of third parties, there can be no assurances the Company's efforts alone will resolve all Y2K issues. The Company continues to communicate with and monitor the compliance efforts of key third parties. The Company will continue these efforts with key third parties through the date rollover and into January 2000.

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, including large IS&T systems, desktop hardware and software, and network hardware and software. Each system is evaluated and the business risk is quantified as being High, Medium or Low Risk to the Company's business. Systems that are High Risk are those, which if uncorrected, would cause an interruption of or complete failure to conduct the Company's business. Medium Risks are those that 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. The Company intends that High and Medium Risk items will be remediated or replaced, and Low Risk items will likely not be addressed prior to the Year 2000. The status of the Company's remediation efforts is discussed below. The Company had substantially completed the Inventory and Risk Assessment Phase for both IT Systems and Non-IT Systems by the end of the third quarter of fiscal 1999. However, the Company has and will continue to review information developed as the result of its Y2K Plan, which could result in additional items being added to its Y2K inventory.

Phase II--Remediation Cost Estimation:

This Phase involves the analysis of each High and Medium Risk to determine how such risks may be remediated and the cost of such remediation. The Company has substantially completed this Phase for both IT and Non-IT Business Systems.

Phase III--Remediation:

This Phase includes the replacement or correction of the High and Medium Risk Non-IT Business Systems and IT Systems. The Company substantially completed this Phase for both IT and Non-IT Business Systems during the fourth quarter of fiscal 1999.

Phase IV--Remediation Testing:

This Phase includes the future date testing of the remediation efforts made in Phase III to confirm that the changes made bring the affected systems into compliance, no new problems have arisen as a result of the remediation, and new systems that replaced noncompliant systems are Y2K compliant. The Company substantially completed this Phase for both IT and Non-IT Business Systems during the first quarter of fiscal 2000.

COSTS TO ADDRESS Y2K

The costs of the Y2K program are primarily costs associated with the utilization of existing internal resources and incremental external spending. The Company's current estimate of total incremental external spending over the life of its Y2K plan to address those risks identified as High or Medium is approximately $10 million of which