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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form l0-Q

 
(Mark One)
 
[X] QUARTERLY REPORT PURSUANT TO SECTION l3 or l5(d)
OF THE SECURITIES EXCHANGE ACT OF l934
 
For the quarterly period ended March 28, 2003
 
or
 
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                 to                

Commission File Number l-3863

HARRIS CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware   34-0276860

 
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)
 
l025 West NASA Boulevard
Melbourne, Florida
  329l9

 
(Address of principal executive offices)   (Zip Code)

(321) 727-9l00

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5 (d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes      X         No             

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

Yes      X         No             

The number of shares outstanding of the registrant’s common stock, as of May 1, 2003 was 66,473,158 shares.

 


TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
CONDENSED CONSOLIDATED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Item 4. Controls and Procedures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURE
CERTIFICATIONS
EXHIBIT INDEX
EX-10(A) Harris Corp. Retirement Plan
EX-10(B)(I) Supplemental Executive Retirement Plan
EX-10(B)(II) Amend #1 to Supp Exec Retirement Plan
EX-12 Computation of Ratio of Earnings/Fixed Chrgs
EX-99.1 Forward Looking Statements
EX-99.2 Certification of CEO
EX-99.3 Certification of CFO


Table of Contents

HARRIS CORPORATION

FORM 10-Q

For the Quarter Ended March 28, 2003

INDEX

                         
                    Page
                   
Part I   Financial Information:        
 
        ITEM 1.  
Financial Statements (unaudited):
       
 
               
Condensed Consolidated Statement of Income for the Quarter and Three Quarters ended March 28, 2003 and March 29, 2002 (unaudited)
    2  
 
               
Condensed Consolidated Balance Sheets at March 28, 2003 (unaudited) and June 28, 2002
    3  
 
               
Condensed Consolidated Statement of Cash Flows for the Three Quarters ended March 28, 2003 and March 29, 2002 (unaudited)
    4  
 
               
Notes to Condensed Consolidated Financial Statements (unaudited)
    5  
 
        ITEM 2.  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    14  
 
        ITEM 3.  
Quantitative and Qualitative Disclosure About Market Risk
    25  
 
        ITEM 4.  
Controls and Procedures
    26  
 
Part II   Other Information:        
 
        ITEM 1.  
Legal Proceedings
    27  
 
        ITEM 2.  
Changes in Securities and Use of Proceeds
    27  
 
        ITEM 3.  
Defaults Upon Senior Securities
    27  
 
        ITEM 4.  
Submission of Matters to a Vote of Security Holders
    27  
 
        ITEM 5.  
Other Information
    27  
 
        ITEM 6.  
Exhibits and Reports on Form 8-K
    28  
 
Signatures     29  
 
Certifications     30  
 
Exhibits     32  

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

The following information for the quarter and three quarters ended March 28, 2003 and March 29, 2002 has not been audited by independent accountants, but in the opinion of management reflects all adjustments (consisting only of normal, recurring items) necessary for a fair presentation of the results for the indicated periods. The results of operations for the quarter and three quarters ended March 28, 2003 are not necessarily indicative of the results for the full fiscal year.

HARRIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(unaudited)

                                     
        Quarter Ended   Three Quarters Ended
       
 
        March 28,   March 29,   March 28,   March 29,
        2003   2002   2003   2002
       
 
 
 
        (In millions, except per share amounts)
 
Revenue from product sales and services
  $ 538.9     $ 483.3     $ 1,513.0     $ 1,378.2  
 
Cost of product sales and services
    (404.9 )     (354.3 )     (1,128.9 )     (1,018.9 )
 
Engineering, selling and administrative expenses
    (97.6 )     (99.3 )     (303.3 )     (296.4 )
 
Non-operating income
    2.8       7.6       22.1       33.3  
 
Interest income
    1.5       2.9       5.0       9.6  
 
Interest expense
    (6.5 )     (6.1 )     (18.8 )     (21.0 )
 
   
     
     
     
 
 
Income before income taxes
    34.2       34.1       89.1       84.8  
 
Income taxes
    (11.6 )     (11.6 )     (30.3 )     (28.8 )
 
   
     
     
     
 
 
Net income
  $ 22.6     $ 22.5     $ 58.8     $ 56.0  
 
   
     
     
     
 
 
Net income per common share
                               
   
Basic
  $ .34     $ .34     $ .89     $ .85  
   
Diluted
  $ .34     $ .34     $ .89     $ .85  
 
 
Cash dividends paid per common share
  $ .08     $ .05     $ .24     $ .15  
 
 
Average basic shares outstanding
    66.2       66.0       66.2       65.9  
 
Average diluted shares outstanding
    66.4       66.3       66.4       66.2  

See Notes to Condensed Consolidated Financial Statements

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HARRIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

                         
            March 28,   June 28,
            2003   2002
            (unaudited)   (audited)
           
 
            (In millions)
Assets
               
Current Assets
               
 
Cash and cash equivalents
  $ 396.5     $ 226.2  
 
Marketable securities
    24.9       52.2  
 
Receivables
    381.7       380.3  
 
Unbilled costs and accrued earnings on fixed-price contracts
    193.4       178.6  
 
Inventories
    236.9       233.2  
 
Current deferred income taxes
    92.2       82.3  
 
Income taxes receivable
          0.7  
 
   
     
 
   
Total current assets
    1,325.6       1,153.5  
Other Assets
               
 
Plant and equipment
    280.0       270.6  
 
Goodwill
    224.7       215.2  
 
Non-current notes receivable
    30.6       30.9  
 
Non-current deferred income taxes
    20.6       26.0  
 
Other assets
    161.8       162.3  
 
   
     
 
 
    717.7       705.0  
 
   
     
 
 
  $ 2,043.3     $ 1,858.5  
 
   
     
 
Liabilities and Shareholders’ Equity
               
Current Liabilities
               
 
Short-term debt
  $ 13.7     $ 24.6  
 
Accounts payable
    120.9       99.2  
 
Compensation and benefits
    110.5       111.8  
 
Other accrued items
    100.9       106.6  
 
Advance payments and unearned income
    109.3       82.1  
 
Income taxes payable
    2.0       -—  
 
Current portion of long-term debt
    0.5       1.3  
 
   
     
 
     
Total current liabilities
    457.8       425.6  
Other Liabilities
               
 
Long-term debt
    402.1       283.0  
Shareholders’ Equity
               
 
Preferred Stock, without par value; 1,000,000 shares authorized; none issued
    -—       -—  
 
Common Stock, $1.00 par value; 250,000,000 shares authorized; issued and outstanding 66,470,117 shares at March 28, 2003 and 66,342,340 shares at June 28, 2002
    66.5       66.3  
 
Other capital
    229.8       223.9  
 
Retained earnings
    912.3       871.7  
 
Unearned compensation
    (6.4 )     (2.1 )
 
Accumulated other comprehensive income (loss)
    (18.8 )     (9.9 )
 
   
     
 
       
Total shareholders’ equity
    1,183.4       1,149.9  
 
   
     
 
 
  $ 2,043.3     $ 1,858.5  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements

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HARRIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

                       
          Three Quarters Ended
         
          March 28,   March 29,
          2003   2002
         
 
          (In millions)
Operating Activities
               
 
Net income
  $ 58.8     $ 56.0  
 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
               
     
Depreciation and amortization
    40.8       40.2  
     
Non-current deferred income tax
    5.3       22.1  
     
Gain on the sale of securities available for sale
    (15.7 )     (46.6 )
     
Gain on the sale of LiveTV, LLC
    (18.8 )     -—  
     
Gain on the sale of GE Harris Energy Systems, LLC
    -—       (10.3 )
 
(Increase) decrease in:
               
   
Accounts and notes receivable
    (1.1 )     44.2  
   
Unbilled costs and inventories
    (18.4 )     32.5  
 
Increase (decrease) in:
               
   
Accounts payable and accrued expenses
    14.7       (48.2 )
   
Advance payments and unearned income
    27.3       18.4  
   
Income taxes
    2.0       (26.6 )
 
Other
    5.9       26.2  
 
   
     
 
Net cash provided by operating activities
    100.8       107.9  
 
   
     
 
Investing Activities
               
 
Cash paid for acquired businesses
    -—       (8.6 )
 
Additions of plant and equipment
    (47.6 )     (29.8 )
 
Cash paid for strategic investments
    (4.4 )     (7.2 )
 
Proceeds from the sale of securities available for sale
    19.3       54.5  
 
Proceeds from the sale of LiveTV, LLC
    19.0       -—  
 
Proceeds from the sale of GE Harris Energy Systems, LLC
    -—       23.0  
 
   
     
 
Net cash provided by (used in) investing activities
    (13.7 )     31.9  
 
   
     
 
Financing Activities
               
 
Increase (decrease) in debt, net
    102.5       (108.9 )
 
Proceeds from sale of common stock
    1.7       5.6  
 
Purchase of common stock for treasury
    (2.9 )     -—  
 
Cash dividends
    (15.9 )     (9.9 )
 
   
     
 
Net cash provided by (used in) financing activities
    85.4       (113.2 )
 
   
     
 
Effect of exchange rate changes on cash and cash equivalents
    (2.2 )     1.3  
 
   
     
 
Net increase in cash and cash equivalents
    170.3       27.9  
Cash and cash equivalents at beginning of year
    226.2       103.0  
 
   
     
 
Cash and cash equivalents at end of quarter
  $ 396.5     $ 130.9  
 
   
     
 

See Notes to Condensed Consolidated Financial Statements

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 28, 2003

Note A – Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Harris Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and changes in cash flows in conformity with accounting principles generally accepted in the United States. In the opinion of management, such financial statements reflect all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods. The results for the quarter and three quarters ended March 28, 2003 are not necessarily indicative of the results that may be expected for the full fiscal year. For further information refer to the Consolidated Financial Statements and related Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 28, 2002 (“Fiscal 2002 Form 10-K”). Certain reclassifications have been made to prior year’s amounts to conform to the current period presentation.

Note B – Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“Statement 143”). Statement 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. We have adopted the provisions of Statement 143 for fiscal 2003, which did not result in a material impact to our financial position, cash flows or results of operations.

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement 144”). Statement 144 supersedes Statement of Financial Accounting Standards No. 121, but retains its fundamental provisions for the (a) recognition and measurement of impairment of long-lived assets to be held and used, and (b) measurement of long-lived assets to be disposed of by sale. Statement 144 also supersedes the accounting and reporting provisions of Accounting Principles Board Opinion No. 30 for segments of a business to be disposed of, but retains the requirement to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. We have adopted the provisions of Statement 144 for fiscal 2003, which did not result in a material impact to our financial position, cash flows or results of operations.

In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” (“Statement 145”). Statement 145 updates, clarifies and simplifies existing accounting pronouncements. Statement 145 rescinds Statement of Financial Accounting Standards No. 4 (“Statement 4”), which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Accounting Principles Board Opinion No. 30 will now be used to classify those gains and losses because Statement 4 has been rescinded. Statement 145 amends Statement of Financial Accounting Standards No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This amendment is consistent with the FASB’s goal of requiring similar accounting treatment for transactions that have similar economic effects. Statement 145 also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. We have adopted the provisions of Statement 145 for fiscal 2003, which did not result in a material impact to our financial position, cash flows or results of operations.

In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“Statement 146”). Statement 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“Issue 94-3”). The principal difference between Statement 146 and Issue 94-

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3 relates to Statement 146’s requirements for recognition of a liability for a cost associated with an exit or disposal activity. Statement 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity’s commitment to an exit plan. A fundamental conclusion reached by the FASB in Statement 146 is that an entity’s commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, Statement 146 eliminates the definition and requirements for recognition of exit costs in Issue 94-3. Statement 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of Statement 146 are effective for exit or disposal activities that are initiated after December 31, 2002. We have adopted the provisions of Statement 146 for the quarter ending March 28, 2003, which did not result in a material impact to our financial position, cash flows or results of operations.

In November 2002, the EITF reached a consensus on Issue 00-21, “Multiple-Deliverable Revenue Arrangements” (“EITF 00-21”). EITF 00-21 addresses how to account for arrangements that may involve the delivery or performance of multiple products, services, and/or rights to use assets. The consensus mandates how to identify whether goods or services or both that are to be delivered separately in a bundled sales arrangement should be accounted for separately because they are “separate units of accounting.” The guidance can affect the timing of revenue recognition for such arrangements, even though it does not change rules governing the timing or pattern of revenue recognition of individual items accounted for separately. We have adopted the provisions of EITF 00-21 for the quarter ended March 28, 2003, which did not result in a material impact to our financial position, cash flows or results of operations.

In November 2002, the FASB issued Interpretation Number 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for interim and annual periods ending after December 15, 2002 and we have adopted those requirements. We have also adopted the initial recognition and initial measurement requirements of FIN 45 prospectively for guarantees issued or modified after December 31, 2002, which did not result in a material impact to our financial position, cash flows or results of operations.

In November 2002, the EITF reached a consensus on Issue 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (“EITF 02-16”). The consensus was reached that cash consideration received by a customer from a vendor is presumed to be a reduction of the prices of the vendor’s products or services and should be treated as a reduction of cost of sales when recognized in the customer’s income statement. This presumption can be overcome if the consideration can be shown to represent either a payment for assets or services delivered to the vendor or a reimbursement of costs incurred by the reseller to sell the vendor’s products. The EITF also reached consensus on when a customer should recognize a rebate or refund that is payable only if the customer completes a specified level of purchases. Recognition should occur when the rebate or refund is probable or reasonably estimable and should be based on a systematic and rational method. This consensus is to be applied to fiscal periods beginning after December 15, 2002. We already account for such consideration as a reduction of cost of sales when the vendor rebate is probable and reasonably estimable and based on a systematic and rational allocation of the cash consideration to be received; therefore, EITF 02-16 has no material impact on our financial position, cash flows or results of operations.

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“Statement 148”). Statement 148 amends Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (“Statement 123”) and provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. Statement 148 also amends the disclosure requirements of Statement 123 to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. The transition guidance and annual disclosure provisions of Statement 148 are effective for financial statements issued for fiscal years ending after December 15, 2002. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. We have adopted the disclosure provisions of Statement 148 for our financial statements included in this Form 10-Q.

In January 2003, the FASB issued Interpretation Number 46, “Consolidation of Variable Interest Entities” (“FIN 46”). This interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” addresses consolidation by business enterprises of variable interest entities. Under current practice, two enterprises generally have been included in consolidated financial statements because one enterprise controls the other through voting interests. FIN

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46 defines the concept of “variable interests” and requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. This interpretation applies immediately to variable interest entities created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. If it is reasonably possible that an enterprise will consolidate or disclose information about a variable interest entity when FIN 46 becomes effective, the enterprise shall disclose information about those entities in all financial statements issued after January 31, 2003. The interpretation may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. We do not expect the adoption of FIN 46 to have an impact on our financial position, cash flows or results of operations.

Note C – Warranties and Financial Guarantees

Warranties:

On product sales in our RF Communications, Microwave Communications, Network Support and Broadcast Communications segments we provide for future warranty costs upon product delivery. The specific terms and conditions of those warranties vary depending upon the product sold and country in which we do business. In the case of hardware manufactured by us, our warranties generally start from the delivery date and continue as follows:

     
Segment   Warranty Periods

 
RF Communications   One to five years
Microwave Communications   Two to three years
Network Support   18 months to three years
Broadcast Communications   One to five years

Longer warranty periods are provided on a limited basis including some “lifetime” warranties on some of our small tools in the Network Support segment.

Software products in our Broadcast Communications and Network Support segments generally carry a 90 day warranty from the date of acceptance. Our liability under these warranties is to provide a corrected copy of any portion of the software found not to be in substantial compliance with the specifications previously agreed to. This may result in, but does not guarantee, the customer receiving a free upgrade to a new release of our software.

Because our products are manufactured, in many cases, to customer specifications and their acceptance is based on meeting those specifications, we historically have experienced minimal warranty costs. Factors that affect our warranty liability include the number of installed units, historical experience and management’s judgment regarding anticipated rates of warranty claims and cost per claim. We assess the adequacy of our recorded warranty liabilities every quarter and make adjustments to the liability if necessary.

Changes in our warranty liability, which is included as a component of “Other accrued items” on the Condensed Consolidated Balance Sheet, during the first three quarters of fiscal 2003 are as follows:

         
(In millions)        
Balance as of June 28, 2002
  $ 17.1  
Warranty provision for sales made during the three quarters ended March 28, 2003
    11.7  
Settlements made during the three quarters ended March 28, 2003
    (10.8 )
Other adjustments to the liability including those for translation during the three quarters ended March 28, 2003
    0.1  
 
   
 
Balance as of March 28, 2003
  $ 18.1  
 
   
 

On long-term contract sales in our Government Communications Systems and RF Communications segments, the value or price of our warranty is generally included in the contract and funded by the customer. A provision is built into the estimated program costs when determining the profit rate to accrue when applying the cost-to-cost percentage of completion revenue recognition method. Warranty costs, if incurred, are charged to the specific program’s cost and both revenue and cost is recognized at that time. Factors that affect the estimated program cost for warranty include terms of

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the contract, number of installed units, historical experience and management’s judgment regarding anticipated rates of warranty claims and cost per claim.

Financial Guarantees:

Guarantees are contingent commitments issued to guarantee the performance of a customer to a third party in borrowing arrangements, such as commercial paper issuances, bond financings and similar transactions. The term of the guarantee is equal to the remaining term of the related debt, which ranges from one to three years. The maximum potential amount of future payments we could be required to make under our guarantees at March 28, 2003 is $1.6 million. At March 28, 2003, there are no guarantees accrued for in our Condensed Consolidated Balance Sheet. We also hold insurance policies with third parties to mitigate the risk of loss on a portion of these guarantees.

Note D – Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

Comprehensive income for the quarters ended March 28, 2003 and March 29, 2002 was $24.5 million and $10.6 million, respectively. Comprehensive income for the three quarters ended March 28, 2003 and March 29, 2002 was $49.9 million and $20.8 million, respectively.

The components of accumulated other comprehensive income (loss), net of related tax, at March 28, 2003 and June 28, 2002 are as follows:

                 
    March 28,   June 28,
    2003   2002
   
 
    (In millions)
Net unrealized gain (loss) on securities available for sale
  $ (2.1 )   $ 12.8  
Foreign currency translation adjustments
    (16.3 )     (22.8 )
Net unrealized gain (loss) on hedging activity
    (0.4 )     0.1  
 
   
     
 
 
  $ (18.8 )   $ (9.9 )
 
   
     
 

Note E – Receivables

Receivables are summarized below:

                 
    March 28,   June 28,
    2003   2002
   
 
    (In millions)
Accounts receivable
  $ 381.8     $ 383.7  
Notes receivable due within one year-net
    13.1       13.3  
 
   
     
 
 
    394.9       397.0  
Less allowances for collection losses
    (13.2 )     (16.7 )
 
   
     
 
 
  $ 381.7     $ 380.3  
 
   
     
 

Note F – Inventories and Unbilled Costs

Inventories are summarized below:

                 
    March 28,   June 28,
    2003   2002
   
 
    (In millions)
Finished products
  $ 41.6     $ 42.9  
Work in process
    26.6       28.2  
Raw materials and supplies
    168.7       162.1  
 
   
     
 
 
  $ 236.9     $ 233.2  
 
   
     
 

Unbilled costs and accrued earnings on fixed-price contracts are net of progress payments of $148.6 million at March 28, 2003 and $217.8 million at June 28, 2002.

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Note G – Plant and Equipment

Plant and equipment are summarized below:

                 
    March 28,   June 28,
    2003   2002
   
 
    (In millions)
Land
  $ 12.3     $ 12.3  
Buildings
    280.6       274.2  
Machinery and equipment
    593.5       563.2  
 
   
     
 
 
    886.4       849.7  
Less allowances for depreciation
    (606.4 )     (579.1 )
 
   
     
 
 
  $ 280.0     $ 270.6  
 
   
     
 

Note H – Net Income Per Share

Average outstanding shares used in the computation of net income per share are as follows:

                                   
      Quarter Ended   Three Quarters Ended
     
 
      March 28,   March 29,   March 28,   March 29,
      2003   2002   2003   2002
     
 
 
 
      (In millions)
Basic:
                               
 
Weighted average shares outstanding
    66.4       66.1       66.4       66.0  
 
Contingently issuable shares
    (0.2 )     (0.1 )     (0.2 )     (0.1 )
 
   
     
     
     
 
 
    66.2       66.0       66.2       65.9  
 
   
     
     
     
 
Diluted:
                               
 
Weighted average shares outstanding
    66.4       66.1       66.4       66.0  
 
Dilutive stock options
    0.2       0.3       0.2       0.3  
 
Contingently issuable shares
    (0.2 )     (0.1 )     (0.2 )     (0.1 )
 
   
     
     
     
 
 
    66.4       66.3       66.4       66.2  
 
   
     
     
     
 

Diluted earnings per share excludes 3,314,917 million shares related to our 3.5% Convertible Debenture due 2022 because conversion conditions have not been met.

Note I – Stock Options

In accordance with APB Opinion No. 25, we use the intrinsic-value method of accounting for stock option awards granted to employees and, accordingly, do not recognize compensation expense for our stock option awards to employees in the Condensed Consolidated Statement of Income, as all option prices are 100 percent of market value on the date the options are granted. Options may be exercised for a maximum of 10 years after the date of grant.

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The following table illustrates the effect on net income and earnings per share as if we had applied the fair value recognition provisions of Statement 123 to all previously granted stock-based awards after giving consideration to potential forfeitures. The fair value of each option grant is estimated using the Black-Scholes option-pricing model. The estimated fair value of options granted is amortized to expense over their vesting period, which is generally three years.

                                   
        Three
      Quarter Ended   Quarters Ended
     
 
      March 28,   March 29,   March 28,   March 29,
      2003   2002   2003   2002
     
 
 
 
      (In millions)
Net income, as reported
  $ 22.6     $ 22.5     $ 58.8     $ 56.0  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards,
net of related tax effects
    (1.4 )     (1.7 )     (4.9 )     (4.8 )
 
   
     
     
     
 
Pro forma net income
  $ 21.2     $ 20.8     $ 53.9     $ 51.2  
 
   
     
     
     
 
Net income per common share, as reported
                               
 
Basic
  $ .34     $ .34     $ .89     $ .85  
 
Diluted
  $ .34     $ .34     $ .89     $ .85  
Pro forma net income per common share
                               
 
Basic
  $ .32     $ .32     $ .81     $ .78  
 
Diluted
  $ .32     $ .31     $ .81     $ .77  

Total compensation expense recognized from performance and restricted shares during the quarters ended March 28, 2003 and March 29, 2002 was $1.1 million and $1.2 million, respectively. Total compensation expense recognized from performance and restricted shares during the three quarters ended March 28, 2003 and March 29, 2002 was $1.3 million and $2.7 million, respectively

Note J – Non-Operating Income

The components of non-operating income are as follows:

                                   
        Three
      Quarter Ended   Quarters Ended
     
 
      March 28,   March 29,   March 28,   March 29,
      2003   2002   2003   2002
     
 
 
 
      (In millions)
Gains from the sale of securities available for sale
  $ 6.3     $ 16.2     $ 16.4     $ 50.3  
Write-downs of securities available for sale for other than temporary decreases in market value
          (0.4 )     (0.7 )     (3.7 )
Gain on the sale of LiveTV, LLC
                18.8        
Gain on the sale of GE Harris Energy Control Systems, LLC
                      10.3  
Write-down of investment interest in Terion, Inc.
                      (10.0 )
Royalty income (expense)
    (1.1 )     1.3       (2.6 )     (3.7 )
Equity income (loss)
                      7.3  
Investments in marketing and technology projects and other items
    (2.4 )     (9.5 )     (9.8 )     (17.2 )
 
   
     
     
     
 
 
  $ 2.8     $ 7.6     $ 22.1     $ 33.3  
 
   
     
     
     
 

On September 27, 2002, we completed the sale of our minority ownership in our LiveTV, LLC (“LiveTV”) venture to JetBlue Airways Corporation (“JetBlue”). Pursuant to the Membership Interest Purchase Agreement entered into between us, the other owners of the equity of LiveTV and JetBlue, JetBlue acquired all of the equity interests in LiveTV. Under the terms of the agreement, JetBlue paid us $19.0 million cash for our interest in LiveTV. JetBlue also repaid approximately $40 million of LiveTV debt, roughly half of which was guaranteed by us. We recorded a gain of $18.8 million for this transaction.

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Note K – Long-Term Debt

On August 26, 2002, we completed the private placement of $150 million of our 3.5% Convertible Debentures due 2022. The debentures initially carry an annual interest rate of 3.5 percent. The Convertible Debenture offering was made only to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the United States pursuant to Regulation S under the Securities Act. The interest rate on the convertible debentures will be reset, within a specified range, in 2007, 2012 and 2017. These debentures are unsecured obligations convertible into shares of our common stock at an initial conversion price of $45.25 per share, subject to adjustment, under any of the following circumstances: (i) during any calendar quarter if the closing sale price of our common stock, for at least 20 trading days in the 30 consecutive trading day period ending on the last trading day of the previous calendar quarter, is more than 110 percent of the applicable conversion price per share of our common stock on such last trading day, (ii) if we have called the debentures for redemption, (iii) upon the occurrence of specified credit rating events with respect to the debentures, or (iv) upon the occurrence of specified corporate transactions. The debentures were issued at 100 percent of the principal amount, less a discount of 2.5 percent to the initial purchasers. We may redeem the debentures commencing August 2007 at 100 percent of the principal amount plus accrued interest, if any. Holders may require us to repurchase the debentures, in whole or in part, on specified dates in 2007, 2012 and 2017 or upon the occurrence of certain other events at 100 percent of the principal amount plus accrued interest, if any. We incurred $4.8 million in debt issuance costs related to the issuance of the Convertible Debentures, which costs are being amortized on a straight-line basis over a five-year period and reflected as a portion of interest expense in the Condensed Consolidated Statement of Income.

Also, during the quarter ended September 27, 2002, we paid $30.5 million to retire our 6.38% notes due 2002.

Note L – Business Segments

We are structured primarily around the markets we serve and operate in five business segments — Government Communications Systems, RF Communications, Microwave Communications, Network Support and Broadcast Communications. Our Government Communications Systems segment engages in advanced research and develops, designs and produces advanced communication and information processing systems. Our RF Communications segment performs advanced research and develops, designs, manufactures and sells tactical radio products and provides services related to tactical radio products. Our Microwave Communications segment designs, manufactures and sells microwave radio products and provides services related to microwave radio products. Our Network Support segment designs, manufactures and sells telephone test equipment and systems; develops, designs, produces and sells network management systems; and provides services related to these products and systems. Our Broadcast Communications segment designs, manufactures and sells television and radio transmission products; develops, designs, produces and sells automation and control systems and studio products; and provides services related to these products and systems.

The accounting policies of the operating segments are the same as those described in the “Significant Accounting Policies” footnote in our Fiscal 2002 Form 10-K. We evaluate each segment’s performance based on its “operating income,” which we define as profit or loss from operations before income taxes excluding interest income and expense, equity income, goodwill amortization and gains or losses from securities and other investments. Intersegment sales, which are insignificant, are accounted for at prices comparable to those provided to unaffiliated customers. “Corporate eliminations” represent the elimination of intersegment sales.

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Total assets by business segment and for headquarters are summarized below:

                 
    March 28,   June 28,
    2003   2002
   
 
    (In millions)
Total Assets
               
Government Communications Systems
  $ 427.0     $ 401.1  
RF Communications
    151.6       119.4  
Microwave Communications
    430.4       457.4  
Network Support
    78.3       91.1  
Broadcast Communications
    358.5       336.0  
Headquarters
    597.5       453.5  
 
   
     
 
 
  $ 2,043.3     $ 1,858.5  
 
   
     
 

Segment revenue, segment operating income and a reconciliation of segment operating income to income before income taxes follows:

                                   
      Quarter Ended   Three Quarters Ended
     
 
      March 28,   March 29,   March 28,   March 29,
      2003   2002   2003 (2)   2002 (3)
     
 
 
 
      (In millions)
Revenue
                               
Government Communications Systems
  $ 296.0     $ 239.0     $ 820.7     $ 675.5  
RF Communications
    87.6       67.3       226.7       184.5  
Microwave Communications
    72.2       71.8       203.8       224.3  
Network Support
    11.9       13.7       37.2       43.0  
Broadcast Communications
    75.9       93.3       238.0       255.0  
Corporate eliminations
    (4.7 )     (1.8 )     (13.4 )     (4.1 )
 
   
     
     
     
 
 
Total Revenue
  $ 538.9     $ 483.3     $ 1,513.0     $ 1,378.2  
 
   
     
     
     
 
Income Before Income Taxes
                               
Segment Operating Income (Loss):
                               
 
Government Communications Systems
  $ 26.6     $ 21.4     $ 74.8     $ 60.3  
 
RF Communications
    23.8       13.3       57.7       33.1  
 
Microwave Communications
    (0.8 )     0.2       (16.3 )     (11.6 )
 
Network Support
    (1.4 )     (0.8 )     (6.6 )     (7.2 )
 
Broadcast Communications
    2.5       8.2       10.4       25.4  
Headquarters expense
    (14.3 )     (12.6 )     (39.2 )     (37.1 )
Non-operating income (1)
    2.8       7.6       22.1       33.3  
Net interest
    (5.0 )     (3.2 )     (13.8 )     (11.4 )
 
   
     
     
     
 
 
Total Income Before Income Taxes
  $ 34.2     $ 34.1     $ 89.1     $ 84.8  
 
   
     
     
     
 


(1)   “Non-operating income” includes equity income, royalty income (expense), gains and losses from the sale of securities available for sale, write-downs of securities available for sale and other investments, and investments made in marketing and technology projects. Additional information regarding non-operating income is set forth in Note J “Non-Operating Income.”
(2)   Non-operating income for the three quarters ended March 28, 2003 includes an $18.8 million pretax gain on the sale of our minority interest in our LiveTV venture.
(3)   Non-operating income for the three quarters ended March 29, 2002 includes a $10.0 million write-down of our investment interest in Terion, Inc. and a $10.3 million pretax gain from the sale of our minority interest in our GE Harris Energy Control Systems, LLC joint venture.

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Note M – Subsequent Events

In the fourth quarter of fiscal 2003 we began implementing cost reduction actions aimed at reducing corporate overhead expenses and increasing operating income in our commercial businesses. Actions in the fourth quarter will include reductions in labor and facility costs, discontinuation of several low-margin telecom products and disposal of assets remaining from the previously exited telecom switch business.

Approximately 230 positions are being eliminated at our Corporate Headquarters location and the Broadcast Communications Division. Product lines to be exited include the wireless local loop WinRoll and RapidNet products, which were principally designed for international market applications. Also being discontinued is our digital subscriber line test product aimed at the domestic CLEC market.

As a result of these cost reduction actions, we expect pre-tax charges in the range of $30 to $35 million, or approximately $.30 to $.35 per share in the fourth quarter of fiscal 2003.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information that management believes is useful in understanding our operating results, cash flows and financial condition. The discussion should be read in conjunction with, and is qualified in its entirety by reference to, the Condensed Consolidated Financial Statements and related Notes to Financial Statements appearing elsewhere in this report. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operation” included in our Fiscal 2002 Form 10-K.

Except for the historical information contained here, the discussions in this document contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under “Forward-Looking Statements and Factors that May Affect Future Results.”

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in the “Significant Accounting Policies” footnote in our Notes to Financial Statements included in our Fiscal 2002 Form 10-K. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Critical accounting estimates for us include: (i) revenue recognition on long-term contracts and contract estimates, (ii) provisions for excess and obsolete inventory losses, (iii) allowance for doubtful accounts and credit losses for accounts and finance receivables, (iv) valuation of marketable securities and strategic investments, and (v) impairment testing of goodwill and other acquired intangible assets. For additional discussion of our critical accounting estimates, see our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal 2002 Form 10-K.

RESULTS OF OPERATIONS

Quarter Ended March 28, 2003: Revenue for the third quarter of fiscal 2003 was $538.9 million, an increase of $55.6 million or 11.5 percent compared to the third quarter of fiscal 2002. The increase in revenues resulted primarily from increased volume in the Government Communications Systems and RF Communications segments, which was partially offset by a decrease in revenues in the Broadcast Communications segment.

Income before income taxes in the third quarter of fiscal 2003 was $34.2 million compared to $34.1 million for the third quarter of fiscal 2002. Operating income increases in our RF Communications and Government Communications Systems segments were offset primarily by a decrease in non-operating income from $7.6 million in the third quarter of fiscal 2002 to $2.8 million in the third quarter of fiscal 2003 and lower operating income in our Broadcast Communications segment. Additionally, there was an increase in net interest expense from $3.2 million in the third quarter of fiscal 2002 to $5.0 million in the third quarter of fiscal 2003.

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Comparative Statement of Income

Our comparative statement of income is as follows:

                                                     
        Quarter Ended     Three Quarters Ended
       
 
                        %                   %
        March 28,   March 29,   Inc./   March 28,   March 29,   Inc./
        2003   2002   (Dec.)   2003   2002   (Dec.)
       
 
 
 
 
 
      (In millions)
Revenue from product sales and services
  $ 538.9     $ 483.3       11.5 %   $ 1,513.0     $ 1,378.2       9.8 %
Cost of product sales and services
    (404.9 )     (354.3 )     14.3 %     (1,128.9 )     (1,018.9 )     10.8 %
 
   
     
             
     
         
Gross margin
    134.0       129.0       3.9 %     384.1       359.3       6.9 %
   
% of revenue
    24.9 %     26.7 %             25.4 %     26.1 %        
Engineering, selling and administrative expenses
    (97.6 )     (99.3 )     (1.7 )%     (303.3 )     (296.4 )     2.3 %
   
% of revenue
    18.1 %     20.5 %             20.0 %     21.5 %        
Non-operating income
    2.8       7.6       (63.2 )%     22.1       33.3       (33.6 )%
Interest income
    1.5       2.9       (48.3 )%     5.0       9.6       (47.9 )%
Interest expense
    (6.5 )     (6.1 )     6.6 %     (18.8 )     (21.0 )     (10.5 )%
 
   
     
             
     
         
Income before income taxes
    34.2       34.1       0.3 %     89.1       84.8       5.1 %
 
% of revenue
    6.3 %     7.1 %             5.9 %     6.2 %        
Income taxes
    (11.6 )     (11.6 )           (30.3 )     (28.8 )     5.2 %
 
   
     
             
     
         
Net income
  $ 22.6     $ 22.5       0.4 %   $ 58.8     $ 56.0       5.0 %
 
   
     
             
     
         
 
% of revenue
    4.2 %     4.7 %             3.9 %     4.1 %        

Gross Margin: Gross margin as a percent of revenue was 24.9 percent in the third quarter of fiscal 2003 compared to 26.7 percent in the third quarter of fiscal 2002. The lower gross margin resulted primarily from our Broadcast Communications segment, which had lower volume and a shift in product mix away from higher margin digital television (“DTV”) equipment to lower-margin analog products. Gross margins in our Microwave Communications and Network Support segments also decreased in the third quarter when compared to the prior-year quarter because of a change in revenue mix and its impact on capacity. These gross margin decreases were partially offset by improved gross margins from higher sales volume and manufacturing efficiencies in our RF Communications segment.

Engineering, Selling and Administrative Expenses: Engineering, selling and administrative expenses decreased $1.7 million and also decreased as a percent of revenue. These expenses were 18.1 percent of revenue in the third quarter of fiscal 2003 compared to 20.5 percent in the third quarter of fiscal 2002. As a result of cost-cutting actions, engineering, selling and administrative expenses declined significantly in our Microwave Communications, Network Support and Broadcast Communications segments. These decreases in engineering, selling and administrative expenses were partially offset by increased supplemental executive retirement plan related headquarters expense and higher research and development and marketing and selling expenses in the RF Communications segment related to new product development for the Joint Tactical Radio System (“JTRS”) as well as other multiband handheld radios. The Government Communications Systems segment also had increased marketing and selling expenses due to increased volume and bid opportunities for the segment.

Non-operating Income: Non-operating income decreased from $7.6 million in the third quarter of fiscal 2002 to $2.8 million in the third quarter of fiscal 2003 due primarily to a decrease in gains from the sale of marketable securities available for sale. Non-operating income in the third quarter of fiscal 2002 included $16.2 million in gains from the sale of marketable securities available for sale compared to $6.3 million in the third quarter of fiscal 2003. The decrease in gains from the sale of marketable securities was partially offset by lower costs related to marketing and technology projects in the third quarter of fiscal 2003 versus the prior-year quarter.

Interest Income and Interest Expense: Interest income of $1.5 million in the third quarter of fiscal 2003 decreased from $2.9 million in the third quarter of fiscal 2002 primarily due to interest received from the U.S. government in the prior year that resulted from the overpayment of taxes. Interest expense increased slightly to $6.5 million in the third quarter of fiscal 2003 versus $6.1 million in the third quarter of fiscal 2002 due to increased borrowings.

Income Taxes: The provision for income taxes as a percentage of pretax income remained unchanged at 34.0 percent in the third quarter of fiscal 2003 compared to the third quarter of fiscal 2002. Both fiscal 2003 and fiscal 2002 tax rates were lower than the federal and state statutory rate and benefited from the impact of export sales.

Return on Revenue: Income before income taxes as a percentage of revenue was 6.3 percent in the third quarter of fiscal 2003 versus 7.1 percent in the third quarter of fiscal 2002. The decrease was due primarily to the reasons previously

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discussed.

Three Quarters Ended March 28, 2003: Revenue for the three quarters ended March 28, 2003 was $1,513.0 million compared to $1,378.2 million for the first three quarters of fiscal 2002 due primarily to the increase in volume at the RF Communications and Government Communications Systems segments. The gross margin as a percent of revenue decreased to 25.4 percent in the first three quarters of fiscal 2003 from 26.1 percent in the first three quarters of fiscal 2002. Decreased gross margin as a percent of sales was primarily due to the decreased margins realized in our Broadcast Communications segment, which had a shift in product mix away from higher margin DTV equipment to lower-margin analog products. This decrease was offset by an increase in our RF Communications segment’s gross margin due to higher volumes and manufacturing efficiencies.

Engineering, selling and administrative expenses increased $6.9 million from $296.4 million in the first three quarters of fiscal 2002 to $303.3 million in the first three quarters of fiscal 2003. Engineering, selling and administrative expenses as a percent of revenue was 20.0 percent in the first three quarters of fiscal 2003 compared to 21.5 percent in the first three quarters of fiscal 2002. The $6.9 million increase was primarily due to $8.3 million of implementation costs associated with cost-cutting actions taken at our Microwave Communications segment in the second quarter of fiscal 2003. There were also increased research and development expenses and selling and marketing expenses in our RF Communications segment related to increased volume and new product development for JTRS and other multiband handheld radios and increased selling and marketing expenses in our Government Communications Systems segment due to increased volumes and bid opportunities. Excluding the $8.3 million implementation costs noted above, engineering, selling and administrative expenses in the Microwave Communications and Network Support segments decreased due to ongoing cost reductions that have been implemented in these segments.

Non-operating income decreased from $33.3 million in the first three quarters of fiscal 2002 to $22.1 million in the first three quarters of fiscal 2003 due primarily to a decrease in gains from the sale of marketable securities available for sale. Non-operating income in the first three quarters of fiscal 2002 included $50.3 million in gains from the sale of marketable securities available for sale compared to $16.4 million in the first three quarters of fiscal 2003. Non-operating income in the first three quarters of fiscal 2002 also included a $10.3 million gain on the sale of our minority interest in GE Harris Energy Control Systems, LLC, joint venture, equity income of $7.3 million and was reduced by a $10.0 million write-down of our investment interest in Terion, Inc. Non-operating income in the first three quarters of fiscal 2003 included an $18.8 million gain on the sale of our minority interest in our LiveTV venture.

Income before income taxes for the first three quarters of fiscal 2003 increased $4.3 million to $89.1 million or 5.9 percent of revenue from $84.8 million or 6.2 percent of revenue for the first three quarters of fiscal 2002. The $4.3 million increase in income before income taxes was due primarily to the reasons previously discussed.

Segment Revenue, Segment Operating Income and Income Before Income Taxes

We are structured primarily around the markets we serve and operate in five business segments, which are Government Communications Systems, RF Communications, Microwave Communications, Network Support and Broadcast Communications. “Corporate eliminations” represent the elimination of inter-segment sales.

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Segment revenue, segment operating income and a reconciliation of segment operating income to income before income taxes are as follows:

                                                     
        Quarter Ended   Three Quarters Ended
       
 
                        %                   %
        March 28,   March 29,   Inc./   March 28,   March 29,   Inc./
        2003   2002   (Dec.)   2003   2002   (Dec.)
       
 
 
 
 
 
        (In millions)
REVENUE
                                               
Government Communications Systems
  $ 296.0     $ 239.0       23.8 %   $ 820.7     $ 675.5       21.5 %
RF Communications
    87.6       67.3       30.2 %     226.7       184.5       22.9 %
Microwave Communications
    72.2       71.8       0.6 %     203.8       224.3       (9.1 )%
Network Support
    11.9       13.7       (13.1 )%     37.2       43.0       (13.5 )%
Broadcast Communications
    75.9       93.3       (18.6 )%     238.0       255.0       (6.7 )%
Corporate eliminations
    (4.7 )     (1.8 )           (13.4 )     (4.1 )      
 
   
     
             
     
         
 
Total Revenue
  $ 538.9     $ 483.3       11.5 %   $ 1,513.0     $ 1,378.2       9.8 %
 
   
     
             
     
         
INCOME BEFORE INCOME TAXES
                                               
Segment Operating Income (Loss):
                                               
 
Government Communications Systems
  $ 26.6     $ 21.4       24.3 %   $ 74.8     $ 60.3       24.0 %
   
% of revenue
    9.0 %     9.0 %             9.1 %     8.9 %        
 
RF Communications
    23.8       13.3       78.9 %     57.7       33.1       74.3 %
   
% of revenue
    27.2 %     19.8 %             25.5 %     17.9 %        
 
Microwave Communications
    (0.8 )     0.2       (500.0 )%     (16.3 )     (11.6 )     40.5 %
   
% of revenue
    (1.1) %     0.3 %             (8.0 )%     (5.2 )%        
 
Network Support
    (1.4 )     (0.8 )     75.0 %     (6.6 )     (7.2 )     (8.3 )%
   
% of revenue
    (11.8 )%     (5.8 )%             ( 17.7 )%     (16.7 )%        
 
Broadcast Communications
    2.5       8.2       (69.5 )%     10.4       25.4       (59.1 )%
   
% of revenue
    3.3 %     8.8 %             4.4 %     10.0 %        
Headquarters expense
    (14.3 )     (12.6 )           (39.2 )     (37.1 )      
Non-operating income (1)
    2.8       7.6       (63.2 )%     22.1       33.3       (33.6 )%
Interest income
    1.5       2.9       (48.3 )%     5.0       9.6       (47.9 )%
Interest expense
    (6.5 )     (6.1 )     6.6 %     (18.8 )     (21.0 )     (10.5 )%
 
   
     
             
     
         
 
Total Income Before Income Taxes
  $ 34.2     $ 34.1       0.3 %   $ 89.1     $ 84.8       5.1 %
 
   
     
             
     
         
   
% of revenue
    6.3 %     7.1 %             5.9 %     6.2 %        


(1)   Non-operating income for the three quarters ended March 28, 2003 includes an $18.8 million pretax gain on the sale of our minority interest in our LiveTV venture. Non-operating income for the three quarters ended March 29, 2002 includes a $10.0 million write-down of our investment interest in Terion, Inc. and a $10.3 million pretax gain from the sale of our minority interest in our GE Harris Energy Control Systems, LLC joint venture.

Government Communications Systems Segment: Revenues from the Government Communications Systems segment in the third quarter of fiscal 2003 increased 23.8 percent when compared to the third quarter of fiscal 2002 and operating income of $26.6 million increased 24.3 percent from the third quarter of fiscal 2002. Growth was all organic and resulted from a broad spectrum of defense and non-defense federal government contract wins and add-ons to previous awards. The U.S. Department of Defense transformation towards integrated communications and network-centric warfare continues and has significantly expanded opportunities for our technology, services and systems integration.

During the third quarter of fiscal 2003, Government Communications Systems won a three-year contract from the U.S. Air Force to develop and demonstrate a prototype radar payload for Space-Based Radar, a critical national defense program. The initial value of this contract with options is $88 million. Harris also received a 20-month, $21 million development contract from the FAA for the Next Generation Air/Ground Communications (“NEXCOM”) program. Harris is leading one of three NEXCOM teams vying for a potential $400 million contract. Also, during the quarter, we received a 10-year, $750 million indefinite delivery/indefinite quantity production contract from the National Imagery and Mapping Agency to supply geospatial and imagery-derived products for the Global Geospatial Intelligence program.

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Government Communications Systems also won additional contracts for on-going programs, including telemetry modules supporting the U.S. Air Force Advanced Medium-Range Air-to-Air Missile. During the quarter, this segment completed its first hardware deliveries for the Joint Strike Fighter program as part of a $68 million advanced avionics design contract. In addition, this segment was awarded a 30-month, $55 million development contract for avionics supporting the U.S. Army’s RAH-66 Comanche helicopter.

RF Communications Segment: The RF communications segment reported record revenue and operating income levels for the quarter. Revenues from the RF Communications segment increased 30.2 percent in the third quarter of fiscal 2003 when compared to the same quarter last year. Operating income increased from $13.3 million in the third quarter of fiscal 2002 to $23.8 million in the third quarter of fiscal 2003. Continuing strong growth was driven by requirements for current products and next-generation tactical radio programs. We are continuing to benefit from our reputation as the technology leader and the most reliable and responsive supplier of secure tactical radios to the U.S. Military and our allies. The increased demand was for products that we either had in stock or could quickly produce with an increase in our production capabilities. Thus, we could meet the increased demand without additional fixed-costs.

During the quarter, RF Communications won contracts for its industry-leading Falcon® II radios from Romania, Macedonia, Uzbekistan, Tunisia and the U.K. Ministry of Defense. Development programs are well underway on next-generation tactical radio programs for the U.K. and U.S. military. This segment began shipping initial production quantities of high-frequency radio systems for integration into the U.K. Bowman Tactical Radio Program and, during the third quarter, was awarded a $10 million contract for cryptographic software development in support of the U.S. radio of the future – the JTRS.

Microwave Communications Segment: Revenues from the Microwave Communications segment increased 0.6 percent in the third quarter of fiscal 2003 compared to the prior-year quarter. This segment had an operating loss of $0.8 million in the third quarter of fiscal 2003 compared to operating income of $0.2 million in the third quarter of fiscal 2002. Microwave Communications revenue grew approximately 20 percent in North America in the third quarter of fiscal 2003 compared to the prior-year quarter primarily as a result of capacity upgrades by cellular and PCS providers. This segment also continued to benefit from a strong position in the private network business. This segment continues to increase its market share in North America through focused customer relationships, attention to product quality and expanded product features. Our new Constellation 155 radio, designed for rapid expansion and deployment of wireless services, has been well received by North American customers. Gross margin in our Microwave Communications segment decreased in the third quarter when compared to the prior-year quarter because of a change in revenue mix and its impact on capacity.

As expected, international markets remained weak and revenue declined compared to the prior-year quarter. Ongoing geo-political turmoil and capital constraints continue to plague infrastructure expansion programs. Eastern Europe, Asia and Africa did, however, continue to show relative strength. During the quarter, this segment won a $17 million contract from Odu’a Telecoms, a wireless broadband service provider in Nigeria. The program includes a five-state service deployment of point-to-multipoint radios and could expand if equipment and related service options are exercised.

Network Support Segment: Revenues from the Network Support segment decreased 13.1 percent in the third quarter of fiscal 2003 when compared to the third quarter of fiscal 2002. This segment had a $1.4 million operating loss in the third quarter of fiscal 2003 compared to an operating loss of $0.8 million in the third quarter of fiscal 2002 as this segment continues to suffer from the collapse of the DSL build-out and lower spending from the Regional Bell Operating Companies. Continued cost cutting programs helped to reduce losses on a sequential quarterly basis.

The business introduced a new Direct Access Test Unit for telecom central offices and field technicians. This product is designed to significantly reduce operating costs for service providers by reducing repeat visits required to diagnose and repair service problems or initiate new services. Initial field trials of this new solution are continuing and have exceeded customer expectations. Following the end of the third quarter we received a $5.1 million purchase order for this new product.

Broadcast Communications Segment: Revenues from the Broadcast Communications segment decreased 18.6 percent in the third quarter of fiscal 2003 compared to the same quarter last year. As anticipated, revenue was lower as U.S. TV broadcast stations delayed planned capital spending. Coverage of the war in Iraq has temporarily disrupted programming and, consequently, reduced advertising revenues and increased operating costs. As a result, many digital studio upgrades and automation projects were put on hold. Also, as previously reported, recent comments by the FCC that it is considering extending the timetable for digital upgrades to full-power requirements are dampening near-term capital spending for additional DTV transmission equipment.

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In international markets, this segment won contracts during the quarter to provide a European standard (“DVB-T”) digital transmitter to Ho Chi Minh City Television in Vietnam, and a U.S. standard (“ATSC”) digital transmitter for the Korean Broadcasting System’s nationwide TV network. In radio markets, this segment expanded its leadership in HD radio, with sales of transmitters and exciters to a number of U.S. radio stations making the transition to digital standards.

The segment reported operating income of $2.5 million, down from $8.2 million in the third quarter of fiscal 2002. The decrease is due to lower revenues and a lower gross margin that reflects a shift in product mix away from higher margin DTV equipment to lower-margin analog products.

LIQUIDITY AND FINANCIAL POSITION

Cash Flows

Net cash provided by operating activities: Net cash provided by operating activities was $100.8 million for the first three quarters of fiscal 2003 compared to $107.9 million for the first three quarters of fiscal 2002. In the first three quarters of fiscal 2003, strong profits and working capital management in our Government Communications Systems and RF Communications segments primarily drove positive cash flows from operating activities.

Net cash provided by (used in) investing activities: Net cash used in investing activities was $13.7 million for the first three quarters of fiscal 2003 compared to net cash provided by investing activities of $31.9 million for the first three quarters of fiscal 2002. The decrease in cash provided by investing activities was due primarily to the decrease in proceeds from the sale of securities available for sale from $54.5 million in the first three quarters of fiscal 2002 to $19.3 million for the first three quarters of fiscal 2003. Also, additions of plant and equipment in the first three quarters of fiscal 2003 were $47.6 million versus $29.8 million in the first three quarters of fiscal 2002. The increase was primarily due to additions related to our Government Communications Systems segment’s recently won contract to integrate and modernize the FAA’s telecommunications infrastructure. Total additions of plant and equipment for us in fiscal 2003 are expected to be in the $80 million to $85 million range.

Cash provided by investing activities in the first three quarters of fiscal 2002 included $23.0 million in proceeds from the sale of our minority interest in our GE Harris Energy Systems, LLC joint venture, which was partially offset by $8.6 million cash paid for acquisitions. Cash used in investing activities in the first three quarters of fiscal 2003 benefited from $19.0 million in proceeds from the sale of our interest in our LiveTV venture.

Net cash provided by (used in) financing activities: Net cash provided by financing activities was $85.4 million for the first three quarters of fiscal 2003 compared to net cash used in financing activities of $113.2 million for the first three quarters of fiscal 2002. The increase is attributable to the receipt of $146.3 million in net proceeds from the private placement of our $150 million 3.5% Convertible Debentures due 2022 which was completed in the first quarter of fiscal 2003, which was offset by the repayment of our $30.5 million 6.38% notes due 2002.

In fiscal 2000, our Board of Directors approved a share repurchase program, which authorizes us to repurchase up to 15 million shares of our common stock periodically in the open market, in negotiated or block transactions or pursuant to tender offers. In the third quarter of fiscal 2003, we repurchased 17,500 shares of our common stock at an average price per share of $25.84. In the first three quarters of fiscal 2003, we have repurchased a total of 117,500 shares of our common stock at an average price of $24.61. An authorization to repurchase an additional 1.6 million shares under this repurchase program still exists.

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Comparative Financial Position

Our comparative financial position is as follows:

                         
    As of   As of        
    March 28,   June 28,   Percent
    2003   2002   Increase/
    (Unaudited)   (Audited)   (Decrease)
   
 
 
    (In millions, except per share amounts)
Cash and cash equivalents
  $ 396.5     $ 226.2       75.3 %
Marketable securities
    24.9       52.2       (52.3 )%
Other current assets
    904.2       875.1       3.3 %
Current liabilities
    (457.8 )     (425.6 )     7.6 %
 
   
     
         
Working capital
  $ 867.8     $ 727.9       19.2 %
Goodwill
  $ 224.7     $ 215.2       4.4 %
Non-current deferred income tax asset
  $ 20.6     $ 26.0       (20.8 )%
Total debt
  $ 416.3     $ 308.9       34.8 %
Total shareholders’ equity
  $ 1,183.4     $ 1,149.9       2.9 %
Total debt as a % of total capital
    26.0 %     21.2 %        
Book value per share
  $ 17.80     $ 17.33       2.7 %

Cash and cash equivalents: Cash increased $170.3 million in the first three quarters of fiscal 2003 due primarily to the net receipt of $146.3 million from the private placement of convertible debentures, cash provided by operating activities of $100.8 million as noted above, cash receipts related to the sale of our interest in our LiveTV venture of $19.0 million and the sale of securities available for sale of $19.3 million. These increases were partially offset by the repayment of our $30.5 million 6.38% notes, $47.6 million in additions of plant and equipment, $15.9 million cash dividends paid and $2.9 million to repurchase 117,500 shares of our common stock.

Marketable securities: Marketable securities decreased from $52.2 million as of June 28, 2002 to $24.9 million as of March 28, 2003. The decrease was primarily due to the sale of a portion of our holdings in Intersil Corporation, the sale of the remainder of our holdings in Advanced Fibre Communications, Inc. and a decrease in the quoted market price of Intersil Corporation stock.

Working capital: Working capital increased 19.2 percent from $727.9 million as of June 28, 2002 to $867.8 million as of March 28, 2003. The $139.9 million increase was due primarily to increases in cash and cash equivalents as discussed above.

Goodwill: Goodwill increased from $215.2 million as of June 28, 2002 to $224.7 million as of March 28, 2003. The increase was due primarily to the final allocation of the purchase price related to the Broadcast Communication segment’s acquisition of Hirschmann Multimedia Communications Network.

Non-current deferred income taxes: The asset related to non-current deferred income taxes was $26.0 million as of June 28, 2002 versus $20.6 million as of March 28, 2003.

Total debt and capitalization: Total debt increased from $308.9 million as of June 28, 2002, representing 21.2 percent of total capital (defined as the sum of total debt plus shareholders’ equity), to $416.3 million as of March 28, 2003, representing 26.0 percent of total capital. The increase was primarily due to the private placement of our $150 million 3.5% convertible debentures in the first quarter of fiscal 2003, which was offset by the repayment of our $30.5 million 6.38% notes.

Capital Structure and Resources: We have available committed syndicated credit facilities with various banks that currently provide for borrowings up to $325.5 million. The credit facilities consist of a $212.5 million 3-Year Credit Agreement, which expires in May 2004 and a $113 million 364-Day Credit Agreement that expires in May 2003. We

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have determined not to renew the 364-Day Credit Agreement as it is not necessary to meet our current business needs. Interest rates on borrowings under these facilities and related fees are determined by a pricing matrix based upon our long-term debt rating assigned by Standard and Poor’s Ratings Group and Moody’s Investors Service. The availability of these facilities is not contingent upon our debt rating. We are not required to maintain compensating balances in connection with these agreements. At March 28, 2003 no amounts were borrowed under these facilities, but availability of borrowings under these facilities does enable us to issue commercial paper. The financial covenants contained in these facilities include, among others, maintenance of consolidated tangible net worth of not less than $801 million (which amount was initially $700 million and is subject to further increase), maintenance of a total debt to earnings before interest, taxes, depreciation and amortization ratio of not more than 3.0 and a limit on total debt to $800 million. These credit facilities also include negative covenants (i) limiting the creation of liens or other encumbrances, (ii) limiting certain sale and leaseback transactions, and (iii) limiting certain sales or other dispositions of assets other than in the ordinary course of business. In addition, these facilities include certain provisions for acceleration of maturity in the case of a (a) “cross default” with other indebtedness in an amount in excess of $25 million, (b) final uninsured judgment in excess of $25 million which remains unpaid or discharged, or (c) change of control, including if a person or group of persons acquires more than 25 percent of our voting stock.

We have an effective shelf registration statement filed with the Securities and Exchange Commission, which provides for the issuance of debt securities of up to $500 million.

On August 26, 2002, we completed the private placement of $150 million of our 3.5% Convertible Debentures due 2022. The debentures are unsecured obligations convertible into shares of our common stock at an initial conversion price of $45.25 per share, subject to adjustment. The debentures were issued at 100 percent of the principal amount, less a discount of 2.5 percent to the initial purchasers. We may redeem the debentures commencing August 2007 at 100 percent of the principal amount plus accrued interest. Holders may require us to repurchase the debentures, in whole or in part, on specified dates in 2007, 2012 and 2017 or upon the occurrence of certain other events at 100 percent of the principal amount plus accrued interest. The debentures initially bear interest at an annual rate of 3.5 percent. The interest rate will be reset in August 2007, 2012 and 2017, but in no event will it be reset below 3.5 percent or above 5.5 percent per annum. More information regarding the terms of the debentures can be found in the related Indenture, dated August 26, 2002. A Registration Statement on Form S-3 relating to the potential resale of the debentures and underlying common stock by the holders was declared effective by the SEC in November.

We have outstanding unsecured long-term debt of $250 million, which we issued in public offerings. The earliest maturity of any long-term debt is more than four years away.

Our debt is currently rated “BBB” by Standard and Poor’s Rating Group and “Baa2” by Moody’s Investors Service. We expect to maintain operating ratios, fixed-charge coverage ratios and balance sheet ratios sufficient for retention of these debt ratings. However, there are no assurances that our credit ratings will not be reduced in the future. If our credit rating is lowered below “investment grade” then we may not be able to issue short-term commercial paper, but would instead need to borrow under our other credit facilities or look for other alternatives. As of March 28, 2003, we had no commercial paper borrowings outstanding.

Management currently believes that existing cash, funds generated from operations, sales of marketable securities, the credit facilities and access to the public and private debt markets will be sufficient to provide for our anticipated requirements for working capital, capital expenditures and stock repurchases, if any, under the current repurchase program for the next 12 months and the foreseeable future.

Off-Balance Sheet Arrangements and Contractual Obligations

We have contractual cash obligations to repay debt and to make payments under operating leases. We also have commitments related to contingent liabilities on outstanding letters of credit and surety bonds that are used to guarantee bids, down payments and performance and financial assurances. Guarantees are contingent commitments issued to guarantee the performance of a customer to a third party in borrowing arrangements, such as commercial paper issuances, bond financings, and similar transactions. The term of the guarantee is equal to the remaining term of the related debt, which ranges from one to three years. The maximum potential amount of future payments we could be required to make under our guarantees at March 28, 2003 is $1.6 million. At March 28, 2003, there are no guarantees accrued for in our Condensed Consolidated Balance Sheet. We also hold insurance policies with third parties to mitigate the risk of loss on a portion of these guarantees.

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The amounts disclosed in our Fiscal 2002 Form 10-K include all of our off-balance sheet arrangements and contractual obligations that we consider to have a more than remote future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

No material changes occurred in our contractual cash obligations to repay debt and to make payments under operating leases or our commitments and contingent liabilities on outstanding letters of credit, guarantees and other arrangements as disclosed in our Fiscal 2002 Form 10-K except that in the first quarter of fiscal 2003, we repaid our $30.5 million 6.38% notes payable to banks and completed the private placement of our 3.5% convertible debt securities, which is previously described. Also, we received a release from our guarantee of borrowings for our LiveTV venture. This release was received in connection with the sale of our interest in LiveTV, which took place during the first quarter of fiscal 2003.

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

As noted in Note B “Recent Accounting Pronouncements” in the Notes to the Condensed Consolidated Financial Statements, there are accounting pronouncements that have been recently issued but not yet implemented by us. Note B describes the potential impact that these pronouncements are expected to have on our financial position, cash flows or results of operations.

OUTLOOK

We have begun implementing cost reduction actions aimed at reducing corporate overhead expenses and increasing operating income in our commercial businesses. Actions in the fourth quarter will include reductions in labor and facility costs, discontinuation of several low-margin telecom products and disposal of assets remaining from the previously exited telecom switch business.

Approximately 230 positions are being eliminated at our Corporate Headquarters location and the Broadcast Communications Division. Product lines to be exited include the wireless local loop WinRoll and RapidNet products, which were principally designed for international market applications. These markets remain relatively weak. Further, our new point-to-multipoint products now offer a superior solution. Also being discontinued is our digital subscriber line test product aimed at the domestic CLEC market, which is unlikely to recover in the near term.

As a result of these cost reduction actions, we expect pre-tax charges in the range of $30 to $35 million, or approximately $.30 to $.35 per share in the fourth quarter of fiscal 2003.

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We are pleased with the company’s solid financial performance and continue to have outstanding results in our two government communications businesses, but our commercial division results have been lagging. Our two telecom businesses appear to have stabilized and will benefit as a result of these cost reductions. Actions being implemented in our Broadcast Communications Division will reduce costs and improve profitability at that segment’s current level of business and position it for growth as the transition to digital technology regains momentum. Although non-operating income is likely to be lower than traditional levels in the near term, we have several important opportunities in the pipeline that will allow us to continue to capitalize on our large warehouse of technology and intellectual property. We remain committed to using our technology assets to create additional shareholder value in the future.

The cost reduction actions we have taken will assist in helping the company achieve significant operating margin improvement in fiscal 2004. The company’s financial position remains strong, and we will continue to invest in new technologies and products. At the same time, we will be persistent in reducing costs and driving efficiencies. As our global commercial markets return to normal conditions, these actions will position us for growth and improved performance.

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This report contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they prove incorrect or never materialize, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements of our plans, strategies and objectives for future operations; any statements concerning new products, services or developments; any statements regarding future economic conditions, performance or outlook; statements as to the outcome of contingencies; statements as to the value of our contract awards and programs; statements of cash flows; statements of belief or expectation; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates” and similar words. You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of the filing of this report. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Our consolidated results and the forward-looking statements could be affected by many factors, including:

    uncertain economic conditions, which make it difficult to estimate growth in our markets and, as a result, future income and expenditures;
 
    the severe telecommunications slow-down, which has had and may continue to have a negative effect on our telecom businesses;
 
    our ability to meet cost reduction goals;
 
    financial and government and regulatory risks relating to international sales and operations, including fluctuations in foreign currency exchange rates and the effectiveness of our currency hedging program;

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    government import and export policies and other government regulations;
 
    the fair values of our portfolio of passive investments, which values are subject to significant volatility or erosion;
 
    our ability to continue to develop new products that achieve market acceptance;
 
    strategic acquisitions and the risks and uncertainties related thereto, including our ability to manage and integrate acquired businesses;
 
    potential changes in government or customer priorities due to program reviews or revisions to strategic objectives, including potential failure to fund government contracts;
 
    risks inherent with large long-term fixed price contracts, particularly the ability to contain cost overruns;
 
    termination of government contracts;
 
    the performance of critical subcontractors or suppliers;
 
    potential claims that we are infringing the intellectual property rights of third parties;
 
    the successful resolution of patent infringement claims and litigation and the ultimate outcome of other litigation and legal matters;
 
    the impact of competitive products and pricing;
 
    the ability to recruit and retain qualified personnel; and
 
    general economic conditions in the markets in which we operate.

Additional details and discussions concerning some of the factors that could affect our forward-looking statements or results are set forth in Exhibit 99.1 of this report, entitled “Forward-Looking Statements and Factors that May Affect Future Results,” which Exhibit is incorporated herein by reference. The foregoing list is not exhaustive. Additional risks and uncertainties not known to us or that we currently believe not to be material also may adversely impact our operations and financial position. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on our business, financial condition, and results of operation.

The forward-looking statements contained in this report are made as of the date hereof and we disclaim any intention or obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events, or otherwise.

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Item 3. Quantitative and Qualitative Disclosure About Market Risk.

In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates, fluctuations in the market value of our equity securities available for sale and changes in interest rates. We employ established policies and procedures governing the use of financial instruments to manage our exposure to such risks.

Foreign Exchange and Currency: We use foreign exchange contracts and options to hedge both balance sheet and off-balance sheet foreign currency commitments. Generally, these foreign exchange contracts offset foreign currency denominated inventory and purchase commitments from suppliers, accounts receivable from and future committed sales to customers and intercompany loans. We believe the use of foreign currency financial instruments should reduce the risk that arises from doing business in international markets. At March 28, 2003, we had open foreign exchange contracts with a notional amount of $110.4 million, of which $24.9 million were classified as cash flow hedges and $85.5 million were classified as fair value hedges. This compares to total foreign exchange contracts with a notional amount of $83.5 million as of June 28, 2002, of which $44.8 million were classified as cash flow hedges and $38.7 million were classified as fair value hedges. At March 28, 2003, contract expiration dates range from less than one month to twenty-eight months with a weighted average contract life of 0.3 years.

More specifically, the foreign exchange contracts classified as cash flow hedges are primarily being used to hedge currency exposures from cash flows anticipated from the United Kingdom Bowman Programme in our RF Communications segment. This contract for our tactical radio products was awarded in the third quarter of fiscal 2002. Under the contract, the customer pays in Pounds Sterling (“GBP”). We also have payments to local suppliers in GBP on this program. We have hedged the forecasted sales and vendor payments denominated in GBP to maintain our anticipated profit margin in U.S. dollars. As of March 28, 2003, we estimate that a pretax loss of $1.4 million would be reclassified into earnings from comprehensive income within the next twenty-eight months related to these transactions. The net gain or loss included in our earnings for the first three quarters of fiscal 2003 and 2002 representing the amount of fair value and cash flow hedges’ ineffectiveness was not material. No amounts were recognized in our earnings for the first three quarters of fiscal 2003 and 2002 related to the component of the derivatives instruments’ gain or loss excluded from the assessment of hedge effectiveness. In addition, no amounts were recognized in our earnings for the first three quarters of fiscal 2003 and 2002 related to hedged firm commitments that no longer qualify as fair value hedges. No material reclassification of gains and losses into earnings from comprehensive income is expected to result from transactions or events related to commitments to customers or suppliers within the next twelve months. All of these derivatives were recorded at their fair value on the balance sheet in accordance with Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“Statement 133”).

Factors that could impact the effectiveness of our foreign exchange and currency hedging programs include accuracy of sales estimates, volatility of currency markets and the cost and availability of hedging instruments. A 10 percent adverse change in currency exchange rates for our foreign currency derivatives held at March 28, 2003 would have an impact of approximately $10.7 million on the fair value of such instruments. This quantification of exposure to the market risk associated with foreign exchange financial instruments does not take into account the offsetting impact of changes in the fair value of our foreign denominated assets, liabilities and firm commitments.

Marketable Securities: We currently have a portfolio of marketable equity securities available for sale. These investments result from the retained interest in sold or spun-off businesses and the investment into start-up companies that have technology or products that are of interest to us. The fair market value of these securities at March 28, 2003 was $24.9 million, compared to $52.2 million at June 28, 2002. This decrease was due primarily to the sale of some of these investments in the first three quarters of fiscal 2003 and a decrease in these securities’ quoted market prices. The corresponding unrealized gain or loss is included as a component of shareholders’ equity. These investments historically have had higher volatility than most market indices. A 10 percent adverse change in the quoted market price of marketable equity securities would have an impact of approximately $2.5 million on the fair market value of these securities.

We utilize option contracts in the form of cashless collars to hedge anticipated cash flows from the sale of marketable securities. Contracts are generally one year or less. At March 28, 2003, we had open option contracts for 25,000 shares of Intersil Corporation stock at a weighted average strike price of $29.71, which compares to 175,000 shares at a weighted average strike price of $32.26 as of June 28, 2002. All of these collars were classified as cash flow hedges and recorded at their fair value on the balance sheet in accordance with Statement 133. The fair market value of these collars reflected in the caption “Other assets” on the Condensed Consolidated Balance Sheet was $0.4 million at March 28, 2003 and $1.9 million at June 28, 2002.

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Factors that could impact the effectiveness of our hedging programs for marketable securities include accuracy of cash flow estimates, volatility of security markets, and the cost and availability of hedging instruments. A 10 percent adverse change in the quoted market price of Intersil Corporation stock would have an impact of approximately $0.1 million on the fair value of such instruments.

Interest Rates: We utilize a balanced mix of debt maturities along with both fixed-rate and variable-rate debt to manage our exposures to changes in interest rates. We do not expect changes in interest rates to have a material effect on income or cash flows in fiscal 2003, although there can be no assurances that interest rates will not change significantly.

Item 4. Controls and Procedures.

(a)  Evaluation of disclosure controls and procedures: As required by Rule 13a-15 under the Exchange Act of 1934, within the 90 days prior to the filing date of this quarterly report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)  Changes in internal controls: There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out the evaluation referenced in paragraph (a) above.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In April 2002, 43 plaintiffs filed suit against 23 defendants, including us, in the United States District Court for the Eastern District of New York (the “Schwinger” matter). The complaint seeks redress for injuries suffered by the plaintiffs as a result of defendants allegedly emitting toxins into the environment located in and near Hicksville, New York. Five related defendants are classified as “Verizon” defendants and are alleged to have released radioactive and toxic materials. The remaining defendants, including us, have been accused of releasing non-radioactive materials. The plaintiffs claimed damages that exceeded $360.0 million. In September 2002, we received an amended complaint, which added approximately 141 plaintiffs bringing the number of plaintiffs to 184. The claim for damages in the amended complaint appeared to double from the original complaint. In December 2002, the judge presiding over the Schwinger matter administratively dismissed the action and required the plaintiffs to refile their claims through three nominative plaintiffs. Those plaintiffs will be required to show how we and other defendants caused their losses before the remaining plaintiffs are allowed to proceed. We have been served with that refiled complaint which includes claims for compensatory and punitive damages. We were also served with a related complaint by a single plaintiff (the “Astuto” matter) who alleges losses similar to the three plaintiffs in the Schwinger matter but makes no monetary demand. The plaintiff in the Astuto matter will be required to show how we caused certain losses before eight other plaintiffs are able to join in that action. We have also been served with a complaint in a third related matter (the “Bennet” matter) where 44 plaintiffs are alleging claims similar to those brought by the Schwinger and Astuto plaintiffs against a similar group of defendants, including us. The Bennet plaintiffs are claiming $135.0 million in damages. We believe that our liability in these related matters, if any, is not significant. We anticipate filing appropriate motions in each case and to vigorously defend each action.

We previously filed a patent infringement claim against Ericsson, Inc. in the United States Federal District Court for the Northern District of Texas. On October 29, 2002, a jury rendered a verdict in our favor against Ericsson, Inc. and its parent company. The jury awarded us approximately $61 million in compensatory damages and found that Ericsson’s conduct was “willful.” We have filed a motion to treble the damages and Ericsson has filed motions (i) to decrease the damage award, (ii) to order a new trial, and (iii) for non-infringement and invalidity of the patent notwithstanding the jury’s verdict. Post trial motions were completed in January and we are awaiting the court’s decision. Decisions on these motions will be subject to potential appeals.

Item 2. Changes in Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

Not applicable.

Item 5. Other Information.

Not applicable.

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Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits:

             
        (3)   (i) Restated Certificate of Incorporation of Harris Corporation (1995), incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996.
             
            (ii) By-Laws of Harris Corporation as in effect December 3, 1999, incorporated herein by reference to Exhibit 3(i) to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 1999.
             
            (iii) Amendment to By-Laws of Harris Corporation adopted on June 23, 2000, incorporated herein by reference to Exhibit (3)(iii) to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2000.
             
        (4)   (a) Specimen stock certificate for the Company’s Common Stock, incorporated herein by reference to Exhibit 4(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 1997.
             
            (b) Stockholder Protection Rights Agreement, between Harris Corporation and Mellon Investor Services, LLC (formerly ChaseMellon Shareholder Services, L.L.C.) as Rights Agent, dated as of December 6, 1996, incorporated herein by reference to Exhibit 1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 1996.
             
        (10)   (a) Harris Corporation Retirement Plan (Amended and Restated effective January 1, 2003).
             
            (b) (i) Harris Corporation Supplemental Executive Retirement Plan (amended and restated effective March 1, 2003).
             
            (b) (ii) Amendment No. 1 to Supplemental Executive Retirement Plan.
             
        (12)   Computation of Ratio of Earnings to Fixed Charges
             
        (99)   Additional Exhibits:
             
        (99.1)   Forward-Looking Statements and Factors that May Affect Future Results.
             
        (99.2)   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
        (99.3)   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)  Reports on Form 8-K

         
    (i)   On January 15, 2003, we filed with the Commission a Current Report on Form 8-K, pursuant to “Item 5. Other Events and Regulation FD Disclosure,” relating to our announcement of revenues and earnings for our fiscal quarter ending December 27, 2002.
         
    (ii)   On January 21, 2003, we filed with the Commission a Current Report on Form 8-K, pursuant to “Item 5. Other Events and Regulation FD Disclosure,” relating to the announcement of the naming of Howard L. Lance as President and Chief Executive Officer of Harris.

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SIGNATURE

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

     
    HARRIS CORPORATION
(Registrant)
 
Date: May 6, 2003   By: /s/ Bryan R. Roub

Bryan R. Roub
Senior Vice President and Chief Financial Officer
(principal financial officer and duly authorized officer)

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I, Howard L. Lance, President and Chief Executive Officer of Harris Corporation, certify that:

  1.   I have reviewed this quarterly report on Form 10-Q of Harris Corporation;
 
  2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
  3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
  4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         
    (a)   Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
         
    (b)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
         
    (c)   Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

  5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

         
    (a)   All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
         
    (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

  6.   The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

May 6, 2003

  /s/ Howard L. Lance
NAME: HOWARD L. LANCE
TITLE: PRESIDENT AND
CHIEF EXECUTIVE OFFICER

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I, Bryan R. Roub, Senior Vice President and Chief Financial Officer of Harris Corporation, certify that:

  1.   I have reviewed this quarterly report on Form 10-Q of Harris Corporation;
 
  2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
  3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
  4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         
    (a)   Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
         
    (b)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
         
    (c)   Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

  5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

         
    (a)   All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
         
    (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

  6.   The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

May 6, 2003

  /s/ Bryan R. Roub
NAME: BRYAN R. ROUB
TITLE: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER

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EXHIBIT INDEX

             
Exhibit No.    
Under Reg    
S-K, Item 601   Description

 
        (3)   (i) Restated Certificate of Incorporation of Harris Corporation (1995), incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996.
             
            (ii) By-Laws of Harris Corporation as in effect December 3, 1999, incorporated herein by reference to Exhibit 3(i) to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 1999.
             
            (iii) Amendment to By-Laws of Harris Corporation adopted on June 23, 2000, incorporated herein by reference to Exhibit (3)(iii) to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2000.
             
        (4)   (a) Specimen stock certificate for the Company’s Common Stock, incorporated herein by reference to
Exhibit 4(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 1997.
             
            (b) Stockholder Protection Rights Agreement, between Harris Corporation and Mellon Investor Services, LLC (formerly ChaseMellon Shareholder Services, L.L.C.) as Rights Agent, dated as of December 6, 1996, incorporated herein by reference to Exhibit 1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 6, 1996.
             
        (10)   (a) Harris Corporation Retirement Plan (Amended and Restated effective January 1, 2003).
             
            (b) (i) Harris Corporation Supplemental Executive Retirement Plan (amended and restated effective March 1, 2003).
             
            (b) (ii) Amendment No. 1 to Supplemental Executive Retirement Plan.
             
        (12)   Computation of Ratio of Earnings to Fixed Charges
             
        (99)   Additional Exhibits:
             
        (99.1)   Forward-Looking Statements and Factors that May Affect Future Results.
             
        (99.2)   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
        (99.3)   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32

Exhibit 10(a)

HARRIS CORPORATION RETIREMENT PLAN

(AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2003)


Harris Corporation Retirement Plan

(Amended and Restated Effective January 1, 2003)

Table of Contents

                                                                                                            Page
                                                                                                            ----
ARTICLE 1     TITLE.......................................................................................    1

ARTICLE 2     DEFINITIONS.................................................................................    2

ARTICLE 3     PARTICIPATION...............................................................................   10

      Section 3.1.  Eligibility for Participation.........................................................   10

      Section 3.2.  Election of Pre-Tax Contributions and After-Tax Contributions.........................   10

      Section 3.3.  Transfers to Affiliates...............................................................   11

ARTICLE 4     PRE-TAX, MATCHING AND PROFIT SHARING CONTRIBUTIONS..........................................   12

      Section 4.1.  Pre-Tax Contributions.................................................................   12

      Section 4.2.  Matching Contributions................................................................   14

      Section 4.3.  Profit Sharing Contributions..........................................................   14

      Section 4.4.  Deposit of Contributions..............................................................   15

      Section 4.5.  Form of Contributions.................................................................   15

ARTICLE 5     AFTER-TAX AND ROLLOVER CONTRIBUTIONS........................................................   16

      Section 5.1.  After-Tax Contributions...............................................................   16

      Section 5.2.  Rollover Contributions................................................................   17

ARTICLE 6     LIMITATIONS ON CONTRIBUTIONS................................................................   18

      Section 6.1.  Annual Limit on Pre-Tax Contributions.................................................   18

      Section 6.2.  Limits on Contributions for Highly Compensated Employees..............................   20

      Section 6.3.  Maximum Annual Additions under Section 415 of the Code................................   25

      Section 6.4.  Other Limitations on Employer Contributions...........................................   27

ARTICLE 7     TRUST AND INVESTMENT FUNDS..................................................................   28

      Section 7.1.  Trust.................................................................................   28

      Section 7.2.  Investments...........................................................................   29

ARTICLE 8     PARTICIPANT ACCOUNTS AND INVESTMENT ELECTIONS...............................................   29

      Section 8.1.  Participant Accounts..................................................................   29

      Section 8.2.  Investment Elections..................................................................   30

      Section 8.3.  Valuation of Funds and Plan Accounts..................................................   32

      Section 8.4.  Valuation of Units within the Harris Stock Fund.......................................   33

i

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(Continued)

                                                                                                            Page
                                                                                                            ----
      Section 8.5.  Allocation of Contributions Other than Profit Sharing Contributions...................   33

      Section 8.6.  Allocation of Profit Sharing Contributions............................................   34

      Section 8.7.  Correction of Error...................................................................   35

ARTICLE 9     WITHDRAWALS AND DISTRIBUTIONS...............................................................   35

      Section 9.1.  Withdrawals Prior to Termination of Employment........................................   35

      Section 9.2.  Distribution of Account Upon Termination of Employment................................   39

      Section 9.3.  Time and Form of Distribution upon Termination of Employment..........................   40

      Section 9.4.  Payment of Small Account Balances.....................................................   42

      Section 9.5.  Medium and Order of Withdrawal or Distribution........................................   43

      Section 9.6.  Direct Rollover Option................................................................   43

      Section 9.7.  Designation of Beneficiary............................................................   44

      Section 9.8.  Missing Persons.......................................................................   46

      Section 9.9.  Distributions to Minor and Disabled Distributees......................................   46

      Section 9.10.  Payment of Group Insurance Premiums..................................................   47

ARTICLE 10    LOANS.......................................................................................   48

      Section 10.1.  Making of Loans......................................................................   48

      Section 10.2.  Restrictions.........................................................................   48

      Section 10.3.  Default..............................................................................   49

      Section 10.4.  Applicability........................................................................   49

ARTICLE 11    SPECIAL PARTICIPATION AND DISTRIBUTION RULES................................................   50

      Section 11.1.  Change of Employment Status..........................................................   50

      Section 11.2.  Reemployment of a Terminated Participant.............................................   50

      Section 11.3.  Employment by Affiliates.............................................................   51

      Section 11.4.  Leased Employees.....................................................................   51

      Section 11.5.  Reemployment of Veterans.............................................................   51

ARTICLE 12    SHAREHOLDER RIGHTS WITH RESPECT TO HARRIS STOCK.............................................   54

      Section 12.1.  Voting Shares of Harris Stock........................................................   54

      Section 12.2.  Tender Offers........................................................................   54

ARTICLE 13    ADMINISTRATION..............................................................................   57

      Section 13.1.  The Administrative Committee.........................................................   57

      Section 13.2.  Named Fiduciaries....................................................................   60

ii

Table of Contents
(Continued)

                                                                                                            Page
                                                                                                            ----
      Section 13.3.  Allocation and Delegation of Responsibilities........................................   60

      Section 13.4.  Professional and Other Services......................................................   60

      Section 13.5.  Claims Procedure.....................................................................   61

      Section 13.6.  Notices to Participants..............................................................   63

      Section 13.7.  Notices to Administrative Committee or Employers.....................................   63

      Section 13.8.  Records..............................................................................   63

      Section 13.9.  Reports of Trustee and Accounting to Participants....................................   63

ARTICLE 14    PARTICIPATION BY EMPLOYERS..................................................................   64

      Section 14.1.  Adoption of Plan.....................................................................   64

      Section 14.2.  Withdrawal from Participation........................................................   64

      Section 14.3.  Company, Administrative Committee, Compensation Committee and
                     Investment Committee as Agents for Employers.........................................   64

      Section 14.4.  Continuance by a Successor...........................................................   65

ARTICLE 15    MISCELLANEOUS...............................................................................   66

      Section 15.1.  Expenses.............................................................................   66

      Section 15.2.  Non-Assignability....................................................................   66

      Section 15.3.  Employment Non-Contractual...........................................................   68

      Section 15.4.  Merger or Consolidation with Another Plan............................................   68

      Section 15.5.  Gender and Plurals...................................................................   68

      Section 15.6.  Applicable Law.......................................................................   68

      Section 15.7.  Severability.........................................................................   69

      Section 15.8.  No Guarantee.........................................................................   69

      Section 15.9.  Plan Voluntary.......................................................................   69

ARTICLE 16    TOP-HEAVY PLAN REQUIREMENTS.................................................................   69

      Section 16.1.  Top-Heavy Plan Determination.........................................................   69

      Section 16.2.  Definitions and Special Rules........................................................   70

      Section 16.3.  Minimum Contribution for Top-Heavy Years.............................................   71

ARTICLE 17    AMENDMENT, ESTABLISHMENT OF SEPARATE PLAN, PLAN
              TERMINATION AND CHANGE OF CONTROL...........................................................   72

      Section 17.1.  Amendment............................................................................   72

      Section 17.2.  Establishment of Separate Plan.......................................................   72

iii

Table of Contents
(Continued)

                                                                                                      Page
                                                                                                      ----
Section 17.3.  Termination..........................................................................   73

Section 17.4.  Change of Control....................................................................   73

Section 17.5.  Trust Fund to Be Applied Exclusively for Participants and Their
               Beneficiaries........................................................................   74

iv

ARTICLE 1

TITLE

The title of this Plan shall be the "Harris Corporation Retirement Plan." This Plan is an amendment and restatement of the Plan in effect as of December 31, 2002. This amendment and restatement shall be effective January 1, 2003, except that:

(i) the provisions of Section 5.2 concerning a Participant's rollover contribution to the Plan and Section 9.6 concerning a Participant's direct rollover distribution option shall be effective January 1, 2002;

(ii) the provisions of Section 4.1(c) permitting certain Participants to make catch-up contributions to the Plan shall be effective May 1, 2002;

(iii) the provisions within the "Compensation" definition set forth in Article 2 concerning the maximum amount of Compensation taken into account under the Plan, Section 6.1(a) concerning the annual limit on pre-tax contributions, Section 6.3 concerning the maximum annual additions under section 415 of the Code and Section 16.2(b) concerning the special rules in determining whether the Plan is top-heavy shall be effective July 1, 2002; and

(iv) any provision of the Plan which specifies a different effective date shall be effective as of the date specified.

The rights and benefits of any Participant whose employment with all Employers and Affiliates terminates on or after January 1, 2003, and the rights and benefits of any Beneficiary of any such Participant, shall be determined solely by reference to the terms of the Plan as amended and restated herein, as may be amended from time to time. The rights and benefits of any Participant whose employment with all Employers and Affiliates terminated prior to January 1, 2003 and who is not reemployed after such date, and the rights and benefits of any Beneficiary of any such Participant, generally shall be determined solely by reference to the terms of the Plan as in effect on the date of the Participant's termination of employment.

The Plan is designated as a "profit sharing plan" within the meaning of U.S. Treasury Regulation Section 1.401-1(a)(2)(ii).


ARTICLE 2

DEFINITIONS

As used herein, the following words and phrases shall have the following respective meanings when capitalized:

Account. The aggregate of a Participant's accounts described in Section 8.1 and such other accounts that may be established from time to time on behalf of a Participant, to be credited with contributions made by or on behalf of the Participant, adjusted for earnings and losses, and debited by distributions to and withdrawals of the Participant and expenses.

Adjusted Consolidated Net Income. The adjusted consolidated net income of the Company and its Consolidated Subsidiaries before net income taxes for a Fiscal Year, determined by adjusting the consolidated net income shown in the annual audit report prepared by the Company's independent public accounts to eliminate the effect, if any, of the following items:

(1) any provision for taxes on or measured by income for such Fiscal Year required by the laws of the United States or of any state or political subdivision thereof (including, however, any taxes required under the Ohio Franchise Income Tax, whether or not in fact measured by income), or any provision for similar taxes required by the laws of any other country;

(2) all items consisting of credits or deficiencies relating to taxes described in clause (1) above on or measured by income for prior Fiscal Years;

(3) any provision for contributions for such Fiscal Year under this Plan or under any profit sharing retirement plan of a Consolidated Subsidiary;

(4) all dividends received during such Fiscal Year with respect to stock of an Affiliate that is not included among the Consolidated Subsidiaries;

(5) any gains or losses from the sale, exchange or other disposition of capital or depreciable property, as defined in the Code;

(6) any income from the use of the "lifo" inventory method resulting from either a reduction in inventory or a decrease in the cost index;

(7) all items of income and expense which relate directly to the conduct by an Affiliate of a business (i) which was formerly conducted by an entity which was not then an Affiliate, and (ii) the net income (or loss) of which was included for the first time in determining the consolidated net income of the Company and its Consolidated Subsidiaries for the Fiscal Year in question;

2

(8) all exchange adjustments resulting from translating to United States currency subsidiaries' year-end balance sheet items which are denominated in a foreign currency; and

(9) any item of income or expense relating to the right of any employee to receive cash upon cancellation of an unexercised stock option.

Administrative Committee. The Retirement Plan Administrative Committee that is appointed pursuant to Section 13.1 to administer the Plan. Reference herein to the Administrative Committee also shall include any person to whom the Administrative Committee has delegated any of its authority pursuant to Section 13.3.

Affiliate. (a) A corporation that is a member of the same controlled group of corporations (within the meaning of section 414(b) of the Code) as an Employer, (b) a trade or business (whether or not incorporated) under common control (within the meaning of section 414(c) of the Code) with an Employer, (c) any organization (whether or not incorporated) that is a member of an affiliated service group (within the meaning of section 414(m) of the Code) that includes an Employer, a corporation described in clause (a) of this subdivision or a trade or business described in clause (b) of this subdivision, or (d) any other entity that is required to be aggregated with an Employer pursuant to Regulations promulgated under section 414(o) of the Code.

After-Tax Account. The account established pursuant to Section 8.1 to which any after-tax contributions made for the benefit of a Participant pursuant to Section 5.1, and earnings and losses thereon, are credited.

Beneficiary. A person entitled under Section 9.7 to receive benefits in the event of the death of a Participant.

Board. The Board of Directors of the Company.

Break in Service. A period other than a period included in an Employee's Service; provided, however, that a Break in Service shall not include a period of absence from employment not in excess of 24 consecutive months because of (A) the Employee's pregnancy, (B) the birth of the Employee's child,
(C) the placement of a child with the Employee in connection with the Employee's adoption of such child or (D) the need of the Employee to care for any such child for a period beginning immediately following such birth or placement. Notwithstanding the foregoing, the immediately preceding sentence shall not apply unless the Employee timely furnishes to the Administrative Committee or its delegate such information as it may reasonably require to establish the reason for such absence and its duration.

Change of Control. For purposes hereof, a "Change of Control" shall be deemed to have occurred if:

(1) any "person" (as such term is defined in section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company

3

representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided however, that the event described in this paragraph (1) shall not be deemed to be a Change of Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, or (D) pursuant to a "Non-Control Transaction" (as defined in paragraph (3));

(2) individuals who, on July 1, 2002, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to July 1, 2002, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors who remain on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall also be deemed to be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(3) the consummation of a merger, consolidation, share exchange or similar form of corporate reorganization of the Company or any such type of transaction involving the Company or any of its Subsidiaries that requires the approval of the Company's stockholders (whether for such transaction or the issuance of securities in the transaction or otherwise) (a "Business Combination"), unless immediately following such Business Combination: (A) more than 80% of the total voting power of the corporation resulting from such Business Combination (including, without limitation, any corporation which directly or indirectly has beneficial ownership of 100% of the Company Voting Securities) eligible to elect directors of such corporation is represented by shares that were Company Voting Securities immediately prior to such Business Combination (either by remaining outstanding or being converted), and such voting power is in substantially the same proportion as the voting power of such Company Voting Securities immediately prior to the Business Combination, (B) no person (other than any publicly traded holding company resulting from such Business Combination or any employee benefit plan sponsored or maintained by the Company (or the corporation resulting from such Business Combination)), becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the corporation resulting from such Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies the conditions specified in (A), (B) and (C) shall be deemed to be a "Non-Control Transaction"); or

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(4) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the direct or indirect sale or other disposition of all or substantially all of the assets of the Company and its Subsidiaries.

Notwithstanding the foregoing, a "Change of Control" shall not occur solely because any person acquires beneficial ownership of 20% or more of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided however, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increase the percentage of outstanding Company Voting Securities beneficially owned by such person, a "Change of Control" shall then occur.

For purposes of this definition of "Change of Control," the term "Subsidiary" shall mean any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.

Code. The Internal Revenue Code of 1986, as amended.

Company. Harris Corporation, a Delaware corporation, and any successor thereto.

Compensation. The following items of remuneration which a Participant earns for work or personal services performed for an Employer: (a) salary or wages, including lump sum merit increases; (b) commission paid pursuant to a sales incentive plan; (c) overtime premium, shift differential or additional compensation in lieu of overtime premium; (d) compensation in lieu of vacation; (e) any annual bonus or incentive compensation payable in the form of cash pursuant to the Harris Corporation Annual Incentive Plan or any successor thereto or other similar plan or award program adopted from time to time by an Employer or any stock award made in lieu of an annual cash bonus or incentive compensation; (f) any compensation of a type described in items (a) through (e) above which is paid as an employee contribution to the Plan; or (g) any salary reduction contributions to a cafeteria plan (within the meaning of section 125 of the Code) or a non-qualified deferred compensation plan maintained by an Employer. Notwithstanding the foregoing, the following items shall be excluded from "Compensation": (i) any extraordinary compensation of a recurring or non-recurring nature not included under items (a) through (g) above, including one-time recognition awards and rewards under a referral program of an Employer;
(ii) any award made or amount paid pursuant to the Harris Corporation Stock Incentive Plan or any successor thereto, including, but not limited to, performance shares, stock options, restricted stock, stock appreciation rights or other stock-based awards or dividend equivalents; (iii) severance pay, separation pay or special retirement pay; (iv) retention bonuses or completion bonuses, unless authorized by the Administrative Committee in a uniform and nondiscriminatory manner to be included in Compensation; (v) reimbursement or allowances with respect to expenses incurred in connection with employment, such as tax equalization, reimbursement for moving expenses, mileage or expense allowance or education expenses; (vi) any salary reduction contributions to an arrangement maintained by an Employer providing

5

qualified transportation fringes (within the meaning of section 132(f)(4) of the Code) or (vii) indirect compensation such as employer-paid group insurance premiums or contributions under this Plan or any other qualified employee benefit plan, other than a contribution described in item (f) or (g) above.

Notwithstanding any provision herein to the contrary, the Compensation of a Participant taken into account for any purpose under the Plan shall not exceed $200,000 (as adjusted pursuant to section 401(a)(17)(B) of the Code). In addition, in the Plan Year in which an Eligible Employee becomes a Participant, only Compensation received on or after the date he or she becomes a Participant shall be taken into account under the Plan.

Compensation Committee. The Management Development and Compensation Committee of the Board. Reference herein to the Compensation Committee also shall include any person to whom the Compensation Committee has delegated any of its authority pursuant to Section 13.3.

Consolidated Subsidiaries. The Company's subsidiaries which are included in the consolidated annual financial statements for the Company.

Disability. A Participant's total and permanent physical or mental disability, as evidenced by the Participant's eligibility for disability benefits under Title II or Title XVI of the Federal Social Security Act. A Participant's Disability shall be deemed to occur as of the effective date determined by the Social Security Administration.

Effective Date. The effective date of this amendment and restatement of the Plan, which, with respect to the Company and any other Employer as of December 31, 2002 shall, except as otherwise provided in Article 1, be January 1, 2003 and, with respect to an entity that becomes an Employer on or after January 1, 2003, shall be the effective date as of which the Plan is adopted by such entity.

Eligible Employee. An Employee other than an Employee (i) the terms of whose employment are subject to a collective bargaining agreement which does not provide for the participation of such Employee in the Plan; (ii) who does not receive any Compensation payable in United States dollars; (iii) who is not treated as an employee of an Employer on such Employer's payroll records (notwithstanding any determination by a court or administrative agency that such individual is an Employee) or (iv) effective July 1, 2003, who is not a United States citizen and who provides services in a location other than the United States. No individual who renders services for an Employer shall be an Eligible Employee if such individual renders services pursuant to an agreement or arrangement (written or oral) (i) that such services are to be rendered by the individual as an independent contractor; (ii) with an entity, including a leasing organization within the meaning of section 414(n)(2) of the Code, that is not an Employer or Affiliate or (iii) that contains a waiver of participation in the Plan.

Employee. An individual whose relationship with an Employer is, under common law, that of an employee.

Employer. The Company or any other entity that, with the consent of the Compensation Committee, elects to participate in the Plan in the manner described in Section

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14.1, including any successor entity that is substituted for an Employer pursuant to Section 14.4. If an Employer withdraws from participation in the Plan pursuant to Section 14.2, or terminates its participation in the Plan pursuant to Section 17.3, it shall thereupon cease to be an Employer. An entity shall cease being an Employer as of the date it ceases to be an Affiliate, unless the Compensation Committee consents to such entity's continued participation in the Plan.

ERISA. The Employee Retirement Income Security Act of 1974, as amended.

Excess Compensation. The portion of a Participant's Compensation that exceeds the Taxable Wage Base for the year in which the Compensation is received.

Fiscal Year. The fiscal year of the Company.

Full-Time Employee. An Employee who regularly is scheduled by an Employer to work 30 or more hours per week and who is not designated on the payroll records of an Employer as a temporary employee.

Harris Stock. Common stock of the Company.

Harris Stock Fund. An investment option, the assets of which consist primarily of shares of Harris Stock.

Highly Compensated Employee. For a Plan Year, any Employee who
(i) is a 5%-owner (as determined under section 416(i)(1) of the Code) at any time during the current Plan Year or the preceding Plan Year or (ii) for the preceding Plan Year, was paid compensation in excess of $90,000 (as adjusted in accordance with section 414(q)(1)(B) of the Code) from an Employer or Affiliate and was a member of the "top-paid group" (as defined in section 414(q)(3) of the Code).

Hour of Service. Each hour for which an Employee is paid or entitled to payment for the performance of duties for an Employer.

Investment Committee. The Investment Committee--Retirement Plans of the Board. Reference herein to the Investment Committee also shall include any person to whom the Investment Committee has delegated any of its authority pursuant to Section 13.3.

Leave of Absence. A period of interruption of the active employment of an Employee granted by an Employer or Predecessor Company with the understanding that the Employee will return to active employment at the expiration of such period (or such extension thereof granted by the Employer or Predecessor Company). The term "Leave of Absence" does not include a period of Qualified Military Service.

Matching Account. The account established pursuant to Section 8.1 to which any matching contributions made for the benefit of a Participant pursuant to Section 4.2, and earnings and losses thereon, are credited.

Maximum Contribution Percentage. The maximum percentage of a Participant's Compensation for a payroll period that may be contributed to the Plan pursuant to Section 5.1, as

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determined from time to time by the Administrative Committee. The Administrative Committee in its sole discretion may establish different Maximum Contribution Percentages with respect to Participants who are not Highly Compensated Employees for a given Plan Year and Participants who are Highly Compensated Employees for such Plan Year, and with respect to classes of Highly Compensated Employees for a given Plan Year.

Maximum Deferral Percentage. The maximum percentage of a Participant's Compensation for a payroll period that may be contributed to the Plan pursuant to Section 4.1(a), as determined from time to time by the Administrative Committee. The Administrative Committee in its sole discretion may establish different Maximum Deferral Percentages with respect to Participants who are not Highly Compensated Employees for a given Plan Year and Participants who are Highly Compensated Employees for such Plan Year, and with respect to classes of Highly Compensated Employees for a given Plan Year.

Participant. An Eligible Employee who has satisfied the requirements set forth in Section 3.1. An individual shall cease to be a Participant upon the complete distribution of his or her vested Account.

Plan. The plan herein set forth, as from time to time amended.

Plan Year. The Fiscal Year.

Predecessor Company. Any entity (i) of which an Affiliate is a successor by reason of having acquired all or substantially all of its business and assets or (ii) from which an Affiliate acquired a business formerly conducted by such entity; provided, however, that in the case of any such entity that continues to conduct a trade or business subsequent to the acquisition by an Affiliate referred in (i) or (ii) above, the status of such entity as a Predecessor Company relates only to the period of time prior to the date of such acquisition.

Pre-Tax Account. The account established pursuant to Section 8.1 to which any pre-tax contributions made for the benefit of a Participant pursuant to Section 4.1, and earnings and losses thereon, are credited.

Profit Sharing Account. The account established pursuant to
Section 8.1 to which any profit sharing contributions made for the benefit of a Participant pursuant to Section 4.3, and earnings and losses thereon, are credited.

Qualified Military Service. An individual's service in the uniformed services (as defined in 38 U.S.C. Section 4303) if such individual is entitled to reemployment rights under USERRA with respect to such service.

Reduction in Force. An involuntary or voluntary reduction in force, as defined in the Company's Severance Pay Program.

Regulations. Written regulations promulgated by the Department of Labor construing Title I of ERISA or by the Internal Revenue Service construing the Code.

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Rollover Account. The account established pursuant to Section 8.1 to which any rollover contributions made by a Participant pursuant to
Section 5.2, and earnings and losses thereon, are credited.

Savings Account. The account established pursuant to Section 8.1 to which any savings contributions under the Plan as in effect prior to July 1, 1983, and earnings and losses thereon, are credited.

Service. The aggregate of the periods during which an Employee is employed by an Employer and any periods of employment or service taken into account pursuant to Sections 11.3 and 11.4, subject to the following:

(1) An Employee shall be deemed to be employed by an Employer during (i) any period of absence from employment by an Employer that is of less than twelve months' duration, (ii) the first twelve months of any period of absence from employment by an Employer for any reason other than the Employee's quitting, retiring, being discharged or death, and (iii) any period of absence from employment by an Employer during which the Employee is in Qualified Military Service, provided that the Employee returns to the employ of an Employer within the period prescribed by USERRA.

(2) An Employee's period of employment by an entity other than an Affiliate that becomes a Predecessor Company shall be included as Service only to the extent expressly provided in the documents effecting the acquisition or otherwise required by law.

(3) An Employee's period of employment by an entity in which the Company owns less than 80% but more than 1% of the outstanding equity interest (a "joint venture") shall be included as Service if (i) the Company or its delegate designates employment with the joint venture as eligible for service credit under the Plan; (ii) such Employee was employed by an Affiliate prior to such Employee's employment by the joint venture and was not employed by any person or entity other than an Affiliate (an "unrelated employer") between such Employee's employment by an Affiliate and the joint venture; and (iii) such Employee returns to employment with an Affiliate following the Employee's termination of employment with the joint venture without having been employed by an unrelated employer between such Employee's employment by the joint venture and an Affiliate.

(4) Solely for purposes of determining the nonforfeitable portion of a Participant's Account under Section 9.2(b), the Service of an Employee whose employment is terminated by an Employer or Affiliate in connection with a Reduction in Force shall include the first twelve months of absence from employment, effective as of the date of such termination of employment.

Service shall be computed in terms of completed years and completed days.

Taxable Wage Base. The maximum amount of earnings that may be considered wages under section 3121(a)(1) of the Code, except for purposes of Medicare taxes, as in effect on the first day of a Plan Year.

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Trust. The trust described in Section 7.1 and created by agreement between the Company and the Trustee.

Trust Fund. All money and property of every kind of the Trust held by the Trustee pursuant to the terms of the agreement governing the Trust.

Trustee. The person or entity appointed by the Investment Committee and serving as trustee of the Trust or, if there is more than one such trustee acting at a particular time, all of such trustees collectively.

USERRA. The Uniformed Services Employment and Reemployment Rights Act of 1994, as amended.

Valuation Date. Each day on which the New York Stock Exchange is open for trading and any other day determined by the Administrative Committee.

Year of Service. A period of Service of 365 days.

ARTICLE 3

PARTICIPATION

Section 3.1. Eligibility for Participation. Each Eligible Employee who was a Participant immediately before the Effective Date shall continue to be a Participant as of the Effective Date. Each other Eligible Employee who is a Full-Time Employee shall become a Participant on the day he or she first performs an Hour of Service. Each other Eligible Employee who is not a Full-Time Employee shall become a Participant on the day he or she first completes a Year of Service.

Section 3.2. Election of Pre-Tax Contributions and After-Tax Contributions. (a) Participant Election. A Participant who desires to make pre-tax contributions or after-tax contributions to the Plan shall make an election, in accordance with procedures prescribed by the Administrative Committee, specifying the Participant's chosen rate of such contributions. Such election shall authorize the Participant's Employer to reduce the Participant's Compensation by the amount of any such pre-tax contributions, shall authorize the Participant's Employer to make

10

regular payroll deductions of any such after-tax contributions, shall specify the Participant's investment election as described in Section 8.2(a) and shall evidence the Participant's acceptance and agreement to all provisions of the Plan. Any election made pursuant to this Section 3.2(a) shall be effective only with respect to Compensation not immediately available to the Participant as of the effective date of such election and shall be effective as of the first payroll period commencing after the date on which the election is received, or such later date as may be administratively practicable.

(b) Participant Deemed Election. A Participant who does not at the time and in the manner prescribed by the Administrative Committee elect otherwise shall be deemed to have elected to make pre-tax contributions to the Plan each payroll period at a rate of 6% of the Participant's Compensation for such payroll period and to have authorized the Participant's Employer to reduce his or her Compensation by the amount thereof. Any deemed election described in this Section 3.2(b) shall be effective only with respect to Compensation not immediately available to the Participant as of the effective date thereof and shall be effective as of the first payroll period commencing after the Eligible Employee becomes a Participant, or such later date as may be administratively practicable.

Section 3.3. Transfers to Affiliates. If a Participant is transferred from one Employer to another Employer or from an Employer to an Affiliate that is not an Employer, such transfer shall not terminate the Participant's participation in the Plan, and such Participant shall continue to participate in the Plan until an event occurs which would have entitled the Participant to a complete distribution of the Participant's vested interest in his or her Account had the Participant continued to be employed by an Employer until the occurrence of such event. Notwithstanding the foregoing, a Participant shall not be entitled to make pre-tax contributions,

11

after-tax contributions or rollover contributions to the Plan, to receive under the Plan allocations of matching contributions or, except as otherwise provided in Section 8.6(a), to receive under the Plan allocations of profit sharing contributions during any period of employment by an Affiliate that is not an Employer, and periods of employment by an Affiliate that is not an Employer shall be taken into account only to the extent set forth in Section 11.3. Payments that are received by a Participant from an Affiliate that is not an Employer shall not be treated as Compensation for any purpose under the Plan.

ARTICLE 4

PRE-TAX, MATCHING AND PROFIT SHARING CONTRIBUTIONS

Section 4.1. Pre-Tax Contributions. (a) Initial Election. Subject to the limitations set forth in Article 6, each Employer shall make a pre-tax contribution for each payroll period on behalf of each Participant who is an Eligible Employee of such Employer in an amount equal to a whole percentage of such Participant's Compensation for such payroll period as elected by the Participant pursuant to Section 3.2. The percentage of Compensation so designated by a Participant for a payroll period may not be less than 1% and may not be more than the Maximum Deferral Percentage with respect to such Participant. Notwithstanding the foregoing, the aggregate of a Participant's pre-tax contributions for a payroll period pursuant to this Section 4.1(a) and a Participant's after-tax contributions for a payroll period pursuant to Section 5.1 may not exceed an amount equal to the Maximum Deferral Percentage with respect to such Participant.

(b) Changes in the Rate or Suspension of Pre-Tax Contributions. A Participant's pre-tax contributions shall continue in effect at the rate elected by the Participant pursuant to Section 3.2 until the Participant changes or suspends such election. A Participant may change or

12

suspend such election at such time and in such manner as may be prescribed by the Administrative Committee, provided that only the last change made by a Participant during a payroll period shall be effectuated. Such change or suspension shall be effective as of the first payroll period commencing after the date on which the change or suspension is received, or such later payroll period as may be administratively practicable. A Participant who has suspended pre-tax contributions pursuant to this subsection may resume pre-tax contributions by making an election at such time and in such manner as may be prescribed by the Administrative Committee.

(c) Catch-Up Contributions. Each Participant who (i) is eligible to make pre-tax contributions under the Plan and (ii) will attain age 50 before the end of a calendar year ending with or within a Plan Year shall be eligible to have pre-tax contributions made on his or her behalf in addition to those described in Section 4.1(a) ("catch-up contributions"). Catch-up contributions shall be elected, made, suspended, resumed and credited in accordance with and subject to the rules and limitations of section 414(v) of the Code and such other rules and limitations prescribed by the Administrative Committee from time to time; provided, however, that (i) the amount of catch-up contributions made on behalf of a Participant during a calendar year shall not exceed the maximum amount permitted under section 414(v)(2) of the Code for the calendar year ($2,000 for 2003); (ii) the amount of catch-up contributions made on behalf of a Participant for a payroll period shall not exceed ten percent (10%) of the Participant's Compensation for the payroll period and (iii) no matching contributions shall be made pursuant to Section 4.2 in connection with catch-up contributions. Catch-up contributions shall not be taken into account for purposes of Sections 6.1 and 6.3, and the Plan shall not be treated as failing to satisfy its provisions implementing the requirements of section
401(k)(3), 401(k)(11),

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401(k)(12), 410(b) or 416 of the Code, as applicable, by reason of the making of catch-up contributions.

Section 4.2. Matching Contributions. Subject to the limitations set forth in Article 6, each Employer shall make a matching contribution for each payroll period on behalf of each Participant who is an Eligible Employee of such Employer, and who has completed a Year of Service, in an amount equal to 100% of the aggregate of (i) the pre-tax contribution made on behalf of such Participant pursuant to Section 4.1 and (ii) the after-tax contribution made on behalf of such Participant pursuant to Section 5.1, provided that the matching contribution shall not exceed 6% of the Participant's Compensation for such payroll period.

Section 4.3. Profit Sharing Contributions. (a) Basic. Subject to the limitations set forth in Article 6, the Employers shall make a profit sharing contribution for each Plan Year in an amount equal to eleven and one-half percent (11 1/2%) of Adjusted Consolidated Net Income for the Fiscal Year that ends with such Plan Year, reduced by the portion of such amount with respect to Participants' Compensation that would have been allocable under
Section 8.6 if Compensation were determined without regard to statutory limits under section 401(a)(17) or 415 of the Code. A profit sharing contribution made pursuant to this Section 4.3 shall be allocated to Participants in accordance with Section 8.6.

(b) Special. Subject to the limitations set forth in Article 6, the Company may, in its discretion, make a profit sharing contribution for a Plan Year (in addition to the profit sharing contribution made pursuant to subsection (a) above) in a specified dollar amount or pursuant to a formula, to be allocated to Participants in accordance with Section 8.6.

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Section 4.4. Deposit of Contributions. An Employer shall deliver to the Trustee any pre-tax contributions for a payroll period as soon as administratively practicable after the date such contributions otherwise would have been paid to the Participants as cash compensation, but in no event later than the 15th business day of the month following the month during which such contributions otherwise would have been paid to the Participants. An Employer shall deliver to the Trustee any matching contributions for a payroll period concurrently with the delivery of the pre-tax contributions or after-tax contributions to which such matching contributions relate. An Employer shall deliver to the Trustee any profit sharing contribution for a Plan Year no later than the date prescribed by the Code, including any authorized extensions thereof, for filing such Employer's federal income tax return for the Fiscal Year which ends with such Plan Year.

Section 4.5. Form of Contributions. Pre-tax contributions, matching contributions and profit sharing contributions shall be contributed to the Plan in cash; provided, however, that if a Participant elects that pre-tax contributions and matching contributions made on his or her behalf be invested in the Harris Stock Fund, the Company in its discretion may make such contributions in shares of Harris Stock, which may be contributed at a discount from fair market value. The portion of any such contribution that is attributable to a discount from fair market value on shares of Harris Stock shall be disregarded for purposes of determining (i) whether the pre-tax contributions made on behalf of a Participant exceed the Maximum Deferral Percentage under Section 4.1(a) with respect to such Participant; (ii) whether the pre-tax contributions made on behalf of a Participant exceed the annual limit on pre-tax contributions described in Section 6.1(a); and (iii) whether the matching contributions made on behalf of a

15

Participant exceed 6% of the Participant's Compensation for a payroll period, as described in Section 4.2.

ARTICLE 5

AFTER-TAX AND ROLLOVER CONTRIBUTIONS

Section 5.1. After-Tax Contributions. (a) Initial Election. Subject to the limitations set forth in Article 6, each Participant may elect in accordance with Section 3.2 to make an after-tax contribution for each payroll period by payroll deduction. The percentage of a Participant's Compensation for a payroll period subject to such election shall be a whole percentage not less than 1% and not more than the Maximum Contribution Percentage with respect to such Participant. Notwithstanding the foregoing, the aggregate of a Participant's pre-tax contributions for a payroll period pursuant to Section 4.1(a) and a Participant's after-tax contributions for a payroll period pursuant to this Section 5.1 may not exceed an amount equal to the Maximum Contribution Percentage with respect to such Participant. An Employer shall deliver to the Trustee any after-tax contributions for a payroll period as soon as administratively practicable after the date such contributions otherwise would have been paid to the Participants as cash compensation, but in no event later than the 15th business day of the month following the month during which such contributions otherwise would have been paid to the Participants.

(b) Changes in the Rate or Suspension of After-Tax Contributions. A Participant's after-tax contributions shall continue in effect at the rate elected by the Participant pursuant to Section 3.2 until the Participant changes or suspends such election. A Participant may change or suspend such election at such time and in such manner as may be prescribed by the Administrative Committee, provided that only the last change made by a Participant during a payroll period shall be effectuated. Such change or suspension shall be effective as of the first

16

payroll period commencing after the date on which the change or suspension is received, or such later payroll period as may be administratively practicable. A Participant who has suspended after-tax contributions pursuant to this subsection may resume after-tax contributions by making an election at such time and in such manner as may be prescribed by the Administrative Committee.

(c) Form of Contributions. After-tax contributions shall be contributed to the Plan in cash; provided, however, that if a Participant elects that after-tax contributions made on his or her behalf be invested in the Harris Stock Fund, the Company in its discretion may make such contributions in shares of Harris Stock, which may be contributed at a discount from fair market value. The portion of any such contribution that is attributable to a discount from fair market value on shares of Harris Stock shall be disregarded for purposes of determining whether the after-tax contributions made on behalf of a Participant exceed the Maximum Contribution Percentage under Section 5.1(a) with respect to such Participant.

Section 5.2. Rollover Contributions. (a) Requirements for Rollover Contributions. If a Participant receives an "eligible rollover distribution" (within the meaning of section 402(c)(4) of the Code) from an employees' trust described in section 401(a) of the Code that is exempt from tax under section 501(a) of the Code, from a qualified annuity plan described in section 403(a) of the Code or from an individual retirement account or annuity described in section 408(a) or (b) of the Code (provided that such amount is eligible to be rolled over from such individual retirement account or annuity and no amount in such individual retirement account or annuity is attributable to any source other than an eligible rollover distribution from an employees' trust described in section 401(a) of the Code that is exempt from tax under section 501(a) of the Code or from a qualified annuity plan described in section 403(a) of the Code, and

17

any earnings thereon), then such Participant may contribute to the Plan an amount that does not exceed the amount of such eligible rollover distribution (including the proceeds from the sale of any property received as part of such eligible rollover distribution). Notwithstanding the foregoing, rollover contributions to the Plan may not include any portion of an eligible rollover distribution that consists of after-tax employee contributions. A rollover contribution may be in the form of cash or, with the consent of the Administrative Committee or its delegate, a promissory note evidencing an outstanding loan balance.

(b) Delivery of Rollover Contributions. Any rollover contribution made pursuant to this Section shall be delivered by the Participant to the Trustee on or before the 60th day after the day on which the Participant receives the distribution (or on or before such later date as may be prescribed by law) or shall be transferred to the Trustee on behalf of the Participant directly from the trust from which the eligible rollover distribution is made. Any such contribution must be accompanied by any information or documentation in connection therewith requested by the Administrative Committee or the Trustee. Notwithstanding the foregoing, the Administrative Committee shall not permit a rollover contribution if in its judgment accepting such contribution would cause the Plan to violate any provision of the Code or Regulations.

ARTICLE 6

LIMITATIONS ON CONTRIBUTIONS

Section 6.1. Annual Limit on Pre-Tax Contributions. (a) General Rule. Notwithstanding the provisions of Section 4.1, pre-tax contributions made on behalf of a Participant pursuant to such Section for any calendar year shall not exceed the dollar limitation in effect for such calendar year under section 402(g) of the Code, except to the extent permitted

18

under Section 4.1(c) of the Plan and section 414(v) of the Code with respect to "catch-up contributions."

(b) Excess Pre-Tax Contributions.

(1) Characterization as After-Tax Contributions. Except to the extent set forth in Section 4.1(c) of the Plan and section 414(v) of the Code with respect to "catch-up contributions," if for any calendar year the pre-tax contributions to the Plan or the aggregate of the pre-tax contributions to the Plan plus amounts contributed under other plans or arrangements described in section 401(k), 403(b), 408(k) or 408(p) of the Code for a Participant reach the limit imposed by subsection (a) of this Section for such calendar year, any contributions under the Plan during the calendar year that exceed such limit ("excess deferrals") shall be characterized as after-tax contributions.

(2) Distribution. Notwithstanding the foregoing, and except to the extent set forth in Section 4.1(c) of the Plan and section 414(v) of the Code with respect to "catch-up contributions," if any excess deferrals of a Participant are not characterized as after-tax contributions, because of the limitation set forth in Section 5.1 on the amount of after-tax contributions that may be made to the Plan or otherwise, such Participant shall, pursuant to such rules and at such time following such calendar year as determined by the Administrative Committee, be allowed to submit a written request that the excess deferrals, plus any income and minus any loss allocable thereto, be distributed to the Participant. The amount of any income or loss allocable to such excess deferrals shall be determined pursuant to Regulations. Such amount of excess deferrals, as adjusted for income or loss, shall be distributed to the Participant no later than April 15 following the calendar year for which such contributions were made. Notwithstanding the provisions of this subsection
(b)(2), any such excess deferrals shall be

19

treated as "annual additions" for purposes of Section 6.3 for the limitation year in which such contributions were made. The amount of excess deferrals that may be distributed under this subsection (b)(2) with respect to a Participant for a calendar year shall be reduced by any amounts previously distributed pursuant to Section 6.2(d)(1) with respect to such Participant for such year.

Section 6.2. Limits on Contributions for Highly Compensated Employees.

(a) Actual Deferral Percentage Test Imposed by Section 401(k)(3) of the Code. Notwithstanding the provisions of Section 4.1, if the pre-tax contributions made pursuant to Section 4.1 for a Plan Year fail, or in the judgment of the Administrative Committee are likely to fail, to satisfy both of the tests set forth in paragraphs (1) and (2) of this subsection, the adjustments prescribed in Section 6.2(d)(1) shall be made. Any pre-tax contributions which are "catch-up contributions" described in Section 4.1(c) shall not be considered to be pre-tax contributions for purposes of determining whether the tests set forth in paragraphs (1) and (2) of this subsection are satisfied or for purposes of making any adjustments prescribed by Section 6.2(d)(1).

(1) The HCE average deferral percentage for such year does not exceed the product of the NHCE average deferral percentage for such year and 1.25.

(2) The HCE average deferral percentage for such year (i) does not exceed the NHCE average deferral percentage for such year by more than two percentage points and (ii) does not exceed the product of the NHCE average deferral percentage for such year and 2.0.

(b) Actual Contribution Percentage Test Imposed by Section 401(m) of the Code. Notwithstanding the provisions of Sections 4.2 and 5.1, if the aggregate of the matching contributions made pursuant to Section 4.2 and the after-tax contributions made pursuant to Section 5.1 for a Plan Year fail, or in the judgment of the Administrative Committee are likely to

20

fail, to satisfy both of the tests set forth in paragraphs (1) and (2) of this subsection, the adjustments prescribed in Section 6.2(d)(2) shall be made.

(1) The HCE average contribution percentage for such year does not exceed the product of the NHCE average contribution percentage for such year and 1.25.

(2) The HCE average contribution percentage for such year (i) does not exceed the NHCE average contribution percentage for such year by more than two percentage points and (ii) does not exceed the product of the NHCE average contribution percentage for such year and 2.0.

(c) Definitions and Special Rules. For purposes of this Section, the following definitions and special rules shall apply:

(1) The "actual deferral percentage test" refers collectively to the tests set forth in paragraphs (1) and (2) of subsection (a) of this Section relating to pre-tax contributions. The actual deferral percentage test shall be satisfied if either of such tests are satisfied.

(2) The "HCE average deferral percentage" for a Plan Year is a percentage determined for the group of Eligible Employees who are eligible to make pre-tax contributions for the current Plan Year and who are Highly Compensated Employees for the current Plan Year. Such percentage shall be equal to the average of the ratios, calculated separately for each such Eligible Employee to the nearest one-hundredth of one percent, of the pre-tax contributions for the benefit of such Eligible Employee for the current Plan Year (if any) to the total compensation for the current Plan Year paid to such Eligible Employee.

(3) The "NHCE average deferral percentage" for a Plan Year is a percentage determined for the group of Eligible Employees who were eligible to make pre-tax contributions for the immediately preceding Plan Year and who were not Highly Compensated Employees for the immediately preceding Plan Year. Such percentage shall be equal to the average of the ratios, calculated separately for each such Eligible Employee to the nearest one-hundredth of one percent, of the pre-tax contributions for the benefit of such Eligible Employee for the immediately preceding Plan Year (if any) to the total compensation for the immediately preceding Plan Year paid to such Eligible Employee.

(4) The "actual contribution percentage test" refers collectively to the tests set forth in paragraphs (1) and (2) of subsection (b) of this Section relating to matching contributions and after-tax contributions. The actual contribution percentage test shall be satisfied if either of such tests are satisfied.

(5) The "HCE average contribution percentage" for a Plan Year is a percentage determined for the group of Eligible Employees who are eligible to have matching contributions, after-tax contributions, or in the discretion of the Administrative

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Committee and to the extent permitted under rules prescribed by the Secretary of the Treasury or otherwise under the law, pre-tax contributions, made for their benefit for the current Plan Year and who are Highly Compensated Employees for the current Plan Year. Such percentage shall be equal to the average of the ratios, calculated separately for each such Eligible Employee to the nearest one-hundredth of one percent, of the matching contributions, after-tax contributions and, in the discretion of the Administrative Committee and to the extent permitted under rules prescribed by the Secretary of the Treasury or otherwise under the law, pre-tax contributions, made for the benefit of such Eligible Employee for the current Plan Year (if any) to the total compensation for the current Plan Year paid to such Eligible Employee.

(6) The "NHCE average contribution percentage" for a Plan Year is a percentage determined for the group of Eligible Employees who were eligible to have matching contributions, after-tax contributions, or in the discretion of the Administrative Committee and to the extent permitted under rules prescribed by the Secretary of the Treasury or otherwise under the law, pre-tax contributions, made for their benefit for the immediately preceding Plan Year and who were not Highly Compensated Employees for the immediately preceding Plan Year. Such percentage shall be equal to the average of the ratios, calculated separately for each such Eligible Employee to the nearest one-hundredth of one percent, of the matching contributions, after-tax contributions and, in the discretion of the Administrative Committee and to the extent permitted under rules prescribed by the Secretary of the Treasury or otherwise under the law, pre-tax contributions, made for the benefit of such Eligible Employee for the immediately preceding Plan Year (if any) to the total compensation for the immediately preceding Plan Year paid to such Eligible Employee.

(7) The term "compensation" shall have the meaning set forth in section 414(s) of the Code or, in the discretion of the Administrative Committee, any other meaning in accordance with the Code for these purposes.

(8) If the Plan and one or more other plans of an Employer to which pre-tax contributions, matching contributions or employee contributions (as such terms are defined for purposes of section 401(m) of the Code), or qualified non-elective contributions (as such term is defined in section 401(m)(4)(C) of the Code), are made are treated as one plan for purposes of section 410(b) of the Code, such plans shall be treated as one plan for purposes of this Section. If a Highly Compensated Employee participates in the Plan and one or more other plans of an Employer to which any such contributions are made, all such contributions shall be aggregated for purposes of this Section.

(9) Solely for purposes of this Section 6.2, if shares of Harris Stock are contributed to the Plan at a discount from fair market value in connection with a Participant's election to invest his or her pre-tax contribution in the Harris Stock Fund, then the amount of such discount shall be treated as a matching contribution.

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(d) Adjustments to Comply with Limits.

(1) Adjustments to Comply with Actual Deferral Percentage Test. The Administrative Committee shall cause to be made such periodic computations as it shall deem necessary or appropriate to determine whether the actual deferral percentage test will be satisfied during a Plan Year, and, if it appears to the Administrative Committee that such test will not be satisfied, the Administrative Committee shall take such steps as it deems necessary or appropriate to adjust the pre-tax contributions made pursuant to Section 4.1 for all or a portion of the remainder of such Plan Year for the benefit of some or all of the Highly Compensated Employees to the extent necessary in order for the actual deferral percentage test to be satisfied. If, after the end of the Plan Year, the Administrative Committee determines that, notwithstanding any adjustments made pursuant to the preceding sentence, the actual deferral percentage test was not satisfied, the Administrative Committee shall calculate a total amount by which pre-tax contributions must be reduced in order to satisfy such test in the manner prescribed by section 401(k)(8)(B) of the Code (the "excess contributions amount"). The amount of pre-tax contributions to be reduced for each Participant who is a Highly Compensated Employee shall be determined by first reducing the pre-tax contributions of each Participant whose actual dollar amount of pre-tax contributions for such Plan Year is highest until such reduced dollar amount equals the next highest actual dollar amount of pre-tax contributions made for such Plan Year on behalf of any Highly Compensated Employee or until the total reduction equals the excess contributions amount. If further reductions are necessary, then the pre-tax contributions on behalf of each Participant who is a Highly Compensated Employee and whose actual dollar amount of pre-tax contributions for such Plan Year is the highest (determined after the reduction described in the preceding sentence) shall be reduced in accordance with the preceding sentence. Such reductions shall continue to be made to the extent necessary so that the total reduction equals the excess contributions amount. The portion of a Participant's pre-tax contributions to be reduced in accordance with this Section 6.2(d)(1) shall be recharacterized as an after-tax contribution, and the Participant shall be notified of such recharacterization and the tax consequences thereof no later than 2 1/2 months after the end of the Plan Year (or if notification by such date is administratively impracticable, no later than the last day of the subsequent Plan Year). The amount of a Participant's pre-tax contributions to be reduced in accordance with this Section shall be reduced by any excess deferrals previously distributed to such Participant pursuant to Section 6.1 in order to comply with the limitations of section 402(g) of the Code. The amount of any income or loss allocable to any such reductions shall be determined pursuant to the applicable Regulations promulgated by the U.S. Treasury Department.

(2) Adjustments to Comply with Actual Contribution Percentage Test. The Administrative Committee shall cause to be made such periodic computations as it shall deem necessary or appropriate to determine whether the average contribution percentage test will be satisfied during a Plan Year, and, if it appears to the Administrative Committee that such test will not be satisfied, the Administrative Committee shall take such steps as it deems necessary or appropriate to adjust the matching contributions and the after-tax contributions made pursuant to Section 4.2 and 5.1, respectively, for all or a portion of the remainder of such Plan Year on behalf of some or all of the Highly

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Compensated Employees to the extent necessary in order for the average contribution percentage test to be satisfied. If, after the end of the Plan Year, the Administrative Committee determines that, notwithstanding any adjustments made pursuant to the preceding sentence, the average contribution percentage test was not satisfied, the Administrative Committee shall, in its discretion, (1) allocate a qualified nonelective contribution pursuant to Section 6.2(e) or (2) reduce the matching contributions and after-tax contributions made on behalf of each Participant who is a Highly Compensated Employee and whose actual dollar amount of matching contributions and after-tax contributions for such Plan Year is the highest in the same manner described in subparagraph (1) of this paragraph to the extent necessary to comply with the average contribution percentage test. The reduction described in the preceding sentence shall be made first with respect to a Participant's after-tax contributions in excess of six percent of Compensation, second with respect to any remaining after-tax contributions and any matching contributions attributable thereto, and third with respect to any other matching contributions. With respect to contributions to be so reduced, no later than 2 1/2 months after the end of the Plan Year (or if correction by such date is administratively impracticable, no later than the last day of the subsequent Plan Year), the Administrative Committee shall cause to be distributed to each such Participant the amount of such reductions made with respect to vested matching contributions to which such Participant would be entitled under the Plan if such Participant had terminated service on the last day of the Plan Year for which such contributions are made (or on the date of the Participant's actual termination of employment, if earlier) and with respect to after-tax contributions (plus any income and minus any loss allocable thereto), and any remaining amount of such reductions (plus any income and minus any loss allocable thereto) shall be forfeited. Any amounts forfeited pursuant to this paragraph shall be treated in the same manner as forfeitures described in Section 9.2(b). The amount of any such income or loss allocable to any such reduction to be so distributed or forfeited shall be determined pursuant to applicable Regulations promulgated by the U.S. Treasury Department.

(e) Qualified Nonelective Contributions. Subject to the limitations set forth in Sections 6.3 and 6.4, and to the extent permitted by Regulations or other pronouncements of the Internal Revenue Service, for purposes of satisfying the actual contribution percentage test set forth in
Section 6.2(b), the Employers may contribute for a Plan Year such amount, if any, as may be designated as a "qualified nonelective contribution" within the meaning of section 401(m)(4)(C) of the Code. Any qualified nonelective contribution to the Plan shall be allocated to the Accounts of those Participants who are not Highly Compensated Employees for the Plan Year with respect to which such qualified nonelective contribution is made and who are actively employed by the contributing Employer on the date such contribution is made, beginning with

24

the Participant with the lowest Compensation for such Plan Year and allocating the maximum amount permissible under Section 6.3 before allocating any portion of such qualified nonelective contribution to the Participant with the next lowest Compensation for the Plan Year. Such allocation shall continue until the Plan satisfies the requirements in Section 6.2(b) or until the amount of such qualified nonelective contribution has been completely allocated. Any such qualified nonelective contributions and earnings and losses thereon shall be accounted for separately by the Trustee and shall be distributable in accordance with the provisions of Article 9. Notwithstanding any provision of the Plan to the contrary, the portion of a Participant's account derived from qualified nonelective contributions at all times shall be nonforfeitable.

Section 6.3. Maximum Annual Additions under Section 415 of the Code. Notwithstanding any other provision of the Plan, and except to the extent permitted under Section 4.1(c) of the Plan and section 414(v) of the Code with respect to "catch-up contributions," the amounts allocated to the Account of each Participant for any limitation year shall be limited so that the aggregate annual additions for such year to the Participant's Account and to the Participant's accounts in all other defined contribution plans maintained by an employer shall not exceed the lesser of:

(a) $40,000 (as adjusted pursuant to section 415(d) of the Code); and

(b) 100% of the Participant's compensation for such limitation year (or such other percentage of compensation set forth in section 415(c) of the Code).

If the annual additions to a Participant's Account exceed the limitations set forth above for any limitation year (i) as a result of a reasonable error in estimating a Participant's annual compensation, (ii) as a result of a reasonable error in determining the amount of pre-tax contributions that may be made by a Participant under section 415 of the Code or (iii) under

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other limited facts and circumstances as determined by the Commissioner of Internal Revenue, the amounts to be allocated to such Participant's Account for such year shall be reduced to the extent of the excess in the following order:

(1) Pre-tax contributions in excess of 6% of the Participant's Compensation;

(2) Remaining pre-tax contributions and any matching contributions attributable thereto on a pro rata basis;

(3) Profit sharing contributions;

(4) After-tax contributions in excess of 6% of the Participant's Compensation; and

(5) Remaining after-tax contributions and any matching contributions attributable thereto on a pro rata basis.

Any pre-tax contributions or after-tax contributions so reduced, plus earnings thereon, shall be distributed to the Participant. Any matching contributions or profit sharing contributions so reduced, plus earnings thereon, shall be held in a segregated suspense account and shall be treated in the next limitation year as matching contributions or profit sharing contributions, as the case may be, thereby reducing amounts actually contributed by the Employers for such year. Upon termination of the Plan, any balance in such suspense account shall be returned to each Employer in the amount determined by the Administrative Committee, but only if the allocation upon Plan termination of such amount to Participants would cause all Participants to receive annual additions in excess of the limitations of section 415 of the Code.

The "annual additions" for a Plan Year to a Participant's Account and to the Participant's accounts in any other defined contribution plan is the sum for such limitation year of:

(a) the amount of employer contributions (including pre-tax contributions) allocated to the Participant's account, excluding, however, any pre-tax contributions that are

26

"catch-up contributions" made pursuant to Section 4.1(c) of the Plan and section 414(v) of the Code,

(b) the amount of forfeitures allocated to the Participant's account,

(c) the amount allocated to any individual medical benefit account (as defined in section 415(l) of the Code) maintained on behalf of the Participant, and

(d) the amount of contributions by the Participant to any such plan, but excluding any rollover contribution made thereto.

For purposes of this Section, the "limitation year" shall be the Plan Year, the terms "compensation" and "defined contribution plan" shall have the meanings set forth in section 415 of the Code and Regulations, and a Participant's employer shall include entities that are members of the same controlled group (within the meaning of section 414(b) of the Code as modified by section 415(h) of the Code) or affiliated service group (within the meaning of section 414(m) of the Code) as the Participant's employer or under common control (within the meaning of section 414(c) of the Code as modified by section 415(h) of the Code) with the Participant's employer or such entities.

Section 6.4. Other Limitations on Employer Contributions. The contributions of the Employers for a Plan Year shall not exceed the maximum amount for which a deduction is allowable to such Employers for federal income tax purposes for the fiscal year of such Employers that ends with such Plan Year.

Any contribution made by an Employer by reason of a good faith mistake of fact, or the portion of any contribution made by an Employer that exceeds the maximum amount for which a deduction is allowable to such Employer for federal income tax purposes by reason of a good faith mistake in determining the maximum allowable deduction, shall upon the request of

27

such Employer be returned by the Trustee to the Employer. An Employer's request and the return of any such contribution must be made within one year after such contribution was mistakenly made or after the deduction of such excess portion of such contribution was disallowed, as the case may be. The amount to be returned to an Employer pursuant to this paragraph shall be the excess of (i) the amount contributed over (ii) the amount that would have been contributed had there not been a mistake of fact or a mistake in determining the maximum allowable deduction. Earnings attributable to the mistaken contribution shall not be returned to the Employer, but losses attributable thereto shall reduce the amount to be so returned. If the return to the Employer of the amount attributable to the mistaken contribution would cause the balance of any Participant's Account as of the date such amount is to be returned (determined as if such date coincided with the close of a Plan Year) to be reduced to less than what would have been the balance of such Account as of such date had the mistaken amount not been contributed, the amount to be returned to the Employer shall be limited so as to avoid such reduction.

ARTICLE 7

TRUST AND INVESTMENT FUNDS

Section 7.1. Trust. A Trust shall be created by the execution of a trust agreement between the Company (acting on behalf of the Employers) and the Trustee. All contributions under the Plan shall be paid to the Trustee. The Trustee shall hold all monies and other property received by it and invest and reinvest the same, together with the income therefrom, on behalf of the Participants collectively in accordance with the provisions of the trust agreement. The Trustee shall make distributions from the Trust Fund at such time or times to such person or persons and in such amounts as the Administrative Committee directs in accordance with the Plan.

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Section 7.2. Investments. (a) In General. The Investment Committee shall establish an investment policy for the Plan. The Investment Committee shall cause the Trustee to establish and maintain two or more separate investment funds exclusively for the collective investment and reinvestment as directed by Participants of amounts credited to their Accounts. Additional investment funds may be established as determined by the Investment Committee from time to time in its sole discretion. The Investment Committee, in its sole discretion, may appoint investment managers to provide services in connection with the investment funds established under the Plan.

(b) Harris Stock Fund. In addition to the investment funds established pursuant to Section 7.2(a), the Investment Committee may cause the Trustee to establish, operate and maintain a Harris Stock Fund. The assets of the Harris Stock Fund shall be invested primarily in shares of Harris Stock. The assets of the Harris Stock Fund also may be invested in short-term liquid investments. Each Participant's interest in the Harris Stock Fund shall be represented by units of participation, and each such unit shall represent a proportionate interest in all the assets of such fund.

ARTICLE 8

PARTICIPANT ACCOUNTS
AND INVESTMENT ELECTIONS

Section 8.1. Participant Accounts. The Administrative Committee shall establish and maintain, or cause the Trustee or such other agent as the Administrative Committee may select, to establish and maintain a separate Account for each Participant. Such Account shall be solely for accounting purposes, and no segregation of assets of the Trust Fund among the separate Accounts shall be required. Each Account shall consist of the following subaccounts:

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(i) if pre-tax contributions have been made for the benefit of a Participant pursuant to Section 4.1, a Pre-Tax Account to which shall be credited such amounts and subsequent earnings and losses thereon;

(ii) if matching contributions have been made for the benefit of a Participant pursuant to Section 4.2, a Matching Account to which shall be credited such amounts and subsequent earnings and losses thereon;

(iii) if profit sharing contributions have been made for the benefit of a Participant pursuant to Section 4.3, a Profit Sharing Account to which shall be credited such amounts and subsequent earnings and losses thereon;

(iv) if after-tax contributions have been made by a Participant pursuant to Section 5.1, an After-Tax Account to which shall be credited such amounts and subsequent earnings and losses thereon;

(v) if a rollover contribution has been made by a Participant pursuant to Section 5.2, a Rollover Account to which shall be credited such amount and subsequent earnings and losses thereon; and

(vi) if applicable, a Savings Account to which shall be credited a Participant's savings contributions under the Plan as in effect prior to July 1, 1983, and subsequent earnings and losses thereon.

The Administrative Committee shall establish and maintain, or cause the Trustee or such other agent as the Administrative Committee may select, to establish and maintain investment subaccounts with respect to each investment fund described in Section 7.2 to which amounts contributed under the Plan shall be credited according to each Participant's investment elections pursuant to Section 8.2. All such investment subaccounts shall be solely for accounting purposes, and there shall be no segregation of assets within the investment funds among the separate investment subaccounts.

Section 8.2. Investment Elections. (a) Initial Election. Each Participant shall make, in the manner prescribed by the Administrative Committee, an investment election that shall apply to the investment of contributions made for a Participant's benefit and any earnings on such contributions, subject to such limitations set forth herein or imposed by the

30

Administrative Committee from time to time. Such election shall specify that such contributions be invested either (i) wholly in one of the funds maintained by the Trustee pursuant to Section 7.2, or (ii) divided among two or more of such funds in increments of 1% (or such larger percentage established by the Administrative Committee from time to time). During any period in which no direction as to the investment of a Participant's Account is on file with the Administrative Committee, contributions made for a Participant's benefit shall be invested in the Balanced Fund.

(b) Change of Election. A Participant may change his or her investment election as of any Valuation Date, subject to such limitations as the Administrative Committee from time to time may impose (including restrictions on investment election changes that apply solely to a particular investment fund). A Participant's investment election change shall be limited to the investment funds then maintained by the Trustee pursuant to Section 7.2. A change in investment election made pursuant to this Section shall apply to a Participant's existing Account or contributions made for the benefit of the Participant after such change, or both. Any such change shall specify that such Account or contributions be invested either (i) wholly in one of the funds maintained by the Trustee pursuant to Section 7.2 or (ii) divided among two or more of such funds in increments of 1% (or such larger percentage established by the Administrative Committee from time to time) or, solely with respect to a Participant's existing Account, in fixed dollar amounts. A Participant's change of investment election must be made in the manner prescribed by the Administrative Committee. The Administrative Committee shall prescribe rules regarding the time by which such an election must be made in order to be effective for a particular Valuation Date.

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(c) Special Rules Concerning the Harris Stock Fund. Notwithstanding any provision of the Plan to the contrary, the following rules shall apply to investments in the Harris Stock Fund:

(1) Availability. Only pre-tax contributions, after-tax contributions and matching contributions may be invested in the Harris Stock Fund. The aggregate of the pre-tax contribution and after-tax contribution invested in the Harris Stock Fund for any payroll period shall not exceed 1% (or such larger percentage established by an appropriate committee of the Board from time to time) of the Participant's Compensation for the payroll period; provided, however, that the portion of any pre-tax contribution or after-tax contribution that is attributable to a discount from fair market value on shares of Harris Stock shall be disregarded for purposes of this sentence. To the extent that pre-tax contributions or after-tax contributions are invested in the Harris Stock Fund, the matching contributions attributable thereto also shall be invested in the Harris Stock Fund.

(2) Restrictions on Transfers. A Participant may not transfer amounts from other investment funds to the Harris Stock Fund. Any contributions invested in the Harris Stock Fund must remain in the fund for a minimum of two Plan Years following the end of the Plan Year in which the investment is made (the "Holding Period"), provided that amounts invested in the Harris Stock Fund may be distributed before the expiration of the Holding Period if a Participant or Beneficiary is entitled to a distribution under the Plan pursuant to Section 9.3. The Investment Committee, in its sole discretion, may impose additional restrictions or requirements regarding transfers from the Harris Stock Fund.

(3) Dividends. A Participant's allocable share of cash or stock dividends (and other cash earnings) credited to the Harris Stock Fund shall be reinvested in the Harris Stock Fund and shall be subject to the same Holding Period as applies to the underlying stock on which the dividends (or other cash earnings) are paid.

(4) Contributions. Amounts invested in the Harris Stock Fund normally shall be contributed in cash; provided, however, that the Company, in its discretion, may contribute such amounts in Harris Stock, which may be contributed at a discount from fair market value. The Trustee is authorized to purchase shares of Harris Stock on the open market, and to give effect to any discount from fair market value established from time to time by allocating shares to a Participant's Account in addition to the number of shares that would have been allocated to the Participant's Account if the discount had not been established.

Section 8.3. Valuation of Funds and Plan Accounts. The value of an investment fund as of any Valuation Date shall be the market value of all assets (including any uninvested cash) held by the fund on such Valuation Date as determined by the Trustee, reduced by the

32

amount of any accrued liabilities of the fund on such Valuation Date. The Trustee's determination of market value shall be binding and conclusive upon all parties. The value of a Participant's Account as of any Valuation Date shall be the sum of the values of his or her investment subaccounts in each of the accounts listed in Section 8.1.

Section 8.4. Valuation of Units within the Harris Stock Fund. As soon as practicable after the close of business on each Valuation Date, the Trustee shall determine the value of the Harris Stock Fund on such Valuation Date in the manner prescribed in Section 8.3, and the value so determined shall be divided by the total number of Harris Stock Fund participating units allocated to the investment subaccounts of Participants. The resulting quotient shall be the value of a participating unit in the Harris Stock Fund as of such Valuation Date and shall constitute the "price" of a participating unit as of such Valuation Date. Participating units shall be credited, at the price so determined, to the investment subaccounts of Participants with respect to moneys contributed or transferred to such investment subaccounts on their behalf on such Valuation Date. The price of such participating units shall be debited to the investment subaccounts of Participants with respect to moneys divested from such investment subaccounts on their behalf on such Valuation Date. The value of all participating units credited to Participants' investment subaccounts shall be redetermined in a similar manner as of each Valuation Date.

Section 8.5. Allocation of Contributions Other than Profit Sharing Contributions. Any pre-tax contribution, matching contribution, after-tax contribution or rollover contribution shall be allocated to the Pre-Tax Account, Matching Account, After-Tax Account or Rollover Account, as applicable, of the Participant for whom such contribution is made as soon as practicable after the Valuation Date coinciding with or next following the date on which such

33

contribution is delivered to the Trustee and shall be credited to such Participant's Account as of such Valuation Date.

Section 8.6. Allocation of Profit Sharing Contributions. (a) Eligibility. A profit sharing contribution made by the Employers or the Company pursuant to Section 4.3 for a Plan Year shall be allocated to the Profit Sharing Accounts of Participants who have completed a Year of Service on or prior to the last day of such Plan Year and who (i) are actively employed as Eligible Employees on the earlier of (A) the last day of such Plan Year and (B) the June 30th nearest to the last day of such Plan Year (the "Eligibility Date"); (ii) were actively employed as Eligible Employees during such Plan Year but are not actively employed on the Eligibility Date due to Leave of Absence or a period of Qualified Military Service; or (iii) were actively employed as Eligible Employees during such Plan Year but terminated employment during such Plan Year (A) on or after the attainment of age 55, (B) due to death or Disability, (C) as a result of a Reduction in Force or (D) as a result of a transfer from employment with an Employer to employment with an Affiliate that is not an Employer. A Participant who is eligible for an allocation of a profit sharing contribution for a Plan Year shall be referred to within this Section 8.6 as an "Eligible Participant."

(b) Amount. A profit sharing contribution for a Plan Year shall be allocated among the Eligible Participants in the proportion that the aggregate of the Compensation and Excess Compensation paid by the Employers or the Company to each such Eligible Participant during such Plan Year bears to the aggregate of the total Compensation and Excess Compensation paid by the Employers or the Company to all such Eligible Participants during such Plan Year. Such allocation shall be made as soon as practicable after the Valuation Date coinciding with or next following the date on which the profit sharing contribution is delivered to

34

the Trustee and shall be credited to such Participants' Profit Sharing Accounts as of such Valuation Date.

(c) Limitation On Amount. Notwithstanding subsection (b), the amount allocated to an Eligible Participant with respect to Excess Compensation shall not exceed the "base contribution percentage" by more than the lesser of
(i) the base contribution percentage and (ii) 5.7% (or if greater, the percentage equal to the Old Age portion of the tax under section 3111(a) of the Code, as in effect on the first day of the Plan Year). Any remaining amount shall be allocated based on the ratio of each Eligible Participant's Compensation for the Plan Year to the Compensation of all Eligible Participants for the Plan Year. The term "base contribution percentage" means the percentage of Compensation of an Eligible Participant contributed by the Employers or the Company with respect to such Participant's Compensation not in excess of the Participant's Taxable Wage Base.

Section 8.7. Correction of Error. If it comes to the attention of the Administrative Committee that an error has been made in any of the allocations prescribed by this Article 8, appropriate adjustment shall be made to the Accounts of all Participants and Beneficiaries that are affected by such error, except that no adjustment need be made with respect to any Participant or Beneficiary whose Account has been distributed in full prior to the discovery of such error.

ARTICLE 9

WITHDRAWALS AND DISTRIBUTIONS

Section 9.1. Withdrawals Prior to Termination of Employment.
(a) Withdrawals from After-Tax Account and Savings Account. As of any Valuation Date, a

35

Participant may withdraw all or any portion of his or her After-Tax Account or Savings Account; provided, however, that (i) only one such withdrawal may be made in any three-month period; (ii) such withdrawal shall be in the form of a lump sum payment; (iii) a Participant may not withdraw any amount from his or her Savings Account until the entire balance of his or her After-Tax Account has been withdrawn; and (iv) a Participant's election under the Plan to make after-tax contributions, if any, shall be suspended, and no after-tax contributions or matching contributions attributable to after-tax contributions shall be allocated to the Participant's Account, for a period of three months after the date of such withdrawal from the Participant's After-Tax Account. At the expiration of such three-month suspension period, a Participant may resume making after-tax contributions in accordance with the procedures set forth in
Section 5.1.

(b) Hardship Withdrawals. Subject to the provisions of this subsection, a Participant who has taken all loans available to the Participant under Article 10, has taken all withdrawals available to the Participant under Sections 9.1(a) and (c) and has incurred a financial hardship may withdraw as of any Valuation Date all or any portion of the combined balance of his or her (i) pre-tax contributions, (ii) Rollover Account and (iii) vested Profit Sharing Account. The amount of such withdrawal shall not exceed the amount needed to satisfy the financial hardship, including amounts necessary to pay any federal, state or local taxes or any penalties reasonably anticipated to result from the hardship withdrawal. The determination of the existence of a financial hardship and the amount required to be distributed to satisfy such hardship shall be made in a uniform and non-discriminatory manner according to the following rules:

(1) A financial hardship shall be deemed to exist if and only if the Participant certifies that the financial need is on account of:

(A) expenses for medical care described in section 213(d) of the Code previously incurred by the Participant, the Participant's spouse, or any dependents

36

of the Participant (as defined in section 152 of the Code) or necessary for such persons to obtain medical care described in section 213(d) of the Code;

(B) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments);

(C) payment of tuition, room and board and related educational fees for the next 12 months of post-secondary education for the Participant, the Participant's spouse or any dependents of the Participant (as defined in section 152 of the Code);

(D) payments necessary to prevent the eviction of the Participant from the Participant's principal residence or foreclosure of the mortgage on that residence; or

(E) the occurrence of any other event determined by the Commissioner of Internal Revenue pursuant to Treasury Regulation section 1.401(k)-1(d)(2)(iv).

(2) A distribution shall be treated as necessary to satisfy a financial need if and only if the Participant certifies (and if the Administrative Committee has no reason to believe that such certification is inaccurate) that such hardship cannot be relieved by or through:

(A) reimbursement or compensation by insurance or otherwise;

(B) cessation of pre-tax contributions and after-tax contributions under the Plan;

(C) reasonable liquidation of the Participant's assets (including assets of the Participant's spouse and minor children that are reasonably available to the Participant), to the extent such liquidation would not itself cause an immediate and heavy financial need; or

(D) other distributions or nontaxable (at the time of the loan) loans from this Plan or other plans maintained by an Employer or by another employer, or by borrowing from commercial sources on reasonable commercial terms.

(3) The Participant shall be required to submit any additional supporting documentation as may be requested by the Administrative Committee.

(4) Any hardship withdrawal pursuant to this Section 9.1(b) shall be in the form of a lump sum payment.

(5) A Participant may receive a hardship withdrawal pursuant to this Section 9.1(b) no more than once during any six-month period.

(6) Amounts distributed to a Participant pursuant to this
Section 9.1(b) shall be withdrawn first from the Participant's Rollover Account, next from the Participant's pre-

37

tax contributions and finally from the vested portion of the Participant's Profit Sharing Account and shall not be taken from the next source until the previous source has been depleted.

(7) Notwithstanding any provision of the Plan to the contrary, a Participant who receives a hardship withdrawal hereunder on or after July 1, 2003 shall be prohibited from making any pre-tax contributions or after-tax contributions under Section 4.1 or Section 5.1, respectively, and under all other plans of the Employers and Affiliates until the first payroll period commencing coincident with or next following the date which is six months after the date the hardship withdrawal was made (or such earlier date as may be permitted by applicable Regulations). Such a Participant may elect to resume making pre-tax contributions in accordance with the procedures set forth in
Section 4.1 and resume making after-tax contributions in accordance with the procedures set forth in Section 5.1. For purposes of this paragraph, "all other plans of the Employers and Affiliates" shall include stock option plans, stock purchase plans, qualified and nonqualified deferred compensation plans and such other plans as may be designated under Regulations, but shall not include health and welfare plans and the mandatory employee contribution portion of a defined benefit plan.

(c) Withdrawals On or After Age 59 1/2. As of any Valuation Date, a Participant who has attained age 59 1/2 may withdraw all or any portion of his or her vested Account. A withdrawal made pursuant to this Section 9.1(c) shall be made at the Participant's election in any form of payment provided under Section 9.3(c).

(d) Conditions Applicable to All Withdrawals. A Participant's request for a withdrawal pursuant to this Section 9.1 shall be made at such time and in such manner as may be prescribed by the Administrative Committee. The amount available for withdrawal pursuant to this Section 9.1 shall be reduced by the amount of any loan made pursuant to Article 10 that is outstanding at the time of withdrawal, and no withdrawal pursuant to this Section 9.1 shall be permitted to the extent that such withdrawal would cause the aggregate amount of such outstanding loan to exceed the limits described in Section 10.1. No withdrawal shall be permitted under this Section 9.1 of the portion of a Participant's Account, if any, which is invested in the Harris Stock Fund and which has not satisfied the Holding Period described in Section 8.2(c). The amount available for withdrawal under this Section 9.1 is subject to

38

reduction in the sole discretion of the Administrative Committee to take into account the investment experience of the Trust Fund between the date of the withdrawal election and the date of the withdrawal.

Section 9.2. Distribution of Account Upon Termination of Employment. (a) Termination of Employment under Circumstances Entitling Participant to Full Distribution of Account. If a Participant's employment with all Employers and Affiliates terminates under any of the following circumstances, then the Participant or his or her designated Beneficiary, as the case may be, shall be entitled to receive the Participant's entire Account:

(1) on or after the date the Participant attains age 55;

(2) on account of the Participant's death;

(3) on account of the Participant's Disability; or

(4) after the Participant is credited with at least six Years of Service.

(b) Termination of Employment under Circumstances Resulting in Partial Forfeiture of the Participant's Account. If a Participant's employment with all Employers and Affiliates terminates under circumstances other than those set forth in Section 9.2(a), then the Participant shall be entitled to receive (i) the entire balance of the Participant's Pre-Tax Account, After-Tax Account, Rollover Account and Savings Account and (ii) a percentage of the balance of the Participant's Matching Account and Profit Sharing Account, which percentage shall be determined as follows by reference to the Participant's Years of Service as of the date of the Participant's termination of employment:

     Years of Service                     Percentage
     ----------------                     ----------
Less than 2                                    0%
At least 2 but less than 3                    20%
At least 3 but less than 4                    40%
At least 4 but less than 5                    60%

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At least 5 but less than 6                    80%
6 or more                                    100%

In the event of the sale or disposition of a business or a sale of substantially all of the assets of a trade or business, a Participant affected by such sale may be entitled to the entire balance of the Participant's Account, irrespective of the Participant's Years of Service, if expressly provided in the documents effecting the transaction or otherwise authorized by the Company.

Any portion of a Participant's Matching Account and Profit Sharing Account which the Participant is not entitled to receive pursuant to this Section 9.2(b) shall be charged to such accounts and forfeited as of the earlier of (i) the date the Participant receives a distribution of the Participant's vested Account pursuant to Section 9.3 or 9.4 and (ii) the last day of the calendar year during which the Participant's employment terminates. If such Participant is reemployed prior to incurring a Break in Service of five consecutive years, then such forfeiture shall be reinstated as prescribed in
Section 11.2(b). Amounts forfeited pursuant to this Section shall be used first to restore the Accounts of "missing" Participants or Beneficiaries of the Employer of the Participant whose Account was forfeited as described in Section 9.8, next to restore the Accounts of Participants who are reemployed by the Employer of such Participant as described in Sections 11.2(b) and finally to reduce future contributions to the Plan by the Employer of such Participant.

Section 9.3. Time and Form of Distribution upon Termination of Employment. (a) In General. A Participant shall be entitled to a distribution of his or her vested Account upon the Participant's termination of employment with all Employers and Affiliates.

(b) Time of Distribution. A Participant shall be entitled to a distribution of his or her vested Account as soon as administratively practicable after the date of the Participant's

40

termination of employment, or, subject to Section 9.4, may defer distribution to a later date; provided, however, that:

(1) subject to Section 9.4, a Participant's Account shall not be distributed prior to the Participant's 65th birthday unless the Participant has consented in writing to such distribution;

(2) if a Participant dies before the commencement of distribution of his or her Account, distributions paid or commencing after the Participant's death shall be completed no later than December 31 of the calendar year which contains the fifth anniversary of the Participant's death, except that (i) if the Participant's Beneficiary is the Participant's spouse, distribution may be deferred until December 31 of the calendar year in which the Participant would have attained age 70 1/2 and (ii) if the Participant's Beneficiary is a natural person other than the Participant's spouse and distributions commence on or before December 31 of the calendar year immediately following the calendar year in which the Participant died, such distributions may be made over a period not longer than the life expectancy of such Beneficiary;

(3) if at the time of a Participant's death, distribution of his or her Account has commenced, the remaining portion of the Participant's Account shall be paid at least as rapidly as under the method of distribution being used prior to the Participant's death;

(4) unless a Participant files a written election to defer distribution, distribution shall be made to a Participant by payment in a single lump sum payment no later than 60 days after the end of the Plan Year which contains the latest of (i) the date of the Participant's termination of employment, (ii) the tenth anniversary of the date the Participant commenced participation in the Plan and (iii) the Participant's 65th birthday; provided, however, that if the Participant does not elect a distribution prior to the latest to occur of the events listed above, the Participant shall be deemed to have elected to defer such distribution until a date no later than April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2; and

(5) with respect to a Participant who continues in employment after attaining age 70 1/2, distribution of the Participant's Account shall commence no later than the Participant's required beginning date. For purposes of this paragraph, the term "required beginning date" shall mean (A) with respect to a Participant who is a 5%-owner (within the meaning of section 416(i) of the Code), April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 and (B) with respect to any other Participant, April 1 of the calendar year following the calendar year in which the Participant terminates employment with all Employers and Affiliates. Distributions made under this paragraph shall be made in accordance with Section 9.3(d).

(c) Form of Distribution. Any distribution to which a Participant (or in the event of the Participant's death, his or her Beneficiary) becomes entitled upon the Participant's

41

termination of employment shall be distributed by the Trustee by whichever of the following methods the Participant (or Beneficiary) elects:

(i) an amount not greater than the vested balance of the Participant's Account, provided, however, that only one such payment may be made in any single month;

(ii) substantially equal periodic installment payments, payable not less frequently than annually and not more frequently than monthly, over a period to be elected by the Participant (or Beneficiary); or

(iii) a combination of (i) and (ii).

A Participant (or Beneficiary) may change his or her election with respect to the form of distribution at any time before or after distribution of benefits commences.

(d) Required Minimum Distributions. Notwithstanding any provision of the Plan to the contrary, with respect to distributions under the Plan made for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of section 401(a)(9) of the Code in accordance with the Regulations under section 401(a)(9) that were proposed on January 17, 2001. This Section 9.3(d) shall continue in effect until the end of the last calendar year beginning before the effective date of final Regulations under section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service.

Section 9.4. Payment of Small Account Balances. Notwithstanding any provision of Section 9.3 to the contrary and subject to
Section 9.6, if a Participant's vested Account to be distributed upon the Participant's termination of employment does not exceed $5,000 (or such other amount prescribed by section 411(a)(11) of the Code), then such amount shall be distributed as soon as practicable after the Participant's termination of employment in the form of a lump sum payment to the Participant or his or her Beneficiary, as the case may be.

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Section 9.5. Medium and Order of Withdrawal or Distribution.
(a) Medium of Withdrawal or Distribution. All withdrawals and distributions under the Plan shall be made in cash; provided, however, that other than with respect to withdrawals pursuant to Sections 9.1(a) and (b), a Participant or Beneficiary may elect, in accordance with procedures established by the Administrative Committee, to receive the portion of his or her Account, if any, that is invested in the Harris Stock Fund in shares of Harris Stock (with fractional shares and de minimis amounts, as determined by the Administrative Committee, distributed in cash). If a Participant or Beneficiary has elected to receive a withdrawal or distribution of any portion of his or her Account that is invested in the Harris Stock Fund in shares of Harris Stock, then such distribution shall, in the discretion of the Administrative Committee, either be made in certificated form or credited to an account established for the Participant under a plan maintained by an Affiliate.

(a) Order of Withdrawal or Distribution. To the extent not otherwise set forth in Section 9.1, any withdrawal pursuant to Section 9.1 and any distribution pursuant to Section 9.3 shall be charged against a Participant's subaccounts in the order determined by the Administrative Committee; provided, however, that in order to maximize the tax benefits associated with participation in the Plan, any such withdrawal or distribution first shall be charged against the Participant's After-Tax Account. In the case of a withdrawal made pursuant to Section 9.1, reduction of amounts invested in the Harris Stock Fund shall be subject to the satisfaction of the Holding Period prescribed in Section 8.2(c).

Section 9.6. Direct Rollover Option. In the case of a distribution that is an "eligible rollover distribution" within the meaning of section 402(c)(4) of the Code, a Participant, a Beneficiary who is a surviving spouse of a Participant, or a spouse or former

43

spouse who is an alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, may elect that all or any portion of such distribution to which he or she is entitled shall be directly transferred from the Plan to (i) an individual retirement account or annuity described in section 408(a) or (b) of the Code, or (ii) if the terms of which permit the acceptance of eligible rollover distributions, to another retirement plan qualified under section 401(a) of the Code, to a qualified annuity plan described in section 403(a) of the Code, to an annuity contract described in section 403(b) of the Code or to an eligible plan under section 457(b) of the Code 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 account separately for amounts transferred into such plan from this Plan.
Notwithstanding the foregoing, any portion of an eligible rollover distribution that consists of after-tax contributions which are not includible in gross income may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to account separately for amounts so transferred.

Section 9.7. Designation of Beneficiary. (a) In General. Each Participant shall have the right to designate a Beneficiary or Beneficiaries (who may be designated contingently or successively and that may be an entity other than a natural person) to receive any distribution to be made under this Article upon the death of such Participant or, in the case of a Participant who dies after his or her termination of employment but prior to the distribution of the entire amount to which he or she is entitled under the Plan, any undistributed balance to which such Participant would have been entitled. No such designation of a Beneficiary other than a Participant's spouse shall be effective if the Participant was married through the one-year period

44

ending on the date of his or her death unless such designation was consented to in writing (or by such other method permitted by the Internal Revenue Service) at the time of such designation by the person who was the Participant's spouse during such period, acknowledging the effect of such consent and witnessed by a notary public or, prior to October 1, 1993, a Plan representative, or it is established to the satisfaction of the Administrative Committee that such consent could not be obtained because the Participant's spouse could not be located or because of the existence of other circumstances as the Secretary of the Treasury may prescribe as excusing the requirement of such consent. Subject to the immediately preceding sentence, a Participant may from time to time, without the consent of any Beneficiary, change or cancel any such designation. Such designation and each change thereof shall be made in the manner prescribed by the Administrative Committee and shall be filed with the Administrative Committee. If (i) no Beneficiary has been named by a deceased Participant, (ii) a Beneficiary designation is not effective pursuant to the second sentence of this section, or (iii) the designated Beneficiary has predeceased the Participant, any undistributed Account of the deceased Participant shall be distributed by the Trustee (a) to the surviving spouse of such deceased Participant, if any, (b) if there is no surviving spouse, to the then living descendants, if any, of the deceased Participant, per stirpes, or (c) if there is no surviving spouse and there are no living descendants, to the executor or administrator of the estate of such deceased Participant.

(b) Successor Beneficiaries. A Beneficiary who has been designated in accordance with Section 9.7(a) may name a successor beneficiary or beneficiaries in the manner prescribed by the Administrative Committee. If a Beneficiary dies after the Participant and before distribution of the entire amount of the Participant's benefit under the Plan in which the Beneficiary has an interest, then any remaining amount shall be distributed, as soon as

45

practicable after the death of such Beneficiary, in the form of a lump sum payment to the successor beneficiary or beneficiaries or, if there is no such successor beneficiary, to the executor or administrator of the estate of such deceased Beneficiary.

Section 9.8. Missing Persons. If following the date on which pursuant to Section 9.3(b) or 9.4 a Participant's Account may be distributed without the Participant's consent, the Administrative Committee in the exercise of reasonable diligence has been unable to locate the person or persons entitled to the Participant's Account, then the Participant's Account shall be forfeited; provided, however, that to the extent required by law the Plan shall reinstate and pay to such person or persons the amount so forfeited upon a claim for such amount made by such person or persons. The amount to be so reinstated shall be obtained from the total amount that shall have been forfeited pursuant to this
Section and Section 9.2(b) during the Plan Year that the claim for such forfeited benefit is made, and shall not include any earnings or losses from the date of the forfeiture under this Section. If the amount to be reinstated exceeds the amount of such forfeitures, the Employer in respect of whose Eligible Employee the claim for forfeited benefit is made shall make a contribution in an amount equal to such excess. To the extent the forfeitures under this Section exceed any claims for forfeited benefits made pursuant to this Section, such excess shall be utilized first to restore the Accounts as described in Section 11.2(b) of Participants who are reemployed by the Employer in respect of whose Eligible Employee experienced the forfeiture hereunder and next to reduce future contributions to the Plan by such Employer.

Section 9.9. Distributions to Minor and Disabled Distributees. Any distribution that is payable to a distributee who is a minor or to a distributee who has been legally determined to be unable to manage his or her affairs by reason of illness or mental incompetency may be

46

made to, or for the benefit of, any such distributee at such time consistent with the provisions of this Plan and in such of the following ways as the legal representative of such distributee shall direct: (a) directly to any such minor distributee if, in the opinion of such legal representative, he or she is able to manage his or her affairs, (b) to such legal representative, (c) to a custodian under a Uniform Gifts to Minors Act for any such minor distributee, or
(d) as otherwise directed by such legal representative. Neither the Administrative Committee nor the Trustee shall be required to oversee the application by any third party other than the legal representative of a distributee of any distribution made to or for the benefit of such distributee pursuant to this Section.

Section 9.10. Payment of Group Insurance Premiums. The Administrative Committee may, in its sole discretion, permit a Participant who
(i) is eligible to be included in any contributory group insurance program maintained or sponsored by an Employer, (ii) elects to be covered under such contributory group insurance program and (iii) is receiving benefits under the Plan in monthly installments to direct that a specified portion of the installment payments be withheld and paid by the Trustee on the Participant's behalf to the Employer as the Participant's contribution under such contributory group insurance program. Such direction by a Participant, if permitted by the Administrative Committee, shall be made at the time and in the manner prescribed by the Administrative Committee. Any such direction may be revoked by a Participant upon at least 15 days' prior written notice to the Administrative Committee. Any withholding and payment of insurance costs on behalf of a Participant shall be made in accordance with Treasury Regulation section 1.401(a)-13.

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ARTICLE 10

LOANS

Section 10.1. Making of Loans. Subject to the provisions of this Article 10, the Administrative Committee shall establish a loan program whereby any Participant who is an Employee may request, by such method prescribed by the Administrative Committee, to borrow funds from the Participant's Pre-Tax Account, After-Tax Account and Rollover Account, and which loan program hereby is incorporated into this Plan by reference. The principal balance of such loan, when aggregated with the outstanding balances of all other loans of the Participant from plans maintained by the Employers and Affiliates, shall not exceed the least of:

(a) $50,000, reduced by the excess, if any, of (x) the highest outstanding loan balance of the Participant under all plans maintained by the Employers and Affiliates during the period beginning one year and one day prior to the date on which such loan is made and ending on the day prior to the date on which such loan is made, over (y) the outstanding loan balance from all such plans on the date on which such loan is made;

(b) fifty percent (50%) of the vested portion of the Participant's Account as of the Valuation Date coinciding with or immediately preceding the date on which the loan is made; and

(c) the aggregate value of the Participant's Pre-Tax Account, After-Tax Account and Rollover Account as of the Valuation Date coinciding with or immediately preceding the date on which the loan is made.

Section 10.2. Restrictions. An application for a loan shall be made at the time and in the manner prescribed by the Administrative Committee. The action of the Administrative Committee or its delegate in approving or disapproving a request for a loan shall

48

be final. Any loan under the Plan shall be subject to the terms, conditions and restrictions set forth in the loan program established by the Administrative Committee.

Section 10.3. Default. If any loan or portion of a loan made to a Participant under the Plan, together with the accrued interest thereon, is in default, the Trustee, upon direction from the Administrative Committee, shall take appropriate steps to collect the outstanding balance of the loan and to foreclose on the security; provided, however, that the Trustee shall not levy against any portion of the Participant's Account until such time as a distribution from such Account otherwise could be made under the Plan. Default shall occur (i) if the Participant fails to make any scheduled loan payment when due or within 90 days thereafter (or within such other grace period as permitted under applicable law and by the Administrative Committee) or (ii) upon the occurrence of any other event that is considered a default event under the loan program established by the Administrative Committee. On the date a Participant is entitled to receive a distribution of his or her Account pursuant to Article 9, any defaulted loan or portion thereof, together with the accrued interest thereon, shall be charged to the Participant's Account after all other adjustments required under the Plan, but before any distribution pursuant to Article 9.

Section 10.4. Applicability. Notwithstanding the foregoing, for purposes of this Article 10, any Participant or Beneficiary who is a "party in interest" as defined in section 3(14) of ERISA may apply for a loan from the Plan, regardless of such Participant's or Beneficiary's employment status. As a condition of receiving a loan from the Plan, such a Participant or Beneficiary who is not an Employee shall consent to have such loan repaid in substantially equal installments at the times and in the manner determined by the Administrative Committee, but not less frequently than quarterly.

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ARTICLE 11

SPECIAL PARTICIPATION AND DISTRIBUTION RULES

Section 11.1. Change of Employment Status. If an Employee who is not an Eligible Employee becomes an Eligible Employee, then the Employee shall become a Participant (i) as of the date such Employee becomes an Eligible Employee, if such Employee has satisfied the service requirement set forth in
Section 3.1, or (ii) as of the date such Employee satisfies the service requirement set forth in Section 3.1.

Section 11.2. Reemployment of a Terminated Participant. (a) Participation. If a terminated Participant is reemployed as an Eligible Employee, then the terminated Participant again shall become a Participant as of the date of the terminated Participant's reemployment. If a terminated Participant is receiving installment payments pursuant to Section 9.3(c), such payments shall be suspended upon such terminated Participant's reemployment unless such Participant has attained age 59 1/2 on or before the date of such reemployment.

(b) Restoration of Forfeitures. If a terminated Participant is reemployed prior to incurring a Break in Service of five consecutive years, and, at or after the Participant's termination of employment, any portion of the Participant's Account was forfeited pursuant to Section 9.2(b), then an amount equal to the portion of the Participant's Account that was forfeited shall be credited to the Participant's Account as soon as administratively practicable after the Participant is reemployed. Any amount to be restored pursuant to this subsection shall be obtained from the total amounts that have been forfeited pursuant to Sections 9.2(b) and 9.8 during the Plan Year in which such Participant is reemployed from the Accounts of Participants employed by the same Employer as the reemployed Participant. If the aggregate amount to be so restored to the Accounts of Participants who are Employees of a particular Employer exceeds the

50

amount of such forfeitures, such Employer shall make a contribution in an amount equal to such excess. Any such contribution shall be made without regard to whether or not the limitations set forth in Article 6 will be exceeded by such contribution.

Section 11.3. Employment by Affiliates. If an individual is employed by an Affiliate that is not an Employer, then any period of such employment shall be taken into account under the Plan solely for the purposes of
(i) measuring such individual's Service and (ii) determining when such individual has terminated his or her employment for purposes of Article 9, to the same extent it would have been had such period of employment been as an Employee.

Section 11.4. Leased Employees. If an individual who performed services as a leased employee (within the meaning of section 414(n)(2) of the Code) of an Employer or an Affiliate becomes an Employee, or if an Employee becomes such a leased employee, then any period during which such services were so performed shall be taken into account under the Plan solely for the purposes of (i) measuring such individual's Service and (ii) determining when such individual has terminated his or her employment for purposes of Article 9, to the same extent it would have been had such period of service been as an Employee. This Section shall not apply to any period of service during which such a leased employee was covered by a plan described in section 414(n)(5) of the Code.

Section 11.5. Reemployment of Veterans. The provisions of this
Section shall apply in the case of the reemployment by an Employer of an Eligible Employee, within the period prescribed by USERRA, after the Eligible Employee's completion of a period of Qualified Military Service. The provisions of this Section are intended to provide such Eligible

51

Employee with the rights required by USERRA and section 414(u) of the Code, and shall be interpreted in accordance with such intent.

(a) Make-Up of Pre-Tax and After-Tax Contributions. Such Eligible Employee shall be entitled to make contributions under the Plan ("make-up participant contributions"), in addition to any pre-tax and after-tax contributions which the Eligible Employee elects to have made under the Plan pursuant to Sections 4.1 and 5.1. From time to time while employed by an Employer, such Eligible Employee may elect to contribute such make-up participant contributions during the period beginning on the date of such Eligible Employee's reemployment and ending on the earlier of:

(i) the end of the period equal to the product of three and such Eligible Employee's period of Qualified Military Service, and

(ii) the fifth anniversary of the date of such reemployment.

Such Eligible Employee shall not be permitted to contribute make-up participant contributions to the Plan in excess of the amount which the Eligible Employee could have elected to have made under the Plan in the form of pre-tax and after-tax contributions if the Eligible Employee had continued in active employment with his or her Employer during such period of Qualified Military Service. The manner in which an Eligible Employee may elect to contribute make-up participant contributions pursuant to this subsection (a) shall be prescribed by the Administrative Committee.

(b) Make-Up of Matching Contributions. An Eligible Employee who contributes make-up participant contributions as described in subsection (a) of this Section shall be entitled to an allocation of matching contributions to his or her Account in an amount equal to the amount of matching contributions that would have been allocated to the Account of such Eligible Employee during the period of Qualified Military Service if such make-up participant

52

contributions had been made in the form of pre-tax and after-tax contributions during such period. The Eligible Employee's Employer shall make a special contribution to the Plan which shall be utilized solely for purposes of such allocation.

(c) Make-Up of Profit Sharing Contributions. Upon the timely reemployment of an Eligible Employee following the completion of a period of Qualified Military Service, such Eligible Employee shall be entitled to an allocation of profit sharing contributions to his or her Account in an amount equal to the difference between (i) the amount of profit sharing contributions that would have been allocated to the Account of such Eligible Employee during the period of Qualified Military Service if the Eligible Employee had continued in active employment with his or her Employer during such period and (ii) the amount of profit sharing contributions that was allocated to the Account of such Eligible Employee during the period of Qualified Military Service pursuant to
Section 8.6. The Eligible Employee's Employer shall make a special contribution to the Plan which shall be utilized solely for purposes of such allocation.

(d) Miscellaneous Rules Regarding Make-Up Contributions. For purposes of determining the amount of contributions to be made under this Section, an Eligible Employee's "Compensation" during any period of Qualified Military Service shall be determined in accordance with section 414(u) of the Code. Any contributions made by an Eligible Employee or an Employer pursuant to this Section on account of a period of Qualified Military Service in a prior Plan Year shall not be subject to the limitations prescribed by Sections 6.1, 6.3 and 6.4 of the Plan (relating to sections 402(g), 415, and 404 of the Code) for the Plan Year in which such contributions are made. The Plan shall not be treated as failing to satisfy the nondiscrimination rules of Section 6.2 of the Plan (relating to sections 401(k)(3) and 401(m) of the Code) for any

53

Plan Year solely on account of any make-up contributions made by an Eligible Employee or an Employer pursuant to this Section.

ARTICLE 12

SHAREHOLDER RIGHTS WITH RESPECT TO HARRIS STOCK

Section 12.1. Voting Shares of Harris Stock. Each Participant (or Beneficiary) may submit non-binding voting instructions, at such time and in such manner as may be prescribed by the Trustee, with respect to the number of shares of Harris Stock represented by the participating units in the Harris Stock Fund then allocated to his or her Account. The Trustee shall vote, in person or by proxy, the shares of Harris Stock held by the Trustee in the Harris Stock Fund in its sole discretion.

Written notice of any meeting of shareholders of the Company and a request for non-binding voting instructions shall be given by the Trustee, at such time and in such manner as the Trustee shall determine, to each Participant (or Beneficiary) with amounts invested in the Harris Stock Fund. The Administrative Committee shall establish, and the Company shall pay for, a means by which such non-binding voting instructions expeditiously can be delivered to the Trustee. The Administrative Committee at its election may engage an agent to receive such instructions and transmit them to the Trustee. All such individual instructions shall be confidential and shall not be disclosed to any person, including any Employer.

Section 12.2. Tender Offers. (a) Rights of Participants. In the event a tender offer is made generally to the shareholders of the Company to transfer all or a portion of their shares of Harris Stock in return for valuable consideration, including, but not limited to, offers regulated by section 14(d) of the Securities Exchange Act of 1934, as amended, the Trustee shall

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respond to such tender offer in respect of shares of Harris Stock held by the Trustee in the Harris Stock Fund in accordance with instructions obtained from Participants (or Beneficiaries). Each Participant (or Beneficiary) shall be entitled to instruct the Trustee regarding how to respond to any such tender offer with respect to the number of shares of Harris Stock represented by the participating units in the Harris Stock Fund then allocated to his or her Account. Each Participant (or Beneficiary) who does not provide timely instructions to the Trustee shall be presumed to have directed the Trustee not to tender shares of Harris Stock represented by the participating units then allocated to his or her Account. A Participant (or Beneficiary) shall not be limited in the number of instructions to tender or withdraw from tender which he or she can give, but a Participant (or Beneficiary) shall not have the right to give instructions to tender or withdraw from tender after a reasonable time established by the Trustee pursuant to subsection (c) of this Section. For purposes of this Section, the shares of Harris Stock held in the Harris Stock Fund shall be treated as allocated to the accounts of Participants in proportion to their respective participating units in the Harris Stock Fund as of the immediately preceding record date for ownership of Harris Stock for stockholders entitled to tender. The Administrative Committee may direct the Trustee to make a special valuation of the Harris Stock Fund in connection with such tender offer.

(b) Duties of the Administrative Committee. Within a reasonable time after the commencement of a tender offer, the Administrative Committee shall cause the Trustee to provide to each Participant or Beneficiary, as the case may be:

(i) the offer to purchase as distributed by the offeror to the shareholders of the Company;

(ii) a statement of the number of shares of Harris Stock represented by the participating units in the Harris Stock Fund allocated to his or her Account; and

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(iii) directions as to the means by which instructions with respect to the tender offer can be given.

The Administrative Committee shall establish, and the Company shall pay for, a means by which instructions with respect to a tender offer expeditiously can be delivered to the Trustee. The Administrative Committee at its election may engage an agent to receive such instructions and transmit them to the Trustee. All such individual instructions shall be confidential and shall not be disclosed to any person, including any Employer.

For purposes of allocating the proceeds of any sale or exchange pursuant to a tender offer, the Trustee shall then treat as having been sold or exchanged from each of the Accounts of Participants (and Beneficiaries) who provided timely directions to the Trustee under this Section to tender that number of shares of Harris Stock represented by participating units in the Harris Stock Fund (if any) subject to such directions and the proceeds of such sale or exchange shall be allocated accordingly. Any proceeds from the sale or exchange of shares of Harris Stock in the Harris Stock Fund shall be invested in a commingled fund maintained by the Trustee designated to hold such amounts pending investment instructions from the Participants (and Beneficiaries) or the Administrative Committee, as the case may be.

(c) Duties of the Trustee. The Trustee shall follow the instructions of the Participants (and Beneficiaries) with respect to the tender offer as transmitted to the Trustee. The Trustee may establish a reasonable time, taking into account the time restrictions of the tender offer, after which it shall not accept instructions of Participants (or Beneficiaries).

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ARTICLE 13

ADMINISTRATION

Section 13.1. The Administrative Committee. (a) The Chief Executive Officer of the Company shall appoint at least two members to the Administrative Committee, unless a committee of the Board is empowered to appoint members to the Administrative Committee. The Administrative Committee shall be the "administrator" of the Plan within the meaning of such term as used in ERISA and shall be responsible for the administration of the Plan. The Chief Executive Officer of the Company, or such Board committee, as the case may be, shall have the right at any time, with or without cause, to remove any member of the Administrative Committee. In addition, any member of the Administrative Committee at any time may resign by giving at least fifteen (15) days' advance written notice to the Chief Executive Officer or such Board committee (or such shorter period of advance written notice acceptable to the Chief Executive Officer or such Board committee). An Employee who serves on the Administrative Committee shall be deemed to have resigned from such committee upon the termination of the Employee's employment with the Company and its Affiliates, effective as of the date of the termination of employment. Upon the removal or resignation of any member of the Administrative Committee, or the failure or inability for any reason of any member of the Administrative Committee to act hereunder, the Chief Executive Officer of the Company or such Board committee, as the case may be, shall appoint a successor member of the Administrative Committee if such removal, resignation, failure or inability causes the Administrative Committee to have fewer than two members. Any successor member of the Administrative Committee shall have all the rights, privileges and duties of the predecessor, but shall not be held accountable for the acts of the predecessor.

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(b) Any member of the Administrative Committee may, but need not, be an employee, director, officer or shareholder of an Employer and such status shall not disqualify him or her from taking any action hereunder or render him or her accountable for any distribution or other material advantage received by such member under the Plan, provided that no member of the Administrative Committee who is a Participant shall take part in any action of the Administrative Committee or any matter involving solely his or her rights under the Plan.

(c) Promptly after the appointment of the members of the Administrative Committee and promptly after the appointment of any successor member of the Administrative Committee, the Trustee shall be notified in writing as to the names of the new members.

(d) The Administrative Committee shall have the duty and authority to interpret and construe, in its sole discretion, the terms of the Plan in all respects, including, but not limited to, all questions of eligibility, the status and rights of Participants, distributees and other persons under the Plan, and the manner, time and amount of payment of any distribution under the Plan. Each Employer shall, from time to time, upon request of the Administrative Committee, furnish to the Administrative Committee such data and information as the Administrative Committee shall require in the performance of its duties. All determinations and actions of the Administrative Committee shall be conclusive and binding upon all affected parties, except that the Administrative Committee may revoke or modify a determination or action that it determines to have been in error. Benefits will be paid under the Plan only if the Administrative Committee decides in its sole discretion that the applicant is entitled to the benefits.

(e) The Administrative Committee shall direct the Trustee to make payments of amounts to be distributed from the Trust under Article 9.

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(f) The Administrative Committee may act at a meeting by the vote of a majority of its members or without a meeting by the unanimous written consent of its members. The Administrative Committee shall keep records of all of its meetings and forward all necessary communications to the Trustee. The Administrative Committee may adopt such rules and procedures as it deems desirable for the conduct of its affairs and the administration of the Plan, provided that any such rules and procedures shall be consistent with the provisions of the Plan and ERISA.

(g) The members of the Administrative Committee shall discharge their duties with respect to the Plan (i) solely in the interest of the Participants and Beneficiaries, (ii) for the exclusive purpose of providing benefits to the Participants and Beneficiaries and of defraying reasonable expenses of administering the Plan and (iii) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Employers hereby jointly and severally indemnify the members of the Administrative Committee, the members of the Compensation Committee and the members of the Investment Committee from the effects and consequences of their acts, omissions and conduct in their official capacity, except to the extent that such effects and consequences result from their own willful or gross misconduct or criminal acts.

(h) The members of the Administrative Committee shall not receive any compensation or fee for services as members of the Administrative Committee. The Employers shall reimburse the members of each of the Administrative Committee, Compensation Committee and Investment Committee for any necessary expenditures incurred in the discharge of their duties hereunder.

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Section 13.2. Named Fiduciaries. The Investment Committee shall be a "named fiduciary" of the Plan within the meaning of such term as used in ERISA solely with respect to its power to appoint certain fiduciaries under the Plan and its management of the assets of the Plan. The Administrative Committee shall be a "named fiduciary" of the Plan within the meaning of such term as used in ERISA solely with respect to its power to appoint certain fiduciaries under the Plan and the exercise of its administrative duties set forth in the Plan that are fiduciary acts. The Compensation Committee shall be a "named fiduciary" of the Plan within the meaning of such term as used in ERISA solely with respect to its power to appoint certain fiduciaries under the Plan. Each fiduciary has only those duties and responsibilities specifically assigned to such fiduciary under the Plan.

Section 13.3. Allocation and Delegation of Responsibilities. Each of the Administrative Committee, the Compensation Committee and the Investment Committee may allocate its responsibilities among its members and may designate any person, partnership, corporation or another committee to carry out any of its responsibilities with respect to the Plan. Any such allocation or designation shall be in writing and shall be kept with the records of the Plan.

Section 13.4. Professional and Other Services. The Company may employ counsel (who may be counsel for an Employer) to advise the Administrative Committee, the Compensation Committee and the Investment Committee and their agents and may arrange for clerical and other services as the Administrative Committee, the Compensation Committee and the Investment Committee and their agents may require in carrying out their duties hereunder.

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Section 13.5. Claims Procedure. If any Participant or distributee believes he or she is entitled to benefits in an amount greater than those which he or she is receiving or has received, he or she (or his or her duly authorized representative) may file a claim with the Administrative Committee. Such a claim shall be in writing and state the nature of the claim, the facts supporting the claim, the amount claimed and the address of the claimant. The Administrative Committee shall review the claim and, unless special circumstances require an extension of time, within 90 days after receipt of the claim give written or electronic notice to the claimant of its decision with respect to the claim. If special circumstances require an extension of time, the claimant shall be so advised in writing or by electronic means within the initial 90-day period and in no event shall such an extension exceed 90 days. The notice of the decision of the Administrative Committee with respect to the claim shall be written in a manner calculated to be understood by the claimant and, if the claim is wholly or partially denied, shall set forth the specific reasons for the denial, specific references to the 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 claim review procedure under the Plan and the time limits applicable to such procedure (including a statement of the claimant's right to bring a civil action under section 502(a) of ERISA following the final denial of a claim).

The claimant (or his or her duly authorized representative) may request a review of the denial by filing with the Administrative Committee a written request for such review within 60 days after notice of the denial has been received by the claimant. Within the same 60-day period, the claimant may submit to the Administrative Committee written comments, documents, records and other information relating to the claim. Upon request and free of charge,

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the claimant also may have reasonable access to, and copies of, documents, records and other information relevant to the claim. If a request for review is so filed, review of the denial shall be made by the Administrative Committee and the claimant shall be given written or electronic notice of the Administrative Committee's final decision within, unless special circumstances require an extension of time, 60 days after receipt of such request. If special circumstances require an extension of time, the claimant shall be so advised in writing or by electronic means within the initial 60-day period and in no event shall such an extension exceed 60 days. If the appeal of the claim is wholly or partially denied, the notice of the Administrative Committee's final decision shall include specific reasons for the denial, specific references to the pertinent Plan provisions on which the denial is based and a statement that the claimant is entitled, upon request and free of charge, to reasonable access to, and copies of, all relevant documents, records and information. The notice shall be written in a manner calculated to be understood by the claimant and shall notify the claimant of his or her right to bring a civil action under section 502(a) of ERISA.

In making determinations regarding claims for benefits, the Administrative Committee shall consider all of the relevant facts and circumstances, including, without limitation, governing plan documents, consistent application of Plan provisions with respect to similarly situated claimants and any comments, documents, records and other information with respect to the claim submitted by the claimant (the "Claimant's Submissions"). The Claimant's Submissions shall be considered by the Administrative Committee without regard to whether the Claimant's Submissions were submitted or considered by the Administrative Committee in the initial benefit determination.

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Section 13.6. Notices to Participants. All notices, reports and statements given, made, delivered or transmitted to a Participant or distributee or any other person entitled to or claiming benefits under the Plan shall be deemed to have been duly given, made, delivered or transmitted when provided via such written or other means as may be permitted by applicable Regulations. A Participant, distributee or other person may record any change of his or her address by written notice filed with his or her Employer.

Section 13.7. Notices to Administrative Committee or Employers. Written directions and notices and other written or electronic communications from Participants, distributees or other persons entitled to or claiming benefits under the Plan to the Administrative Committee or the Employers shall be deemed to have been duly given, made, delivered or transmitted when given, made, delivered or transmitted in the manner and to the location prescribed by the Administrative Committee or the Employers for the giving of such directions, notices and other communications.

Section 13.8. Records. The Administrative Committee shall keep a record of all of its proceedings with respect to the Plan and shall keep or cause to be kept all books of account, records and other data as may be necessary or advisable in its judgment for the administration of the Plan.

Section 13.9. Reports of Trustee and Accounting to Participants. The Administrative Committee shall keep on file, in such form as it shall deem convenient and proper, all reports concerning the Trust Fund received by it from the Trustee, and, as soon as practicable after the close of each Plan Year, each Participant and Beneficiary shall be provided a written benefit statement indicating the balance credited to any Account for such individual as of

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the close of such Plan Year. Any Participant or Beneficiary claiming that an error has been made with respect to such balance shall notify the Administrative Committee in writing within ninety (90) days following the delivery of such benefit statement. If no notice of error timely is provided, the benefit statement shall be presumed to be correct.

ARTICLE 14

PARTICIPATION BY EMPLOYERS

Section 14.1. Adoption of Plan. With the consent of the Compensation Committee, any entity may become an Employer under the Plan by (a) taking such action as shall be necessary to adopt the Plan and (b) executing and delivering such instruments and taking such other action as may be necessary or desirable to put the Plan and Trust into effect with respect to such entity, as prescribed by the Compensation Committee. The powers and control of the Company, as provided in the Plan and the trust agreement, shall not be diminished by reason of participation of any such adopting entity in the Plan.

Section 14.2. Withdrawal from Participation. An Employer may withdraw from participation in the Plan at any time by filing with the Compensation Committee a duly certified copy of a written instrument duly adopted by the Employer to that effect and giving notice of its intended withdrawal to the Compensation Committee, the Employers and the Trustee prior to the effective date of withdrawal.

Section 14.3. Company, Administrative Committee, Compensation Committee and Investment Committee as Agents for Employers. Each entity which becomes an Employer pursuant to Section 14.1 or Section 14.4 by so doing shall be deemed to have appointed the Company, the Administrative Committee, the Compensation Committee and the Investment

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Committee as its agents to exercise on its behalf all of the powers and authorities conferred upon the Company, the Administrative Committee, the Compensation Committee and the Investment Committee by the terms of the Plan. The authority of the Company, the Administrative Committee, the Compensation Committee or the Investment Committee to act as such agent shall continue unless and until the portion of the Trust Fund held for the benefit of Employees of the particular Employer and their Beneficiaries is set aside in a separate Trust Fund as provided in Section 17.2.

Section 14.4. Continuance by a Successor. In the event that an Employer other than the Company is reorganized by way of merger, consolidation, transfer of assets or otherwise, so that another entity other than an Employer succeeds to all or substantially all of such Employer's business, such successor entity may, with the consent of the Compensation Committee, be substituted for such Employer under the Plan by adopting the Plan. Contributions by such Employer automatically shall be suspended from the effective date of any such reorganization until the date upon which the substitution of such successor entity for the Employer under the Plan becomes effective. If, within 90 days following the effective date of any such reorganization, such successor entity shall not have elected to adopt the Plan, the Compensation Committee fails to consent to such adoption, or an Employer adopts a plan of complete liquidation other than in connection with a reorganization, the Plan automatically shall be terminated with respect to employees of such Employer as of the close of business on the 90th day following the effective date of such reorganization or as of the close of business on the date of adoption of such plan of complete liquidation, as the case may be, and the Administrative Committee shall direct the Trustee to distribute the portion of the Trust Fund applicable to such Employer in the manner provided in Section 17.3.

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If such successor entity is substituted for an Employer as described above, then, for all purposes of the Plan, employment of each Employee with such Employer, including service with and compensation paid by such Employer, shall be considered to be employment with such successor entity.

ARTICLE 15

MISCELLANEOUS

Section 15.1. Expenses. All costs and expenses of administering the Plan and the Trust, including the expenses of the Company, the Administrative Committee, the Compensation Committee and the Investment Committee, the fees of counsel and of any agents for the Company or such committees, investment advisory and recordkeeping fees, the fees and expenses of the Trustee, the fees of counsel for the Trustee and other administrative expenses, shall be paid under the direction of the Administrative Committee from the Trust Fund to the extent such expenses are not paid by the Employers. The Administrative Committee, in its sole discretion, having regard to the nature of a particular expense, shall determine the portion of such expense that is to be borne by each Employer. An Employer may seek reimbursement of any expense paid by such Employer that the Administrative Committee determines is properly payable from the Trust Fund.

Section 15.2. Non-Assignability.

(a) In General. No right or interest of any Participant or Beneficiary in the Plan shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge or bankruptcy, but excluding devolution by death or mental incompetency, and any

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attempt to do so shall be void, and no right or interest of any Participant or Beneficiary in the Plan shall be liable for, or subject to, any obligation or liability of such Participant or Beneficiary, including claims for alimony or the support of any spouse, except as provided below.

(b) Exception for Qualified Domestic Relations Orders. Notwithstanding any provision of the Plan to the contrary, if a Participant's Account under the Plan, or any portion thereof, is the subject of one or more qualified domestic relations orders (as defined in section 414(p) of the Code), such Account or portion thereof shall be paid to the person, at the time and in the manner specified in any such order. The Administrative Committee shall adopt rules and procedures, in accordance with section 414(p) of the Code, relating to its (i) review of any domestic relations order for purposes of determining whether the order is a qualified domestic relations order and (ii) administration of a qualified domestic relations order. A domestic relations order shall not fail to constitute a qualified domestic relations order solely because such order provides for distribution to an alternate payee of the benefit assigned to the alternate payee under the Plan prior to the applicable Participant's earliest retirement age (as defined in section 414(p) of the Code) under the Plan.

(c) Other Exception. Notwithstanding any provision of the Plan to the contrary, if a Participant is ordered or required to pay an amount to the Plan pursuant to (i) a judgement in a criminal action, (ii) a civil judgement in connection with a violation (or alleged violation) of Part 4 of Subtitle B of Title I of ERISA or (iii) a settlement agreement between the Secretary of Labor and the Participant or the Pension Benefit Guaranty Corporation and the Participant in connection with a violation (or alleged violation) of Part 4 of Subtitle B of Title I of ERISA, the

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Participant's Account under the Plan may, to the extent permitted by law, be offset by such amount.

Section 15.3. Employment Non-Contractual. The Plan confers no right upon an Employee to continue in employment.

Section 15.4. Merger or Consolidation with Another Plan. A merger or consolidation with, or transfer of assets or liabilities to, any other plan shall not be effected unless the terms of such merger, consolidation or transfer are such that each Participant, distributee, Beneficiary or other person entitled to receive benefits from the Plan would, if the Plan were to terminate immediately after the merger, consolidation or transfer, receive a benefit equal to or greater than the benefit such person would be entitled to receive if the Plan were to terminate immediately before the merger, consolidation, or transfer.

Section 15.5. Gender and Plurals. Wherever used in the Plan, words in the masculine gender shall include the masculine or feminine gender, and, unless the context otherwise requires, words in the singular shall include the plural, and words in the plural shall include the singular.

Section 15.6. Applicable Law. The Plan and all rights hereunder shall be governed by and construed in accordance with the laws of the State of Florida to the extent such laws have not been preempted by applicable federal law. Venue for any action arising under the Plan shall be in Brevard County, Florida.

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Section 15.7. Severability. If any provision of the Plan is held illegal or invalid, the illegality or invalidity shall not affect the remaining provisions of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included in the Plan.

Section 15.8. No Guarantee. None of the Company, the Employers, the Administrative Committee, the Compensation Committee, the Investment Committee or the Trustee in any way guarantees the Trust from loss or depreciation nor the payment of any benefit that may be or become due to any person from the Trust Fund. Nothing in the Plan shall be deemed to give any Participant, distributee or Beneficiary an interest in any specific part of the Trust Fund or any other interest except the right to receive benefits from the Trust Fund in accordance with the provisions of the Plan and the trust agreement.

Section 15.9. Plan Voluntary. Although it is intended that the Plan shall be continued and that contributions shall be made as herein provided, the Plan is entirely voluntary on the part of the Employers and the continuance of the Plan and the contributions hereunder are not and shall not be regarded as contractual obligations of the Employers.

ARTICLE 16

TOP-HEAVY PLAN REQUIREMENTS

Section 16.1. Top-Heavy Plan Determination. If as of the determination date (as hereinafter defined) for any Plan Year the aggregate of
(a) the account balances under the Plan and all other defined contribution plans in the aggregation group (as hereinafter defined) and (b) the present value of accrued benefits under all defined benefit plans in such aggregation group of all participants in such plans who are key employees (as hereinafter defined) for such Plan Year exceeds 60% of the aggregate of the account balances and the present value of accrued benefits

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of all participants in such plans as of the determination date, then the Plan shall be a "top-heavy plan" for such Plan Year, and the requirements of Section 16.3 shall be applicable for such Plan Year as of the first day thereof. If the Plan is a top-heavy plan for any Plan Year and is not a top-heavy plan for any subsequent Plan Year, the requirements of Section 16.3 shall not be applicable for such subsequent Plan Year.

Section 16.2. Definitions and Special Rules.

(a) Definitions. For purposes of this Article 16, the following definitions shall apply:

(1) Determination Date. The determination date for all plans in the aggregation group shall be the last day of the preceding Plan Year, and the valuation date applicable to a determination date shall be (i) in the case of a defined contribution plan, the date as of which account balances are determined that coincides with or immediately precedes the determination date, and (ii) in the case of a defined benefit plan, the date as of which the most recent actuarial valuation for the Plan Year that includes the determination date is prepared, except that if any such plan specifies a different determination or valuation date, such different date shall be used with respect to such plan.

(2) Aggregation Group. The aggregation group shall consist of
(a) each plan of an Employer in which a key employee is a participant,
(b) each other plan that enables such a plan to be qualified under section 401(a) of the Code, and (c) any other plans of an Employer that the Company designates as part of the aggregation group.

(3) Key Employee. Key employee shall have the meaning set forth in section 416(i) of the Code.

(4) Compensation. Compensation shall have the meaning set forth in U.S. Treasury Regulation Section 1.415-2(d).

(b) Special Rules. For the purpose of determining the accrued benefit or account balance of a participant, (i) the accrued benefit or account balance of any person who has not performed services for an Employer at any time during the one-year period ending on the determination date shall not be taken into account pursuant to this Section, and (ii) any person who received a distribution from a plan (including a plan that has terminated) in the aggregation

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group during the one-year period ending on the determination date shall be treated as a participant in such plan, and any such distribution shall be included in such participant's account balance or accrued benefit, as the case may be; provided, however, that in the case of a distribution made for a reason other than a person's severance from employment, death or disability, clause
(ii) of this Section 16.2(b) shall be applied by substituting "five-year period" for "one-year period."

Section 16.3. Minimum Contribution for Top-Heavy Years. Notwithstanding any provision of the Plan to the contrary, for any Plan Year for which the Plan is a top-heavy plan, a minimum contribution shall be made on behalf of each Participant (other than a key employee) who is an Employee on the last day of the Plan Year in an amount equal to the lesser of (i) 3% of such Participant's compensation during such Plan Year and (ii) the highest percentage at which Employer contributions (including pre-tax contributions) are made on behalf of any key employee for such Plan Year. If during any Plan Year for which this Section 16.3 is applicable a defined benefit plan is included in the aggregation group and such defined benefit plan is a top-heavy plan for such Plan Year, the percentage set forth in clause (i) of the first sentence of this
Section 16.3 shall be 5%. The percentage referred to in clause (ii) of the first sentence of this Section 16.3 shall be obtained by dividing the aggregate of Employer contributions made pursuant to Article 4 and pursuant to any other defined contribution plan that is required to be included in the aggregation group (other than a defined contribution plan that enables a defined benefit plan that is required to be included in such group to be qualified under section 401(a) of the Code) during the Plan Year on behalf of such key employee by such key employee's compensation for the Plan Year. Notwithstanding the foregoing, the minimum contribution described in this Section 16.3 for any Plan Year for which the Plan is a top-heavy

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plan shall not be made under this Plan with respect to any Participant who receives a minimum contribution or minimum benefit for purposes of section 416(c) of the Code under another plan maintained by an Affiliate.

In order to satisfy the minimum contribution required by this
Section 16.3, the profit sharing contribution for a Plan Year for which the Plan is a top-heavy plan first shall be allocated, without regard to any Social Security contribution, to all Participants who are Employees on the last day of such Plan Year in an amount that meets the minimum contribution requirement. Any remaining profit sharing contribution shall be allocated in accordance with
Section 8.6.

ARTICLE 17

AMENDMENT, ESTABLISHMENT OF
SEPARATE PLAN, PLAN TERMINATION AND CHANGE OF CONTROL

Section 17.1. Amendment. The Investment Committee (or such other committee of the Board as the Board may designate from time to time) may, at any time and from time to time, amend or modify the Plan. Any such amendment or modification shall become effective as of such date determined by the Investment Committee (or such other committee), including retroactively to the extent permitted by law, and may apply to Participants in the Plan at the time thereof as well as to future Participants.

Section 17.2. Establishment of Separate Plan. If an Employer withdraws from the Plan pursuant to Section 14.2, then the Administrative Committee shall determine the portion of each of the funds of the Trust Fund that is applicable to the Participants of such Employer and their Beneficiaries and direct the Trustee to segregate such portions in a separate trust. Such separate trust thereafter shall be held and administered as a part of the separate plan of such

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Employer. The portion of a fund of the Trust Fund applicable to the Participants (and Beneficiaries) of a particular Employer shall be an amount that bears the same ratio to the value of such fund as the total value of the fund accounts of Participants (and Beneficiaries) of such Employer bears to the total value of the fund accounts of all Participants (and Beneficiaries).

Section 17.3. Termination. The Company at any time may terminate the Plan by resolution of an appropriate committee of the Board. An Employer at any time may terminate its participation in the Plan by resolution of its board of directors. In the event of any such termination, or in the event of the partial termination of the Plan with respect to a group of Participants, the Accounts of Participants with respect to whom the Plan is terminated shall become fully vested and thereafter shall not be subject to forfeiture. In the event that an Employer terminates its participation in the Plan, the Administrative Committee shall determine, in the manner provided in Section 17.2, the portion of each of the funds of the Trust Fund that is applicable to the Participants of such Employer and their Beneficiaries and direct the Trustee to distribute such portions to such Participants and Beneficiaries ratably in proportion to the balances of their respective Accounts.

A complete discontinuance of contributions by an Employer shall be deemed a termination of such Employer's participation in the Plan for purposes of this Section.

Section 17.4. Change of Control. (a) Effect. Notwithstanding any provision of the Plan to the contrary, during the period commencing on the date of a Change of Control and ending at the close of business on the last day of the Fiscal Year during which the Change of Control occurs (the "Restriction Period"), the Plan may not be terminated, and the Plan may not be amended to:

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(1) revise the definition of Eligible Employee such that fewer Employees are eligible to participate in the Plan, lengthen the service requirement for participation in the Plan, create an age requirement or entry dates for participation in the Plan or otherwise reduce coverage under the Plan;

(2) reduce the amount of profit sharing contribution required to be made for the Plan Year ending on the last day of the Restriction Period;

(3) reduce the amount of pre-tax contributions or after-tax contributions that a Participant is permitted to make under the Plan; or

(4) reduce the amount of matching contributions required to be made under the Plan.

(b) Miscellaneous. (1) For the purpose of computing the amount of the profit sharing contribution for the Plan Year ending on the last day of the Restriction Period, Adjusted Consolidated Net Income shall be the forecast of the consolidated net income of the Company and its Consolidated Subsidiaries for the Fiscal Year ending on the last day of the Restriction Period as set forth in the annual operating plan of the Company for such Fiscal Year.

(2) Any person who was an Eligible Employee on the day immediately preceding a Change of Control shall be deemed to be an Eligible Employee during the Restriction Period so long as the person is employed by a member of a "controlled group of corporations" which includes, or by a trade or business that is under common control with (as those terms are defined in sections 414(b) and (c) of the Code), the Company, any corporation which is the survivor of any merger or consolidation to which the Company was a party, or any corporation into which the Company has been liquidated.

Section 17.5. Trust Fund to Be Applied Exclusively for Participants and Their Beneficiaries. Subject only to the provisions of Article 6 and Sections 15.2(b) and (c), and any other provision of the Plan to the contrary notwithstanding, no part of the Trust Fund shall be used for or diverted to any purpose not for the exclusive benefit of the Participants and their Beneficiaries either by operation or termination of the Plan, power of amendment or other means.

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IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer this 3rd day of March, 2003.

HARRIS CORPORATION

By: /s/ Jeffrey P. Morrill
    -------------------------------

Title: Assistant Treasurer

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Exhibit 10(b)(i)
HARRIS CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

ARTICLE I - PURPOSE AND EFFECTIVE DATE

The Harris Corporation Supplemental Executive Retirement Plan (the "SERP") is intended to provide deferred compensation to a "select group of management or highly compensated employees" (within the meaning of section 201(2) of ERISA) who are eligible to participate in the SERP. The SERP, as amended and restated herein, is effective as of March 1, 2003.

ARTICLE II - DEFINITIONS

Each capitalized term used herein shall have the meaning set forth in the Harris Corporation Retirement Plan, except as otherwise set forth below.

2.1. Account - means an account established on the books of the Corporation on behalf of a Participant pursuant to Section 5.1.

2.2. Code - means the Internal Revenue Code of 1986, as amended from time to time.

2.3. Committee - means the Retirement Plan Administrative Committee, the members of which shall be appointed by the committee of the Board of Directors of the Corporation that has the power to appoint and remove such members.

2.4. Compensation - means "Compensation" as defined in the Retirement Plan, except that the dollar limitation imposed on tax-qualified plans under section 401(a)(17) of the Code shall not apply.

2.5. Compensation Committee - means the Management Development and Compensation Committee of the Board of Directors of the Corporation.

2.6. Corporation - means Harris Corporation, a Delaware corporation.

2.7. ERISA - means the Employee Retirement Income Security Act of 1974, as amended from time to time.

2.8. Financial Hardship - means a severe financial hardship resulting from a sudden and unexpected illness or accident of the Participant or his or her dependent (within the meaning of section 152(a) of the Code), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising from events beyond the Participant's control.

2.9. Participant - means an individual who satisfies the requirements of Section 3.1 or 3.2 and, if applicable, files an election form with the Committee pursuant to Article IV.

2.10. Retirement Plan - means the Harris Corporation Retirement Plan, as amended from time to time.


2.11. SERP - means this Harris Corporation Supplemental Executive Retirement Plan, as amended from time to time.

ARTICLE III - ELIGIBILITY AND PARTICIPATION

3.1. Eligibility. An employee of the Corporation or any of its affiliates shall be eligible to participate in the SERP for any Plan Year if such employee's annual rate of compensation for such Plan Year is at least equal to the threshold amount for SERP participation determined for such year by the Committee in its sole discretion, and such employee either (i) is a participant in the Retirement Plan whose Pre-Tax Contributions, Matching Pre-Tax Contributions or Profit Sharing Contributions under the Retirement Plan are limited by one or more of sections 401(a)(17), 401(k)(3), 401(m)(2)(A), 402(g) and 415 of the Code, or (ii) is designated by the Committee to be eligible to participate in the SERP. An eligible employee shall become a Participant by completing an election form at the time and in the manner prescribed by the Committee, except that an employee who is eligible to participate solely because the Profit Sharing Contributions allocable to his or her account under the Retirement Plan are limited by either section 415 or 401(a)(17) of the Code shall automatically become a Participant at the time an amount equal to the difference between the amount of the Profit Sharing Contributions made to the Retirement Plan and the amount of the Profit Sharing Contributions that would have been made to the Retirement Plan had the limitations of such Code sections not applied is allocated to such Participant's Account hereunder. As a condition to participation in the SERP, each eligible employee shall agree to receive any distribution payments under the SERP in the form of direct deposit (or other method determined by the Committee).

3.2. Continued Participation. Any individual who was a participant in the SERP on December 31, 1997 shall continue to be a Participant in the SERP as long as he or she has a balance credited to his or her Account.

ARTICLE IV - CONTRIBUTIONS

4.1. Account Allocations and Elections.

(a) Contribution Amounts. A Participant whose Pre-Tax Contributions or Matching Pre-Tax Contributions under the Retirement Plan are limited for a Plan Year by section 401(a)(17), 401(k)(3), 401(m)(2)(A) or 402(g) of the Code shall have amounts credited to his or her Account for the remainder of such Plan Year by completing an election form that (i) in respect of the Pre-Tax Contributions in excess of those that may be allocated to the Participant's account under the Retirement Plan, are determined by applying to the Participant's Compensation the same percentage contribution rate for Pre-Tax Contributions in effect on the date as of which any of such sections of the Code first became applicable to such Pre-Tax Contributions and (ii) in respect of the Matching Pre-Tax Contributions in excess of those that may be allocated to the Participant's account under the Retirement Plan, are determined by applying to the Participant's Compensation the same percentage contribution rate for Pre-Tax Contributions in effect on the date as of which any of such sections of the Code first became applicable to Matching Pre-Tax Contributions. Any amounts of Pre-Tax Contributions, Matching Pre-Tax Contributions or Profit Sharing Contributions that are not credited to the Participant's Retirement Plan account because of a limitation imposed under section 401(a)(17),

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401(k)(3), 401(m)(2)(A), 402(g) or 415 of the Code shall be credited to the Participant's Account at the time or times any such amount would have been credited to the Participant's Retirement Plan account but for such a limitation.

(b) Time of Elections. The Committee shall determine the period of time in the beginning of each Plan Year during which eligible employees may elect to participate in the SERP pursuant to Section 4.1(a) or (c) with respect to Compensation not yet earned. Any eligible employee who is hired by the Corporation or any of its affiliates after the end of such period may elect to participate in the SERP for such Plan Year within the first 30 days of his or her employment. Elections to participate in the SERP must be made in the manner prescribed by the Committee.

(c) Permitted Salary Deferral Elections. In addition to the Compensation under Section 4.1 that a Participant may elect to defer, the Committee, in its sole discretion, may permit a Participant to elect to defer the receipt of any portion of his or her Compensation by completing an election form at the time and in the manner prescribed by the Committee. An amount equal to such portion of the Participant's Compensation shall be credited to his or her Account.

4.2. Special Award Amounts. The Compensation Committee, in its sole discretion, may grant a special award to any Participant, and an amount equal to the award shall be credited to such Participant's Account.

4.3. Transferred Accounts. The Committee, in its sole discretion, may provide that a Participant's Account shall be credited with an amount credited to the Participant under a nonqualified deferred compensation plan maintained by his or her prior employer. If the Committee so provides, then the Committee shall determine the extent to which the Participant shall be vested in the balance of his or her Account attributable to such amount

ARTICLE V - ACCOUNTS AND INVESTMENTS

5.1. Establishment of Accounts. An Account shall be established on the books of the Corporation in the name of and on behalf of each Participant. A Participant's Account shall be credited in an amount equal to (i) the Compensation the Participant elected to defer pursuant to Section 4.1, (ii) the Profit Sharing Contribution that was not made to the Retirement Plan because of limitations imposed under sections 401(a)(17) and 415 of the Code, (iii) any special awards granted to the Participant pursuant to Section 4.2, (iv) any amount permitted to be credited to the Participant's Account by the Committee pursuant to Section 4.3, and (v) any deemed investment gains and losses determined pursuant to Section 5.2.

5.2. Account Investments.

(a) Elections. Each Participant's Account shall be credited with earnings and losses experienced by the investment funds elected by such Participant from among the investment funds designated by the Committee from time to time in accordance with the rules and procedures established by the Committee, except that Participants who are not participants in the Retirement Plan may not direct the investment of their Accounts to reflect the performance of the Harris Stock Fund even if such fund is otherwise available under the SERP.

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(b) Investment Elections to Remain in Effect. A Participant's investment election shall remain in effect until the Participant changes it. If an investment fund selected by a Participant is no longer offered under the SERP and the Participant does not file a new investment election with the Committee, then the portion of the Participant's Account previously deemed invested in such investment fund shall be invested in the Balanced Fund.

(c) Timing. A Participant's Account shall be credited periodically with amounts equal to the gains and losses that would have been realized by the Corporation if the Account had been invested as it is deemed to be invested.

ARTICLE VI - VESTING AND DISTRIBUTIONS

6.1. Vesting. Amounts credited to a Participant's Account pursuant to Section
4.1 (as adjusted for deemed gains and losses pursuant to Section 5.2) shall become vested at the same time and to the same extent as their corresponding contributions to the Retirement Plan become vested. Amounts credited to a Participant's Account pursuant to Sections 4.2 and 4.3 shall become vested as determined by the Committee.

6.2. Time of Payment. A Participant shall commence receiving distributions from his or her Account in January of the calendar year following the later of (i) the calendar year in which such Participant attains age 55 and (ii) the calendar year in which the Participant terminates employment with the Corporation and its affiliates, provided that a Participant who terminates employment before attaining age 55 and whose vested interest in his or her Account at the time of such termination is less than $25,000 (or such other amount as may be designated by the Committee) shall receive a single sum distribution of such vested interest as soon as practicable following his or her termination of employment.

6.3. Form of Distribution.

(a) Elections. A Participant may elect the form of distribution of his or her vested Account balance by filing an election form with the Committee before October 1st of the calendar year in which such Participant terminates employment with the Corporation and its affiliates, except that if a Participant terminates employment with the Corporation and its affiliates on or after October 1st of a calendar year in connection with a Reduction in Force, then the Participant must elect the form of distribution before the end of such calendar year. A Participant may change a prior election regarding the form of distribution by filing a new election form with the Committee at the time and in the manner permitted by the Committee, provided that such form is received by the Committee no later than a date determined by the Committee within the calendar year prior to the year in which such distribution was to be paid or commence pursuant to the Participant's prior election.

(b) Available Forms of Distribution. A Participant may elect to receive payment of his or her vested Account balance in any one of the following forms:

(1) a single sum;

(2) installments over a five-year period;

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(3) installments over a seven-year period;

(4) installments over a ten-year period; or

(5) installments over a fifteen-year period.

Installment payments shall be made annually, unless the annual installment amount would be greater than the threshold amount established by the Committee in its sole discretion from time to time ($250,000 for 2003).

(c) Default Form of Distribution. A Participant who has not filed an election under Section 6.3(a) shall receive the distribution of his or her vested Account balance in installments over ten years.

(d) De Minimus Amounts. Notwithstanding Section 6.3(b), if a Participant's vested interest in his or her Account is less than an amount determined by the Committee, in its sole discretion, from time to time ($25,000 for 2003) that is applied uniformly to all Participants who become entitled to a distribution after the Committee makes such a determination, then the Participant's vested interest in his or her Account shall be paid in a single sum as soon as reasonably practicable after the Participant becomes entitled to a distribution.

6.4. Reemployment. Installment payments to a Participant shall cease upon such Participant's reemployment by the Corporation or one of its affiliates. The Participant's remaining vested interest in his or her Account shall be distributed to the Participant upon his or her subsequent termination of employment with the Corporation and its affiliates according to the Participant's most recent election made pursuant to Section 6.3.

6.5. Death. If a Participant shall die before the entire vested interest of his or her Account is distributed, then the remaining vested interest shall be paid, in the manner such vested interest would have been paid to the Participant, to the beneficiary or the beneficiaries designated by the Participant on the form and in the manner prescribed by the Committee. A Participant may revoke or change his or her beneficiary designation at any time by filing a new beneficiary designation form with the Committee. If a Participant does not designate a beneficiary under the SERP or if no designated beneficiary survives the Participant, then the vested interest of his or her Account shall be distributed to the Beneficiary or Beneficiaries entitled to his or her accounts under the Retirement Plan (or who would be so entitled if the Participant had Retirement Plan accounts).

6.6. Financial Hardship. A Participant may request a payment of all or a portion of his or her vested Account interest on account of a Financial Hardship by submitting a written request to the Committee accompanied by documentation evidencing the Financial Hardship. The Committee shall review the request and shall determine, in its sole discretion, whether a Financial Hardship exists. Any payment on account of the Participant's Financial Hardship shall be limited to an amount that the Committee, in its sole discretion, determines is reasonably necessary to satisfy the Participant's Financial Hardship needs.

6.7. Change in Control. Notwithstanding anything herein to the contrary, in the event of a Change in Control, each Participant's vested interest in his or her Account shall be either

5

distributed to such Participant in a single sum as soon as practicable or transferred (or retained) in a grantor trust established by the Corporation and distributed in accordance with the Change in Control election on file with the Committee. A Participant may change his or her election under this Section 6.7 by filing a new election form with the Committee at the time and in the manner permitted by the Committee, provided that such election form is received by the Committee by the earlier of (i) October 1st of the calendar year before the year in which such Change in Control occurs and (ii) the last date the Committee, in its sole discretion, determines that the Participant was not likely to be aware that a Change in Control was pending. The provisions of this Section 6.7 may not be amended after the date of a Change in Control without the written consent of a majority of those individuals with an Account balance under the SERP on the date of such Change in Control.

6.8. Overpayments of Installments. In the event that a payment is made with respect to a Participant's Account which exceeds the amount to which the Participant is entitled, future installment payments shall be reduced in any manner which the Committee, in its sole discretion, deems equitable.

6.9. Withholding for Taxes. For each calendar year in which a Participant's Compensation is reduced pursuant to the Participant's election under the SERP, the Corporation shall withhold from the Participant's payments of compensation for such year any taxes imposed upon the Participant pursuant to section 3121(v) of the Code in respect to the amount by which the Participant's Compensation is reduced. The Corporation shall have the right to deduct any federal, state or local income, employment or other taxes required by law to be withheld with respect to any payments to be made under the SERP, and to withhold such amounts from any payment otherwise due the Participant (or his or her beneficiary).

ARTICLE VII - ADMINISTRATION

7.1. Authority of Committee. The SERP shall be administered by the Committee. The Committee shall, in its sole and absolute discretion, have the complete authority to interpret the SERP, to adopt rules for carrying out the purposes of the SERP and to make all other determinations necessary or advisable for the administration of the SERP. To the extent practicable, the SERP shall be administered in a manner consistent with the administration of the Retirement Plan. Nevertheless, any decision or interpretation of any provision of the SERP made by the Committee shall be final and conclusive, and shall be binding on all Participants (and their beneficiaries). A Participant who has any authority to make any SERP administrative decisions may not participate in any such decision that may affect his or her rights or obligations under the SERP, unless the decision affects all Participants.

7.2. Delegation of Authority. The Committee may delegate any of its responsibilities, powers or duties under the SERP to any person or committee. The Committee or its delegate may employ such attorneys, agents and advisors as the Committee or such delegate may deem necessary or advisable to assist it in carrying out its duties hereunder.

7.3. Liability. No member of the Committee and no person to whom the Committee has delegated any responsibility, power or duty under the SERP shall be liable for any action or

6

failure to act under this SERP, except where such action or failure to act was due to gross negligence or fraud.

ARTICLE VIII - GENERAL PROVISIONS

8.1. Amendment and Termination. Subject to Section 6.7, the committee of the Board of Directors of the Corporation that has the power to amend or terminate the SERP may do so at any time, provided that no amendment or termination of the SERP shall reduce or cancel the amount credited to any Participant's Account.

8.2. Anti-Alienation. A Participant's rights and interest under the SERP may not be assigned or transferred except by will or the laws of descent or distribution, or as may be required under ERISA pursuant to a qualified domestic relations order. Any other purported transfer, assignment, pledge or other encumbrance or attachment of any payments or benefits under the SERP shall not be permitted or recognized and shall be void.

8.3. Funding. The Corporation may, but is not required to, establish a trust to fund the amounts credited to Accounts under this SERP, provided that the assets in such trust shall be subject to the claims of the Corporation's general creditors in the event of insolvency. Any payments pursuant to the SERP shall be made out of the general assets of the Corporation, and Participants (and beneficiaries) shall have no interest in any fund or specific asset of the Corporation. The rights of each Participant (and beneficiary) to any payments under the SERP shall be solely those of any unsecured creditor of the Corporation.

8.4. Severability. If any provision of the SERP is found illegal or invalid by any court having proper jurisdiction, then such provision shall be construed by such court to reflect most nearly the Corporation's original intent in adopting the SERP, consistent with applicable law, and the illegality or invalidity shall not affect the remaining provisions of the Plan.

8.5. Not a Contract of Employment. The SERP shall not constitute a contract of employment or in any manner obligate the Corporation to continue the employment of any employee.

8.6. Successors and Assigns. The provisions of the SERP shall bind and inure the Corporation and its successors and assigns, as well as each Participant and beneficiary.

8.7. Construction. The SERP shall be construed in accordance with the laws of the State of Florida.

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IN WITNESS WHEREOF, Harris Corporation has caused this instrument to be executed by its duly authorized officer on this 3rd day of March, 2003.

HARRIS CORPORATION

                                         By:  /s/ Jeffrey P. Morrill
                                             ---------------------------------

                                         Title: Assistant Treasurer

ATTEST:

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Exhibit (10)(b)(ii)

AMENDMENT NUMBER ONE
TO THE
HARRIS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

WHEREAS, Harris Corporation, a Delaware corporation (the "Corporation"), has heretofore adopted and maintains the Harris Corporation Supplemental Executive Retirement Plan, as amended and restated effective March 1, 2003 (the "Plan");

WHEREAS, the Corporation, by action of the Management, Development and Compensation Committee of the Corporation's Board of Directors (the "Compensation Committee"), has the authority to amend the Plan pursuant to
Section 8.1 of the Plan.

NOW, THEREFORE, pursuant to the power of amendment contained in Section 8.1 of the Plan, the Plan is hereby amended effective May 1, 2003 in the following respects:

1. Section 5.1 of the Plan is hereby amended to add the words "and related Matching Pre-Tax Contributions" immediately after the words "Section 4.1" in the second sentence thereof.

2. Section 5.2(a) of the Plan is hereby amended and restated in its entirety to read as follows:

(a) Elections. Each Participant's Account shall be credited with earnings and losses experienced by the investment funds elected by such Participant from among the investment funds designated by the Committee from time to time in accordance with the rules and procedures established by the Committee.


3. Section 5.2 of the Plan is amended to add the following new subsection (b) immediately after subsection (a) and the remaining subsections of
Section 5.2 shall be relettered appropriately:

(b) Harris Stock. If the Harris Stock Fund is designated by the Committee as an investment fund hereunder, then Participants who are not participants in the Retirement Plan may not direct the investment of their Accounts to reflect the performance of the Harris Stock Fund. The special rules set forth in Section 8.2(c) of the Retirement Plan applicable to the Harris Stock Fund relating to availability, restrictions on transfer, and dividends shall apply to amounts deemed invested in the Harris Stock Fund under this Plan. If a Participant who is a director or officer of the Corporation within the meaning of Rule 16a-1(f) under Section 16 of the Securities Exchange Act of 1934 and who is a participant in the Retirement Plan elects to have his or her Account credited with earnings and losses experienced by the Harris Stock Fund, then, unless otherwise directed by the Committee with respect to all such directors and officers, amounts credited during any calendar quarter to such Participant's Account pursuant to the Participant's election to have such amounts deemed invested in the Harris Stock Fund shall be an election to have the amounts deemed to be invested in the Stable Value Fund (or such other investment fund designated by the Committee) until the first day of the following calendar quarter and on such day shall be deemed to be invested in the Harris Stock Fund.

4. Section 5.2(c) (as relettered by this amendment) is amended to add the following words at the end of the first sentence thereof:

, except that in the case of a Participant who is a director or officer of the Corporation within the meaning of Rule 16a-1(f) under
Section 16 of the Securities Exchange Act of 1934 who had elected to have a portion of his or her Account deemed to be invested in the Harris Stock Fund prior to June 1, 2003, such Participant's investment election shall be modified to provide the temporary investment in the Stable Value Fund as described in Section 5.2(b).

APPROVED by the members of the HARRIS CORPORATION MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE and by the BOARD OF DIRECTORS on this
25th day of April, 2003.

HARRIS CORPORATION

                                       /s/ Howard L. Lance
                                       -----------------------------------
                                       Howard L. Lance
Attest:                                President and Chief Executive Officer

/s/ Richard L. Ballatnyne
-------------------------
Corporate Secretary


.

.
.

EXHIBIT 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

                                                             Three Quarters Ended
                                                         ---------------------------
                                                         March 28,         March 29,
(In millions, except ratios)                               2003              2002
                                                         ---------         ---------

EARNINGS:
Net Income                                                $  58.8           $  56.0
Plus: Income taxes                                           30.3              28.8
      Fixed charges                                          24.3              26.4
      Amortization of capitalized interest                    -                 -
Less: Interest capitalized during the period                  -                 -
      Undistributed earnings in equity investments            -                (1.8)
                                                          -------           -------
                                                          $ 113.4           $ 113.0
                                                          =======           =======

FIXED CHARGES:
Interest expense                                          $  18.8           $  21.0
Plus: Interest capitalized during the period                  -                 -
      Portion of rents deemed representative of
       the interest factor                                    5.5               5.4
                                                          -------           -------
                                                          $  24.3           $  26.4
                                                          =======           =======

RATIO OF EARNINGS TO FIXED CHARGES                           4.67              4.28


 

Exhibit 99.1

Forward-Looking Statements and Factors that May Affect Future Results

We currently are experiencing uncertain economic conditions, which makes it difficult to estimate growth in our markets and, as a result, future income and expenditures .

Current conditions in the domestic and global economies are extremely uncertain. As a result, it is difficult to estimate the level of growth for the economy as a whole. It is even more difficult to estimate growth in various parts of the economy, including some of the markets in which we participate. Because all components of our budgeting and forecasting are dependent upon estimates of growth in the markets we serve, the prevailing economic uncertainty renders estimates of future income and expenditures even more difficult than usual. As a result, we may make significant investments and expenditures but never realize the anticipated benefits, which could affect adversely our results of operations. The future direction of the overall domestic and global economies will have a significant impact on our overall performance.

The severe telecommunications slowdown has had a negative impact on our telecom businesses and continued weakness could further hurt our operations .

For more than a year there has been a severe downturn and tightening of capital markets for the telecommunication, cellular and wireless telephone industry in general. Additionally, the Competitive Local Exchange Carrier (“CLEC”) business has experienced a severe downturn and many CLECs have ceased operations or have scaled back operations significantly. This slowdown has had an adverse impact upon our network support and microwave businesses and continued weakness may have an adverse impact on the development of the market for our broadband wireless access products.

We have undertaken cost reductions which may not yield the benefits we expect and could have adverse effects on our future business.

We are implementing cost-cutting measures throughout our Company. There are risks inherent in our efforts to reduce costs. These include the risk that we will not be able to reduce expenditures quickly enough and sustain them at a level necessary to improve profitability and that we may have to undertake additional cost-cutting measures. In addition, there is the risk that cost-cutting initiatives will impair our ability to effectively develop and market products and remain competitive. Each of the above measures could have a long-term effect on these businesses by reducing our pool of technical talent, decreasing or slowing improvements in our products, making it more difficult for us to respond to customers, and limiting our ability to hire and retain key personnel.

We depend on the U.S. Government for a significant portion of our sales, and the loss of this relationship or a shift in government funding could have adverse consequences on our business.

A significant portion of our net sales are to the U.S. Government. Therefore, any significant disruption or deterioration of our relationship with the U.S. Government could significantly reduce our revenues. Our U.S. Government programs must compete with programs managed by other defense contractors for a limited number of programs and for uncertain levels of funding. Our competitors continuously engage in efforts to expand their business relationships with the U.S. Government and likely will continue these efforts in the future. The U.S. Government may choose to use other contractors for its limited number of programs. In addition, the funding of government programs also competes with other non-procurement spending of the U.S. Government. Budget decisions made by the U.S. Government are outside of our control and have long-term consequences for our business. A shift in government defense spending to other programs in which we are not involved, or a reduction in U.S. Government spending generally, could have adverse consequences on our business.

We derive a significant portion of our revenues from international sales and are subject to the risks of doing business in foreign countries including fluctuations in foreign currency exchange rates.

In fiscal 2002, revenues from products exported from the U.S. or manufactured abroad were 22 percent of our total revenues. Approximately 56 percent of our international business in fiscal 2002 was transacted in local currency environments. Losses resulting from currency rate fluctuations can adversely affect our results. We expect that international sales will continue to account for a significant portion of our total sales. As a result, we are subject to risks of doing business internationally, including:

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    currency exchange controls, fluctuations of currency and currency revaluations,
 
    the laws, regulations and policies of foreign governments relating to investments and operations, as well as U.S. laws affecting the activities of U.S. companies abroad,
 
    changes in regulatory requirements, including imposition of tariffs or embargoes, export controls and other trade restrictions,
 
    uncertainties and restrictions concerning the availability of funding, credit or guarantees,
 
    the difficulty of managing an organization doing business in many countries,
 
    import and export licensing requirements and regulations,
 
    taxes,
 
    uncertainties as to local laws and enforcement of contract and intellectual property rights and occasional requirements for onerous contract clauses, and
 
    rapid changes in government, economic and political policies, political or civil unrest or the threat of international boycotts or U.S. anti-boycott legislation.

While these factors or the impact of these factors are difficult to predict, any one or more of them could adversely affect our operations in the future.

The fair values of our portfolio of passive investments are subject to significant price volatility or erosion.

We maintain portfolio holdings of various issuers and types of securities. These securities generally are classified as available-for-sale and, consequently, are recorded on our balance sheet at fair value. Part of our portfolio includes minority equity investments in several publicly-traded companies. Because the majority of these securities represent investments in technology companies, the fair market values of these securities are subject to significant price volatility. In addition, the realizable value of these securities is subject to market and other conditions. We also have invested in numerous privately held companies, many of which still can be considered in the start-up or developmental stages. These investments are illiquid and are inherently risky as the markets for the technologies or products they have under development are typically in the early stages and may never materialize. We could lose our entire investment in these companies.

Our future success will depend on our ability to develop new products that achieve market acceptance .

Both our commercial and government businesses are characterized by rapidly changing technologies and evolving industry standards. Accordingly, our future performance depends on a number of factors, including our ability to:

    identify emerging technological trends in our target markets,
 
    develop and maintain competitive products,
 
    enhance our products by adding innovative features that differentiate our products from those of our competitors, and
 
    manufacture and bring cost-effective products to market quickly.

We believe that, in order to remain competitive in the future, we will need to continue to develop new products, which will require the investment of significant financial resources in new product development. The need to make these expenditures could divert our attention and resources from other projects, and we cannot be sure that these expenditures ultimately will lead to the timely development of new products. Due to the design complexity of some of our products, we may experience delays in completing development and introducing new products in the future. Any delays could result in increased costs of development or redirect resources from other projects. In addition, we cannot provide assurances that the markets for our products will develop as we currently anticipate. The failure of our products to gain

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market acceptance could reduce significantly our revenues and harm our business. Furthermore, we cannot be sure that our competitors will not develop competing products that gain market acceptance in advance of our products or that our competitors will not develop new products that cause our existing products to become obsolete. If we fail in our new product development efforts or our products fail to achieve market acceptance more rapidly than those of our competitors, our revenues will decline and our business, financial condition and results of operations will be adversely affected.

We cannot predict the consequences of future geo-political events, but they may affect adversely the markets in which we operate, our ability to insure against risks, our operations or our profitability.

Recent geo-political events have created economic and political uncertainties that could have a material adverse effect on our business and the prices of our securities. These matters have caused uncertainty in the world’s financial and insurance markets and may increase significantly the political, economic and social instability in the geographic areas in which we operate. These matters also have caused the premiums charged for our insurance coverages to increase and may cause some coverages to be unavailable altogether. While our government businesses have benefited from the War on Terrorism and the War in Iraq, these developments may affect adversely our business and profitability and the prices of our securities in ways that we cannot predict at this time.

We have made, and may continue to make, strategic acquisitions that involve significant risks and uncertainties.

We have made, and we may continue to make, strategic acquisitions that involve significant risks and uncertainties. These risks and uncertainties include:

    the difficulty in integrating newly-acquired businesses and operations in an efficient and cost-effective manner and the risk that we encounter significant unanticipated costs or other problems associated with integration,
 
    the challenges in achieving strategic objectives, cost savings and other benefits expected from acquisitions,
 
    the risk that our markets do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in those markets,
 
    the risk that we assume significant liabilities that exceed the limitations of any applicable indemnification provisions or the financial resources of any indemnifying parties,
 
    the potential loss of key employees of the acquired businesses, and
 
    the risk of diverting the attention of senior management from our existing operations.

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We depend significantly on our government contracts, which are only partially funded, subject to immediate termination, and heavily regulated and audited. The termination or failure to fund one or more of these contracts could have an adverse impact on our business.

Over its lifetime, a government program may be implemented by the award of many different individual contracts and subcontracts. The funding of government programs in the United States is subject to Congressional appropriations. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs often receive only partial funding initially, and additional funds are committed only as Congress makes further appropriations. The termination of funding for a government program would result in a loss of anticipated future revenues attributable to that program. That could have an adverse impact on our operations. In addition, the termination of a program or the failure to commit additional funds to a program that already has been started could result in lost revenue.

Generally, government contracts are subject to oversight audits by government representatives. In addition, the contracts generally contain provisions permitting termination, in whole or in part, without prior notice at the government’s convenience upon the payment of compensation only for work done and commitments made at the time of termination. We can give no assurance that one or more of our government contracts will not be terminated under these circumstances. Also, we can give no assurance that we would be able to procure new government contracts to offset the revenues lost as a result of any termination of our government contracts. Because a significant portion of our revenues are dependent on our procurement, performance and payment under our government contracts, the loss of one or more large contracts could have an adverse impact on our financial condition.

Our government business also is subject to specific procurement regulations and a variety of socioeconomic and other requirements. These requirements, although customary in government contracts, increase our performance and compliance costs. These costs might increase in the future, thereby reducing our margins, which could have an adverse effect on our financial condition. Failure to comply with these regulations and requirements could lead to suspension or debarment from government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various statutes, including those related to procurement integrity, export control, government security regulations, employment practices, protection of the environment, accuracy of records and recording of costs. The termination of a government contract or relationship as a result of any of these acts would have an adverse impact on our operations and could have an adverse effect on our reputation and ability to procure other government contracts in the future. We currently are cooperating with certain government representatives in investigations relating to potential violations of foreign corrupt practices, export controls and other laws. No assurance can be given that the outcome of these investigations will not have a material adverse effect on our financial condition or our business as a whole.

We enter into fixed-price contracts that could subject us to losses in the event that we have cost overruns .

Sometimes, we enter into contracts on a firm, fixed-price basis. During fiscal 2002 approximately 33 percent of our total Government Communications Systems and RF Communications segments’ revenues were from fixed-price contracts. This allows us to benefit from cost savings, but it carries the burden of potential cost overruns since we assume all of the cost risk. If our initial estimates are incorrect, we can lose money on these contracts. Government contracts can expose us to potentially large losses because the government can compel us to complete a project or, in certain circumstances, pay the entire cost of its replacement by another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract. Because many of these projects involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, problems with other contractors and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us over time. Furthermore, if we do not meet project deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to terminate. In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts we may not realize their full benefits. Our results of operations are dependent on our ability to maximize our earnings from our contracts. Lower earnings caused by cost overruns and cost controls would have an adverse impact on our financial results.

Third parties have claimed in the past and may claim in the future that we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products.

Third parties have claimed in the past and may claim in the future that we are infringing their intellectual property rights, and we may be found to infringe those intellectual property rights. While we do not believe that any of our products

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infringe the valid intellectual property rights of third parties, we may be unaware of intellectual property rights of others that may cover some of our technology, products and services.

Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert our management and key personnel from our business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require us to enter into costly royalty or license agreements. Moreover, we may not be able to obtain royalty or license agreements on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against development and sale of certain of our products.

We often rely on licenses of intellectual property useful for our businesses. We cannot provide assurances that these licenses will be available in the future on favorable terms or at all.

Third parties may infringe our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury.

Our success depends in large part on our proprietary technology. We rely on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. If we fail to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our financial condition.

Our pending patent and trademark registration applications may not be allowed, or competitors may challenge the validity or scope of these patents or trademark registrations. In addition, our patents may not provide us a significant competitive advantage.

We may be required to spend significant resources to monitor and police our intellectual property rights. We may not be able to detect infringement and our competitive position may be harmed before we do so. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share.

The outcome of litigation in which we have been named as a defendant is unpredictable and an adverse decision in any such matter could have a material adverse affect on our financial position and results of operations.

We are defendants in a number of litigation matters. These claims may divert financial and management resources that would otherwise be used to benefit our operations. Although we believe that we have meritorious defenses to the claims made in each and all of the litigation matters to which we have been named a party, and intend to contest each lawsuit vigorously, no assurances can be given that the results of these matters will be favorable to us. An adverse resolution of any of these lawsuits could have a material adverse affect on our financial position.

We are subject to customer demand for financing and customer credit risk.

The competitive environment in which we operate historically has required us, and many of our principal competitors, to provide medium-term and long-term customer financing. Customer financing arrangements may include all or a portion of the purchase price for our products and services, as well as working capital. We also may assist customers in obtaining financing from banks and other sources. Our success for some of our businesses may be dependent, in part, upon our ability to provide customer financing on competitive terms. While we generally have been able to place a portion of our customer financings with third-party lenders or to otherwise insure a portion of this risk, a portion of these financings is provided directly by us. There can be higher risks associated with some of these financings, particularly when provided to start-up operations such as local network providers, to customers in developing countries or to customers in specific financing-intensive areas of the telecommunications industry. If customers fail to meet their obligations, losses could be incurred and such losses could have an adverse effect on us. Our losses could be much greater if it becomes more difficult to place or insure against these risks with third parties. This also may put us at a competitive disadvantage to competitors with greater financial resources. We have various programs in place to monitor and mitigate customer credit risk; however, we cannot assure you that such measures will be effective in reducing our exposure to our customers’ credit risk. Continued weakness in the general economy, and the telecommunications industry in particular, may result in increased defaults by customers and increased losses.

We operate in highly competitive businesses.

We operate in highly competitive businesses that are sensitive to technological advances. Although successful product and systems development is not necessarily dependent on substantial financial resources, some of our competitors in each of our businesses are larger and can maintain higher levels of expenditures for research and development than we

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can. Our competitors in our commercial communications businesses include large multinational communications companies, as well as smaller companies with developing technology expertise. Our competitors for U.S. Government contracts typically are large, technically competent firms with substantial assets. We concentrate in each of our businesses on the market opportunities that we believe are compatible with our resources, overall technological capabilities and objectives. Principal competitive factors in these businesses are cost-effectiveness, product quality and reliability, technological capabilities, service, ability to meet delivery schedules and the effectiveness of dealers in international areas. We cannot assure you that we will be able to compete successfully against our current or future competitors or that the competitive pressures that we face will not result in reduced revenues and market share.

We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could affect adversely our business.

Due to the specialized nature of some of our businesses, our future performance is dependent upon the continued services of our executive officers and key engineering personnel. Our prospects depend upon our ability to attract and retain qualified engineering, manufacturing, marketing, sales and management personnel for our operations. Competition for personnel, particularly people with key technology skills, is intense, and we may not be successful in attracting or retaining qualified personnel. Our failure to successfully compete for these personnel or the cost of competing for these personnel could seriously harm our business, results of operations and financial condition.

Accounting estimates impact our financial reporting.

In preparing our financial statements and accounting for the underlying transactions and balances, we apply our accounting policies as disclosed in the Notes to Financial Statements contained in our Fiscal 2002 Form 10-K. The application of certain of these policies places significant demands on our judgment, with financial reporting results relying on estimates about the effect of matters that are inherently uncertain. Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. Critical accounting estimates are those that require application of management’s most difficult, subjective, or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Critical accounting estimates for us include: (i) revenue recognition on long-term contracts and estimates, (ii) provisions for excess and obsolete inventory losses, (iii) allowance for doubtful accounts and credit losses for accounts and finance receivables, (iv) valuation of marketable securities and strategic investments, and (v) impairment testing of goodwill and other acquired intangible assets. Actual results may vary from those estimates.

For example, standard “percentage of completion” accounting for multi-year contracts requires us to make estimates about future expenses associated with those contracts. These estimates, including changes we make in these estimates, affect current reported results. In addition, our financial results and our financial condition in subsequent periods are affected by positive and negative variances between our estimates and actual income and expense items recognized in those periods. We regularly evaluate these estimates and make changes based upon developments during a reporting period.

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Exhibit 99.2

Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of the
United States Code as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

     In connection with the filing of the Quarterly Report on Form 10-Q of Harris Corporation (“Harris”) for the fiscal quarter ended March 28, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Howard L. Lance, President and Chief Executive Officer of Harris, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1350, that:

     (1)   The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
 
     (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Harris.

     
Dated: May 6, 2003   /s/ Howard L. Lance

Name: Howard L. Lance
Title: President and Chief Executive Officer

     A signed original of this written statement required by Section 906 has been provided to Harris Corporation and will be retained by Harris Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

 

Exhibit 99.3

Certification
Pursuant to Section 1350 of Chapter 63 of Title 18 of the
United States Code as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002

     In connection with the filing of the Quarterly Report on Form 10-Q of Harris Corporation (“Harris”) for the fiscal quarter ended March 28, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Bryan R. Roub, Senior Vice President and Chief Financial Officer of Harris, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. §1350, that:

       (1)   The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
 
       (2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Harris.

     
Dated: May 6, 2003   /s/ Bryan R. Roub

Name: Bryan R. Roub
Title: Senior Vice President and Chief Financial Officer

     A signed original of this written statement required by Section 906 has been provided to Harris Corporation and will be retained by Harris Corporation and furnished to the Securities and Exchange Commission or its staff upon request.