will not produce errors processing date data in connection with the year change from December 31, 1999, to January 1, 2000, when used with accurate date data in accordance with its documentation, provided all other products (including other software, firmware and hardware) used with it properly exchange date data with it. A Y2K compliant product will recognize the Year 2000 as a leap year. 

THIRD PARTY RELATIONSHIPS 

The Company's business operations are heavily dependent on third party corporate service vendors, materials suppliers, outsourced operations partners, distributors and others. The Company is working with key external parties to identify and attempt to mitigate the potential risks to it of Y2K. The failure of external parties to resolve their own Y2K issues in a timely manner could result in a material financial risk to the Company. As part of its overall Y2K program, the Company is actively communicating with third parties through face to face meetings and correspondence, on an ongoing basis, to ascertain their state of readiness. Although numerous third parties have indicated to the Company in writing that they are addressing their Y2K issues on a timely basis, the readiness of third parties overall varies widely. Because the Company's Y2K compliance is dependent on the timely Y2K compliance of third parties, there can be no assurances that the Company's efforts alone will resolve all Y2K issues. 

IT SYSTEMS AND NON-IT BUSINESS SYSTEMS Phase I--Inventory and Risk Assessment: 

This Phase requires an inventory and assessment of the Non-IT Business systems used by the Company including systems with embedded technology, building access systems, and health and safety systems. This Phase also includes inventory and assessment of IT Systems used by the Company which include large IS&T systems, desktop hardware and software, and network hardware and software. Each such system is evaluated and the business risk is quantified as being High, Medium or Low Risk to the Company's Business. Systems which are High Risk are those which if uncorrected would cause an interruption or complete failure to conduct the Company's business. Medium Risks are those which would negatively impact the business but complete cessation could be avoided with some inconvenience. Low Risks are those where the risk to business interruption or cessation are remote. High and Medium Risk items will be remediated or replaced, and Low risk items will likely not be addressed prior to the Year 2000. Currently, the Company has completed this Phase for the IT Systems and is approximately 80% complete for the Non-IT Business Systems. The Company anticipates that this Phase will be completed during the second quarter of fiscal 1999. 

Phase II--Remediation Cost Estimation: 

This Phase involves the analysis of each High and Medium Risk to determine how such risks will be remediated and the cost of such remediation. The Company has completed this Phase for the IT Systems and is approximately 70% complete for the identified Non-IT Business Systems. The Company anticipates that this Phase will be completed during the second quarter of fiscal 1999. 

Phase III--Remediation: