participant's ESOP Account, Participant's Matching Account or Participant's Profit Sharing Account; or

(b) The last day of the Plan Year in which the Participant incurs five consecutive One-Year Breaks in Service.

For purposes of paragraph (a) above, in the case of a Terminated Participant whose Vested interest in his Participant's ESOP Account, Participant's Matching Account or Participant's Profit Sharing Account is zero, such Terminated Participant shall be deemed to have received a distribution of his Vested interest in such account(s) upon the effective date of his termination of employment. Restoration of such amounts shall occur pursuant to Section 3.4.

1.36 "Former Participant" means a person who has been an active Participant, but who has ceased to be a Participant for any reason.

1.37 "Gap Period" means the period of time between the end of the applicable computation period (i.e., Participant's taxable year or the Plan Year) and the date a corrective distribution is made to the Participant.

1.38 "Highly Compensated Employee" means an Employee described in Code § 414(q) and the Regulations thereunder, and generally means an Employee who performed services for the Employer during the Determination Year, and is in one or more of the following groups:

(a) Employees who at any time during the Determination Year or Look-Back Year were "five percent owners" of the Employer.

(b) Employees who received Compensation during the Look-Back Year from the Employer in excess of $75,000.

(c) Employees who received Compensation during the Look-Back Year from the Employer in excess of $50,000 ($80,000 for Plan Years beginning after December 31, 1996) and were in the Top Paid Group of Employees for the Plan Year (Look-Back Year for Plan Years beginning after December 31, 1996).

(d) Employees who during the Look-Back Year were "officers" of the Employer (as that term is defined within the meaning of the Regulations under Code § 416) and received Compensation during the Look-Back Year from the Employer greater than 50% of the limit in effect under Code § 415(b)(1)(A) for any such Plan Year. The number of officers shall be limited to the lesser of (i) 50 employees; or (ii) the greater of three employees or ten percent of all employees. For purposes of determining the number of officers, Employees described in Section (a), (b), (c) and (d) shall be excluded, but such Employees shall still be considered for purposes of identifying the particular Employees who are officers. If the Employer does not have at least one officer whose annual Compensation is in excess of 50% of the Code § 415(b)(1)(A) limit, then the highest paid officer of the Employer shall be treated as a Highly Compensated Employee.

(e) Employees who are in the group consisting of the 100 Employees paid the greatest Compensation during the Determination Year and are also described in (b), (c) or (d) above when these paragraphs are modified to substitute Determination Year for Look-Back Year.

For Plan Years beginning after December 31, 1996, subparagraphs (b), (d) and (e) shall no longer apply, except that in determining whether an Employee is a Highly Compensated Employee for purposes of the Plan Year beginning October 1, 1997, subparagraphs (b), (d) and (e) shall not be applied to the Look-Back Year beginning October 1, 1996, and the parenthetical language in subparagraph (c) shall be applied to such Look-Back Year.

The dollar threshold amounts specified in (b) and (c) above shall be adjusted at such time and in such manner as is provided in Code § 414(q)(1). In the case of such an adjustment, the dollar limits which shall be applied are those for the calendar year in which the Determination Year or Look-Back Year begins.

In determining who is a Highly Compensated Employee, Employees who are non-resident aliens and who received no earned income (within the meaning of Code § 911(d)(2)) from the Employer constituting United States source income within the meaning of Code § 861(a)(3) shall not be treated as Employees. Additionally, all Affiliated Employers shall be taken into account as a single employer and Leased Employees within the meaning of Code § 414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased Employees are covered by a plan described in Code § 414(n)(5) and are not covered in any qualified plan maintained by the Employer. The exclusion of Leased Employees for this purpose shall be applied on a uniform and consistent basis for all of the Employer's retirement plans. Highly Compensated Former Employees shall be treated as Highly Compensated Employees without regard to whether they performed services during the Determination Year.

1.39 "Highly Compensated Former Employee" means a former Employee who (i) had a separation year prior to the Determination Year and (ii) was either a Highly Compensated Employee in the year of separation from service or in any Determination Year after attaining age 55. Highly Compensated Former Employees shall be treated as Highly Compensated Employees.

1.40 "Highly Compensated Participant" means any Highly Compensated Employee who is eligible to participate in the Plan.

1.41 "Hour of Service" means (a) each hour for which an Employee is directly or indirectly compensated or entitled to compensation by the Employer for the performance of duties during the applicable computation period; (b) each hour for which an Employee is directly or indirectly compensated or entitled to compensation by the Employer (irrespective of whether the employment relationship has terminated) for reasons other than performance of duties (such as vacation, holidays, sickness, jury duty, disability, lay-off, military duty or leave of absence) during the applicable computation period; and (c) each hour for which back pay is awarded or agreed to by the Employer without regard to mitigation of damages.

For purposes of (a) above, Hours of Service shall be credited to the computation period (See definition of Year of Service) in which the duties are performed. For purposes of (b) above, Hours of Service shall be credited to the computation period provided for in Department of Labor regulations §2530.200b-2(c)(2). Finally, for purposes of (c) above, Hours of Service shall be credited to the computation period or periods to which the award or agreement for back pay pertains, rather than to the computation period in which the award, agreement or payment is made.

Hours of Service for hourly Employees shall be based on actual hours worked, and for salaried Employees on the basis of 45 Hours of Service for each week (or portion thereof) employed by the Employer.

Notwithstanding the above, (i) no more that 501 Hours of Service are required to be credited to any Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period); (ii) an hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker's compensation, unemployment compensation or disability insurance laws; and (iii) Hours of Service are not required to be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

For purposes of this Section, a payment shall be deemed to be made by or due from the Employer regardless of whether such payment is made by or due from the Employer directly or indirectly through, among others, a trust, fund, or insurer, to which the Employer contributes or pays premiums and regardless of whether contributions made or due to the trust, fund, insurer, or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate.

An Hour of Service must be counted for purposes of determining a Year of Service, a year of participation for purposes of accrued benefits, a One-Year Break in Service, and employment commencement date (or reemployment commencement date). The provisions of Department of Labor Regulations §§ 2530.200 b-2(b) and (c) are incorporated herein by reference.

1.42 "Investment Manager" means any person, firm or corporation (other than the Trustee or named Fiduciary) who (i) is a registered investment adviser under the Investment Advisers Act of 1940, or is a bank or insurance company described in Act § 3(38), (ii) has the power to manage, acquire, or dispose of Plan assets, and (iii) acknowledges in writing its fiduciary responsibility to the Plan under the Act. See Section 8.1(c).

1.43 "Leased Employee" means a person who provides services to the Employer and is described in Code § 414(n) and Regulations promulgated thereunder. Generally, a person shall be considered a Leased Employee if:

(a) He is not otherwise an Employee of the Employer,

(b) He provides services to the Employer,

(d) Such person has performed such services for the Employer on a substantially full-time basis for at least twelve months, and

(e) Such services are of a type historically performed in the Employer's business field by employees. Effective for Plan Years beginning after December 31, 1996, this requirement shall be amended by deleting the foregoing "historically performed" provision and instead requiring that such services be performed under the primary direction and control of the Employer.

1.44 "Look-Back Year" means the twelve month period immediately preceding the Determination Year for which testing is being performed to determine if an Employee is a Highly Compensated Employee. See definition of Highly Compensated Employee.

1.45 "Matching Contribution" means the Employer's matching contribution made to the Plan pursuant to Section 3.1(c) and allocated to a Participant's Matching Account.

1.46 "Net Profit" means, with respect to any Fiscal Year, the Employer's pre-tax profit for such Fiscal Year determined upon the basis of the Employer's books of account in accordance with the method of accounting regularly used by the Employer, without any reduction for taxes upon income or for contributions made by the Employer to this Plan or any other qualified retirement plan.

1.47 "Nonallocation Period" means the period beginning on the date of the sale of Company Stock to the Plan and ending on the later of:

(a) the date which is 10 years after the date of sale; or

(b) the date of the Plan allocation attributable to the final payment of acquisition indebtedness incurred in connection with such sale.

1.48 "Noncurrent Obligations" means Trust obligations arising from an extension of credit to the Trust which are payable in cash later than one year from the date an Employer contribution is due.

1.49 "Non-Highly Compensated Employee" means any Employee who is neither a Highly Compensated Employee or (for Plan Years beginning prior to December 31, 1996) a Family Member thereof.

1.50 "Non-Highly Compensated Participant" means any Participant who is neither a Highly Compensated Employee or (for Plan Years beginning prior to December 31, 1996) a Family Member thereof.

1.51 "Normal Retirement Date" means the first day of the month coinciding with or next following the earlier of (i) the date of attainment of the Participant's Normal Retirement Age, or (ii) the date on which the combination of the Participants' attained age plus Years of Service equals or exceeds seventy (70). For purposes of this Section, "Normal Retirement Age" means the earlier of the Participant's attainment of (X) age 65 with five (5) or more years of participation in the Plan, or (Y) age 55 with seven (7) or more Years of Service. A Participant shall become 100% Vested in his Aggregate Account upon attaining his Normal Retirement Age. See Section 6.1 for distributions following a termination of employment after a Participant's Normal Retirement Date.

1.52 "One-Year Break in Service" means a Plan Year during which an Employee has not completed more than 500 Hours of Service with the Employer. An Employee shall not incur a One-Year Break in Service for the Plan Year in which he becomes a Participant, dies, retires or suffers a Total and Permanent Disability. Furthermore, solely for the purpose of determining whether a Participant has incurred a One-Year Break in Service, Hours of Service shall be recognized for "authorized leaves of absence" and "maternity or paternity leaves of absence."

"Authorized leave of absence" means an unpaid, temporary cessation from active employment with the Employer pursuant to an established, non-discriminatory policy, whether occasioned by illness, military service, or any other reason.

A "maternity or paternity leave of absence" means an absence from work for any period by reason of the Employee's pregnancy, birth of the Employee's child, placement of a child with the Employee in connection with the adoption of such child, or any absence for the purpose of caring for such child for a period immediately following such birth or placement. For this purpose, Hours of Service shall be credited for the computation period in which the absence from work begins only if credit therefore is necessary to prevent the Employee from incurring a One-Year Break in Service or, in any case in which the Administrator is unable to determine such hours normally credited, eight Hours of Service per day. The total Hours of Service required to be credited for a "maternity or paternity leave of absence" shall not exceed 501.

1.53 "Participant" means any Eligible Employee who becomes eligible for and enters the Plan as provided in Sections 2.1 and 2.2, and has not for any reason become ineligible to participate further in the Plan. Upon termination of employment, a Participant becomes a Former Participant for purposes of the Plan.

1.54 "Participant's Company Stock Account" means the subaccount of the Participant's ESOP Account which is credited with the shares of Company Stock purchased and paid for by the Trust or contributed to the Trust Fund.

1.55 "Participant's Deferral Account" means the account established and maintained by the Administrator for each Participant with respect to his interest in the Plan resulting from the Participant's Deferred Compensation contributed to the Plan pursuant to Sections 3.1(b) and 3.2. A Participant shall be 100% Vested in his Participant's Deferral Account at all times.

1.56 "Participant's ESOP Account" means the account established and maintained by the Administrator for each Participant with respect to his interest in the Plan resulting from the Employer's ESOP Contributions made pursuant to Section 3.1(a) and Forfeitures allocated pursuant to Section 3.4. A Participant's ESOP Account may be further subdivided into a Participant's Company Stock Account, Participant's ESOP Investment Account and Participant's Qualified Directed Investment Account. A Participant's interest in his Participant's ESOP Account shall be subject to the vesting provisions of Section 6.4.

1.57 Participant's ESOP Investment Account" means the subaccount of the Participant's ESOP Account which is credited with his share of net gains or losses, Forfeitures and Employer ESOP Contributions held in a form other than Company Stock and which is debited with payments to acquire Company Stock.

1.58 "Participant's Matching Account" means the account established and maintained by the Administrator for each Participant with respect to his interest in the Plan resulting from the Employer's Matching Contributions made pursuant to Section 3.1(c). A Participant's interest in his Participant's Matching Account shall be subject to the vesting provisions of Section 6.4.

1.59 "Participant's Profit Sharing Account" means the account established and maintained by the Administrator for each Participant with respect to his interest in the Plan resulting from the Employer's

Profit Sharing Contribution, if any, made pursuant to Section 3.1(e). A Participant's interest in his Participant's Profit Sharing Account shall be subject to the vesting provisions of Section 6.4.

1.60 "Participant's Qualified Directed Investment Account" means the subaccount established by the Administrator for a Qualified Participant who makes a diversification election pursuant to Section 3.12.

1.61 "Participant's Rollover Account" means the account established and maintained by the Administrator for any Participant (or Employee) who has transferred amounts to the Plan from another qualified plan (or conduit IRA) pursuant to Section 3.11. A Participant shall be 100% Vested in his Participant's Rollover Account at all times.

1.62 "Plan Year" means the Plan's accounting year of 12 months commencing on October 1 of each year and ending the following September 30.

1.63 "Profit Sharing Contribution" means the Employer's contribution to the Plan made pursuant to Section 3.1(e) and allocated to the Participant's Profit Sharing Account.

1.64 "Qualified Election Period" means the six Plan Year period beginning with the first Plan Year in which the Participant becomes a Qualified Participant.

1.65 "Qualified Non-Elective Contribution" means the Employer's contributions to the Plan that are made pursuant to Section 3.1(d). Such contributions shall be (i) considered additional Deferred Compensation for purposes of the Plan, (ii) allocated to the Participant's Deferral Account, and (iii) used to satisfy the Average Deferral Percentage test of Section 3.5.

1.66 "Qualified Participant" means any Participant or Former Participant who has attained age 55 and has been credited with ten (10) Years of Service.

1.67 "Regulation" means the income tax regulations promulgated by the Secretary of the Treasury or his delegate, as amended from time to time.

1.68 "Retired Participant" means a person who has been a Participant, but who has become entitled to retirement benefits under the Plan.

1.69 "Retirement Date" means the date as of which a Participant retires.

1.70 "Suspense Account" means the account credited with the portion of all Former Participant's ESOP Accounts, Participant's Matching Accounts and Participant's Profit Sharing Accounts which have become forfeitable during any Plan Year, but which have not been reallocated pursuant to Section 3.4(e).

1.71 "Terminated Participant" means a person who has been a Participant, but whose employment has been terminated other than by death, Total and Permanent Disability, or retirement.

1.72 "Total and Permanent Disability" means a physical or mental condition of the Participant resulting from bodily injury, disease or mental disorder which results in a termination of employment of the Participant and which satisfies the requirements for long term disability income benefits under the Employer's group, long term disability income insurance policy. Such determination of disability shall be made under the terms of such group, long term disability income insurance policy by the insurance company.

In the event no such group, long term disability income insurance policy is provided by the Employer, "Total and Permanent Disability" means a physical or mental condition of the Participant resulting from bodily injury, disease or mental disorder which renders him incapable of continuing his usual and customary employment with the Employer after reasonable accommodations have been made in accordance with applicable federal and state laws, resulting in a termination of employment of the Participant for a period not less than ninety (90) days. The determination of Total and Permanent

Disability shall be made by the Administrator in its discretion, and shall be based upon a medical examination of the Participant by a licensed medical provider designated by the Administrator. All fees and costs of the examination by a licensed medical provider shall be paid by the Employer. The decision of the Administrator pursuant to this paragraph shall be subject to review by the Participant in accordance with Sections 8.11 and 8.12 below.

A Participant shall not be deemed to be Totally and Permanently Disabled while on an authorized leave of absence or on a leave of absence under the Family and Medical Leave Act.

1.73 "Trustee" means the person named as Trustee of the Sawtek Inc. Employee Stock Ownership and 401(k) Trust.

1.74 "Trust Fund" means the assets of the Plan as the same shall exist from time to time.

1.75 "Unallocated Company Stock Suspense Account" means an account containing Company Stock acquired with the proceeds of an Exempt Loan, which Company Stock has not been released from such account and allocated to the Participants' Company Stock Accounts.

1.76 "Valuation Date" means the Anniversary Date of the Plan, and any other date on which the Administrator makes allocations, or pursuant to Section 4.1, directs the Trustee to value the Trust Fund. In the event the Employer elects to value the Trust Fund, or any portion thereof, on a daily basis, Valuation Date also shall include all Business Days.

1.77 "Vested" means the portion of any of the Participant's accounts in the Plan that is nonforfeitable. This Plan does not permit forfeiture for cause. However, see Section 3.1 for permitted reversions of all or a portion of the Trust Fund to the Employer.

1.78 "Year of Service" shall mean a Plan Year, during which an Employee is credited with at least 1000 Hours of Service.

Years of Service (including service as a Leased Employee) with any Affiliated Employer shall be recognized.

Service from the date on which the Employee first performs an Hour of Service shall be counted in computing Years of Service for vesting purposes.

The Administrator shall, in accordance with a uniform, non-discriminatory policy, elect to credit Hours of Service pursuant to this Plan by counting actual Hours of Service for any Employee, or by adopting an equivalency based on a period of employment as provides in §2530.200-2(c) of the Department of Labor Regulations.

ARTICLE II
ELIGIBILITY

2.1 CONDITIONS OF ELIGIBILITY

Any full-time Employee who had entered the Plan as of July 16, 1997 shall continue to be eligible to participate hereunder. Otherwise, an Employee must meet the eligibility requirements described below in order to become a Participant.

Any Employee who has attained age 18 shall be eligible to participate hereunder immediately upon his employment, provided such Employee is not excluded from participation by the Eligible Employee provisions of Section 1.21.

2.2 EFFECTIVE DATE OF PARTICIPATION

Any Eligible Employee who had entered the Plan as of July 16, 1997 shall continue to participate in the Plan for all purposes. Thereafter, an Employee who, pursuant to Section 2.1, has become eligible

to participate hereunder shall enter the Plan immediately upon meeting the requirements of Section 2.1.

2.3 TERMINATION OF ELIGIBILITY

(a) In the event a Participant shall go from a classification of an Eligible Employee to a non-eligible Employee (e.g., by becoming a Leased Employee or Employee covered by a collective bargaining agreement), such Participant shall become a Former Participant but shall continue to vest in his or her Participant's ESOP Account, Participant's Profit Sharing Account and Participant's Matching Account for each Year of Service completed while a non-eligible Employee, until such time as his Participant's ESOP Account, Participant's Profit Sharing Account and Participant's Matching Account shall be forfeited or distributed pursuant to the terms of the Plan. Additionally, such Former Participant's Aggregate Account in the Plan shall continue to share in the income, gains or losses of the Trust Fund, unless such Aggregate Account is otherwise segregated or subject to the investment direction provisions of Section 3.13.

(b) In the event an Employee ceases to be a Participant in the Plan because of a change of job classification (i.e., becomes a Leased Employee, covered by a collective bargaining agreement, or an independent contractor), but has not incurred a One-Year Break in Service, such Employee shall again become a Participant effective as of the first day of the Plan Year in which such Employee again becomes an Eligible Employee.

(c) In the event an individual who is an Employee, but not an Eligible Employee, becomes a member of an eligible class, then such Employee shall enter the Plan and become a Participant as of the later of (i) the first day of the Plan Year in which the Employee becomes an Eligible Employee, or (ii) the entry date provided in Section 2.2 coinciding with or next following the date the Employee met any age requirement of Section 2.1 (assuming the Employee had been an Eligible Employee during his entire period of service to the Employer).

2.4 OMISSION OF ELIGIBLE EMPLOYEE

If in any Plan Year any Employee who should be included as a Participant in the Plan is erroneously omitted, and discovery of such omission is not made until after a contribution by the Employer for the Plan Year has been made and after the allocation of such contribution has been completed pursuant to Section 3.4, the Employer shall make a subsequent contribution (or any available Forfeitures shall be applied) with respect to the omitted Employee in an amount which the Administrator would have allocated to such omitted Participant's Aggregate Account (plus any lost earnings due to the omission) had the Participant not been omitted. Such contribution shall be made regardless of its deductibility in whole or in part in any taxable year under applicable provisions of the Code. In addition, such Employee may immediately begin making salary deferrals.

2.5 INCLUSION OF INELIGIBLE EMPLOYEE

If in any Plan Year any person who should not have been included as a Participant in the Plan is erroneously included, and discovery of such incorrect inclusion is not made until after a contribution for the Plan Year has been made and after the allocation of such contribution erroneously has been made to the Participant pursuant to Section 3.4, the Employer shall not be entitled to recover the contribution made with respect to the ineligible person regardless of its deductibility with respect to such contribution. However, in such event, the amount contributed with respect to the ineligible person shall constitute a Forfeiture for the Plan Year in which the discovery is made, shall be credited to the Suspense Account and shall be reallocated as a Forfeiture pursuant to Section 3.4(e) for the Plan Year of discovery. Such person's Deferred Compensation shall remain in the Plan for the benefit of such person until such time as one of the events described in Article VI shall occur and give rise to a distribution. Such person's Participant Aggregate Account shall share in the Trust Fund's earnings until distributed.

ARTICLE III
CONTRIBUTION AND ALLOCATION

3.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION

For each Plan Year, the Employer may or shall (as the case may be) contribute to the Plan the following amounts, which shall be subject to the following conditions.

(a) ESOP Contribution: For each Fiscal Year, the Employer may, in its sole discretion, determine the amount, if any, of any ESOP Contribution to be made by it to the Plan. Such contribution may be made by the Employer regardless of Net Profits or accumulated earnings, and shall be allocated to each Participant's ESOP Account. In determining such contribution, the Employer shall be entitled to rely upon an estimate of its Net Profits, of the total Compensation for all Participants, and of the amounts contributable by it. Except as otherwise provided herein, the Employer's determination of such contribution shall be binding on all Participants, the Administrator and the Trustee. The Trustee shall have no right or duty to inquire into the amount of the Employer's contribution or the method used in determining the amount of the Employer's contribution, but shall be accountable only for funds actually received by the Trustee.

Notwithstanding the preceding paragraph, and except as otherwise required herein, the Employer's ESOP Contribution for each Fiscal Year shall not be less than the amount required to enable the Trust to timely discharge its Current Obligations, even if some or all of such contribution may not be deductible by the Employer under the Code.

(b) Deferred Compensation: The Employer shall contribute to the Plan the total amount of all Participants' Compensation which has been deferred into the Plan pursuant to Section 3.2. Such amount shall be deemed to be Deferred Compensation and allocated to the applicable Participants' Deferral Accounts.

(c) Matching Contribution: Effective for Plan Years beginning on or after October 1, 1997, on behalf of each Participant who has elected to defer a portion of his Compensation into the Plan pursuant to Section 3.2 or has been allocated a Qualified Non-Elective Contribution, the Employer shall make a discretionary Matching Contribution based on the matching formula determined from time to time by the Employer. Such amount shall be deemed to be a Matching Contribution and allocated to the applicable Participants' Matching Accounts.

(d) Qualified Non-Elective Contribution: On behalf of each Participant (or if elected by the Employer, on behalf of each Non-Highly Compensated Participant only), the Employer may make a discretionary, Qualified Non-Elective Contribution equal to a percentage of Compensation of such Participants (or, if applicable, such Non-Highly Compensated Participants only) determined by the Employer. Such amount shall be deemed to be additional Deferred Compensation and allocated to the applicable Participants' Deferral Accounts.

(e) Profit Sharing Contribution: For each Fiscal Year, the Employer may, in its sole discretion, determine the amount, if any, of any Profit Sharing Contribution to be made by it to the Plan. Such contribution may be made by the Employer regardless of Net Profits or accumulated earnings, and shall be allocated to each Participant's Profit Sharing Account. In determining such Profit Sharing Contribution, the Employer shall be entitled to rely upon an estimate of its Net Profits, of the total Compensation for all Participants, and of the amounts contributable by it. Except as otherwise provided herein, the Employer's determination of such contribution shall be binding on all Participants, the Administrator and the Trustee. The Trustee shall have no right or duty to inquire into the amount of the Employer's contribution or the method used in determining the amount of the Employer's contribution, but shall be accountable only for funds actually received by the Trustee.

(f) Except as otherwise required herein, the Employer's contributions provided for in this Section shall not exceed the maximum amount allowable as a deduction to the Employer under the provisions of Code § 404. All contributions by the Employer shall be made in cash or in such property as is acceptable to the Trustee and permitted by the Act and the Code.

(g) Notwithstanding the foregoing provisions, to the extent necessary to provide the top heavy minimum allocations required by Article VII, the Employer shall make a contribution even if it exceeds the Employer's current or accumulated Net Profit or the amount which is deductible under Code § 404.

(h) Except as provided in paragraph (g) above and in accordance with Act § 403(c)(2)(C), Revenue Ruling 91-4 and the Code, any contribution by the Employer to the Trust Fund is conditioned upon the deductibility of the contribution by the Employer under the Code and, to the extent any such deduction is disallowed, the Employer may, within one year following a final determination of the disallowance, whether by agreement with the Internal Revenue Service or by final decision of a court of competent jurisdiction, demand repayment of such disallowed contribution, and the Trustee shall return such contribution within one year following the disallowance, provided such return of contribution is otherwise permitted by the Act, Revenue Ruling 91-4 and the Code. Earnings of the Plan attributable to the excess contribution may not be returned to the Employer, but any losses attributable thereto must reduce the amount so returned.

(i) Notwithstanding anything herein to the contrary, in the event the Employer shall make an excessive contribution under a mistake of fact as described in Act § 403(c)(2)(A) and Revenue Ruling 91-4, the Employer may demand repayment of such excessive contribution at any time within one year following the time of payment and the Trustee shall return such amount to the Employer within the one year period. Earnings of the Plan attributable to the excess contributions may not be returned to the Employer, but any losses attributable thereto must reduce the amount so returned.

(j) Notwithstanding any provision of this Plan to the contrary, any amount returned to the Employer pursuant to the foregoing paragraphs of this Section 3.1 may be returned to the Employer regardless of whether the Participant is Vested, in whole or in part. However, the maximum reversion to the Employer shall not exceed the limitations of Revenue Ruling 91-4.

3.2 PARTICIPANT'S SALARY REDUCTION ELECTION

(a) Pursuant to procedures and guidelines established from time to time by the Administrator in accordance with paragraph (j) below, each Participant may elect to defer into the Plan a portion (up to the maximum percentage allowed by law) of his Compensation which would have been received during the Plan Year (but for the deferral election). Except as provided below, such deferral made under this Plan, and any other tax qualified plan maintained by the Employer or Affiliated Employer, shall comply with the requirements of the Average Deferral Percentage test of Section 3.5, the annual addition requirements of Section 3.9, and the dollar limit contained in Code §402(g) in effect for such taxable year, and shall not exceed the maximum amount allowable as a deduction to the Employer under Code § 404. A deferral election (or modification of an earlier election) may not be made with respect to Compensation which is available on or before the date the Participant executes such election. The amount by which a Participant's Compensation is reduced shall be that Participant's Deferred Compensation and allocated to that Participant's Deferral Account.

(b) Notwithstanding the foregoing limitations on Deferred Compensation, effective January 1, 2002, all Participants who are eligible to make a deferral election pursuant to this Section and who have attained age 50 before the close of the taxable year shall be eligible to make "catch up contributions" of Deferred Compensation in accordance with, and subject to the limitations of,

Code § 414(v). Such "catch up contributions" shall be that Participant's Deferred Compensation and allocated to that Participant's Deferral Account, but shall not be taken into account for purposes of the Plan implementing the required limitations of Code §§ 402(g) and 415. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code §§ 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of the making of such "catch-up contributions" of Deferred Compensation.

"Catch up contributions" made pursuant to this Section 3.2 shall not be eligible for a matching contribution under Section 3.1(c).

(c) The balance in each Participant's Deferral Account shall be 100% Vested at all times, and shall not be subject to Forfeiture for any reason.

(d) Amounts held in a Participant's Deferral Account shall not be distributable earlier than the:

(1) Participant's termination of employment, Total and Permanent Disability, or death (and effective January 1, 2002, the Participant's "Severance from Employment" as defined in Code §401(k)(2)(B)(i)(I)).

(2) Participant's attainment of age 59¹/2.

(3) Termination of the Plan without the existence at the time of Plan termination of another defined contribution plan (other than an employee stock ownership plan as defined in Code § 4975(e)(7) or a simplified employee pension as defined in Code §408(k)) or the establishment of a successor defined contribution plan (other than an employee stock ownership plan as defined in Code § 4975(e)(7) or a simplified employee pension as defined in Code §408(k)) by the Employer or an Affiliated Employer within the period ending twelve (12) months after distribution of all assets from the Plan. For purposes of this Section, the rules of Code §401(k)(10)(A) and of Regulation §§ 1.401(k)-1(d)(3) and (5) are incorporated herein by reference, and the foregoing provision no longer shall apply for distributions after December 31, 2001. Effective with respect to distributions of a Participant's Deferral Account after December 31, 2001, this event shall include only the termination of the Plan without the establishment or maintenance by the Employer of another defined contribution plan (other than an employee stock ownership plan as defined in Code § 4975(e)(7)), provided the "lump sum distribution" rules of Code § 401(k)(10)(B) are met.

(4) Proven financial hardship of a Participant, subject to the limitations of Section 6.14.

(e) In the event a Participant has received a hardship distribution from his Participant's Deferral Account pursuant to Section 6.14 or, pursuant to Regulations under Code §401(k)(iii)(B), from any other plan maintained by the Employer, then such Participant shall not be permitted to elect to have Deferred Compensation contributed to the Plan on his behalf for a period of 12 months following the date of receipt of such hardship distribution. A Participant who receives a hardship distribution from his Participant's Deferral Account during calendar year 2001 pursuant to Section 6.14 or pursuant to Regulations under Code §401(k)(iii)(B), from any other plan maintained by the Employer during calendar year 2001, shall not be permitted to elect to have Deferred Compensation contributed to the Plan on his behalf for six (6) months after receipt of such distribution, or until January 1, 2002, if later. Furthermore, the dollar limitation under Code § 402(g) applicable to such Participant shall be reduced with respect to the Participant's taxable year following the taxable year in which the hardship distribution was received, by the amount of such Participant's Deferred Compensation, if any, under this Plan (and any other maintained by the Employer) for the taxable year of the hardship distribution.

(f) If a Participant's Deferred Compensation under this Plan, together with any elective deferrals (as defined in Regulation § 1.402(g)-1(b)) under another qualified cash or deferred arrangement (as defined in Code § 401(k)), a simplified employee pension (as defined in Code § 408(k)), a salary reduction arrangement (within the meaning of Code § 3121(a)(5)(D)), a deferred compensation plan under Code § 457 or a trust described in Code § 501(c)(18), cumulatively exceed the limitation imposed by Code § 402(g) for such Participant's taxable year (such limitation to be adjusted annually in accordance with the method provided in Code § 415(d) pursuant to Regulations), the Participant may, not later than March 1 following the close of his taxable year, notify the Administrator in writing of such Excess Deferred Compensation and request that his Deferred Compensation under this Plan be reduced by an amount specified by the Participant. In such event, the Administrator shall direct the Trustee to distribute such Excess Deferred Compensation (and any "income" allocable to such excess amount) to the Participant not later than the first April 15th following the close of the Participant's taxable year in which such Excess Deferred Compensation was contributed. A Participant shall be deemed to have notified the Administrator in writing of such Excess Deferred Compensation for a taxable year if such excess is calculated by taking into account only elective deferrals under the Plan and other plans of the Employer. Any distribution of less than the entire amount of Excess Deferred Compensation and "income" shall be treated as a pro rata distribution of Excess Deferred Compensation and "income." The amount distributed shall not exceed the Participant's Deferred Compensation under the Plan for the taxable year. Any distribution on or before the last day of the Participant's taxable year in which the Excess Deferred Compensation was contributed must satisfy each of the following conditions:

(1) The Participant shall designate (or is deemed to have so designated) the distribution as Excess Deferred Compensation;

(2) The distribution must be made after the date on which the Plan received the Excess Deferred Compensation; and

(3) The Plan must designate the distribution as a distribution of Excess Deferred Compensation.

Any Matching Contributions made on account of Excess Deferred Compensation distributed pursuant to this Section shall be treated as a Forfeiture for the Plan Year of distribution of such Excess Deferred Compensation.

(g) For purposes of Section 3.2(f) above, "income" means the gain or loss allocable to Excess Deferred Compensation which shall equal the allocable gain or loss for the taxable year of the Participant. The income allocable to Excess Deferred Compensation for the taxable year of the Participant is determined by multiplying the income allocable to Deferred Compensation for the taxable year of the Participant by a fraction. The numerator of the fraction is the Participant's Excess Deferred Compensation for the taxable year of the Participant. The denominator of the fraction is the sum of the Participant's Deferral Account as of the beginning of the taxable year of the Participant plus the Deferred Compensation allocable to such Participant's Deferral Account for the taxable year of the Participant. No income shall be allocable to Excess Deferred Compensation for the Gap Period.

(h) Income allocable to any distribution of Excess Deferred Compensation on or before the last day of the taxable year of the Participant shall be calculated from the first day of the taxable year of the Participant to the date on which distribution is made pursuant to Section 3.2(f) above, using the method described in paragraph (g) above for the income allocable to Excess Deferred Compensation for the taxable year of the Participant.

(i) Notwithstanding Section 3.2(f) above, a Participant's Excess Deferred Compensation shall be reduced, but not below zero, by any distribution and/or recharacterization of Excess Elective Contributions pursuant to Section 3.6 for the Plan Year beginning with or within the taxable year of the Participant.

(j) The Employer and the Administrator shall implement the salary deferral elections provided for in this Section 3.2 in accordance with the following:

(1) A Participant may commence making elective deferrals to the Plan only after first satisfying the eligibility and participation requirements specified in Article II. If a Participant fails to make his initial salary deferral election within the designated enrollment term, then such Participant may thereafter make an election in accordance with the rules governing modifications. A Participant shall make such election by executing a deferral election form, and filing such agreement with the Administrator.

Such election (i) shall initially be effective beginning with the first pay period administratively feasible to effect the deferral election, (ii) shall not have retroactive effect, and (iii) shall remain in force until revoked or modified.

(2) A Participant may modify a prior election during the Plan Year and concurrently make a new election by filing a revised deferral election form with the Administrator at such times or during such enrollment periods as are established by the Administrator. However, until the Administrator provides otherwise, modifications of a prior deferral election shall only be made as of the first day of each calendar quarter.

(3) Notwithstanding the above provisions, a Participant may elect prospectively to revoke his salary reduction agreement in its entirety at any time during the Plan Year by providing the Administrator with written notice of such revocation. Such revocation shall become effective as of the payroll date for which it is administratively practical to give effect. Furthermore, the receipt of a hardship distribution pursuant to Section 6.14, the termination of the Participant's employment, or the cessation of participation in the Plan for any reason, shall be deemed to revoke any salary reduction agreement then in effect, effective as of the date administratively practical following the close of the pay period within which such receipt, termination or cessation occurs.

3.3 TIME OF PAYMENT OF CONTRIBUTIONS

The Employer shall pay to the Trustee its contributions to the Plan for each Plan Year within the time prescribed by law, including extensions of time, for the filing of the Employer's federal income tax return for the Fiscal Year. The Employer shall designate the Plan Year to which the contribution relates. To the extent the Trust has Current Obligations, the Employer's ESOP Contribution shall be paid to the Plan in cash in sufficient and timely amounts to meet the terms of such Current obligations. However, Deferred Compensation accumulated through payroll deductions shall be paid to the Trustee within the times prescribed by the Department of Labor. Furthermore, any additional Employer contributions which are Qualified Non-Elective Contributions allocable to the Participant's Deferral Account for a Plan Year shall be paid to the Plan no later than the twelve-month period immediately following the close of such Plan Year.

3.4 ACCOUNTING AND ALLOCATION

(a) The Administrator shall establish and maintain a Participant's Deferral Account, Participant's ESOP Account, Participant's Matching Account, and Participant's Profit Sharing Accounts (and if applicable, a Participant's Rollover Account) in the name of each Participant, to which the Administrator shall credit, as of each Anniversary Date (or at more frequent intervals determined by the Administrator), all amounts allocable to each Participant as hereinafter set

forth. The Administrator may divide the Participant's ESOP Account into a Participant's Company Stock Account, Participant's ESOP Investment Account and/or Participant's Qualified Directed Investment Account.

(b) The Employer shall provide the Administrator with all information required by the Administrator to make a proper allocation of all Employer contributions (including the ESOP Contribution, Matching Contribution and Profit Sharing Contribution, if any), Forfeitures, Company Stock released from the Unallocated Company Stock Suspense Account, or Trust Fund earnings or losses for each Plan Year. Within a reasonable time after the date of receipt by the Administrator of such information, the Administrator shall allocate any such contributions, Company Stock released from the unallocated Company Stock Suspense Account and Forfeitures (after making any reinstatements required by Section 3.4(f)) as follows:

(1) With respect to any Employer's Profit Sharing Contributions, ESOP Contributions, Forfeitures of such Employer's ESOP Contributions and Profit Sharing Contributions, and Company Stock released from the Unallocated Company Stock Suspense Account, after making any reinstatements required by Section 3.4(f), the Administrator shall allocate such amounts in the same proportion that each such Participant's Compensation with respect to such Plan Year (or calendar quarter or other computation period designated by the TriQuint Semiconductor, Inc. Board in the case of a Profit Sharing Contribution) bears to the total Compensation of all Participants with respect to such Plan Year.

(2) With respect to the Deferred Compensation contributed pursuant to Section 3.1(b), to each Participant's Deferral Account, an amount equal to his Deferred Compensation for such Plan Year (or other interval).

(3) Effective for Plan Years beginning on and after October 1, 1997, with respect to the Matching Contributions made pursuant to Section 3.1(c), to each Participant's Matching Account an amount determined under the matching formula for the Plan Year (or other interval).

(4) With respect to any Qualified Non-Elective Contributions made pursuant to Section 3.1(d), to each Participant's (or if applicable, to each Non-Highly Compensated Participant only) Deferral Account, an amount determined by the Employer for such Plan Year.

(c) (1) Notwithstanding the above provisions of Section 3.4(b), a Participant who performed less than 500 Hours of Service during a Plan Year or terminated employment for any reason during the Plan Year shall not be allocated a share of the Employer's ESOP Contribution, Forfeitures thereof, or Company Stock Released from the Unallocated Company Stock Suspense Account, unless required by Section 7.4 or unless required to meet the minimum participation or coverage tests of Code §§ 401(a)(26) and 410 or to avoid discrimination under Code § 401(a)(4) for that Plan Year. Notwithstanding the foregoing, a Participant who terminated employment during the Plan Year due to death or Total and Permanent Disability shall be allocated a share of such contributions for such Plan Year, provided such Participant had 500 Hours of Service for that Plan Year. Furthermore, a Participant whose effective date of termination is September 30 shall be deemed to be employed on the last day of the Plan Year. |

(2) Notwithstanding the above provisions of Section 3.4(b), and except as provided in Subsection (c)(1) above, a Participant must be employed on the last day of the computation period designated by the Board of Directors of the Company as the computation period for a particular contribution (i.e., last day of quarter, or on the payroll date) in order to be allocated a share of the Company's Profit Sharing Contribution, Matching Contribution or Qualified Non-Elective Contribution.

(d) The Company Stock Account of each Participant shall be credited as of each Anniversary Date with the Participant's allocable share (determined pursuant to paragraph (b) above) of Company Stock (including fractional shares) purchased and paid for by the Trust or contributed in kind to the Trust by the Employer. In addition, each Participant's Company Stock Account shall be credited as of each Anniversary Date with Forfeitures of Company Stock and with stock dividends on Company Stock that previously had been allocated to the Participant's Company Stock Account. Cash dividends on Company Stock held in a Participant's Company Stock Account shall, in the discretion of the Administrator, be allocated to the Participant's ESOP Investment Account, paid directly to the Participant, or used to repay an Exempt Loan (provided that Company Stock released from the Unallocated Company Stock Suspense Account and allocated to the Participant's Company Stock Account has a fair market value not less than the amount of cash dividends which would have been allocated to such Participant's ESOP Investment Account for the Plan Year). Company Stock acquired by the Plan with the proceeds of an Exempt Loan shall be allocated to each Participant's Company Stock Account upon release from the Unallocated Company Stock Suspense Account as provided in Section 3.4(g) below. Company Stock received by the Trust during a Plan Year with respect to an ESOP Contribution by the Employer for the preceding Plan Year shall be allocated to the Participant's Company Stock Accounts as of the Anniversary Date of such preceding Plan Year.

(e) As of each Anniversary Date or other Valuation Date, before allocation of the Employer's contributions made pursuant to Section 3.1, any Company Stock released from the Unallocated Company Stock Suspense Account, any Forfeitures, and any earnings or losses (including net appreciation or net depreciation) of the Trust Fund (other than earnings or losses on segregated accounts subject to Participant self-direction) since the last valuation shall be allocated in the same proportion that each Participant's and Former Participant's Aggregate Account (as of the beginning of the valuation period) bears to the total of all Participants' and Former Participants' Aggregate Accounts as of the same date. Such allocation shall, pursuant to a uniform procedure determined by the Administrator, be reduced by any withdrawals, distributions, forfeitures, or hardship distributions made pursuant to Section 6.14. Notwithstanding the foregoing, unless the Administrator elects to value the Trust Fund daily, the Administrator may, pursuant to a uniform procedure determined by the Administrator, provide that gains or losses on Deferred Compensation may be computed on a time-weighted basis to give effect to the periodic contribution of Deferred Compensation required by Section 3.4. Furthermore, in the event the Employer elects to value the Trust Fund on each Business Day, (i) each distribution or withdrawal shall be charged to the appropriate account on the Business Day as of which such distribution or withdrawal is processed, and (ii) contributions made by or on behalf of a Participant shall be credited to the appropriate account on the Business Day as of which such contribution is received and processed. The Trustee's determination of the net value of the Trust Fund, and of the debits and credits to each account, shall be conclusive and binding on the Participants and Beneficiaries. See also Section 3.12 regarding the allocation of earnings to Participant's Qualified Directed Investment Accounts.

(f) As of each Anniversary Date, any amounts credited to the Suspense Account that have become Forfeitures during the Plan Year (including amounts forfeited under Section 6.4) first, in accordance with Section 8.9, shall be used to pay Plan expenses, costs and fees, and the balance shall be allocated as follows:

(1) Forfeitures in the Suspense Account relating to Participants' and Former Participants' ESOP Accounts, Participants' Profit Sharing Accounts, and Participant's Matching Accounts shall first be used to reinstate previously forfeited Participants' ESOP Accounts, Participants' Profit Sharing Accounts and Participants' Matching Accounts, if any, pursuant to

Section 6.4(g). If required restorations exceed available Forfeitures, the Employer shall contribute the excess to the Plan.

(2) Any remaining Forfeitures in the Suspense Account relating to Participants' ESOP Accounts and Participants' Profit Sharing Accounts shall be allocated in the year forfeited among the Participants' ESOP and Participants' Profit Sharing Accounts in the same manner, and in connection with, the allocation of the Employer's ESOP Contribution and Profit Sharing Contribution respectively allocated pursuant to Section 3.4(b).

(3) Any remaining Forfeitures in the Suspense Account relating to Participant's Matching Accounts shall be used in the year forfeited to reduce the Employer's Matching Contribution required by Section 3.1(c) above.

(4) In the event the allocation of Forfeitures shall cause the "annual addition" limitation of Section 3.9 to be exceeded, the excess shall be reallocated in accordance with Section 3.10.

(5) Notwithstanding the above provisions of this Section 3.4(f), a Participant who performed less than 500 Hours of Service during the Plan Year or terminated employment for any reason during the Plan Year shall not be allocated a share of the Plan Forfeitures for that Plan Year unless required pursuant to Section 7.4 or unless required to meet the minimum participation or coverage tests of Code §§ 401(a)(26) and 410 or to avoid discrimination under Code § 401(a)(4) for that Plan Year. However, effective October 1, 1997, a Participant who terminated employment during such Plan Year due to death or Total and Permanent Disability shall be allocated a share of such Plan Forfeitures for such Plan Year, provided such Participant was credited with 500 Hours of Service for that Plan Year. Furthermore, a Participant whose effective date of termination is September 30 shall be deemed to be employed on the last day of the Plan Year.

(g) All Company Stock acquired by the Plan with the proceeds of an Exempt Loan shall be added to and maintained in the Unallocated Company Stock Suspense Account. Such Company Stock shall be released and withdrawn from that account as if all Company Stock in that account were encumbered. For each Plan Year during the duration of the Exempt Loan, the number of shares of the Company Stock released shall equal the number of encumbered shares held immediately before release for the current Plan Year multiplied by a fraction, the numerator of which is the amount of principal and interest paid for the Plan Year and the denominator of which is the sum of the numerator plus the principal and interest to be paid for all future Plan Years. (See Section 5.5 regarding Exempt Loans). The rules of Labor Regulation §2550.408b-3(h)(1) are incorporated herein by reference. As of each Anniversary Date, the Administrator shall consistently allocate to each Participant's Company Stock Account, in the same manner as the Employer's ESOP Contributions are allocated, non-monetary units (i.e., shares and fractional shares of Company Stock) representing each Participant's interest in the Company Stock withdrawn from the Unallocated Company Stock Suspense Account. Notwithstanding the foregoing, Company Stock released from the Unallocated Company Stock Suspense Account with cash dividends pursuant to this Section shall be allocated to each Participant's Company Stock Account in the same proportion that each such Participant's number of shares of Company Stock sharing in such cash dividends bears to the total number of shares of all Participants' Company Stock sharing in such cash dividends. Income earned with respect to Company Stock in the Unallocated Company Stock Suspense Account may be used, at the discretion of the Administrator, to repay the Exempt Loan used to purchase such Company Stock. Any income which is not so used shall be allocated as income of the Plan.

(h) If a Former Participant is reemployed after five consecutive One-Year Breaks in Service, then separate accounts shall be maintained as follows:

(1) One account for nonforfeitable benefits attributable to pre-break service; and

(2) One account representing his status in the Plan attributable to post-break service.

(i) If, because of the service requirements in Sections 3.4(c) or 3.4(f)(5), this Plan would otherwise fail to meet the requirements of Code §§ 401(a)(26), 410 or 401(a)(4) and the Regulations thereunder, because the Employer's ESOP Contributions, Profit Sharing Contributions and/or Forfeitures have not been allocated to a sufficient number or percentage of Participants or Former Participants for a Plan Year, then the following rules shall apply:

(1) The group of Participants eligible to share in the Employer's ESOP Contributions, Profit Sharing Contribution and/or Forfeitures for the Plan Year shall be expanded to include the minimum number of Participants who would not otherwise be eligible as are necessary to satisfy the applicable test specified above. The specific Participants who shall become eligible under the terms of this paragraph shall be those who are actively employed on the last day of the Plan Year and, when compared to similarly situated Participants, have completed the greatest number of Hours of Service in the Plan Year.

(2) If after application of paragraph (1) above, the applicable test is still not satisfied, then the group of Participants or Former Participants eligible to share in the Employer's ESOP Contributions, Profit Sharing Contribution and/or Forfeitures for the Plan Year shall be further expanded to include the minimum number of Participants or Former Participants who are not actively employed on the last day of the Plan Year as are necessary to satisfy the applicable test. The specific Participants or Former Participants who shall become eligible to share shall be those Participants or Former Participants, when compared to similarly situated Participants or Former Participants, who have completed the greatest number of Hours of Service in the Plan Year before terminating employment.

(3) Nothing in this Section shall permit the reduction of a Participant's Aggregate Account. Therefore, any amounts that have previously been allocated to Participants or Former Participants may not be reallocated to satisfy these requirements. In such event, the Employer shall make an additional contribution equal to the amount such affected Participants or Former Participants would have received had they been included in the allocations, even if its exceeds the amount which would be deductible under Code § 404. Any adjustment to the allocations pursuant to this paragraph shall be considered a retroactive amendment adopted by the last day of the Plan Year.

3.5 AVERAGE DEFERRAL PERCENTAGE TESTS

(a) For each Plan Year, the annual allocation under Section 3.4(b)(2) derived from Deferred Compensation allocated to a Participant's Deferral Account shall satisfy one of the following tests:

(1) The Average Deferral Percentage for the Highly Compensated Participant group for the Plan Year shall not be more than the Average Deferral Percentage of the Non-Highly Compensated Participant group for the Plan Year (or for Plan Years beginning after December 31, 1996, for the preceding Plan Year) multiplied by 1.25, or

(2) The excess of the Average Deferral Percentage for the Highly Compensated Participant group for the Plan Year over the Average Deferral Percentage for the Non-Highly Compensated Participant group for the Plan Year (or for Plan Years beginning after December 31, 1996, for the preceding Plan Year) shall not be more than two percentage points, and the Average Deferral Percentage for the Highly Compensated Participant group for the Plan Year shall not exceed the Average Deferral Percentage for the Non-Highly

Compensated Participant group for the Plan Year (or for Plan Years beginning after December 31, 1996, for the preceding Plan Year) multiplied by two. The provisions of Code § 401(k)(3) and Regulation § 1.401(k)-1(b) are incorporated herein by reference.

For Plan Years beginning after December 31, 1996, the current Plan Year may be used for computing the Average Deferral Percentage of the Non-Highly Compensated Participant group if the Employer so elects, but once such election is made, it may not be changed except as provided by the Secretary of the Treasury.

(b) In order to prevent the multiple use of the alternative method described in subparagraph (a)(2) above and Section 3.7(a)(2) with respect to any Highly Compensated Employee, the provisions of Regulation § 1.401(m)-2 are incorporated herein by reference. See Section 3.7(b) for the method of eliminating such multiple use.

(c) For Plan Years beginning prior to December 31, 1996, for purposes of determining the Actual Deferral Percentage of a Highly Compensated Employee who is subject to the Family Member rules of Code § 414(q)(6) the following shall apply:

(1) The combined Actual Deferral Percentage for the family group (which shall be treated as one Highly Compensated Participant) shall be determined by aggregating the Deferred Compensation and Compensation of all eligible Family Members (including Highly Compensated Participants). However, in applying the $150,000 limit (as adjusted) to Compensation, Family Member shall include only the affected Employee's spouse and any lineal decedents who have not attained age 19 before the close of the Plan Year.

(2) The Deferred Compensation, Compensation and Qualified Non-Elective Contributions of all Family Members shall be disregarded for purposes of determining the Actual Deferral Percentage of the Non-Highly Compensated Participated group except to the extent taken into account in paragraph (1) above.

(3) If a Participant is required to be aggregated as a member of more than one family group in a plan, all Participants who are members of those family groups that include the Participant are aggregated as one family group in accordance with paragraphs (1) and (2) above.

(d) For purposes of Sections 3.5(a) and 3.6, a Highly Compensated Participant and a Non-Highly Compensated Participant shall include any Employee eligible to make a deferral election pursuant to Section 3.2, whether or not such deferral election was made or suspended.

(e) For purposes of this Section and Code §§ 401(a)(4), 410(b) and 401(k), if two or more plans which include cash or deferred arrangements are considered one plan for purposes of Code § 410(b) (other than for purposes of the average benefit percentage test), the cash or deferred arrangements included in such plans shall be treated as one arrangement. In addition, two or more cash or deferred arrangements may be considered as a single arrangement for purposes of determining whether such arrangements satisfy Code §§ 401(a)(4), 410(b) and 401(k). In such case, the cash or deferred arrangements included in such plans and the plans including such arrangements shall be treated as one arrangement and as one plan for purposes of this Section and Code §§ 401(a)(4), 410(b) and 401(k). For Plans Years beginning after December 31, 1989, plans may be aggregated under this paragraph (e) only if they have the same plan year.

(f) For purposes of this Section, if a Highly Compensated Participant is a Participant under two or more cash or deferred arrangements (other than a plan described in Regulation § 1.401(k)-1(b)(3)(ii)(B)) which are maintained by the Employer or an Affiliated Employer and to which Deferred Compensation contributions are made, all such cash or deferred arrangements shall be treated as one cash or deferred arrangement for the purpose of determining the Actual

Deferral Percentage with respect to such Highly Compensated Participant. If the cash or deferred arrangements have different plan years, this paragraph shall be applied by treating all cash or deferred arrangements ending with or within the same calendar year as a single arrangement.

3.6 ADJUSTMENT TO AVERAGE DEFERRAL PERCENTAGE TESTS

(a) In the event that the initial allocations of Deferred Compensation made pursuant to Section 3.4(b)(2) do not satisfy one of the tests set forth in Section 3.5(a), then on or before the fifteenth day of the third month following the end of the Plan Year, the Administrator shall adjust the Excess Elective Contributions as follows:

(1) For Plan years beginning prior to December 31, 1996, the Administrator shall direct the Trustee that the Highly Compensated Participant having the highest Actual Deferral Percentage shall have his portion of Excess Elective Contributions distributed to him (without the need for Participant or spousal consent) until one of the tests set forth in Section 3.5(a) is satisfied by the Highly Compensated Participant group, or until his Actual Deferral Percentage equals the Actual Deferral Percentage of the Highly Compensated Participant having the second highest Actual Deferral Percentage. This process shall continue until one of the tests set forth in Section 3.5(a) is satisfied by the Highly Compensated Participant group. For each Highly Compensated Participant, the amount of Excess Elective Contributions is equal to the difference between the Deferred Compensation of such Highly Compensated Participant (determined prior to the application of this paragraph) minus the amount determined by multiplying the Highly Compensated Participant's Actual Deferral Percentage (determined after application of this paragraph) by his Compensation. However, in determining the amount of Excess Elective Contributions to be distributed with respect to an affected Highly Compensated Participant as determined herein, such amount shall be reduced by any Excess Deferred Compensation previously distributed to such affected Highly Compensated Participant for his taxable year ending with or within such Plan Year. See Sections 3.2(f) and (g).

(2) For Plan Years beginning after December 31, 1996, the Administrator first shall determine the total dollar amount of Excess Elective Contributions that must be returned to the Highly Compensated Participant group in order to satisfy one of the tests set forth in Section 3.5(a). Next, the Administrator shall direct the Trustee to distribute such total dollar amount of Excess Elective Contributions to the Highly Compensated Participants on the basis of the dollar amount of Deferred Compensation allocated to the Highly Compensated Participants pursuant to Section 3.4(b)(2) (prior to the application of this subsection), such that Excess Elective Contributions shall be distributed to the Highly Compensated Participants who were allocated the highest dollar amount of Deferred Compensation. This provision shall be applied by distributing (without the need for Participant or spousal consent) to the Highly Compensated Participant who was allocated the highest dollar amount a dollar amount of Excess Elective Contributions until the total amount of Excess Elective Contributions is distributed, or until his dollar amount of Deferred Compensation equals the dollar amount of Deferred Compensation of the Highly Compensated Participant that was allocated the second highest amount of Deferred Compensation. This process shall continue until the total dollar amount of Excess Elective Contributions that must be returned to the Highly Compensated Participant group is in fact returned and distributed. The rules of Notice 97-2, 1997-1 C.B. 348 are incorporated herein by reference. However, in determining the amount of Excess Elective Contributions to be distributed, such total amount shall be reduced by any Excess Deferred Compensation previously distributed to a Highly Compensated Participant for his taxable year ending with or within such Plan Year. See Sections 3.2(f) and (g).

(3) With respect to the distribution of Excess Elective Contributions pursuant to (a) above, such distribution:

(i) may be postponed, but not later than the close of the Plan Year following the Plan Year to which they are allocable;

(ii) shall be made first from unmatched Deferred Compensation and, thereafter, from Deferred Compensation which is matched. Matching Contributions relating to Excess Elective Contributions shall not be distributed, but rather shall be treated as a Forfeiture of a Matching Contribution in the Plan Year of the distribution and reallocation pursuant to Section 3.4.

(iii) shall be made from Qualified Non-Elective Contributions only to the extent that Excess Elective Contributions exceed the balance in the Participant's Deferral Account attributable to Deferred Compensation contributed pursuant to Section 3.1(b);

(iv) shall be adjusted for "income" (as defined in paragraph 4 below); and

(v) shall be designated by the Employer as a distribution of Excess Elective Contributions and "income".

(4) For purposes of this Section 3.6, "income" means the gain or loss allocable to Excess Elective Contributions for the Plan Year. Such amount shall be determined by multiplying the income allocable to Deferred Compensation for the Plan Year by a fraction. The numerator of the fraction is the Participant's Excess Elective Contributions for the Plan Year. The denominator of the fraction is the sum of the Participant's Deferral Account as of the beginning of the Plan Year plus the Deferred Compensation allocable to such Participant's Deferral Account for the Plan Year. No income shall be allocable to Excess Elective Contributions for the Gap Period.

(5) Any distribution of less than the entire amount of Excess Elective Contributions shall be treated as a pro rata distribution of Excess Elective Contributions and income.

(6) For Plan Years beginning prior to December 31, 1996, the determination and correction of Excess Elective Contributions of a Highly Compensated Participant whose Actual Deferral Percentage is determined under the Family Member rules of Code § 414(q)(6) and Section 3.5(b) shall be accomplished by reducing the Actual Deferral Percentage as required herein, and allocating the Excess Elective Contributions for the family unit among the Family Members in proportion to the Deferred Compensation of each Family Member that was combined to determine the group Actual Deferral Percentage.

(b) Within 12 months after the end of the Plan Year, the Employer may make a special Qualified Non-Elective Contribution on behalf of all Participants (or Non-Highly Compensated Participants only) in an amount sufficient to satisfy one of the tests set forth in Section 3.5(a). Such contribution shall be allocated to the Participant's Deferral Account of each Participant (or Non-Highly Compensated Participants only) in the same proportion that each Participant's Compensation (or Non-Highly Compensated Participant's Compensation only) for the Plan Year bears to the total Compensation of all Participants (or Non-Highly Compensated Participants only).

3.7 AVERAGE CONTRIBUTION PERCENTAGE TESTS

(a) For each Plan Year, the Average Contribution Percentage for the Highly Compensated Participant group shall satisfy one of the following tests:

(1) The Average Contribution Percentage for the Highly Compensated Participant group for the Plan Year shall not be more than the Average Contribution Percentage for the Non-Highly Compensated Participant group for the Plan Year (for Plan Years beginning after December 31, 1996, for the preceding Plan Year) multiplied by 1.25, or

(2) The excess of the Average Contribution Percentage for the Highly Compensated Participant group for the Plan Year over the Average Contribution Percentage for the Non-Highly Compensated Participant group for the Plan Year (for Plan Years beginning after December 31, 1996, for the preceding Plan Year) shall not be more than two percentage points, and the Average Contribution Percentage for the Highly Compensated Participant group for the Plan Year (for Plan Years beginning after December 31, 1996, for the preceding Plan Year) shall not exceed the Average Contribution Percentage for the Non-Highly Compensated Participant group for the Plan Year (for Plan Years beginning after December 31, 1996, for the preceding Plan Year) multiplied by two.

For Plan Years beginning after December 31, 1996, the current Plan Year may be used in computing the Average Contribution Percentage of the Non-Highly Compensated Participant group if the Employer so elects, but once such election is made, it may not be changed except as provided by the Secretary of the Treasury.

(b) In order to prevent the multiple use of the alternative method described in subparagraph (a)(2) above and Section 3.5(a)(2), any Highly Compensated Participant eligible to make Deferred Compensation contributions pursuant to Section 3.2 or any other cash or deferred arrangement maintained by the Employer or an Affiliated Employer, and to receive Matching Contributions under this Plan or under any other plan maintained by the Employer or an Affiliated Employer, shall have his Actual Contribution Percentage reduced pursuant to Regulation § 1.401(m)-2. The provisions of Code § 401(m) and Regulation §§ 1.401(m)-1(b) and 1.401(m)-2 are incorporated herein by reference. See Section 3.8 for the reduction of the Actual Contribution Percentage. In lieu of such reduction, the Employer may eliminate such multiple use by making Qualified Non-Elective Contributions.

(c) For purposes of determining the Actual Contribution Percentage and the amount of Excess Matching Contributions pursuant to Section 3.8, only Employer Matching Contributions

contributed to the Plan prior to the end of the succeeding Plan Year shall be considered. In addition, the Administrator may elect to take into account, with respect to Employees eligible to have Employer Matching Contributions pursuant to Section 3.1(c) allocated to their accounts, elective deferrals (as defined in Regulation § 1.402(g)-1(b)) and qualified non-elective contributions (as defined in Code § 401(m)(4)(C)) contributed to any plan maintained by the Employer. Qualified non-elective contributions may be treated as Employer Matching Contributions only if the requirements of Regulation §§ 1.401(m)-1(b)(5) and 1.401(k)-1(g)(13)(iii) are satisfied. Furthermore, such elective deferrals and qualified non-elective contributions shall be treated as Employer Matching Contributions subject to Regulation § 1.401(m)-1(b)(2) which is incorporated herein by reference. However, the Plan Year of this Plan must be the same as the plan year of the plan to which the elective deferrals and the qualified non-elective contributions are made.

(d) For Plan Years beginning prior to December 31, 1996, for purposes of determining the Actual Contribution Percentage of a Highly Compensated Employee who is subject to the Family Member aggregation rules of Code § 414(q)(6), the following shall apply:

(1) The combined Actual Contribution Percentage for the family group (which shall be treated as one Highly Compensated Participant) shall be determined by aggregating Employer Matching Contributions made pursuant to Section 3.1(c) of all eligible Family Members (including Highly Compensated Participants). However, in applying the $200,000 limit to Compensation, for Plan Years beginning after December 1988, Family Members shall include only the affected Employee's spouse and any lineal descendants who have not attained age 19 before the close of the Plan Year.

(2) The Employer Matching Contributions made pursuant to Section 3.1(c), Deferred Compensation, Compensation and contributions treated as Matching Contributions of all Family Members shall be disregarded for purposes of determining the Average Contribution Percentage of the Highly Compensated Participant and the Non-Highly Compensated Participant group, except to the extent taken into account in paragraph (1) above.

(e) For purposes of this Section and Code §§ 401(a)(4), 410(b) and 401(m), if two or more plans of the Employer to which Matching Contributions are made are treated as one plan for purposes of Code § 410(b) (other than the average benefits test under Code § 410(b)(2)(A)(ii) as in effect for Plan Years beginning after December 31, 1988), such plans shall be treated as one plan. In addition, two or more plans of the Employer to which Matching Contributions are made may be considered as a single plan for purposes of determining whether such plans satisfy Code §§ 401(a)(4), 410(b) and 401(m). In such case, the aggregated plans must satisfy this Section and Code §§ 401(a)(4), 410(b) and 401(m) as though such aggregated plans were a single plan. For Plan Years beginning after December 31, 1989, plans may be aggregated under this paragraph (d) only if they have the same plan year.

Notwithstanding the above, an employee stock ownership plan described in Code § 4975(e)(7) may not be aggregated with this Plan for purposes of determining whether the employee stock ownership plan or this Plan satisfies this Section and Code §§ 401(a)(4), 410(b) and 401(m).

(f) For purposes of this Section, if a Highly Compensated Participant is a Participant under two or more plans (other than a plan described in Regulation § 1.401(m)-1(b)(3)(ii)) which are maintained by the Employer or an Affiliated Employer and to which Matching Contributions are

made, all such contributions on behalf of such Highly Compensated Participant shall be aggregated for purposes of determining such Highly Compensated Participant's Actual Contribution Percentage. However, if the plans have different plan years, this paragraph shall be applied by treating all plans ending with or within the same calendar year as a single plan.

(g) For purposes of Sections 3.7(a) and 3.8, a Highly Compensated Participant and Non-Highly Compensated Participant shall include any Employee eligible to have Employer Matching Contributions pursuant to Section 3.1(c) (whether or not a deferral election was made or suspended pursuant to Section 3.2(d)) allocated to his Participant Matching Account for the Plan Year.

3.8 ADJUSTMENT TO AVERAGE CONTRIBUTION PERCENTAGE TESTS

(a) In the event that the initial allocations of Matching Contributions made pursuant to Section 3.4(b)(3) do not satisfy one of the tests set forth in Section 3.7(a), then on or before the fifteenth day of the third month following the end of the Plan Year, the Administrator shall adjust the Excess Matching Contributions.

(1) Effective for Plan Years beginning on and after October 1, 1997, the Administrator first shall determine the total dollar amount of Excess Matching Contributions that must be distributed to or forfeited by the Highly Compensated Participant group in order to satisfy one of the tests set forth in Section 3.7(a). Next, the Administrator shall direct the Trustee to distribute or forfeit (as provided below) such total dollar amount of Excess Matching Contributions with respect to the Highly Compensated Participants on the basis of the dollar amount of Matching Contributions allocated to the Highly Compensated Participants pursuant to Section 3.4(b)(3) (prior to the application of this subsection), such that Excess Matching Contributions shall be distributed to or forfeited with respect to the Highly Compensated Participants who were allocated the highest dollar amount of Matching Contributions. This provision shall be applied by distributing to or forfeiting with respect to the Highly Compensated Participant with the highest dollar allocation of Matching Contributions a dollar amount until the total amount of Excess Matching Contributions that must be distributed to or forfeited by the Highly Compensated Participant group are distributed or forfeited, or until his dollar amount of Matching Contributions equals the dollar amount of Matching Contributions of the Highly Compensated Participant who was allocated the second highest amount of Matching Contributions. This process shall continue until the total dollar amount of Excess Matching Contributions that must be distributed to or forfeited by the Highly Compensated Participant group are distributed or forfeited. The rules of Notice 97-2, 1997-1 C.B. are incorporated herein by reference. Except as provided in Section 3.6(a)(3)(ii), for purposes of this subsection, to the extent a Highly Compensated Participant described herein is Vested, Excess Matching Contributions (and income allocable thereto) shall be distributed, and the portion thereof that is not Vested shall be forfeited at that time.

(2) The distribution and/or Forfeiture of Excess Matching Contributions shall be made in the following order:

(i) Employer Matching Contributions forfeited pursuant to Section 3.6(a)(3)(ii);

(ii) Remaining Employer Matching Contributions.

(b) Any distribution and/or Forfeiture of less than the entire amount of Excess Matching Contributions and income shall be treated as a pro rata distribution and/or Forfeiture of Excess Matching Contributions and income. Distribution of Excess Matching Contributions shall be designated by the Employer as a distribution of Excess Matching Contributions and income. Forfeitures of Excess Matching Contributions shall be treated in accordance with Section 3.4.

However, no such Forfeiture may be allocated to a Highly Compensated Participant whose contributions are reduced pursuant to this Section.

(c) Excess Matching Contributions, including forfeited Matching Contributions, shall be treated as Employer contributions for purposes of Code §§ 404 and 415, even if distributed from the Plan.

(d) For purposes of this Section 3.8, "income" means the gain or loss allocable to Excess Matching Contributions for the Plan Year. Such amount shall be determined by multiplying the income allocable to Matching Contributions for the Plan Year by a fraction. The numerator of the fraction is the Participant's Excess Matching Contributions for the Plan Year. The denominator of the fraction is the sum of the Participant's Matching Account as of the beginning of the Plan Year plus the Matching Contributions allocable to such Participant's Matching Account for the Plan Year. No income shall be allocable to Excess Matching Contributions for the Gap Period.

(e) In no case shall the amount of Excess Matching Contributions with respect to any Highly Compensated Participant exceed the amount of Employer Matching Contributions made pursuant to Section 3.1(c) and any Qualified Non-Elective Contributions or elective deferrals taken into account pursuant to Section 3.7 on behalf of such Highly Compensated Participant for such Plan Year.

(f) Notwithstanding the above, within 12 months after the end of the Plan Year, the Employer may make a special Qualified Non-Elective Contribution on behalf of all Participants (or Non-Highly Compensated Participants only) in an amount sufficient to satisfy one of the tests set forth in Section 3.7(a). Such contributions shall be allocated to the Participant's Deferral Account of each Participant (or Non-Highly Compensated Participant only) in the same proportion that each Participant's Compensation (or Non-Highly Compensated Participant's Compensation only) for the Plan Year bears to the total Compensation of all Participants (or Non-Highly Compensated Participants only). A separate accounting shall be maintained for the purpose of excluding such contributions from the Actual Deferral Percentage tests pursuant to Section 3.5(a) and shall comply with the requirements of Regulation § 1.401(m)-1(b)(5).

3.9 MAXIMUM ANNUAL ADDITIONS

(a) (1) Notwithstanding Section 3.4, for Plan Years beginning on or before October 1, 2001, the maximum annual additions (as defined in Section 3.9(b) below) credited to a Participant's Aggregate Account for any limitation year (as defined in Section 3.9(d) below) shall equal the lesser of: (1) $30,000, or (2) 25% of the Participant's Compensation for such limitation year, as adjusted from time to time as in Section 3.9(e) below.

(2) Notwithstanding Section 3.4, and except as provided in Section 3.2(b) above and Code § 414(v) (relating to catch-up, Deferred Compensation contributions by Participants age 50 and older), effective for "limitation years" beginning on and after October 1, 2002, the maximum "annual additions" credited to a Participant's Aggregate Account for any "limitation year" shall equal the lesser of: (1) $40,000 (as adjusted from time to time as in Section 3.9(e) below, or (2) 100% of the Participant's Compensation, within the meaning of Code § 415(c)(3), for the "limitation year." The Compensation limit referred to in the preceding sentence shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code Sections 401(h) or 419A(f)(2) which is otherwise treated as an annual addition.

(3) Provided that no more than one-third of the Employer's ESOP Contributions for the Plan Year, which are deductible under the principal and interest deduction rules of Code § 404(a)(9), are allocated to Highly Compensated Participants, the limitations of Code § 415 shall not apply to Forfeitures of Company Stock if such Company Stock was acquired with the

proceeds of an Exempt Loan, or to the portion of the Employer's ESOP Contribution which is deductible as an interest payment under Code § 404(a)(9)(B).

(b) For purposes of applying the limitations of Code § 415, annual additions means the sum credited to a Participant's Aggregate Account for any limitation year of: (1) Deferred Compensation, Matching Contributions, Profit Sharing Contributions, and Qualified Non-Elective Contributions; (2) ESOP Contributions; (3) Forfeitures; (4) amounts allocated to an individual medical account, as defined in Code § 415(l)(2) which is part of a pension or annuity plan maintained by the Employer; and (5) except for purposes of subsection (a)(2) above, amounts derived from contributions paid or accrued which are attributable to postretirement medical benefits allocated to the separate account of a key employee (as defined in § 419(A)(d)(3) of the Code) under a welfare benefit plan (as defined in § 419(e) of the Code) maintained by the Employer. Contributions do not fail to be annual additions merely because they are Excess Deferred Compensation, Excess Elective Contributions, or Excess Matching Contributions, or merely because Excess Elective Contributions or Excess Matching Contributions are distributed or recharacterized. Excess Deferred Compensation distributed pursuant to Regulation § 1.402(g)-1(e)(2) or (3) are not annual additions. The Compensation percentage limitation referred to in Section 3.9(a)(2) above shall not apply to any contribution for medical benefits (within the meaning of Code § 419A(f)(2)) after separation from service which is otherwise treated as an annual addition, or any amount otherwise treated as an annual addition under Code § 415(l)(i).

(c) For purposes of applying the limitations of Code § 415, the following are not annual additions: (1) transfer of funds from one qualified plan to another; (2) rollover contributions (as defined in Code §§ 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3)); (3) repayments of loans made to a Participant from the Plan; (4) repayments of distributions received by an Employee pursuant to Code § 411(a)(7)(B) (cash-outs); (5) repayments of distributions received by an Employee pursuant to Code § 411(a)(3)(D) (mandatory contributions); (6) Employee contributions to a simplified employee pension excludable under Code § 408(k)(6); and (7) deductible Employee contributions to a qualified Plan.

(d) For purposes of applying the limitations of Code § 415, the "limitation year" shall be the Plan Year.

(e) The limitation stated in paragraph (a)(1) above shall be adjusted annually as provided in Code § 415(d) pursuant to Regulations. The adjusted limitation is effective as of January 1 of each calendar year and is applicable to limitation years ending with or within that calendar year.

(f) For purposes of this Section, all qualified defined benefit plans (whether terminated or not) ever maintained by the Employer shall be treated as one defined benefit plan, and all qualified defined contribution plans (whether terminated or not) ever maintained by the Employer shall be treated as one defined contribution plan.

(g) For purposes of this Section, all Employees of any Affiliated Employers shall be considered to be employed by a single Employer.

3.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS

(a) If, as a result of a reasonable error in estimating a Participant's Compensation, a reasonable error in determining the amount of Deferred Compensation (within the meaning of Code § 402(g)(3)) that may be made with respect to any Participant under the limits of Section 3.9 above, or other facts and circumstances to which Regulation § 1.415-6(b)(6) shall be applicable, the annual additions under this Plan would cause the maximum annual additions to be exceeded for any Participant, the Administrator shall (1) distribute any Deferred Compensation (within the meaning of Code § 402(g)(3)) credited for the limitation year to the extent that the return would reduce the "excess amount" in the Participant's Aggregate Account; (2) hold any remaining "excess amount" after the return of any voluntary Employee contributions in a "Section 415 suspense account"; (3) allocate and reallocate the "Section 415 suspense account" in the next limitation year (and succeeding limitation years if necessary) to all Participants in the Plan before any Employer or Employee contributions which would constitute annual additions are made to the Plan for such limitation year; and (4) reduce the Employer's discretionary contributions to the Plan for such limitation year by the amount of the "Section 415 suspense account" allocated and reallocated during such limitation year.

(b) For purposes of this Article, "excess amount" for any Participant for a limitation year shall mean the excess, if any, of: (1) the annual additions which would be credited to his account under the terms of the Plan without regard to the limitations of Code § 415, over (2) the maximum annual additions determined pursuant to Section 3.9.

(c) For purposes of this Section, "Section 415 suspense account" shall mean an unallocated account equal to the sum of "excess amounts" for all Participants in the Plan during the limitation year. The "Section 415 suspense account" shall not share in any earnings or losses of the Trust Fund.

(d) Except as provided in this Section 3.10, the Plan may not distribute "excess amounts" to Participants or Former Participants.

3.11 TRANSFERS FROM QUALIFIED PLANS

(a) With the consent of the Administrator, amounts may be transferred by or on behalf of a Participant from "qualified plans and accounts" provided that the trust or account from which such funds are transferred permits the transfer to be made and, in the opinion of legal counsel for the Employer, the transfer will not jeopardize the tax exempt status of the Plan or create adverse tax consequences for the Employer. The amounts transferred shall be credited to the Participant's Rollover Account. Such account shall be 100% Vested at all times and shall not be subject to Forfeiture for any reason. For purposes of this Section, "qualified plans and accounts" means (i) other qualified plans under Code §§ 401(a) or 403(a), (ii) conduit individual retirement accounts, (iii) other amounts in an individual retirement account which would be includable in gross income if distributed to the Employee in cash, (iv) tax sheltered annuity plans under Code § 403(b), and (v) Code § 457(b) plans.

(b) Amounts in a Participant's Rollover Account shall be held by the Trustee pursuant to the provisions of this Plan, and such amounts may not be withdrawn by, or distributed to the Participant, in whole or in part, except as provided in paragraph (c) of this Section.

(c) At Normal Retirement Date, or such other date when the Participant or his Beneficiary would be entitled to receive his Participants' Matching Account and/or Participant's Profit Sharing Account under the terms of the Plan, the Participant's Rollover Account shall be distributed to the Participant or his Beneficiary in the form that the Participant or Beneficiary shall elect pursuant to Article VI. Notwithstanding the foregoing, a Participant may request and receive a lump sum distribution of all, and only all, of his Participant's Rollover Account at any time, even while still

employed by the Employer. Such lump sum distribution shall be made as soon as practical after the Anniversary Date or Valuation Date coinciding with, or next following, the date on which the Participant requests distribution of his Participant's Rollover Account.

(d) Unless the Administrator directs that the Participant's Rollover Account be segregated into a separate account for such Participant in a federally insured savings account, certificate of deposit in a bank or savings and loan association, money market certificate, or other short-term debt security acceptable to the Trustee, or unless the Participant's Rollover Account is subject to the directed investment provisions of Section 3.13, such account shall be invested as part of the general Trust Fund and shall share in any income earned or losses incurred thereon pursuant to the terms of Section 3.4.

(e) The Administrator may direct that Employee transfers and rollovers made after a certain date pursuant to this Section be segregated into a separate account for each Participant in a federal insured savings account, certificate of deposit in a bank or savings and loan association, money market certificate, or other short-term debt security acceptable to the Trustee until such time as the allocations pursuant to this Agreement have been made. Alternately, the Administrator may direct that Participant transfers and rollovers be received only at certain times throughout the Plan Year.

(f) For purposes of this Section, the term "amounts transferred from another qualified corporate and noncorporate plan" shall mean: (1) amounts transferred to this Plan directly from another corporate or noncorporate plan; (2) lump sum distributions received by an Employee from another qualified plan which are eligible for tax free rollover to a qualified corporate or noncorporate plan and which are transferred by the Employee to this Plan within 60 days following his receipt thereof; (3) amounts transferred to this Plan from a conduit individual retirement account provided that the conduit individual retirement account has no assets other than assets (and the earnings therein) which (i) were previously distributed to the Employee by another qualified corporation or noncorporation plan as a lump sum distribution, (ii) were eligible for tax free rollover to a qualified corporate or noncorporate plan, and (iii) were deposited in such conduit individual retirement account within 60 days of receipt thereof; and (4) amounts distributed to the Employee from a conduit individual retirement account meeting the requirements of clause (3) above, and transferred by the Employee to this Plan within 60 days of his receipt thereof from such conduit individual retirement account. Prior to accepting any transfers to which this Section applies, the Administrator may require the Participant to establish that the amounts to be transferred to this Plan meet the requirements of this Section and may also require the Participant to provide an opinion of counsel satisfactory to the Employer that the amounts to be transferred meet the requirements of this Section.

(g) For purposes of this Section, the term "qualified corporate or noncorporate plan" shall mean any tax qualified plan under Code § 401(a).

3.12 PARTICIPANT'S QUALIFIED DIRECTED INVESTMENT ACCOUNT

(a) Each Qualified Participant may elect no later than 90 days after the close of each Plan Year during the Qualified Election Period to direct the Trustee in writing as to the investment of 25% of the total number of shares of Company Stock acquired by or contributed to the Plan that have ever been allocated to the Participant's Company Stock Account of such Qualified Participant (reduced by the number of shares of Company Stock previously diversified or distributed pursuant to this Section 3.12). In the last Plan Year of the Qualified Election Period, 50% shall be substituted for 25% in the preceding sentence. Furthermore, the rules of Code § 401(a)(28) are incorporated herein by reference.

(b) Notwithstanding Section 3.12(a), if the fair market value (determined as of the Valuation Date immediately preceding the beginning of the 90 day election period) of Company Stock acquired by or contributed to the Plan that has ever been allocated to the Participant's Company Stock Account of the Qualified Participant is less than $500, then such Participant's Company Stock Account shall not be subject to the diversification requirements of this Section 3.12.

(c) A separate Participant's Qualified Directed Investment Account shall be established by the Administrator for any Qualified Participant that makes a diversification election pursuant to this Section 3.12. Such Qualified Directed Investment Account shall not share in the earning or losses of the Trust Fund with respect to the Company Stock so diversified, but instead shall be credited or debited with only the earnings or losses attributable to the investments directed pursuant to Section 3.12(d) below.

(d) The Administrator shall select a minimum of three investment options that shall be available to Qualified Participants for reinvestment of the portion of their Participant's Company Stock Account diversified pursuant to Section 3.12(a). A Qualified Participant shall have the right to direct the portion of his Participant's Company Stock Account that has been diversified into a minimum of one of the three available options. A Qualified Participant may change his investment option at least once a Plan Year in accordance with procedures established by the Administrator. If the Administrator permits a change of investment options only once a year, such change shall be made during the first 90 days of the Plan Year. The Administrator and Trustee shall complete a Qualified Participant's election under Section 3.12(a) or change his investment option pursuant to this Section 3.12(d) within 90 days of receipt of written notice from the Qualified Participant. Alternately, in lieu of establishing three investment options, the Administrator may authorize and direct the Trustee to distribute the Company Stock subject to the diversification elections within 90 days after the close of the Plan Year.

(e) In the event a Qualified Participant directs a portion of his Participant's Employer Account pursuant to this Section 3.12, such Qualified Participant shall not have, with respect to such directed portion, the right to demand Company Stock pursuant to Code § 409(h)(1)(A) and Section 6.8 of this Plan.

3.13 DIRECTED INVESTMENT ACCOUNT

The Administrator, in its sole discretion, may permit Participants, Former Participants, Terminated Participants and Beneficiaries to direct the investment of all or any portion of their Aggregate Account (other than their Participants' Company Stock Account) among investment funds or options designated by the Investment Advisory Committee appointed by the Employer pursuant to Section 8.1(a). Such investment direction shall be in accordance with the rules and procedures established by the Administrator from time to time.

3.14 VOTING COMPANY STOCK

The Trustee shall vote all Company Stock held by it as part of the Plan's assets and in accordance with this Section.

Except as otherwise required by the Act, the Trustee shall vote Company Stock which has been allocated to a Participant's or Former Participant's Company Stock Account in accordance with the voting instructions of such Participant or Former Participant. To the extent a Participant or Former Participant fails to timely exercise the right to vote Company Stock which has been so allocated to his Company Stock Account, the Trustee shall vote such allocated shares of Company Stock, together with any Company Stock held in the Unallocated Company Stock Suspense Account, in the sole discretion of the Trustee.

In the event the Trustee receives a notice of tender offer for the Company Stock, the Trustee immediately shall forward such notice to Participants and Former Participants with Company Stock Accounts at that time. Except as otherwise required by the Act, the Trustee shall request each Participant and Former Participant to instruct the Trustee as to the tender of shares of Company Stock allocated to his Company Stock Account, and the Trustee shall tender (or not tender) those shares according to such instructions. To the extent a Participant or Former Participant fails to timely instruct the Trustee, the Trustee shall determine, in its sole discretion, whether to tender such allocated shares of Company Stock, together with any Company Stock then held in the Unallocated Company Stock Suspense Account.

3.15 UNIFORMED SERVICES EMPLOYMENT AND RE-EMPLOYMENT RIGHTS ACT

Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code § 414(u). Loan repayments will be suspended under this Plan as permitted under Code § 414(u)(4).

ARTICLE IV
VALUATIONS

4.1 VALUATION OF THE TRUST FUND

The Administrator shall direct the Trustee, as of each Anniversary Date and Valuation Date, to determine the net worth of the assets comprising the Trust Fund as it exists on such Anniversary Date or Valuation Date. See Section 3.4(e) for the rules and methods by which the Participants' Aggregate Accounts shall be valued and by which distributions, withdrawals and contributions shall be debited and credited to such accounts. In determining such net worth, the Trustee shall value the assets comprising the Trust Fund at their fair market value as of such Anniversary Date or Valuation Date and may deduct and pay all expenses for which the Trustee, Administrator or other third party service provider has not yet obtained reimbursement from the Employer or the Trust Fund. See Section 8.9 pertaining to the payment of expenses.

Determination of fair market value shall be made in good faith and based on all relevant factors for determining the fair market value of the asset.

In determining the value of any security, if the security is traded on a national exchange, the Trustee shall consider the price at which it was last traded. With respect to any unlisted security held in the Trust Fund, the bid price next preceding the close of business on the Valuation Date shall be considered. In either event, the Trustee shall also consider such other facts (including without limitation minority discounts and discounts for lack of marketability) that the Trustee determines, in its discretion, to reasonably influence the price of the security. The Trustee may, in any case, employ one or more appraisers for the purpose of valuing the securities or any other assets and may rely on the values established by such appraiser or appraisers. All valuations of Company Stock which is not readily tradeable on an established securities market shall be made by an independent appraiser that meets the requirements of Code § 401(a)(28)(c).

ARTICLE V
FUNDING AND INVESTMENT POLICY

5.1 INVESTMENT POLICY

(a) The Plan is designed to have a cash or deferred component (i.e., the Deferred Compensation and Matching Contribution) and an ESOP component. The ESOP component is designed to invest primarily in Company Stock.

(b) Notwithstanding paragraph (a) above, the Administrator may also direct the Trustee to invest (or may permit Participant direction) in other property described in the Trust or the Trustee may hold such funds in cash or cash equivalents.

(c) The Plan may not obligate itself to acquire Company Stock from a particular holder thereof at an indefinite time determined upon the happening of an event such as the death of the holder.

(d) The Plan may not obligate itself to acquire Company Stock under a put option binding upon the Plan. However, at the time a put option is exercised by the Employer, the Plan may be given an option to assume the rights and obligations of the Employer under a put option binding upon the Employer.

(e) All purchases of Company Stock shall be made at a price which, in the judgment of the Administrator, does not exceed the fair market value thereof. All sales of the Company Stock shall be made at a price which, in the judgment of the Administrator, is not less than the fair market value thereof. The valuation rules set forth in Article IV and Code § 401(a)(28) shall be applicable to all such purchases and sales.

5.2 EMPLOYER SECURITIES

The ESOP component of the Plan is designed to invest in "qualifying Employer securities" as that term is defined in the Act.

5.3 APPLICATION OF CASH

Employer contributions in cash and other cash received by the Trust Fund (other than Deferred Compensation, Matching Contributions and rollover contributions) shall first be applied to pay any Current Obligations of the Trust Fund.

5.4 TRANSACTIONS INVOLVING COMPANY STOCK

(a) No portion of the Trust Fund attributable to (or allocable in lieu of) Company Stock acquired by the Plan in a sale to which Code § 1042 applies may accrue, or be allocated directly or indirectly under any plan maintained by the Employer meeting the requirements of Code § 401(a):

(1) During the Nonallocation Period, for the benefit of:

(i): Any taxpayer who makes an election under Code § 1042(a) with respect to Company Stock; or
(ii): Any individual who is related to the taxpayer within the meaning of Code § 267(b), or

(2) For the benefit of any other person who owns (after application of Code § 318(a), applied without regard to the employee trust exemption in Code § 318(a)(2)(B)(i)) more than 25% of:

(i): Any class of outstanding stock of the Employer or Affiliated Employer which issued such Company Stock, or
(ii): The total value of any class of outstanding stock of the Employer or Affiliated Employer.

(b) Subparagraph (a)(1)(ii) (relating to family attribution rules) shall not apply to lineal descendants of the taxpayer, provided that the aggregate amount allocated to the benefit of all such lineal descendants during the Nonallocation Period does not exceed more than 5% of the Company Stock (or amounts allocated in lieu thereof) held by the Plan which are attributable to a

sale to the Plan by any person related to such descendants (within the meaning of Code § 267(c)(4)) in a transaction to which Code § 1042 is applied.

(c) A person shall be treated as failing to meet the 25% stock ownership limitation under paragraph (a)(2) above if such person fails such limitation:

(1) At any time during the one year period ending on the date of sale of Company Stock to the Plan, or

(2) On the date as of which Company Stock is allocated to Participants in the Plan.

5.5 LOANS TO THE TRUST

(a) The Plan may borrow money for any lawful purpose, provided the proceeds of an Exempt Loan are used within a reasonable time after receipt only to:

(1): Acquire Company Stock;
(2): Repay an Exempt Loan; or
(3): Repay a prior Exempt Loan.

(b) All loans to the Trust which are made or guaranteed by a disqualified person must satisfy all requirements applicable to Exempt Loans under Code § 4975(d)(3), Regulation § 54.4975-7(b), Act § 408(b)(3) and Department of Labor Regulation § 2550.408(b)-3 including, but not limited to, the following:

(1): The loan must be at a reasonable rate of interest;
(2): The amount of interest paid shall not exceed the amount of each payment which would be treated as interest under standard loan amortization tables;
(3): Any collateral pledged to the creditor by the Plan shall consist only of the Company Stock purchased with the borrowed funds;
(4): Under the terms of the loan, any pledge of Company Stock shall provide for the release of shares so pledged on a pro-rata basis pursuant to Section 3.4(g);
(5): Under the terms of the loan, the creditor shall have no recourse against the Plan except with respect to such collateral, earnings attributable to such collateral, Employer contributions (other than contributions of Company Stock) that are made to meet Current Obligations and earnings attributable to such contributions;
(6): The loan must be for a specific term and may not be payable at the demand of any person, except in the case of default;
(7): In the event of default upon an Exempt Loan, the value of the Trust Fund transferred in satisfaction of the Exempt Loan shall not exceed the amount of default. If the lender is a disqualified person, an Exempt Loan shall provide for a transfer of Trust Funds upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Exempt Loan; and
(8): Exempt Loan payments during a Plan Year must not exceed an amount equal to: (A) the sum, over all Plan Years, of all contributions and cash dividends paid by the Employer to the Plan with respect to such Exempt Loan and earnings on such Employer contributions and cash dividends, less (B) the sum of the Exempt Loan payments in all preceding Plan Years. A separate accounting shall be maintained for such Employer contributions, cash dividends and earnings until the Exempt Loan is repaid.

ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS

6.1 DETERMINATION OF BENEFITS UPON RETIREMENT

(a) As of, or after, a Participant's Normal Retirement Date, such Participant may terminate employment and request a distribution of his Participant's Aggregate Account. As of the attainment of Normal Retirement Age, such Participant's Aggregate Account shall become 100% vested. Participants shall be permitted to continue participation in the Plan after the attainment of their Normal Retirement Age.

(b) As soon as is practicable after the Participant's request for a Normal Retirement distribution, the Administrator shall direct the Trustee to distribute, or begin the distribution of, all amounts credited to such Participant's Aggregate Account in accordance with Section 6.6.

6.2 DETERMINATION OF BENEFITS UPON DEATH

(a) Upon the death of a Participant before his Retirement Date or other termination of employment, all amounts credited to such Participant's Aggregate Account shall become 100% Vested. Unless a later date is elected by the deceased Participant's Beneficiary, as soon as is practical after the Beneficiary's request for a distribution, the Administrator shall direct the Trustee, in accordance with the provisions of Section 6.7, to distribute, or begin the distribution of, the deceased Participant's Aggregate Account to the Participant's Beneficiary.

(b) Unless a later date is elected by a deceased Former Participant's Beneficiary, as soon as is practical after the Beneficiary's request for distribution, the Administrator shall direct the Trustee, in accordance with the provisions of Section 6.7, to distribute, or begin the distribution of, any remaining amounts credited to the Participant's Aggregate Account of such deceased Former Participant to such Former Participant's Beneficiary.

(c) The Administrator may require such proper proof of death and such evidence of the right of any person to receive payment of the value of the Aggregate Account of a deceased Participant or Former Participant as the Administrator may deem desirable. The Administrator's determination of death and of the right of any person to receive payment shall be conclusive.

(d) Unless otherwise elected and consented to in the manner prescribed in Code § 417(a)(2), the Beneficiary of the death benefit of a married Participant shall be the Participant's spouse. However, the Participant may designate a Beneficiary other than his spouse if:

(1) The spouse has validly waived her right to be the Participant's Beneficiary pursuant to Code § 417(a)(2);

(2) The Participant has no spouse; or

(3) The spouse cannot be located.

The designation of a Beneficiary by a Participant (whether married or single) shall be made on a form satisfactory to the Administrator. A Participant may at any time revoke his designation of a Beneficiary or change his Beneficiary by filing notice of such revocation or change with the Administrator. However, if married, the Participant's spouse must again consent in writing to any change in Beneficiary unless the original consent acknowledges that the spouse had the right to limit consent only to a specific Beneficiary and that the spouse voluntarily elected to relinquish such right. In the event a Participant has no spouse and no valid designation of Beneficiary exists at the time of the Participant's death, the Participant's Aggregate Account shall be payable in the following order:

(1) To the Participant's lineal descendants, per stirpes, including his legally adopted children;

(2) To the Participant's lineal ascendants, per capita, that survive the Participant; and

(3) To the Participant's estate.

6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY

Upon a Participant's Total and Permanent Disability prior to his Retirement Date or other termination of employment, all amounts credited to such Participant's Aggregate Account shall become 100% Vested. Unless otherwise elected by the Participant, as soon as is practical after the determination of Total and Permanent Disability and the Participant's request for a distribution, the Administrator shall direct the Trustee, in accordance with the provisions of Section 6.6, to distribute to (or begin the distribution to) such Participant all amounts credited to such Participant's Aggregate Account as though he had retired.

6.4 DETERMINATION OF BENEFITS UPON TERMINATION

(a) Upon the termination of employment of a Participant prior to his retirement, death or Total and Permanent Disability, the Terminated Participant shall be entitled to a distribution of the Vested portion of his Aggregate Account in accordance with this Section and Section 6.6 below.

(b) With respect to the Terminated Participant's Deferral Account, Participant's Matching Account, Participant's Profit Sharing Account and Participant's Rollover Account, as soon as is practical after the terminated Participant's request for a termination of service distribution, the Administrator shall direct the Trustee, in accordance with the provisions of Section 6.6, to distribute, or begin the distribution of, the Terminated Participant's Deferral Account, Participant's Matching Account, Participant's Profit Sharing Account and Participant's Rollover Account. With respect to the Participant's ESOP Account (which includes the Participant's Company Stock Account, Participant's ESOP Investment Account and Participant's Qualified Directed Investment Account), upon a request for a termination of service distribution, unless the Terminated Participant elects a later distribution commencement date, distribution of the Participant's ESOP Account shall commence as of the last day of the Plan Year which is the fifth Plan Year after the Plan Year in which the Participant otherwise separated from service with the Employer, unless the Participant is reemployed by the Employer before distribution is otherwise required by this paragraph. The rules of Code §409(o) are incorporated herein by reference. See Section 6.6. In the event a Participant's effective date of termination of service is September 30, the Plan Year that includes such September 30 shall be regarded as the Plan Year in which the Participant otherwise separated from Service with the Employer. See also Section 3.4(c).

(c) The amount of the Terminated Participant's ESOP Account, Participant's Profit Sharing Account and Participant's Matching Account which is not Vested shall be credited to the Suspense Account, pending Forfeiture, as of the effective date of termination of employment.

(d) For purposes of this Section 6.4, if a Terminated Participant's Vested balance in his Aggregate Account is zero, the Terminated Participant shall be deemed to have received a distribution of such vested balance upon termination of employment.

(e) The Vested portion of any Participant's ESOP Account, Participant's Profit Sharing Account, and Participant's Matching Account shall be a percentage of the total amount credited to such Participant's ESOP Account, Participant's Profit Sharing Account and Participant's Matching Account, respectively, determined on the basis of the Participant's number of Years of Service according to the following schedule:

Vesting Schedule
Years of Service	Percentage
Less than 3	0	%
3	20	%
4	40	%
5	60	%
6	80	%
7 or more	100	%

Effective with respect to terminations of employment occurring after November 3, 2000, the Vesting Schedule shall be as follows:

Vesting Schedule
Years of Service	Percentage
Less than 1	0	%
1	15	%
2	30	%
3	45	%
4	60	%
5	75	%
6	90	%
7 or more	100	%

Effective with respect to terminations of employment occurring on or after October 1, 2001, the Vested portion of any Participant's Matching Account and Profit Sharing Account shall be 100% at all times. The Vested portion of any Participant's ESOP Account shall be the following percentage, determined on a basis of the Participant's number of Years of Service:

Vesting Schedule
Years of Service	Percentage
Less than 1	0	%
1	20	%
2	40	%
3	60	%
4	80	%
5 or more	100	%

(f) The computation of a Participant's Vested percentage of his interest in the Plan shall not be reduced as the result of any direct or indirect amendment to this Plan. In the event that this Plan is amended to change or modify any vesting schedule, a Participant with at least three Years of Service as of the expiration date of the election period provided herein may elect to have his Vested percentage computed under the Plan without regard to such amendment. If a Participant fails to make such election, then such Participant shall be subject to the amended vesting schedule. The Participant's election period shall commence on the adoption date of the amendment and shall end 60 days after the latest of:

(1) The adoption date of the amendment;

(2) The effective date of the amendment; or

(3) The date the Participant received written notice of the amendment from the Employer or Administrator.

(g) (1) If any Former Participant shall be reemployed by the Employer before a One-Year Break in Service occurs, he shall continue to participate in the Plan in the same manner as if such termination had not occurred.

(2) If any Former Participant shall be reemployed by the Employer before five consecutive One-Year Breaks in Service, his forfeited Aggregate Account shall be reinstated only if he repays the full amount distributed to him, other than his voluntary contributions, prior to the fifth anniversary of his date of reemployment. In the event the Former Participant does repay the full amount distributed to him, the undistributed portion of the Participant's Aggregate Account must be restored in full, unadjusted by any gains or losses occurring subsequent to the Anniversary

Date or other Valuation Date preceding his termination. See Section 3.4(f) regarding the reinstatement of Aggregate Accounts.

(3) If any Former Participant is reemployed after a One-Year Break in Service has occurred, Years of Service shall include Years of Service prior to his One-Year Break in Service subject to the following rules:

(i) If any non-Vested, Former Participant (i.e., had less than 7 Years of Service at his termination of service) has a One-Year Break in Service (but less than 5 consecutive One-Year Breaks in Service) he shall immediately be eligible to participate in the Plan. Except as provided below, Years of Service before and after his One-Year Break in Service shall be recognized for vesting purposes with respect to his Aggregate Account balance attributable to both pre-break and post-break service.

(ii) After the greater of (A) five consecutive One-Year Breaks in Service, or (B) a number of One-Year Breaks in Service equal to the Former Participants' pre-break Years of Service, a Participant's Vested Aggregate Account attributable to post-break Years of Service shall not be increased as a result of pre-break Years of Service pursuant to Code § 411(a)(6)(D)(I);

(iii) After five consecutive One-Year Breaks in Service, a Former Participant's Vested Aggregate Account balance attributable to pre-break service shall not be increased as a result of post-break service;

(iv) If a non-Vested, Former Participant incurs five consecutive One-Year Breaks in Service, he must again satisfy the requirements of Sections 2.1 and 2.2 in order to become eligible for and enter the Plan; and

(v) If a Former Participant completes a Year of Service (a One-Year Break in Service previously occurred, but employment had not terminated), he shall participate in the Plan retroactively from the first day of the Plan Year during which he completes one Year of Service.

6.5 DETERMINATION OF BENEFITS AT AGE 59¹/2

(a) As of, or after, the date a Participant attains age 59¹/2, such Participant may request a distribution of all, or any portion, of the Vested portion of his Participant's Deferral Account, Participant's Matching Account, Participant's Profit Sharing Account, and Participant's Rollover Account, even if the Participant continues as an Employee of the Employer. Such Participant shall continue to participate in the Plan provided the Participant continues to meet the eligibility requirements of Article II.

(b) Upon a request for a distribution in accordance with the preceding paragraph, or as soon as practicable thereafter, the Administrator shall direct the Trustee to distribute, or begin the distribution of, all amounts credited to such Participant's Deferral Account, Participant's Matching Account, Participant's Profit Sharing Account and Participant's Rollover Account, in accordance with Section 6.6.

6.6 DISTRIBUTION OF BENEFITS

(a) With respect to the Participant's ESOP Account (which includes his Company Stock Account, ESOP Investment Account and Qualified Directed Investment Account, in the event a Participant is entitled to a lifetime distribution in accordance with Sections 6.1, 6.3, 6.4 or 6.5, the Administrator, pursuant to the election of the Participant, shall direct the Trustee to distribute to

the Participant or Former Participant, the Vested portion of his Participant's ESOP Account, in one of the following methods selected by the Participant or Former Participant:

(1) One lump sum payment in cash or in kind (as determined by the Administrator, but subject to Section 6.8);

(2) Systematic installment payments in cash or in kind (as determined by the Administrator, but subject to Section 6.8) over a period certain (not to exceed the life expectancy of the Participant or the joint life expectancy of the Participant and his Beneficiary). Furthermore, the Participant shall have the right to modify, from time to time, the amount and frequency of the installments and the period over which such installments will be made (including a total acceleration to a lump sum distribution of the remainder of his accounts) in accordance with procedures established by the Administrator.

A participant may make separate payment elections under this paragraph with respect to his Company Stock Account, ESOP Investment Account and Qualified Directed Investment Account.

Notwithstanding the foregoing provisions of this Section 6.6(a) and the fifth Plan Year delay provision of Section 6.4(b) above, with respect to distributions to Former Participants who have terminated employment and have requested a distribution pursuant to Section 6.4 above, if the fair market value of the Vested portion such Participant's ESOP Account (and only his Participant's ESOP Account) is less than $50,000 as of the effective date of such Participant's termination of employment with the Employer, distribution of the Vested portion of such Participant's ESOP Account, including the Company Stock Account, ESOP Investment Account and Qualified Directed Investment Account, made pursuant to Section 6.4, may be made in cash or in kind (as determined by the Administrator, but subject to Section 6.8) in a single lump sum, at any time after the Participant's termination of employment. In all other cases to which Section 6.4(b) applies, the fifth Plan Year delay provision of Section 6.4(b) shall apply. Such Participant (with a Participant's ESOP Account less than $50,000) shall not be subject to the five Plan Year deferral period of Section 6.4(b) of this Plan.

(b) With respect to the Participant's Deferral Account, Participant's Matching Account, Participant's Profit Sharing Account and Participant's Rollover Account, in the event a Participant is entitled to a lifetime distribution in accordance with Sections 6.1, 6.3, 6.4 or 6.5, the Administrator, pursuant to the election of the Participant, shall direct the Trustee to distribute to the Participant or Former Participant, the Vested portion of his Participant's Deferral Account, Participant's Matching Account, Participant's Profit Sharing Account, and/or Participant's Rollover Account, in one of the following methods selected by the Participant or Terminated Participant:

(1) One lump sum payment in cash or in kind;

(2) Systematic installment payments over a period certain (not to exceed the life expectancy of the Participant or the joint life expectancy of the Participant and his Beneficiary). Furthermore, the Participant shall have the right to modify, from time to time, the amount and frequency of the installments and the period over which such installments will be made (including a total acceleration to a lump sum distribution of the remainder of his accounts) in accordance with procedures established by the Administrator.

(c) Notwithstanding this Section 6.6, cash dividends on shares of Company Stock allocable to the Participants' Company Stock Accounts may be paid pursuant to Section 3.4(d) to the Participants or Beneficiaries within 90 days after the close of the Plan Year in which the dividend is paid.

(d) Any part of a Participant's Aggregate Account which is retained in the Plan after the Anniversary Date on which his participation in the Plan terminates will continue to be treated as a

Participant's Aggregate Account. However, such account shall not be credited with any further Employer contributions or Forfeitures.

(e) The Participant's Aggregate Account may not be paid without his written consent if the value exceeds, or has ever exceeded, $5,000 at the time of any prior distribution. If the value of the Participant's Aggregate Account does not exceed $5,000, and has never exceeded $5,000, at the time of any prior distribution, the Administrator may immediately distribute such Aggregate Account (in a single lump sum) without such Participant's consent. No distribution may be made under this Section 6.6 unless the Administrator first complies with the tax and distribution reporting and disclosure provisions of the Code and Regulations. For purposes of the $5,000 involuntary cash out provisions of this Subsection, with respect to distributions made after December 31, 2001, for purposes of determining if the Vested portion of the Participant's or Former Participant's Aggregate Account exceeds $5,000, amounts distributed from the Participant's or Former Participant's Rollover Account shall be excluded.

(f) Notwithstanding any provision in the Plan to the contrary, the distribution of a Participant's Aggregate Account shall be made in accordance with the following requirements and shall otherwise comply with Code § 401(a)(9) and the Regulations thereunder (including Regulation § 1.401(a)(9)-(2)), the provisions of which are incorporated herein by reference:

(1) A Participant's Aggregate Account shall be distributed to him not later than the Participant's "required beginning date." Alternatively, distributions to a Participant must begin no later than the Participant's "required beginning date," and must be made over the life of the Participant (or the joint lives of the Participant and the Participant's designated Beneficiary) or a period certain measured by the life expectancy of the Participant (or the joint life expectancies of the Participant and his designated Beneficiary) in accordance with Regulations. For Plan Years beginning prior to December 31, 1996, a Participant's "required beginning date" means April 1 of the calendar year following the calendar year in which the Participant attains age 70¹/2. For Plan Years beginning after December 31, 1996, a Participant's "required beginning date" means April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 70¹/2, or (ii) the calendar year in which the Participant retires. However, part (ii) of the preceding sentence shall not apply to any Participant that is a "five percent owner" (as defined in Code § 416) for the Plan Year ending in the calendar year in which such Participant attains age 70¹/2.

(2) Distributions to a Participant and his Beneficiaries shall only be made in accordance with the incidental death benefit requirements of Code § 401(a)(9)(G) and the Regulations thereunder.

(3) January, 2001 Proposed Regulations. With respect to distributions under the Plan made for calendar years on or after January 1, 2000, the Plan will apply the minimum distribution requirements of Code § 401(a)(9) in accordance with Regulations under Code § 401(a)(9) that were proposed in January, 2001, notwithstanding any provision of the Plan to the contrary. This subsection shall continue in effect until the end of the last calendar year beginning before the effective date of final Regulations under Code § 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service.

(g) All annuity contracts under this Plan shall be non-transferable when distributed. Furthermore, the terms of any annuity contract purchased and distributed to a Participant or spouse shall comply with all of the requirements of the Plan.

(h) If a distribution is one to which Code §§ 401(a)(11) and 417 do not apply, such distribution may commence less than thirty (30) days after the notice required under Regulation § 1.411(a)-11(c) is given, provided that: (1) the Administrator clearly informs the Participant that the

Participant has a right to a period of at least thirty (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, and (2) the Participant, after receiving the notice, affirmatively elects a distribution.

(i) In no event shall a distribution required by this Article VI be distributed later than 180 days after the Anniversary Date for the Plan Year in which such distribution is to be made. However, unless otherwise elected in writing by the Former Participant (such election may not result in a death benefit that is more than incidental), a distribution shall begin not later than the 60th day after the close of the Plan Year in which the latest of the following events occurs.

(i) The date on which the Participant attains his Normal Retirement Age;

(ii) The 10th anniversary of the year in which the Participant commenced participation in the Plan; or

(iii) The date the Participant terminates his service with the Employer.

6.7 DISTRIBUTION OF BENEFITS UPON DEATH

(a) (i) Participant's Aggregate Account. Unless otherwise elected as provided in Section 6.2(d), a Participant who dies before the distribution of his Participant's Aggregate Account has commenced pursuant to Section 6.6 above, and who has a surviving spouse, shall have the value of his Participant's Aggregate Account paid to his surviving spouse, while the Participant's Aggregate Account of an unmarried Participant shall be paid to his Beneficiary.

(ii) A married Participant, with the written consent of his spouse, may elect to name a Beneficiary other than his surviving spouse. In order to make such election, the procedures of Code § 417, and the Regulations thereunder, shall be applied, which generally shall require that:

(A) The Plan Administrator shall provide the Participant and his spouse a written explanation of the spouse's rights hereunder.

(B) Such explanation shall be given during the "applicable period" as defined in Code § 417(a)(3)(B)(ii), and the Regulations thereunder.

(C) Such election may be made only after the first day of the Plan Year in which the Participant attains age 35, except that in the case of a Terminated Participant, such election may be made any time after the Terminated Participant's separation from service with the Employer.

(D) The spouse's consent to such election is in writing and witnessed by a notary public, designates a Beneficiary or form of benefit which may not be changed (but may be revoked) without spousal consent (unless the prior spousal consent expressly permitted future designations or elections by the Participant without spousal consent), and the spousal consent acknowledges the effect of such election.

(b) In the event a Participant has commenced distribution of his Aggregate Account prior to death, distribution of the Participant's Aggregate Account shall continue in the form or forms, and at least as rapidly, as prior to the Participant's death.

(c) Except as provided in paragraph (b) above, in the event a Beneficiary is entitled to a death benefit in accordance with Section 6.2, the Administrator, pursuant to the election of the Beneficiary, shall direct the Trustee to distribute to the Beneficiary, the deceased Participant's Aggregate Account, in one of the methods of distribution specified in Section 6.6 above (giving effect to the separate forms of distribution for the "ESOP Account" and "Other Accounts").

(d) The deceased Participant's Aggregate Account may not be paid without the Beneficiary's consent if the value of such Aggregate Account exceeds, or has ever exceeded, $5,000 at the time of any prior distribution. If the value of the Participant's Aggregate Account does not exceed $5,000 and has never exceeded $5,000 at the time of any prior distribution, the Administrator may immediately distribute such Aggregate Account (in a single lump sum) without such Beneficiary's consent. No such distribution may be made under this Section unless the Administrator first complies with the tax and distribution reporting and disclosure provisions of the Code and Regulations. For purposes of the $5,000 involuntary cash-out provisions of this Subsection, with respect to distributions made after December 31, 2001, for purposes of determining if the Vested portion of the Participant's or Former Participant's Aggregate Account exceeds $5,000, amounts distributed from the Participant's or Former Participant's Rollover Account shall be excluded.

(e) January, 2001 Proposed Regulations. With respect to distributions under the Plan made for calendar years on or after January 1, 2000, the Plan will apply the minimum distribution requirements of Code § 401(a)(9) in accordance with Regulations under Code § 401(a)(9) that were proposed in January, 2001, notwithstanding any provision of the Plan to the contrary. This subsection shall continue in effect until the end of the last calendar year beginning before the effective date of final Regulations under Code § 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service.

6.8 HOW ESOP BENEFITS WILL BE DISTRIBUTED

(a) Distribution of a Participant's ESOP Account may be made in cash or Company Stock or both (as determined by the Administrator), provided, however, that if a Participant or Beneficiary so demands, such benefit (other than Company Stock sold and reinvested pursuant to Section 3.12) shall be distributed only in the form of Company Stock. Prior to making a distribution of benefits, the Administrator shall advise the Participant or his Beneficiary, in writing, of the right to demand that benefits be distributed solely in Company Stock.

(b) If a Participant or Beneficiary demands that benefits be distributed solely in Company Stock, distribution of a Participant's ESOP Account will be made entirely in whole shares or other units of Company Stock. Any balance in a Participant's ESOP Investment Account will be applied to acquire for distribution the maximum number of whole shares or other units of Company Stock at the then fair market value. Any fractional unit value unexpended will be distributed in cash. If Company Stock is not available for purchase by the Trustee, then the Trustee shall hold such balance until Company Stock is acquired and then make such distribution, subject to this Article VI.

6.9 IN SERVICE DISTRIBUTION

(a) At such time as a Participant (but not a Former Participant or Terminated Participant) is credited with five (5) Years of Service, such Participant thereafter may request once each Plan Year a distribution not to exceed ten percent (10%) of such Participant's Company Stock Account, determined as of the Anniversary Date or Valuation Date immediately preceding such request. For those Participants (but not Former Participants or Terminated Participants) who have not been credited with five (5) Years of Service, such Participant may request once each Plan Year a distribution not to exceed five percent (5%) of the Vested portion of the Participant's Company Stock Account, determined as of the Anniversary Date or Valuation Date immediately preceding such request, provided that the distributed shares of Company Stock have been allocated to the Participant's Company Stock Account at least two (2) years as of the date of such distribution. Such Participant shall continue to participate in the Plan provided the Participant continues to meet the eligibility requirements of Article II.

(b) In service distributions pursuant to this Section shall be made in one lump payment, in cash or in kind (as determined by the Administrator), but the provisions of Sections 6.8 and 6.18 shall apply to in service distributions permitted by this Section 6.9.

(c) Requests for in service distributions under this Section 6.9 shall be made by the Participant to the Administrator on a form to be supplied by the Administrator. The Administrator is authorized to, and shall, promulgate procedures from time to time which govern in service distributions, including the times of the Plan Year during which in service distributions may be requested.

(d) This Section 6.9 shall be effective as soon as administratively practicable after July 1, 1997.

6.10 TIME OF SEGREGATION OR DISTRIBUTION

Notwithstanding any other provision of this Agreement to the contrary, whenever the Trustee is to make a distribution or to commence a series of payments, the distribution or series of payments may be made or begun as soon after the Participant's or Beneficiary's request as is practicable, but unless otherwise consented to in writing by the Participant or Beneficiary, in no event shall distribution be made or begun later than 180 days after the Anniversary Date following such request. However, unless otherwise elected in writing by the Former Participant (such election may not result in a death benefit that is more than incidental), a "distribution" shall begin not later than the 60th day after the close of the Plan Year in which the latest of the following events occurs:

(a) The date on which the Participant attains his Normal Retirement Age;

(b) The 10th anniversary of the year in which the Participant commenced participation in the Plan; or

6.11 DISTRIBUTION FOR MINOR BENEFICIARY

In the event a distribution is to be made to a minor, then the Administrator may, in his sole discretion, direct that such distribution be paid to the legal guardian, or, if none, to a parent of such Beneficiary or a responsible adult with whom the Beneficiary maintains his residence, or to the custodian for such Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted by the laws of the state in which said minor Beneficiary resides. Such payment to the legal

guardian or parent of a minor Beneficiary shall fully discharge the Trustee, Employer, Administrator and Plan from further liability on account thereof.

6.12 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN

In the event that all, or any portion, of the distribution payable to a Participant or his Beneficiary hereunder shall, at the expiration of five years after it shall become payable, remain unpaid solely by reason of the inability of the Administrator, after sending a registered letter, return receipt requested, to the last known address, and after further diligent effort, to ascertain the whereabouts of such Participant or his beneficiary, the amount so distributable shall be forfeited and shall be used to reduce the cost of the Plan. In the event a Participant or Beneficiary is located subsequent to his benefit being forfeited, such benefit shall be restored.

6.13 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS

All rights and benefits, including elections, provided to a Participant in this Plan shall be subject to the rights afforded to any "alternate payee" under a "qualified domestic relations order" as that term is defined in Code § 414(p).

6.14 DISTRIBUTION OF DEFERRAL ACCOUNT UPON HARDSHIP

(a) The Plan Administrator may direct the Trustee to distribute a portion of a Participant's Deferral Account (not to exceed the Participant's Deferral Account valued as of the next preceding Anniversary Date or Valuation Date) in the event of an immediate and heavy financial need. Such hardship distribution shall be made only within the "deemed hardship distribution standards" published by the Internal Revenue Service in Regulations § 1.401(k)-1(d)(2)(iv).

(b) The determination of whether an immediate and heavy financial need exists shall be made by the Administrator based upon all relevant facts and circumstances. A hardship withdrawal shall be authorized only if the distribution is to be used for one of the following purposes:

(1) The payment of unreimbursed medical expenses incurred by the Participant, his spouse or his dependent (as defined in Code § 152) or the payment of unreimbursed expenses necessary for these persons to obtain medical care;

(2) Costs directly related to the purchase of a principal residence by the Participant (excluding mortgage payments);

(3) The payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, or his spouse or dependent (as defined in Code § 152);

(4) The need to prevent the eviction from the Participant's principal residence or foreclosure on the mortgage of the Participant's principal residence.

(c) In order to obtain a hardship withdrawal, the Participant must certify to the Administrator and agree that all of the following conditions are satisfied:

(1) The distribution is not in excess of the amount of the Participant's immediate and heavy financial need (which amount may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution);

(2) The Participant has obtained all distributions, other than hardship distributions, and all non-taxable loans currently available under all plans maintained by the Employer; and

(3) The Participant's salary deferrals to the Plan "and all other plans maintained by the Employer" (as that phrase is defined in Regulation § 1.401(k)-1(d)(2)(iv)(B)(4) will be

suspended for at least 12 months, and his maximum salary deferrals for the following taxable year shall be reduced pursuant to Section 3.2(e).

(d) A distribution to satisfy an immediate or heavy financial need may only be made if the Participant does not have other resources available to satisfy such need. For this purpose, a Participant's resources shall include property which is owned by him, his spouse or minor children. The determination whether a Participant has other resources with which to satisfy the financial need will be based upon all relevant facts and circumstances. The Participant shall certify and provide such documentation as may be necessary to show that the amount of the distribution is not in excess of the financial need and that the need cannot be met by one of the following alternatives:

(1) Through reimbursement or compensation by insurance or otherwise;

(2) By selling or otherwise liquidating assets in a reasonable manner, but only if doing so would not create an immediate and heavy financial need;

(3) By stopping elective contributions to the Plan under Section 3.2;

(4) By borrowing money from a bank or other commercial lender on terms that would be considered commercially reasonable; or

(5) By electing to receive any available distribution from the Plan.

6.15 DIRECT ROLLOVERS

Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article, a Distributee may elect, at the time and in the manner prescribed by the 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. Nothing in this Section 6.15 shall be construed to grant or Distribute any right to a distribution other than those rights provided in this Article VI.

6.16 LOANS TO PARTICIPANTS

(a) The Administrator shall have the authority to administer the loan program provided under the Plan. Such authority shall include, without limitation, the authority to (i) approve or deny loan applications, (ii) establish limitations on the amount or terms of a loan, (iii) determine the rate of interest and the collateral for each loan, and (iv) call a loan into default and take all actions necessary or appropriate to preserve Plan assets in the event of such default.

(b) Loans shall be available to all Participants (but not Former Participants or Terminated Participants) of the Plan provided they are Employees of the Employer on the date the loan is made. Any Participant may request a loan from the Plan in writing by delivering a written request to the Administrator on a form prescribed by the Employer. The Administrator shall then approve or deny such loan application within 30 days of the receipt thereof.

In the event the loan is approved, the Participant shall execute a promissory note, security agreement, an authorization to withhold loan repayments from the Participant's regular paycheck from the Employer, and such other documents as shall be required by the Administrator.

Any loan that is approved shall be treated as a segregated, directed investment under Article III (for purposes of crediting earnings) for the benefit of only the borrowing Participant.

(1) The sum of all the Participant's (and spouse's) monthly debt payments (computed immediately after the Plan loan is made, and including principal and interest payments on mortgage loans, car loans, credit cards and other unsecured or secured debt obligations but excluding obligations paid off with the proceeds of the Plan loan), plus the monthly amortization of the Participant's Plan loan then being requested shall not exceed 45% of the Participant's (and spouse's) gross monthly income (computed before any Internal Revenue Code §§ 401(k) or 125 salary deferrals). The Participant shall certify this to the Administrator at the time the loan is requested.

(2) The loan does not exceed the maximum loan limitations in paragraph (d) below.

(3) The Participant does not have any other loans outstanding from the Plan at the time the Participant applies for the loan.

(4) The loan is repaid in level payments of principal and interest over a period not to exceed five years (thirty years in the event the loan is to purchase a principal residence for the Participant), by payroll deduction from the Participant's regular paychecks.

(5) The loan satisfies the provisions otherwise provided in this section as to interest rate, collateral and documentation.

(6) The Participant agrees to pay (or have deducted) all fees and documentary stamps associated with the loan, whether incurred at the time of the loan or on an annual basis.

(d) The maximum dollar amount of any Plan loan to a Participant, when added to plan loans from any other qualified plans maintained by the Employer, shall not exceed the lesser of—

(1) $50,000, reduced by the excess (if any) of—

(i) the highest outstanding balance of loans from the Plan to the Participant during the one year period ending on the day before the date of the loan, over

(ii) the outstanding balance of loans from the Plan to the Participant on the date of the loan; or

(2) One-half of the Participant's Vested Aggregate Account balance (excluding the Participant's Company Stock Account).

The minimum dollar amount of any Plan loan to a Participant shall be $1,000.

No loans shall be made from the Plan if the rate of interest determined pursuant to paragraph (e) below would exceed the state usuary rate at the time the loan would be made.

(e) Loans shall bear a reasonable rate of interest, which shall be commensurate with interest rates charged by persons in the business of lending money under similar circumstances. The Administrator (or its designee) shall determine the interest rate for any loan based on the rate charged by one or more commercial lenders for a similar loan, taking into account similar collateral.

(f) All loans shall be evidenced by a promissory note executed by the Participant in favor of the Trustee of the Plan. In addition, the loan shall be secured by a grant by the Participant to the Trustee of a security interest in 50% of the Participant's Vested Aggregate Account balance in the Plan. Such security interest shall be evidenced by a duly executed security agreement and, if the Administrator requests, an executed and filed Form UCC-1 Financing Statement. The Plan shall

have a right to offset the amount of any loan, including interest and collection costs, against any amount distributable to or on behalf of the Participant or his Beneficiary.

(g) In the event the Participant fails to pay any principal or interest when due, the Plan loan shall be considered in default 60 days after the date such payment was due. Unless prohibited by the Code or Regulations, the loan shall then be foreclosed, and the amount of the loan treated as a deemed, in service distribution to the Participant of the entire amount of the unpaid principal and accrued interest (plus collection costs).

(h) All loans shall be due and payable upon a Participant's termination of employment with the Employer or Affiliated Employer.

(i) In the event a Participant defaults on the repayment of a Plan loan as provided in paragraph (g) above or in the event a Plan loan becomes due and payable upon a Participant's termination of employment, the Administrator shall have the authority to determine the Participant accounts that will be reduced and offset to satisfy such Plan loan, provided that the Administrator makes such determination in a consistent and nondiscriminatory manner. In the event it is necessary to reduce and offset all or any portion of the Participant's ESOP Account to satisfy such Plan loan, then notwithstanding the deferred distribution provisions of Section 6.4(b) that apply to the Participant's ESOP Account, the Administrator may then treat the satisfaction of such Plan loan as an immediate distribution of the corresponding portion of such Participant's ESOP Account.

(j) In the event a Participant is married at the time a loan is made to such Participant, the spouse of such Participant shall consent to such loan in writing and in accordance with Code §§401(a)(11) and 417. Such consent shall be obtained no earlier than the beginning of the ninety (90) day period that ends on the date the loan is made.

6.17 PUT OPTION

(a) If Company Stock which was not acquired with the proceeds of an Exempt Loan is distributed to a Participant and such Company Stock is not readily tradeable on an established securities market, a Participant shall have the right to require the Employer to repurchase the Company Stock distributed to such Participant under a fair valuation formula. Such Stock shall be subject to the provisions of paragraph (c) below.

(b) Company Stock which is acquired with the proceeds of an Exempt Loan and which is not publicly traded when distributed, or if it is subject to a trading limitation when distributed, must be subject to a put option. For purposes of this paragraph, a "trading limitation" on Company Stock is a restriction under any federal or state securities law or any regulation thereunder, or an agreement (not prohibited by this Plan affecting the Company Stock which would make the Company Stock not as freely tradeable as stock not subject to such restriction.

(c) The put option shall be exercisable only by a Participant or Former Participant, by the Participant's or Former Participant's donees, or by a person (including an estate or its distributee) to whom the Company Stock passes by reason of a Participant's or Former Participant's death. (Under this paragraph, Participant or Former Participant means a Participant or Former Participant and the Beneficiaries of the Participant or Former Participant under the Plan.) The put option must permit a Participant or Former Participant to put the Company Stock to the Employer. Under no circumstances may the put option bind the Plan. However, the option shall grant the Plan an option to assume the rights and obligations of the Employer at the time that the put option is exercised. If it is known at the time a loan is made that federal or state law will be violated by the Employer's honoring such put option, the put option must permit the Company Stock to be put, in a manner consistent with such law, to a third party (e.g., an affiliate of the

Employer or a shareholder other than the Plan) that has substantial net worth at the time the loan is made and whose net worth is reasonably expected to remain substantial.

The put option shall commence as of the day following the date the Company Stock is distributed to the Former Participant and end 60 days thereafter and if not exercised within such 60-day period, an additional 60-day option shall commence on the first day of the fifth month of the Plan Year next following the date the Company Stock was distributed to the Former Participant (or such other 60-day period as provided in Regulations). However, in the case of Company Stock that is publicly traded without restrictions when distributed but ceases to be so traded within the option period described herein, the Employer must notify each holder of such Company Stock in writing on or before the 10th day after the date the Company Stock ceases to be so traded that for the remainder of the applicable option period the Company Stock is subject to the put option. The number of days between the 10th day and the date on which notice is actually given, if later than the 10th day, must be added to the duration of the put option. The notice must inform distributees of the term of the put options that they are to hold. The terms must satisfy the requirements of this paragraph.

The put option shall be exercised by the holder notifying the Employer in writing that the put option is being exercised. The notice shall state the name and address of the holder and the number of shares to be sold. The period during which a put option is exercisable does not include any time when a distributee is unable to exercise it because the party bound by the put option is prohibited from honoring it by applicable federal or state law. The price at which a put option must be exercisable is the value of the Company Stock determined in accordance with Article V. Payment under the put option involving a "total distribution" shall be paid in substantially equal annual installments over a period certain beginning not later than thirty days after the exercise of the put option and not extending beyond five (5) years. The length of the term of the payout shall be determined by the Administrator. The deferral of payment shall be evidenced by a promissory note that is adequately secured and bears a reasonable interest rate on the unpaid amounts. The first payment under the put option involving installment distributions must be paid not later than thirty (30) days after the exercise of the put option. Payment under a put option must not be restricted by the provisions of a loan or any other arrangement, including the terms of the Employer's articles of incorporation, unless so required by applicable state law.

For purposes of this Section, "Total Distribution" means a distribution to a Participant or his Beneficiary within one taxable year of the entire Vested Participant's ESOP Account.

(d) An arrangement involving the Plan that creates a put option must not provide for the issuance of put options other than as provided under this Section. The Plan (and the Trust Fund) must not otherwise obligate itself to acquire Company Stock from a particular holder thereof at an indefinite time determined upon the happening of an event such as the death of the holder.

6.18 NONTERMINABLE PROTECTIONS AND RIGHTS

No Company Stock, other than that described in Section 6.17, acquired with the proceeds of a loan described in Section 5.5 hereof, may be subject to a put, call, or other option, or buy-sell or similar arrangement when held by and when distributed from the Trust Fund, whether or not the Plan is then an ESOP. The protections and rights shall continue to exist under the terms of this Plan so long as any Company Stock acquired with the proceeds of a loan described in Section 5.5 hereof is held by the Trust Fund or by any Participant, Former Participant or other person for whose benefit such protections and rights have been created, and neither the repayment of such loan nor the failure of the Plan to be an ESOP, nor an amendment of the Plan shall cause a termination of said protections and rights.

ARTICLE VII
TOP HEAVY RULES

7.1 DEFINITIONS

For purposes of this Article VII, and this Agreement, the following capitalized terms shall have the following meanings:

(a) "Aggregation Group" means either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter defined.

Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top Heavy Plans.

An Aggregation Group shall include any terminated qualified retirement plan of the Employer that was maintained by the Employer within the last five year period ending on the Determination Date.

(b) "Determination Date" means the last day of the preceding Plan Year.

(c) "Five Percent Owner" means any person who owns (or is considered as owning within the meaning of Code § 318) more than 5% of the outstanding stock of the Employer or stock possessing more than 5% of the total combined voting power of all stock of the Employer or, in the case of an unincorporated business, any person who owns more than 5% of the capital or profits interest in the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code §§ 414(b), (c), (m), or (o) shall be treated as separate employers.

(d) "Key Employee" means those Employees defined in Code § 416(i) and the Regulations thereunder. Generally, the term includes any Employee or former Employee (and his Beneficiaries) who, at any time during the prior Plan Year or for Plan Years beginning prior to January 1, 2002, during the current Plan Year and any of the preceding four Plan Years, is:

(1) An officer of the Employer (as that term is defined within the meaning of the Regulations under Code § 416) having Compensation for Plan Years beginning prior to January 1, 2002, in excess of 50% of the amount in effect under Code § 415(b)(1)(A) for the Plan Year, or for Plan Years beginning after December 31, 2001, in excess of $130,000. For purposes of this definition, no more than 50 Employees (or if less, the greater of three Employees or ten percent of the Employees) shall be treated as officers, and Employees described in Code § 414(q)(8) shall be excluded as officers. For purposes of this definition, no more than fifty Employees (or if less, the greater of three Employees or ten percent of the Employees) shall be treated as officers, and Employees described in Code § 414(q)(8) shall be excluded as officers. For Plan Years beginning after December 31, 2002, the $130,000 amount enumerated above shall be adjusted at the same time and in the same manner as under Code §415(d), except that the base period shall be the calendar quarter beginning July 1, 2001, and any increase under this sentence which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000.

(2) For Plan Years beginning prior to January 1, 2002, one of the 10 Employees having Compensation greater than the amount in effect under Code § 415(c)(1)(A), and owning (or considered as owning within the meaning of Code § 318) both more than a one-half percent interest in the Employer or Affiliated Employer, and one of the 10 largest interests in the Employer or Affiliated Employer.

(3) A "Five Percent Owner" of the Employer.

(4) A "one percent owner" of the Employer having Compensation from the Employer of more than $150,000 for the Plan Year. "One percent owner" means any person who owns (or

is considered as owning within the meaning of Code § 318) more than one percent of the outstanding stock of the Employer or stock possessing more than one percent of the total combined voting power of all the stock of the Employer. For purposes of this definition, the rules of subsections (b), (c) and (m) of Code § 414 shall not apply in determining ownership. However, in determining whether an individual has Compensation of more than $150,000, Compensation from each employer required to be aggregated under Code § 414(b), (c) and (m) shall be taken into account.

(e) "Non-Key Employee" means any Employee or former Employee (and his Beneficiaries) who is not a Key Employee.

(f) "Permissive Aggregation Group" means an Aggregation Group, selected by the Employer, that includes any plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code §§ 401(a)(4) and 410.

In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is a Top Heavy Group. No plan in the Permissive Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is not a Top Heavy Group.

(g) "Required Aggregation Group" means an Aggregation Group which includes a plan of the Employer in which a Key Employee is a Participant, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code §§ 401(a)(4) or 410.

In the case of a Required Aggregation Group, each plan in the group will be considered a Top Heavy Plan if the Required Aggregation Group is a Top Heavy Group. No plan in the Required Aggregation Group will be considered a Top Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.

(h) "Super Top Heavy Plan" means a plan described in Section 7.3(b) below.

(i) "Top Heavy Plan" means a plan described in Section 7.3(a) below.

(j) "Top Heavy Group" means an Aggregation Group in which, as of the Determination Date, the sum of:

(1) The present value of accrued benefits of Key Employees under all defined benefit pension plans included in the group; plus

(2) The aggregate accounts of Key Employees under all defined contribution plans included in the group;

exceeds 60% of a similar sum determined for all Participants.

(k) "Top Heavy Plan Year" means that, for a particular Plan Year, the Plan is a Top Heavy Plan.

7.2 TOP HEAVY PLAN REQUIREMENTS

(a) For any Top Heavy Plan Year, the Plan shall provide the following:

(1) Special vesting requirements of Code § 416(b) pursuant to Section 7.5 below; and

(2) Special minimum contribution and allocation requirements of Code § 416(c) pursuant to Section 7.4 below.

7.3 DETERMINATION OF TOP HEAVY STATUS

(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as of the Determination Date, the sum of:

(i) the present value of accrued benefits of Key Employees, plus

(ii) the Participants' Aggregate Accounts (other than the Participants' Rollover Accounts) of Key Employees under this Plan and the aggregate accounts of Key Employees in all plans of an Aggregation Group,

exceeds 60% of the sum of:

(i) the present value of accrued benefits of all Key Employees and Non-Key Employees, plus

(ii) the Participants' Aggregate Accounts (other than the Participants' Rollover Accounts) of all Key Employees and Non-Key Employees under this Plan and the aggregate accounts of all Key Employees and Non-Key Employees in all plans of an Aggregation Group.

If any Participant is a Non-Key Employee for any Plan Year, but such Participant was a Key Employee for any prior Plan Year, such Participant's present value of accrued benefit and/or Participant's Aggregate Account and aggregate account balance in other aggregate plans shall not be taken into account for purposes of determining whether this Plan is a Top Heavy or Super Top

Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top Heavy Group). In addition, if a Participant or Former Participant has not performed any services for any Employer maintaining the Plan at any time during the five-year period ending on the Determination Date, the present value of accrued benefit and/or Participant's Aggregate Account or other aggregate account balance in other aggregate plans for such Participant or Former Participant shall not be taken into account for the purposes of determining whether this Plan is a Top Heavy or Super Top Heavy Plan.

The present value of accrued benefits and the Participant's Aggregate Accounts of any Employee who does not perform services for the Employer during the one-year period ending on the Determination Date shall not be taken into account for purpose of this Article VII.

(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in which the provisions of paragraph (a) are met, substituting 90% for 60%.

7.4 REQUIRED MINIMUM ALLOCATIONS

(a) Notwithstanding Section 3.4, for any Top Heavy Plan Year, the sum of the Employer's Profit Sharing Contribution, ESOP Contributions and Forfeitures allocated to the Participant's ESOP Account and Participant's Profit Sharing Account, and for Plan Years beginning after December 31, 2001, Matching Contributions allocated to the Participant's Matching Account, of each Non-Key Employee shall be equal to 3% of such Non-Key Employee's Compensation (reduced by contributions and Forfeitures, if any, allocated to each Non-Key Employee in any other defined contribution plan included with this Plan in a Required Aggregation Group). However, if (i) the sum of the Employer's Profit Sharing Contribution, ESOP Contribution and Forfeitures allocated to the Participant's ESOP Account and Participant's Profit Sharing Account, and for Plan Years beginning after December 31, 2001, Matching Contributions allocated to the Participant's Matching Account, of each Key Employee for such Top Heavy Plan Year is less than 3% of each Key Employee's Compensation; and (ii) this Plan is not required to be included in an Aggregation Group to enable a defined benefit plan to meet the requirements of Code §§ 401(a)(4) or 410, then the sum of the Employer's Profit Sharing Contribution, ESOP Contribution and Forfeitures, allocated to the Participant's ESOP Account and Participant's Profit Sharing Account, and for Plan Years beginning after December 31, 2001, Matching Contributions allocated to the Participant's Matching Account, of each Non-Key Employee shall be equal to the largest percentage allocated to the Participant's ESOP Account, Participant's Profit Sharing Account, and Participant's Matching Account of any Key Employee.

Notwithstanding anything in this Section to the contrary, in determining whether a Non-Key Employee has received the required minimum allocation, (i) Qualified Non-Elective Contributions allocated to both Non-Key Employees and Key Employees, (ii) Matching Contributions allocated to both Non-Key Employees and Key Employees, and (iii) Deferred Compensation of Key Employees only, shall be treated as a Profit Sharing Contribution, and shall be taken into account in determining the minimum allocation required by this Section. However, for Plan Years beginning prior to January 1, 2002, if a Matching Contribution allocated to a Non-Key Employee is taken into account under this Section 4.4(f) in determining the minimum allocation required by Code § 416, such Matching Contribution shall be disregarded for purposes of Sections 4.7 and 4.8.

(b) Notwithstanding any provision of this Plan to the contrary, a Non-Key Employee who has not separated from service with the Employer as of the last day of the Plan Year shall receive the required minimum allocation provided by Section 7.4(a) even if the Non-Key Employee, for such Plan Year, (i) has not been credited with 1,000 Hours of Service, (ii) earned Compensation below a stated amount, or (iii) has failed to make any mandatory or elective contributions.

(c) For purposes of determining the "largest percentage allocated to the Participant's ESOP Account and Participant's Profit Sharing Account," of a Key Employee, the total amount of a Key Employee's Compensation which has been deferred into the Plan pursuant to Section 3.2 shall be included as an amount allocated to such Key Employee's Profit Sharing Account for that Plan Year.

7.5 TOP HEAVY VESTING SCHEDULE

Notwithstanding the vesting schedule in Section 6.4(e), for any Top Heavy Plan Year, the Vested portion of any Participant's ESOP Account, Participant's Matching Account and Participant's Profit Sharing Account shall be a percentage of the total amount credited to such accounts determined on the basis of the Participant's number of Years of Service according to the following schedule:

Vesting Schedule
Years of Service	Percentage
Less than 1	0	%
1	15	%
2	30	%
3	45	%
4	60	%
5	80	%
6 or more	100	%

ARTICLE VIII
ADMINISTRATION

8.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER

(a) The Employer shall be empowered to appoint and remove the Trustee, Administrator and Investment Advisory Committee from time to time as it deems necessary for the proper administration of the Plan and to assure that the Plan is being operated for the exclusive benefit of the Participants, Former Participants and their Beneficiaries in accordance with the terms of this Plan, the Code, and the Act.

(b) The Employer shall establish a "funding policy and method" (i.e., it shall determine whether the Plan has a short run need for liquidity (e.g., to pay benefits) or whether liquidity is a long run goal and investment growth (and stability of same) is a more current need) or shall appoint a qualified person to do so. However, the Employer or its delegate shall communicate such needs and goals to the Trustee, who shall coordinate such Plan needs with its investment policy. The communication of such "funding policy and method" shall not constitute a directive to the Trustee as to investment of the Trust Funds. Such "funding policy and method" shall be consistent with the objectives of this Plan and with the requirements of Title I of the Act.

(c) The Employer may, in its discretion, appoint an Investment Advisory Committee that shall have the authority to designate, monitor and change the investment options made available to Participants, Former Participant's and Beneficiaries pursuant to Section 3.13. Furthermore, the Employer may, in its discretion, appoint an Investment Manager to manage all or a designated portion of the assets of the Plan. In such event, the Trustee shall follow the directive of the Investment Manager in investing the assets of the Plan, provided that such direction is made in accordance with the terms and objectives of this Plan and are not contrary to the Act.

8.2 ASSIGNMENT AND DESIGNATION OF ADMINISTRATIVE AUTHORITY

The Employer may appoint one or more Administrators and one or more members of an Investment Advisory Committee. Any person, including but not limited to, the Employees of the

Employer, shall be eligible to serve as an Administrator or on a committee designated as the Administrator, or on the Investment Advisory Committee.

Any Administrator, member of any administrative committee, or member of an Investment Advisory Committee may resign by delivering his written resignation to the Employer, or be removed by the Employer by delivery of written notice of removal, to take effect at a date specified therein, or upon delivery to the individual if no date is specified. The Employer, upon the resignation or removal of an Administrator or committee member, shall promptly designate in writing a successor to this position.

If the Employer does not appoint an Administrator or Investment Advisory Committee, or if the committee is without members, the Employer shall function as the Administrator.

8.3 ALLOCATION AND DELEGATION OF RESPONSIBILITIES

In the event a committee is appointed by the Employer to serve as Administrator or Investment Advisory Committee, the members of the committee may allocate the responsibilities of the Administrator or Investment Advisory Committee among themselves, in which event the members of the committee shall notify the Employer and the Trustee in writing of such action and specify the responsibilities of each member. The Trustee thereafter shall accept and rely upon any instruction by the appropriate Administrator or committee member until such time as the Employer, Administrators or committee file with the Trustee a written revocation of such designation.

8.4 POWERS, DUTIES AND RESPONSIBILITIES

The primary responsibility of the Administrator is to administer the Plan for the exclusive benefit of the Participants and their Beneficiaries, subject to the specific terms of the Plan, the Act and the Code. The Administrator shall administer the Plan in accordance with its terms and shall have the discretionary power to determine all questions arising in connection with the administration, interpretation, and application of the Plan. Any such determination by the Administrator shall be conclusive and binding upon all persons. The Administrator, in its discretion, may establish procedures, correct any defect, supply any information, or reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of this Plan; provided, however, that any procedure, discretionary act, discretionary interpretation or construction shall be done in a non-discriminatory manner based upon uniform principles consistently applied and shall be consistent with the intent that the Plan shall continue to be deemed a qualified plan under the terms of Code § 401(a), and shall comply with the terms of the Act and all regulations issued pursuant thereto. The Administrator shall have all powers necessary or appropriate to accomplish his duties under this Plan.

The Administrator shall be charged with the duties of the general administration of the Plan, including, but not limited to, the following:

(a) To determine, in its discretion, all questions relating to the eligibility of Employees to participate or remain a Participant hereunder, based upon information furnished by the Employer;

(b) To compute, certify, and direct the Trustee with respect to the amount and kind of benefits to which any Participant shall be entitled hereunder;

(c) To authorize and direct the Trustee with respect to all non-discretionary or otherwise directed disbursements from the Trust;

(d) To maintain all necessary records for the administration of the Plan;

(e) To interpret or construe, in its discretion, the provisions of the Plan and to make and publish such rules for regulation of the Plan as are consistent with the terms hereof;

(f) To determine the size and type of any contract on insurance to be purchased from any insurer, and to designate the insurer from which such contract of insurance shall be purchased;

(g) To compute and certify to the Employer and to the Trustee from time to time the sums of money necessary or desirable to be contributed to the Trust Fund;

(h) To consult with the Employer and the Trustee regarding the short and long-term liquidity needs of the Plan in order for the Trustee to exercise any investment discretion in a manner designed to accomplish specific objectives;

(i) To assist any Participant regarding his rights, benefits, or elections available under the Plan; and

(j) To prepare and implement a procedure to notify Eligible Employees that they may elect to have a portion of their Compensation deferred or paid to them in cash.

8.5 RECORDS AND REPORTS

The Administrator shall keep a record of all actions taken and shall keep all other books of account, records, and other data that may be necessary for proper administration of the Plan, and shall be responsible for supplying all information and reports to the Internal Revenue Service, Department of Labor, Participants, Beneficiaries and others as required by law.

8.6 ANNUAL REPORT

The Administrator may, as soon as possible after each Anniversary Date, but in any event no later than 210 days thereafter, furnish each Participant with a written statement showing:

(a) The balance of his Aggregate Account as of the preceding Anniversary Date.

(b) The amount of Employer contributions and Forfeitures allocated to his Participant's Aggregate Account for the Plan Year.

(c) The adjustment to his Participant's Aggregate Account to reflect his share of the income and expenses, gains or losses of the Trust Fund for the Plan Year.

8.7 APPOINTMENT OF ADVISERS

The Administrator, or the Trustee with the consent of the Administrator, may appoint counsel, specialists, advisers, and other persons as the Administrator or the Trustee deems necessary or desirable in connection with the administration of this Plan.

8.8 INFORMATION FROM EMPLOYER

To enable the Administrator to perform his functions, the Employer shall supply full and timely information to the Administrator on all matters relating to the Compensation of all Participants, their Hours of Service, their Years of Service, their retirement, death, disability, or termination of employment, and such other pertinent facts as the Administrator may require; and the Administrator shall advise the Trustee of such of the foregoing facts as may be pertinent to the Trustee's duties under the Plan. The Administrator may rely upon such information as is supplied by the Employer and shall have no duty or responsibility to verify such information.

8.9 PAYMENT OF EXPENSES

All expenses of administration shall be paid out of the Trust Fund unless paid by the Employer. Such expenses shall include any expenses incident to the functioning of the Administrator, including, but not limited to, fees of accountants, counsel, and other specialists and their agents, and other costs of administering the Plan. Until paid, the expenses shall constitute a liability of the Trust Fund. However, the Employer may reimburse the Trust Fund for any administration expense incurred.

However, the Employer may, in its discretion, and on a uniform nondiscriminatory basis, reimburse the Trust Fund only for the portion of such Expenses allocable to Participants, and direct the Trustee that the portion of expenses allocable to Former Participant's be paid by the Trust Fund and debited to such Former Participant's Aggregate Account. Any administration expense paid to the Trust Fund as a reimbursement shall not be considered an Employer contribution.

8.10 MAJORITY ACTIONS

Except where there has been an allocation and delegation of administrative authority pursuant to Section 7.3, if there shall be more than one Administrator, or if the Administrator is a committee, the Administrators or committee members, as the case may be, shall act by a majority of their number, but may authorize one or more of them to sign all papers on their behalf.

8.11 CLAIMS PROCEDURE

Claims for benefits under the Plan may be filed with the Administrator on forms supplied by the Employer. Written notice of the disposition of a claim shall be furnished to the claimant within 90 days after the application is filed. In the event the claim is denied, the reasons for the denial shall be specifically set forth in the notice in language calculated to be understood by the claimant, pertinent provisions of the Plan shall be cited, and, where appropriate, an explanation as to how the claimant can perfect the claim will be provided. In addition, the claimant shall be furnished with an explanation of the Plan's claims review procedure.

8.12 CLAIMS REVIEW PROCEDURE

Any Employee, former Employee, or Beneficiary of either, who has been denied a benefit or has been determined to be ineligible to participate in the Plan or remain a Participant in the Plan, by a decision of the Administrator pursuant to Section 8.11, shall be entitled to request the Administrator to give further consideration to his claim by filing with the Administrator (on a form which may be obtained from the Administrator) a request for a hearing. Such request, together with a written statement of the reasons why the claimant believes his claim should be allowed, shall be filed with the Administrator no later than 60 days after receipt of the written notification provided for in Section 8.11. The Administrator shall then conduct a hearing within the next 60 days, at which the claimant may be represented by an attorney or any other representative of his choosing and at which the claimant shall have an opportunity to present written and oral evidence and arguments in support of his claim. At the hearing (or prior thereto, upon 5 business days written notice to the Administrator) the claimant or his representative shall have an opportunity to review all documents in the possession of the Administrator which are pertinent to the claim at issue and its disallowance. Either the claimant or the Administrator may cause a court reporter to attend the hearing and record the proceedings. In such event, a complete written transcript of the proceedings shall be furnished to both parties by the court reporter. The full expense of such court reporter and such transcripts shall be borne by the party causing the court reporter to attend the hearing. A final decision as to the allowance of the claim shall be made by the Administrator within 60 days of receipt of the appeal (unless there has been an extension of 60 days due to special circumstances, provided the delay and the special circumstances occasioning it are communicated in writing to the claimant within the 60-day period). The final decision shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based.

ARTICLE IX
AMENDMENT, TERMINATION, AND MERGERS

9.1 AMENDMENT

The Employer shall have the right at any time to amend this Agreement. However, no such amendment shall authorize or permit any part of the Trust Fund (other than such part as is required to pay taxes and administration expenses) to be used for or diverted to purposes other than for the exclusive benefit of the Participants or their Beneficiaries or estates; no such amendment shall cause any reduction in the amount credited to the account of any Participant or cause or permit any portion of the Trust Fund to revert to or become the property of the Employer; and no such amendment which affects the rights, duties or responsibilities of the Trustee and Administrator may be without the Trustee's and Administrator's written consent. Any such amendment shall become effective as provided therein upon its execution.

For the purposes of this Section, a Plan amendment which has the effect of eliminating or reducing an early retirement benefit or eliminating an optional form of benefit (as provided in Regulations) shall be treated as reducing the amount credited to the account of a Participant.

9.2 TERMINATION

The Employer shall have the right at any time to terminate the Plan (and the other Employers and Affiliated Employers shall have the right to terminate their participation in the Plan) by delivering to the Trustee and Administrator written notice of such termination. The Plan shall also terminate upon complete discontinuance of contributions (both elective or non-elective) by the Employer. Upon any termination (full or partial), all amounts credited to any affected Participants' Aggregate Account shall become 100% Vested and shall not thereafter be subject to Forfeiture and all unallocated amounts shall be allocated to the Aggregate Accounts of all Participants in accordance with the provisions

hereof. Upon such termination of the Plan or complete discontinuance of contributions, the Employer, by written notice to the Trustee and Administrator, may direct either:

(a) Complete distribution of the assets in the Trust Fund to the Participants in cash or in kind, in the form provided in Section 6.6 as soon as the Administrator deems it to be in the best interests of the Participants, but in no event later than two years after such termination; or

(b) Continuation of the Trust created by this Agreement and the distribution of benefits pursuant to Article VI at such time and in such manner as though the Plan had not been terminated.

9.3 MERGER OR CONSOLIDATION

This Plan and Trust may be merged or consolidated with, or its assets and/or liabilities may be transferred to any other plan and trust only if the benefits which would be received by a Participant of this Plan, in the event of a termination of the Plan immediately after such transfer, merger or consolidation are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the transfer, merger or consolidation.

ARTICLE X
MISCELLANEOUS

10.1 PARTICIPANT'S RIGHTS

This Plan shall not be deemed to constitute a contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant or Employee. Nothing contained in this Plan shall be deemed to give any Participant or Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge any Participant or Employee at any time regardless of the effect which such discharge shall have upon him as a Participant of this Plan.

10.2 ALIENATION

(a) Subject to the exceptions provided below, no benefit which shall be payable out of the Trust Fund to any person (including a Participant or his Beneficiary) shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void, and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any such person, nor shall it be subject to attachment or legal process for or against such person, and the same shall not be recognized by the Trustee, except to such extent as may be required by law.

(b) This provision shall not apply to the extent a Participant, Former Participant or Beneficiary is indebted to the Plan, for any reason, under any provision of this Agreement. At the time a distribution is to be made to or for a Participant's, Former Participant's or Beneficiary's benefit, such proportion of the amount distributed as shall equal such indebtedness shall be paid or offset by the Trustee to the Trustee or the Administrator, at the direction of the Administrator, to apply against, offset or discharge such indebtedness. However, prior to making a payment, the Participant, Former Participant or Beneficiary must be given written notice by the Administrator that such indebtedness is to be paid in whole or part from his Participant's Aggregate Account. If the Participant, Former Participant or Beneficiary does not agree that the indebtedness is a valid claim against his Vested Participant's Aggregate Account, he shall be entitled to a review of the validity of the claim in accordance with procedures provided in Sections 8.11 and 8.12.

(c) This provision shall not apply to a "qualified domestic relations order" defined in Code § 414(p), and those other domestic relations orders permitted to be so treated by the Administrator

under the provisions of the Retirement Equity Act of 1984. The Administrator shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. Further, to the extent provided under a "qualified domestic relations order", a former spouse of a Participant shall be treated as the spouse or surviving spouse for all purposes under this Plan.

10.3 CONSTRUCTION OF AGREEMENT

This Plan and Trust shall be construed and enforced according to the Act, the Code and the laws of the State of Florida, to the extent not preempted by the Act or the Code. Any such claim shall be brought exclusively in the Federal District Court for the Middle District of Florida, Orlando Division.

10.4 GENDER AND NUMBER

Wherever any words are used herein in the masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.

10.5 LEGAL ACTION

In the event any claim, suit, or proceeding is brought regarding the Plan established hereunder to which the Trustee or the Administrator may be a party, and such claim, suit, or proceeding is resolved in favor of that Trustee or Administrator, they shall be entitled to be reimbursed from the Trust Fund for any and all costs, attorney's fees, and other expenses pertaining thereto incurred by them for which they shall have become liable.

10.6 PROHIBITION AGAINST DIVERSION OF FUNDS OR FORFEITURE FOR CAUSE

(a) Except as provided below and otherwise specifically permitted by law, it shall be impossible by operation of the Plan, by termination thereof, by power of revocation or amendment, by the happening of any contingency, by collateral arrangement or by any other means, for any part of the corpus or income of any Trust Fund maintained pursuant to the Plan, or any funds contributed thereto, to be used for, or diverted to, purposes other than the exclusive benefit of Participants, Former Participants, or their Beneficiaries.

(b) No portion of a participant's Vested Participant's Aggregate Account shall be forfeited for cause. However, see Section 3.1 for permitted reversions of all or a portion of the Trust Fund to the Employer.

10.7 BONDING

Every Fiduciary, except a bank or an insurance company, unless exempted by the Act and regulations thereunder, shall be bonded in an amount not less than 10% of the amount of the funds such Fiduciary handles; provided, however, that the minimum bond shall be $1,000 and the maximum bond $500,000. The amount of funds handled shall be determined at the beginning of each Plan Year by the amount of funds handled by such person, group or class to be covered and their predecessors, if any, during the preceding Plan Year, or if there is no preceding Plan Year, then by the amount of the funds to be handled during the then current Plan Year. The bond shall provide protection to the Plan against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in connivance with others. The surety shall be a corporate surety company (as such term is used in § 412(a)(2) of the Act), and the bond shall be in a form approved by the Secretary of Labor. Notwithstanding anything in this Agreement to the contrary, the cost of such bonds shall be an expense of and may, at the election of the Administrator, be paid from the Trust Fund or by the Employer.

10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE

Neither the Employer nor the Trustee, nor their successors, shall be responsible for the validity of any contract of insurance issued hereunder or for the failure on the part of the insurer to make payments provided by any such contract of insurance, or for the action of any person which may delay payment or render a contract of insurance null and void or unenforceable in whole or in part.

10.9 RECEIPT AND RELEASE FOR PAYMENTS

Any payment to any Participant, Former Participant, his legal representative, Beneficiary, or to any guardian, parent or committee appointed for such Participant, Former Participant or Beneficiary in accordance with the provisions of this Agreement, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Trustee, Administrator and the Employer, any of whom may require such Participant, Former Participant, Beneficiary, legal representative, guardian, parent or committee, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Trustee, Administrator or Employer.

10.10 ACTION BY THE EMPLOYER

Whenever the Employer, under the terms of this Agreement, is permitted or required to do or perform any act or matter or thing, it shall be done and performed by a person duly authorized by its legally constituted authority.

10.11 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

The "named Fiduciaries" of this Plan are (a) the Employer, (b) the Administrator, (c) the Trustee, and (d) any Investment Manager appointed hereunder. The named Fiduciaries shall have only those specific powers, duties, responsibilities, and obligations as are specifically given them under this Agreement. In general, the Employer shall have the sole responsibility for making the contributions provided for under Section 3.1; the sole authority to appoint and remove the Trustee, the Administrator, and any Investment Manager which may be provided for under this Agreement; to formulate the Plan's "funding policy and method"; and to amend or terminate, in whole or in part, this Agreement. The Administrator shall have the sole responsibility for the administration of this Agreement, which responsibility is specifically described in this Agreement. The Trustee shall have the sole responsibility of management of the assets held under the Trust, except those assets, the management of which has been assigned to an Investment Manager, who shall be solely responsible for the management of the assets assigned to it, all as specifically provided in this Agreement. Each named Fiduciary warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of this Agreement, authorizing or providing for such direction, information or action. Furthermore, each named Fiduciary may rely upon any such direction, information or action of another named Fiduciary as being proper under this Agreement, and is not required under this Agreement to inquire into the propriety of any such direction, information or action. It is intended under this Agreement that each named Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under this Agreement. No named Fiduciary shall guarantee the Trust Fund in any manner against investment loss or depreciation in asset value. Any person or group may serve in more than one Fiduciary capacity.

10.12 HEADINGS

The headings and subheadings of this Agreement have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.

10.13 UNIFORMITY

All provisions of this Plan shall be interpreted and applied in a uniform, non-discriminatory manner.

IN WITNESS WHEREOF, this Agreement has been executed the day and year first above written.

		EMPLOYER:
		SAWTEK INC.
		By:

APPENDIX A

Unless otherwise modified by the Board of Directors of TriQuint Semiconductor, Inc. ("TriQuint"), the TriQuint Profit Sharing Program (the "TriQuint PS Program"), and the allocation of profits thereunder, shall be as follows:

Step 1: Effective October 1, 2001 and continuing until such time as the TriQuint Board, in its discretion, takes action to the contrary, TriQuint shall allocate and pay to the TriQuint PS Program for each calendar quarter an amount equal to ten percent (10%) of TriQuint's consolidated GAAP operating income (inclusive of accruals for profit sharing contributions and exclusive of any one time charges to operating income), as determined by the TriQuint Chief Executive Officer and Chief Financial Officer, whose determination shall be final and binding on the employees of TriQuint and the Company (the "Quarterly Contribution").

Step 2: After the foregoing Quarterly Contribution is determined, it shall be allocated for the benefit of the TriQuint employees and Sawtek (the "Company") employees based upon a percentage computed using the total "Compensation" actually paid in that calendar quarter to the employees of TriQuint and the Company. For these purposes, the definition of "compensation" used in the TriQuint Savings and Profit Sharing Plan (the "TriQuint Plan") and the Sawtek Inc. Employee Stock Ownership and 401(k) Plan (the "KSOP") shall be used ("Compensation"), and only Compensation of those individuals employed (or deemed by the TriQuint Board as employed) by TriQuint or the Company on the last day of the calendar quarter shall be considered. An employee must be an eligible employee in the applicable plan (TriQuint Plan or KSOP) in order to participate in the TriQuint PS Program. The percentage for each company shall be computed by dividing that companies' aggregate Compensation by the aggregate Compensation paid to all the employees of both TriQuint and the Company.

Step 3: After the foregoing Quarterly Contribution is allocated between TriQuint and the Company, it shall be allocated among the individual employees of each company who remain employed (or are deemed by the TriQuint Board as employed) on the last day of the calendar quarter based upon each employee's relative Compensation. An employee's percentage shall be determined by dividing his/her Compensation by the aggregate Compensation of all employees participating in such allocation.

Step 4: After the foregoing Quarterly Contribution is allocated among the individual employees as provided above, one-half of such allocation shall be paid to the employee in cash (net of required payroll taxes) and the other one-half shall be paid to the employee's qualified retirement plan (the TriQuint Plan or KSOP, as the case may be), to be allocated, held, invested and distributed as a discretionary profit sharing contribution in accordance with the terms of such qualified retirement plan.

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EXHIBIT 10.33

EX-10.41 5 a2086235zex-10_41.htm EXHIBIT 10.41
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EXHIBIT 10.41

Date: June 28, 2002

Mr. Ralph Quinsey

Dear Ralph:

On behalf of TriQuint Semiconductor, Inc. (the "Company"), I am pleased to offer you the position of President and Chief Executive Officer, and member of the Company's Board of Directors (the "Board"). For 2003 and forward Board membership is subject to the approval of the shareholders. We look forward to working closely with you in the position to build the future success of the Company.

The terms of your new position with the Company are as set forth below:

1.

Position.

(a): You will be employed as President, Chief Executive Officer and member of the Board, working out of the Company's headquarters office in Hillsboro, Oregon, reporting to the Board.
(b): You agree to perform all of the duties and obligations required of you pursuant to the express and implicit terms herein to the best of your ability and experience, and perform such services loyally and conscientiously, and to the reasonable satisfaction of the Board. During the term of your employment, you further agree that you will devote all of your business time and attention to the business of the Company; the Company will be entitled to all of the benefits and profits arising from or incident to all such work services; you will not render commercial or professional services of any nature to any person or organization without the prior written consent of the Board.

2.

Start Date. Subject to fulfillment of all conditions set forth in this letter agreement, you will commence your position with the Company on or before July 16, 2002 (the "Start Date").

3.

Proof of Right to Work. For purposes of federal immigration law, you will be required to provide the Company satisfactory documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your start date, or our employment relationship with you may be ended for Termination for Cause.

4.

Hire on Bonus. You will receive a $25,000 hire on bonus which will be paid to you within 60 days of your first day of employment. The bonus is subject to the appropriate withholdings.

5.

Compensation.

(a): Base Salary. You will be $12,700 per pay period (26 pay periods per year) which equals an annual base salary of $330,200. Your base salary will be payable pursuant to the Company's regular payroll policy, and shall be subject to appropriate withholdings. (The annualized base salary described above, together with any subsequent increases thereto, shall be referred to herein as the "Base Salary.")
(b): Bonus. You will be eligible for an annual target bonus of 50% of your base salary in compliance with performance against a corporate wide bonus plan. If there is a bonus plan approved by the Board for 2002 you will be eligible to earn a pro rata portion of this bonus for the period ending December 31, 2002 based upon the amount of time you are employed by the Company in 2002. (The initial annual target bonus amount stated above, together with any subsequent increases thereto, shall be referred to herein as the "Target Bonus.") The performance criteria for each year beginning with 2003 will be established, after consultation with you. The amount of bonus that you earn for any given year and the payment schedule

will be in compliance with the then current plan. In the event of your termination, bonus payout, if any, shall be in accordance with the then current plan.

(c): Annual Review. Your compensation and performance will be reviewed at the Focal Review period conducted each year.
(d): Options/Stock Grant. In connection with the commencement of your employment, we will recommend to the Board that the Board grant you an option for 500,000 shares of the Company's Common Stock (the "Option Shares"). The option will be granted as an Incentive Stock Option ("ISO") up to $100K value vesting in a calendar year which is the maximum allowed by the IRS. The amount of the option grant that exceeds the IRS limit will be granted as a NonQualified Stock Option ("NSO"). The option price will be the closing price on your first day of your employment. The options will vest according to the terms of the stock option agreement (28% on first anniversary of option grant, then 2% monthly thereafter until fully vested). After 12 months of continuous employment you will be eligible to participate in the Company's next scheduled annual Stock Option Refresh Program.
(e): Vesting of Stock Options. In the event of a Termination Without Cause or a Resignation for Good Reason (as defined below) at any time from the date the Board of Directors approves a transaction which, if consummated, will result in a Change in Control and continuing for twelve (12) months following the effective date of such Change in Control (as defined in paragraph (f)), the furthest out twelve (12) months of unvested Option Shares shall automatically become fully vested.
(f): Change in Control. A "Change in Control" of the Company shall be deemed to occur if and when (i) the Company is merged, consolidated or reorganized into or with another entity, after which the holders of voting securities of the Company immediately prior to such transaction, including voting securities issuable upon exercise or conversion of vested options, warrants or other securities or rights, hold (directly or indirectly) less than a majority of the combined voting power of the then-outstanding securities of the surviving entity; (ii) a sale of the stock of the Company occurs, after which the holders of voting securities of the Company immediately prior to such sale, including voting securities issuable upon exercise or conversion of vested options, warrants or other securities or rights, hold (directly or indirectly) less than a majority of the combined voting power of the Company; (iii) the Company sells or otherwise transfers all or substantially all of its assets to any other entity, after which the holders of voting securities of the Company immediately prior to such sale, including voting securities issuable upon exercise or conversion of vested options, warrants or other securities or rights, hold (directly or indirectly) less than a majority of the combined voting power of the then-outstanding securities of the purchasing entity; or (iv) the membership of the board of directors of the Company changes as the result of a contested election, such that individuals who were directors at the beginning of any twenty-four (24) month period (whether commencing before or after the date of this letter) do not constitute a majority of the board of directors at the end of such period.
(g): Termination for Cause. The term "Termination for Cause" shall mean a termination of your employment by the Company for any of the following reasons: i) intentional failure to perform assigned duties, ii) personal dishonesty, iii) incompetence, as measured against standards generally prevailing in the industry, iv) willful misconduct, v) any breach of fiduciary duty involving personal profit, vi) willful violation of any domestic or international law, rule, regulation (other than traffic violations or similar minor offenses) or final cease and desist order, or any sexual or other harassment of others; vii) not establishing a primary residence in Oregon within the agreed upon timeframe; provided however, that with respect to reasons i), iii), iv) and vii) above, no Termination for Cause shall be deemed to have occurred if you have

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not been provided with written notice of the factual basis for the alleged failure to perform or incompetence and a thirty (30) day period to take corrective action. In determining incompetence, the act or omissions shall be measured against standards generally prevailing in the industry. Notwithstanding the foregoing, a Termination for Cause shall not be deemed to have occurred unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than a "majority" (>50%) of the members of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to you and an opportunity for you, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board, you were guilty of conduct justifying Termination for Cause and specifying the particulars thereof in detail. A termination of your employment by the Company for any other reason than those stated in i) through vii) above, or under any other circumstances than those stated in this paragraph, shall be a "Termination Without Cause."

(h): Resignation for Good Reason. For purposes of this agreement, a "Resignation for Good Reason" shall be deemed to occur if you resign your employment within sixty (60) days of the occurrence of any of the following that occur without your written consent: (i) a loss of the title of President and/or Chief Executive Officer (except during the 12 months following a Change in Control (as defined above); (ii) a material reduction in duties or responsibilities; (iii) any reduction in your Base Salary or any Target Bonus (other than a reduction comparable in percentage to a reduction affecting the Company's executives generally); (iv) any material reduction in your benefits (other than a reduction affecting the Company's personnel generally); or (v) a Company-mandated relocation of your principal place of employment or your current principal residence by more than 50 miles from its respective Oregon location immediately prior to the resignation; provided however, that a Resignation for Good Reason shall not be effective until thirty (30) days following delivery by you of a written notice to the Company stating that you are resigning your employment and that such resignation constitutes Resignation for Good Reason. The Company may at it's discretion, during the 30 day period, review the Reasons for Termination and may reverse the conduct which gave rise to Good Reason, thereby reversing the Resignation for Good Reason. A resignation of your employment for any other reason or under any other circumstances shall be a "Resignation Without Good Reason."

6.

Benefits.

(a): Relocation. The Company, at it's cost, will relocate you and your immediate family from your home in Arizona to Portland, OR in accordance with the attached CEO Relocation Benefit document Attachment 1. It is expected that you will relocate and establish your primary residence in Oregon within 6 months of your Start Date. In lieu of the 6% Realtor fee the Company will pay to you $18,000 grossed up twice, for taxes, and payment will be made to you within 60 days of Start Date.
(b): Insurance Benefits. The Company will provide you with its standard medical and dental insurance benefits.
(c): Vacation. The Company will provide you with its standard time off benefits.
(d): Other Benefits. You will be eligible to participate in TriQuint 401(k), Employee Stock Purchase Plan, and Profit Sharing plans.

7.: Confidentiality Agreement. Your acceptance of this offer and commencement of employment with the Company is contingent upon the execution, and delivery to an officer of the Company, of the Company's standard Confidentiality Agreement, Business Ethics Policy, Harassment Statement and Company Policies, prior to or on the Start Date.

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8.

Severance Benefits. You shall be entitled to receive severance benefits upon termination or resignation of employment only as set forth in this Section 8:

(a): Termination for Cause/Resignation Without Good Reason. In the event of a Termination for Cause or Resignation Without Good Reason, then you shall not be entitled to receive payment of any severance benefits. You will receive payment(s) for all salary and unpaid Paid Time Off(defined per Company policy) accrued as of the date of termination of your employment and your benefits will be continued under the Company's then existing benefit plans and policies in accordance with such plans and policies in effect on the date of termination and in accordance with applicable law.
(b): Termination Without Cause. In the event of a Termination Without Cause you will be entitled to receive payment, within thirty (30) days of the date on which your employment terminates, of severance benefits equal to a lump sum payment equivalent to 12 months Base Salary less appropriate witholdings. Health and life insurance benefits with the same coverage provided to you prior to termination of your employment and in all other respects significantly comparable to those in place immediately prior to such termination will be provided at the Company's cost over the 12 month period immediately following the termination (the "Severance Period"). Also please refer to section 5(e).
(c): Resignation for Good Reason. In the event of a Resignation for Good Reason, then you will be entitled to receive payment, within thirty (30) days of the date on which your employment terminates, of severance benefits equal to a lump sum payment equivalent to 12 months Base Salary less appropriate witholdings. Health and life insurance benefits with the same coverage provided to you prior to termination of your employment and in all other respects significantly comparable to those in place immediately prior to such termination will be provided at the Company's cost over the 12 month period immediately following the termination (the "Severance Period"). Also please refer to section 5(e).
(d): Termination by Reason of Death or Disability. In the event that your employment with the Company terminates as a result of your death or Disability (as defined below), you or your estate or legal representative will receive all salary and unpaid Paid Time Off accrued as of the date of your death or Disability, all severance benefits payable under Section 8(b) above and any other benefits payable under the Company's then existing benefit plans and policies in accordance with such plans and policies in effect on the date of death or Disability and in accordance with applicable law. For purposes of this Agreement, disability coverage and definition will be in compliance with the then current Company insured plans.

9.

Miscellaneous Provisions.

(a): Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.
(b): Legal Fees. The Company agrees to reimburse you for up to $2000 in attorney fees incurred in reviewing, negotiating and finalizing this Agreement and related documents; provided, however, that if you resign your employment or are terminated for any reason within your first year of employment, you will be responsible for repaying the entire amount.
(c): Indemnification. Company shall indemnify you in accordance with the Company's obligations to you as a Director, CEO and President, as set forth in the Company's Bylaws.
(d): At-Will Employment. Your employment with TriQuint is at-will and, as such, may be terminated at any time by you or by the Company for any reason including those defined in Section 8 above. In the event of your Resignation for Good Reason, you will provide the Company with the written notice required in Section 5(h).

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(e): Drug Test. TriQuint's mandatory drug test policy requires that all new hires be tested for drugs prior to their first day of work. Therefore this offer is contingent upon passing a pre-employment drug test prior to your start date.
(f): Severability. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define, or limit the extent or intent of the Agreement or of any part hereof.

10.

Non Compete Agreement.

(a)

You recognize that the Company's willingness to enter into this Agreement is based in material part on your agreement to the provisions of this paragraph 10 and that your breach of the provisions of this paragraph 10 could materially damage the Company. Subject to the further provisions of this Agreement, You will not, during the term of his employment with the Company and in the event of a termination without cause/resignation for good reason as defined in Section 5 in the contract, for the duration of any "Severance Period," as also defined in Section 8b, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, or business of whatever nature:

(i): Engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any compound semiconductor communications Semiconductor business(Competitor). Should you be hired by a competitor, as defined above, you agree to pay to TriQuint Semiconductor all net gains on stock options received in the 3 years and 4 months immediately prior to a date that is 4 months after the termination date from TriQuint Semiconductor. You further agree that this payment will be made within 60 days of the date of requested by TriQuint.
(ii): Contact any person who is, at that time, an employee of the Company for the purpose or with the intent of enticing such employee away from or out of the employ of the Company;
(iii): Call upon any prospective acquisition candidate, on your own behalf or on behalf of any competitor, which candidate was, to your actual knowledge, either called upon by the Company or for which the Company made an acquisition analysis, for the purpose of acquiring such entity; or
(iv): Disclose customers, whether in existence or proposed, of the Company to any person, firm, partnership, corporation, or business for any reason or purpose whatsoever except to the extent that the Company has in the past disclosed such information to the public for valid business reasons.

(b): It is agreed by the parties that the foregoing covenants in this Section 10 impose a reasonable restraint on you in light of the activities and business of the Company on the date of the execution of this Agreement and the current plans of the Company; but it is also the intent of the Company and you that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the date of termination of the employment of you, unless youwere conducting such new business prior to the Company conducting such new business. For example, if, during the term of this Agreement, the Company engages in new and different activities, enters a new business, or establishes new locations for its current activities or business in addition to or other than the activities or business enumerated under the

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Recitals above or the locations currently established therefor, then You will be precluded from soliciting the customers or employees of such new activities or business or from such new location and from directly competing with such new business, unless the you was conducting such new business prior to the Company conducting such new business.

(c): The parties further acknowledge and agree that any violation of the provisions of this Section 10 could cause irreparable injury to the Company, and that no adequate remedy at law exists for violation of these provisions. Consequently, in addition to any damages, the Company shall be entitled to injunctive relief.
(d): The covenants in this Section 10 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time, or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that the court deems reasonable, and the Agreement shall thereby be reformed.
(e): It is specifically agreed that for purposes of this Section 10, the duration of the Severance Period following termination of employment and the covenants of this Section 10 operative during the Severance Period shall be extended by any time during which you is in violation of any provision of this Section 10.
(f): The Company and the you hereby agree that this covenant is a material and substantial part of this Contract.

11.

Dispute Resolution Process.

(a): Election of Remedies. All disputes arising out of this Agreement, including those relating to the meaning or effect of any of its provisions, and all disputes arising out any aspect of the employment relationship, including your rights under any federal, state (excluding workers compensation) or local employment and/or labor law or regulation, shall be exclusively resolved in a final and binding manner through arbitration as set forth in this Section 11. You and the Company therefore expressly waive the right to litigate any such disputes in any other forum, administrative or judicial, and expressly waive the right to trial by jury.
(b): By You. You shall have the discretion to invoke final and binding arbitration under Section 11 and upon so doing, you shall be barred from pursuing the same dispute in any other contractual or statutory forum, regardless of whether you elect to exhaust the chosen procedure.
(c): By the Company. The Company shall have the discretion to invoke final and binding arbitration as set forth in this Section 11 when it believes you have violated any of the terms and conditions of this Agreement or you have asserted any violation of this Agreement by the Company, and shall be required to do so in any dispute in which it claims monetary damages from you. However, this shall not prevent the Company from taking any form of disciplinary action against you, but you shall then have the right to challenge such action under the procedures established in this Section 11.
(d): Injunctive or Other Equitable Relief. Nothing in this Section 11 shall prevent you or the Company from seeking injunctive relief against the other in circumstances allowed by law and/or authorized by any of the terms and conditions of this Agreement.
(e): Initiation of Process. In the event either party claims any violation of this Agreement, the party must notify the other party in writing within thirty (30) calendar days of the occurrence or the date the occurrence should reasonably have become known. In the event either party claims any violation of any applicable statutory right, the party must notify the other party in

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writing within six (6) calendar months of the occurrence or the date the occurrence should reasonably have become known. The notice shall describe the alleged violation and identify any relevant provisions of this Agreement, the proposed remedy and, if from you, the desired dispute resolution process.

(f): Mediation. Upon notification that a dispute exists, either party shall then have thirty (30) calendar days in which to notify the other that the matter will be referred to mediation (which shall not be adversarial in nature). The parties (or their representatives) shall immediately attempt to agree upon a mediator, and shall have the right to have representatives, including counsel, present at mediation.

If a party does not exercise its right to require mediation within the thirty (30) days or the parties are unable to select a mediator or reach agreement in mediation then, within fifteen (15) calendar days thereafter, either party may invoke arbitration or the alleged violation(s) shall be deemed waived for all purposes.

Each party will bear its own costs and attorneys fees in any mediation, and the mediation fee and any related costs shall be the responsibility of the party demanding mediation.

(g): Arbitration. Except as expressly modified by this Section 11 (g), arbitration shall follow the procedures established in the Employment Dispute Resolution Rules of the American Arbitration Association or its successor.
(h): Selection of Arbitrator. In any such dispute and request for arbitration, the moving party shall submit a request to the American Arbitration Association for a list of seven National Academy arbitrators maintaining their primary residence in Washington or Oregon. Upon receiving the list, the parties shall alternately strike one name each, with you striking first, until one name remains on the list.
(i): Conduct of Arbitration Hearing. Except as expressly modified by this Section 11 (f), the arbitrator shall follow the procedures established in the Employment Dispute Resolution Rules of the American Arbitration Association and the National Academy of Arbitrators Code of Professional Responsibility. Either party may require that a professional reporter prepare an official record of the proceedings.
(j): Damages. An arbitrator selected to hear a dispute shall be authorized to determine and award such damages as either party could have received in an appropriate action in the Oregon or federal courts under Oregon and/or federal law, and the same shall be true of prevailing party reasonable attorneys fees and costs incurred in the litigation, excluding any attorneys fees or costs incurred in connection with any mediation.
(k): Arbitration Decision and Award. The decision of the arbitrator shall be in writing, shall state findings of fact and conclusions of law, and shall be signed by the arbitrator and served on both parties.
(l): Costs of Arbitration. Except as otherwise provided in Section 11(f), each party will bear its own costs and attorneys' fees in any arbitration proceeding and one-half of the arbitrators and any separate arbitration and/or reporting fees.
(m): Severability and Reformation. You and the Company acknowledge that the law is evolving as it relates to final and binding arbitration of disputes arising out of employment relationships, and particularly disputes arising under federal and state laws, and therefore all of the provisions of this Section 11 shall be subject to Section 9(f) of this Agreement.

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We are delighted to extend you this offer and look forward to working with you. To indicate your acceptance of the Company's offer, please sign and date this letter agreement in the space provided below and return it to me by Wednesday June 26, 2002.

This letter agreement sets forth the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral. This letter agreement may be modified or amended only by a written agreement, signed by the Company and by you.

Very truly yours,
TriQuint Semiconductor, Inc.
By:		/s/ Steve Sharp Steve Sharp, CEO, President, and Chairman of the Board
ACCEPTED and AGREED this 1 day of July 2002:
By:		/s/ Ralph Quinsey Ralph Quinsey

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EXHIBIT 10.41

EX-99.1 6 a2086235zex-99_1.htm EXHIBIT 99.1
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EXHIBIT 99.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Ralph Quinsey, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of TriQuint Semiconductor, Inc. on Form 10-Q for the quarterly period ended June 30, 2002 fully complies with the requirements of Section 13(a) or 15d(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of TriQuint Semiconductor, Inc.

		By:		/s/ Ralph Quinsey
		Name:		Ralph Quinsey
		Title:		President and Chief Executive Officer

I, Raymond A. Link, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of TriQuint Semiconductor, Inc. on Form 10-Q for the quarterly period ended June 30, 2002 fully complies with the requirements of Section 13(a) or 15d(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of TriQuint Semiconductor, Inc.

		By:		/s/ Raymond A. Link
		Name:		Raymond A. Link
		Title:		Vice President, Finance and Administration, Chief Financial Officer and Secretary

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EXHIBIT 99.1

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