[Federal Register Volume 64, Number 239 (Tuesday, December 14, 1999)]
[Notices]
[Pages 69784-69797]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31669]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. AlliedSignal Inc. and Honeywell Inc.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the United States District Court for the District 
of Columbia, Washington, DC, in United States v. AlliedSignal Inc. and 
Honeywell Inc., Case No. 1:99 CV 02959 (PLF).
    On November 8, 1999, the United States filed a Complaint, which 
alleged that AlliedSignal's proposed merger with Honeywell would 
violate Section 7 of the Clayton Act, 15 U.S.C. 18, by substantially 
lessening competition in the traffic alert and collision avoidance 
systems (``TCAS'') market, the search and surveillance weather radar 
(``SSWR'') market, the reaction and momentum wheel market, and the 
inertial systems market. The proposed Final Judgment, filed on November 
8, 1999, requires AlliedSignal and Honeywell to divest the TCAS 
business of Honeywell located in Glendale, Arizona; the SSWR business 
of AlliedSignal located in Olathe, Kansas; the space and navigation 
business of AlliedSignal located in Teterboro, New Jersey; the 
mechanical rate gyroscope business of Allied Signal located in 
Cheshire, Connecticut, and a related repair business in Newark Ohio; 
the microSCIRAS technology business of AlliedSignal located in Redmond, 
Washington, or, in the alternative, the micro-electro-mechanical system 
inertial sensor business of Honeywell located in Minneapolis and 
Plymouth, Minnesota; and the AlliedSignal micromachined silicon 
accelerator and micromachined accelerometer gyroscope technology 
business.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses thereof will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to J. Robert Kramer II, Chief, Litigation II Section, Antitrust 
Division, U.S. Department of Justice, 1401 H. Street, NW, Suite 3000, 
Washington, DC 20530 [telephone: (202) 307-0924].
Constance K. Robinson,
Director of Operations & Merger Enforcement.

Hold Separate Stipulation and Order

    It is hereby stipulated and agreed by and between the undersigned 
parties, subject to approval and entry by the Court, that:

I. Definitions

    As used in this Hold Separate Stipulation and Order:
    A. ``United States'' means plaintiff United States of America.
    B. ``DoD'' means the United States Department of Defense.
    C. ``AlliedSignal'' means defendant AlliedSignal Inc., a Delaware 
corporation with its headquarters in Morristown, New Jersey, and its 
successors, assigns, subsidiaries,

[[Page 69785]]

divisions, groups, affiliates, partnerships and joint ventures, and 
directors, officers, managers, agents, and employees.
    D. ``Honeywell'' means defendant Honeywell Inc., a Delaware 
corporation with its headquarters in Minneapolis, Minnesota, and its 
successors, assigns, subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and directors, officers, managers, 
agents, and employees.
    E. ``TCAS Business'' means the traffic alert and collision 
avoidance systems (``TCAS'') business of Honeywell, as defined in the 
proposed Final Judgment filed in this case.
    F. ``SSWR Business'' means the search and surveillance weather 
radar (``SSWR'') business of AlliedSignal, as defined in the proposed 
Final Judgment filed in this case.
    G. ``Teterboro Business'' means AlliedSignal's entire Space and 
Navigation business in Teterboro, New Jersey, as defined in the 
proposed Final Judgment filed in this case.
    H. ``Cheshire Business'' means the entire business of AlliedSignal 
in Cheshire, Connecticut that produces mechanical inertial measurement 
units and components, as defined in the proposed Final Judgment filed 
in this case.
    I. ``AlliedSignal Micro SCIRAS Business'' means the micro SCIRAS 
business of AlliedSignal, as defined in the proposed Final Judgment 
filed in this case.
    J. ``Honeywell MEMS Business'' means the micro-electro-mechanical 
systems (``MEMS'') business of Honeywell, as defined in the proposed 
Final Judgment filed in this case.
    K. ``AlliedSignal MSA and MAG Technology Business'' means the 
business owned by AlliedSignal and relating directly to the 
``Micromachined Silicon Accelerometer (`MSA')'' and the ``Micromachined 
Accelerometer Gyroscope (`MAG')'', as defined in the proposed Final 
Judgment filed in this case.
    L. ``Divested Businesses'' means the TCAS Business, the SSWR 
Business, the Teterboro Business, the Cheshire Business, the 
AlliedSignal Micro SCIRAS Business (or, as provided in the proposed 
Final Judgment filed in this case, the Honeywell MEMS Business), and 
the AlliedSignal MSA and MAG Technology Business.
    M. ``Post-merger Company'' means that company resulting from the 
merger of defendants AlliedSignal and Honeywell, in accordance with the 
terms contained in the proposed Final Judgment in this case.
    N. ``Merger Agreement'' means the Agreement and Plan of Merger 
entered into by AlliedSignal and Honeywell on June 4, 1999, and any 
subsequent agreement relating to or amending the June 4, 1999 
agreement.

II. Objectives

    The proposed Final Judgment filed in this case is meant to ensure 
prompt divestiture by defendants of the Divested Businesses for the 
purposes of creating viable competitors in the innovation, development, 
production, marketing and sale of the products of the Divested 
Businesses and to remedy the effects that the United States alleges 
would otherwise result from defendants' proposed merger. This Hold 
Separate Stipulation and Order ensures the timely and complete transfer 
of the Divested Businesses and maintains each of the Divested 
Businesses as an independent, viable competitor until the divestitures 
are complete.

III. Jurisdiction and Venue

    The Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto, and venue of this action is proper 
in the United States District Court for the District of Columbia.

IV. Compliance With and Entry of Proposed Final Judgment

    A. The parties stipulate that a proposed Final Judgment in the form 
attached hereto as Exhibit A may be filed with and entered by the 
Court, upon the motion of any party or upon the Court's own motion, at 
any time after compliance with the requirements of the Antitrust 
Procedures and Penalties Act (15 U.S.C. 16), and without further notice 
to any party or other proceedings, provided that the United States has 
not withdrawn its consent, which it may do at any time before the entry 
of the proposed Final Judgment by serving notice thereof on defendants 
and by filing that notice with the Court.
    B. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment, pending the Judgment's entry by the Court, or 
until expiration of time for all appeals of any Court ruling declining 
entry of the proposed Final Judgment, and shall, from the date of the 
signing of this Hold Separate Stipulation and Order by the parties, 
comply with all the terms and provisions of the proposed Final Judgment 
as though the same were in full force and effect as an order of the 
Court.
    C. Defendants shall not consummate the transaction sought to be 
enjoined by the Complaint herein before the Court has signed this Hold 
Separate Stipulation and Order.
    D. This Hold Separate Stipulation and Order shall apply with equal 
force and effect to any amended proposed Final Judgment agreed upon in 
writing by the parties and submitted to the Court.
    E. In the event (1) The United States has withdrawn its consent, as 
provided in Section IV(A) above, or (2) The proposed Final Judgment is 
not entered pursuant to this Hold Separate Stipulation and Order, the 
time has expired for all appeals of any Court ruling declining entry of 
the proposed Final Judgment, and the Court has not otherwise ordered 
continued compliance with the terms and provisions of the proposed 
Final Judgment, then the parties are released from all further 
obligations under this Hold Separate Stipulation and Order, and the 
making of this Hold Separate Stipulation and Order shall be without 
prejudice to any party in this or any other proceeding.
    F. Defendants represent that the divestitures ordered in the 
proposed Final Judgment can and will be made, and that defendants will 
later raise no claim of mistake, hardship or difficulty of compliance 
as grounds for asking the Court to modify any of the provisions 
contained therein.

V. Hold Separate Provisions

    A. Defendants shall expressly undertake to compete with each of the 
Divested Businesses in the applicable market in the exercise of their 
best judgments and without regard to the Merger Agreement, as if the 
Post-merger Company and the Divested Businesses were in all respects 
separate and independent business entities.
    B. Defendants shall preserve, maintain, and operate each of the 
Divested Businesses as an independent competitor with management, 
research, development, production, sales and operations held entirely 
separate, distinct and apart from the other businesses of defendants. 
None of the Divested Businesses shall coordinate its innovation, 
development, production, marketing or sales with that of the Post-
merger Company, except to the limited extent provided in V(D) below, or 
to provide the accounting, management information services or other 
necessary support functions afforded by AlliedSignal or Honeywell prior 
to the merger. Within fifteen (15) days of the entering of this Hold 
Separate Stipulation and Order, defendants shall inform the United 
States and DoD of the steps taken to comply with this provision.

[[Page 69786]]

    C. Defendants shall take all steps necessary to ensure that each of 
the Divested Businesses will be maintained and operated as an 
independent, ongoing, and economically viable and active competitor in 
the innovation, research and development, production, and sale of 
products it develops, produces, and sells; that all planned innovation, 
research, and product development be continued; that the management of 
each of the Divested Businesses will not be influenced by defendants; 
and that the books, records, competitively sensitive sales, marketing 
and pricing information, and decision-making associated with each of 
the Divested Businesses, including the performance and decision-making 
functions regarding internal innovation, research and development, 
sales and pricing, will be kept separate and apart from the business of 
the Post-merger Company. Defendants' influence over each of the 
Divested Businesses shall be limited to that necessary to carry out 
their obligations under this Hold Separate Stipulation and Order and 
the proposed Final Judgment.
    D. Defendants shall provide and maintain sufficient working capital 
to maintain each of the Divested Businesses as economically viable, 
ongoing businesses, consistent with current business plans.
    E. Defendants shall provide and maintain sufficient lines and 
sources of credit to maintain each of the Divested Businesses as 
economically viable, ongoing businesses.
    F. Defendants shall maintain on behalf of each of the Divested 
Businesses in accordance with sound accounting practices, separate, 
true and complete financial ledgers, books and records reporting the 
assets, liabilities, expenses, revenues and income of each of the 
Divested Businesses on a periodic basis, such as the last business day 
of each month, consistent with past practices.
    G. Defendants shall use all reasonable efforts to maintain and 
increase sales and revenues of each of the Divested Businesses and 
shall maintain at 1998 or previously approved levels for 1999, 
whichever are higher, all internal research and development funding, 
promotional, advertising, sales, technical assistance, marketing, and 
merchandising support for products produced or under development of 
each of the Divested Businesses.
    H. Defendants shall not sell, lease, assign, transfer or otherwise 
dispose of, or pledge as collateral for loans, assets that may be 
required to be divested pursuant to the proposed Final Judgment filed 
in this case.
    I. Defendants shall preserve the assets that may be required to be 
divested pursuant to the proposed Final Judgment filed in this case in 
a state of repair equal to their state of repair as of the date of this 
Hold Separate Stipulation and Order, ordinary wear and tear excepted, 
and shall maintain and adhere to normal repair and maintenance 
schedules for these assets.
    J. Except in the ordinary course of business or as is otherwise 
consistent with this Hold Separate Stipulation and Order, defendants 
shall not transfer or terminate any employee who, on the date of the 
filing of the Complaint in this mater, works for any of the Divested 
Businesses, or alter, to the detriment of any such employee, the 
employee's current employment, benefits, or salary agreement.
    K. Until such time as this Hold Separate Stipulation and Order is 
terminated, defendants shall not change the management of any of the 
Divested Businesses, except in the ordinary course of business. The 
TCAS Business shall be managed by Joseph Hoffman; the SSWR Business 
shall be managed by Walter Mores; the Teterboro Business shall be 
managed by Christopher D. Clayton; the Cheshire Business shall be 
managed by Wayne R. Demmons; the AlliedSignal MicroSCRIRAS Business and 
the AlliedSignal MSA and MAG Technology Business shall be managed by 
Randy Sprague; and the Honeywell MEMS Business shall be managed by 
David S. Willits. Each identified manager shall have complete 
managerial responsibility for his respective Divested Business, subject 
to the provisions of this Hold Separate Stipulation and Order and the 
proposed Final Judgment. In the event that any identified manager of 
any of the Divested Businesses is unable to perform his duties, 
defendants shall appoint a replacement within ten (10) days from the 
current management of the applicable Divested Business, subject to DOJ 
approval. Should defendants fail to appoint a replacement acceptable to 
the DOJ within ten (10) working days, the DOJ, after consultation with 
DoD, shall appoint a replacement.
    L. Defendants shall take no action that would interfere with the 
ability of the trustees appointed pursuant to the proposed Final 
Judgment filed in this case to complete the divestitures required by 
that Final Judgment.
    M. Defendants shall ensure to the satisfaction of DoD that the 
operations of each of the Divested Businesses, including its support of 
DoD programs, not be disrupted during the required divestitures.
    N. This Hold Separate Stipulation and order shall remain in effect 
until all of the divestitures required by the proposed Final Judgment 
filed in this case are complete or until further Order of the Court.

    Dated: November 8, 1999.
    For Plaintiff United States of America:
Michael K. Hammaker,
DC Bar #233684, U.S. Department of Justice, Antitrust Division, 
Litigation II, Suite 3000, Washington, D.C. 20005, (202) 307-0924.
    For Defendant AlliedSignal Inc.:
William J. Kolasky,
DC Bar #217539, Wilmer, Cutler & Pickering, 2445 M Street, NW, 
Washington, DC 20037, 202-663-6357.
    For Defendant Honeywell Inc.:
C. Benjamin Crisman, Jr.,
DC Bar #240135, Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New York 
Avenue, NW, Washington, DC 20005, 202-371-7330.
    It Is So Ordered by the Court, this ______ day of November, 
1999.

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United States District Judge

Parties Entitled to Notice of Entry of Order:

Counsel for Plaintiff United States of America.
Michael K. Hammaker, U.S. Department of Justice, Antitrust Division, 
Suite 3000, 1401 H Street, NW, Washington, D.C. 20503.
Counsel for Defendant AlliedSignal Inc.
William J. Kolasky,
Wilmer, Cutler & Pickering, 2445 M Street, NW, Washington, DC 20037.
Counsel for Honeywell Inc.
C. Benjamin Crisman, Jr.,
Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New York Avenue, NW, 
Washington, DC 20005.

Final Judgment

    Whereas, plaintiff, the United States of America (``United 
States''), and defendants AlliedSignal Inc. and Honeywell Inc., by 
their respective attorneys, having consented to the entry of this Final 
Judgment without trial or adjudication of any issue of fact or law 
herein, and without this Final Judgment constituting any evidence 
against or an admission by any party with respect to any issue of law 
or fact herein;
    And Whereas, defendants have agreed to be bound by the provisions 
of this Final Judgment pending its approval by the Court;
    And Whereas, the essence of this Final Judgment is, in the event of 
a merger between the defendants, the prompt and certain divestiture of 
the businesses identified below to assure that competition is not 
substantially lessened;

[[Page 69787]]

    And Whereas, the United States requires defendants to make the 
divestitures ordered herein for the purpose of remedying the loss of 
competition alleged in the Complaint;
    And Whereas, defendants have represented to the United States that 
the divestitures ordered herein can and will be made promptly and that 
defendants later will raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the divestiture 
provisions contained below;
    Now, Therefore, before taking any testimony, and without trial or 
adjudication of any issue of fact or law herein, and upon consent of 
the parties hereto, it is hereby Ordered, Adjudged, and Decreed as 
follows:

I. Jurisdiction

    This Court has jurisdiction over each of the parties hereto and 
over the subject matter of this action. The Complaint states a claim 
upon which relief may be granted against defendants, as hereinafter 
defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``AlliedSignal'' means defendant AlliedSignal Inc., a Delaware 
corporation with its headquarters in Morristown, New Jersey, and 
includes its successors and assigns, and its subsidiaries, divisions, 
groups, affiliates, partnerships, joint ventures, directors, officers, 
managers, agents, and employees.
    B. ``Honeywell'' means defendant Honeywell Inc., a Delaware 
corporation with its headquarters in Minneapolis, Minnesota, and 
includes its successors and assigns, and its subsidiaries, divisions, 
groups, affiliates, partnerships, joint ventures, directors, officers, 
managers, agents, and employees.
    C. ``DoD'' means the United States Department of Defense.
    D. ``TCAS Business'' means the traffic alert and collision 
avoidance systems (``TCAS'') business of Honeywell, which it operates 
at its Glendale and Phoenix, Arizona facilities. The TCAS Business does 
not include the building or related fixtures housing the Glendale and 
Phoenix operations. The TCAS Business includes, but is not limited to, 
Honeywell's TCAS II computer, TCAS 2000 computer, TCAS 1500 computer 
(still under development), TCAS directional antenna, dedicated TCAS 
controller, and the dedicated TCAS display (``TCAS System'') and all 
employees listed in Confidential Attachment A. Also included, as common 
to the TCAS System and other systems of Honeywell, are the Vertical 
Speed Indicator/Traffic Resolution Advisory (``VSI/TRA''), pressure 
transducer and ARINC Diversity/Mode S transponder used with the basic 
TCAS System, and the following:
    (1) All tangible assets used in the TCAS Business, including, but 
not limited to, research and development activities; all manufacturing 
equipment and fixed assets, personal property, inventory, office 
furniture, materials, supplies, and other tangible property used in the 
TCAS Business; all licenses, permits and authorizations issued by any 
governmental organization for the TCAS Business; all contracts, teaming 
arrangements, agreements, leases, commitments and understandings of the 
TCAS Business, including supply agreements; all customer lists and 
credit records; all other records of the TCAS Business; and, at the 
purchaser's request, a lease to any real property currently utilized 
for the TCAS Business;
    (2) Any and all intangible assets used in the TCAS Business, 
including, but not limited to, (a) All intellectual property rights 
used exclusively in the TCAS Business, (b) With respect to all other 
intellectual property rights used in both the TCAS Business and other 
Honeywell businesses, a transferable, paid-up license, exclusive in the 
TCAS Business field of use;
    (c) All existing licenses and sublicenses relating exclusively to 
the TCAS Business; and (d) A transferable, paid-up sublicense, 
exclusive in the TCAS Business field of use, to all other existing 
licenses and sublicenses relating to the TCAS Business. Intellectual 
property rights comprise, but are not limited to, patents, copyrights, 
technical information, computer software and related documentation, 
know-how, trade secrets, drawings, blueprints, designs, design 
protocols, specifications for materials, parts and devices, safety 
procedures for the handling of materials and substances, quality 
assurance and control procedures, design tools and simulation 
capability, manuals, and all research data concerning historic and 
current research and development efforts relating to the TCAS Business, 
including, but not limited to, designs of experiments, and the results 
of successful and unsuccessful designs and experiments (Intellectual 
property does not include the mark HONEYWELL).
    E. ``SSWR Business'' means the search and surveillance weather 
radar (``SSWR'') business of AlliedSignal, which it operates at its 
Olathe, Kansas facility. The SSWR Business does not include the 
building or related fixtures housing the Olathe operations. The SSWR 
Business includes, not is not limited to, AlliedSignal's RDR-1400 and 
RDR-1500 product lines, all employees listed in Confidential Attachment 
A, and the following:
    (1) All tangible assets used in the SSWR Business, including, but 
not limited to, research and development activities; all manufacturing 
equipment and fixed assets, personal property, inventory, office 
furniture, materials, supplies, and other tangible property used in the 
SSWR Business; all licenses, permits and authorizations issued by any 
governmental organization for the SSWR Business; all contracts, teaming 
arrangements, agreements, leases, commitments and understandings of the 
SSWR Business, including supply agreements; all customer lists and 
credit records; all other records of the SSWR Business; and, at the 
purchaser's request, a lease to any real property currently utilized 
for the SSWR Business;
    (2) Any and all intangible assets used in the SSWR Business, 
including, but not limited to, (a) All intellectual property rights 
used exclusively in the SSWR Business, (b) With respect to all other 
intellectual property rights used in both the SSWR Business and other 
AlliedSignal businesses, a transferable, paid-up license, exclusive in 
the SSWR Business field of use; (c) All existing licenses and 
sublicenses relating exclusively to the SSWR Business and (d) A 
transferable, paid-up sublicense, exclusive in the SSWR Business field 
of use, to all other existing licenses and sublicenses relating to the 
SSWR Business. Intellectual property rights comprise, but are not 
limited to, patents, copyrights, technical information, computer 
software and related documentation, know-how, trade secrets, drawings, 
blueprints, designs, design protocols, specifications for materials, 
parts and devices, safety procedures for the handling of materials and 
substances, quality assurance and control procedures, design tools and 
simulation capability, manuals, and all research data concerning 
historic and current research and development efforts relating to the 
SSWR Business, including, but not limited to, designs of experiments, 
and the results of successful and unsuccessful designs and experiments 
(Intellectual property does not include the marks AlliedSignal, Bendix 
King, or Bendix).
    F. ``Teterboro Space and Navigation Business'' means AlliedSignal's 
entire Space and Navigation Systems business in Teterboro, New Jersey 
(including an option to buy or lease the facility in

[[Page 69788]]

which the business is housed or to lease a portion of the facility, 
including fixtures and improvements). The Teterboro Space and 
Navigation Business includes, but is not limited to, ring laser 
gyroscopes (``RLGs''), fiber optic gyroscopes (```FOGs''), inertial 
measurement units, reaction and momentum wheels, control moment 
gyroscopes, star sensors, sun shades, navigation and pointing systems 
and fire control systems. The Teterboro Space and Navigation Business 
does not include avionics products, avionics test products, the rate 
grade mechanical inertial measurement units manufactured in Cheshire, 
or RLV (``reusable launch vehicle'') integration systems (X-33 and 
Kistler). The Teterboro Space and Navigation Business includes all 
employees listed in Confidential Attachment A, and the following:
    (1) All tangible assets used in the Teterboro Space and Navigation 
Business, including, but not limited to, research and development 
activities; all manufacturing equipment and fixed assets, personal 
property, inventory, office furniture, materials, supplies, and other 
tangible property used in the Teterboro Space and Navigation Business; 
all licenses, permits and authorizations issued by any governmental 
organization for the Teterboro Space and Navigation Business; all 
contracts, teaming arrangements, agreements, leases, commitments and 
understandings of the Teterboro Space and Navigation Business, 
including supply agreements, all customer lists and credit records; and 
all other records of the Teterboro Space and Navigation Business;
    (2) Any and all intangible assets used in the Teterboro Space and 
Navigation Business, including, but not limited to, (a) All 
intellectual property rights used exclusively in the Teterboro Space 
and Navigation Business, (b) With respect to all other intellectual 
property rights used in both the Teterboro Space and Navigation 
Business and other AlliedSignal businesses, a transferable, paid-up 
license, exclusive in the Teterboro Space and Navigation Business field 
of use; (c) All existing licenses and sublicenses relating exclusively 
to the Teterboro Space and Navigation Business; and (d) A transferable, 
paid-up sublicense, exclusive in the Teterboro Space and Navigation 
Business field of use, to all other existing licenses and sublicenses 
relating to the Teterboro Space and Navigation Business. Intellectual 
property rights comprise, but are not limited to, patents, copyrights, 
technical information, computer software and related documentation, 
know-how, trade secrets, drawings, blueprints, designs, design 
protocols, specifications for materials, parts and devices, safety 
procedures for the handling of materials and substances, quality 
assurance and control procedures, design tools and simulation 
capability, annuals, and all research data concerning historic and 
current research and development efforts relating to the Teterboro 
Space and Navigation Business, including, but not limited to, designs 
of experiments, and the results of successful and unsuccessful designs 
and experiments (Intellectual property does not include the mark 
AlliedSignal).
    G. ``Cheshire Business'' means the entire business of AlliedSignal 
in Cheshire, Connecticut that produces rate-grade mechanical inertial 
measurement units and components. The Cheshire Business includes, but 
is not limited to, AlliedSignal's Newark, Ohio repair and overhaul 
business, all employees listed in Confidential Attachment A, and the 
following:
    (1) All tangible assets used in the Cheshire Business, including, 
but not limited to, research and development activities, all leases for 
real property housing the Cheshire and Newark operations; all 
manufacturing equipment and fixed assets, personal property, inventory, 
office furniture, materials, supplies, and other tangible property or 
improvements used in the Cheshire Business; all licenses, permits and 
authorizations issued by any governmental organization for the Cheshire 
Business; all contracts, teaming arrangements, agreements, leases, 
commitments and understandings of the Cheshire Business, including 
supply agreements, all customer lists and credit records; and all other 
records of the Cheshire Business;
    (2) Any and all intangible assets used in the Cheshire Business, 
including, but not limited to, (a) All intellectual property rights 
used exclusively in conducting the Cheshire Business, (b) With respect 
to all other intellectual property rights used in both the Cheshire 
Business and other AlliedSignal businesses, a transferable, paid-up 
license, exclusive in the Cheshire Business field of use, (c) All 
existing licenses and sublicenses relating exclusively to the Cheshire 
Business, and (d) A transferable, paid-up sublicense, exclusive in the 
Cheshire Business field of use, to all other existing licenses and 
sublicenses relating to the Cheshire Business. Intellectual property 
rights comprise, but are not limited to, patents, copyrights, technical 
information, computer software and related documentation, know-how, 
trade secrets, drawings, blueprints, designs, design protocols, 
specifications for materials, parts and devices, safety procedures for 
the handling of materials and substances, quality assurance and control 
procedures, design tools and simulation capability, manuals, and all 
research data concerning historic and current research and development 
efforts relating to the Cheshire Business, including, but not limited 
to, designs of experiments, and the results of successful and 
unsuccessful designs and experiments (Intellectual property does not 
include the Mark AlliedSignal).
    H. ``AlliedSignal MicroSCIRAS Business'' means the MicroSCIRAS 
business of AlliedSignal, which it operates at its Richmond, Washington 
facility. The AlliedSignal MicroSCIRAS Business does not include the 
building or related fixtures housing the Redmond MicroSCIRAS 
operations. Subject to AlliedSignal's reasonable continued use of the 
engineering foundry with respect to its remaining businesses, the 
AlliedSignal MicroSCIRAS Business, but is not limited to, the right to 
use the existing silicon engineering foundry at the Redmond facility; 
an option to lease the existing engineering foundry in Redmond, and/or 
an option to purchase the equipment currently in or authorized for the 
foundry, on November 1, 2000 or the date that AlliedSignal's separate 
silicon production foundry is completed, whichever occurs first, all 
employees listed in Confidential Attachment A; and the following:
    (1) All tangible assets used in the AlliedSignal MicroSCIRAS 
Business, including, but not limited to, research and development 
activities; all manufacturing equipment and fixed assets, personal 
property, inventory, office furniture, materials, supplies, and other 
tangible property used in the AlliedSignal MicroSCIRAS Business; all 
licenses, permits and authorizations issued by any governmental 
organization for the AlliedSignal MicroSCIRAS Business; all contracts, 
teaming arrangements, agreements, leases, commitments and 
understandings of the AlliedSignal MicroSCIRAS Business, including 
supply agreements; all customer lists and credit records; and all other 
records of the AlliedSignal MicroSCIRAS Business;
    (2) Any and all intangible assets used in the AlliedSignal 
MicroSCIRAS Business, including, but not limited to, (a) all 
intellectual property rights used exclusively in conducting the 
AlliedSignal MicroSCIRAS Business, (b)

[[Page 69789]]

with respect to all other intellectual property rights used in both the 
AlliedSignal MicroSCIRAS Business and other AlliedSignal businesses, a 
transferable, paid-up license, exclusive in the AlliedSignal 
MicroSCIRAS Business field of use; (c) all existing licenses and 
sublicenses relating exclusively to the AlliedSignal MicroSCIRAS 
Business; and (d) a transferable, paid-up sublicense, exclusive in the 
AlliedSignal MicroSCIRAS Business field of use, to all other existing 
licenses and sublicenses relating to the AlliedSignal MicroSCIRAS 
Business. Intellectual property rights comprise, but are not limited 
to, patents, copyrights, technical information, maskwork rights, 
computer software and related documentation, know-how, trade secrets, 
drawings, blueprints, designs, design protocols, specifications for 
materials, parts and devices, safety procedures for the handling of 
materials and substances, quality assurance and control procedures, 
design tools and simulation capability, manuals, and all research data 
concerning historic and current research and development efforts 
relating to the AlliedSignal MicroSCIRAS Business, including, but not 
limited to, designs of experiments, and the results of successful and 
unsuccessful designs and experiments (Intellectual property does not 
include the mark AlliedSignal).
    1. ``Honeywell MEMS Business'' means the entire micro-electro-
mechanical systems (``MEMS'') inertial sensor business of Honeywell, 
located in Minneapolis and Plymouth, Minnesota. The Honeywell MEMS 
Business does not include the buildings or related fixtures housing the 
Minneapolis and Plymouth operations. The Honeywell MEMS Business 
includes, but is not limited to, all employees listed in Confidential 
Attachment A and the following:
    (1) All tangible assets used in the Honeywell MEMS Business, 
including, but not limited to, research and development activities, all 
manufacturing equipment and fixed assets, personal property, inventory, 
office furniture, materials, supplies, and other tangible property used 
in the Honeywell MEMS; all licenses, permits and authorizations issued 
by any governmental organization for the Honeywell MEMS Business; all 
contracts, teaming arrangements, agreements, leases, commitments and 
understandings of the Honeywell MEMS Business, including supply 
agreements, all customer lists and credit records; all other records of 
the Honeywell MEMS Business; and, at the purchaser's request, a lease 
to any real property currently utilized for the Honeywell MEMS 
Business;
    (2) Any and all intangible assets used in the Honeywell MEMS 
Business, including, but not limited to, (a) All intellectual property 
rights used exclusively in conducting the Honeywell MEMS Business, (b) 
With respect to all other intellectual property rights used in both the 
Honeywell MEMS Business and other Honeywell business, a transferable, 
paid-up license, exclusive in the Honeywell MEMS Business field of use; 
(c) All existing licenses and sublicenses relating exclusively to the 
Honeywell MEMS Business; and (d) A transferable, paid-up sublicense, 
exclusive in the Honeywell MEMS Business field of use, to all other 
existing licenses and sublicenses relating to the Honeywell MEMS 
Business. Intellectual property rights comprise, but are not limited 
to, patents, copyrights, technical information, maskwork rights, 
computer software and related documentation, know-how, trade secrets, 
drawings, blueprints, designs, design protocols, specifications for 
materials, parts and devices, safety procedures for the handling of 
materials and substances, quality assurance and control procedures, 
design tools and simulation capability, manuals, and all research data 
concerning historic and current research and development efforts 
relating to the Honeywell MEMS Business, including, but not limited to, 
designs of experiments, and the results of successful and unsuccessful 
designs and experiments (Intellectual property does not include the 
mark HONEYWELL).
    J. ``AlliedSignal MSA and MAG Technology Business'' means 
AlliedSignal's business relating directly to the ``Micromachined 
Silicon Accelerometer (``MSA'') and the ``Micromachined Accelerometer 
Gyroscope (``MAG'') as defined in the agreements listed below.
    Sales and License Agreement For MSA Technology Between Northrop 
Grumman Precision Products Plant and Endevco Corporation, dated August 
4, 1994, as amended; and
    Sales and License Agreement for MAG Technology Between Northrop 
Grumman Precision Products--Norwood and Endevco Corporation, dated 
April 12, 1995, as amended.
    The business includes an assignment of AlliedSignal's interest in 
all intellectual property identified in one or more of these 
agreements, as well as the agreements themselves.
    K. ``Divested Businesses'' mean the Teterboro Space and Navigation 
Business, the Cheshire Business, the TCAS Business, the SSWR Business, 
the AlliedSignal MicroSCIRAS Business (or as described below in Section 
VI, the Honeywell MEMS business), and the AlliedSignal MSA and MAG 
Technology Business. To the extent that employees of any of the 
Divested Businesses are still employed by defendants, the sale of each 
of the Divested Businesses shall include the purchaser's right to 
reasonable access to the technical, sales, production and 
administrative employees of the defendants for a period not to exceed 
eighteen months from the date of the purchase. The services furnished 
to each Divested Business will be provided free by defendants for the 
first six months following the respective closing date applicable to 
the sale of each of the Divested Businesses. Thereafter, the charges 
for such services will be set by the defendants at a rate sufficient to 
cover the service provider's reasonable estimate of its actual costs 
for providing the services and, if applicable, consistent with the 
prices the service provider would charge to an affiliate.

III. Applicability

    A. The provisions of this Final Judgment apply to the defendants, 
their successors and assigns, their subsidiaries, directors, officers, 
managers, agents, and employees, and all other persons in active 
concert or participation with any of them who shall have received 
actual notice of this Final Judgment by personal service or otherwise.
    B. Defendants shall require, as a condition of the sale of all or 
substantially all of their assets, or of lesser business units 
including AlliedSignal or Honeywell's business of developing and 
producing traffic alert and collision avoidance systems and Mode S 
transponders, search and surveillance weather radar systems, reaction 
and momentum wheels, or inertial system products or assets, that the 
purchaser or purchasers agree to be bound by the provisions of this 
Final Judgment.

IV. Divestiture

    A. Defendants are hereby ordered and directed in accordance with 
the terms of this Final Judgment, by February 29, 2000, or within five 
(5) days of the approval of the proposed merger between defendants by 
the European Commission, or within five (5) days after notice of the 
entry of this Final Judgment by the Court, whichever is later, to sell 
the Divested Businesses as viable ongoing businesses to one or more 
purchasers acceptable to the

[[Page 69790]]

United States and DoD in their sole discretion.
    B. Defendants shall use their best efforts to accomplish the 
divestitures ordered by this Final Judgment is expeditiously and timely 
as possible. The United States, in its sole discretion in consultation 
with DoD, may extend the time period for any divestiture for an 
additional period of time not to exceed sixty (60) days.
    C. In accomplishing the divestitures ordered by this Final 
Judgment, defendants shall make known promptly, by usual and customary 
means, the availability of the businesses to be divested pursuant to 
this Final Judgment. Defendants shall inform all person making an 
inquiry regarding a possible purchase that the sale is being made 
pursuant to this Final Judgment and provide such person with a copy of 
this Final Judgment. Defendants also shall offer to furnish to all 
prospective purchasers, subject to section IV(I) and customary 
confidentiality assurances, all information regarding any business to 
be divested customarily provided in a due diligence process except such 
information subject to attorney-client privilege or attorney work-
product privilege. Defendants shall make available such information to 
the United States and DoD at the same time that such information is 
made available to any other person.
    D. Subject to Section IV(I), defendants shall permit all 
prospective purchasers of any business to be divested pursuant to this 
Final Judgment to have reasonable access to personnel relating to that 
business and to make such inspection of the physical facilities of that 
business and all financial, operation, or other documents and 
information customarily provided as part of a due diligence process.
    E. For a period of two years from the filing of the Complaint in 
this matter, defendants shall not solicit to hire, or hire, any 
individual listed in Confidential Attachment A who, within six (6) 
months of the date of sale of the Divested Business that employs the 
individual, receives a reasonable offer of employment from the approved 
purchaser of the Divested Business, unless such employee is terminated 
or laid off by the purchaser. Defendants shall not interfere with any 
negotiations by the purchaser of a Divested Business to employ an 
AlliedSignal or Honeywell employee of that Business listed in 
Confidential Attachment A, including, but no limited to, offering to 
increase in any way the employee's salary or other benefits (other than 
company-wide increases in salary or other benefits). In order to foster 
the employment and retention of employees by the purchasers, 
AlliedSignal or Honeywell, as the case may be, shall, for each employee 
of the TCAS Business, the SSWR Business and the AlliedSignal 
MicroSCIRAS Business (or, as described below in Section VI, the 
Honeywell MEMS Business) who elects to be employed by the purchaser of 
the Divested Business, vest all unvested pension and other equity 
rights of that employee. For each such employee, AlliedSignal or 
Honeywell shall also provide all benefits to which the employee would 
have been entitled if terminated without cause, provided the employee 
is still employed by the purchaser at the end of the time period 
covered by such benefits.
    F. Defendants shall take no action, direct or indirect, to impede 
in any way the operation of one or more of the businesses to be 
divested.
    G. Defendants shall warrant to each purchaser of a business to be 
divested that the existing business will be operational on the date of 
sale.
    H. Unless both the United States and DoD consent in writing, the 
divestiture of each business to be divested pursuant to Section IV of 
this Final Judgment, whether by defendants or by a trustee appointed 
pursuant to Section VI of this Final Judgment, shall include the entire 
business as defined in Section II. Prior to divestiture, each of the 
Divested Businesses shall be operated in place pursuant to the Hold 
Separate Stipulation and Order entered by this Court. Each such 
divestiture shall be accomplished by selling or otherwise conveying the 
business to be divested to a purchaser in such a way as to satisfy the 
United States and DoD, in their sole discretion, that the business to 
be divested can and will be used by the purchaser of the business as 
part of a viable ongoing business. Each divestiture, whether pursuant 
to Section IV or Section VI of this Final Judgment shall be made to a 
purchaser that has satisfied the United States and DoD, in their sole 
discretion, that it: (1) Has the capability and intent of competing 
effectively in the development, production and sale of the relevant 
products; (2) Has the managerial, operational, and financial capability 
to compete effectively in the development, production and sale of the 
relevant products; (3) Is eligible to receive applicable DoD security 
clearances; and (4) Is not hindered by the terms of any agreement 
between the purchaser and defendants that gives either defendant the 
ability unreasonably to raise the purchaser's costs, to lower the 
purchaser's efficiency, or otherwise to interfere with the ability to 
purchaser to compete effectively.
    I. Defendants shall comply with all agreements with DoD and all 
applicable United States laws and regulations, including those 
regarding the protection of classified information and export control.
    J. Defendants shall not charge to DoD any costs directly or 
indirectly incurred in complying with this Final Judgment.

V. Notice of Proposed Divestitures

    A. Within two (2) business days following execution of a definitive 
agreement, contingent upon compliance with the terms of this Final 
Judgment, to effect, in whole or in part, any proposed divestitures 
pursuant to Sections IV or VI of this Final Judgment, defendants or the 
trustee, whichever is then responsible for effecting the divestitures, 
shall notify the United States and DoD of the proposed divestitures. If 
the trustee is responsible, it shall similarly notify defendants. The 
notice shall set forth the details of the proposed transaction and list 
the name, address, and telephone number of each person not previously 
identified who offered to, or expressed an interest in or a desire to, 
acquire any ownership interest in the business to be divested that is 
the subject of the binding contract, together with full details of 
same. Within fifteen (15) calendar days of receipt by the United States 
and DoD of such divestiture notice, the United States, in consultation 
with DoD, may request from defendants, the proposed purchaser, or any 
other third party additional information concerning the proposed 
divestiture and the proposed purchaser. Defendants and the trustee 
shall furnish any additional information requested from them within 
fifteen (15) calendar days of the receipt of the request, unless the 
parties shall otherwise agree. Within thirty (30) calendar days, after 
receipt of the notice or within twenty (20) calendar days after the 
United States and DoD have been provided the additional information 
requested from the defendants, the proposed purchaser, and any third 
party, whichever is later, the United States and DoD shall each provide 
written notice to defendants and the trustee, if there is one, stating 
whether or not it objects to the proposed divestiture. If the United 
States and DoD provide written notice to defendants (and the trustee if 
applicable) that they do not object, then the divestiture may be 
consummated, subject only to defendants' limited right to object to the 
sale under Section VI(B) of this Final Judgment. Absent written notice 
that the United States and DoD do not object to

[[Page 69791]]

the proposed purchaser or upon objection by the United States or DoD, a 
divestiture proposed under Section IV or Section VI may not be 
consummated. Upon objection by defendants under the provision in 
Section VI(B), a divestiture proposed under Section VI shall not be 
consummated unless approved by the Court.
    B. Purchasers of the Teterboro Space and Navigation Business and 
the AlliedSignal MicroSCIRAS Business (or, as described below in 
Section VI, the Honeywell MEMS Business) must be identified 
simultaneously by defendants, or by the applicable trustee, in order 
that the proposed divestitures may be reviewed jointly and approved 
together by the United States and DoD in accordance with the terms and 
conditions of the Final Judgment.

VI. Appointment of Trustees

    A. Immediately upon the filing of this Final Judgment, the United 
States may, in its sole discretion, nominate no more than two trustees, 
which the Court shall appoint. If two trustees are appointed, one 
trustee shall monitor the divestiture by defendants of the TCAS 
Business and the SSWR Business, and the other trustee shall monitor the 
divestiture by the defendants of the Teterboro Space and Navigation 
Business, the Cheshire Business, the AlliedSignal MicroSCIRAS Business, 
and the AlliedSignal MSA and MAG Technology Business. This procedure 
will enable each trustee to be familiar with all applicable divestiture 
issues in the event the trustee becomes responsible, pursuant to this 
Final Judgment, to divest all non-divested businesses the trustee is 
monitoring.
    B. In the event that defendants have not divested all of the 
businesses required to be divested pursuant to this Final Judgment 
within the time specified in Section IV of this Final Judgment, only 
the trustee monitoring defendants' attempts to divest the non-divested 
business shall have the power and authority to accomplish the 
divestiture of the non-divested businesses. If the AlliedSignal 
MicroSCIRAS Business has not been divested, the trustee responsible for 
divesting that business may, in its sole discretion, divest the 
Honeywell MEMS Business instead. For each non-divested business, the 
trustee shall seek to attain the best price then obtainable for the 
non-divested business upon a reasonable effort by the trustee, subject 
to the provisions of Sections IV and VI of this Final Judgment, and 
shall have such other powers as the Court shall deem appropriate. 
Subject to Section VI(C) of this Final Judgment, each trustee shall 
have the power and authority to hire, after the time period described 
in section IV(A) and at the cost and expense of the defendants, any 
investment bankers, attorneys, or other agents reasonably necessary in 
the judgment of the trustee to assist in the divestitures, and such 
professionals and agent shall be accountable solely to the trustee. The 
trustees shall have the power and authority to accomplish the 
divestitures at the earliest possible time to a purchaser acceptable to 
the United States and DoD and shall have such other powers as this 
Court shall deem appropriate. Defendants shall not object to a 
divestiture by a trustee on any ground other than the trustee's 
malfeasance. Any such objections by defendants must be conveyed in 
writing to the United States and the appropriate trustee within ten 
(10) calendar days after the trustee has provided the notice required 
under Section V of this Final Judgment.
    C. The trustees shall serve at the cost and expense of defendants, 
on customary and reasonable terms and conditions agreed to by the 
trustees and the United States, unless modified by the Court. Each 
trustee shall account for all monies derived from the sale of each 
asset sold by the trustee and all costs and expenses so incurred. After 
approval by the Court of the trustee's accounting, including fees for 
its services and those of any professionals and agents retained by the 
trustee, all remaining money shall be paid to defendants and the trust 
shall then be terminated. The compensation of the trustees and of any 
professionals and agents retained by any trustee shall be reasonable in 
light of the value of the divested businesses and based on a fee 
arrangement providing the trustees with an incentive based on the price 
and terms of the divestitures and the speed with which they are 
accomplished.
    D. Defendants shall use their best efforts to assist the trustees 
to monitor carefully defendants' attempts to divest the businesses to 
be divested pursuant to the Final Judgment and, if necessary, to 
accomplish the required divestitures, including their best efforts to 
effect all necessary consents and regulatory approvals. Each trustee 
and any consultants, accountants, attorneys, and other persons retained 
by the trustee shall have, to the extent permitted by law, full and 
complete access to the personnel, books, records, and facilities of the 
businesses to be divested by the trustee, and defendants shall develop 
financial or other information relevant to the businesses to be 
divested customarily provided in a due diligence process as the trustee 
may reasonably request, subject to customary confidentiality 
assurances.
    E. After its appointment, each trustee shall file monthly reports 
with the parties and the Court setting forth either the defendants' or 
the trustee's efforts, whichever is applicable, to accomplish the 
divestitures ordered under this Final Judgment; provided, however, that 
to the extent such reports contain information that the trustee or the 
defendants deem confidential, such reports shall not be filed in the 
public docket of the Court. After the time period described in Section 
IV(A), such reports shall include the name, address and telephone 
number of each person who, during the preceding month, made an offer to 
acquire, expressed an interest in acquiring, entered into negotiations 
to acquire, or was contacted or made an inquiry about acquiring, any 
interest in the businesses to be divested, and shall describe in detail 
each contact with any such person during that period. The trustee shall 
maintain full records of all efforts made to divest the businesses to 
be divested.
    F. If a trustee has not accomplished the divestiture of all non-
divested businesses within six (6) months after it became responsible 
for selling the non-divested businesses, the trustee thereupon shall 
file promptly with the Court a report setting forth (1) The trustee's 
efforts to accomplish the required divestitures, (2) The reasons, in 
the trustee's judgment, why the required divestitures have not been 
accomplished, and (3) The trustees recommendations; provided, however, 
that to the extent such reports contain information that the trustee 
deems confidential, such reports shall not be filed in the public 
docket of the Court. The trustee shall at the same time furnish such 
report to the parties, who shall each have the right to be heard and to 
make additional recommendations consistent with the purpose of the 
trust. The Court shall enter thereafter such orders as it shall deem 
appropriate in order to carry out the purpose of the trust which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.

VII. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter and every thirty (30) calendar days thereafter until the 
divestitures have been completed, whether pursuant to Section IV or 
Section VI of this Final Judgment, defendants shall deliver to the 
United States and DoD an affidavit as to the fact and manner of 
compliance with Sections IV or VI of this Final

[[Page 69792]]

Judgment. Each such affidavit shall include, inter alia, the name, 
address, and telephone number of each person who, at any time after the 
period covered by the last such report, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or was contacted or made an inquiry about acquiring, any 
interest in the businesses to be divested, and shall describe in detail 
each contact with any such person during that period. Each such 
affidavit shall also include a description of the efforts that 
defendants have taken to solicit potential purchasers for the 
businesses to be divested and to provide required information to 
potential purchasers, including the limitations, if any, on such 
information. Assuming the information set forth in the affidavit is 
true and complete, any objection by the United States to information 
provided by defendants, including limitations on information, shall be 
made within fourteen (14) days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States and DoD 
an affidavit which describes in detail all actions defendants have 
taken and all steps defendants have implemented on an on-going basis to 
preserve the businesses to be divested pursuant to Section VIII of this 
Final Judgment and the Hold Separate Stipulation and Order entered by 
the Court. The affidavit also shall describe, but not be limited to, 
defendants' efforts to maintain and operate each business to be 
divested as an active competitor, maintain the management, staffing, 
research and development activities, sales, marketing and pricing of 
each business to be divested and maintain each such business in 
operable condition at current capacity configurations. Defendants shall 
deliver to the United States and DoD an affidavit describing any 
changes to the efforts and actions outlined in defendants' earlier 
affidavit(s) filed pursuant to this Section within fifteen (15) 
calendar days after the change is implemented.
    C. Until one year after each such divestiture has been completed, 
defendants shall preserve all records of all efforts made to preserve 
the business to be divested and to effect the ordered divestiture.

VIII. Hold Separate Order

    Until the divestitures required by the Final Judgment have been 
accomplished, defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestitures 
ordered by this Court.

IX. Financing

    Defendants are ordered and directed not to finance all or any part 
of any purchase made pursuant to Sections IV or VI of this Final 
Judgment.

X. Compliance Inspection

    For the purposes of determining or securing compliance with this 
Final Judgment or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time:
    A. Duly authorized representatives of the United States Department 
of Justice, upon written request, of the Attorney General or of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to defendants made to their principal offices, shall 
be permitted:
    1. Access during office hours of defendants to inspect and copy all 
books, ledgers, accounts, correspondence, memoranda, and other records 
and documents in the possession or under the control of defendants, who 
may have counsel present, relating to the matters contained in this 
Final Judgment and the Hold Separate Stipulation and Order; and
    2. Subject to the reasonable convenience of defendants and without 
restraint or interference from them, to interview, either informally or 
on the record, their officers, employees, and agents, who may have 
counsel present, regarding any such matters.
    B. Upon the written request of the Attorney General or of the 
Assistant Attorney General in charge of the Antitrust Division, made to 
defendants' principal offices, defendants shall submit such written 
reports, under oath if requested, with respect to any matter contained 
in the Final Judgment and the Hold Separate Stipulation and Order.
    C. No information or documents obtained by the means provided in 
Sections VII or X of this Final Judgment shall be divulged by a 
representative of the United States to any person other than a duly 
authorized representative of the Executive Branch of the United States, 
except in the course of legal proceedings to which the United States is 
a party (including grand jury proceedings), or for the purpose of 
securing compliance with this Final Judgment, or as otherwise required 
by law.
    D. If at the time information or documents are furnished by 
defendants to the United States or DoD, defendants represent and 
identify in writing the material in any such information or documents 
to which a claim of protection may be asserted under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure, and defendants mark each 
pertinent page of such material, ``Subject to claim of protection under 
Rule 26(c)(7) of the Federal Rules of Civil Procedure,'' then ten (10) 
calendar days notice shall be given to defendants by the United States 
or DoD prior to divulging such material in any legal proceeding (other 
than a grand jury proceeding) to which defendants are not a party.

XI. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders and directions as may be necessary or 
appropriate for the construction or carrying out of this final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violations hereof.

XII. Termination

    Unless this Court grants an extension, this Final Judgment will 
expire upon the tenth anniversary of the date of its entry.

XIII. Public Interest

    Entry of this Final Judgment is in the public interest.

    Dated: January ____, 2000.
----------------------------------------------------------------------
United States District Judge

Confidential Attachment a to Final Judgment

    To be filed under seal.

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files 
this Competitive Impact Statement relating to the proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On November 8, 1999, the United States filed a civil antitrust 
Complaint alleging that the proposed merger of AlliedSignal Inc. 
(``AlliedSignal'') and Honeywell Inc. (``Honeywell'') would violate 
Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint alleges that 
Honeywell and AlliedSignal are two of the leading manufacturers of 
aerospace products used by the U.S. military and by numerous commercial 
aviation and

[[Page 69793]]

space companies. AlliedSignal competes against Honeywell in the 
production of traffic alert and collision avoidance systems, search and 
surveillance weather radar, reaction and momentum wheels, and inertial 
systems used in a wide range of applications. The proposed merger of 
Honeywell and AlliedSignal would substantially lessen or eliminate 
competition in major product areas critical to the national defense and 
to the commercial aviation and space industries. Unless the merger is 
blocked, the loss of competition will likely result in higher prices, 
lower quality and less innovation for each of these products.
    The prayer for relief in the Complaint seeks: (1) A judgment that 
the proposed merger would violate Section 7 of the Clayton Act; (2) A 
permanent injunction preventing AlliedSignal and Honeywell from 
merging; (3) An award to the United States of its costs in bringing the 
lawsuit; and (4) Such other relief as the Court deems proper.
    When the Complaint was filed, the United States also filed a 
proposed settlement that would permit AlliedSignal and Honeywell to 
merge, but would require divestitures to preserve competition in the 
relevant markets. This settlement consists of a Hold Separate 
Stipulation and Order and a proposed Final Judgment.
    The proposed Final Judgment orders the defendants to divest, by 
February 29, 2000, or within five (5) days of the approval of the 
proposed merger by the European Commission, which has concurrent 
jurisdiction over the proposed merger, or within (5) days after notice 
of the entry of the Final Judgment by the Court, whichever is later, 
certain businesses and associated assets as defined in Section II of 
the proposed Final Judgment. Specifically, the defendants must divest 
to a purchaser or purchasers acceptable to the United States and to the 
U.S. Department of Defense (``DoD'') the Traffic Alert and Collision 
Avoidance Systems (``TCAS'') Business of Honeywell; the Search and 
Surveillance Weather Radar (``SSWR'') Business of AlliedSignal; the 
Teterboro Space and Navigation Business of AlliedSignal; the Cheshire 
Business of AlliedSignal; the AlliedSignal MicroSCIRAS Business, or, in 
the alternative, the Honeywell MEMS Business; and the AlliedSignal 
Micromachined Silicon Accelerator (``MSA'') and Micromachined 
Accelerometer Gyroscope (``MAG'') Technology Business (collectively, 
the ``Divested Businesses''). Purchasers of the Teterboro Space and 
Navigation Business and the AlliedSignal MicroSCIRAS Business (or, as 
described in Section VI of the proposed Final Judgment, the Honeywell 
MEMS Business) must be approved simultaneously. The proposed Final 
Judgment authorizes the United States to nominate for appointment 
immediately up to two trustees to monitor the defendants' efforts to 
sell the Divested Businesses, and to sell those businesses if 
defendants cannot do so in the required time frame.
    The terms of the Hold Separate Stipulation and Order ensure that 
each of the Divested Businesses shall be held separate and apart from 
the post-merger company and maintained as viable, independent 
competitors until such time as each business is divested.
    The plaintiff and defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate the action, except that the 
Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    AlliedSignal is a Delaware corporation headquartered in Morristown, 
New Jersey. The advanced technology and manufacturing company provides 
aerospace products and services, automotive products, chemicals, 
fibers, plastics and advanced materials. The company reported 1998 
sales of about $15 billion, and sales to the U.S. Government (primarily 
aerospace-related) of about $1.9 billion. The aerospace business unit 
generated about half, or about $7.5 billion, of the company's 1998 
revenues.
    Honeywell, a Delaware corporation headquartered in Minneapolis, 
Minnesota, develops and supplies advanced technology controls and other 
products, systems and services to homes and buildings, industry, and 
space and aviation customers. The company had annual revenues of about 
$8.4 billion in 1998, approximately one-fourth of which were generated 
by Honeywell's space and aviation business.
    Pursuant to an Agreement and Plan of Merger entered into by 
defendants on June 4, 1999, AlliedSignal proposes to merge its business 
with Honeywell.

B. The Relevant Markets

1. TCAS
    A traffic alert and collision avoidance system is an avionics 
safety product that reduces the potential for mid-air collisions 
between aircraft. TCAS provides pilots with information on surrounding 
air traffic, alerts them when a nearby aircraft has the potential to be 
a hazard, and affords a means for coordinating evasive maneuvers for 
both aircraft. TCAS operates by transmitting to and eliciting replies 
from communications transponders installed on approaching aircraft. The 
system tracks aircraft within a specified range and altitude to 
determine whether they have the potential to become a collision threat.
2. Search and Surveillance Weather Radar
    Weather radar uses radio wave reflections from water droplets and 
ice crystals to locate areas of rain, snow and other precipitation. 
Search and surveillance weather radar is a special type of weather 
radar often installed on helicopters and frequently used in rescue 
missions. The radar employs traditional radio frequency technology, but 
also has a beaconing capacity which allows the pilot to detect radio 
transmissions emitted by small objects, such as a boat or an oil 
drilling rig, during poor weather conditions.
3. Reaction and Momentum Wheels
    Reaction and momentum wheels are mechanical devices that move and 
stabilize satellites by spinning and generating torque. The desired 
combination of torque and momentum generated by changes in wheel speed 
repositions the satellite. Satellites typically have one to three 
reaction and momentum wheels.
4. Inertial Systems
    An inertial measurement unit (``IMU'') measures the linear 
acceleration and angular rate of rotation of a vehicle. A typical IMU 
includes three accelerometers and three gyroscopes. Accelerometers 
measure the linear acceleration of a vehicle, which is used to 
determine vehicle velocity and vehicle position. Gyroscopes measure the 
angular rate of rotation of a vehicle. From these measurements, a 
computer can calculate the vehicle's position and heading.
    A variety of different types of gyroscopes are used in IMUs, 
including mechanical rate gyroscopes (``MRGs''), ring laser gyroscopes 
(``RLGs''), fiber optic gyroscopes (``FOGs''), and micro-electro-
mechanical systems (``MEMS'') gyroscopes. Each of these gyroscopes may 
substitute with the others as an

[[Page 69794]]

input into an IMU, depending on performance, cost and size 
requirements.
    MRGs include gas, spinning mass and other comparable mechanical 
gyroscopes. Based upon technology developed in the 1950s, these 
gyroscopes (often employing magnets, gases and other masses) are 
generally larger and more expensive than those produced using newer 
technologies. Mechanical gyroscopes are utilized in high accuracy space 
applications, strategic missiles, and tactical munitions.
    An RLG uses two laser beams housed in an optical cavity with a set 
of highly reflective mirrors. One laser beam travels clockwise around 
the optical cavity while the other moves counter-clockwise. When the 
gyroscope is rotated, a small difference in the circulation time for 
each beam occurs because one beam travels less distance than the other. 
This difference is used to compute the rate of angular rotation. RLGs 
are commonly used in commercial and military aviation, land 
applications, satellites, space launch vehicles and high performance 
tactical missiles.
    FOGs employ optical fiber wound on a spool. Each FOG has a light 
source and control electronics to provide two beams of light, one 
traveling clockwise and the other counter-clockwise, through the wound 
coil. A detector on the coil output senses phase shifts between the two 
light beams and converts the phase shift into an angular rate of 
rotation. FOGS were developed after RLGs and are beginning to be 
utilize in commercial and military aviation, land applications, 
satellites, space launch vehicles and high performance tactical 
missiles.
    MEMS is a developing technology which produces IMUs using silicon 
wafers made from semiconductor manufacturing processes and 
sophisticated micro-machining. MEMS technology holds tremendous 
potential for the next-generation IMU. MEMS IMUs may permit 
manufacturers to achieve significant size, cost and weight reductions 
in the product. Depending on the ultimate degree of accuracy that MEMS 
IMUs provide, they could eventually supplement or replace numerous 
types of IMUs currently in the marketplace.

C. Harm to Competition as a Consequence of the Merger

    AlliedSignal and Honeywell are two of only three manufacturers of 
TCAS used in U.S. military and commercial aircraft. Post merger, the 
comined firm would posses more than 60% of the TCAS market.
    In addition, the merger of Allied Signal and Honeywell would 
eliminate competition in the development, production, and sale of 
search and surveillance weather radar and effectively give the combined 
firm a monopoly in this market.
    AlliedSignal and Honey well are two of only four significant 
companies that produce reaction and momentum wheels for use in U.S. 
military and commercial space projects. Post merger, the combined firm 
would control over 50 percent of the reaction and momentum wheel 
market.
    Finally, AlliedSignal and Honeywell are two of the leading inertial 
system manufacturers in the world. Each company competes to produce and 
sell inertial systems for tactical, strategic, navigation and space 
applications to the U.S. military and to numerous commercial and space 
customers. Allied Signal and Honeywell each manufacture MRGs, RLGs, and 
FOGs that are used in inertial systems. In addition, the defendants are 
leading competitors in the development of a MEMS IMU. The merger of 
these two inertial manufacturers would substantially limit competition 
in the production of inertial systems.
    Entry by a new company would not be timely, likely or sufficient to 
prevent harm to competition in any of these markets. In each market, a 
successful entrant would have to design and develop sophisticated, high 
technology products, establish complex production processes, and meet 
rigorous qualification standards. Applicable laws and regulations may 
make it difficult, if not impossible, for manufacturers of the relevant 
products located outside the United States to sell their products to 
the U.S. military, a major purchaser. It is unrealistic to expect 
sufficient new entry in a timely fashion to protect competition in the 
relevant markets following the proposed merger.
    The Complaint alleges that the effect of AlliedSignal's proposed 
merger with Honeywell would be to lessen competition substantially and 
to tend to create a monopoly in interstate trade and commerce in 
violation of Section 7 of the Clayton Act. The combined firm would have 
the ability to increase prices for each relevant product, either 
unilaterally or in coordination with other competitors. In particular, 
the proposed merger likely would have the following effects, among 
others: actual and potential competition between AlliedSignal and 
Honeywell in the development, production, and sale of products in each 
of the relevant markets would be eliminated; competition in the 
development, production, and sale of products in each of the relevant 
markets would be eliminated or substantially lessened; prices for 
products in each relevant market likely would increase and quality 
likely would decline; and innovation in each relevant market likely 
would decrease.

III. Explanation of the Proposed Final Judgment

A. The Divested Businesses

    The provisions of the proposed Final Judgment are designed to 
eliminate the anticompetitive effects of the merger of Honeywell and 
AlliedSignal. The divestiture of the businesses required by the 
proposed Final Judgment, which collectively generate about $250 million 
in annual revenues, will ensure that competition will continue to 
flourish in the markets where AlliedSignal and Honeywell compete. 
Without the divestitures required by the proposed settlement, a broad 
range of commercial, space, and U.S. defense customers likely would 
suffer from higher prices for advanced avionics products essential to 
their businesses and from a decline in product quality and innovation.
    Pursuant to the proposed Final Judgment, Honeywell will divest its 
TCAS Business, which it operates at its Glendale and Phoenix, Arizona 
facilities. The TCAS Business to be divested includes Honeywell's TCAS 
II computer, TCAS 2000 computer, TCAS 1500 computer (which is still 
under development), TCAS directional antenna, dedicated TCAS 
controller, and the dedicated TCAS display (``TCAS System''). The TCAS 
divestiture also includes, as common to the TACS System and other 
systems of Honeywell, the Vertical Speed Indicator/Traffic Resolution 
Advisory (``VSI/TRA''), pressure transducer and ARINC Diversity/Mode S 
transponder used with the basic Honeywell TCAS System. The divested 
TCAS Business will include all relevant tangible and intangible assets 
used in connection with the business and needed to make it a viable 
competitor in the TCAS marketplace.
    AlliedSignal will, pursuant to the proposed Final Judgment, divest 
its SSWR Business, which it operates at its Olathe, Kansas facility. 
The SSWR Business includes AlliedSignal's RDR-1400 and RDR-1500 product 
lines. The divested SSWR Business will include all relevant tangible 
and intangible assets used in connection with the business and needed 
to make it a viable competitor in the SSWR marketplace.
    AlliedSignal also will divest its Teterboro Space and Navigation 
Business located in Teterboro, New

[[Page 69795]]

Jersey. The Teterboro Space and Navigation Business produces ring laser 
gyroscopes, fiber optic gyroscopes, inertial measurement units, 
reaction and momentum wheels, control moment gyroscopes, star sensors, 
sun shades, navigation and pointing systems and fire control systems. 
The divested Teterboro Space and Navigation Business will include all 
relevant tangible and intangible assets used in connection with the 
business and needed to make it a viable competitor in both the IMU 
marketplace and the reaction and momentum wheel marketplace.
    AlliedSignal also will divest its IMU business located in Cheshire, 
Connecticut that produces rate-grade mechanical inertial measurement 
units and components. The Cheshire Business also includes 
AlliedSignal's Newark, Ohio repair and overhaul business. The divested 
Cheshire Business will include all relevant tangible and intangible 
assets used in connection with the business and needed to make it a 
viable competitor in the rate-grade mechanical IMU marketplace.
    AlliedSignal also will divest its MicroSCIRAS Business, which it 
operates at its Redmond, Washington facility. MicroSCIRAS is a silicon-
based MEMS technology. The divested AlliedSignal MicroSCIRAS Business 
includes the right to use the existing silicon engineering foundry at 
the Redmond facility, an option to lease the existing Redmond 
engineering foundry, and/or an option to purchase the equipment 
currently in or authorized for the foundry, on November 1, 2000 or the 
date that AlliedSignal's separate silicon production foundry is 
completed, whichever occurs first. The divested MicroSCIRAS Business 
will include all relevant tangible and intangible assets used in 
connection with the business and needed to make it a viable competitor 
in the MEMS marketplace.
    If AlliedSignal does not divest its MicroSCIRAS Business as 
required by the proposed Final Judgment, Honeywell's MEMS Business, 
which is located in Minneapolis and Plymouth, Minnesota, may be 
divested. The Honeywell MEMS Business will include all relevant 
tangible and intangible assets used in connection with the business and 
needed to make it a viable competitor in the MEMS marketplace.
    Finally, AlliedSignal will divest its MSA and MAG Technology 
Business. IMUs to be produced with the technologies controlled by this 
business, which AlliedSignal acquired pursuant to two agreements 
identified in the proposed Final Judgment, potentially compete with the 
MEMS technology AlliedSignal is ordered to divest.
    Each of the businesses to be divested is defined in detail in 
Section II of the proposed Final Judgment. The divestiture of the TCAS 
Business, the SSWR Business, the Teterboro Space and Navigation 
Business, and the Cheshire Business each involves the sale of 
production equipment or facilities which manufacture the identified 
products on a daily basis. In contrast, the divestiture of the 
AlliedSignal MicroSCIRAS Business, the Honeywell MEMS Business and the 
AlliedSignal MSA and MAG Technology Business each involves the sale or 
transfer of developing IMU technologies. With one exception,\1\ these 
latter three businesses do not yet have the current capability to 
produce IMU products at production level volumes for sale to the 
public.
---------------------------------------------------------------------------

    \1\ The AlliedSignal MSA and MAG Technology Business owns, among 
other assets, patents which are exclusively licensed to Endevco 
Corporation and permit Endevco to manufacture micromachined silicon 
accelerometers sold to the public.
---------------------------------------------------------------------------

B. Employees

    The proposed Final Judgment contains other provisions designed to 
protect competition in the relevant product markets. The most important 
of these provisions relate to employees of the Divested Businesses and 
the firms that purchase the businesses.
    Confidential Attachment A to the proposed Final Judgment lists for 
each business to be divested a group of employees who are important to 
operating the business. The proposed Final Judgment provides that, for 
a period of two years from the filing of the Complaint in this matter, 
defendants shall not solicit to hire, or hire, any individual listed in 
Confidential Attachment A who, within six months of the date of sale of 
a Divested Business that employs the individual, receives a reasonable 
offer of employment from the approved purchaser of the Divested 
Business, unless such employee is terminated or laid off by the 
purchaser. Defendants shall not interfere with any negotiations by the 
purchaser of a Divested Business to employ anyone listed in 
Confidential Attachment A, including, but not limited to, offering to 
increase in any way the employee's salary or other benefits (other than 
company-wide increases in salary or other benefits). In addition, 
AlliedSignal or Honeywell, as the case may be, shall, for each employee 
of the TCAS Business, the SSWR Business and the AlliedSignal 
MicroSCIRAS Business (or, as described in Section VI of the proposed 
Final Judgment, the Honeywell MEMS Business) who elects to be employed 
by the purchaser of the Divested Business, vest all unvested pension 
and other equity rights of that employee. For each such employee, 
AlliedSignal or Honeywell shall also provide all benefits to which the 
employee would have been entitled if terminated without cause, provided 
the employee is still employed by the purchaser at the end of the time 
period covered by such benefit.
    The proposed Final Judgment also directs that to the extent 
employees of any of the Divested Businesses remain employed by 
defendants, the sale of each Divested Business shall include the 
purchaser's right to reasonable access to such employees for up to 
eighteen (18) months from the date of the purchase. The services 
furnished will be provided free by defendants for the first six (6) 
months following the sale of the business. Thereafter, the charges for 
such services will be set by the defendants at a rate sufficient to 
cover the service provider's reasonable estimate of its actual costs 
for providing the services and, if applicable, consistent with the 
prices the service provider would charge to an affiliate.

C. Approval of Divested Business Purchasers and Appointment of Trustees

    Each business divested pursuant to the proposed Final Judgment must 
be sold to a purchaser that can satisfy the United States and DoD, in 
their sole discretion, that the business will be a viable ongoing 
business. The purchaser must satisfy the United States and DoD, in 
their sole discretion, that it: (1) Has the capability and intent of 
competing effectively in the development, production, and sale of the 
relevant products; (2) Has the managerial, operational, and financial 
capability to compete effectively in the development, production, and 
sale of the relevant products; (3) Is eligible to receive applicable 
DoD security clearances; and (4) Is not hindered by the terms of any 
agreement between the purchaser and defendants that gives either 
defendant the ability unreasonably to raise the purchaser's costs, to 
lower the purchaser's efficiency, or otherwise to interfere with the 
ability of the purchaser to compete effectively.
    Immediately upon the filing of the proposed Final Judgment, the 
United States may, in its sole discretion, nominate no more than two 
trustees for Court appointment. The trustees shall serve at the cost 
and expense of defendants, on customary and reasonable terms and 
conditions agreed to by the trustees and the United States,

[[Page 69796]]

unless modified by the Court. If two trustees are appointed, one 
trustee shall monitor the divestiture by defendants of the TCAS 
Business and the SSWR Business, and the other trustee shall monitor the 
divestiture by the defendants of the Teterboro Space and Navigation 
Business, the Cheshire Business, the AlliedSignal MicroSCIRAS Business, 
and the AlliedSignal MSA and MAG Technology Business.
    In the event that defendants have not sold all of the businesses 
required to be divested pursuant to the proposed Final Judgment in the 
specified time frame, only the trustee monitoring defendants' attempts 
to divest each non-divested business shall have the power and authority 
to accomplish the divestiture. If the AlliedSignal Micro SCIRAS 
Business has not been divested, the trustee responsible for divesting 
that business may, in its sole discretion, divest the Honeywell MEMS 
Business instead. Defendants may not object to a divestiture by a 
trustee on any ground other than the trustee's malfeasance.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act (15 U.S.C. 15) provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act (15 U.S.C. 
16(a)), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of The Proposed Final 
Judgment

    The United States and defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States have not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. The United States will 
evaluate and respond to the comments. All comments will be given due 
consideration by the Department of Justice, which remains free to 
withdraw its consent to the proposed final Judgment at any time prior 
to entry. The comments and the response of the United States will be 
field with the Court and published in the Federal Register. Written 
comments should be submitted to:
J. Robert Kramer II,
Chief, Litigation II Section, Antitrust Division, United States 
Department of Justice, 1401 H Street, N.W., Suite 3000, Washington, 
D.C. 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the proposed Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against defendants. The 
United States could have brought suit and sought preliminary and 
permanent injunctions against the merger of AlliedSignal and Honeywell.
    The United States is satisfied that the divestiture of the 
described businesses and assets pursuant to the proposed Final Judgment 
will encourage viable competition in the research, development, 
production, and sale of TCAS, SSWR, reaction and momentum wheels, and 
inertial systems. The United States is satisfied that the proposed 
relief will prevent the merger from having anticompetitive effects in 
any of these markets.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day comment 
period, after which the Court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' In making that 
determination, the Court may consider--

    (1) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) The impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the compliant including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

    15 U.S.C. 16(e). As the Court of Appeals for the District of 
Columbia Circuit held, the APPA permits a court to consider, among 
other things, the relationship between the secured and the specific 
allegations set forth in the government's complaint, whether the decree 
is sufficiently clear, whether enforcement mechanisms are sufficient, 
and whether the decree may positively harm third parties. See United 
States v. Microsoft, 56 F.3d 1448, 1458-62 (D.C. Cir. 1995). The courts 
have recognized that the term `` `public interest' take[s] meaning from 
the purposes of the regulatory legislation.'' NAACP v. Federal Power 
Comm'n, 425 U.S. 662, 669 (1976). Since the purpose of the antitrust 
laws is to preserve ``free and unfettered competition as the rule of 
trade,'' Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4 
(1958), the focus of the ``public interest'' inquiry under the APPA is 
whether the proposed Final Judgment would serve the public interest in 
free and unfettered competition. United States v. American Cyanamid 
Co., 719 F.2d 558, 565 (2d Cir 1983), cert, denied, 465 U.S. 1101 
(1984); United States v. Waste Management, Inc., 1985-2 Trade Cas., 
para. 66,651, at 63,046 (D.D.C. 1985). In conducting this inquiry, 
``the Court is nowhere compelled to go to trial or to engage in 
extended proceedings which might have the effect of vitiating the 
benefits of prompt and less costly settlement through the consent 
decree process.'' \2\ Rather,

    \2\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D.Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. Sec. 16(f), those procedures are discretionary. A court 
need not invoke any of them unless it believes that the comments 
have raised significant issues and that further proceedings would 
aid the court in resolving those issues. See H.R. 93-1463, 93rd 
Cong. 2d Sess. 8-9, reprinted in (1974) U.S. Code Cong. & Ad. News 
6535, 6538.
---------------------------------------------------------------------------

[a]bsent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making its public interest finding, should * 
* * carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.


[[Page 69797]]


United States v. Mid-America Dairymen, Inc. 1977-1 Trade Cas. para. 
61,508, at 71,980 (W.D. Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in unrestricted evaluation of what 
relief would best serve the public.'' United States v. BNS, Inc., 858 
F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel Corp., 
648 F.2d 660 (9th Cir.), cert denied, 454 U.S. 1083 (1981). See also 
Microsoft, 56 F.3d 1448 (D.C. Cir. 1995). Precedent requires that:

    The balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is `within the reaches of the public 
interest' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\3\

    \3\ United States v. Bechtel, 648 F.2d at 666 (citations 
omitted)(emphasis added); See United States v. BNS, Inc., 858 F.2d 
at 463; United States v. National Broadcasting Co., 449 F. Supp. 
1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co., 406 F. 
Supp. at 716. See also United States v. American Cyanamid Co., 719 
F.2d at 565.
---------------------------------------------------------------------------

    A proposed consent decree is an agreement between the parties which 
is reached after exhaustive negotiations and discussions. Parties to 
not hastily and thoughtlessly stipulate to a decree because, in doing 
so, they

waive their right to litigate the issues involved in the case the 
thus save themselves the time, expense, and inevitable risk of 
litigation. Naturally, the agreement reached normally embodies a 
compromise; in exchange for the saving of cost and the elimination 
of risk, the parties each give up something they might have won had 
they proceeded with the litigation.

United States v. Armour & Co.,  402 U.S. 673, 681 (1971).
    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free completion in the future. Court approval of a 
proposed final judgment requires a standard more flexible and less 
strict than the standard required for a finding of liability. ``[A] 
proposed decree must be approved even if it falls short of the remedy 
the court would impose on its own, as long as it falls within the range 
of acceptability or is `within the reaches of public interest.' '' 
(citations omitted).\4\
---------------------------------------------------------------------------

    \4\ United States v. American Tel. and Tel. Co., 552 F. Supp. 
131, 150 (D.D.C. 1982), aff'd sub nom, Maryland v. United States, 
460 U.S. 1001 (1983), quoting United States v. Gillette Co., supra, 
406 F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F. 
Supp. 619, 622 (W.D. Ky. 1985).
---------------------------------------------------------------------------

VIII. Determinative Documents

    No determinative materials or documents within the meaning of the 
APPA were considered by the United States in formulating the proposed 
Final Judgment.

    Dated: November 22, 1999.

    For Plaintiff United States of America:
J. Robert Kramer II,
Chief, Litigation II Section,
PA Bar # 23963.
Michael K. Hammaker,
DC Bar # 233684 and
P. Terry Lubeck,
Janet Adams Nash,
Carolyn Davis,
Denise Cheung,
Paul E. O'Brien,
Trial Attorneys,
U.S. Department of Justice, Antitrust Division, 1401 H St., NW., Suite 
3000, Washington DC 20530, 202-307-0924, 202-307-6283 (Facsimile).

[FR Doc. 99-31669 Filed 12-13-99; 8:45 am]
BILLING CODE 4410-11-M