Document:

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                                                                   Exhibit 10.62

                               WMECO FUNDING LLC,

                                 as Note Issuer

                                       and

                     WESTERN MASSACHUSETTS ELECTRIC COMPANY,

                                   as Servicer

                     TRANSITION PROPERTY SERVICING AGREEMENT

                            Dated as of May 17, 2001

<TABLE>
<S>         <C>
ARTICLE 1   DEFINITIONS
     Section 1.01.                                       Definitions
     Section 1.02.                     Other Definitional Provisions
ARTICLE 2   APPOINTMENT AND AUTHORIZATION
     Section 2.01. Appointment of Servicer; Acceptance of Appointment
     Section 2.02.                                      Authorization
     Section 2.03.  Dominion and Control Over the Transition Property
ARTICLE 3   BILLING SERVICES
     Section 3.01.                                 Duties of Servicer
     Section 3.02.                Servicing and Maintenance Standards
     Section 3.03.                          Certificate of Compliance
     Section 3.04.    Annual Report by Independent Public Accountants
ARTICLE 4   SERVICES RELATED TO PERIODIC ADJUSTMENTS; REMITTANCES
     Section 4.01.                               Periodic Adjustments
     Section 4.02.                            Limitation of Liability
     Section 4.03.                                        Remittances
ARTICLE 5   THE TRANSITION PROPERTY
     Section 5.01.             Custody of Transition Property Records
     Section 5.02.                    Duties of Servicer as Custodian
     Section 5.03.                     Instructions; Authority to Act
     Section 5.04.                   Effective Period and Termination
     Section 5.05.                Monitoring of Third-Party Suppliers
     Section 5.06.             Monitoring and Collecting Exit Charges
ARTICLE 6   THE SERVICER
     Section 6.01.         Representations and Warranties of Servicer
     Section 6.02.                            Indemnities of Servicer
     Section 6.03.     Limitation on Liability of Servicer and Others
     Section 6.04.     Merger or Consolidation of, or Assumption of
                       the Obligations of, Servicer
     Section 6.05.      Western Massachusetts Electric Company Not to
                        Resign as Servicer
     Section 6.06.                             Servicing Compensation
     Section 6.07.                     Compliance with Applicable Law
</Table>
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<TABLE>
<S>          <C>
     Section 6.08.Access to Certain Records and Information Regarding
                  Transition Property
     Section 6.09.                                       Appointments
     Section 6.10.                               No Servicer Advances
     Section 6.11.                          Maintenance of Operations
ARTICLE 7   DEFAULT
     Section 7.01.                                   Servicer Default
     Section 7.02.                           Appointment of Successor
     Section 7.03.                            Waiver of Past Defaults
     Section 7.04.                         Notice of Servicer Default
ARTICLE 8   MISCELLANEOUS PROVISIONS
     Section 8.01.                                          Amendment
     Section 8.02.                Maintenance of Accounts and Records
     Section 8.03.                                            Notices
     Section 8.04.                                         Assignment
     Section 8.05.             Limitations on Rights of Third Parties
     Section 8.06.                                       Severability
     Section 8.07.                              Separate Counterparts
     Section 8.08.                                           Headings
     Section 8.09.                                      Governing Law
     Section 8.10.                         Assignment to Note Trustee
     Section 8.11.                              Nonpetition Covenants
</TABLE>

     This TRANSITION PROPERTY SERVICING AGREEMENT, dated as of May 17, 2001, is
between WMECO Funding LLC, a Delaware limited liability company (together with
any successor thereto permitted under the Note Indenture, as hereinafter
defined, the "Note Issuer"), and Western Massachusetts Electric Company, a
Massachusetts corporation.

                                    RECITALS

     WHEREAS, pursuant to the Statute and the Financing Order, the Seller and
the Note Issuer are concurrently entering into the Sale Agreement pursuant to
which the Seller is selling to the Note Issuer the Transition Property
created pursuant to the Statute and the Financing Order.

     WHEREAS, in connection with its ownership of the Transition Property and
in order to collect the RTC Charge, the Note Issuer desires to engage the
Servicer to carry out the functions described herein. The Servicer currently
performs similar functions for itself with respect to its own charges to its
customers and for others. In addition, the Note Issuer desires to engage the
Servicer to act on its behalf in obtaining Periodic Adjustments from the DTE.
The Servicer desires to perform all of these activities on behalf of the Note
Issuer.

     NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

<PAGE>

                                  ARTICLE 1

                                 DEFINITIONS

     Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:

     "Advice Letter" means any filing made with the DTE by the Servicer on
behalf of the Note Issuer to set or adjust the RTC Charge, including the
Issuance Advice Letter, a Routine Anniversary True-Up Letter, a Routine True-Up
Letter or a Non-Routine True-Up Letter.

     "Agreement" means this Transition Property Servicing Agreement, together
with all Exhibits, Schedules and Annexes hereto, as the same may be amended
and supplemented from time to time.

     "Annual Accountant's Report" has the meaning set forth in Section 3.04.

     "Applicable TPS" means, with respect to each Customer, the TPS, if any,
billing the RTC Charge to that Customer.

     "Bills" means each of the regular monthly bills, summary bills and other
bills issued to Customers or TPSs by Western Massachusetts Electric Company on
its own behalf and in its capacity as Servicer.

     "Certificate of Compliance" has the meaning set forth in Section 3.03.

     "Closing Date" means May 17, 2001.

     "Customers" means Seller's customers and ratepayers taking the delivery,
transmission, distribution, back-up, maintenance, emergency and any other
delivery or energy service provided by Seller to such customer within the
territory in which Seller serves customers, regardless of that customer's source
of electric power whether or not energy is purchased from WMECO or any TPS and
whether or not such distribution system is being operated by Seller or a
successor distribution company.

     "Declaration of Trust" means the Declaration of Trust dated as of May 15,
2001 by The Bank of New York (Delaware), a Delaware banking corporation, as
Delaware Trustee, the Massachusetts Development Finance Agency and the
Massachusetts Health and Educational Facilities Authority, as the same may be
amended and supplemented from time to time.
<PAGE>

     "DTE" means the Massachusetts Department of Telecommunications and Energy
and any successor thereto.

     "DTE Regulations" means all regulations, rules, tariffs and laws applicable
to public utilities or TPSs, as the case may be, and promulgated by, enforced by
or otherwise within the jurisdiction of the DTE.

     "Expected Amortization Schedule" means Schedule 4.01(a) hereto.

     "Financing Order" means the order of the DTE, DTE-00-40, issued on
February 7, 2001.

     "Financing Order Anniversary Date" means February 7 of each year.

     "Indemnified Person" has the meaning assigned to such term in Section 6.02.

     "Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due.

     "Issuance Advice Letter" means the initial Issuance Advice Letter, dated
May 16, 2001, filed with the DTE pursuant to the Financing Order.

     "Lien" means a security interest, lien, charge, pledge or encumbrance of
any kind.

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     "Losses" has the meaning assigned to that term in Section 6.02(b).

     "Monthly Servicer Certificate" has the meaning assigned to that term in
Section 4.01(d)(2).

     "Non-Routine Periodic Adjustment" has the meaning set forth in Section
4.01(c)(1).

     "Non-Routine True-Up Letter" means a letter filed with the DTE in
accordance with the Financing Order with respect to any Non-Routine Periodic
Adjustment, pursuant to which the related Non-Routine Periodic Adjustment
will become effective within 60 days after filing of the Non-Routine True-Up
Letter, subject to the review and approval of the DTE.

     "Note Indenture" means the Note Indenture dated as of May 17, 2001,
between the Note Issuer and the Note Trustee, as the same may be amended and
supplemented from time to time.

     "Note Issuer" has the meaning set forth in the preamble to this
Agreement.

     "Officer's Certificate" means a certificate of the Servicer signed by a
Responsible Officer.

     "Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the party providing such opinion(s) of counsel,
which counsel shall be reasonably acceptable to the party receiving such
opinion(s) of counsel.

     "Periodic Adjustment" means each adjustment to the RTC Charge made pursuant
to the terms of the Financing Order and in accordance with Section 4.01 hereof.

     "Principal Balance" means, as of any Payment Date, the sum of the
outstanding principal amount of the Notes.

     "Projected Principal Balance" means, as of any Payment Date, the sum of
the projected outstanding principal amount of the Notes for such Payment Date
set forth in the Expected Amortization Schedule.

     "Quarterly Servicer Certificate" has the meaning assigned to that term
in Section 4.01(d)(3).

     "Remittance" means each remittance pursuant to Section 4.03 of RTC
Charge Payments by the Servicer to the Note Trustee.

     "Remittance Date" means each Servicer Business Day on which a
<PAGE>
Remittance is to be made by the Servicer pursuant to Section 4.03.

     "Remittance Period" means the twelve-month period commencing on March 1 of
each year and ending on the last day of February of the succeeding year;
provided, however, that the initial Remittance Period shall commence on the
Closing Date and end on February 28, 2002.

     "Required Debt Service" means, for any Remittance Period, the total dollar
amount calculated by the Servicer in accordance with Section 4.01(b)(1) as
necessary to be remitted to the Collection Account during such Remittance Period
(after giving effect to (a) the allocation and distribution of amounts on
deposit in the Reserve Subaccount at the time of calculation and which are
available for payments on the Notes, (b) any shortfalls in Required Debt Service
for any prior Remittance Period and (c) any Remittances based upon the RTC
Charge in effect in the prior Remittance Period that are expected to be realized
in such Remittance Period) in order to ensure that, as of the Payment Date
immediately following the end of such period, (i) all accrued and unpaid
interest on the Notes then due shall have been paid in full, (ii) the Principal
Balance of the Notes is equal to the Projected Principal Balance of the Notes
for that Payment Date, (iii) the balance on deposit in the Capital Subaccount
equals the aggregate Required Capital Level, (iv) the balance on deposit in the
Overcollateralization Subaccount equals the aggregate Required
Overcollateralization Level and (v) all other fees, expenses and indemnities due
and owing and required or allowed to be paid under Section 8.02 of the Note
Indenture as of such date shall have been paid in full; provided, however, that,
with respect to any Periodic Adjustment occurring after the last Scheduled
Maturity Date for any Notes, the Required Debt Service shall be calculated to
ensure that sufficient amounts will be collected to retire such Notes in full as
of the earlier of (x) the next Payment Date and (y) the Final Maturity Date for
such Notes.

     "Responsible Officer" means the chief executive officer, the president, the
chairman or vice chairman of the board, any vice president, the treasurer, any
assistant treasurer, the clerk, any assistant clerk, the secretary, any
assistant secretary, the controller or the finance manager of the Servicer.

     "Retirement of the Notes" means the day on which the final payment is

<PAGE>

made to the Note Trustee in respect of the last outstanding Note.

     "Routine Anniversary True-Up Letter" means a letter substantially in the
form of Exhibit B hereto filed with the DTE prior to the Financing Order
Anniversary Date in respect of an annual Periodic Adjustment. The Routine
Anniversary True-Up Letter will become effective on the first calendar day of
the next succeeding calendar month after filing, or such date as may be
specified in such Routine Anniversary True-Up Letter, so long as such effective
date is at least 15 days after the filing of such Routine Anniversary True-Up
Letter.

     "Routine True-Up Letter" means letter filed with the DTE in respect of a
Periodic Adjustment, substantially in the form of Exhibit B hereto. The Routine
True-Up Letter will become effective on the first calendar day of the next
succeeding calendar month after filing, or such date as may be specified in such
Routine True-Up Letter, so long as such effective date is at least 15 days after
the filing of such Routine True-Up Letter.

     "RTC Charge" means the portion (which may become all) of the Transition
Charge designated pursuant to the Financing Order as the RTC Charge, as the same
may be adjusted from time to time as provided in the Financing Order, and may in
the future include a pro rata component of any exit fee collected pursuant to
Section 1G(g) of Chapter 164 of the Massachusetts General Laws.

     "RTC Charge Collections" means the RTC Charge Payments remitted to the
Collection Account.

     "RTC Charge Payments" means the actual payments received by the Servicer,
directly or indirectly (including through a TPS), from or on behalf of
Customers, multiplied by the percentage of such collections which is calculated
in accordance with Annex II hereto to have been received in respect of the RTC
Charge.

     "Sale Agreement" means the Transition Property Purchase and Sale Agreement
dated as of May 17, 2001, between Western Massachusetts Electric Company, as
Seller, and the Note Issuer, as the same may be amended and supplemented from
time to time.

     "Seller" means Western Massachusetts Electric Company, a Massachusetts
corporation, and its permitted successors and assigns under the Sale Agreement.

     "Servicer" means Western Massachusetts Electric Company, as the servicer of
the Transition Property, or each successor (in the same capacity)
<PAGE>
pursuant to Sections 6.04 or 7.02.

     "Servicer Business Day" means any Business Day on which the Servicer's
offices in The Commonwealth of Massachusetts and in the State of Connecticut
are open for business.

     "Servicer Default" means an event specified in Section 7.01.

     "Servicing Fee" has the meaning set forth in Section 6.06(a).

     "Statute" means Chapter 164 of the Massachusetts Acts of 1997, entitled an
Act Relative to Restructuring the Electric Utility Industry in the Commonwealth,
Regulating the Provision of Electricity and Other Services, and Promoting
Enhanced Consumer Protections Therein.

     "Termination Notice" has the meaning assigned to that term in Section
7.01(e).

     "TPS" means a third party supplier of energy who has entered into a TPS
Service Agreement with the Servicer.

     "TPS Service Agreement" means an agreement between a third party supplier
of energy and the Servicer pursuant to which such third party supplier of energy
bills and collects the RTC Charge to and from Customers in accordance with DTE
Regulations, the Financing Order and the guidelines described in Schedule A to
Annex I.

     "Transition Charge" means the "Transition Charge" as defined in the Statute
and referred to as the Seller's "Transition Charge" in Western Massachusetts
Electric Company's, DTE Docket No. 97-120 and subsequent filings with the DTE
pursuant thereto.

     "Transition Property" means the transition property that exists under Order
7 of the Financing Order and is sold by the Seller to the Note Issuer under the
Sale Agreement.

     "Transition Property Records" has the meaning assigned to that term in
Section 5.01.

     Section 1.02. Other Definitional Provisions.

          (a)  Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Note Indenture.

          (b)  All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.

<PAGE>
          (c)  The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section, Schedule,
Exhibit and Annex references contained in this Agreement are references to
Sections, Schedules, Exhibits and Annexes in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."

          (d)  The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter forms of such terms.

                                    ARTICLE 2

                          APPOINTMENT AND AUTHORIZATION

     Section 2.01. Appointment of Servicer; Acceptance of Appointment. Subject
to Section 6.05 and Article 7, the Note Issuer hereby appoints the Servicer, and
the Servicer hereby accepts such appointment, to perform the Servicer's
obligations pursuant to this Agreement on behalf of and for the benefit of the
Note Issuer or any assignee thereof in accordance with the terms of this
Agreement and applicable law. This appointment and the Servicer's acceptance
thereof may not be revoked except in accordance with the express terms of this
Agreement.

     Section 2.02. Authorization. With respect to all or any portion of the
Transition Property, the Servicer shall be, and hereby is, authorized and
empowered by the Note Issuer to (a) execute and deliver, on behalf of itself
and/or the Note Issuer, as the case may be, any and all instruments, documents
or notices, and (b) on behalf of itself and/or the Note Issuer, as the case may
be, make any filing and participate in proceedings of any kind with any
governmental authorities, including with the DTE. The Note Issuer shall execute
and/or furnish the Servicer with such documents as have been prepared by the
Servicer for execution by the Note Issuer, and with such other documents as may
be in the Note Issuer's possession, as the Servicer may determine to be
necessary or appropriate to enable it to carry out its servicing and
administrative duties hereunder. Upon the Servicer's written request, the Note
Issuer shall furnish the Servicer with any powers of
<PAGE>
attorney or other documents necessary or appropriate to enable the Servicer to
carry out its duties hereunder.

     Section 2.03. Dominion and Control Over the Transition Property.
Notwithstanding any other provision herein, the Note Issuer shall have dominion
and control over the Transition Property, and the Servicer, in accordance with
the terms hereof, is acting solely as the servicing agent and custodian for the
Note Issuer with respect to the Transition Property and the Transition Property
Records. The Servicer shall not take any action that is not authorized by this
Agreement or that shall impair the rights of the Note Issuer or the Note Trustee
in the Transition Property, in each case unless such action is required by
applicable law.

                                    ARTICLE 3

                                BILLING SERVICES

     Section 3.01. Duties of Servicer. The Servicer, as agent for the Note
Issuer, shall have the following duties:

          (a)  Duties of Servicer Generally.

               (1)  General Duties. The Servicer's duties in general shall
include management, servicing and administration of the Transition Property;
obtaining meter reads, calculating electricity usage (including usage by
Customers of any TPS), billing, collection and posting of all payments in
respect of the Transition Property; responding to inquiries by Customers, the
DTE, or any federal, local or other state governmental authorities with
respect to the Transition Property; delivering Bills to Customers and TPSs,
investigating and handling delinquencies, processing and depositing
collections and making periodic remittances; furnishing periodic reports to
the Note Issuer, the Note Trustee, the Certificate Trustee and the Rating
Agencies; and taking all necessary action in connection with Periodic
Adjustments as set forth herein. Certain of the duties set forth above may
be performed by TPSs pursuant to TPS Service Agreements. Without limiting
the generality of this Section 3.01(a)(1), in furtherance of the foregoing,
the Servicer hereby agrees that it shall also have, and shall comply with,
the duties and responsibilities relating to data acquisition, usage and bill
calculation, billing, customer service functions, collection, payment
processing and remittance set forth in Annex I hereto.

               (2)  DTE Regulations Control. Notwithstanding anything
<PAGE>
to the contrary in this Agreement, the duties of the Servicer set forth in this
Agreement shall be qualified in their entirety by any DTE Regulations as in
effect at the time such duties are to be performed.

          (b)  Reporting Functions.

               (1)  Notification of Laws and Regulations. The Servicer shall
promptly notify the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies in writing of any laws or DTE Regulations hereafter
promulgated that have a material adverse effect on the Servicer's ability to
perform its duties under this Agreement.

               (2)  Other Information. Upon the reasonable request of the
Note Issuer, the Note Trustee, the Certificate Trustee, or any Rating Agency,
the Servicer shall provide to such Note Issuer, Note Trustee, Certificate
Trustee, or the Rating Agencies, as the case may be, any public financial
information in respect of the Servicer, or any material information regarding
the Transition Property to the extent it is reasonably available to the
Servicer, as may be reasonably necessary and permitted by law for the Note
Issuer, the Note Trustee, the Certificate Trustee, or the Rating Agencies to
monitor the Servicer's performance hereunder.

               (3)  Preparation of Reports to be Filed with the SEC. The
Servicer shall prepare or cause to be prepared any reports required to be
filed by the Note Issuer or the Certificate Issuer under the securities laws,
including a copy of each Quarterly Servicer Certificate described in Section
4.01(d)(3), the annual Certificate of Compliance described in Section 3.03
and the Annual Accountant's Report described in Section 3.04.

     Section 3.02. Servicing and Maintenance Standards. On behalf of the Note
Issuer, the Servicer shall (a) manage, service, administer and make collections
in respect of the Transition Property with reasonable care and in accordance
with applicable law, including all applicable DTE Regulations and guidelines,
using the same degree of care and diligence that the Servicer exercises with
respect to similar assets for its own account and, if applicable, for others;
(b) follow customary standards, policies and procedures for the industry in
performing its duties as Servicer; (c) use all reasonable efforts, consistent
with its customary servicing procedures, to bill and collect the RTC Charge; (d)
file all filings under the applicable Uniform Commercial Code or the Statute
necessary or desirable to maintain the
<PAGE>
perfected ownership interest and security interest of the Note Issuer and the
Note Trustee in the Transition Property, (e) comply in all material respects
with all laws and regulations applicable to and binding on it relating to the
Transition Property, and (f) submit at least annually the Periodic Adjustments
pursuant to Section 4.01. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of all or any portion of the Transition Property, which, in the
Servicer's judgment, may include the taking of legal action, at the Note
Issuer's expense.

     Section 3.03. Certificate of Compliance. The Servicer shall deliver to the
Note Issuer, the Note Trustee, the Certificate Trustee and the Rating Agencies
on or before March 31 of each year, commencing March 31, 2002 to and including
the March 31 succeeding the Retirement of the Notes, an Officer's Certificate
substantially in the form of Exhibit A hereto (a "Certificate of Compliance"),
stating that: (i) a review of the activities of the Servicer during the twelve
months ended the preceding December 31 (or, in the case of the first Certificate
of Compliance to be delivered on or before March 31, 2002, the period of time
from the date of this Agreement until December 31, 2001) and of its performance
under this Agreement has been made under such Responsible Officer's supervision,
and (ii) to such Responsible Officer's knowledge, based on such review, the
Servicer has fulfilled all of its obligations in all material respects under
this Agreement throughout such twelve months (or, in the case of the Certificate
of Compliance to be delivered on or before March 31, 2002, the period of time
from the date of this Agreement until December 31, 2001), or, if there has been
a default in the fulfillment of any such material obligation, specifying each
such material default known to such Responsible Officer and the nature and
status thereof.

     Section 3.04. Annual Report by Independent Public Accountants.

          (a)  The Servicer, at the Note Issuer's expense, shall cause a firm
of independent certified public accountants (which may provide other services
to the Servicer) to prepare, and the Servicer shall deliver to the Note
Issuer, the Note Trustee, the Certificate Trustee and the Rating Agencies, a
report addressed to the Servicer (the "Annual Accountant's Report"),
<PAGE>
which may be included as part of the Servicer's customary auditing activities,
for the information and use of the Note Issuer, the Note Trustee, the
Certificate Trustee and the Rating Agencies, on or before March 31 each year,
beginning March 31, 2002 to and including the March 31 succeeding the Retirement
of the Notes, to the effect that such firm has performed certain procedures,
agreed between the Servicer and such accountants, in connection with the
Servicer's compliance with its obligations under this Agreement during the
preceding twelve months ended December 31 (or, in the case of the first Annual
Accountant's Report to be delivered on or before March 31, 2002, the period of
time from the date of this Agreement until December 31, 2001), identifying the
results of such procedures and including any exceptions noted.

          (b)  The Annual Accountant's Report shall also indicate that the
accounting firm providing such report is independent of the Servicer within
the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

                                    ARTICLE 4

                    SERVICES RELATED TO PERIODIC ADJUSTMENTS;
                                   REMITTANCES

     Section 4.01. Periodic Adjustments. From time to time, until the Retirement
of the Notes, the Servicer shall identify the need for Periodic Adjustments and
shall take all reasonable action to obtain and implement such Periodic
Adjustments, all in accordance with the following:

          (a)  Expected Amortization Schedule. The Expected Amortization
Schedule is attached hereto as Schedule 4.01(a).

          (b)  Routine Periodic Adjustments and Yearly Filings.

               (1)  Routine Anniversary Periodic Adjustments and Filings.
For the purpose of preparing a Routine Anniversary True-Up Letter, the
Servicer shall: (A) update the assumptions underlying the calculation of the
RTC Charge, including energy usage volume, the rate of charge-offs and
estimated expenses and fees of the Note Issuer and the Certificate Issuer to
the extent not fixed, in each case for the Remittance Period beginning on
March 1 of each year; (B) determine the Required Debt Service for such
Remittance Period based upon such updated assumptions; and (C) determine
<PAGE>

the RTC Charge to be charged during such Remittance Period based upon such
Required Debt Service. The Servicer shall file a Routine Anniversary True-Up
Letter with the DTE prior to February 7 of each year and such Routine
Anniversary True-Up Letter shall reflect information updated in all respects as
of a date no earlier than December 31 of the calendar year preceding the
calendar year in which such Routine Anniversary True-Up Letter is filed.

               (2)  Routine Periodic Adjustments. Beginning in the last year
the Notes are scheduled to be outstanding, the Servicer shall file a Routine
True-Up Letter at least 15 days before the end of each calendar quarter.
In addition, the Servicer shall file a Routine True-Up Letter at least 15 days
before the end of any calendar quarter or, beginning in the last year the Notes
are scheduled to be outstanding, at least 15 days before the end of any calendar
month, at each such time as the Servicer may reasonably determine is necessary
to meet the Required Debt Service for the then current Remittance Period.

               (3)  Servicer's Efforts. The Servicer shall take all reasonable
actions and make all reasonable efforts to secure any Periodic Adjustments.

          (c)  Non-Routine Periodic Adjustments.

               (1)  When Required. Whenever the Servicer determines that the
existing model for calculating the RTC Charge should be amended or revised,
subject to the consent of the Note Issuer under the conditions set forth in
Section 3.18 of the Note Indenture, the Servicer shall file a Non-Routine
True-Up Letter with the DTE designating the adjustments to such model and any
corresponding adjustments to the RTC Charge (collectively, a "Non-Routine
Periodic Adjustment"), subject to the review and approval of the DTE pursuant to
the Financing Order.

               (2)  Servicer's Efforts. The Servicer shall take all reasonable
actions and make all reasonable efforts to secure any Non-Routine Periodic
Adjustments.

               (3)  Implementation. The Servicer shall implement any resulting
adjustments to the model and any resulting revised RTC Charge as of the
effective date of the Non-Routine True-Up Letter.

          (d)  Reports.

               (1)  Notification of Advice Letter Filings and Periodic
Adjustments. Whenever the Servicer files an Advice Letter with the DTE, the
Servicer shall send a copy of such filing to the Note Issuer, the Note
<PAGE>
Trustee, the Certificate Trustee and the Rating Agencies concurrently therewith.
If any Periodic Adjustment requested in any such Advice Letter filing does not
become effective on the applicable date as provided by the Financing Order, the
Servicer shall notify the Note Issuer, the Note Trustee, the Certificate Trustee
and the Rating Agencies by the end of the second Servicer Business Day after
such applicable date.

               (2)  Monthly Servicer Certificate. So long as any Notes are
outstanding, not later than fifteen (15) days after the end of each month after
the Certificates are issued (excluding May, 2001), or if such day is not a
Servicer Business Day, the next succeeding Servicer Business Day, the Servicer
shall deliver a written report substantially in the form of Exhibit C hereto
(the "Monthly Servicer Certificate") to the Note Issuer, the Note Trustee, the
Certificate Trustee and the Rating Agencies.

               (3)  Quarterly Servicer Certificate. So long as any Notes are
outstanding, not later than 11:00 a.m. (New York City time) on the Servicer
Business Day immediately preceding each Payment Date, the Servicer shall deliver
a written report substantially in the form of Exhibit D hereto (the "Quarterly
Servicer Certificate") to the Note Issuer, the Note Trustee, the Certificate
Trustee and the Rating Agencies.

               (4)  TPS Reports. The Servicer shall provide to the Rating
Agencies, upon request, any publicly available reports filed by the Servicer
with the DTE (or otherwise made publicly available by the Servicer) relating to
TPSs and any other non-confidential and non-proprietary information relating to
TPSs reasonably requested by the Rating Agencies.

     Section 4.02. Limitation of Liability.

          (a)  Specific Limitations. The Note Issuer and the Servicer expressly
agree and acknowledge that:

               (1)  Capacity. In connection with any Periodic Adjustment, the
Servicer is acting solely in its capacity as the servicing agent hereunder.

               (2)  No Liability for Failure to File. Neither the Servicer
nor the Note Issuer shall be responsible in any manner for, and shall have no
liability whatsoever as a result of, any action, decision, ruling or other
determination made or not made, or any delay (other than any delay resulting
from the Servicer's failure to file for Periodic Adjustments or Non-Routine
Periodic Adjustments required by Section 4.01 in a timely and correct manner
<PAGE>
or other material breach by the Servicer of its duties under this Agreement that
materially and adversely affects any Periodic Adjustments or Non-Routine
Periodic Adjustments), by the DTE (or, in connection with any Non-Routine
Periodic Adjustment, by the Rating Agencies) in any way related to the
Transition Property or in connection with any Periodic Adjustment or Non-
Routine Periodic Adjustment, the subject of any filings under Section 4.01, any
proposed Periodic Adjustment or Non-Routine Periodic Adjustment, or the approval
of the RTC Charge and the adjustments thereto.

               (3)  No Liability for Calculation. The Servicer shall have no
liability whatsoever relating to the calculation of the RTC Charge and the
adjustments thereto (including any Non-Routine Periodic Adjustment), including
as a result of any inaccuracy of any of the assumptions made in such calculation
regarding expected energy usage volume, the rate of charge-offs, estimated
expenses and fees of the Note Issuer and the Certificate Issuer, so long as the
Servicer has not acted in a negligent manner in connection therewith, nor shall
the Servicer have any liability whatsoever as a result of any Person, including
the Noteholders or the Certificateholders, not receiving any payment, amount or
return anticipated or expected in respect of any Note or Certificate generally,
except only to the extent that the Servicer is liable under Section 6.02 of this
Agreement.

          (b)  Liability for Misrepresentation and Breach. Notwithstanding
the foregoing, this Section 4.02 shall not relieve the Servicer of any liability
under Section 6.02 for any misrepresentation by the Servicer under Section 6.01
or for any breach by the Servicer of its obligations under this Agreement.

     Section 4.03. Remittances.

          (a)  Remittance to General Subaccount. Pursuant to the remittance
methodology more fully described in Annex II hereto, starting with collections
that are received on the first Servicer Business Day that is at least 45 days
after the first day on which Western Massachusetts Electric Company imposes the
RRB Charge, the Servicer will remit to the Note Trustee, within two Servicer
Business Days after receipt, by wire transfer of immediately available funds to
the General Subaccount of the Collection Account, an amount equal to the RTC
Charge Payments (as calculated in accordance with Annex II hereto) received on
such day and on any prior day that was not a Servicer Business Day for which a
Remittance has not previously been made. Prior to or simultaneous with each
Remittance to the
<PAGE>
General Subaccount of the Collection Account pursuant to this Section, the
Servicer shall provide written notice to the Note Trustee of each such
Remittance (including the exact dollar amount to be remitted).

          (b)  Frequency of Remittances. The Servicer may elect to make
Remittances less frequently than on a daily basis, and shall be permitted to do
so, but in any event shall make Remittances within one calendar month of
collection thereof, provided that the Servicer shall send written notice of such
election to the Note Issuer, the Note Trustee and the Certificate Trustee,
together with (i) an Officer's Certificate stating that no Servicer Default has
occurred and is continuing under this Servicing Agreement, (ii) evidence that
the Rating Agency Condition has been satisfied, (iii) either the Servicer's
commercial paper is rated P-1 by Moody's or the Servicer's long term unsecured
debt is rated A2 or better by Moody's, (iv) evidence of the delivery by the
Servicer to the Note Issuer or the Note Trustee, as applicable, of any credit
enhancement which may be required by the Rating Agencies in connection therewith
in form and substance satisfactory or to the Note Issuer and the Note Trustee,
as applicable, the cost of which credit enhancement shall be borne solely by the
Servicer, and (v) an executed copy of any appropriate amendment hereto or to the
Note Indenture or any other Basic Agreement as reasonably requested by the
Servicer, the Note Issuer or the Note Trustee in connection therewith.

          (c)  No Deduction. The Servicer agrees and acknowledges that it
will remit RTC Charge Payments in accordance with this Section 4.03 without
any surcharge, fee, offset, charge or other deduction except for late fees
permitted by Section 6.06.

                                    ARTICLE 5

                             THE TRANSITION PROPERTY

     Section 5.01. Custody of Transition Property Records. To assure
uniform quality in servicing the Transition Property and to reduce
administrative costs, the Note Issuer hereby revocably appoints the Servicer,
and the Servicer hereby accepts such appointment, to act as the agent of the
Note Issuer and the Note Trustee as custodian of any and all documents and
records that the Servicer shall keep on file, in accordance with its
customary procedures, relating to the Transition Property, including copies

<PAGE>
of the Financing Order and Advice Letters relating thereto and all documents
filed with the DTE in connection with any Periodic Adjustment or Non-Routine
Periodic Adjustment and computational records relating thereto (collectively,
the "Transition Property Records"), which are hereby constructively delivered
to the Note Trustee, as pledgee of the Note Issuer with respect to all
Transition Property.

     Section 5.02. Duties of Servicer as Custodian.

          (a)  Safekeeping. The Servicer shall hold the Transition Property
Records on behalf of the Note Issuer and the Note Trustee and maintain such
accurate and complete accounts, records and computer systems pertaining to the
Transition Property Records on behalf of the Note Issuer and the Note Trustee as
shall enable the Note Issuer to comply with this Agreement and the Note
Indenture. In performing its duties as custodian the Servicer shall act with
reasonable care, using that degree of care and diligence that the Servicer
exercises with respect to comparable assets that the Servicer services for
itself or, if applicable, for others. The Servicer shall promptly report to the
Note Issuer and the Note Trustee any failure on its part to hold the Transition
Property Records and maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such failure.
Nothing herein shall be deemed to require an initial review or any periodic
review by the Note Issuer or the Note Trustee of the Transition Property
Records. The Servicer's duties to hold the Transition Property Records on behalf
of the Note Issuer set forth in this Section 5.02, to the extent such Transition
Property Records have not been previously transferred to a successor Servicer
pursuant to Article 7, shall terminate one year and one day after the earlier of
the date on which (i) the Servicer is succeeded by a successor Servicer in
accordance with Article 7 and (ii) no Notes are outstanding.

          (b)  Maintenance of and Access to Records. The Servicer shall
maintain at all times records and accounts that permit the Servicer to identify
RTC Charges billed. The Servicer shall maintain the Transition Property Records
in West Springfield, Massachusetts or at such other office in the United States
of America as shall be specified to the Note Issuer and the Note Trustee by
written notice at least 30 days prior to any change in location. The Servicer
shall make available for inspection to the Note Issuer and the Note Trustee or
their respective duly authorized representatives, attorneys or auditors the
Transition Property Records
<PAGE>
at such times during normal business hours as the Note Issuer or the Note
Trustee shall reasonably request and which do not unreasonably interfere with
the Servicer's normal operations. Nothing in this Section 5.02(b) shall affect
the obligation of the Servicer to observe any applicable law (including any DTE
Regulations) prohibiting disclosure of information regarding the Customers, and
the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this Section 5.02(b).

          (c)  Release of Documents. Upon instruction from the Note Trustee
in accordance with the Note Indenture, the Servicer shall release any Transition
Property Records to the Note Trustee, the Note Trustee's agent or the Note
Trustee's designee, as the case may be, at such place or places as the Note
Trustee may designate, as soon as practicable.

          (d)  Defending Transition Property Against Claims. The Servicer,
shall institute any action or proceeding necessary to compel performance by the
DTE or The Commonwealth of Massachusetts of any of their obligations or duties
under the Statute, the Financing Order or any Advice Letter, and the Servicer
agrees to take such legal or administrative actions, including defending against
or instituting and pursuing legal actions and appearing or testifying at
hearings or similar proceedings, as may be reasonably necessary to block or
overturn any attempts to cause a repeal of, modification of or supplement to the
Statute or the Financing Order or the rights of holders of Transition Property
by executive action, legislative enactment, voter initiative or constitutional
amendment that would be adverse to Certificateholders, Noteholders, the Note
Issuer, the Note Trustee, the Delaware Trustee or the Certificate Trustee. The
costs of any such action shall be payable from RTC Charge Collections as an
Operating Expense in accordance with the priorities set forth in Section 8.02(d)
of the Note Indenture. The Servicer's obligations pursuant to this Section 5.02
shall survive and continue notwithstanding the fact that the payment of
Operating Expenses pursuant to Section 8.02(d) of the Note Indenture may be
delayed (it being understood that the Servicer may be required to advance its
own funds to satisfy its obligations hereunder).

     Section 5.03. Instructions; Authority to Act. For so long as any Notes
remain outstanding, the Servicer shall be deemed to have received proper
instructions with respect to the Transition Property Records upon its receipt
<PAGE>
of written instructions signed by a Responsible Officer (as defined in the Note
Indenture) of the Note Trustee.

     Section 5.04. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section
5.04. If any Servicer shall resign as Servicer in accordance with the provisions
of this Agreement or if all of the rights and obligations of any Servicer shall
have been terminated under Section 7.01, the appointment of such Servicer as
custodian shall terminate upon appointment of a successor Servicer, subject to
the approval of the DTE, and acceptance by such successor Servicer of such
appointment.

     Section 5.05. Monitoring of Third-Party Suppliers. From time to time,
until the Retirement of the Notes, the Servicer shall, using the same degree of
care and diligence that it exercises with respect to payments owed to it for its
own account, implement such procedures and policies as are necessary to properly
enforce the obligations of each TPS to remit RTC Charges, in accordance with the
terms and provisions of the Financing Order, the TPS Service Agreement and
Schedule A to Annex I hereto.

     Section 5.06. Monitoring and Collecting Exit Charges. The Servicer
shall, using the same degree of care and diligence that it exercises with
respect to payments owed to it for its own account, bill and collect any exit
charges to which it may be entitled pursuant to Section 1G(g) of Chapter 164 of
the Massachusetts General Laws, and shall remit that portion of the exit charges
representing (or allocable to) the RTC Charge together with the RTC Charge
Payments for a particular billing date.

                                    ARTICLE 6

                                  THE SERVICER

     Section 6.01. Representations and Warranties of Servicer. The Servicer
makes the following representations and warranties, as of the Closing Date, on
which the Note Issuer is deemed to have relied in entering into this Agreement
relating to the servicing of the Transition Property.

          (a)  Organization and Good Standing. The Servicer is duly organized
and validly existing as a corporation in good standing under the laws of The
Commonwealth of Massachusetts, with the requisite corporate

<PAGE>
power and authority to own its properties as such properties are currently owned
and to conduct its business as such business is now conducted by it, and has the
requisite corporate power and authority to service the Transition Property and
to hold the Transition Property Records as custodian.

          (b)  Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business (including the servicing of the
Transition Property as required by this Agreement) shall require such
qualifications, licenses or approvals (except where the failure to so qualify or
obtain such licenses and approvals would not be reasonably likely to have a
material adverse effect on the Servicer's business, operations, assets, revenues
or properties or adversely affect the servicing of the Transition Property).

          (c)  Power and Authority. The Servicer has the requisite corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; and the execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of the Servicer.

          (d)  Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Servicer enforceable against it in accordance with
its terms, subject to applicable insolvency, reorganization, moratorium,
fraudulent transfer and other laws relating to or affecting creditors' rights
generally from time to time in effect and to general principles of equity
(including concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law.

          (e)  No Violation. The consummation of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof do not: (i) conflict
with or result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
articles of organization or by-laws of the Servicer, or any material indenture,
agreement or other instrument to which the Servicer
<PAGE>
is a party or by which it is bound; (ii) result in the creation or imposition of
any Lien upon any of the Servicer's properties pursuant to the terms of any such
indenture, agreement or other instrument; nor violate any existing law or any
existing order, rule or regulation applicable to the Servicer of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties, so as to adversely affect the Servicer, the Noteholders or the
Certificateholders.

          (f)  No Proceedings. There are no proceedings pending and, to the
Servicer's knowledge, there are no proceedings threatened and, to the Servicer's
knowledge, there are no investigations pending or threatened, before any court,
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties
involving or relating to the Servicer or the Note Issuer or, to the Servicer's
knowledge, any other Person: (i) asserting the invalidity of this Agreement;
(ii) seeking to prevent the consummation of any of the transactions contemplated
by this Agreement; or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement.

          (g)  Approvals. No approval, authorization, consent, order or other
action of, or filing with, any court, federal or state regulatory body,
administrative agency or other governmental instrumentality is required in
connection with the execution and delivery by the Servicer of this Agreement,
the performance by the Servicer of the transactions contemplated hereby or the
fulfillment by the Servicer of the terms hereof, except those that have been
obtained or made and those that the Servicer is required to make in the future
pursuant to Article 3 or 4 and post-closing filings in connection therewith.

     Section 6.02. Indemnities of Servicer.

          (a)  The Servicer shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Servicer and as
expressly provided under this Section 6.02.

          (b)  The Servicer shall indemnify the Note Issuer, the Noteholders
<PAGE>
and the Certificateholders (each an "Indemnified Person" for purposes of Section
6.02 (b) and (d)) for, and defend and hold harmless each such Person from and
against, any and all liabilities, obligations, losses, damages, payments,
claims, costs or expenses of any kind whatsoever (collectively, "Losses") that
may be imposed on, incurred by or asserted against any such Person as a result
of (i) the Servicer's willful misconduct or negligence in the performance of its
duties or observance of its covenants under this Agreement (including the
Servicer's willful misconduct or negligence relating to the maintenance and
custody by the Servicer, as custodian, of the Transition Property Records) or
(ii) the Servicer's breach in any material respect of any of its representations
or warranties in this Agreement; provided, however, that the Servicer shall not
be liable for any Losses resulting from the willful misconduct or gross
negligence of any such Indemnified Person; and, provided, further, that the
Noteholders and the Certificateholders shall be entitled to enforce their rights
and remedies against the Servicer under this Section 6.02(b) solely through a
cause of action brought for their benefit by the Note Trustee or the Certificate
Trustee, as the case may be; and, provided, further, that the Servicer shall not
be liable for any Losses, regardless of when incurred, after the Notes and the
Certificates have been paid in full, except as provided in Section 6.02(c).

          (c)  The Servicer shall indemnify and hold harmless the Note Trustee,
the Delaware Trustee, the Certificate Trustee, the Certificate Issuer, The
Commonwealth of Massachusetts, the Executive Office for Administration and
Finance of The Commonwealth of Massachusetts and the Agencies and any of their
respective affiliates, officials, officers, directors, employees, consultants,
counsel and agents (each an "Indemnified Person" for purposes of Section 6.02(c)
and (d)) for, and defend and hold harmless each such Person from and against,
any and all Losses imposed on, incurred by or asserted against any of such
Indemnified Persons as a result of: (i) the Servicer's willful misconduct or
negligence in the performance of its duties or observance of its covenants under
this Agreement (including the Servicer's willful misconduct or negligence
relating to the maintenance and custody by the Servicer, as custodian, of the
Transition Property Records) or (ii) the Servicer's breach in any material
respect of any of its representations or warranties in this Agreement; provided,
however, that the Servicer shall not be liable for any Losses resulting from the
willful misconduct or gross negligence of such Indemnified Person or resulting
from a breach of a representation or warranty made by such Indemnified Person
<PAGE>
in any of the Basic Documents that gives rise to the Servicer's breach.

          (d)  The Servicer shall not be required to indemnify an Indemnified
Person for any amount paid or payable by such Indemnified Person pursuant to
Section 6.02(b) or (c) in the settlement of any action, proceeding or
investigation without the written consent of the Servicer, which consent shall
not be unreasonably withheld. Promptly after receipt by an Indemnified Person of
notice of its involvement in any action, proceeding or investigation, such
Indemnified Person shall, if a claim for indemnification in respect thereof is
to be made against the Servicer under Section 6.02 (b) or (c), notify the
Servicer in writing of such involvement. Failure by an Indemnified Person to so
notify the Servicer shall relieve the Servicer from the obligation to indemnify
and hold harmless such Indemnified Person under Section 6.02(b) or (c), as
applicable, only to the extent that the Servicer suffers actual prejudice as a
result of such failure. With respect to any action, proceeding or investigation
brought by a third party for which indemnification may be sought under Section
6.02(b) or (c), the Servicer shall be entitled to assume the defense of any such
action, proceeding or investigation. Upon assumption by the Servicer of the
defense of any such action, proceeding or investigation, the Indemnified Person
shall have the right to participate in such action or proceeding and to retain
its own counsel. The Servicer shall be entitled to appoint counsel of the
Servicer's choice at the Servicer's expense to represent the Indemnified Person
in any action, proceeding or investigation for which a claim of indemnification
is made against the Servicer under Section 6.02(b) or (c) (in which case the
Servicer shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the Indemnified Person except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
Indemnified Person. Notwithstanding the Servicer's election to appoint counsel
to represent the Indemnified Person in an action, proceeding or investigation,
the Indemnified Person shall have the right to employ separate counsel
(including local counsel), and the Servicer shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel chosen by
the Servicer to represent the Indemnified Person would present such counsel with
a conflict of interest, (ii) the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person and the Servicer and the
Indemnified Person shall
<PAGE>
have reasonably concluded that there may be legal defenses available to it that
are different from or additional to those available to the Servicer, (iii) the
Servicer shall not have employed counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person within a reasonable time
after notice of the institution of such action or (iv) the Servicer shall
authorize the Indemnified Person to employ separate counsel at the expense of
the Servicer. Notwithstanding the foregoing, the Servicer shall not be obligated
to pay for the fees, costs and expenses of more than one separate counsel for
the Indemnified Persons (in addition to local counsel). The Servicer will not,
without the prior written consent of the Indemnified Person, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought under Section 6.02(b) or (c), as applicable
(whether or not the Indemnified Person is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of the Indemnified Person from all liability arising out
of such claim, action, suit or proceeding.

          (e)  Indemnification under Section 6.02(b) and 6.02(c) shall include
reasonable fees and out-of-pocket expenses of investigation and litigation
(including reasonable attorneys' fees and expenses), except as otherwise
provided in this Agreement.

          (f)  For purposes of Section 6.02(b) and 6.02(c), in the event of the
termination of the rights and obligations of Western Massachusetts Electric
Company (or any successor thereto pursuant to Section 6.04) as Servicer pursuant
to Section 7.01, or a resignation by such Servicer pursuant to this Agreement,
such Servicer shall be deemed to be the Servicer pending appointment of a
successor Servicer pursuant to Section 7.02.

          (g)  The indemnities contained in this Section 6.02 survive the
resignation or termination of the Note Trustee, the Certificate Trustee or the
Delaware Trustee or the termination of this Agreement.

     Section 6.03. Limitation on Liability of Servicer and Others. Except as
otherwise provided under this Agreement, neither the Servicer nor any of the
directors, officers, employees or agents of the Servicer shall be liable to the
Note Issuer or any other Person for any action taken or for
<PAGE>
refraining from the taking of any action pursuant to this Agreement or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer or any director, officer, employee or agent of the Servicer against any
liability that would otherwise be imposed by reason of willful misconduct or
negligence in the performance of duties under this Agreement. The Servicer and
any director, officer, employee or agent of the Servicer may rely in good faith
on the advice of counsel reasonably acceptable to the Note Trustee or on any
document of any kind, prima facie properly executed and submitted by any Person,
respecting any matters arising under this Agreement.

     Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action relating to the
Transition Property.

     Section 6.04. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party or (c) which may succeed to the properties and assets
of the Servicer substantially as a whole, which Person in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Servicer hereunder, shall be the successor to the Servicer under this Agreement
without further act on the part of any of the parties to this Agreement;
provided, however, that (i) immediately after giving effect to such transaction,
no Servicer Default and no event which, after notice or lapse of time, or both,
would become a Servicer Default shall have occurred and be continuing, (ii) the
Servicer shall have delivered to the Note Issuer and the Note Trustee an
Officers' Certificate stating that such consolidation, merger or succession and
such agreement of assumption comply with this Section and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with, (iii) the Servicer shall have delivered to the Note Issuer and
the Note Trustee an Opinion of Counsel stating that, in the opinion of such
counsel (A) such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent provided
for in this Agreement relating to such transaction have been complied with and
(B) either (1) all statutory filings to be made by the Servicer, including
filings
<PAGE>
with the DTE pursuant to the Statute and filings under the applicable UCC, have
been executed and filed that are necessary to preserve and protect fully the
interests of the Note Issuer and the Note Trustee in the Transition Property and
reciting the details of such filings or (2) no such action shall be necessary to
preserve and protect such interests and (iv) the Rating Agencies shall have
received prior written notice of such transaction. When any Person acquires the
properties and assets of the Servicer substantially as a whole and becomes the
successor to the Servicer in accordance with the terms of this Section 6.04,
then upon satisfaction of all of the other conditions of this Section 6.04, the
Servicer shall automatically and without further notice be released from all its
obligations hereunder.

     Section 6.05. Western Massachusetts Electric Company Not to Resign as
Servicer. Subject to the provisions of Section 6.04, Western Massachusetts
Electric Company shall not resign from the obligations and duties hereby imposed
on it as Servicer under this Agreement except upon either (a) a determination
that the performance of its duties under this Agreement shall no longer be
permissible under applicable law or (b) satisfaction of the following: (i) the
Rating Agency Condition shall have been satisfied (except that with respect to
Moody's it shall be sufficient to provide ten days prior notice) and (ii) the
DTE shall have approved such resignation. Notice of any such determination
permitting the resignation of Western Massachusetts Electric Company shall be
communicated to the Note Issuer, the Note Trustee, the Certificate Trustee and
the Rating Agencies at the earliest practicable time (and, if such communication
is not in writing, shall be confirmed in writing at the earliest practicable
time) and any such determination that the performance of Western Massachusetts
Electric Company's duties under this Agreement shall no longer be permissible
under applicable law shall be evidenced by an Opinion of Counsel to such effect
delivered by Western Massachusetts Electric Company to the Note Issuer, the Note
Trustee and the Certificate Trustee concurrently with or promptly after such
notice. No such resignation shall become effective until a successor Servicer
shall have assumed the responsibilities and obligations of Western Massachusetts
Electric Company in accordance with Section 7.02.

     Section 6.06. Servicing Compensation.

          (a) In consideration for its services hereunder, until the Retirement
of the Notes, the Servicer shall receive an annual fee (the
<PAGE>

"Servicing Fee") in an amount equal to (i) five one-hundredth of one percent
(0.05%) of the initial principal balance of the Notes for so long as the
Servicer is Western Massachusetts Electric Company or any successor Servicer
that bills the RTC Charge concurrently with other charges for services or (ii)
up to one and one-quarter percent (1.25%) of the initial principal balance of
the Notes for so long as the Servicer is a successor Servicer that bills the RTC
Charge separately to Customers (which amount shall be determined by a separate
agreement between the Note Issuer and the Servicer). The Servicing Fee shall be
payable in quarterly installments on each Payment Date. The Servicer also shall
be entitled to retain as additional compensation (i) any interest earnings on
RTC Charge Payments received by the Servicer and invested by the Servicer
pursuant to Section 6(c) of Annex I hereto prior to remittance to the Collection
Account and (ii) all late payment charges, if any, collected from Customers or
TPSs.

          (b) The Servicing Fee set forth in Section 6.06(a) and expenses
provided for in Section 6.06(c) shall be paid to the Servicer by the Note
Trustee, on each Payment Date in accordance with the priorities set forth in
Section 8.02(d) of the Note Indenture, by wire transfer of immediately available
funds from the Collection Account to an account designated by the Servicer. Any
portion of the Servicing Fee not paid on such date shall be added to the
Servicing Fee payable on the subsequent Payment Date.

          (c) The Note Issuer shall pay all expenses incurred by the Servicer in
connection with its activities hereunder (including any reasonable fees to and
disbursements by accountants, counsel, or any other Person, any taxes imposed on
the Servicer (other than taxes based on the Servicer's net income) and any
expenses incurred in connection with reports to Noteholders and
Certificateholders, subject to the priorities set forth in Section 8.02(d) of
the Note Indenture).

     Section 6.07. Compliance with Applicable Law. The Servicer covenants
and agrees, in servicing the Transition Property, to comply in all material
respects with all laws applicable to, and binding upon, the Servicer and
relating to such Transition Property the noncompliance with which would have
a material adverse effect on the value of the Transition Property; provided,
however, that the foregoing is not intended to, and shall not, impose any
liability on the Servicer for noncompliance with any law that the Servicer is
contesting in good faith in accordance with its customary standards and
<PAGE>
procedures.

     Section 6.08. Access to Certain Records and Information Regarding
Transition Property. The Servicer shall provide to the Noteholders, the Note
Issuer, the Note Trustee and the Certificate Trustee access to the Transition
Property Records in such cases where the Noteholders, the Note Issuer, the Note
Trustee and the Certificate Trustee shall be required by applicable law to be
provided access to such records. Access shall be afforded without charge, but
only upon reasonable request and during normal business hours at the respective
offices of the Servicer. Nothing in this Section shall affect the obligation of
the Servicer to observe any applicable law (including any DTE Regulation)
prohibiting disclosure of information regarding the Customers, and the failure
of the Servicer to provide access to such information as a result of such
obligation shall not constitute a breach of this Section.

     Section 6.09. Appointments.

          (a) The Servicer may at any time appoint any Person to perform all or
any portion of its obligations as Servicer hereunder; provided, however, that
the Rating Agency Condition shall have been satisfied in connection therewith
(except that with respect to Moody's it shall be sufficient to provide ten days
prior notice); and, provided, further, that the Servicer shall remain obligated
and be liable under this Agreement for the servicing and administering of the
Transition Property in accordance with the provisions hereof without diminution
of such obligation and liability by virtue of the appointment of such Person and
to the same extent and under the same terms and conditions as if the Servicer
alone were servicing and administering the Transition Property; and, provided,
further, however, that nothing herein (including the Rating Agency Condition)
shall preclude the execution by the Servicer of a TPS Service Agreement with any
TPS pursuant to applicable DTE Regulations. The fees and expenses of any such
Person shall be as agreed between the Servicer and such Person from time to time
and none of the Note Issuer, the Note Trustee, the Noteholders or any other
Person shall have any responsibility therefor or right or claim thereto. Any
such appointment shall not constitute a Servicer resignation under Section 6.05.

          (b) The Servicer has no employees. Therefore, in carrying out the
<PAGE>
foregoing duties or any of its other obligations under this Agreement, the
Servicer may enter into transactions with or otherwise deal with any of its
Affiliates to obtain the services of employees of such Affiliates as is its
current practice; provided, however, that the terms of any such transactions or
dealings shall be no less favorable to the Note Issuer than would be available
from unaffiliated parties or that would be available if the Servicer were to
hire its own employees to perform such services.

     Section 6.10. No Servicer Advances. The Servicer shall not make any
advances of interest on or principal of the Notes or the Certificates.

     Section 6.11. Maintenance of Operations. The Servicer agrees to continue to
operate its distribution system to provide service to its customers so long as
it is acting as the Servicer under this Agreement.

                                    ARTICLE 7

                                     DEFAULT

     Section 7.01. Servicer Default. If any one of the following events (each a
"Servicer Default") shall occur and be continuing:

          (a)  any failure by the Servicer to remit to the Collection Account
on behalf of the Note Issuer any required Remittance that shall continue
unremedied for a period of five (5) Business Days after written notice of
such failure is received by the Servicer from the Note Issuer or the Note
Trustee; or

          (b)  any failure on the part of the Servicer duly to observe or to
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement, which failure shall (a) materially and
adversely affect the rights of the Noteholders or Certificateholders and (ii)
continue unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given (A) to the Servicer by the Note Issuer or (B) to the Servicer by the
Note Trustee or by the Holders of Notes evidencing not less than 25 percent
of the Outstanding Amount of the Notes; or

          (c)  any representation or warranty made by the Servicer in this
Agreement shall prove to have been incorrect in any material respect when
made, which has a material adverse effect on the Noteholders or
Certificateholders and which material adverse effect continues unremedied for
<PAGE>
a period of 60 days after written notice of such failure is received by the
Servicer from the Note Issuer or the Note Trustee; or

          (d)  an Insolvency Event occurs with respect to the Servicer; then,
and in each and every case, so long as the Servicer Default shall not have been
remedied, either the Note Trustee, or the Holders of Notes evidencing not less
than 25 percent of the Outstanding Amount of the Notes, by notice then given in
writing to the Servicer (and to the Note Trustee if given by the Noteholders) (a
"Termination Notice") may terminate all the rights and obligations (other than
the obligations set forth in Section 6.02) of the Servicer under this Agreement.
In addition, upon a Servicer Default described in Section 7.01(a), each of the
following shall be entitled to apply to the DTE for sequestration and payment of
revenues arising with respect to the Transition Property: (1) the Note Trustee
or the Noteholders; (2) the Certificate Trustee or the Certificateholders; (3)
the Delaware Trustee; (4) the Note Issuer or its assignees; or (5) pledgees or
transferees of the Transition Property, including transferees under Section
1H(f) of Chapter 164 of the Massachusetts General Laws and beneficiaries of the
statutory lien pursuant to Section 1H(e) of Chapter 164 of the Massachusetts
General Laws. On or after the receipt by the Servicer of a Termination Notice,
and subject to the approval of the DTE, all authority and power of the Servicer
under this Agreement, whether with respect to the Notes, the Transition
Property, the RTC Charge or otherwise, shall, without further action, pass to
and be vested in such successor Servicer as may be appointed under Section 7.02;
and, without limitation, the Note Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such Termination Notice, whether to complete the transfer of the
Transition Property Records and related documents, or otherwise. The predecessor
Servicer shall cooperate with the successor Servicer, the Note Issuer and the
Note Trustee in effecting the termination of the responsibilities and rights of
the predecessor Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the predecessor Servicer for remittance, or shall thereafter
be received by it with respect to the Transition Property or the RTC Charge. In
case a successor Servicer is appointed as a result of a Servicer Default, all
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) incurred in connection with transferring
<PAGE>
the Transition Property Records to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. All other reasonable costs and
expenses incurred in transferring servicing responsibilities to a successor
servicer shall constitute Operating Expenses of the Note Issuer. Section 7.02.
Appointment of Successor.

          (a)  Upon the Servicer's receipt of a Termination Notice pursuant
to Section 7.01 or the Servicer's resignation or removal in accordance with the
terms of this Agreement, the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, and shall be entitled to receive the
requisite portion of the Servicing Fee and reimbursement of expenses as provided
herein, until a successor Servicer shall have assumed in writing the obligations
of the Servicer hereunder as described below. In the event of the Servicer's
termination hereunder, the Note Issuer shall appoint, subject to the approval of
the DTE, a successor Servicer with the Note Trustee's prior written consent
thereto (which consent shall not be unreasonably withheld), and the successor
Servicer shall accept its appointment by a written assumption in form reasonably
acceptable to the Note Issuer and the Note Trustee. If within 30 days after the
delivery of the Termination Notice, the Note Issuer shall not have obtained such
a new Servicer, the Note Trustee may appoint (subject to the approval of the
DTE) or petition the DTE or a court of competent jurisdiction to appoint a
successor Servicer under this Agreement. A Person shall qualify as a successor
Servicer only if (i) such Person is permitted under DTE Regulations to perform
the duties of the Servicer, (ii) the Rating Agency Condition shall have been
satisfied and (iii) such Person assumes in writing the obligations of the
Servicer hereunder or enters into a servicing agreement with the Note Issuer
having substantially the same provisions as this Agreement.

          (b)  Upon appointment, the successor Servicer shall be the successor
in all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to the Servicing Fee
and all the rights granted to the predecessor Servicer by the terms and
provisions of this Agreement.

     Section 7.03. Waiver of Past Defaults. The Holders of Notes
<PAGE>
evidencing not less than a majority of the Outstanding Amount of the Notes may,
on behalf of all Noteholders, waive in writing any default by the Servicer in
the performance of its obligations hereunder and its consequences, except a
default in making any required Remittances to the Collection Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.

     Section 7.04. Notice of Servicer Default. The Servicer shall deliver to the
Note Issuer, the Note Trustee, the Certificate Trustee, the Certificate Issuer,
the Agencies and the Rating Agencies, promptly after any of its Responsible
Officers having obtained actual knowledge thereof, but in no event later than
five Business Days thereafter, written notice in an Officers' Certificate of any
event which with the giving of notice or lapse of time, or both, would become a
Servicer Default under Section 7.01(a) or (b).

                                    ARTICLE 8

                            MISCELLANEOUS PROVISIONS

     Section 8.01. Amendment.

          (a)  This Agreement may be amended in writing by the Servicer and
the Note Issuer with ten Business Days' prior written notice given to the Rating
Agencies and the prior written consent of the Note Trustee (which consent shall
not be unreasonably withheld), but without the consent of any of the Noteholders
or any of the Certificateholders (notwithstanding any provision of any other
document that would otherwise require such consent as a precondition of Note
Trustee consent), to cure any ambiguity, to correct or supplement any provisions
in this Agreement or for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions in this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
such action shall not, as evidenced by an Officer's Certificate delivered to the
Note Issuer and the Note
<PAGE>
Trustee, adversely affect in any material respect the interests of any
Noteholder or any Certificateholder.

          (b) This Agreement may also be amended in writing from time to time by
the Servicer and the Note Issuer with ten Business Days' prior written notice
given to the Rating Agencies and the prior written consent of the Note Trustee
(which consent shall not be unreasonably withheld) and the prior written consent
of the Holders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders; provided, however, that
any amendment of the provisions of Sections 4.01 or 4.03 shall satisfy the
Rating Agency Condition.

          (c) If the written consent of Noteholders is required in connection
with an amendment hereof, approval by Noteholders of the substance of any
proposed amendment or consent shall constitute sufficient consent of the
Noteholders pursuant to this Section, and it shall not be necessary that
Noteholders approve of the particular form of any amendment or consent.

          (d) Promptly after the execution thereof, the Note Issuer shall
provide each of the Rating Agencies with a copy of any amendment to this
Agreement.

          (e) Prior to its consent to any amendment to this Agreement, the Note
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that such amendment is authorized or permitted by this
Agreement. The Note Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Note Trustee's own rights, duties or immunities
under this Agreement or otherwise.

     Section 8.02. Maintenance of Accounts and Records.

          (a) The Servicer shall maintain accounts and records as to the
Transition Property accurately and in accordance with its standard accounting
procedures.

          (b) The Servicer shall permit the Note Issuer and the Note Trustee and
its agents at any time during normal business hours, upon reasonable notice to
the Servicer and to the extent it does not unreasonably interfere with the
Servicer's normal operations, to inspect, audit and make copies of and abstracts
from the Servicer's records regarding the Transition Property and the RTC
Charge. Nothing in this Section 8.02(b) shall affect the obligation of the
Servicer to observe any applicable law (including any DTE
<PAGE>
Regulation) prohibiting disclosure of information regarding the Customers, and
the failure of the Servicer to provide access to such information as a result of
such obligation shall not constitute a breach of this Section 8.02(b).

     Section 8.03. Notices. Unless otherwise specifically provided herein, all
notices, directions, consents and waivers required under the terms and
provisions of this Agreement shall be in English and in writing, and any such
notice, direction, consent or waiver may be given by United States mail, courier
service, facsimile transmission or electronic mail (confirmed by telephone,
United States mail or courier service in the case of notice by facsimile
transmission or electronic mail) or any other customary means of communication,
and any such notice, direction, consent or waiver shall be effective when
delivered, or if mailed, three days after deposit in the United States mail with
proper postage for ordinary mail prepaid:

          (a)  if to the Servicer, to

                    Western Massachusetts Electric Company
                       174 Brush Hill Avenue
                       West Springfield, MA 01089
                    Facsimile:     (860) 665-5457
                    Telephone:     (860) 665-3258
                    Email:         shoopra@nu.com

                    with a copy to:
                    Western Massachusetts Electric Company
                      c/o Northeast Utilities Service Company
                    if by U.S. Mail:
                      P.O. Box 270
                      Hartford, CT  06141-0270
                    if by courier:
                      107 Selden Street
                      Berlin, CT  06037
                    Attention:  Assistant Treasurer-Finance
                    Facsimile:     (860) 665-5457
                    Telephone:     (860) 665-3258
                    Email:         shoopra@nu.com

          (b)  if to the Note Issuer, to

                    WMECO Funding LLC
                       c/o Western Massachusetts Electric Company
                       174 Brush Hill Avenue
                       West Springfield, MA 01089
                    Facsimile:     (860) 665-5457
                    Telephone:     (860) 665-3258
                    Email:         shoopra@nu.com

                    with a copy to:
                    Western Massachusetts Electric Company
                       c/o Northeast Utilities Service Company
                       107 Selden Street
<PAGE>
                       Berlin, CT 06037
                    Attention:  Assistant Treasurer-Finance
                    Facsimile:     860-665-5457
                    Telephone:     860-665-3258
                    Email:         shoopra@nu.com

          (c)  if to the Note Trustee or the Certificate Trustee, to

                    The Bank of New York, as trustee
                    101 Barclay Street
                    Floor 12 East
                    New York, NY  10286
                    Attention:  ABS Unit
                    Facsimile:     (212) 815-5563
                    Telephone:     (212) 815-5368

          (d)  if to Moody's, to

                    Moody's Investors Service, Inc.
                    99 Church Street
                    New York, NY 10007
                    Attention:  ABS Monitoring Department
                    Facsimile:     (212) 553-0573
                    Telephone:     (212) 553-3686

          (e)  if to S&P, to

                    Standard & Poor's
                    55 Water Street, 41st Floor
                    New York, NY 10041
                    Attention:  Asset Backed Surveillance Department
                    Facsimile:     (212) 438-2664
                    Telephone:     (212) 438-2000

          (f)  if to Fitch, to

                    Fitch, Inc.
                    One State Street Plaza
                    New York, NY 10004
                    Attention:  ABS Surveillance
                    Facsimile:     (212) 514-9879
                    Telephone:     (212) 908-0500
                    Email:         surv@fitchratings.com

          (g)  if to the Agencies, to

                    Massachusetts Development Finance Agency
                    75 Federal Street
                    Boston, MA 02110
                    Attention:  General Counsel
                    Facsimile:     (617) 727-8741
                    Telephone:     (617) 451-2477

               and

                    Massachusetts Health and Educational Facilities Authority
                    99 Summer Street, 10th Floor
                    Boston, MA 02110
                    Attention:  General Counsel
<PAGE>
                    Facsimile:     (617) 737-8366
                    Telephone:     (617) 737-8377

          (h)  if to the Certificate Issuer, to:

                    The Bank of New York (Delaware), as Delaware Trustee for
                    Massachusetts RRB Special Purpose Trust WMECO-1
                    700 White Clay Center
                    Route 273
                    Newark, Delaware  19711
                    Attention:  Compliance
                    Facsimile:     (302) 283-8298
                    Telephone:     (302) 451-2500

               with a copy to:
               The Bank of New York
               101 Barclay Street
               Floor 12 East
               New York, NY  10286
               Attention:  ABS Unit
               Facsimile:     (212) 815-5563
               Telephone:     (212) 815-5368

               (with copies to the Agencies at the addresses listed herein)

          (i)  as to each of the foregoing, at such other address as shall be
designated by written notice to the other parties.

     Section 8.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 6.04 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer, this
Agreement may not be assigned by the Servicer.

     Section 8.05. Limitations on Rights of Third Parties. The provisions
of this Agreement are solely for the benefit of the Servicer, the Note Issuer,
the Noteholders, the Certificateholders, the Note Trustee, the Certificate
Trustee, the Delaware Trustee, the Agencies, the Certificate Issuer and the
other Persons expressly referred to herein and such Persons shall have the right
to enforce the relevant provisions of this Agreement, except that the
Noteholders and the Certificateholders shall be entitled to enforce their rights
against the Servicer under this Agreement solely through a cause of action
brought for their benefit by the Note Trustee or the Certificate Trustee, as the
case may be. Nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Transition Property or under or in respect of this Agreement or any
covenants, conditions or provisions
<PAGE>
contained herein.

     Section 8.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     Section 8.07. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

     Section 8.08. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

     Section 8.09. Governing Law. This Agreement shall be construed in
accordance with the substantive laws of The Commonwealth of Massachusetts,
without giving effect to its conflict of law or other principles that would
cause the application of the laws of another jurisdiction, and the obligations,
rights and remedies of the parties hereunder shall be determined in accordance
with such laws.

     Section 8.10. Assignment to Note Trustee. The Servicer hereby acknowledges
and consents to the collateral assignment or pledge of, or grant of a security
interest in, any or all of the Note Issuer's rights and obligations hereunder to
the Note Trustee for the benefit of the holders of the Notes and to the further
assignment of the Note Trustee's rights and obligations under the Note Indenture
to the Certificate Trustee for the benefit of the holders of the Certificates.

     Section 8.11. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement or the Note Indenture, but subject to the DTE's right to order
the sequestration and payment of revenues arising with respect to the Transition
Property notwithstanding any bankruptcy, reorganization or other insolvency
proceedings with respect to the debtor, pledgor or transferor of the Transition
Property pursuant to Sections 1H(d)(5) and 1H(e) of Chapter 164 of the
Massachusetts General Laws, the Servicer shall not, prior to the date which is
one year and one day after the termination of the Note Indenture with respect to
the Note Issuer, petition or otherwise invoke
<PAGE>
or cause the Note Issuer or the Trust to invoke the process of any court or
governmental authority for the purpose of commencing or sustaining a case
against the Note Issuer or the Trust under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Note Issuer or
the Trust or any substantial part of the property of the Note Issuer or the
Trust, or ordering the winding up or liquidation of the affairs of the Note
Issuer or the Trust.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

     IN WITNESS WHEREOF, the parties hereto have caused this Transition Property
Servicing Agreement to be duly executed under seal by their respective officers
as of the day and year first above written.

                              WMECO FUNDING LLC,
                              Note Issuer

                              By: /s/ Randy A. Shoop
                                  ------------------------------------------
                                  Name:  Randy A. Shoop
                                  Title: President

                              WESTERN MASSACHUSETTS ELECTRIC COMPANY,
                              Servicer

                              By: /s/ Randy A. Shoop
                                  ------------------------------------------
                                  Name:  Randy A. Shoop
                                  Title: Assistant Treasurer-Finance

                                    EXHIBIT A

                            CERTIFICATE OF COMPLIANCE

     The undersigned hereby certifies that he/she is the duly elected and acting
[________] of Western Massachusetts Electric Company, as servicer (the
"Servicer") under the Transition Property Servicing Agreement, dated as of May
17, 2001 (the "Servicing Agreement"), between the Servicer and WMECO Funding LLC
(the "Note Issuer"), and further certifies on behalf of the Servicer that:

     1. A review of the activities of the Servicer and of its performance under
the Servicing Agreement during the [_____________] months ended December 31,
20[_] has been made under the supervision of the undersigned pursuant to Section
3.03 of the Servicing Agreement; and

<PAGE>

     2. To the undersigned's knowledge, based on such review, the Servicer has
fulfilled all of its material obligations in all material respects under the
Servicing Agreement throughout the [__________________] months ended December
31, 20[_], except as listed on Annex A hereto.

     Executed as of this _______ day of ________________, 20__.

                              WESTERN MASSACHUSETTS ELECTRIC COMPANY,
                              Servicer

                              By:
                                 ------------------------------------------
                                 Name:
                                 Title:

                              ANNEX A TO EXHIBIT A

                            LIST OF SERVICER DEFAULTS

Nature of Default                Status

                                    EXHIBIT B

                      FORM OF ROUTINE TRUE-UP ADVICE LETTER

                                     [Date]

ADVICE
       ------------------

DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY (THE "DEPARTMENT") OF THE
COMMONWEALTH OF MASSACHUSETTS

SUBJECT:  Periodic RTC Charge True-Up Mechanism Advice Filing

Pursuant to D.T.E. Docket No. 00-40 (the "Financing Order"), Western
Massachusetts Electric Company ("WMECO"), as servicer of the RRBs or any
successor Servicer and on behalf of the trustee for the SPE Debt Securities as
assignee of the special purpose entity (the "SPE"), shall apply for adjustment
to the RTC Charge no later than 15 days prior to each anniversary of the date of
the Financing Order and at such additional intervals as may be provided for in
the Financing Order. Any capitalized terms not defined herein shall have the
meanings ascribed thereto in the Financing Order.

PURPOSE

This filing establishes the revised RTC Charge to be assessed and collected from
all Seller customers and ratepayers taking the delivery, transmission,
distribution, back-up, maintenance, emergency and any other delivery or
<PAGE>
energy service provided by Seller to such customer within the territory in which
Seller serves customers, regardless of that customer's source of electric power,
whether or not energy is purchased from WMECO or any TPS, and whether or not
such distribution system is being operated by WMECO or a successor distribution
company ("Retail Customers"). The RTC Charge is a usage-based component of the
transition charge on each Retail Customer's monthly bill and may include in the
future a component of any exit fee collected pursuant to M.G.L. c. 164, Section
1G(g), until the Total RRB Payment Requirements are discharged in full. In the
Financing Order, the Department authorized WMECO to file Routine True-Up Letters
prior to each anniversary of the date of the Financing Order and at such
additional intervals, if necessary, as provided for in the Financing Order.
WMECO, or a successor Servicer, is authorized to file periodic RTC Charge
adjustments to the extent necessary to ensure the timely recovery of revenues
sufficient to provide for the payment of an amount equal to the sum of the
Periodic RRB Payment Requirements (as defined in the Financing Order) for the
upcoming year, which may include indemnity obligations of the SPE in the RRB
transaction documents for SPE officers and directors, trustee fees, liabilities
of the special purpose trust and liabilities to the underwriters related to the
underwriting of the RRBs. Routine True-Up Letter filings are those in which
WMECO uses the methodology approved by the Department in the Financing Order to
adjust upward or downward the existing RTC Charge.

Using the methodology approved by the Department in the Financing Order, this
filing modifies the variables used in the RTC Charge calculation and provides
the resulting modified RTC Charge. Table I shows the revised assumptions for
each of the variables used in calculating the RTC Charge for Retail Customers.
The assumptions underlying the current RTC Charges were filed in an [Issuance]
Advice Letter, dated __________ __, 200_.

Table I below shows the current assumptions for each of the variables used in
the RTC Charge calculation.

                                     TABLE I
                           INPUT VALUES FOR RTC CHARGE

Period from ____________ to _____________

    Forecasted retail kWh sales for the period:
    Forecasted percent of Retail Customers' billed amounts charged-off:
    Percent of Retail Customers' billed amounts charged-off:
<PAGE>
    Weighted average days sales outstanding:
    (calculated as follows)
         Percent of billed amounts collected in current month:
         Percent of billed amounts collected in second month after billing:
         Percent of billed amounts collected in third month after billing:
         Percent of billed amounts collected in fourth month after billing:
         Percent of billed amounts collected in fifth month after billing:
    Forecasted ongoing interest and transaction expenses (including any already
    accrued but unpaid for the period):
    Current Overcollateralization Subaccount balance:
    Scheduled Overcollateralization Subaccount
    balance at the end of the period:
    Current Capital Subaccount balance:
    Initial Capital Subaccount balance:
    Current RRB outstanding balance:
    Scheduled RRB outstanding balance at the end of the period:
    Current Reserve Subaccount balance:
    The adjusted RTC Charge calculated for Retail  _________cents/kWh
    Customers is as follows:

EFFECTIVE DATE

In accordance with the Financing Order, Routine True-Up Letters for annual RTC
Charge adjustments shall be filed prior to the anniversary of the Financing
Order, or more frequently if necessary, with the resulting changes to be
effective on the first day of the succeeding calendar month, or such date as may
be specified in the Routine True-Up Letter, as long as such effective date is at
least 15 days after the filing of such Routine True-Up Letter. No approval by
the Department is required. Therefore, these RTC Charges shall be effective as
of _______________.

NOTICE

Copies of this filing are being furnished to the parties on the attached service
list. Notice to the public is hereby given by filing and keeping this filing
open for public inspection at WMECO's corporate headquarters.

                                    EXHIBIT C
                      FORM OF MONTHLY SERVICER CERTIFICATE

     Pursuant to Section 4.01(d)(2) of the Transition Property Servicing
Agreement, dated as of May 17, 2001 (the "Agreement"), between Western
Massachusetts Electric Company, as servicer (the "Servicer") and WMECO Funding
LLC, the Servicer does hereby certify as follows:

     Capitalized terms used herein have their respective meanings as set forth
in the Agreement.

For the Monthly Period:_____________
<PAGE>
1.   Billings:

a)   Monthly kWh Consumption:
b)   Applicable RTC Charge:
c)   Total RTC Charge Amount Billed this Month:
d)   Cumulative RTC Charge Amount Billed this
     Remittance Period:

2.   Remittances:

a)   Total Amount Remitted this Month:
b)   Cumulative Amount Remitted this Remittance Period:
c)   "RTC %" (calculated in accordance with Annex II to the Agreement) for
     this Monthly Period:

3.   Draws on Subaccounts:

a)   Reserve Subaccount Draw Amount this Month:
b)   Cumulative Reserve Subaccount Draw Amount this Remittance Period
     (net of funding):
c)   Overcollateralization Subaccount Draw Amount this Month:
d)   Cumulative Overcollateralization Subaccount Draw Amount this Remittance
     Period (net of funding):
e)   Capital Subaccount Draw Amount this Month:
f)   Cumulative Capital Subaccount Draw Amount this Remittance Period
     (net of funding):
4.   Balances in Collection Account and Subaccounts:
a)   Balance in Collection Account
b)   Balance in Overcollateralization Subaccount
c)   Required Overcollateralization Level
d)   Balance in Reserve Subaccount
e)   Balance in Capital Subaccount
f)   Required Capital Level

     Executed as of this _____________ day of ___________.

                              WESTERN MASSACHUSETTS ELECTRIC COMPANY,
                              Servicer

                              By:
                                 ------------------------------------------
                                 Name:
                                 Title:

                                    EXHIBIT D

                     FORM OF QUARTERLY SERVICER CERTIFICATE

     Pursuant to Section 4.01(d)(3) of the Transition Property Servicing
Agreement, dated as of May __, 2001 (the "Agreement"), between Western
Massachusetts Electric Company, as Servicer and WMECO Funding LLC, the Servicer
does hereby certify, for the Current Payment Date, as follows:

     Capitalized terms used herein have their respective meanings as set forth
in the Agreement. References herein to certain sections and subsections are
references to the respective sections of the Agreement.

1. RTC Charge Collections and Aggregate Amounts Available for
<PAGE>
   the Current Payment Date:

   i.   Amount Remitted [Month] [Year]
   ii.  Amount Remitted [Month] [Year]
   iii  Amount Remitted [Month] [Year]
   iv.  Amount Remitted [Month] [Year]
   v.   Amount Remitted [Month] [Year]
   vi.  Amount Remitted [Month] [Year]
   vii  Amount Remitted [Month] [Year]
   viii Amount Remitted [Month] [Year]
   ix.  Total Amount Remitted for this Period (sum of i. through viii. above):
   x.   Net Earnings on Collection Account:
   xi.  Expenses Paid to Date:
   xii. General Subaccount Balance (sum of ix. and x. above minus xi.):
   xiii.Reserve Subaccount Balance
   xiv. Overcollateralization Subaccount Balance
   xv.  Capital Subaccount Balance
   xvi. Collection Account Balance (sum of xii. through xv. above):

2. Outstanding Principal Balance as of Prior Payment
   Date by Tranche:

   i.     Class A-1 Principal Balance Outstanding Note/Certificate:
   ii.    Total Note/Certificate Principal Balance:

3. Required Funding/Payments as of Current Payment Date

   a)  Projected Principal Balances and Payments

                               Projected    Quarterly
                               Principal    Principal
                                Balance        Due

       i.  Class A-1
           Note/Certificate
       ii. Total Projected
           Principal Amount:

   b)  Required Interest Payments

                               Note/Cert     Days in    Interest
                               Interest    Applicable     Due
                                 Rate        Period

       i.  Class A-1
           Note/Certificate
       ii. Total Required
           Interest Amount:

   c)  Projected Subaccount Payments and Levels

                               Subaccount    Projected   Funding
                                               Level     Required
<PAGE>
      i.  Capital
          Subaccount:
      ii. Overcollateraliza-
          tion Subaccount:
      ii  Total Subaccount
      i.  Payments and
          Levels:

4. Allocation of Remittances as of Current Payment Date Pursuant
   to Section 8.02(d) of Note Indenture:

   a) Quarterly Expenses

      Net Expense Amount (Payable on Current Payment Date)

      i.  Note, Delaware and Certificate Trustee
          Fees and Expenses:
      ii. Quarterly Servicing Fee:

      iii.Quarterly Administration Fee:

      iv. Operating Expenses (subject to $100,000 cap):
      v.  Total Expenses:

   b) Quarterly Interest

                                     Per $1000 of     Aggregate
                                       Original       Principal
                                                       Amount

      i.  Class A-1
          Note/Certificate
      ii. Total Quarterly
          Interest:

   c)  Quarterly Principal

                                     Per $1000 of     Aggregate
                                       Original       Principal
                                                       Amount

      i.  Class A-1
          Note/Certificate
      ii. Total Quarterly
          Principal:

   d) Other Payments

      i.  Operating Expenses (in
          excess of $100,000):
      ii. Funding of Capital
          Subaccount (to required
          amount):
      iii.Funding of
          Overcollateralization
          Subaccount (to required level):
<PAGE>
      iv. Deposits to Reserve Subaccount:
      v.  Interest earnings on
          Capital Account Released
          to Note Issuer:

   e) Aggregate Payments Pursuant
      to Section 8.02(d)(i) of Note Indenture

      i.  To Note Trustee,
          Certificate Trustee and
          Delaware Trustee:

      ii  To Agencies and
          Certificate Issuer:

5. Outstanding Principal Balance and Collection Account Balance as of Current
   Payment Date (after giving effect to payments to be made on such
   distribution date):

   a)  Principal Balance Outstanding:

      i.  Class A-1 Principal Balance Outstanding
          Note/Certificate:
      ii. Total Note/Certificate Principal
          Balance:

   b)  Collection Account Balances Outstanding:

      i.  Capital Subaccount:
      ii. Overcollateralization Subaccount:
      iii.Reserve Subaccount:
      iv. Total Subaccount Amount:

6. Subaccount Draws as of Current Payment Date (if applicable, pursuant to
   Section 8.02(e) of Note Indenture):

      i.  Capital Subaccount:
      ii. Overcollateralization Subaccount:
      iii.Reserve Subaccount:
      iv. Total Subaccount Draws:

7. Shortfalls in Interest and Principal Payments as of Current Payment Date
   (if applicable):

   a)  Quarterly Interest Shortfall

      i.  Class A-1 Note/Certificate
      ii. Total Quarterly Interest Shortfall:

   b)  Quarterly Principal Shortfall
<PAGE>
      i.  Class A-1 Note/Certificate
      ii. Total Quarterly Principal Shortfall:

8. Shortfalls in Required Subaccount Levels as of Current Distribution Date:

      i.  Capital Subaccount
      ii. Overcollateralization Subaccount:
      iii.Total Subaccount Shortfalls:

     IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Quarterly Servicer Certificate under seal this _______ day of _____________,
20__.

                              WESTERN MASSACHUSETTS ELECTRIC COMPANY,
                              Servicer

                              By:
                                  ------------------------------------------
                                  Name:
                                  Title:

                                SCHEDULE 4.01(a)

                         Expected Amortization Schedule

<TABLE>
<CAPTION>
Payment    Outstanding      Payment      Outstanding
  Date      Principal         Date        Principal
              Amount                        Amount
<S>       <C>             <C>           <C>
Closing   155,000,000      9/1/2007     89,888,002
12/1/2001 152,317,336     12/1/2007     86,731,394
3/1/2002  149,568,944      3/1/2008     83,261,952
6/1/2002  147,184,844      6/1/2008     79,875,484
9/1/2002  144,980,067      9/1/2008     76,552,625
12/1/2002 142,742,170     12/1/2008     73,176,352
3/1/2003  140,219,779      3/1/2009     69,496,635
6/1/2003  137,769,289      6/1/2009     65,893,553
9/1/2003  135,383,097      9/1/2009     62,343,137
12/1/2003 132,959,538     12/1/2009     58,735,305
3/1/2004  130,247,945      3/1/2010     54,814,526
6/1/2004  127,628,222      6/1/2010     50,970,210
9/1/2004  125,078,425      9/1/2010     47,178,396
12/1/2004 122,488,629     12/1/2010     43,325,013
3/1/2005  119,611,970      3/1/2011     39,154,564
6/1/2005  116,822,982      6/1/2011     35,056,795
9/1/2005  114,098,464      9/1/2011     31,007,335
12/1/2005 111,330,951     12/1/2011     26,891,856
3/1/2006  108,267,623      3/1/2012     22,451,624
6/1/2006  105,293,016      6/1/2012     18,078,675
9/1/2006  102,383,760      9/1/2012     13,750,638
</TABLE>
<PAGE>
<TABLE>
<S>        <C>            <C>            <C>
12/1/2006  99,428,304     12/1/2012      9,351,812
3/1/2007   96,167,724      3/1/2013      4,636,241
6/1/2007   92,994,977      6/1/2013              0
</TABLE>

                                     ANNEX I

                              SERVICING PROCEDURES

     The Servicer agrees to comply with the following servicing procedures:

     SECTION 1.  DEFINITIONS

     (a)  Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in the Agreement.

     (b)  Whenever used in this Annex I, the following words and phrases
shall have the following meanings:

     "Billed RTC Charges" means the dollar amounts billed to Customers or the
Applicable TPS in respect of the RTC Charge, whether billed to Customers or
the Applicable TPS by the Servicer or to Customers by a TPS pursuant to a TPS
Service Agreement.

     "Servicer Policies and Practices" means, with respect to the Servicer's
duties under this Annex I, the policies and practices of the Servicer applicable
to such duties that the Servicer follows with respect to comparable assets that
it services for itself or others, as in effect from time to time and in
accordance with DTE Regulations. The Servicer shall provide ten days' prior
written notice to the Rating Agencies of any amendment to the Servicer Policies
and Practices that would adversely affect in any material respect the
Noteholders or Certificateholders.

     SECTION 2.  DATA ACQUISITION

     (a)  Installation and Maintenance of Meters.  Except to the extent that
a TPS is responsible for such services pursuant to a TPS Service Agreement,
the Servicer shall cause to be installed, replaced and maintained meters in
accordance with the Servicer Policies and Practices.

     (b)  Meter Reading.  In accordance with the Servicer Policies and
Practices, the Servicer shall obtain usage measurements for each Customer;
provided, however, that the Servicer may determine any Customer's usage on
the basis of estimates in accordance with applicable DTE Regulations; and,
provided, further, that the Servicer may obtain usage measurements from the
Applicable TPS for Customers receiving meter reading services from such
<PAGE>
TPS if the applicable TPS Service Agreement so provides.

     (c)  Cost of Metering.  The Note Issuer shall not be obligated to pay
any costs associated with the metering duties set forth in this Section 2,
including the costs of installing, replacing and maintaining meters, nor
shall the Note Issuer be entitled to any credit against the Servicing Fee for
any cost savings realized by the Servicer or any TPS as a result of new
metering and/or billing technologies.

     SECTION 3.  USAGE AND BILL CALCULATION

     The Servicer shall obtain a calculation of each Customer's usage (which
may be based on data obtained from such Customer's meter read or on usage
estimates determined in accordance with applicable DTE Regulations) in
accordance with the Servicer Policies and Practices and shall determine
therefrom Billed RTC Charges; provided, however, that in the case of
Customers served by a TPS pursuant to a TPS Service Agreement, the Servicer
may obtain usage measurements from the Applicable TPS for Customers receiving
meter reading services from such TPS if the applicable TPS Service Agreement
so provides and shall determine therefrom Billed RTC Charges.

     SECTION 4.  BILLING

     (a)  The Servicer shall implement the RTC Charge as of the Closing Date
and shall thereafter bill each Customer or the Applicable TPS for each
Customer's Billed RTC Charges in accordance with the provisions of this
Section 4.

     (b)  Frequency of Bills; Billing Practices.  In accordance with the
Servicer Policies and Practices, the Servicer shall generate and issue a Bill
to each Customer, or, in the case of a Customer who is being billed by a TPS,
to the Applicable TPS, with respect to such Customer's Billed RTC Charges.
In the event that the Servicer makes any material modification to the
Servicer Policies and Practices, it shall notify the Note Issuer, the Note
Trustee, the Certificate Trustee and the Rating Agencies as soon as
practicable, and in no event later than 60 Servicer Business Days after such
modification goes into effect; provided, however, that the Servicer may not
make any modification that will materially adversely affect the
Certificateholders.

     (c)  Format.

          (i)  Each Bill to a Customer shall contain a Transition Charge that
shall include the RTC Charge owed by such Customer for the applicable
<PAGE>
billing period.

          (ii) Each Bill in which the Transition Charge is listed as a line
item shall contain a statement (as a footnote) to the effect that all or a
portion of the Transition Charge is owned by the Note Issuer and not the
Seller.

          (iii)The Servicer shall conform to such requirements in respect of the
format, structure and text of Bills delivered to Customers and TPSs as
applicable DTE Regulations shall from time to time prescribe. To the extent that
Bill format, structure and text are not prescribed by applicable law or by
applicable DTE Regulations, the Servicer shall, subject to clauses (i) and (ii)
of this subsection (c), determine the format, structure and text of all Bills in
accordance with its reasonable business judgment, the Servicer Policies and
Practices and historical practice.

     (d)  Delivery.  Except as provided in the next sentence, the Servicer
shall deliver all Bills to Customers (i) by United States mail in such class
or classes as are consistent with the Servicer Policies and Practices or (ii)
by any other means, whether electronic or otherwise, that the Servicer may
from time to time use in accordance with the Servicer Policies and Practices.
In the case of Customers that have elected to be billed by a TPS, the
Servicer shall deliver all Bills to the Applicable TPSs by such means as are
mutually agreed upon by the Servicer and the Applicable TPS in the TPS
Service Agreement and which are consistent with DTE Regulations.  The
Servicer or a TPS, as applicable, shall pay from its own funds all costs of
issuance and delivery of all Bills that it renders, including printing and
postage costs as the same may increase or decrease from time to time.

     SECTION 5.  CUSTOMER SERVICE FUNCTIONS

     The Servicer or a TPS to the extent provided in the applicable TPS Service
Agreement shall handle all Customer inquiries and other Customer service matters
according to the Servicer Policies and Practices.

     SECTION 6.  COLLECTIONS; PAYMENT PROCESSING; REMITTANCE

     (a)  Collection Efforts, Policies, Procedures.

          (i)  The Servicer shall collect Billed RTC Charges from Customers
and TPSs as and when the same become due in accordance with such collection
procedures as it follows with respect to comparable assets that it services
<PAGE>
for itself or others, including the following:

          (A)  The Servicer shall prepare and deliver overdue notices to
Customers and TPSs in accordance with applicable DTE Regulations and the
Servicer Policies and Practices.

          (B)  The Servicer shall deliver past-due and shut-off notices in
accordance with applicable DTE Regulations and the Servicer Policies and
Practices.

          (C)  The Servicer shall adhere to and carry out disconnection
policies and termination of billing by a TPS pursuant to a TPS Service
Agreement in accordance with Massachusetts General Laws Chapter 164,   116,
124-124I or successor provisions, applicable DTE Regulations and the Servicer
Policies and Practices.

          (D)  The Servicer may employ the assistance of collection agents in
accordance with applicable DTE Regulations and the Servicer Policies and
Practices.

          (E)  The Servicer shall apply Customer and TPS deposits to the
payment of delinquent accounts in accordance with applicable DTE Regulations
and the Servicer Polices and Practices.

          (ii) The Servicer shall not waive any late payment charge or any
other fee or charge relating to delinquent payments, if any, or waive, vary
or modify any terms of payment of any amounts payable by a Customer, in each
case unless such waiver or action: (A) would be in accordance with the
Servicer Policies and Practices, (B) would not materially adversely affect
the Certificateholders and (C) would comply in all material respects with
applicable law.

          (iii)     The Servicer shall accept payment from Customers in
respect of Billed RTC Charges in such forms and methods and at such times and
places in accordance with the Servicer Policies and Practices.  The Servicer
shall accept payment from TPSs in respect of Billed RTC Charges in such forms
and methods and at such times and places as the Servicer and each TPS shall
mutually agree in accordance with the applicable TPS Service Agreement and
applicable DTE Regulations.

     (b)  Payment Processing, Allocation, Priority of Payments.  The Servicer
shall post all payments received to Customer or TPS accounts as promptly as
practicable, and, in any event, substantially all payments shall be posted no
<PAGE>
later than one Servicer Business Day after receipt.

     (c)  Investment of RTC Charge Payments Received.  Prior to remittance on
the applicable Remittance Date, the Servicer may invest RTC Charge Payments
at its own risk and for its own benefit, and such investments and funds shall
not be required to be segregated from the other investments and funds of the
Servicer.  The Servicer shall be entitled to retain as additional
compensation any interest earnings on RTC Charge Payments invested by it.

     (d)  Calculation of RTC Charge Payments; Remittances.  In accordance
with Section 4.03(a) of the Agreement, the Servicer shall remit to the Note
Trustee for deposit in the Collection Account an amount equal to the RTC
Charge Payments calculated in accordance with the methodology described in
Annex II attached to the Agreement.

     (e)  Remittances.

          (i)  The Note Issuer shall cause to be established the Collection
Account in the name of the Note Trustee in accordance with Section 8.02 of
the Note Indenture.

          (ii) The Servicer shall make or cause to be made Remittances to the
Collection Account in accordance with Section 4.03 of the Agreement.

          (iii)Any change of account or change of institution affecting the
Collection Account shall not take effect until the Note Issuer has provided at
least fifteen (15) Servicer Business Days written notice thereof to the
Servicer.

     SECTION 7.  TPSs

     In the event a TPS performs services pursuant to a TPS Service Agreement,
the Servicer shall comply with the procedures set forth in Schedule A to this
Annex I.

                                   SCHEDULE A

                                   TO ANNEX I

               Additional Servicing Procedures Applicable to TPSs

1.   Establishing TPS Relationship

     In addition to any actions required by the DTE or by applicable law, for
each TPS that is responsible for collecting Billed RTC Charges, the Servicer
shall take the following steps:
<PAGE>

     (a)  Maintain adequate records of the payment arrangement applicable to
     such TPS;

     (b)  Maintain copies of all Customer requests to convert to billing by a
     TPS;

     (c)  Verify with the DTE that each TPS is licensed to supply electricity
     in Massachusetts;

     (d)  Obtain information from the TPS including, but not limited to:
     name, contact, address, telephone facsimile transmission number and
     internet address;

     (e)  Maintain and update records of Customers to permit prompt reversion
     to dual-billing;

     (f)  Maintain estimates of one month's maximum RTC Charge Payments for
     each TPS required to post a bond, letter of credit or cash deposit
     pursuant to the applicable TPS Service Agreement; and

     (g)  Comply with credit conditions set out in the Financing Order and
     applicable TPS Service Agreement.

2.   Monitoring TPS Obligations

     (a)  The Servicer shall require each TPS to pay all undisputed and all
     disputed Billed RTC Charges or make a financial arrangement for such
     payment according to the applicable TPS Service Agreement; and

     (b)  For all TPSs subject to any remittance option where such TPS is
     liable for all amounts billed in respect of Customers served thereby
     regardless of the amounts received therefrom, the Servicer shall monitor
     payment compliance and take all actions permitted by the DTE and the
     Financing Order in the event of a default in payment.

3.   Enforcing TPS Obligations

     The Servicer shall promptly take all actions specified by the Financing
Order with respect to amounts not remitted to the Servicer in accordance with
the payment terms specified by the Financing Order, in addition to any other
remedies available at law.

                                    ANNEX II
                             REMITTANCE METHODOLOGYTellabs Advantage Program - NEW

TELLABS

ADVANTAGE PROGRAM

Amended and Restated Effective January 1, 1997

Except as Specifically Provided Otherwise

 

 

 

TABLE OF CONTENTS

	 	Page

	ARTICLE 1	GENERAL	1

	   1.1	Purpose	1
	   1.2	Source of Funds	1
	   1.3	Scope of Plan Coverage	1
	   1.4	Definititions	1
		         Account	1
		         Accounts	1
		         Active Participant	1
		         Actual Deferral Percentage	2
		         Administrative Committee	2
		         Affiliate	2
		         After-Tax Contribution	2
		         Aggregate Limit	2
		         Alternative Payee	2
		         Annual Addition	2
		         Annuity Starting Date	2
		         Basic before-Tax Contribution	2
		         Board of Directors	2
		         Business Day	3
		         Code	3
		         Coherent Accounts	3
		         Coherent Acquisition Date	3
		         Coherent Participant	3
		         Coherent Plan	3
		         Committees	3
		         Company	3
		         Compensation	4
		         Contribution Percentage	4
		         Defined Contribition Dollar Limitation	4
		         Dependent	4
		         Designated Before-Tax Contribution	4
		         Determination Period	4
		         Disability Plan	4
		         Election Period	4
		         Eligible Employee	4
		         Eligible Individual	5
		         Eligible Limited Participant	5
		         Eligible Participant	5
		         Eligible Retiree	5
		         Eligible Retirement Plan	5
		         Eligible Rollover Distribution	5
		         Eligibility Period	5
		         Employer	6
		         Entry Date	6
		         ERISA	6
		         Employer Excess Contribution	6
		         Excess Forfeiture Suspense Account	6
		         Excess Tentative Employer Contribution	6
		         Five-Percent Owner	6
		         Funds	6
		         Health Plan	6
		         Highly Compensated Employee	6
		         Hours of Service	7
		         Individual Beneficiary	7
		         Intern Employee	8
		         Investment Committee	8
		         Investment Manager	8
		         Key Employee	8
		         Leased Employee	8
		         Limited Term Employee	8
		         Limitation Year	8
		         Matching Contribution	8
		         Maximum Annual Addition	8
		         Medical Benefits	8
		         Medical Benefits Account	8
		         Member of a Collective Bargaining Unit	9
		         Multiple Use	9
		         Non-Highly Compensated Employee	9
		         Normal Retirement Date	9
		         One-Percent Owner	9
		         Participant	9
		         Plan	9
		         Permissive Aggregation Group	9
		         Plan Year	9
		         Pre-Retirement Survivor Annuity	9
		         Present Value	9
		         Prior Plan	10
		         Profit Sharing Contribution	10
		         Provisional Annual Addition	10
		         Qualified Domestic Relations Order	10
		         Qualified Joint and Survivor Annuity	10
		         Qualified Military Service	10
		         Required Aggregation Group	10
		         Required Beginning Date	10
		         Retirement Contribution	11
		         Retirement Program	11
		         Rollover Contribution	11
		         Salix Accounts	11
		         Salix Acquisition Date	11
		         Salix Participant	11
		         Salix Plan	11
		         Savings Program	12
		         Service	12
		         Simplified Employee Pension Plan	13
		         Supplemental Before-Tax Contribution	13
		         Tellabs Stock Fund	13
		         Tentative Employer Contribution	13
		         Top-Heavy	13
		         Top-Heavy Determination Date	13
		         Top-Heavy Ratio	14
		         Trust	14
		         Trustee	14
		         Unit	14
		         Valuation Date	14
	   1.5	EGTRRA Compliance	14
	 	 	 
	ARTICLE 2	ELIGIBILITY AND PARTICIPATION	15

	   2.1	Eligibility Requirements	15
	   2.2	Continued Participaton; Reemployment	16
	   2.3	Transfers and Changes in Status	16
	   2.4	Leaves of Absence	17
	   2.5	Qualifed Military Service	17
	 	 	 
	ARTICLE 3	CONTRIBUTIONS	18
	   3.1	Employer Contributions	18
	   3.2	Retirement Contribution Under the Retirement Program	18
	   3.3	Profit Sharing Contribution Under the Savings Program	18
	   3.4	Before-Tax Contributions Under the Savings Program	19
	   3.5	Limitations On Before-Tax Contributions Under the Savings Program	19
	   3.6	Matching Contribution Under the Savings Program	22
	   3.7	Limitations on Matching Contributions Under the Savings Program	23
	   3.8	Multiple Use	25
	 	 	 
	ARTICLE 4	CONTRIBUTIONS BY EMPLOYEE	27
	   4.1	No After-Tax Contributions	27
	   4.2	Rollover Contribution	27
	 	 	 
	ARTICLE 5	ACCOUNTING PROVISIONS AND ALLOCATIONS	28
	   5.1	Participant’s Accounts	28
	   5.2	Common Fund	28
	   5.3	Unit Values	31
	   5.4	Eligibility to Share in Employer Contributions and Forfeitures	31
	   5.5	Allocation of Before-Tax Contributions	32
	   5.6	Allocation of Matching Contributions	32
	   5.7	Allocation of After-Tax Contributions	32
	   5.8	Allocation of Retirement Contribution and Forfeitures	32
	   5.9	Allocation of Profit Sharing Contribution and Forfeitures	32
	   5.10	Crediting Accounts	32
	   5.11	Provisional Annual Addition	33
	   5.12	Limitation on Annual Additions	33
	 	 	 
	ARTICLE 6	AMOUNT OF PAYMENTS TO PARTICIPANTS	36
	   6.1	General Rule	36
	   6.2	Normal Retirement	36
	   6.3	Death	36
	   6.4	Disability	36
	   6.5	Vesting	36
	   6.6	Resignation or Dismissal	36
	   6.7	Treatment of Forfeitures	37
	 	 	 
	ARTICLE 7	DISTRIBUTIONS	38
	   7.1	Commencement and Form of Distributions	38
	   7.2	Qualified Joint and Survivor Annuity - Retirement Account, Salix Accounts and Coherent Accounts	41
	   7.3	Pre-Retirement Survivor Annuity - Retirement Account, Salix Accounts and Coherent Accounts	43
	   7.4	Distributions to Beneficiaries	44
	   7.5	Beneficiary Designations	45
	   7.6	Installment or Deferred Distributions	46
	   7.7	Form of Elections and Applications for Benefits	46
	   7.8	Unclaimed Distributions	46
	   7.9	Distributions in Kind	47
	   7.10	Distributions of Participant's After-Tax Account, Rollover Account, Salix Rollover Account and Coherent Rollover Accounts Prior to Termination of Employment	47
	   7.11	Loans	48
	   7.12	Withdrawals Prior to Termination of Employment and After Age 59-1/2	50
	   7.13	Pre-59-1/2 Coherent Account Withdrawals; Hardship Withdrawals	51
	   7.14	Eligible Rollover Distributions	53
	   7.15	Facility of Payment	54
	   7.16	Claims Procedure	55
	 	 	 
	ARTICLE 8	TOP-HEAVY PLAN REQUIREMENTS	57
	   8.1	Top-Heavy Definitions	57
	   8.2	Top-Heavy Plan Requirements	60
	 	 	 
	ARTICLE 9	POWERS AND DUTIES OF COMMITTEES	62
	   9.1	Appointment of Committees	62
	   9.2	Powers and Duties of Administrative Committee	62
	   9.3	Powers and Duties of the Investment Committee	63
	   9.4	Committee Procedures	64
	   9.5	Consultation with Advisors	65
	   9.6	Committee Members as Participants	65
	   9.7	Records and Reports	65
	   9.8	Investment Policy	65
	   9.9	Designation of Other Fiduciaries	66
	   9.10	Obligations of Each Committee	66
	   9.11	Indemnification of Each Committee	67
	 	 	 
	ARTICLE 10	TRUSTEE AND TRUST FUND	68
	   10.1	Trust Fund	68
	   10.2	Payments to Trust Fund and Expenses	68
	   10.3	Trustee’s Responsibilities	68
	   10.4	Reversion to the Employer	68
	 	 	 
	ARTICLE 11	AMENDMENT OR TERMINATION	69
	   11.1	Amendment	69
	   11.2	Termination	69
	   11.3	Form of Amendment, Discontinuance of Employer Contributions, and Termination	69
	   11.4	Limitations on Amendments	69
	   11.5	Level of Benefits Upon Merger	70
	   11.6	Vesting Upon Termination or Discontinuance of Employer Contributions; Liquidation of Trust	70
	 	 	 
	ARTICLE 12	MISCELLANEOUS	72
	   12.1	No Guarantee of Employment, Etc.	72
	   12.2	Nonalienation	72
	   12.3	Qualified Domestic Relations Order	72
	   12.4	Controlling Law	72
	   12.5	Severability	73
	   12.6	Notification of Addresses	73
	   12.7	Gender and Number	73
	 	 	 
	ARTICLE 13	ADOPTION BY AFFILIATES	74
	   13.1	Adoption of Plan	74
	   13.2	The Company as Agent for Employer	74
	   13.3	Termination of Amendments	74
	   13.4	Termination	74
	   13.5	Date to Be Furnished by Employers	74
	   13.6	Joint Employers	74
	   13.7	Expenses	75
	   13.8	Withdrawal	75
	   13.9	Prior Plans	75
	 	 	 
	ARTICLE 14	RETIREE MEDICAL BENEFITS	76
	   14.1	Medical Benefits Account	76
	   14.2	Retiree Medical Benefits Definitions	76
	   14.3	Separate Account	76
	   14.4	Impossibility of Diversion Prior to Satisfaction of All Liabilities	77
	   14.5	Reversion upon Satisfaction of All Liabilities	77
	   14.6	Medical Benefits	77
	   14.7	Coordination with Health Plan	77
	   14.8	Employer Contributions	77
	   14.9	Reservation of Right to Terminate Medical Benefits	77

ARTICLE 1

General

   SECTION 1.1      Purpose.    It is the intention of the Employer to continue to provide for the administration of the Tellabs Retirement Plan, a money purchase pension plan, together with a retiree medical benefits account under the provisions of Code Section 401(h) and the Tellabs Profit Sharing and Savings Plan, a profit sharing and Code Section 401(k) savings program as parts of this Tellabs Advantage Program (the “Plan”) and a Trust Fund in conjunction therewith for the benefit of eligible employees of an Employer, in accordance with the provisions of Code Sections 401 and 501 and in accordance with other provisions of law relating to money purchase pension plans and profit sharing plans containing a Code Section 401(k) arrangement.  Except as otherwise provided in this Plan or the Trust, upon the transfer by an Employer of any funds to the Trust Fund in accordance with the provisions of this Plan, all interest of the Employer therein shall cease and terminate, and no part of the Trust Fund shall be used for, or diverted to, purposes other than the exclusive benefit of Participants and their beneficiaries.

   SECTION 1.2      Source of Funds.    The Trust Fund shall be created, funded and maintained by contributions of an Employer, by contributions of the Participants, and by such net earnings as are obtained from the investment of the funds of the Trust Fund.

   SECTION 1.3      Scope of Plan Coverage.    The provisions of the Plan as herein restated shall be effective as of January 1, 1997, except for certain provisions the effective dates of which are set forth therein.  However, the rights and benefits of any Participant whose employment with an Employer prior to the Effective Date shall be determined in accordance with the corresponding provisions of the Prior Plan documents as in effect upon the Participant’s termination of employment and, to the extent necessary, the provisions of the Prior Plan documents are hereby specifically incorporated by reference into this Plan.  Except as may be required by ERISA or the Code, the rights of any person whose status as an employee of the Employer and all Affiliates has terminated shall be determined pursuant to the Plan as in effect on the date such employment terminated, unless a subsequently adopted provision of the Plan is made specifically applicable to such person.

   SECTION 1.4      Definitions.    Certain terms are capitalized and have the respective meanings set forth in the Plan.

“Account” means each of the individual accounts established pursuant to Article 5 (Accounting Provisions and Allocations) representing a Participant’s allocable share of the Trust Fund.

“Accounts” means the collective individual accounts established pursuant to Article 5 (Accounting Provisions and Allocations).

“Active Participant” means a Participant who, on a given date, is employed by an Employer as an Eligible Employee.

“Actual Deferral Percentage” and “Actual Deferral Percentage Tests” are described in Section 3.5 (Limitations on Before Tax Contributions Under the Savings Program).

“Administrative Committee” is the Committee so appointed in accordance with Article 9 (Powers and Duties of Committees) as the administrator and named fiduciary of the Plan.

“Affiliate” means any corporation or enterprise, other than the Company, which, as of a given date, is a member of the same controlled group of corporations, the same group of trades or businesses under common control or the same affiliated service group, determined in accordance with Code Sections 414(b), (c), (m) or (o), as is the Company.  For purposes of determining the amount of a Participant’s Annual Addition or Total Compensation and applying the limitations of Code Section 415 set forth in Article 5 (Accounting Provisions and Allocations), “Affiliate” shall include any corporation or enterprise, other than the Company, which, as of a given date, is a member of the same controlled group of corporations or the same group of trades or businesses under common control, determined in accordance with Code Sections 414(b) or (c) as modified by Code Section 415(h), as is the Company.

“After-Tax Contribution” means after-tax employee contributions made by Participants under the Plan prior to January 1, 1994.

“Aggregate Limit” is described in Section 3.8 (Multiple Use).

“Alternate Payee” means the person, other than the Participant, designated by a court to receive benefits under the Plan in a Qualified Domestic Relations Order as further described in Section 12.3 (Qualified Domestic Relations Order).

“Annual Addition” means for any Limitation Year, the sum of (a) all Before-Tax Contributions, Matching Contributions, Profit Sharing Contributions (including forfeitures allocated as a part thereof), Retirement Contributions (including forfeitures allocated as a part thereof) and, for Limitation Years beginning prior to January 1, 1994, After-Tax Contributions, allocated to the Accounts of a Participant under this Plan; (b) any employer contributions, forfeitures and employee after-tax contributions allocated to such Participant under this or any other defined contribution plan maintained by the Employer or an Affiliate; and (c) amounts allocated to an individual medical account as defined in Code Section 415(l)(2) and amounts attributable to post-retirement medical benefits allocated to the separate account of a “key employee,” as described in Code Section 419A(d)(3) maintained by the Employer or an Affiliate.

“Annuity Starting Date” means the first day of the first period for which a benefit is payable in the form of an annuity or any other form.

“Basic Before-Tax Contribution” means, for any period, with respect to a Participant, the portion of the Before-Tax Contribution made on his behalf by an Employer during such period equal to the lesser of 3% of the Participant’s Considered Compensation paid during such period or the Participant’s Before-Tax Contribution for such period.  For any period, “Basic Before-Tax Contribution” means, with respect to the Employer, the sum of such contributions.

“Before-Tax Contribution” means, with respect to a Participant, the contribution by an Employer on his behalf described in Section 3.4 (Before-Tax Contribution Under the Savings Program) and, with respect to the Employer, means the sum of such contributions.

“Board of Directors” means the Board of Directors of the Company.

“Business Day” means each day on which the Federal Reserve, the New York Stock Exchange and the Trustee are open for business, or if different and to the extent applicable, each day as of which trades are recognized under the rules governing an investment fund of the Plan.

“Code” means the Internal Revenue Code of 1986 and the regulations promulgated thereunder, as from time to time amended.

“Coherent Accounts” means the separate Coherent Before-Tax Account, Coherent Employer Account and Coherent Rollover Account of Coherent Participants described in Section 5.1 (Participant Accounts).

“Coherent Acquisition Date” means the date of the acquisition of Coherent Communications Systems Corporation by Tellabs, Inc.

“Coherent Participant” means employees of Coherent Communications Systems Corporation or any subsidiary thereof who were participants in the Coherent Plan on December 31, 1998 and (a) became Participants in the Plan on January 1, 1999, or (b) whose Coherent Accounts were subsequently transferred from the Coherent Plan to the Trust Fund as a result of the merger of the Coherent Plan into the Plan effective April 1, 1999.

“Coherent Plan” means the Coherent Communications Systems Corporation Savings Incentive Plan as in effect on the Coherent Acquisition Date, and as amended from time to time thereafter up to and including its merger into the Plan effective April 1, 1999.

“Committees” means the Administrative Committee and the Investment Committee appointed pursuant to Article 9 (Powers and Duties of the Committees).

“Company” means Tellabs Operations, Inc., a Delaware corporation, a predecessor of such corporation, or any successor to it in ownership of all or substantially all of its assets.

“Compensation” means a Participant’s “Considered Compensation” or “Total Compensation,” as follows:

	“Considered Compensation” is the Participant’s Total Compensation for the Plan Year paid while he was an Active Participant but excluding reimbursements or other expense allowances, fringe benefits (cash and noncash), moving or education expenses, income from participation in any stock purchase plan, income from stock awards, income from the exercise of stock appreciation rights, dividends on restricted stock or other extraordinary remuneration, provided, however, beginning with the 1998 Plan Year Considered Compensation shall include amounts excluded from the Participant’s income for the period under Code Sections 125, 132(f)(4), 402(g)(3) or 457 including before-tax contributions and elective contributions to a plan of the Employer established under Code Section 125.

	“Total Compensation” for a period is the Participant’s compensation (as described in Treasury Regulation Section 1.415-2(d)(2)) paid during the period for personal services actually rendered in the course of employment with the Employer and all Affiliates, excluding contributions made by an Employer (other than the Before-Tax Contribution) to a plan to the extent that such are not included in the gross income of the Participant in the year made and other amounts which receive special tax treatment (as described in Treasury Regulation Section 1.415-2(d)(3)); effective with the 1998 Plan Year, plus amounts excluded from the Participant’s income for the period under Code Sections 125, 132(f)(4), 402(g)(3) or 457; provided, however, that the Total Compensation for any Participant taken into account for determining all benefits provided under the Plan for any Plan Year shall not include any amount in excess of $160,000 (for any Plan Year beginning after December 31, 2001, shall not include any amount in excess of $200,000) as adjusted by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with Code Section 401(a)(17)(B).  The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year.  If a determination period consists of fewer than 12 months, the annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12.

“Contribution Percentage” and “Contribution Percentage Tests” are described in Section 3.7 (Limitations on Matching Contributions Under the Savings Program).

“Defined Contribution Dollar Limitation” effective for Limitation Years beginning after December 31, 1994, means an amount equal to $30,000 ($40,000 beginning with the 2002 Limitation Year), as adjusted by the Secretary of the Treasury pursuant to Code Section 415(d), prorated for any Limitation Year of less than 12 months; provided that for purposes of Code Section 511(a)(ii), such amount shall be reduced by the amounts allocated to any medical accounts described in subsection (c) of the definition of “Annual Addition.” 

“Dependent” means an individual entitled to medical benefits as a dependent of an Eligible Retiree, as described in Section 14.2 (Retiree Medical Benefits Definitions).

“Designated Before-Tax Contributions” means the contributions referred to in Section 3.7 (Limitations on Matching Contributions Under the Savings Program).

“Determination Period” means the Plan Year containing the Top-Heavy Determination Date and the 4 preceding Plan Years, as further referenced in Article 8 (Top-Heavy Plan Requirements).

“Disability Plan” with respect to any Participant means the long term disability plan maintained by the Employer and covering such Participant.

“Election Period” means the period defined in Section 7.2 (Qualified Joint and Survivor Annuity — Retirement Account, Salix Accounts and Coherent Accounts) relating to the period during which a Participant may elect to have the Participant’s Retirement Account distributed in a form other than a Qualified Joint and Survivor Annuity.

“Eligible Employee” means any employee of the Employer but excluding any employee who is (1) a Member of a Collective Bargaining Unit; (2) an individual providing services to the Employer in the capacity of, or who is or was designated by the Employer as, a Leased Employee, an independent contractor, Intern Employee or a Limited Term Employee; or (3) are non-resident aliens who receive no earned income from the Employer which constitutes income from services within the United States.  Notwithstanding the foregoing, any employee of Salix Technologies, Inc. or any subsidiary thereof who was eligible to participate in the Salix Plan as of May 19, 2000 will be considered an Eligible Employee as of May 19, 2000. Notwithstanding the foregoing, any individual employed by Coherent Communications Systems Corporation or any subsidiary thereof as of the Coherent Acquisition Date, or thereafter until December 31, 1998, shall not become an Eligible Employee until January 1, 1999.

“Eligible Individual” means an individual entitled to Medical Benefits, as described in Section 14.2 (Retiree Medical Benefits Definitions).

“Eligible Limited Participant” means an individual eligible to make Before-Tax Contributions under the Savings Program, but not entitled to receive the matching contribution portions of the Profit Sharing Contribution and the Retirement Contribution provisions of the Plan, as further described in subsection 2.1(d).

“Eligible Participant” means an Active Participant who has completed his Eligibility Period making him eligible to share in the Matching Contribution bi-weekly, and share in the Profit Sharing Contribution and forfeitures and Retirement Contribution and forfeitures for a given quarter of the Plan Year as of the last day of the quarter for which such contribution or forfeitures are being allocated if he is then employed by the Employer as an Eligible Employee and as further defined in Section 5.4 (Eligibility to Share in Employer Contributions and Forfeitures).

“Eligible Retiree” means an individual entitled to receive retiree medical benefits under the Health Plan, as described in Section 14.2 (Retiree Medical Benefits Definitions).

“Eligible Retirement Plan” with respect to a Participant, the surviving spouse of a Participant or a former spouse of the Participant who is an Alternate Payee under a Qualified Domestic Relations Order is (a) an individual retirement account described in Code Section 408(a) or individual retirement annuity described in Code Section 408(b), and, with respect to a Participant, is also (b) an annuity plan described in Code Section 403(a) or a qualified trust described in Code Section 401(a).

“Eligible Rollover Distribution” means any rollover distribution of the Accounts distributable to a Participant, the surviving spouse of a Participant or the former spouse of the Participant who is an Alternate Payee under a Qualified Domestic Relations Order; provided, however, (a) the portion of any distribution required to be made under Code Section 401(a)(9), (b) the portion of any distribution that is not includable in the gross income of the recipient (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities), shall not constitute an Eligible Rollover Distribution and (c) the portion of the Account distributed to a Participant as a hardship withdrawal pursuant to subsection 7.13(b) (Pre-59-1/2 Coherent Account Withdrawals; Hardship Withdrawals) shall not constitute an Eligible Rollover Distribution.

“Eligibility Period” is a rolling one-year period used for the purpose of determining when an employee is eligible to share in the Matching Contribution, the Profit Sharing Contribution and forfeitures and the Retirement Contribution and forfeitures.  An employee’s first Eligibility Period shall commence on the date on which he first completes an Hour of Service.  Subsequent Eligibility Periods shall commence on the first day of each month following such date. Notwithstanding the foregoing, the initial Eligibility Period of a former employee who is reemployed after incurring a Period of Severance of one year or more and who is not eligible for immediate participation pursuant to Section 2.1(c) (Eligibility Requirements) shall commence on the date on which he first performs duties for an Employer or an Affiliate after such Period of Severance and subsequent Eligibility Periods shall commence on the Entry Date following such date.

“Employer” means the Company and any Affiliate which adopts this Plan pursuant to Article 13 (Adoption by Affiliates).

“Entry Date” means the first day of each Plan Year, the first day of the fourth month of each Plan Year, the first day of the seventh month of each Plan Year and the first day of the tenth month of the Plan Year shall be an “Entry Date.”  Solely for purposes of subsection 2.1(d) (Eligibility Requirements) and the ability to participate in the Savings Program as an Eligible Limited Participant commencing April 1, 1999, each business day shall also be an “Entry Date.”

“ERISA” means the Employee Retirement Income Security Act of 1974 and the regulations promulgated thereunder, as from time to time amended.

“Employer Excess Contribution” is the contribution defined in Section 3.1 (Employer Contributions).

“Excess Forfeiture Suspense Account” means the Account described in Section 5.12 (Limitations on Annual Additions).

“Excess Tentative Employer Contribution” means the excess contribution described in Section 5.12 (Limitations on Annual Additions).

“Five-Percent Owner” means an employee described in Code Section 416(i)(1).

“Funds” means the separate investment funds as described in Section 5.2 (Common Fund).

“Health Plan” means a retiree medical plan maintained by an Employer, as described in Section 14.2 (Retiree Medical Benefits Definitions).

“Highly Compensated Employee” means an employee of the Employer or an Affiliate who was a Participant eligible during the Plan Year to make Before-Tax Contributions and who:

	was a Five-Percent Owner at any time during the Plan Year or the preceding Plan Year; or

	received Total Compensation in excess of $80,000 (as adjusted for increases in the cost of living by the Secretary of the Treasury) during the preceding Plan Year and was among the top 20% of the employees (disregarding those employees excludable under Code Section 414(q)(5)) when ranked on the basis of Total Compensation paid for that year.

To the extent required by Code Section 414(q)(6), a former employee who was a Highly Compensated Employee when he separated from service with the Employer and all Affiliates or at any time after attaining age 55 shall be treated as a Highly Compensated Employee.

“Hour of Service” is:

	each hour for which an employee is paid or entitled to payment for the performance of duties for the Employer or an Affiliate;

	each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer or an Affiliate; and

	each hour for which an employee is paid or entitled to payment for a period during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity, layoff, jury duty, military duty, or leave of absence.  In crediting Hours of Service pursuant to this subparagraph (c), all payments made or due shall be taken into account, whether such payments are made directly by the Employer or an Affiliate or indirectly (e.g., through a trust fund or insurer to which the Employer or an Affiliate makes payments, or otherwise), except that:

	no more than 501 such Hours of Service shall be credited for any continuous period during which the employee performs no duties;

	no such Hours of Service shall be credited if payments are made or due under a plan maintained solely for the purpose of complying with any workers’ compensation, unemployment compensation or disability insurance laws; and

	no such Hours of Service shall be credited for payments which are made solely to reimburse the employee for medical or medically related expenses.

The Hours of Service, if any, for which an employee is credited for a period in which he performs no duties shall be computed and credited to computation periods in accordance with 29 C.F.R. 2530.200b-2 and other applicable regulations promulgated by the Secretary of Labor.  For purposes of computing the Hours of Service to be credited to an employee for whom a record of hours worked is not maintained, an employee shall be credited with 45 Hours of Service for each week in which he completes at least one Hour of Service.  In addition, an employee shall be credited with Hours of Service for each week the employee is on a leave of absence in accordance with Section 2.4 (Leaves of Absence); provided however, that except as provided in Section 2.4 (Leaves of Absence), no more than 501 Hours of Service shall be credited with respect to any continuous period of a leave of absence.

“Individual Beneficiary” means a natural person designated by the Participant in accordance with Section 7.5 (Beneficiary Designations) to receive all or any portion of the amounts remaining in the Participant’s Accounts at the time of the Participant’s death.  “Individual Beneficiary” also means a natural person who is a beneficiary of a trust designated by the Participant in accordance with Section 7.5 (Beneficiary Designations) to receive all or a portion of such amount, provided the trust complies with the requirements of Code Section 401(a)(9) and the regulations promulgated thereunder, including that the trust is irrevocable, the beneficiaries with respect to the trust’s interest in the Participant’s Accounts are identifiable from the trust agreement, and a copy of the trust agreement is provided to the Administrative Committee prior to the date distributions commence to such trust.

“Intern Employee” means an employee who is hired on a temporary basis in connection with an intern program established by the Employer.  If an Intern Employee is later offered a full-time position with Employer, such employee will become an Eligible Employee, at that time, and will receive credit, for purposes of determining eligibility to participate under Section 2.1 (Eligibility Requirements), for Hours of Service accumulated as an Intern Employee.  However, such employee will not be entitled to share in any benefits under the Program while he was classified as an Intern Employee.

“Investment Committee” is the Committee so appointed in accordance with Article 9 (Powers and Duties of Committees).

“Investment Manager” means a registered investment adviser or other entity, as described in Section 9.8 (Investment Policy).

“Key Employee” means an employee described in Section 8.1 (Top-Heavy Definitions).

“Leased Employee” means any individual who is not carried on the payroll of the Employer or an Affiliate and who, pursuant to an agreement between the Employer or an Affiliate and any other person (“leasing organization”), has performed services for the Employer or an Affiliate (or a related person as determined in accordance with Code Section 414(n)(6)) on a substantially full-time basis for a period of at least one year, and such services are performed under primary direction or control by the Employer or Affiliate.  Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for the Employer shall be treated as provided by the Employer.

“Limited Term Employee” means an employee whose employment is for a temporary basis and is classified as a limited term employee or a coop employee under the records of his Employer.

“Limitation Year” means the relevant Plan Year.

“Matching Contribution” is the contribution referred to in Section 3.6 (Matching Contribution Under the Savings Program).

“Maximum Annual Addition” is the amount defined in Section 5.12 (Limitations on Annual Additions).

“Medical Benefits” means the benefits described in Section 14.2 (Retiree Medical Benefits Definitions).

“Medical Benefits Account” means the account established in accordance with Code Section 401(h) as part of the Retirement Program for the purpose of providing retiree medical benefits, as described in Article 14 (Retiree Medical Benefits).

“Member of a Collective Bargaining Unit” means any employee who is included in a collective bargaining unit and whose terms and conditions of employment are or were covered by a collective bargaining agreement if there is evidence that retirement benefits were the subject of good-faith bargaining between representatives of such employee and the Employer, unless such collective bargaining agreement makes this Plan applicable to such employee.

“Multiple Use” is described in Section 3.8 (Multiple Use).

“Non-Highly Compensated Employee” means, for any Plan Year, any employee of the Employer or Affiliate who:

	at any time during the Plan Year was a Participant eligible to make Before-Tax Contributions, and

	was not a Highly Compensated Employee for such Plan Year.

“Normal Retirement Date” means a Participant’s 65th birthday.

“One-Percent Owner” means an employee described in Code Section 416(i)(1).

“Participant” means:

	a current employee of the Employer or an Affiliate who has become a Participant in the Plan pursuant to subsections (a), (b), (c), (f), or (g) of Section 2.1 (Eligibility Requirements) or;

	a former employee of the Employer or an Affiliate for whose benefit an Account in the Trust Fund is maintained.

“Plan” means the Tellabs Advantage Program set forth herein, including all Appendices hereto.

“Permissive Aggregation Group” means the Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410, as further referenced in Article 8 (Top-Heavy Plan Requirements).

“Plan Year” means a 12-month period beginning on January 1 and ending on December 31.

“Pre-Retirement Survivor Annuity” means the surviving spouse survivor annuity defined in Section 7.3 (Pre-Retirement Survivor Annuity — Retirement Account, Salix Account and Coherent Accounts).

“Present Value” means the present value of accrued benefits under the aggregated defined benefit plan or plans for all Participants as of the Top-Heavy Determination Date(s), as determined in accordance with Code Section 416 and the regulations thereunder, as further defined in Article 8 (Top-Heavy Plan Requirements).

“Prior Plan” means prior versions of the Plan.

“Profit Sharing Contribution” means the contribution referred to in Section 3.3 (Profit Sharing Contribution under the Savings Program)

“Provisional Annual Addition” is the amount described in Section 5.11 (Provisional Annual Addition).

“Qualified Domestic Relations Order” means any domestic relations order that creates, recognizes or assigns to an Alternate Payee the right to receive all or a portion of Participant’s benefits payable hereunder and meets the requirements of Code Section 414(p).

“Qualified Joint and Survivor Annuity” for a married Participant, means an annuity for the life of a Participant with a survivor annuity for the life of the Participant’s surviving spouse equal to fifty percent (50%) of in the amount of the annuity which is payable during the joint lives of the Participant and his surviving spouse.  The Qualified Joint and Survivor Annuity shall be the actuarial equivalent of the Participant’s vested Account Balance.

“Qualified Military Service” means the performance of duty on a voluntary or involuntary basis in the Uniformed Services of the United States by an Eligible Employee provided he is re-employed by the Employer or an Affiliate within the applicable time period specified in Chapter 43 of Title 38 of the United States Code (Employment and Reemployment Rights of Members of the Uniformed Services) and the total length of all such absences does not exceed the maximum specified by law for the retention of reemployment rights.  The term “Uniformed Services of the United States” means the Armed Forces, the Army National Guard and the Air National Guard when engaged in active duty for training, inactive duty training, or full-time National Guard duty, or full-time duty in the commissioned corps of the Public Health Service as defined in Chapter 43 of Title 38 of the United States Code.

“Required Aggregation Group” means (i) each qualified plan of the Employer in which at least one Key Employee participates or participated at any time during the Determination Period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in subsection (i) above to meet the requirements of Code Sections 401(a)(4) or 410 as further referenced in Article 8 (Top-Heavy Plan Requirements).

“Required Beginning Date” means:

	for a Participant who is not a Five-Percent Owner, the April 1 following the later of the calendar year in which the Participant attains age 70-1/2 or the calendar year in which the Participant terminates employment; or

	for a Participant who is a Five-Percent Owner with respect to the Plan Year in which he attains age 70-1/2, the April 1 following the calendar year in which he attained age 70-1/2.

“Retirement Contribution” means the contribution referred to in Section 3.2 (Retirement Contribution Under the Retirement Program).

“Retirement Program” means the provisions of this Plan relating to the Tellabs Retirement Plan, the money purchase pension plan which forms a part hereof.

“Rollover Contribution” means:

	all or a portion of a distribution received by an employee from another qualified plan which is eligible for tax-free rollover to a qualified plan and which is rolled over by the employee to this Plan within 60 days following his receipt thereof;

	amounts rolled over to this Plan from a conduit individual retirement account which has no assets other than assets (and the earnings thereon) which were

	previously distributed to the employee by another qualified plan as a distribution which is eligible for tax-free rollover to a qualified plan and

	deposited in such conduit individual retirement account within 60 days of receipt thereof;

	amounts distributed to the employee from a conduit individual retirement account meeting the requirements of (b) above, and rolled over by the employee to this Plan within 60 days of his receipt thereof from such conduit individual retirement account;

	amounts rolled over directly to this Plan by the trustee of another qualified plan pursuant to the provisions of Code Section 401(a)(31) and to any other related laws and regulations as in effect at the time of such direct rollover; and

	any amounts distributed from another qualified plan will not be eligible as a Rollover Contribution if such money had been contributed to that plan as an after-tax contribution.

“Salix Accounts” means the separate Salix Before-Tax Account, Salix Employer Account and Salix Rollover Account of Salix Participants described in Section 5.1 (Participant Accounts).

“Salix Acquisition Date” means the date of the acquisition of Salix Technologies, Inc. by Tellabs, Inc.

“Salix Participant” means employees of Salix Technologies, Inc. or any subsidiary thereof who were participants in the Salix Plan on May 19, 2000 and (a) became Participants in the Plan on May 19, 2000, or (b) whose Salix Accounts were subsequently transferred from the Salix Plan to the Trust Fund as a result of the merger of the Salix Plan into the Plan effective May 19, 2000.

“Salix Plan” means the Salix Technologies, Inc. 401(k) Plan as in effect on the Salix Acquisition Date, and as amended from time to time thereafter up to and including its merger into the Plan effective May 19, 2000.

“Savings Program” means the provisions of the Plan relating to the Tellabs Profit Sharing and Savings Plan, a profit sharing and Code Section 401 savings and matching contribution plan which forms a part hereof.

“Service” means the period credited to an Eligible Employee or Participant for purposes of determining the level of a Participant’s nonforfeitable benefits under the Tellabs Retirement Program.  A Participant’s or Eligible Employee’s Service shall be the period beginning on his Employment Commencement Date (or Re-employment Commencement Date, if applicable) and ending on his Termination Date, computed in accordance with the following rules:

	Special Definitions.

	“Employment Commencement Date” means the date an employee first performs an Hour of Service.

	“Termination Date” means the earlier of:

	The date on which an employee quits, retires, is discharged or dies; or

	The first anniversary of the first day of a period in which an employee remains absent from service (with or without pay) for any reason other than a quit, retirement, discharge or death, such as vacation, holiday, sickness, disability, leave of absence or layoff, except that this clause (B) shall not apply to an employee on leave of absence for service in the United States armed forces or the Family and Medical Leave Act of 1993.

	“Re-employment Commencement Date” means the date on which an employee first performs an Hour of Service following a Period of Severance.

	“Period of Severance” means the period beginning on an employee’s Termination Date and ending on his Re-employment Commencement Date.

	“Year of Service” means each full year (on the basis that 365 days equal a full year) in the employee’s period of Service.

	Aggregation Rule.  All of an employee’s periods of Service with any Affiliate shall be aggregated on the basis that 365 days equal a full year, except that if an employee has a Period of Severance of five years or more:

	The prior period of Service shall be disregarded unless (A) his Retirement Account was nonforfeitable at the time the Period of Severance began or (B) the Period of Severance is less than the prior period of Service, and

	Any period of Service after such Period of Severance shall be disregarded in determining the vested percentage of his Retirement Account which accrued before the Period of Severance.

	Service Spanning Rule.  If an employee’s Re-employment Commencement Date occurs within 12 months after his Termination Date, his Service shall include the intervening Period of Severance.

	Service with Predecessor and Related Employers.  An employee’s period of service,

	with another employer before the acquisition of that employer’s business by the Employer shall, to the extent provided in the agreement pertaining to such acquisition or as approved by the Board of Directors, be included in his Service to the same extent as if such service was performed for the Employer, provided however, that in no event shall any service prior to January 6, 1975 be deemed Service hereunder; and

	with any employer while such employer is an Affiliate shall be included in his Service to the same extent as if such service was performed for the Employer, provided however, that in no event shall any service prior to January 6, 1975 be deemed Service hereunder.

	Recognition of Services under Salix Plan and Coherent Plan.  Solely with respect to former Salix Participants and Coherent Participants, each such Participant’s period of service shall include such period or periods of employment previously credited to that Participant under the Salix Plan or Coherent Plan, as applicable; provided, however, that in no event shall any service prior to January 6, 1975 be deemed Service hereunder.

“Simplified Employee Pension Plan” means a plan designed to meet the requirements of a simplified pension plan pursuant to Code Section 408(k), as further referenced in Article 8 (Top-Heavy Plan Requirements) and subsection 11.6(c).

“Supplemental Before-Tax Contribution” means for any period, with respect to a Participant, the portion of the Before-Tax Contribution made on his behalf by an Employer during such period which exceeds such Participant’s Basic Before-Tax Contribution for such period.  For any period, “Supplemental Before-Tax Contribution” means, with respect to the Employer, the sum of such contributions.

“Tellabs Stock Fund” is the Fund described in Section 5.2 (Common Fund).

“Tentative Employer Contribution” is the contribution described in Section 3.3 (Profit Sharing Contribution Under the Savings Program).

“Top-Heavy” describes a plan which is determined to be Top-Heavy in accordance with Code Section 416 as further detailed in Section 8.1 (Top-Heavy Definitions).

“Top-Heavy Determination Date” means, for any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year or, for the first Plan Year of the Plan, the last day of that year as further described in Section 8.1 (Top-Heavy Definitions).

“Top-Heavy Ratio” means the ratio set forth in Code Section 416, as further described in Section 8.1 (Top-Heavy Definitions).

“Trust” or “Trust Fund” means the Tellabs, Inc. Profit Sharing and Savings Trust or such other trust established in accordance with Article 9 (Powers and Duties of Committees).

“Trustee” means the Trustee or Trustees under the Trust referred to in Article 9 (Powers and Duties of Committees).

“Unit” means the unit of measure (determined as provided in Article 5 (Accounting Provisions and Allocations) of the proportionate measure, if any, of the Accounts of a Participant in the investment Funds established pursuant to Section 5.2 (Common Fund).

“Valuation Date” means each Business Day as of which the Administrative Committee shall determine the value of each Account.

   SECTION 1.5      EGTRRA Compliance.    This Plan reflects certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”).  The provisions of the Plan relating to EGTRRA are intended to demonstrate good faith compliance with the requirements of EGTRRA and are to be construed in accordance with EGTRRA and guidance issued thereunder, including but not limited to IRS Notice 2001-57.  Except as otherwise provided, the provisions of the Plan relating to EGTRRA shall be effective as of the first day of the 2002 Plan Year, and shall supercede other provisions of the Plan to the extent such provisions are inconsistent therewith.

ARTICLE 2

Eligibility and Participation

   SECTION 2.1      Eligibility Requirements.

	Every Participant on January 1, 1997 shall continue as such subject to the provisions of the Plan.

	Every other Eligible Employee shall first be eligible to participate in the Matching Contribution, the Profit Sharing Contribution and the Retirement Contribution provisions of the Plan, if he is then employed by an Employer, on the Entry Date coinciding with or next following his first nine (9) months of continuous employment, if he has completed 1,000 Hours of Service during such nine (9) month period and attained his 21st birthday (18th birthday, commencing with the April 1, 1999 Entry Date) on or before such Entry Date.  An Eligible Employee who does not become a Participant pursuant to the preceding sentence shall first be eligible to participate, if he is then employed by an Employer, on the Entry Date coinciding with or next following the later of (i) the end of the first Eligibility Period in which he completes 1,000 Hours of Service or (ii) his 21st birthday (18th birthday, commencing with the April 1, 1999 Entry Date).

	Any former employee of the Employer or an Affiliate who was a Participant or could have become a Participant under subsection (b) above had he been employed on a prior Entry Date, and is reemployed by the Employer as an Eligible Employee, shall be eligible to participate on the first Entry Date after reemployment.

	Notwithstanding any provisions of this Section 2.1 to the contrary, an Eligible Employee who does not meet the requirements of paragraph (a), (b) or (c) above and who is reasonably expected to meet the requirements of paragraph (b) shall first be eligible to participate in the Plan as an Eligible Limited Participant on the Entry Date coinciding with or next following the later of his Employment Commencement Date or 21st birthday (18th birthday, commencing with the April 1, 1999 Entry Date), solely for purposes of making a Before-Tax Contribution pursuant to Section 3.4 (Before-Tax Contributions under the Savings Program) (but not for purposes of receiving a Matching Contribution with respect thereto) and/or a Participant Rollover Contribution pursuant to Section 4.2 (Rollover Contribution), and exercising rights with respect to the Account(s) established thereby.

	Notwithstanding any provisions of this Plan to the contrary, any individual who was providing services to the Employer in the capacity of, or who was designated by the Employer as, an independent contractor, a Leased Employee, or a Limited Term Employee and who is subsequently re-classified as an Eligible Employee for the purposes of this Plan (regardless of whether such re-classification is retrospective or prospective), shall be eligible to participate in the Plan on a prospective basis only from the date of the re-classification and shall not have any retroactive claim for benefits.

	Notwithstanding the foregoing provisions of this Section 2.1 (Eligibility Requirements) a Coherent Participant who is an Eligible Employee on January 1, 1999 shall become a Participant as of that date.  Any other individual who was an employee of Coherent Communications Systems Corporation or any subsidiary thereof and first became an Eligible Employee on January 1, 1999, shall become a Participant on the first Entry Date on which such Eligible Employee’s satisfies the requirements of paragraph (b), (c), or (d) above, as the case may be.

	Notwithstanding the foregoing provisions of this Section 2.1 (Eligibility Requirements) a Salix Participant who is an Eligible Employee on May 19, 2000 shall become a Participant as of that date.

   SECTION 2.2      Continued Participation; Reemployment.

	Except as provided in Section 2.3 (Transfers and Changes in Status), once an Eligible Employee has become a Eligible Limited Term Participant eligible to elect to make Before-Tax Contributions pursuant to subsection 2.1(d), he shall continue to be eligible to make such Contributions, subject to the conditions and limitations in the Plan, until he incurs his Termination Date.

	Except as provided in Section 2.3 (Transfer and Changes in Status), once an Eligible Employee becomes a Participant for purposes of determining the amount of the Matching Contribution, the Profit Sharing Contribution and the Retirement Contribution and eligibility to share in the Matching Contribution, the Profit Sharing Contribution and the Retirement Contribution, he shall continue to be eligible to share in the Matching Contribution, the Profit-Sharing Contribution and the Retirement Contribution, subject to the conditions and limitations in the Plan, for each Plan Year as provided in Section 5.4 (Eligibility to Share in the Employer Contributions and Forfeiture).

	In the event an Eligible Employee who has become a Participant incurs his Termination Date and he is subsequently reemployed, he shall be eligible to elect to make Before-Tax Contributions as of the first business day following such Re-Employment Commencement Date and to share in the Matching Contribution, the Profit Sharing Contribution and the Retirement Contribution for the Plan Year in which his Re-Employment Commencement Date occurs, provided the Participant is an Eligible Employee and, with respect to the Matching Contribution, the Profit Sharing Contribution and the Retirement Contribution, satisfies the requirements of Section 5.4 as of the first Entry Date after he becomes eligible - (Eligibility to Share in the Employer Contributions and Forfeiture).

   SECTION 2.3      Transfers and Changes in Status.

	As provided in Section 1.4 (Definitions), an Eligible Employee’s Service with

	an Employer while a Member of a Collective Bargaining Unit before his transfer to an employment status outside of the collective bargaining unit, or

	another employer before the acquisition of that employer’s business by an Employer (but only to the extent approved by the Board of Directors and exclusive of any period prior to January 6, 1975), or

	another employer while such employer is a Related Employer prior to the date the Employee is transferred to an Employer,

shall be taken into account (applying the principles of Sections 2.1 (Eligibility Requirements) and 2.2 (Continued Participation Reemployment)) for purposes of determining the Eligible Employee’s eligibility to participate in the Plan.  In the event that based upon such service, the Eligible Employee would have become a Participant as of an Entry Date had he been an Eligible Employee of the Employer, then such Eligible Employee shall become a Participant for purposes of Section 2.1 (Eligibility Requirements) as of the date of such acquisition or transfer provided he is an Eligible Employee as of such date.

	If a Participant is transferred to a position with an Employer such that he no longer is an Eligible Employee, or is transferred to employment with an Affiliate which is not an Employer, he shall be treated for all purposes under this Plan as if he were on a leave of absence without Compensation while in that position.

   SECTION 2.4      Leaves of Absence.    An employee shall be credited with 45 Hours of Service for each full week the employee is on a leave of absence, including, but not limited to a leave of absence required to be recognized under the provisions of the Retirement Equity Act of 1984 or the Family and Medical Leave Act of 1993, if he is not otherwise credited with such Hours of Service, provided that other than with respect to a leave of absence for service in the United States armed forces, not more than 501 Hours of Service shall be credited with respect to any continuous period of leave of absence.  Any leave of absence under this Section 2.4 must be granted in writing and pursuant to the Employer’s established leave policy, which shall be administered in a uniform and nondiscriminatory manner to similarly situated employees.

   SECTION 2.5      Qualified Military Service.  Notwithstanding any provision of this Plan to the contrary, effective on and after December 12, 1994, contributions, benefits and service credit with respect to Qualified Military Service will be provided in accordance with Code Section 414(u).

ARTICLE 3

Contributions

   SECTION 3.1      Employer Contributions.    Subject to the right reserved to the Company to alter, amend or discontinue this Plan and the Trust, each Employer shall for each Plan Year contribute to the Trust Fund an amount equal to the sum of:

	the Retirement Contribution;

	the Profit Sharing Contribution;

	the Before-Tax Contribution; and

	the Matching Contribution.

Such sum, which is known as the Tentative Employer Contribution, shall be reduced by an amount equal to the Excess Tentative Employer Contribution (as provided in Section 5.12 (Limitation on Annual Additions)); provided that in no event shall the Tentative Employer Contribution, as reduced by the Excess Tentative Employer Contribution, exceed the amount deductible by the Employer for said year for federal income tax purposes.

In addition, each Employer shall contribute to the Medical Benefits Account maintained as part of the Trust Fund such amounts as may be determined in accordance with Article 14 (Retiree Medical Benefits) hereof.

   SECTION 3.2      Retirement Contribution Under the Retirement Program.    Subject to the provisions of Section 3.1 (Employer Contributions), each Employer shall pay to the Trustee for each quarter of each Plan Year an amount which, together with the forfeitures allocable for such quarter, shall be equal to:

	4.5% (four and five-tenths percent) effective January 1, 1999; or

	3.6% (three and six-tenths percent) effective January 1, 1994;

of the Considered Compensation of each Eligible Participant for such quarter.  Such contribution is known as the “Retirement Contribution.”

   SECTION 3.3      Profit Sharing Contribution Under the Savings Program.    Subject to the provisions of Section 3.1 (Employer Contributions):

	Each Employer shall pay to the Trustee for each quarter of each Plan Year an amount which, together with the forfeitures allocable for such quarter, shall be equal to .5% (five-tenths of one percent) of the Considered Compensation of each Eligible Participant for such quarter; and

	Each Employer shall also pay to the Trustee for each Plan Year such additional amounts, if any, as the Board of Directors shall determine.

Such contributions are, collectively, known as the “Profit Sharing Contribution.”

   SECTION 3.4      Before-Tax Contributions Under the Savings Program.

	Subject to the provisions of Sections 3.1 (Employer Contributions) and 3.3 (Profit Sharing Contributions Under the Savings Program), each Active Participant may for each payroll period elect to have the Employer make a Basic Before-Tax Contribution on his behalf in an amount 1% up to 15% (effective January 1, 2002, up to 20%) of his Considered Compensation (rounded to the nearest cent).  Such elections (other than a complete suspension of Before-Tax Contributions under this Section) shall be subject to change effective on any Entry Date in accordance with procedures established by the Administrative Committee from time to time.  A Participant may elect to have his Employer suspend all Before-Tax Contributions to be made on his behalf under this Section 3.4 as of the beginning of any payroll period provided he notifies such Employer within such time and in accordance with such procedures as may from time to time be established by the Administrative Committee.

	The Administrative Committee may establish procedures whereby each Eligible Participant on whose behalf the total contribution made under Section 3.4(a) is less than 15% (effective January 1, 2002, less than 20%) of his Considered Compensation for the Plan Year may, subject to the provisions of Section 3.1 (Employer Contributions) and 3.5 (Limitations on Before-Tax Contributions Under the Savings Program), elect to have his Employer make an additional contribution on his behalf in an amount not exceeding his annual incentive cash bonus for such Plan Year so long as the sum of such additional contribution and the contributions made on his behalf under subsection 3.4(a) above does not exceed 15% (effective January 1, 2002, does not exceed 20%) of his Considered Compensation for the Plan Year.

	The amount of the Before-Tax Contributions to be made pursuant to a Participant’s election shall reduce the compensation otherwise payable to him by the Employer.

   SECTION 3.5      Limitations on Before-Tax Contributions Under the Savings Program.

	In no event shall a Participant’s Before-Tax Contributions during any calendar year exceed the dollar limitation in effect under Code Section 402(g) at the beginning of such calendar year; provided, however that:

	contributions made under Section 2.5 (Qualified Military Service) shall be subject to such limitation for the year to which they relate instead of the year they are actually made; and

	effective as of the first day of the first Plan Year beginning after December 31, 2001, all employees who are eligible to make elective deferrals under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Code Section 414(v).  Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code Sections 402(g) and 415.  The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of any such catch-up contributions.

If a Participant’s Before-Tax Contributions, together with any additional elective contributions to any other qualified cash or deferred arrangement, and any elective deferrals under a tax-sheltered annuity program or a simplified employee pension plan, exceed such dollar limitation for any calendar year, such excess, and any earnings allocable thereto, shall be distributed to the Participant by April 15 of the following year; provided that, if such excess contributions were made to a plan or arrangement not maintained by the Employer or an Affiliate, the Participant must first notify the Administrative Committee of the amount of such excess allocable to this Plan by March 1 of the following year.

	Notwithstanding any other provision of this Plan to the contrary, the Before-Tax Contributions for the Highly Compensated Employees for the Plan Year shall be reduced in accordance with the following provisions:

	The Before-Tax Contributions of the Highly Compensated Employees shall be reduced if neither of the Actual Deferral Percentage Tests set forth in (A) or (B) below is satisfied after taking into account the provisions of subsection (f) below:

	The 1.25 Test.  The Actual Deferral Percentage of the Highly Compensated Employees is not more than the Actual Deferral Percentage of the Non-Highly Compensated Employees multiplied by 1.25.

	The 2.0 Test.  The Actual Deferral Percentage of the Highly Compensated Employees is not more than 2 percentage points greater than the Actual Deferral Percentage of the Non-Highly Compensated Employees and the Actual Deferral Percentage of the Highly Compensated Employees is not more than the Actual Deferral Percentage of the Non-Highly Compensated Employees multiplied by 2.0.

The provisions of this subsection (b) shall apply separately with respect to each group of employees who are Members of a Collective Bargaining Unit (if any) and the group of employees who are not Members of a Collective Bargaining Unit.

	As used in this subsection, “Actual Deferral Percentage” means:

	With respect to Non-Highly Compensated Employees, the average of the ratios of each Non-Highly Compensated Employee’s Before-Tax Contributions with respect to the prior Plan Year, to each such Participant’s Considered Compensation for such Plan Year; and

	With respect to Highly Compensated Employees, the average of the ratios of each Highly Compensated Employee’s Before-Tax Contributions with respect to the current Plan Year, to each such Participant’s Considered Compensation for such Plan Year.

	All Before-Tax Contributions made under this Plan and all before-tax contributions made under any other plan that is aggregated with this Plan for purposes of Code Sections 401(a)(4) and 410(b) shall be treated as made under a single plan.  If any plan is permissively aggregated with this Plan for purposes of Code Section 401(k), the aggregated plans must also satisfy Code Sections 401(a)(4) and 410(b) as though they were a single plan.  The Actual Deferral Percentage ratios of any Highly Compensated Employee will be determined by treating all plans subject to Code Section 401(k) under which the Highly Compensated Employee is eligible as a single plan.  Notwithstanding the foregoing, Before-Tax Contributions made under Section 2.5 (Qualified Military Service) corresponding to a preceding Plan Year shall not be included in the Actual Deferral Percentage Test.

	If neither Actual Deferral Percentage Test is satisfied as of the end of the Plan Year, the Administrative Committee shall cause the Before-Tax Contributions for Highly Compensated Employees to be reduced and refunded to each such Highly Compensated Employee in accordance with this subsection (iv) and subsection (v), respectively, until either Actual Deferral Percentage Test is satisfied.  The sequence for determining the amount of such reductions shall begin with Highly Compensated Employees who elected to defer the greatest percentage of Considered Compensation, assuming that Supplemental Before-Tax Contributions represent the last contribution made to the Participant’s Account, then the second greatest percentage amount, continuing until either Actual Deferral Percentage Test is satisfied.  This process shall continue through the remaining Supplemental Before-Tax Contributions and continuing with the Basic Before-Tax Contributions until either Actual Deferral Percentage Test is satisfied.

	Once the total amount of reductions has been determined under subsection (iv) above, the Administrative Committee shall direct the Trustee to distribute as a refund to the appropriate Highly Compensated Employees an allocable portion of such reduction attributable to excess Before-Tax Contributions, together with the net earnings or losses allocable thereto.  The sequence for determining and refunding a Highly Compensated Employee’s allocable portion of excess Before-Tax Contributions shall begin with the Highly Compensated Employee who elected to defer the greatest dollar amount of Before-Tax Contributions.  The Before-Tax Contributions of such Participant shall be reduced by the amount required to cause that Participant’s Before-Tax Contributions to equal the dollar amount of the Before-Tax Contributions of the Highly Compensated Employee with the next highest dollar amount of Before-Tax Contributions.  If the total amount distributed is less than the total excess contributions, this process shall continue until all excess Before-Tax Contributions are distributed and excess Matching Contributions are forfeited.  However, notwithstanding anything in the foregoing to the contrary, if a lesser reduction, when added to the total dollar amount previously reduced, would equal the total excess contributions, such lesser reduction shall be utilized.  The Administrative Committee shall designate such distribution and forfeiture as a distribution of excess Before-Tax Contributions and forfeiture of excess Matching Contributions, determine the amount of the allocable net earnings or losses to be distributed and forfeited in accordance with subsections (c) and (d) below, and cause such distributions and forfeitures to occur prior to the end of the Plan Year following the Plan Year in which the excess Before-Tax Contributions and excess Matching Contributions were made.

	Net earnings or losses to be distributed with the excess Before-Tax Contributions shall be equal to the net earnings or losses on such contributions for the Plan Year in which the contributions were made.  The net earnings or losses allocable to the excess Before-Tax Contributions for the Plan Year shall be determined in the manner set forth in Article 5 (Accounting Provisions and Allocations).

	Net earnings or losses to be treated as forfeitures together with the Matching Contributions shall be equal to the net earnings or losses on such contributions for the Plan Year in which the contributions were made.  Net earnings or losses on Matching Contributions shall be determined in the same manner as in subsection (c) above.

	Any excess Matching Contribution treated as a forfeiture pursuant to subsection (b) above shall be used to reduce the Profit Sharing Contribution in Section 3.3 (Profit Sharing Contribution Under the Savings Program).

	For the purpose of avoiding the necessity of adjustments pursuant to this Section or Section 5.12 (Limitations on Annual Additions), or to comply with any applicable laws or regulations:

	The Administrative Committee may adopt such rules as it deems necessary or desirable to:

	impose limitations during a Plan Year on the percentage or amount of Before-Tax Contributions elected by Participants pursuant to Section 3.2 (Retirement Contribution Under the Retirement Plan); or

	increase during a Plan Year the percentage of Considered Compensation with respect to which a Participant may elect a Before-Tax Contribution for the purpose of providing Participants with the opportunity to increase their Before-Tax Contributions within the limitations of Section 3.3 (Profit Sharing Contribution Under the Savings Program).

	The Employer may at its sole discretion make fully vested contributions to the Plan which will be allocated to the Before-Tax Accounts of one or more Participants who are Non-Highly Compensated Employees in such amounts as the Employer directs for the purpose of complying with the applicable limits on Before-Tax Contributions in the Code.  Such contributions will not be taken into account in the allocation of Matching Contributions.

	The amount of each Participant’s Basic Before-Tax Contributions and Supplemental Before-Tax Contributions as determined under this Section 3.5 is also subject to the provisions of Sections 5.12 (Limitations on Annual Additions).

   SECTION 3.6      Matching Contribution Under the Savings Plan.    Subject to the provisions of Section 3.1 (Employer Contributions), each Employer shall each payroll period of the Plan Year contribute to the Trust Fund 1 cent for each cent of Basic Before-Tax Contribution made on behalf of each Eligible Participant for such payroll period.  Each Employer shall also contribute as of the last day of the Plan Year on behalf of each Eligible Participant employed by the Employer on the last day of such Plan Year an amount equal to each such Participant’s Basic Before-Tax Contribution for the Plan Year less the amount of the payroll period contributions made during such Plan Year pursuant to the first sentence of this Section 3.6 on behalf of each such Participant.  The sum of such contributions is known as the “Matching Contribution.”

   SECTION 3.7      Limitations on Matching Contributions Under the Savings Program

	Notwithstanding any other provision to the contrary, the share of Matching Contributions of the Highly Compensated Employees shall be reduced in accordance with the following provisions:

	The share of Matching Contributions of the Highly Compensated Employees shall be reduced if neither of the Contribution Percentage Tests set forth in (A) or (B) below is satisfied after taking into account the provisions of subsection (f) below:

	The 1.25 Test.  The Contribution Percentage of the Highly Compensated Employees is not more than the Contribution Percentage of all Non-Highly Compensated Employees multiplied by 1.25.

	The 2.0 Test.  The Contribution Percentage of the Highly Compensated Employees is not more than 2 percentage points greater than the Contribution Percentage of all Non-Highly Compensated Employees, and the Contribution Percentage of the Highly Compensated Employees is not more than the Contribution Percentage of all Non-Highly Compensated Employees multiplied by 2.0.

The provisions of this subsection (a) shall not apply to any group of employees who are Members of a Collective Bargaining Unit.

	As used in this Section 3.7, “Contribution Percentage” means:

	With respect to Non-Highly Compensated Employees, the average of the ratios of each Non-Highly Compensated Employee’s share of Matching Contributions, plus Designated Before-Tax Contributions (as defined in subsection (b) below), with respect to the prior Plan Year, to each such Participant’s Considered Compensation for such Plan Year; and

	With respect to Highly Compensated Employees, the average of the ratios of each Highly Compensated Employee’s share of Matching Contributions, plus Designated Before-Tax Contributions (as defined in subsection (b) below), with respect to the current Plan Year, to each such Participant’s Considered Compensation for such Plan Year.

	All Matching Contributions made under this Plan and all employee contributions and matching contributions made under any other plan that is aggregated with this Plan for purposes of Code Sections 401(a)(4) and 410(b) shall be treated as made under a single plan.  If any plan is permissively aggregated with this Plan for purposes of Code Section 401(m), the aggregated plans must also satisfy Code Sections 401(a)(4) and 410(b) as though they were a single plan.  The Contribution Percentage ratio of any Highly Compensated Employee will be determined by treating all plans subject to Code Section 401(m) under which the Highly Compensated Employee is eligible as a single plan.  Notwithstanding the foregoing, Matching Contributions made under Section 2.5 (Qualified Military Service) corresponding to a preceding Plan Year shall not be included in the Contribution Percentage Test.

	To the extent necessary, and solely for the exclusive purpose of satisfying the Contribution Percentage Test in subsection 3.7(a), all or part of the Before-Tax Contributions of Participants and/or Matching Contributions  may be treated by the Committee as After-Tax Contributions (“Designated Before-Tax Contributions”), provided that each of the following is satisfied:

	The Before-Tax Contributions, including Designated Before-Tax Contributions, satisfy the requirements of subsection 3.5(b); and

	The Before-Tax Contributions, excluding Designated Before-Tax Contributions, satisfy the requirements of subsection 3.5(b).

	If neither Contribution Percentage Test is satisfied as of the end of the Plan Year, the Committee shall first cause the Matching Contributions of the Highly Compensated Employees to be reduced and refunded or forfeited, as the case may be, in accordance with this subsection (c) and subsection (d) below until either Contribution Percentage Test is satisfied.  The sequence for determining the amount of such reductions shall begin with Highly Compensated Employees who received the greatest amount of Matching Contributions as a percentage of Considered Compensation, then the second greatest percentage amount, continuing until either Contribution Percentage Test is satisfied.  This process shall continue through the remaining Matching Contributions for Highly Compensated Employees until either Contribution Percentage Test is satisfied.

	Once the total amount of reductions has been determined under subsection (c) above, the Committee shall direct the Trustee to distribute as a refund to the appropriate Highly Compensated Employees an allocable portion of such reduction attributable to any excess vested Matching Contribution, and to treat as a forfeiture an allocable portion of such reduction attributable to any excess nonvested Matching Contributions, together with the net earnings or losses allocable thereto.  The sequence for determining and refunding a Highly Compensated Employee’s allocable portion of excess vested Matching Contributions or forfeiture of nonvested Matching Contributions shall begin with the Highly Compensated Employee who elected and received the greatest dollar amount of such contributions.  The Matching Contributions of such Participant shall be reduced by the amount required to cause that Participant’s Matching Contribution to equal the dollar amount of the Matching Contributions of the Highly Compensated Employee with the next highest dollar amount of such contributions.  If the total amount distributed or forfeited is less than the total excess contributions, this process shall continue until all such excess Matching Contributions have been distributed or forfeited.  However, notwithstanding anything in the foregoing to the contrary, if a lesser reduction, when added to the dollar amount previously reduced, would equal the total excess contribution, such lesser amount shall be utilized.  The Committee shall designate such distribution and forfeiture as a distribution and forfeiture of excess contributions, determine the amount of the allocable net earnings or losses to be distributed in accordance with subsection (e) below, and cause such distributions and forfeitures to occur prior to the end of the Plan Year following the Plan Year in which such excess Matching Contributions were made.

	Net earnings or losses to be distributed with the excess vested Matching Contribution or to be treated as forfeitures together with the excess nonvested Matching Contributions shall be equal to the net earnings or losses on such contributions for the Plan Year in which the contributions were made.  Net earnings or losses shall be determined and allocated in the same manner as in subsection 3.5(c) above.

	Any Matching Contributions which are treated as forfeitures pursuant to subsection 3.7(d) above shall be used to reduce the Profit-Sharing Contribution in Section 3.3 (Profit-Sharing Contribution Under the Savings Plan) and Matching Contribution in Section 3.6 (Matching Contribution Under the Savings Plan).

	For the purpose of avoiding the necessity of adjustments pursuant to this Section 3.7 or Section 5.12 (Limitations on Annual Additions), or to comply with any applicable laws or regulations:

	The Employer may in its sole discretion make fully vested contributions to the Plan, which will be allocated to the Matching Accounts of one or more Participants who are Non-Highly Compensated Employees, in such amounts as the Employer directs for the purpose of complying with applicable limits on Matching Contributions in the Code.

	The Committee, in its sole discretion, may elect for a Plan Year to perform the test under subsection (b) above separately for those Active Participants who have not yet attained age 21 and completed one Year of Service or, alternatively, for Plan Years beginning after December 31, 1998, exclude such Active Participants who are Non-Highly Compensated Employees from testing under subsection (c) above.

   SECTION 3.8      Multiple Use.  The multiple use test described in Treasury Regulation Section 1.401(m)-2 and this Section 3.8 shall not apply for Plan Years beginning after December 31, 2001.

	This Section 3.8 will be applicable if The 2.0 Test is used to satisfy both the Actual Deferral Percentage Test and the Contribution Percentage Test.  If this Section 3.8 is applicable, the Committee shall determine whether a “Multiple Use” has occurred, and if such a Multiple Use has occurred, the Matching Contributions of the Highly Compensated Employees shall be reduced in accordance with the provisions of subsection (c) below.

	A Multiple Use occurs when for the Highly Compensated Employees, the sum of the Actual Deferral Percentage used to satisfy The 2.0 Test plus the Contribution Percentage used to satisfy The 2.0 Test exceeds the “Aggregate Limit.”  The Aggregate Limit is the greater of subsection (i) or (ii) below, determined as follows:

	First, multiply 1.25 by the greater of:

	the Actual Deferral Percentage, or

	the Contribution Percentage of the Non-Highly Compensated Employees;

	Second, add 2.0 to the lesser of (A) or (B) above provided that such sum shall not exceed 2 times the lesser of (A) or (B) above; and

	Finally, add the results from the first and second steps above to determine the Aggregate Limit; or

	First, multiply 1.25 by the lesser of

	the Actual Deferral Percentage, or

	the Contribution Percentage of the Non-Highly Compensated Employees;

	Second, add 2.0 to the greater of (A) or (B) above provided that such sum shall not exceed 2 times the greater of (A) or (B) above; and

	Third, add the results from the first and second steps above to determine the Aggregate Limit.

	If a Multiple Use has occurred, such Multiple Use shall be corrected by reducing the Contribution Percentage of Highly Compensated Employees in accordance with the provisions of subsection 3.7(b) above until the sum of the Actual Deferral Percentage plus the Contribution Percentage for the Highly Compensated Employees equals the Aggregate Limit.

	Net earnings or losses to be refunded or to be treated as forfeitures together with the excess Matching Contributions shall be equal to the net earnings or losses on such contributions for the Plan Year in which the contributions were made.  Net earnings or losses shall be determined and allocated in the same manner as in subsection 3.5(c) above.

ARTICLE 4

Contributions by Employee

   SECTION 4.1      No After-Tax Contributions.    No Participant shall be required or permitted to make any after-tax contributions to this Plan.

   SECTION 4.1      Rollover Contribution.

	A Rollover Contribution may be rolled over in cash to the Trust Fund for the benefit of a Participant with the permission of the Administrative Committee.  Prior to accepting any contribution which is intended to be a Rollover Contribution, the Administrative Committee may require the Participant to establish that the amount to be rolled over meets the definition of a Rollover Contribution and any other limitations of the Code applicable to such rollovers.

	An Eligible Employee who is not eligible to participate in the Plan solely by reason of failing to meet the eligibility requirements of Article 2 (Eligibility and Participation) and who reasonably expects to become a Participant when such requirements are met, may be a Participant in the Plan solely for the limited purposes of making a Rollover Contribution, and taking actions with respect to his Rollover Account for the purposes of loans in accordance with Article 7 (Distributions), investment options in accordance with this Section 4.2, and the withdrawal of Rollover Contributions in accordance with subsection (e) below, subject to the same conditions as any other Participant.

	If the Administrative Committee determines after a Rollover Contribution has been made that such Rollover Contribution did not in fact constitute a Rollover Contribution as defined in Section 1.4 (Definitions), the amount of such Rollover Contribution and any earnings thereon shall be returned to the employee.

	Each Participant’s Rollover Contribution shall be allocated to his Rollover Account as of the Valuation Date coinciding with or next succeeding the date on which such amount is received by the Trustee, and invested in accordance with Section 5.2 (Common Fund).  A Participant’s Rollover Account shall be fully vested and nonforfeitable.

ARTICLE 5

Accounting Provisions and Allocations

   SECTION 5.1      
Participant’s Accounts.

	For each Participant there shall be maintained as appropriate a separate Retirement Account, a separate Profit Sharing Account (which shall, if applicable, consist of separate pre-1993 and post-1992 sub-accounts as prescribed by the Administrative Committee), a separate Matching Account, a separate After-Tax Account (which shall, if applicable, consist of a separate pre-1987 After-Tax sub-account and a separate post-1986 After-Tax sub-account as prescribed by the Administrative Committee), a separate Before-Tax Account (which shall, if applicable, consist of separate basic and supplemental sub-accounts as prescribed by the Administrative Committee), and a separate Rollover Account.  Effective April 1, 1999, for each Coherent Participant, there shall also be maintained as appropriate a separate Coherent Before-Tax Account (which shall consist of a balance of the Coherent Participant’s pre-tax contribution account under the Coherent Plan), a separate Coherent Employer Account (which shall consist of the balance of the Coherent Participant’s matching and profit sharing accounts under the Coherent Plan) and a separate Coherent Rollover Account (such separate Accounts of the Coherent Participant sometimes referred to collectively as “Coherent Accounts”).  Effective May 19, 2000, for each Salix Participant, there shall also be maintained as appropriate a separate Salix Before-Tax Account (which shall consist of a balance of the Salix Participant’s pre-tax contribution account under the Salix Plan), a separate Salix Employer Account (which shall consist of the balance of the Salix Participant’s matching and profit sharing accounts under the Salix Plan) and a separate Salix Rollover Account (such separate Accounts of the Salix Participant sometimes referred to collectively as “Salix Accounts”).  Each Account (including any sub-accounts) shall be credited with the amount of contributions, interest and earnings of the Trust Fund allocated to such Account and shall be charged with all distributions, withdrawals and losses of the Trust Fund allocated to such Account.

	The post-1986 After-Tax sub-account shall be a “separate contract” for the purposes of Code Section 72(e).

   SECTION 5.2      Common Fund.

	The Trust Fund shall be a common fund divided into separate investment funds (“Funds”) as provided in this Section 5.2.  Each Fund as may from time to time be established shall be a common fund in which each Participant shall have an undivided interest in the respective assets of the Fund, provided that all accounts segregated and all loans made to Participants pursuant to the provisions of Section 7.11 (Loans) shall together with any income or expense of such Accounts or loans be accounted for separately and will not be included in any of the adjustments resulting from the application of this Section 5.2.  Except as otherwise provided, the value of each Participant’s Accounts in such Funds shall be measured by the value of the shares or Units of such Fund credited to his Accounts as of the date that such valuation is being determined.  For purposes of allocation of income and valuation, each Fund shall be considered separately.  No Fund shall share in the gains and losses of any other, and no Fund shall be valued by taking into account any assets or distributions from any other.

	Each Fund shall be established and invested by the Trustee in accordance with investment policies determined, or as the Trustee may be directed, from time to time by the Investment Committee.  The Investment Committee may from time to time also direct that Funds be terminated or that Funds with similar investment objectives be consolidated.  Subject to the Investment Committee’s authority to consolidate, Funds shall be maintained for the various types of Accounts as follows:

	At least one Fund shall be established, maintained and invested with the objective of minimizing the effect of market fluctuations while producing a rate of return consistent with such objective.

	A second Fund shall be established, maintained and invested in common stock of Tellabs, Inc., the Company’s parent holding company (“Tellabs Stock Fund”).

	An additional Fund or Funds shall be established, maintained and invested as the Investment Committee may from time to time direct. 

	Participant investment elections shall be made as follows:

	Subject to subsection (iii) below, the Investment Committee shall direct the Trustee to invest each Participant’s Accounts from time to time among the Funds as the Participant may elect.  A Participant may elect to have a uniform percentage of his Retirement Account, Profit Sharing Account, After-Tax Account, Matching Account, Before-Tax Account, Rollover Account, effective as of April 1, 1999, each of his Coherent Accounts (excluding the value of any loan credited to any such Account), and effective as of May 19, 2000, each of his Salix Accounts (excluding the value of any loan credited to any such Account) credited in increments of 1% to one or more of the Funds.  All contributions to his Retirement Account, Profit Sharing Account, After-Tax Account, Before-Tax Account, and Rollover Account shall be credited to such Funds in accord with such election.

	Subject to subsection (iii) and (vi) below and to any restriction on transfer which result from the investment medium chosen for a Fund, a Participant may elect to transfer in multiples of 1% a uniform percentage of his Retirement Account, Profit Sharing Account, Matching Account, After-Tax Account, Before-Tax Account, Rollover Account, effective as of April 1, 1999, each of his Coherent Accounts (excluding the value of any loan credited to any such Account), and effective as of May 19, 2000, each of his Salix Accounts (excluding the value of any loan credited to any such Account) held in any Fund to one or more different Funds.  Any such election shall not affect any prior election under subsection (i) above.  Loans made pursuant to Section 7.11 (Loans) shall be treated as segregated investments from the Participant’s applicable Accounts, transferred to and from various Funds in accord with uniform rules established by the Administrative Committee.

	Investment of amounts allocated to a Participant’s Retirement Account and Profit Sharing Account shall be subject to the restrictions set forth in this subsection (iii).  No amount attributable to the Retirement Account of any Participant shall be transferred to the Tellabs Stock Fund pursuant to subsection (ii) above.  Amounts contributed to a Participant’s Profit Sharing Account after 1992 shall be invested in the Tellabs Stock Fund and no amount attributable thereto shall be transferred by a Participant from the Tellabs Stock Fund to any other Fund pursuant to subsection (ii) above prior to the date such Participant attains age 55.  No amount attributable to the Profit Sharing Account which is transferred from the Tellabs Stock Fund pursuant to the preceding sentence shall thereafter be transferred to the Tellabs Stock Fund.

	Elections under this Section shall be made at such times in accordance with procedures established by the Administrative Committee.  Such elections shall be effective as of the Entry Date following timely receipt by the Administrative Committee.

	To the extent provided in the Trust, or as may be prescribed by the Investment Committee, a Participant may direct the Trustee with respect to the voting or exercise of any other rights with respect to the Funds.  Any such directions shall be made in the manner set forth in the trust agreement or as prescribed by the Administrative Committee.

	Transfer elections to or from the Tellabs Stock Fund (including, for this purpose, liquidation of amounts held in the Tellabs Stock Fund to fund loans or in-service withdrawals pursuant to Sections 7.10 (Distribution of Participants’ After-Tax Account and Rollover Account), 7.11 (Loans), 7.12 (Withdrawals Prior to Termination of Employment and After Age 59-1/2) or 7.13 (Hardship Withdrawals) below (other than distributions or transactions made in connection with death, disability, retirement or termination of employment)) made by a Participant who is subject to the liability provisions of Section 16 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), shall not be effective unless such transfer election is made at least six months following the date of the most recent transfer election made by such Participant under this Plan, or under any other plan maintained by the Employer, that effected a “discretionary transaction” within the meaning of Rule 16b-3 promulgated under Section 16 of the 1934 Act that was an “opposite way” transaction.  For this purpose, a transfer into the Tellabs Stock Fund (or similar fund under another plan) is an “opposite way” transaction from a transfer or distribution out of the Tellabs Stock Fund (or similar fund under another plan), and vice versa.

	Notwithstanding anything in this Article 5 (Accounting Provisions and Allocations) to the contrary, amounts contributed by the Employers pursuant to Article 14 (Retiree Medical Benefits) shall be allocated, invested and distributed in accordance with the provisions of Article 14 (Retiree Medical Benefits).

	Wherever in this Section 5.2 the term “Participant” is used, it shall be deemed to include, where applicable, (i) the beneficiary of a deceased Participant who is entitled to any portion of the deceased Participant’s Accounts, and (ii) an Alternate Payee under a Qualified Domestic Relations Order described in Code Section 414(p).

	The Plan is intended to constitute a plan described in ERISA Section 404(c) and Title 29 of Federal Regulations Section 2550.404c-1.  To the extent permitted by law, the fiduciary of the Plan shall be relieved of liability for any losses which are the direct and necessary result of investment instructions given by any Participant.

   SECTION 5.3      Unit Values.

	The value of a Unit in each Fund on any Valuation Date shall be the quotient obtained by dividing the sum of (i) the cash and (ii) the fair market value (as determined by the Trustee) of all securities and other property held in such Fund, less any charges and expenses accrued and properly chargeable to such Fund as of said Valuation Date by the aggregate number of Units credited to the Accounts of all Participants with respect to such Fund.  The Trustee will furnish to the Committees a report with respect to the fair market value of all securities and other property held in any Fund as of any Valuation Date.  To the extent that any assets of a Fund have been invested in one or more separate investment trusts, mutual funds, investment contracts or similar investment media, the net earnings or losses attributable to such investments shall be determined in accordance with the procedures of such investment media.

	The value of each Unit in a Segregated Loan Account shall be equal to one dollar.  The value of any note as of each Valuation Date shall be the amount of any outstanding principal.

   SECTION 5.4      Eligibility to Share in Employer Contributions and Forfeitures.

	Under the Retirement Program.  An Active Participant shall be eligible to share in the Retirement Contribution and forfeitures for a given quarter of the Plan Year as of the last day of the quarter for which such contribution or forfeitures are being allocated if he is then employed by the Employer as an Eligible Employee.  A Participant who, during such quarter, retires on or after his Normal Retirement Date, dies or is initially deemed to be totally and permanently disabled in accordance with the Disability Plan shall also be eligible to share in the Retirement Contribution and forfeitures for such quarter.

	Profit Sharing Contribution Under the Savings Program.  An Active Participant shall be eligible to share in the Profit Sharing Contribution and forfeitures for a given quarter of the Plan Year as of the last day of the quarter for which such contribution or forfeitures are being allocated if he is then employed by the Employer as an Eligible Employee.  An Active Participant who, during a Plan Year, retires on or after his Normal Retirement Date, dies or is initially deemed to be totally and permanently disabled in accordance with the Disability Plan, shall also be eligible to share in the Profit Sharing Contribution and forfeitures for said Plan Year.  The Participants eligible to share in the Profit Sharing Contribution for a given Plan Year under subsection 3.3(b) above shall be as the Board of Directors shall determine in connection with its determination of the amount of the Profit Sharing Contribution to be made under subsection 3.3(b) above.

	Matching Contribution Under the Savings Program.  An Active Participant shall be eligible to share in the Matching Contribution for a given quarter of the Plan Year as of the first pay period of the quarter for which such contribution is being allocated.  Eligibility to share in and sharing in the Matching Contribution shall be subject to the conditions and limitations of Sections 3.6 (Matching Contributions Under the Savings Plan) and 3.7 (Limitations on Matching Conditions Under the Savings Plan).

	A Participant eligible to share in the Matching Contribution, the Retirement Contribution and/or Profit Sharing Contribution pursuant to the above subsections (a), (b) and/or (c) shall for purposes of such paragraphs be known as an “Eligible Participant.”

   SECTION 5.5      Allocation of Before-Tax Contributions.  The Before-Tax Contributions made on behalf of a Participant shall be allocated to such Participant’s Before-Tax Account as soon as practicable after the Trustee receives such contribution.

   SECTION 5.6      Allocation of Matching Contributions.  The portion of Matching Contributions made on a bi-weekly payroll basis shall on behalf of a Participant be allocated to the Matching Account of such Participant as soon as practicable after the Trustee receives such contribution.

   SECTION 5.7      Allocation of After-Tax Contributions.  While After-Tax Contributions are not allowed after January 1, 1994, for those Participants who still have an After-Tax Account then as of each Valuation Date, the earnings and interest on the After-Tax Contributions of a Participant received since the prior Valuation Date shall be allocated to such Participant’s After-Tax Account.

   SECTION 5.8      Allocation of Retirement Contribution and Forfeitures.  As of the last day of a Plan Year, the Retirement Contribution (together with the forfeitures taken into account in determining the Retirement Contribution under Section 3.2 (Retirement Contribution Under the Retirement Program), shall be allocated among the Retirement Accounts of all Eligible Participants under subsection 5.4(a) in the ratio that the Considered Compensation of each such Participant for such Plan Year bears to the Considered Compensation of all such Participants for such Plan Year.

   SECTION 5.9      Allocation of Profit Sharing Contribution and Forfeitures.  As of the last day of each quarter of a Plan Year, the Profit Sharing Contribution (together with the forfeitures taken into account in determining the Profit Sharing Contribution under subsection 3.3(a)) above shall be allocated among the Profit Sharing Accounts of all Eligible Participants under subsection 5.4(b) above in the ratio that the Considered Compensation of each such Participant for such quarter bears to the Considered Compensation of all such Participants for such quarter of the Plan Year.  As of the last day of each Plan Year, the portion of the Profit Sharing Contribution under subsection 3.3(b) above, if any, to be allocated for the Plan Year shall be allocated among the Profit Sharing Accounts of all Eligible Participants under subsection 5.4(b) above in the manner prescribed by the Board of Directors with respect to such Profit Sharing Contribution.

   SECTION 5.10      Crediting Accounts.

	All contributions or Rollover Amounts to the Trust made by or on behalf of a Participant shall be deposited in the form of cash or other assets acceptable to the Trustee and consistent with the investment Funds then maintained, including, but not limited to, securities of Tellabs, Inc. and shall be credited to the appropriate Accounts of such Participant as of the date received by the Trust Fund; provided, however, any contributions made with respect to a Plan Year shall be credited to the appropriate Accounts of such Participant as of the last day of such Plan Year.

	For each amount allocable to the Accounts of any Participant with respect to any Fund, his Accounts with respect thereto shall be credited with a number of Units equal to the quotient obtained by dividing such amount by the value of a Unit, determined as of the applicable Valuation Date.

	The Administrative Committee shall also establish and maintain an Account with respect to each Segregated Loan made to a Participant pursuant to Section 7.11 (Loans).  The Participant’s Segregated Loan Account shall be credited with a number of Units determined in accordance with Section 5.3 (Unit Values) and equal to the value of any notes held by the Account.  A number of Units equal to the value of any principal payments by the Participant to the Segregated Loan Account shall be promptly charged to the Segregated Loan Account and transferred along with any interest payments to the separate investment Funds in accordance with the Participant’s investment election then in effect under Section 5.2 (Common Fund).

   SECTION 5.11      Provisional Annual Addition.    The sum of the amounts allocated to the Accounts of each Participant pursuant to Sections 5.5 (Allocation of Before-Tax Contributions), 5.6 (Allocation of Matching Contributions), 5.7 (Allocation of After-Tax Contributions), 5.8 (Allocation of Retirement Contribution and Forfeitures) and 5.9 (Allocation of Profit Sharing Contribution and Forfeitures) for a Plan Year shall be known as the “Provisional Annual Addition” and shall be subject to the limitation on Annual Additions in Section 5.12 (Limitation on Annual Additions).

   SECTION 5.12      Limitation on Annual Additions.

	For the purpose of complying with the restrictions on Annual Additions to defined contribution plans imposed by Code Section 415, for each Active Participant during the Plan Year, there shall be computed a Maximum Annual Addition, which:

	for Plan Years effective prior to January 1, 2002, shall be the lesser of:

	25% of his Total Compensation for the Plan Year; or

	the Defined Contribution Dollar Limitation for the Plan Year.

	for Plan Years effective on or after January 1, 2002, except as permitted under subsection 3.5(a)(ii) above and Code Section 414(v), if applicable, shall be the lesser of:

	100% of his Total Compensation for the Plan Year; or

	the Defined Contribution Dollar Limitation for the Plan Year.

The compensation limit referred to in subsection (A) above shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code Section 401(h) or Code Section 419A(f)(2)) which is otherwise treated as an Annual Addition.

If a short Limitation Year is created because of an amendment changing the Limitation Year to a different 12 consecutive month period, the Maximum Annual Addition will not exceed the Defined Contribution Dollar Limitation multiplied by the following fraction:

Number of months in the short Limitation Year

12

The limitation under subsection (a) above shall not apply to any contribution for medical benefits within the meaning of Code Section 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 Section 415(l)(2).

	If the Maximum Annual Addition for a Participant equals or exceeds the Provisional Annual Addition for that Participant, an amount equal to the Provisional Annual Addition shall be allocated to the Participant’s respective Accounts.

	If the Provisional Annual Addition exceeds the Maximum Annual Addition for that Participant, the Provisional Annual Addition shall be reduced as set forth below until the Provisional Annual Addition as so reduced equals the Maximum Annual Addition for such Participant:

	first, the Tentative Employer Contribution allocable to such Participant’s respective Accounts shall be reduced by reducing (A) the Supplemental Before-Tax Contributions, and (B) the Basic Before-Tax Contributions and Matching Contributions, proportionately, in that order;

	second, the Tentative Employer Contribution allocable to such Participant’s respective Accounts shall be reduced by reducing the Profit Sharing Contribution; and

	third, the Tentative Employer Contribution allocable to such Participant’s respective Accounts shall be reduced by reducing the Retirement Contribution.

The Provisional Annual Addition remaining after such reductions shall be allocated to the Participant’s respective Accounts.

	Any forfeiture which cannot be allocated under the Plan because of the application of the above limit shall be carried in the Excess Forfeiture Suspense Account for such Plan Year.  In the next succeeding Plan Year the amounts included in such Account shall be treated as a forfeiture for such Plan Year and shall be used to reduce Employer Contributions (as defined in Section 3.1 (Employer Contributions)) for such plan year.  Amounts which are included in the Excess Forfeiture Suspense Account as of the end of a Plan Year shall be treated as a liability of the Trust Fund.  Upon termination of the Plan, amounts then held in the Excess Forfeiture Suspense Account which cannot be allocated pursuant to this Section shall revert to the Employer.

	The Excess Tentative Employer Contribution is an amount equal to the sum of the reductions in the Tentative Employer Contribution allocable to the Accounts of Participants pursuant to subsection (b) above.

	Contributions made under Section 2.5 (Qualified Military Service) shall be treated as Annual Additions for the Plan Year to which they relate instead of the Plan Year when they are actually made.

ARTICLE 6

Amount of Payments to Participants

   SECTION 6.1      
General Rule.    Upon the retirement, disability, resignation or dismissal of a Participant, he, or in the event of his death, his beneficiary, shall be entitled to receive from his respective Accounts in the Trust Fund:

	an amount equal to the value of the Units credited to the Participant’s Profit Sharing Account attributable to pre-1993 contributions, Before-Tax Account, Matching Account, After-Tax Account, Rollover Account, Coherent Before-Tax Account, Coherent Rollover Account, Salix Before-Tax Account, Salix Employer Account and Salix Rollover Account, plus any of the Participant’s Before-Tax Contributions and After-Tax Contributions made to the Trust Fund but not included in the Participant’s Units as of such Valuation Date; and

	an amount equal to the value of the Units credited to the nonforfeitable portion of the Participant’s Retirement Account, Post-1992 Profit Sharing Account and Coherent Employer Account determined as hereafter set forth.

The time and manner of distribution of a Participant’s Accounts shall be determined in accordance with Article 7 (Distributions).

   SECTION 6.2      Normal Retirement.  Any Participant may retire on or after his Normal Retirement Date, at which date the forfeitable portion, if any, of his Retirement Account and Post-1992 Profit Sharing Account shall become nonforfeitable.  If the retirement of a Participant is deferred beyond his Normal Retirement Date, he shall continue in full participation in the Plan and Trust Fund.

   SECTION 6.3      Death.  As of the date any Participant dies while employed by the Employer or an Affiliate, the forfeitable portion, if any, of his Retirement Account and Post-1992 Profit Sharing Account shall become nonforfeitable.

   SECTION 6.4      Disability.  As of the date any Participant shall be determined by the Administrative Committee to have become totally and permanently disabled because of physical or mental infirmity in accordance with the Disability Plan while in the employ of the Employer or an Affiliate and his employment shall have terminated, the forfeitable portion, if any, of his Retirement Account and Post-1992 Profit Sharing Account shall become nonforfeitable.

   SECTION 6.5      Vesting.  A Participant’s interest in his Accounts, other than his Retirement Account and Post-1992 Profit Sharing Account (and Coherent Employer Account in accordance with Section 6.6 (Resignation or Dismissal), shall be nonforfeitable at all times.  A Participant who has completed five (5) or more Years of Service shall have a nonforfeitable interest in his Retirement Account, and his Post-1992 Profit Sharing Account.

   SECTION 6.6      Resignation or Dismissal.  If any Participant shall incur a Termination Date, prior to the date his Retirement Account and Post-1992 Profit Sharing Account shall become nonforfeitable in accordance with Section 6.5 (Vesting), other than in circumstances described in Section 6.2 (Normal Retirement), 6.3 (Death) or 6.4 (Disability), then the Retirement Account and Post-1992 Profit Sharing Account of such Participant shall be treated as a forfeiture pursuant to Section 6.7 (Treatment of Forfeitures).  The Coherent Employer Account of any Coherent Participant who shall have incurred a Termination Date prior to April 1, 1999 and who incurred a forfeiture because such Account was not 100% nonforfeitable as of such Termination Date shall be treated as a forfeiture pursuant to Section 6.7 (Treatment of Forfeitures) as if the Coherent Participant’s termination of employment occurred on April 1, 1999.

   SECTION 6.7      Treatment of Forfeitures.

	Upon termination of a Participant’s employment with the Company and all Affiliates, if his Retirement Account and Post-1992 Profit Sharing Account become a forfeiture pursuant to Section 6.6 (Resignation or Dismissal), each Account shall become allocable pursuant to Sections 5.8 (Allocation of Retirement Contribution and Forfeitures) and 5.9 (Allocation of Profit Sharing Contribution and Forfeitures), as applicable, at the end of the last day of the quarter of the Plan Year in which the termination of employment occurred if the Participant is not then reemployed by the Employer or an Affiliate.  Any Coherent Employer Account treated as a forfeiture on April 1, 1999 pursuant to Section 6.6 (Resignation or Dismissal) shall be allocable pursuant to Section 5.9 (Allocation of Profit Sharing Contribution and Forfeitures) as of June 30, 1999.

	If the Participant is reemployed by the Employer or an Affiliate without incurring a Period of Severance of five consecutive years, the amount of the forfeitures shall be restored to his Retirement Account, Profit Sharing Account and Coherent Employer Account as of the last day of the quarter of the Plan Year in which he is reemployed and shall be deducted from the forfeitures which otherwise would be allocable as of such date or, to the extent such forfeitures are insufficient, shall require a supplemental contribution from the Employer.

ARTICLE 7

Distributions

   SECTION 7.1      
Commencement and Form of Distributions.

	Except as otherwise provided in subsection (g) below a Participant (and, when applicable for distributions from the Retirement Account, the Participant’s spouse) must consent, in writing to any distribution of the Participant’s Accounts in the Trust Fund.  Distribution of a Participant’s Accounts in the Trust Fund shall commence not later than the first to occur of:

	the 60th day after the close of the later of the Plan Year in which the Participant attains his Normal Retirement Date or terminates employment with the Company and all Affiliates, unless the Participant has requested to defer the distribution to a later date; or

	on or as soon as practicable after the date set forth in the Participant’s request for distribution, provided the Administrative Committee informs the Participant, as outlined in subsection 7.1(i) below, that the Participant has a right for a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and a particular distribution option).

	A Participant who continues employment after his Normal Retirement Date may elect to receive distribution of his Accounts in the manner described in subsection (a)(i) above.  A Participant employed by an Employer after his Normal Retirement Date will be deemed to have requested a deferral, unless he specifically requests a distribution.

	In all events, distribution shall commence no later than the Required Beginning Date, and subsequent distributions required to be made each year for compliance with Code Section 401(a)(9) and the regulations promulgated thereunder shall be made no later than December 31 of such year.  However, in the event that a domestic relations order is received by the Administrative Committee, required distributions on or after the required beginning date may be postponed until the order is determined to be qualified or not pursuant to Section 12.3 (Qualified Domestic Relations Order).

	Form of Distribution for Accounts other than the Retirement Account:

	Effective for distributions made on or after February 1, 2002, the Accounts distributable to a Participant, other than the Retirement Account, shall be distributed in one or more of the following ways, as the Participant may request by filing such notice as shall be prescribed by the Administrative Committee, and in accordance with applicable laws and regulations:

	by payment in a single sum; or

	by a direct rollover to an employee’s trust in which he is a participant, which is described in Code Section 401(a) and which is exempt from tax under Code Section 501(a), or to an individual retirement arrangement described in Code Section 408, in accordance with Section 7.14 (Eligible Rollover Distributions).

	Effective for distributions prior to February 1, 2002, the Accounts distributable to a Participant, other than the Retirement Account, shall be distributed in one or more of the following ways, as the Participant may request by filing such notice as shall be prescribed by the Administrative Committee, and in accordance with applicable laws and regulations:

	by payment in a single sum;

	in substantially equal monthly, quarterly, semi-annual or annual installments which, except for the final payment, shall not be less than $100; or

	by a direct rollover to an employee’s trust in which he is a participant, which is described in Code Section 401(a) and which is exempt from tax under Code Section 501(a), or to an individual retirement arrangement described in Code Section 408, in accordance with Section 7.14 (Eligible Rollover Distributions).

	The Retirement Account distributable to a Participant shall be distributed pursuant to Section 7.2 (Qualified Joint and Survivor Annuity) and 7.3 (Pre-Retirement Survivor Annuity — Retirement Account, Salix Accounts and Coherent Accounts) of this Article, unless the Qualified Joint and Survivor Annuity or Survivor Annuity form of distribution are waived and such Account is distributed pursuant to the Participant’s or Surviving Spouse’s election under subsection 7.1(d) above.

	The value of the Participant’s Accounts shall be paid to the Participant over a period not to exceed his life expectancy or the joint life expectancy of the Participant and his Individual Beneficiary.  The minimum amount of any installment distribution and determination of the life expectancy of a Participant and the joint life expectancy of a Participant and his Individual Beneficiary shall be determined in accordance with the regulations prescribed under Code Section 401(a)(9); provided that the life expectancy of a Participant or his spouse shall be re-determined annually.  

	In no event shall the amount distributable in any year be less than the amount determined in accordance with the minimum distribution incidental benefit requirements of Treasury Regulation Section 1.401(a)(9)-2.

	However, with respect to all distributions under the Plan made for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Code Section 401(a)(9) in accordance with the regulations under Code Section 401(a)(9) that were proposed on January 17, 2001, notwithstanding any provision of the Plan to the contrary.  This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under Code Section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service.

	Notwithstanding anything in this Section 7.1 to the contrary, if the present value of the nonforfeitable portion of the Participant’s Retirement Account, or if the vested balance of the Participant’s remaining Accounts does not exceed $3,500 at the time a distribution is to be made from the Plan (or at the time of any prior distributions did not exceed $3,500) and distribution pursuant to this Section 7.1 has not otherwise commenced, the Administrative Committee shall direct the Trustee to distribute such amount in a single sum payment to the individual so entitled and the payment thereof shall be in full satisfaction of any liability of the Trust to such individual.  Any Participant whose vested balance of his Employer Account is 0% shall be deemed to have received a single sum payment upon termination of employment.  Effective with the 1998 Plan Year, $5,000 shall be substituted wherever $3,500 appears in this subsection (g).  Effective for distributions made on or after March 22, 1999, the $5,000 cash out amount shall apply at the time a distribution is made, regardless of whether the Participant’s vested Account balances exceeded $5,000 at the time of any prior distribution.  Effective for distributions made after December 31, 2001, the present value of a Participant’s nonforfeitable accrued benefit may be determined without regard to the portion of the benefit that is attributable to Rollover Contributions (and any earnings allocable to the rollover contributions).  Rollover Contributions are defined as any rollover contribution under Code Sections 402(c), 403(a)(4), 403(b)(8), 438(d)(3)(A)(ii) and 457(e)(16).

	Notwithstanding anything in this Section 7.1 to the contrary, if the amount of any distribution required to commence on a certain date cannot be ascertained by such date, a payment retroactive to such date may be made no later than 60 days after the earliest date on which such amount can be ascertained.

	The Administrative Committee shall furnish each Participant who has a vested interest in a Retirement Account a general written explanation, in a manner that would satisfy the notice requirements of Sections 1.411(a)-11(c) and 1.417(e)-1(b) of the income tax regulations, of the terms and conditions of the Qualified Joint and Survivor Annuity, the Participant’s right to make and the effect of an election to waive it, the rights of the Participant’s spouse, the Participant’s right to revoke an election to waive the Qualified Joint and Survivor Annuity and the effect of such a revocation.  This general explanation shall be furnished to a Participant within 90 days before the Participant’s Annuity Starting Date.

	General written explanations under this subsection 7.1(i) shall satisfy the following requirements:

	the Committee informs the Participant that the Participant has a right for a period of at least 30 days after receiving the general explanation to consider the decision of whether to waive the Qualified Joint and Survivor Annuity and consent to another form of distribution,

	the Participant may revoke an election to waive the Qualified Joint and Survivor Annuity until the later of his Annuity Starting Date or the seventh day following the date the general explanation is provided to the Participant,

	the Participant’s Annuity Starting Date is after the date that the general explanation is given to the Participant, and

	the Participant, after receiving the general explanation, affirmatively elects a form of distribution (with appropriate spousal consent as provided in subsection 7.2(c) below), and the actual distribution begins more than seven days after the date the general explanation is provided to the Participant;

	However, notwithstanding the foregoing, a Participant may elect an Annuity Starting Date that is before the date on which the general explanation is provided to the Participant if the following conditions are met:

	the actual distribution begins more than seven days after the date the general explanation is provided to the Participant; and

	the Plan makes retroactive payments to make up for any payments that would have been made since the Annuity Starting Date.

   SECTION 7.2      Qualified Joint and Survivor Annuity — Retirement Account, Salix Accounts and Coherent Accounts.

	Distributions from a Participant’s Retirement Account and prior to February 1, 2002, his Coherent Accounts shall be made in the form of a Qualified Joint and Survivor Annuity unless the Participant has elected not to receive a Qualified Joint and Survivor Annuity pursuant to subsection (c) below.  Prior to February 1, 2002, distributions from a Participant’s Salix Accounts may be made in the form of a Qualified Joint and Survivor Annuity if the Participant makes a written election requesting such form of distribution to the Administrative Committee.  Distributions from a Participant’s Coherent Accounts or his Salix Accounts made on or after February 1, 2002, will only be offered in the form of a lump sum distribution.

	Benefits payable in the form of a Qualified Joint and Survivor Annuity shall be paid by distributing to the Participant an annuity contract purchased by the Trustee at the direction of the Administrative Committee with the nonforfeitable balance of the Participant’s Retirement Account, Salix Accounts and Coherent Accounts determined on the Valuation Date preceding the date of purchase.  Any such annuity contract shall be nonassignable and noncommutable and shall be subject to the election, consent, written explanation and Survivor Annuity requirements of this Article 7 (Distributions).  Delivery of such contract shall be in full satisfaction of the rights of the Participant hereunder with respect to such Account, and upon delivery of any such contract, the Participant shall not have any interest in the Trust Fund but shall look solely to the insurer issuing such contract for the payment of benefits.

	Elections and revocations of a Qualified Joint and Survivor Annuity shall be made as follows:

	A Participant may, within 90 days before his Annuity Starting Date elect not to receive a Qualified Joint and Survivor Annuity and, in lieu thereof, elect to receive distribution of such Account in the same time and manner as distribution of his other Accounts.  Such elections may be revoked and elections and revocations made at a time after the general explanation in subsection 7.1(a)(ii) above has been provided, and if so revoked the Participant’s benefit shall automatically be paid in the form of a Qualified Joint and Survivor Annuity unless he has elected another form of payment pursuant to subsection 7.1(d) above.

	If a Participant is married on his Annuity Starting Date, to be effective, any elections hereunder and under subsection 7.3(e) or 7.7(b) below must have the consent of the Participant’s spouse unless the Participant establishes to the satisfaction of the Administrative Committee that the consent of the spouse cannot be obtained because there is no spouse, such spouse cannot be located or by reason of such other circumstances as may be prescribed by regulations.  Any consent (or establishment that the consent cannot be obtained) shall be effective only with respect to such spouse.  Such consent shall be in writing, witnessed by a Plan representative or notary public, acknowledging the effect of the election and any nonspouse beneficiary, including any class of beneficiary or any contingent beneficiary, designated under the form of benefit elected, and shall be irrevocable with respect to such form and beneficiary designation.

	Notwithstanding the above, the consent of a Participant’s spouse to the waiver of a Qualified Joint and Survivor Annuity shall not be required if the Participant was not married throughout the one-year period ending on his Annuity Starting Date.  A Participant who marries within one year before his Annuity Starting Date and is married to such spouse for a one-year period ending prior to his death shall be deemed to have been married throughout the one-year period ending on his Annuity Starting Date.

	If the spouse of a Participant dies, or is divorced from the Participant before the Participant’s Annuity Starting Date, the Participant’s retirement benefit shall not be reduced in accordance with this Section.  If a Participant’s spouse dies or is divorced from the Participant on or after the Participant’s Annuity Starting Date, but prior to the death of the Participant, the Qualified Joint and Survivor Annuity shall continue to be paid in the same reduced amount determined under this Section.

	If the Participant dies before his Annuity Starting Date, no annuity shall be payable to his spouse pursuant to this Section and the benefit payable to such spouse, if any, shall be determined under Sections 7.3 (Pre-Retirement Survivor Annuity — Retirement Account, Salix Accounts and Coherent Accounts), 7.4 (Distributions to Beneficiaries) or 7.6 (Installment or Deferred Distributions).  If the Participant dies after his Annuity Starting Date and while receiving benefits in the form of a Qualified Joint and Survivor Annuity, the spouse to whom the Participant was married on his Annuity Starting Date shall, except as may be otherwise provided in any Qualified Domestic Relations Order, be entitled to receive the survivor annuity benefit whether or not the Participant and such spouse are married on the date of the Participant’s death.

   SECTION 7.3      Pre-Retirement Survivor Annuity — Retirement Account, Salix Accounts and Coherent Accounts

	The Retirement Account and prior to February 1, 2002, the Coherent Accounts and Salix Accounts in the Trust Fund distributable to a Participant who dies prior to his Annuity Starting Date and who is married on the date of his death shall be distributed in the form of an annuity for the life of his surviving spouse (“Pre-Retirement Survivor Annuity”) unless such Participant has elected not to have benefits paid in the form of a Pre-Retirement Survivor Annuity pursuant to subsection (e) below or the surviving spouse elects otherwise pursuant to subsection (d) below.  For distributions made from a Participant’s Coherent Accounts or his Salix Accounts on or after February 1, 2002, only a lump sum distribution will be offered.

	Benefits payable in the form of a Pre-Retirement Survivor Annuity shall be paid by distributing to the surviving spouse of the Participant an annuity contract purchased by the Administrative Committee with the nonforfeitable balance of the Participant’s Retirement Account, Salix Accounts and Coherent Accounts on the Valuation Date preceding the date of purchase.  Such annuity contract shall provide for level monthly payments for the life of the surviving spouse of the Participant commencing as soon as practicable thereafter.  Any such annuity contract shall be nonassignable and noncommutable.  Delivery of any such contract shall be in full satisfaction of the rights of the Participant’s spouse.

	Payment of the Pre-Retirement Survivor Annuity shall commence as of the first day of the month coinciding with or next following the latest of:

	the date the Participant dies; or

	the date the Participant’s surviving spouse elects, but not later than the Participant’s Normal Retirement Date.

	Notwithstanding subsection (b) above, the surviving spouse of a Participant may elect to receive a distribution of the balance of the deceased Participant’s Retirement Account, Salix Accounts and Coherent Accounts in a single sum by filing an election with the Administrative Committee at such time and in such manner as the Administrative Committee shall provide.

	A Participant may elect not to have a Pre-Retirement Survivor Annuity paid to his surviving spouse.  Such election may be made at any time during the Election Period described in subsection (f) below.  In addition, a Participant may elect to waive the Pre-Retirement Survivor Annuity prior to the Election Period, provided he has been given the information described in subsection (g) below prior to making such election, and further provided that such election shall become invalid as of the first day of the Plan Year in which the Participant attains age 35.  To be effective, any such election shall require the consent of the Participant’s spouse as provided in subsection 7.2(c).  Any such election may be revoked by the Participant within the Election Period.

	The Election Period shall commence on the first day of the Plan Year in which the Participant attains age 35 and end on the earlier of:

	the date of the Participant’s death, or

	his Annuity Starting Date.

provided that, in the case of a Participant who separates from service prior to attaining age 35 and who has a nonforfeitable right to any portion of his Accounts, the Election Period shall commence on the date of his separation from service with respect to his Accounts as of such date.

	The Administrative Committee shall furnish each Participant a general written explanation of the terms and conditions of the Pre-Retirement Survivor Annuity, the Participant’s right to make and the effect of an election to waive it, the rights of the Participant’s spouse, the Participant’s right to revoke an election to waive the Pre-Retirement Survivor Annuity and the effect of such revocation.  Such information shall be provided within the period beginning on the first day of the Plan Year in which the Participant attains age 32, and ending with the last day of the Plan Year preceding the Plan Year in which the Participant attains age 35, provided however, that:

	If an individual becomes a Participant after attaining age 32, the information described above shall be provided no later than the close of the second Plan Year following the date he became a Participant; and

	If a Participant separates from service prior to attaining age 35 and has a nonforfeitable right to any portion of his Retirement Account, Salix Accounts and Coherent Accounts, the information described above shall be provided to him/her no later than one year after his separation from service.

   SECTION 7.4      Distributions to Beneficiaries

	Except as otherwise provided in this Section 7.4, the balance of a deceased Participant’s Accounts other than the Retirement Account and prior to February 1, 2002, his Salix Accounts and Coherent Accounts which are distributable to a beneficiary shall be distributed in one or more of the forms described in subsection 7.1(d)(i) or 7.1(d)(ii) above, in accordance with an effective designation filed by the Participant with the Administrative Committee or, if no such designation has been filed, in one of such forms as the beneficiaries shall request.

	If the distribution of the Participant’s Accounts has begun in accordance with Section 7.1 (Commencement and Form of Distribution), any form of distribution to a beneficiary under this Section 7.4 shall be designed to distribute the balance of the deceased Participant’s Accounts at least as rapidly as under the method of distribution in effect at the time of the Participant’s death.

	If the distribution of a Participant’s Accounts has not commenced at the time of his death, any form of distribution to a beneficiary shall be designed to distribute the balance of the deceased Participant’s Accounts as follows:

	Any portion of the Accounts payable to or for the benefit of an Individual Beneficiary may be distributed over a period not to exceed the life expectancy of such Individual Beneficiary if such payments commence not later than the December 31 coinciding with or next following the first anniversary of the Participant’s death, unless such Individual Beneficiary is the surviving spouse of the Participant, in which case such payments need not commence until the later of:

	the December 31 coinciding with or next following the first anniversary of the Participant’s death, or

	the December 31 of the calendar year in which the Participant would have attained age 70-1/2.

	If the Participant’s surviving spouse is an Individual Beneficiary and dies prior to the commencement of benefit payments to such spouse, subsection (i) above shall be applied as if the Participant’s death had occurred on the date of such spouse’s death.

	Unless distribution is made in accordance with subsection (i) or (ii) above, the balance of the Participant’s Accounts shall be distributed in full no later than the December 31 coinciding with or next following the 5th anniversary of the Participant’s death.

	If a beneficiary to whom payments have commenced dies prior to receipt of all such payments, the remaining balance of the Participant’s Accounts shall be distributed as described in subsection 7.5(d) at least as rapidly as under the method of distribution in effect at the time of the beneficiary’s death.

	The life expectancy of an Individual Beneficiary who is the surviving spouse of the Participant shall be re-determined annually in accordance with regulations prescribed under Code Section 401(a)(9).

   SECTION 7.5      Beneficiary Designations.

	Unless a Participant has effectively elected otherwise in accordance with this Section 7.5, the distributable balance of a deceased Participant’s Accounts shall be paid to his surviving spouse.

	The distributable balance of a deceased Participant’s Accounts shall be distributed to the persons effectively designated by the Participant as his beneficiaries.  To be effective, the designation shall be filed with the Administrative Committee in such written form as the Administrative Committee requires and may include contingent or successive beneficiaries; provided that any designation by a Participant who is married at the time of his death or, if earlier, the date his benefit payments commence, which fails to name his surviving spouse as the sole primary beneficiary shall not be effective unless such surviving spouse has consented to the designation in writing, witnessed by a Plan representative or notary public, acknowledging the effect of the designation and the specific non-spouse beneficiary, including any class of beneficiaries or any contingent beneficiary.  Such consent shall be irrevocable with respect to such beneficiary designation.  Such consent shall not be required if the Participant establishes to the satisfaction of the Administrative Committee that the consent of the Participant’s spouse cannot be obtained because there is no spouse, such spouse cannot be located or by reason of such other circumstances as may be prescribed by regulations.  Any consent (or establishment that the consent cannot be obtained) shall be effective only with respect to such spouse.  Any Participant may change his beneficiary designation at any time by filing with the Administrative Committee a new beneficiary designation (with such spousal consent as may be required).  Notwithstanding the foregoing, designation of a beneficiary by a Participant who did not have an Hour of Service after August 22, 1984, shall not require the consent of his surviving spouse to be effective.

	If a Participant dies, and to the knowledge of the Administrative Committee after reasonable inquiry leaves no surviving spouse, has not filed an effective beneficiary designation or has revoked all such designations, or has filed an effective designation but the beneficiary or beneficiaries predeceased him, the distributable portion of the Participant’s Accounts shall be paid to the executor or administrator of the Participant’s estate.

	If the beneficiary, having survived the Participant, dies prior to the final and complete distribution of the Participant’s Accounts, then the distributable portion of said Accounts shall be paid:

	to the beneficiary named in the most recent effective beneficiary designation filed by the Participant’s original beneficiary in accordance with such designation; or

	if no such beneficiary has been named, to the executor or administrator of the beneficiary’s estate.

   SECTION 7.6      Installment or Deferred Distributions.    If distribution is made to a Participant or to the beneficiary of a deceased Participant in installments or is deferred, the undistributed vested balance shall share in the net earnings or losses (including the net adjustments in the value of the Trust Fund) as provided in Section 5.3 (Unit Values) and such Participant or beneficiary shall be entitled to make elections with respect to the transfer of such balance among the investment Funds in accordance with Section 5.2 (Common Fund).

   SECTION 7.7      Form of Elections and Applications for Benefits.  Any election, revocation of an election or application for benefits pursuant to the Plan shall not be effective unless it is:

	made on such form, if any, as the Administrative Committee may prescribe for such purpose;

	signed by the Participant and, if required by subsection 7.2(c) above or Section 7.5 (Beneficiary Designations), by the Participant’s spouse; and

	filed with the Administrative Committee.

   SECTION 7.8      Unclaimed Distributions.    In the event any distribution cannot be made because the person entitled thereto cannot be located and the distribution remains unclaimed for 2 years after the distribution date established by the Administrative Committee, then such amount shall be treated as a forfeiture as of the last day of the Plan Year in which such 2-year period ended, shall reduce the Retirement Contribution and Profit Sharing Contribution of such person’s Employer for said Plan Year, and shall be allocated as part of such Contributions to the Trust Fund in accordance with Section 5.8 (Allocation of Retirement Contribution and Forefeitures).  In the event such person subsequently files a valid claim for such amount, such amount treated as a forfeiture (without any earnings thereon) shall be restored to the Participant’s Accounts by an additional Employer Contribution (as defined in Section 3.1 (Employer Contribution)) allocable to such Accounts.

   SECTION 7.9      Distributions in Kind.    The Administrative Committee shall, upon request of a Participant or beneficiary, distribute amounts from the Fund invested in common stock of the Company in shares of such stock, provided that cash in lieu of any fractional shares shall be distributed.  In the event any distributions to a Participant or beneficiary are made in kind, the assets so distributed shall be valued at their fair market value as of the distribution date established by the Administrative Committee.

   SECTION 7.10      Distribution of Participant’s After-Tax Account, Rollover Account, Salix Rollover Account and Coherent Rollover Accounts Prior to Termination of Employment.    A Participant, with the written consent of his spouse if applicable, may direct the Administrative Committee to make the following payments:

	An amount equal to the balance in the Participant’s After-Tax Account as determined on the Valuation Date coinciding with or immediately preceding such direction (less any distribution made to the Participant from the Valuation Date to the date of payment).

	An amount not to exceed his After-Tax Account on the Valuation Date coinciding with or immediately preceding such action provided the Participant limits such payments to one withdrawal for each Plan Year.

	An amount not to exceed the balance in the Participant’s Rollover Contribution Account, Salix Rollover Account and Coherent Rollover Account, provided that no such distribution shall reduce the Participant’s Accounts to an amount equal to the amount of any unpaid loan made pursuant to Section 7.11 (Loans).

	Notwithstanding the foregoing:

	No distribution pursuant to this Section 7.10 shall be made which reduces the aggregate balance of the Participant’s Accounts below the amount of the unpaid balance of any loan pursuant to Section 7.11 (Loans); and

	Only one distribution from a Participant’s Rollover Account pursuant to this Section 7.10 shall be permitted for each Plan Year; and

	No more than an aggregate of two distributions from a Coherent Participant’s Coherent Rollover Account under this Section 7.10 and from any Coherent Account under Sections 7.12 (Withdrawals Prior to Termination of Employment and After Age 59-1/2) and 7.13 (Pre-59-1/2 Coherent Account Withdrawals; Hardship Withdrawals) shall be permitted for each Plan Year.  This subsection (iii) shall expire December 31, 2001.

	Distributions pursuant to this Section 7.10 shall be made from the respective Account invested in the separate Funds.  The amounts distributed from such separate Funds shall be determined pursuant to procedures established by the Administrative Committee and subject to the limitations or restrictions thereon imposed by the sponsor(s) of the respective Fund.

	Any distribution of a Participant’s After-Tax Account shall be deemed to be made in the following order:

	contributions allocated to the pre-1987 After-Tax sub-account then earnings on the pre-1987 After-Tax sub-account;

	contributions allocated to the post-1986 After-Tax sub-account then earnings on the post-1986 After-Tax sub-account.

	Withdrawals made pursuant to this Section 7.10 from a Coherent Participant’s Coherent Rollover Account or a Salix Participant’s Salix Rollover Account shall be subject to the provisions of Section 7.2 (Qualified Joint and Survivor Annuity - Retirement Account, Salix Accounts and Coherent Accounts.)

	Any distribution from a Participant’s Rollover Account, Salix Rollover Account and Coherent Rollover Account shall be deemed to be made first from the Rollover Account and then from the Salix Rollover Account or Coherent Rollover Account.

   SECTION 7.11      Loans.

	Upon the submission by the Participant of a written loan application form as prescribed by the Administrative Committee, or any other process approved by the Administrative Committee, a Participant shall be able to obtain a loan from his Accounts other than the Retirement Account and his Profit Sharing Account attributable to post-1992 Profit Sharing Contributions; provided, however, that if the Administrative Committee reasonably believes that the Participant either does not intend to repay the loan or lacks proper financial ability to repay the loan, it shall not grant such a loan.  A Participant shall have no more than three loans outstanding at any time.

	Loans shall be an asset of the Participant’s Accounts and shall be treated in the manner of a segregated account.

	The amount of any loan shall not be less than $1,000 and shall not exceed 50% of the amount which the Participant would be entitled to receive from his Accounts other than his Retirement Account and his Profit Sharing Account attributable to post-1992 Profit Sharing Contributions, if he had resigned from the service of the Employer and all Affiliates on the Valuation Date immediately preceding the date of such authorization; provided, however, that the Administrative Committee may, in its sole discretion, approve a loan in an amount less than $1,000 in the event that a Participant demonstrates financial hardship; provided further, however, that the amount of such loan shall not exceed $50,000 reduced by the greater of:

	the highest outstanding balance of loans to the Participant from the Trust Fund during the one-year period ending on the day before the date on which such loan is made or modified; or

	the outstanding balance of loans to the Participant from the Trust Fund on the date on which such loan is made or modified.

	Such loans shall be made available on a reasonably equivalent basis to all Participants and beneficiaries who have vested Account balances in the Plan and who either:

	are active employees; or

	are determined by the Administrative Committee to be “parties in interest” as that term is defined in ERISA Section 3(14), so long as the making of such loans does not discriminate in favor of Highly Compensated Employees.

	Loans shall be made on such terms as the Administrative Committee may prescribe, provided that any such loan shall be evidenced by a note, shall bear interest on the unpaid balance thereof at a reasonable rate per annum to be set from time to time by the Administrative Committee which is commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances, shall bear the loan processing fee as the Administrative Committee shall from time to time approve and shall be secured by the Participant’s segregated loan account and such other security as the Administrative Committee in its discretion deems appropriate.

	Repayment:

	Loans shall be repaid by the Participant by payroll deduction or any other method approved by the Administrative Committee that requires level amortization of principal and the loan fee (which amounts shall be applied to defray the administrative expenses of the Plan) and repayments not less frequently than quarterly.  Such loans shall be repaid over a period not to exceed 5 years or a reasonable amount of time as established by the Administrative Committee, not to exceed 15 years, for loans used to acquire a dwelling unit which within a reasonable time is to be used as the principal residence of the Participant as determined under the applicable Code provisions in accordance with procedures established by the Administrative Committee from time to time.  The loan shall be amortized in substantially equal payments over the term of the loan.

	Loan repayments may, however, be suspended during a leave of absence of up to one year if a Participant’s pay from the Employer is insufficient to service the debt, but only if the loan is repaid by the latest date permitted under Code Section 72(p)(2)(B) (which is usually 5 years).  The loan will not be considered in default as provided below during this one year period.

	Loan repayments may, as determined by the Administrative Committee, be suspended under this Plan as permitted under Code Section 414(u) during periods of Qualified Military Service.

	If, at the time benefits are to be distributed (or to commence being distributed) to a Participant with respect to a separation from service or the death of the Participant, there remains any unpaid balance of a loan hereunder, such unpaid balance shall, to the extent consistent with Department of Labor Regulations, become immediately due and payable in full.  Such unpaid balance, together with any accrued but unpaid interest on the loan, shall be deducted from the Participant’s Accounts, subject to the default provisions below, before any distribution of benefits is made, unless the Participant pays back the loan in full.  No loan shall be made or remain outstanding with respect to a Participant under this Section 7.11 after the time distributions to the Participant with respect to a separation from service are to be paid.

	Default:

	Default occurs when any payment of principal or interest is not made as set forth in the promissory note.  In the event of a default, the Participant shall be given a reasonable opportunity to cure such default.  The cure period shall end not later than the last day of the calendar quarter following the calendar quarter in which the required installment payment was due.

	After the cure period has expired, if such default is not cured, the unpaid balance of the loan shall become due and payable, will be treated as a deemed distribution to the Participant.   Further, the unpaid balance of such loan, together with any accrued but unpaid interest on the loan, may in the Administrative Committee’s discretion be charged against the Participant’s segregated loan account.

	If after the Participant’s segregated loan account has been so charged, there remains an unpaid balance of any such loan and interest, then the remaining unpaid balance of such loan shall be charged against any property pledged as security with respect to such loan.

	For any period of time after default during which the Participant’s outstanding loan balance has not been charged against his segregated loan account, the loan will be considered to be outstanding for purposes of determining the amount available for subsequent loans under subsection 7.11(c) above.

   SECTION 7.12      Withdrawals Prior to Termination of Employment and After Age 59-1/2.

	A Participant who has attained age 59-1/2 may elect to withdraw amounts from his Before-Tax Account, After-Tax Account, Rollover Account, Matching Account, Salix Before-Tax Account, Salix Rollover Account, Coherent Before-Tax Account and Coherent Rollover Account as of the Valuation Date coinciding with or immediately preceding the date of such withdrawal; provided, however, that during a Plan Year not more than one withdrawal shall be made pursuant to this Section 7.12; provided, further, for Plan Years starting before December 31, 2001, that during a Plan Year, not more than an aggregate of two withdrawals shall be made by a Coherent Participant from his Coherent Accounts under this Section 7.12, Section 7.10 (Distribution of Participants’ After-Tax Account, Rollover Accounts and Coherent Rollover Account) and Section 7.13 (Pre-59-1/2 Coherent Account Withdrawals; Hardship Withdrawals).

	Withdrawals made pursuant to this Section 7.12 shall be charged against the Participant’s Accounts in the following order:

	Pre-1987 After-Tax Account;

	Post-1986 After-Tax Account;

	Rollover Account;

	Matching Account;

	Before-Tax Account;

	Salix Before-Tax Account or Coherent Before-Tax Account;

	Salix Rollover Account or Coherent Rollover Account.

and made from the separate Funds in which such Accounts are invested pursuant to procedures established by the Administrative Committee, subject to the limitations or restrictions thereon imposed by the sponsor(s) of the respective Funds or by Section 5.2 (Common Fund).

   SECTION 7.13      Pre-59-1/2 Coherent Account Withdrawals; Hardship Withdrawals.

	Withdrawals Prior to Age 59-1/2.  Effective for Plan Years starting on or after December 31, 2001, no withdrawals will be allowed for Participants prior to the age of 59-1/2, except as provided in subsection (b) below.  For Plan Years prior to January 1, 2002, a Coherent Participant who has completed at least five (5) Years of Services may elect to withdraw all or a portion of his Coherent Employer Account and Coherent Rollover Account.  Withdrawals made pursuant to this subsection 7.13(a) shall be charged against the Coherent Participants Coherent Accounts in the following order; provided, however, that during a Plan Year not more than two withdrawals from a Coherent Participant’s Coherent Accounts shall be made pursuant to this Section 7.13, Section 7.10 (Distribution of Participant’s After-Tax Account, Rollover Accounts, Salix Rollover Accounts and Coherent Rollover Accounts Prior to Termination of Employment) and Section 7.12 (Withdrawals Prior to Termination of Employment and After Age 59-1/2).

	Hardship.  A Participant who has not attained age 59-1/2 may, upon the determination by the Administrative Committee that he has incurred a financial hardship, make a hardship withdrawal from his Before-Tax Contributions and Employer Matching Contributions (together with any income allocated to his Before-Tax Account and Matching Account as of December 31, 1988), After-Tax Account, Rollover Account, Salix Before-Tax Account, Salix Rollover Account, Coherent Before-Tax Account and Coherent Rollover Account (but only to the extent of the pre-tax contributions made and pre-1989 earnings allocated thereto).

	In any case where the Participant claims financial hardship, he shall submit a written request for such distribution in accordance with procedures prescribed by the Administrative Committee.  The Administrative Committee shall determine whether the Participant has a financial hardship on the basis of such written request in accordance with this Section 7.10, and such determination shall be made in a uniform and nondiscriminatory manner.  The Administrative Committee shall only make a determination of financial hardship if the distribution is requested on account of an immediate and heavy financial need of the Participant and the funds to be distributed are necessary to satisfy the Participant’s need, taking into account any amounts necessary to pay any Federal, state or local income taxes or penalties reasonably anticipated to result from the distribution.

	The determination of whether a Participant has an immediate and heavy financial need is to be made by the Administrative Committee on the basis of all the relevant facts and circumstances.  The following expenses shall be deemed to constitute an immediate and heavy financial need:

	expenses for medical care (as described in Code Section 213(d)) previously incurred by the Participant, the Participant’s spouse or any dependents of the Participant (as defined in Code Section 152) or necessary for these persons to obtain such medical care;

	the purchase (excluding mortgage payments) of a principal residence for the Participant;

	tuition and related educational fees (including room and board) due for the next 12 months of post-secondary education for the Participant, the Participant’s spouse, children or dependents;

	the need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant’s principal residence; or

	payments necessary to prevent utility shut off or similar immediate housing needs, of the Participant, or the Participant’s spouse, children or dependents (as defined in Code Section 152), payments for child custody or dependent sponsorship fees and expenses, payments for emergency travel expenses, and other similar events or expenses determined to be an immediate and heavy financial need by the Administrative Committee.

	The determination of whether a distribution is necessary to satisfy the immediate and heavy financial need of the Participant shall be made by the Administrative Committee on the basis of all relevant facts and circumstances.  The Administrative Committee may determine that a distribution is necessary to satisfy the immediate and heavy financial need of the Participant if the Participant reasonably demonstrates that all of the following requirements are satisfied:

	the distribution is not in excess of the amount of the immediate and heavy financial need of the Participant, taking into account any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution;

	the Participant has obtained all distributions (other than hardship distributions), and all nontaxable loans that would not cause a financial hardship under all of the plans maintained by the Employer or any Affiliate;

	the Participant will not make any contributions to any retirement plan (other than mandatory employee contributions to a defined benefit plan) maintained by the Employer or any Affiliate for 12 months (6 months effective for hardship distributions made after December 31, 2001) after receiving the hardship distribution; and

	the Participant’s Before-Tax Contributions to this Plan and to all plans maintained by the Employer or any Affiliate in the calendar year following the calendar year of the hardship distribution do not exceed the limitation in Code Section 402(g)(1) applicable to such following calendar year, minus the amount of his Before-Tax Contributions for the calendar year of the hardship distribution.

	Any withdrawals under this Section 7.13 shall not reduce the Participant’s Before-Tax Account below the amount of twice the balance of any outstanding loan made pursuant to Section 7.11 (Loans).

	Withdrawals made pursuant to this Section 7.13 shall be charged against the respective Accounts invested in the separate Funds.  The amounts withdrawn from such separate Funds shall be determined pursuant to procedures established by the Administrative Committee and subject to the limitations or restrictions thereon imposed by the sponsor(s) of the respective Funds.

	Withdrawals made pursuant to this Section 7.13 shall be charged against the Participant’s Accounts in the order provided in subsection 7.12(b) above.

	Withdrawals made pursuant to this Section 7.13 from a Coherent Participant’s Coherent Accounts shall be subject to the provisions of Section 7.2 (Qualifying Joint and Survivor Annuity — Retirement Account, Salix Accounts and Coherent Accounts).

   SECTION 7.14      Eligible Rollover Distributions.

	Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under Article 6 (Amount of Payments to Participants), a distributee may elect, at the time and in the manner prescribed by the Administrative Committee, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

	Eligible rollover distribution:  an eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include:  any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities), beginning with the 2000 Plan Year, any distribution that is a hardship distribution described in Code Section 401(k)(2)(B)(i)(IV); and beginning with the 2002 Plan Year, any distribution which is made upon hardship of the employee.

	Eligible retirement plan:  an eligible retirement plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the distributee’s eligible rollover distribution.  However, in the case of an eligible rollover distribution made on or before December 31, 2001 to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.

For distributions made on or after January 1, 2002, an eligible retirement plan shall also mean an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan.  The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relation Order, as defined in Code Section 414(p).

	For distributions made on or after January 1, 2002, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of After-Tax Contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

	Distributee:  a distributee includes an employee or former employee.  In addition, the employee’s or former employee’s surviving spouse and the employee’s or former employee’s spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relations Order, as defined in Code Section 414(p), are distributees with regard to the interest of the spouse or former spouse.

	Direct rollover:  a direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee.

   SECTION 7.15      Facility of Payment.    When, in the Administrative Committee’s opinion, a Participant or beneficiary is under a legal disability or is incapacitated in any way so as to be unable to manage his affairs, the Administrative Committee may direct the Trustee to make payments:

	directly to the Participant or beneficiary;

	to a duly appointed guardian or conservator of the Participant or beneficiary;

	to a custodian for the Participant or beneficiary under the Uniform Gifts to Minors Act;

	to an adult relative of the Participant or beneficiary; or

	directly for the benefit of the Participant or beneficiary.

Any such payment shall constitute a complete discharge therefor with respect to the Trustee and the Administrative Committee.

   SECTION 7.16      Claims Procedure.

	Any person who believes that he is then entitled to receive a benefit under the Plan, including one greater than that initially determined by the Administrative Committee, may file a claim in writing with the Administrative Committee.

	The Administrative Committee shall within 90 days of the receipt of a claim either allow or deny the claim in writing.  A denial of a claim shall be written in a manner calculated to be understood by the claimant and shall include:

	the specific reason or reasons for the denial;

	specific references to pertinent Plan provisions on which the denial is based;

	a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

	an explanation of the Plan’s claim review procedure.

	A claimant whose claim is denied (or his duly authorized representative) may, within 60 days after receipt of denial of his claim:

	submit a written request for review to the Administrative Committee;

	review pertinent documents; and

	submit issues and comments in writing.

	The Administrative Committee shall notify the claimant of its decision on review within 60 days of receipt of a request for review.  The decision on review 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.

	The 90-day and 60-day periods described in subsections (b) and (d) above, respectively, may be extended at the discretion of the Administrative Committee for a second 90- or 60-day period, as the case may be, provided that written notice of the extension is furnished to the claimant prior to the termination of the initial period, indicating the special circumstances requiring such extension of time and the date by which a final decision is expected.

	Participants and beneficiaries shall not be entitled to challenge the Administrative Committee’s determinations in judicial or administrative proceedings without first complying with the procedures in this Article.  The Administrative Committee’s decisions made pursuant to this Section are intended to be final and binding on Participants, beneficiaries and others.  Further, no legal actions may be commenced with respect to a request by Participant or Participant’s beneficiary for benefits later than two (2) years after the Participant or Participant’s beneficiary originally filed his claim for benefits.

ARTICLE 8

Top-Heavy Plan Requirements

   SECTION 8.1      Top-Heavy Definitions.    For purposes of this Article 8:

	For Plan Years prior to January 1, 2002, a “Key Employee” is any current or former employee (and the beneficiaries of such employee) who at any time during the Determination Period was an officer of the Employer or an Affiliate if such individual’s annual compensation exceeds 50% of the defined benefit dollar limitation in Code Section 415(b)(1)(A), an owner (or considered an owner under Code Section 318) of one of the 10 largest interests in the Employer if such individual’s compensation exceeds 100% of the Defined Contribution Dollar Limitation, a Five-Percent Owner, or a One-Percent Owner of the Employer who has an annual compensation of more than $150,000.  Annual compensation means Total Compensation plus amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the employee’s gross income under Code Section 125, 402(e)(3), 402(h)(1)(B) or 403(b).

For Plan Years beginning on or after January 1, 2002, a “Key Employee” is any employee or former employee (including any deceased employee) who at any time during the Determination Period was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002), a 5-percent owner of the Employer, or a 1-percent owner of the Employer having annual compensation of more than $150,000.  For this purpose, annual compensation means compensation within the meaning of Code Section 415(c)(3).

The determination of who is a Key Employee will be made in accordance with Code Section 416(i)(1) and the regulations thereunder.

	For any Plan Year beginning after December 31, 1983, this Plan is “Top-Heavy” if any of the following conditions exists:

	The Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans;

	This Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%;

	This Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%.

	The “Top-Heavy Ratio” shall be determined as follows:

	If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer has not maintained any defined benefit plan which during the 5-year period ending on the Top-Heavy Determination Date(s) has or has had accrued benefits, the Top-Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the Account balances of all Key Employees as of the Top-Heavy Determination Date(s) (including any part of any Account balance distributed in the 5-year period ending on the Top-Heavy Determination Date(s)), and the denominator of which is the sum of all Account balances (including any part of any Account balance distributed in the 5-year period ending on the Top-Heavy Determination Date(s)), both computed in accordance with Code Section 416 and the regulations thereunder.  Both the numerator and denominator of the Top-Heavy Ratio are increased to reflect any contribution not actually made as of the Top-Heavy Determination Date, but which is required to be taken into account on that date under Code Section 416 and the regulations thereunder.

	If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the Top-Heavy Determination Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for any Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of Account balances under the aggregated defined contribution plan or plans for all Key Employees, determined in accordance with subsection (i) above, and the Present Value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Top-Heavy Determination Date(s), and the denominator of which is the sum of the Account balances under the aggregated defined contribution plan or plans for all Participants, determined in accordance with subsection (i) above, and the Present Value of accrued benefits under the aggregated defined benefit plan or plans for all Participants as of the Top-Heavy Determination Date(s), all determined in accordance with Code Section 416 and the regulations thereunder.  The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the Top-Heavy Determination Date.

	For purposes of subsections (i) and (ii) above the value of Account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Top-Heavy Determination Date, except as provided in Code Section 416 and the regulations thereunder for the first and second plan years of a defined benefit plan.  The Account balances and accrued benefits of a Participant:

	who is not a Key Employee but who was a Key Employee in a prior year; or

	who has not been credited with at least one Hour of Service with any Employer maintaining the Plan at any time during the 5-year period ending on the Top-Heavy Determination Date

will be disregarded.  The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account, will be made in accordance with Code Section 416 and the regulations thereunder.  Deductible employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio.  When aggregating plans the value of Account balances and accrued benefits will be calculated with reference to the Top-Heavy Determination Date(s) that fall within the same calendar year.  The accrued benefit of a Participant other than a Key Employee shall be determined under (1) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (2) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code Section 411(b)(1)(C).

	The “Present Value” shall be based on an interest assumption of 5% and a post-retirement mortality assumption based on the UP-1984 Mortality Table.  However, for Plan Years beginning on or after January 1, 2002, see subsection (f) below.

	“Employer” for the purposes of this Article 8 (Top-Heavy Plan Requirements) means the Employer and all Affiliates except for purposes of determining ownership under Code Section 416(i)(1).

	For Plan Years beginning on or after January 1, 2002, this subsection (f) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date.

	Distributions during year ending on the determination date. The present values of accrued benefits and the amounts of Account balances of an employee at any time during the Determination Period shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the 1-year period ending on the last day of the Determination Period.  The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i).  In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting “5-year period”  for “1-year period.”

	Employees not performing services during the year ending on the Top Heavy Determination Date.  The accrued benefits and Accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Top Heavy Determination Date shall not be taken into Account.

	Minimum Benefits.  For Plan Years beginning on or after January 1, 2002, Employer Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the actual contribution percentage test and other requirements of Code Section 401(m).

   SECTION 8.2      Top-Heavy Plan Requirements.

	Except as otherwise provided in subsections (b) and (c) below, the Profit Sharing Contributions (exclusive of any Before-Tax Contributions) and forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than the lesser of three percent of such Participant’s Total Compensation, or in the case where the Employer has no defined benefit plan which designates this Plan to satisfy Code Section 401, the largest percentage of Profit Sharing Contributions (inclusive of any Before-Tax Contributions) and forfeitures, as a percentage of the Key Employee’s Total Compensation, allocated on behalf of any Key Employee for that year.  The minimum allocation is determined without regard to any Social Security contribution.  This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year because of:

	the Participant’s failure to complete 1,000 Hours of Service (or any equivalent provided in the Plan);

	the Participant’s failure to make mandatory employee contributions to the Plan; or

	Total Compensation less than a stated amount.

	The provision in subsection (a) above shall not apply to any Participant who was not employed by the Employer or an Affiliate on the last day of the Plan Year.

	The provision in subsection (a) above shall not apply to any Participant to the extent the Participant is covered under any other plan or plans of the Employer and the Employer’s contribution and forfeitures allocated under such plan or plans are equal to or exceed the amount required to be allocated under subsection (a) above.

	The minimum allocation required (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).

	For any Plan Year in which this Plan is Top-Heavy, the following schedule shall be substituted for the schedule set forth in Section 6.5 (Vesting), provided that Section 6.5 (Vesting) shall apply to the extent that the nonforfeitable percentage thereunder is greater than the following schedule:

	
Years of Service
	
Nonforfeitable Percentage

	
Less than 2
	
0

	
2 but less than 3
	
20

	
3 but less than 4
	
40

	
4 but less than 5
	
60

	
5 or more
	
100

The minimum vesting schedule applies to all benefits within the meaning of Code Section 411(a)(7) except those attributable to employee contributions, including benefits accrued before the effective date of Code Section 416 and benefits accrued before the Plan became Top-Heavy.  Further, no decrease in a Participant’s nonforfeitable percentage may occur in the event the Plan’s status as Top-Heavy changes for any Plan Year.  However, this Section does not apply to the Account balances of any employee who does not have an Hour of Service after the Plan has initially become Top-Heavy and such employee’s Account balance attributable to Profit Sharing Contributions and forfeitures will be determined without regard to this Section 8.2.

	If a Participant has 3 or more Years of Service as of the last day of the Plan Year for which the vested percentage of his Employer Account was subject to subsection (e) above, he may elect to have the vested percentage of his Employer Account determined under subsection (e) above in any subsequent Plan Year when this Section 8.2 is not applicable.

ARTICLE 9

Powers and Duties of Committees

   SECTION 9.1      Appointment of Committees.

	The Board of Directors of the Company shall name an Administrative Committee to consist of not less than 3 persons to serve as administrator and named fiduciary of the Plan.  The Board of Directors shall also name an Investment Committee hereunder to review investment performance of the Trust Fund, to establish the investment policy for the Trustee, to direct investment of the assets of the Trust Fund and to take such other action provided in this Plan.  Any person, including directors, shareholders, officers and employees of the Employer, shall be eligible to serve on the Committees.  Every person appointed a member of the Committees shall signify his acceptance in writing to the Board of Directors.  In the event the Board of Directors does not appoint an Administrative Committee pursuant to this Section 9.1, the Company shall act as the administrator and a named fiduciary of the Plan and all references to the Administrative Committee shall mean references to the Company so acting as administrator and a named fiduciary of the Plan.

	Members of the Committees shall serve at the pleasure of the Board of Directors and may be removed by the Board of Directors at any time with or without cause.  Any member of the Committees may resign by giving ten days advanced written notice to the Company and other Committee members.  Such resignation shall become effective at delivery or at any later date specified therein.  While there is a vacancy in the membership on a Committee the remaining Committee members shall have the same powers as the full Committee until the vacancy is filled.

	Usual and reasonable expenses of the Committees may be paid in whole or in part by the Employer and any such expenses not paid by the Employer shall be paid by the Trustee out of the principal or income of the Trust Fund.  The members of the Committees shall not receive any compensation for their services as such.

   SECTION 9.2      Powers and Duties of Administrative Committee.  Except as otherwise provided in this Article 9, the Administrative Committee shall have final and binding discretionary authority to control and manage the operation and administration of the Plan, including all rights and powers necessary or convenient to the carrying out of its functions hereunder, whether or not such rights and powers are specifically enumerated herein.  In exercising its responsibilities hereunder, the Administrative Committee may manage and administer the Plan through the use of agents who may include employees of the Employer.

Without limiting the generality of the foregoing, and in addition to the other powers set forth in this Article 9, the Administrative Committee shall have the following discretionary authorities:

	To construe and interpret the Plan, decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder.

	To prescribe procedures and regulations to be followed by Participants or beneficiaries with respect to the filing of elections, requests, applications for benefits, consents and waivers, which procedures and regulations may include the utilization of telephone voice response, internet or intranet systems or other electronic media as an equivalent means for filing written paper documents.

	To prepare and distribute, in such manner as the Administrative Committee determines to be appropriate, information explaining the Plan and a Participant’s or beneficiary’s rights hereunder, which manner may include utilization of a telephone voice response, internet or intranet system, or other electronic media as an equivalent means for filing written paper documents.

	To request and receive from each Employer, Participants and others such information as shall be necessary for the proper administration of the Plan.

	To furnish the Company upon request such annual and other reports with respect to the administration of the Plan as are reasonable and appropriate.

	To receive, review and maintain on file reports of the financial condition and of the receipts and disbursements of the Trust Fund from the Trustee.

	To fix and determine the respective amounts payable by the Employers pursuant to Article 3 (Contributions).

	To take such action not included within responsibilities allocated to the Board of Directors, the Investment Committee, or the Trustee under the provisions of the Plan as may be needed to carry out the orderly administration of the Plan.

	To determine all questions relating to the eligibility, benefits and other rights of employees, Participants and beneficiaries under the Plan.

	To allocate fiduciary responsibilities (other than Trustee responsibilities) among its members and to designate other persons to carry out nonfiduciary and fiduciary responsibilities (other than Trustee responsibilities).

	To take such action as it deems appropriate to correct any errors or omissions with respect to the administration of the Plan, including but not limited to causing to be allocated from future Contributions to the Trust Fund or causing distributions from the Trust Fund to be withheld, accelerated or adjusted in order to accord to a Participant or beneficiary the allocations to his Accounts or distributions therefrom to which he is entitled under the Plan.

   SECTION 9.3      Powers and Duties of the Investment Committee.

	Except for responsibilities retained by the Board of Directors of the Company, the Investment Committee shall have the responsibility to (i) review investment performance of the Trust Fund; (ii) establish investment Funds pursuant to Section 5.2 (Common Fund); (iii) direct the Trustee with regard to the investment of assets; and (iv) such other responsibilities as may be delegated to it by the Board of Directors or pursuant to the Plan or trust agreement.

	In connection with these responsibilities, the Investment Committee shall have the following powers and duties:

	to establish investment guidelines and objectives for the investment of the Trust Fund and each investment Fund as a part thereof, including, but not by way of limitation, the establishment of additional investment funds or the consolidation of one or more of the existing funds;

	to review the performance of and appoint and dismiss the Trustee;

	to receive, review and retain (as it deems convenient or proper) reports of the investments and the receipts and disbursements of the Trust Fund from the Trustee and/or any Investment Managers; and

	to manage the investment of any assets for which the Investment Committee serves as investment advisor.

	The Investment Committee may, subject to periodic review, (i) allocate or delegate among its members certain powers, (ii) authorize one or more of its members or an agent to execute or deliver any instruments or make payment on the Investment Committee’s behalf, and (iii) utilize the services of agents and employ persons to perform ministerial, clerical, record-keeping, consulting or legal services to assist the Investment Committee in the performance of its duties.

	The Investment Committee shall maintain records and accounts showing the fiscal transactions and performance evaluations of the Trust Fund.  At least annually, the Investment Committee shall submit to the Board a report regarding the operation of the Trust during the past year and shall also submit such other reports as the Board shall request.

   SECTION 9.4      Committee Procedures.

	Each Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs.

	A majority of the members of each Committee at the time in office shall constitute a quorum for the transaction of business.  All resolutions or other actions taken by the Committees at any meeting shall be by the vote of the majority of the members of the Committees present at the meeting.  Each Committee may act without a meeting by written consent of a majority of its members.

	Each Committee may elect one of its members as chairman and may appoint a secretary, who may or may not be a Committee member, and shall advise the Trustee and the Company of such actions in writing.  The secretary shall keep a record of all actions of the Committees and shall forward all necessary communications to the Company or the Trustee.

	Filing or delivery of any document with or to the secretary of a Committee in person or by registered or certified mail, addressed in care of the Company, shall be deemed a filing with or delivery to the Committee.

   SECTION 9.5      Consultation with Advisors.    Each Committee (or any fiduciary designated by a Committee pursuant to Section 9.9 (Designation of Other Fiduciaries)) may employ or consult with counsel, actuaries, accountants, physicians or other advisors (who may be counsel, actuaries, accountants, physicians or other advisors for the Employer).

   SECTION 9.5      Committee Members as Participants.    Each Committee member may also be a Participant, but no Committee member shall have power to take part in any discretionary decision or action affecting his own interest as a Participant under this Plan unless such decision or action is upon a matter which affects all other Participants similarly situated and confers no special right, benefit or privilege not simultaneously conferred upon all other such Participants.

   SECTION 9.7      Records and Reports.    Each Committee shall take all such action as it deems necessary or appropriate to comply with governmental laws and regulations relating to the maintenance of records, notifications to Participants, registrations with the Internal Revenue Service, reports to the U.S. Department of Labor and all other requirements applicable to the Plan.  At the end of each Plan Year and such other periods as the Administrative Committee may determine, the Administrative Committee will provide each Participant with a statement of the balances in his Accounts.

   SECTION 9.7      Investment Policy.

	As provided in Section 9.3 (Powers and Duties of the Investment Committee), the Investment Committee from time to time shall determine the Plan’s short-term and long-term financial needs, with which the investment policy of the Trust shall be appropriately coordinated, and such needs shall be communicated from time to time to the Trustee, Investment Managers or others having any responsibility for management and control of the Trust assets.

	Subject to the provisions of Section 5.2 (Common Fund) relating to the investment direction of Participants, and to subsection (c) below, the Trustee shall have exclusive authority and discretion to manage and control the assets of the Trust pursuant to an investment policy coordinated with the needs of the Plan as determined by the Investment Committee.

	The Investment Committee may in its discretion manage or may appoint one or more Investment Managers to manage (including the power to acquire and dispose of) any assets of the Plan pursuant to an investment policy coordinated with the needs of the Plan as determined by the Investment Committee, in which event the Trustee shall not be liable for the acts or omissions of the Investment Committee or any such Investment Manager or be under an obligation to invest or otherwise manage any asset of the Plan which is subject to the management of the Investment Committee or any such Investment Manager except as directed.  Any such Investment Manager shall acknowledge in writing that he is a fiduciary with respect to the Plan.

	The term “Investment Manager” shall mean:

	a registered investment adviser under the Investment Advisers Act of 1940, as amended;

	a bank as defined in the Investment Advisers Act of 1940, as amended; or

	an insurance company qualified under the laws of more than one state to manage, acquire and dispose of plan assets.

   SECTION 9.9      Designation of Other Fiduciaries.    Each Committee may designate in writing other persons to carry out a specified part or parts of its responsibilities hereunder (including the power to designate other persons to carry out a part of such designated  responsibility), but not including the power to appoint Investment Managers.  Any such designation shall be accepted by the designated person, who shall acknowledge in writing that he is a fiduciary with respect to the Plan.

   SECTION 9.10      Obligations of Each Committee.

	Each Committee or its properly authorized delegate shall make such determinations as are necessary to accomplish the purposes of the Plan with respect to individual Participants or classes of such Participants.  The Company shall notify each Committee of facts relevant to such determinations, including, without limitation, length of Service, compensation for services, dates of death, permanent disability, granting or terminating of leaves of absence, ages, retirement and termination of Service for any reason (but indicating such reason), and termination of participation.  The Company shall also be responsible for notifying each Committee of any other facts which may be necessary for the Committee to discharge its responsibilities hereunder.

	Each Committee is hereby authorized to act solely upon the basis of such notifications from the Company and to rely upon any document or signature believed by the Committee to be genuine and shall be fully protected in so doing.  For the purpose of this Section 9.10, a letter or other written instrument signed in the name of the Company by any officer thereof shall constitute a notification from the Company; except that any action by the Company or its Board of Directors with respect to the appointment or removal of a member of a Committee or the amendment of the Plan and Trust or the designation of a group of employees to which the Plan is applicable shall be evidenced by an instrument in writing, signed by a duly authorized officer or officers, certifying that said action has been authorized and directed by a resolution of the Board of Directors of the Company.

	Each Committee shall notify the Trustee of its actions and determinations affecting the responsibilities of the Trustee and shall give the Trustee directions as to payments or other distributions from the Trust Fund to the extent they may be necessary for the Trustee to fulfill the terms of the trust agreement.

	Each Committee shall be under no obligation to enforce payment of contributions hereunder or to determine whether contributions delivered to the Trustee comply with the provisions hereof relating to contributions, and is obligated only to administer this Plan pursuant to the terms hereof.

   SECTION 9.11      Indemnification of Each Committee.  Each Employer shall indemnify members of each Committee and its authorized delegates who are employees of an Employer for any liability or expenses, including attorneys’ fees, incurred in the defense of any  threatened or pending action, suit or proceeding by reason of their status as members of the Committee or its authorized delegates, to the full extent permitted by the law of the Employer’s state of incorporation.

ARTICLE 10

Trustee and Trust Fund

   SECTION 10.1      Trust Fund.    A Trust Fund to be known as the Tellabs, Inc. Profit Sharing and Savings Trust has been established by the execution of a trust agreement with one or more Trustees and is maintained for the purposes of this Plan.  The assets of the Trust will be held, invested and disposed of by the Trustee, in accordance with the terms of the Trust, for the benefit of the Participants and their beneficiaries.

   SECTION 10.2      Payments to Trust Fund and Expenses.    All contributions hereunder will be paid into and credited to the Trust Fund and all benefits hereunder and expenses chargeable thereto will be paid from the Trust Fund and charged thereto.

   SECTION 10.3      Trustee’s Responsibilities.    The powers, duties and responsibilities of the Trustee shall be as set forth in the trust agreement and nothing contained in this Plan, either expressly or by implication, shall impose any additional powers, duties or responsibilities upon the Trustee.

   SECTION 10.4      Reversion to the Employer.    An Employer has no beneficial interest in the Trust Fund and no part of the Trust Fund shall ever revert or be repaid to the Employer, directly or indirectly, except that an Employer shall upon written request have a right to recover:

	within one year of the date of payment of a contribution by an Employer, any amount (less any losses attributable thereto) contributed through a mistake of fact;

	within one year of the date on which any deduction for a contribution by an Employer under Code Section 404 is disallowed, an amount equal to the amount disallowed (less any losses attributable thereto);

	at the termination of the Plan, any amounts remaining in the Excess Forfeiture Suspense Account;

	upon satisfaction of all liabilities for Medical Benefits arising out of the operation of Article 14 (Retiree Medical Benefits), any amounts remaining in the Medical Benefits Account.

ARTICLE 11

Amendment or Termination

   SECTION 11.1      Amendment.    The Company reserves the right to amend this Plan at any time to take effect retroactively or otherwise, in any manner which it deems desirable including, but not by way of limitation, the right to increase or diminish contributions to be made by an Employer hereunder, to change or modify the method of allocation of its contributions, to change any provision relating to the distribution or payment, or both, of any assets of the Trust.

   SECTION 11.2      Termination.    The Company further reserves the right to terminate this Plan at any time.

   SECTION 11.3      Form of Amendment, Discontinuance of Employer Contributions, and Termination    Any such amendment, discontinuance of Employer Contributions (as defined in Section 3.1 (Employer Contributions)) or termination shall be made only by resolution of the Board of Directors or by an officer of the Company or by any person so duly authorized by resolution of the Board of Directors.

   SECTION 11.4      Limitations on Amendments.    The provisions of this Article 11 are subject to the following restrictions:

	Except as provided in Section 10.4 (Reversion to the Employer), no amendment shall operate either directly or indirectly to give an Employer any interest whatsoever in any funds or property held by the Trustee under the terms hereof, or to permit corpus or income of the Trust to be used for or diverted to purposes other than the exclusive benefit of the Participants and their beneficiaries.

	Except to the extent necessary to conform to the laws and regulations or to the extent permitted by any applicable law or regulation, no amendment shall operate either directly or indirectly to deprive any Participant of his nonforfeitable beneficial interest in his Accounts as they are constituted at the date of the amendment.

	No amendment shall change any vesting schedule unless each Participant who has completed 3 or more Years of Service is permitted to elect to have the nonforfeitable percentage of his Employer Account and Matching Account computed under the Plan without regard to such amendment.  The period for making such election shall commence no later than the date of the adoption of such amendment and shall expire no earlier than 60 days after the latest of the following dates:

	the date the Plan amendment is adopted; or

	the date the Plan amendment becomes effective; or

	the date the Participant is issued written notice of the Plan amendment by the Administrative Committee.

Notwithstanding the foregoing, no election need be offered to a Participant whose nonforfeitable percentage of his Employer Account and Matching Account cannot at any time be lower than such percentage determined without regard to such amendment.

	Except as permitted by applicable law, no amendment shall eliminate or reduce an early retirement benefit or a retirement-type subsidy or eliminate an optional form of benefit.

   SECTION 11.5      Level of Benefits Upon Merger.    This Plan shall not merge or consolidate with, or transfer assets or liabilities to, any other plan, unless each Participant shall be entitled to receive a benefit immediately after said merger, consolidation or transfer (if such other plan were then terminated) which shall be not less than the benefit he would have been entitled to receive immediately before said merger, consolidation or transfer (if this Plan were then terminated).

   SECTION 11.6      Vesting Upon Termination or Discontinuance of Employer Contributions; Liquidation of Trust.

	This Plan shall be deemed terminated if and only if the Plan terminates by operation of law or pursuant to Section 11.2 (Termination).  In the event of any termination or partial termination within the meaning of the Code, or in the event an Employer permanently discontinues the making of contributions to the Plan, the Retirement Account and Post-1992 Profit Sharing Account of each affected Participant who is employed by such Employer on the date of the occurrence of such event shall be nonforfeitable; provided, however, that in no event shall any Participant or beneficiary have recourse to other than the Trust Fund for the satisfaction of benefits hereunder.

	In the event an Employer permanently discontinues the making of contributions to the Plan, the Trustee shall make or commence distribution to each Participant or his beneficiaries of the value of such Participant’s Accounts as provided herein within the time prescribed in Article 7 (Distributions).  However, if, after such discontinuance, the Company shall determine it to be impracticable to continue the Trust any longer, the Company may, in its discretion, declare a date to be the Valuation Date for all Participants whose Valuation Date has not yet occurred, and the Trustee shall thereupon, as promptly as shall then be reasonable under the circumstances, liquidate the Trust assets and distribute to each such Participant his Accounts in the Trust Fund.  Such date shall also constitute the final distribution date for each Participant or beneficiary whose Accounts are being distributed in installments.  Upon completion of such liquidation and distribution, the Trust shall finally and completely terminate.

	The liquidation of the Trust, if any, in connection with any Plan termination shall be accomplished by the Administrative Committee acting on behalf of the Company.  After directing that sufficient funds be set aside to provide for the payment of all expenses incurred in the administration of the Plan and the Trust, to the extent not paid or provided for by the Employer, the Administrative Committee shall, as promptly as shall then be reasonable under the circumstances, liquidate the Trust assets and distribute to each Participant or beneficiary his Accounts in the Trust Fund.  Notwithstanding the foregoing, if the Employer or an Affiliate maintains another defined contribution plan, other than an employee stock ownership plan (as defined in Code Section 4975(e) or 409) or a Simplified Employee Pension Plan, the Accounts of all Participants shall be transferred to the other plan; provided, however, that if fewer than 2% of the Participants in this Plan at the time this Plan is terminated are or were eligible to participate under such other defined contribution plan at any time during the 24-month period beginning 12 months before the time of termination, a Participant’s Accounts shall be transferred to the other plan only if the vested balance of the Participant’s Accounts exceeds $3,500 and the Participant does not consent to the distribution of such Accounts.  Upon completion of such liquidation and distribution, the Trust shall finally and completely terminate.  In the event the Administrative Committee is no longer in existence, the actions to be taken by the Administrative Committee pursuant to this Section shall be taken by the Trustee.  Effective with the 1998 Plan Year, $5,000 shall be substituted for $3,500 in this subsection (c).

ARTICLE 12

Miscellaneous

   SECTION 12.1      No Guarantee of Employment, Etc.    Neither the creation of the Plan nor anything contained in the Plan or trust agreement shall be construed as a contract of employment between the Employer and the Participant or as giving any Participant hereunder or other employee of the Employer any right to remain in the employ of an Employer, any equity or other interest in the assets, business or affairs of the Employer, or any right to complain about any action taken or any policy adopted or pursued by the Employer.

   SECTION 12.2      Nonalienation.

	Except as may be provided in the Plan with respect to loans to Participants, no Participant shall have any right to sell, assign, pledge, hypothecate, anticipate or in any way create a lien upon any part of the Trust Fund.  Except to the extent required by law or provided in the Plan, no interest in the Trust Fund, or any part thereof, shall be assignable in or by operation of law, or be subject to liability in any way for the debts or defaults of Participants, their beneficiaries, spouses or heirs-at-law, whether to the Employer or to others.

	Prior to the time that distributions are to be made hereunder, the Participants, their spouses, beneficiaries, heirs-at-law or legal representatives shall have no right to receive cash or other things of value from an Employer or the Trustee from or as a result of the Plan and Trust.

   SECTION 12.3      Qualified Domestic Relations Order.    Notwithstanding anything in this Plan to the contrary, the Administrative Committee shall distribute a Participant’s Accounts, or any portion thereof, in accordance with the terms of any domestic relations order entered on or after January 1, 1985, which the Administrative Committee determines to be a Qualified Domestic Relations Order described in Code Section 414(p).  Further notwithstanding any other provision of this Plan to the contrary, such distribution of a Participant’s Accounts, or any portion thereof, to an Alternate Payee under a Qualified Domestic Relations Order shall, unless such order otherwise provides, be made in a single sum as soon as administratively practicable after the Administrative Committee has determined that a domestic relations order is a Qualified Domestic Relations Order described in Code Section 414(p).  No Qualified Domestic Relations Order shall permit the payment of any benefit in any amount, form of benefit, time of payment or any option not otherwise provided; however, to the extent provided in Code Section 414(p), benefits may be paid to an Alternate Payee in any form in which benefits may be paid to the Participant (even though the Participant has not separated from Service) as if he had retired on the date payment is to begin under such Qualified Domestic Relations Order.  The account of any Alternate Payee shall be paid to such Alternate Payee immediately if the Qualified Domestic Relations Order so states.

   SECTION 12.4      Controlling Law.    To the extent not preempted by the laws of the United States of America, the laws of the State of Illinois shall be controlling state law in all matters relating to the Plan.

   SECTION 12.5      Severability.  If any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of this Plan, but this Plan shall be construed and enforced as if said illegal or invalid provision had never been included herein.

   SECTION 12.6      Notification of Addresses.  Each Participant and each beneficiary eligible for benefits under this Plan shall file with the Administrative Committee from time to time in writing his post-office address and each change of post-office address.  Any communication, statement or notice addressed to the last post-office address filed with the Administrative Committee, or if no such address was filed with the Administrative Committee, then to the last post-office address of the Participant or beneficiary as shown on an Employer’s records, will be binding on the Participant and his beneficiary for all purposes of this Plan and neither the Administrative Committee nor the Employer shall be obliged to search for or ascertain the whereabouts of any Participant or beneficiary, nor shall any Employer, Committee, director, officer, employee or agent of any of them be liable for any loss, cost or expense associated with any Participant’s or beneficiary’s failure to so file such Participant’s or beneficiary’s address with the Administrative Committee.

   SECTION 12.7      Gender and Number.  Whenever the context requires or permits, the gender and number of words shall be interchangeable.

ARTICLE 13

Adoption by Affiliates

   SECTION 13.1      Adoption of Plan.    Subject to any resolution or terms of any agreement approved by the Board of Directors of the Company or a Committee thereof to the contrary, any Affiliate may adopt this Plan for the benefit of its eligible employees if authorized to do so by the Board of Directors of the Company.  Such adoption shall be by resolution of such Affiliate’s board of directors, a certified copy of which shall be filed with the Company, the Administrative Committee and the Trustee.  Upon such adoption, such Affiliate shall become an “Employer.”

   SECTION 13.2      The Company as Agent for Employer    Each Employer which has adopted this Plan pursuant to Section 13.1 (Adoption of Plan) hereby irrevocably gives and grants to the Company full and exclusive power conferred upon it by the terms of the Plan and Trust to take or refrain from taking any and all action which such Employer might otherwise take or refrain from taking with respect to the Plan, including sole and exclusive power to exercise, enforce or waive any rights whatsoever which such Employer might otherwise have with respect to the Trust, and each such Employer, by adopting this Plan, irrevocably appoints the Company its agent for such purposes.  Neither the Trustee nor any Committee nor any other person shall have any obligation to account to any such Employer or to follow the instructions of or otherwise deal with any such Employer, the intention being that all persons shall deal solely with the Company as if it were the sole company which had adopted this Plan.  Each such Employer shall contribute such amounts as determined under Article 3 (Contributions).

   SECTION 13.3      Adoption of Amendments.

	Any Employer which adopts this Plan pursuant to Section 13.1 (Adoption of Plan) may amend this Plan with respect to its own employees by resolution of its board of directors, if authorized to do so by the Board of Directors of the Company or any person so duly authorized by the Board of Directors of the Company.

	Any Employer shall be deemed conclusively to have assented to any amendment of this Plan by the Company without the necessity of any affirmative action on the part of such Employer.

   SECTION 13.4      Termination.    Any Employer which adopts this Plan pursuant to Section 13.1 (Adoption of Plan) may terminate this Plan with respect to its own employees by resolution of its board of directors, if authorized to do so by the Board of Directors of the Company, or any person so duly authorized by the Board of Directors of the Company.

   SECTION 13.5      Data to Be Furnished by Employers.    Each Employer which adopts this Plan pursuant to Section 13.1 (Adoption of Plan) shall furnish information and maintain such records with respect to its Participants as called for hereunder, and its determinations and notifications with respect thereto shall have the same force and effect as comparable determinations by the Company with respect to its Participants.

   SECTION 13.6      Joint Employers.    If a Participant receives Considered Compensation during a Plan Year from more than one Employer, the total amount of such Considered Compensation shall be considered for the purposes of the Plan, and the respective Employers shall share in contributions to the Plan on account of said Participant based on the Considered Compensation paid to such Participant by the Employer.

   SECTION 13.7      Expenses.    Except to the extent paid by the Employers, all expenses of the Plan shall be paid from the Trust Fund as the Administrative Committee from time to time may direct in accordance with the trust agreement.

   SECTION 13.8      Withdrawal.    An Employer may withdraw from the Plan by giving 60 days’ written notice of its intention to the Company and the Trustee, unless a shorter notice shall be agreed to by the Company.

   SECTION 13.9      Prior Plans.    If an Employer adopting the Plan already maintains a defined contribution plan covering employees who will be covered by this Plan, it may, with the consent of the Company, provide in its resolution adopting this Plan for the termination of its own plan or for the merger, restatement and continuation, of its own plan by this Plan.  In either case, such Employer may, subject to the approval of the Company, provide in its resolution of adoption of this Plan for the transfer of the assets of such plan to the Trust for this Plan for the payment of benefits accrued under such other plan.

ARTICLE 14

Retiree Medical Benefits

   SECTION 14.1      Medical Benefits Account.    Effective April 1, 1999, there is created, established and maintained a separate Medical Benefits Account as part of the Retirement Program for the purposes of providing certain medical benefits to Eligible Individuals in accordance with this Article 14 and Code Section 401(h).

   SECTION 14.2      Retiree Medical Benefits Definitions.    For purposes of this Article 14, the following definitions shall apply:

	Dependent.  The term “Dependent” shall mean any individual who is entitled to benefits under the Health Plan as a dependent of an eligible retiree provided that such individual is a “dependent” within the meaning of Code Section 152.

	Eligible Individual.  The term “Eligible Individual” shall mean an Eligible Retiree or a Dependent.

	Eligible Retiree.  The term “Eligible Retiree” shall mean an individual who:

	is a Participant in the Retirement Program and who retires under circumstances which entitle the Participant to receive retiree medical benefits under the Health Plan; and

	is not a Key Employee (as defined in Code Section 416(i)(1)) at any time during the current Plan Year and has not been a Key Employee at any time during any previous Plan Year for which contributions were made to the Medical Benefits Account.

	Health Plan.  The term “Health Plan” shall mean Tellabs Retiree Medical Plan, or such other medical plan maintained by an Employer, but only as such plan relates to retired individuals and dependents, as such Retiree Medical Plan or plans may be amended from time to time, and the provisions of such Retiree Medical Plan or plans are incorporated herein by reference.

	Medical Benefits.  The term “Medical Benefits” shall mean the benefits specified and payable under Section 14.6 (Medical Benefits) from the Medical Benefits Account.

	Medical Benefits Account.  The term “Medical Benefits Account” shall mean the separate account established pursuant to Section 14.3 (Separate Account) for contributions to fund Medical Benefits payable under this Article 14.

   SECTION 14.3      Separate Account.    A Medical Benefits Account shall be maintained with respect to contributions to fund the benefits payable under this Article 14, which shall be kept separate (for record-keeping purposes only) from the amounts contributed to the Retirement Program to fund all other benefits.  The funds in the Medical Benefits Account shall be invested as the Investment Committee shall determine, and may, but need not be, invested in one or more of the Funds; provided, however, that in no event shall amounts allocable to the Medical Benefits Account be invested in the Tellabs Stock Fund.

   SECTION 14.4      Impossibility of Diversion Prior to Satisfaction of All Liabilities.    Prior to the satisfaction of all liabilities under this Article 14 to provide for the payment of Medical Benefits, no part of the corpus or income of the Medical Benefits Account may be used for, or diverted to, any purpose other than the providing of Medical Benefits or the payment of any necessary or appropriate expenses attributable to the administration thereof.

   SECTION 14.5      Reversion upon Satisfaction of All Liabilities.    Any amounts which are contributed to fund Medical Benefits and that remain in the Medical Benefits Account upon the satisfaction of all liabilities arising out of the operation of this Article 14 are to be returned to the Employer in accordance with Section 10.4 (Reversion to the Employer).

   SECTION 14.6      Medical Benefits.    The Medical Benefits payable from the Medical Benefits Account shall be limited to the payment of medical benefits for Eligible Individuals under the Health Plan.  Notwithstanding any other provision of this Article 14, the Medical Benefits paid out of the Medical Benefits Account at any time shall be limited to the amount in such Account.  The Medical Benefits provided under the Health Plan and the contributions by the Employers to fund said Medical Benefits shall not discriminate in favor of Highly Compensated Employees.

   SECTION 14.7      Coordination with Health Plan.    Medical Benefits under the Medical Benefits Account shall be provided by reimbursing, no less frequently than annually, the Employers or other paying agent under the Health Plan for amounts not to exceed the aggregate Medical Benefits, as defined in Section 14.6 (Medical Benefits), for Eligible Individuals.

   SECTION 14.8      Employer Contributions.      All contributions to fund Medical Benefits provided under the Medical Benefits Account shall be made by the Employers.  The Employers may, in their discretion, contribute to the Medical Benefits Account amounts which in the aggregate shall not exceed the amount reasonably estimated to cover the total cost of the Medical Benefits to be provided hereunder.  Such total cost shall be determined in accordance with any generally accepted actuarial method which is reasonable in view of the provisions and coverage of the Health Plan, the investment of the Medical Benefits Account and other applicable considerations.  Notwithstanding the foregoing, Employer contributions to the Medical Benefits Account shall be limited so that the aggregate actual contributions made to the Medical Benefits Account shall not exceed 25% of the total aggregate actual contributions made after April 1, 1999 under the Retirement Program to the Retirement Accounts of Participants and the Medical Benefit Account.  At the time an Employer makes a contribution to the Retirement Program, it shall designate the portion allocable to the Medical Benefits Account.

   SECTION 14.9      Reservation of the Right to Terminate Medical Benefits.    In addition to the rights set forth in Article 11 (Amendment or Termination), the Employers reserve the right to amend, suspend, curtail or terminate the Medical Benefits provided hereunder or under the Health Plan at any time.

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