United States v. International Business Machines Corporation and Storage Technology Corporation; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. International Business Machines Corporation and

Storage Technology Corporation; 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,

Stipulation, and Competitive Impact Statement have been filed with the

United States District Court for the District of Columbia in a civil

antitrust case, United States v. International Business Machines

Corporation and Storage Technology Corporation, Case Number 1:97 CV

03040.

On December 18, 1997, the United States filed a Complaint alleging

that an ``OEM Agreement'' between International Business Machines

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Corporation )``IBM'') and Storage Technology Corporation (``STK'')

unlawfully restrains competition in the market for disk storage

subsystems (``DASD'') for mainframe computers, in violation of Section

1 of the Sherman Act, 15 U.S.C. 1. The proposed Final Judgment

prohibits IBM and STK from carrying out anticompetitive terms of the

OEM Agreement and imposes requirements to restore competition in the

market. A Competitive Impact Statement filed by the United States

describes the Complaint, the proposed Final Judgment, and remedies

available to private litigants.

The public is invited to comment to the Justice Department and to

the Court. Comments should be addressed to John F. Greaney, Chief,

Computers & Finance Section, U.S. Department of Justice, Antitrust

Division, 600 E. Street, N.W., Suite 9500, Washington, D.C. 20530

(telephone: (202) 307-6200). Comments must be received within sixty

days.

Copies of the Complaint, Stipulation, proposed Final Judgment, and

Competitive Impact Statement are available for inspection in Room 207

of the U.S. Department of Justice, Antitrust Division, 325 7th Street,

N.W., Washington, D.C. 20530 (telephone: (202) 514-2481), and at the

Office of the Clerk of the United States District Court for the

District of Columbia, 333 Constitution Avenue, N.W., Washington, D.C.

20001. Copies of these materials may be obtained from the U.S.

Department of Justice upon request and payment of a copying fee.

Rebecca P. Dick,

Director, Civil Non-Merger Enforcement.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. 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 District of Columbia.

2. The parties consent that a Final Judgment in the form hereto

attached may be filed 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 plaintiff 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 the defendants and by filing that

notice with the Court.

3. The defendants shall abide by and comply with the provisions of

the proposed Final Judgment pending entry of the Final Judgment, and

shall, from the date of the filing of this Stipulation, comply with all

the terms and provisions thereof as though the same were in full force

and effect as an order of the Court.

4. In the event plaintiff withdraws its consent or if the proposed

Final Judgment is not entered pursuant to this Stipulation, this

Stipulation shall be of no effect whatever, and the making of this

Stipulation shall be without prejudice to any party in this or any

other proceeding.

Dated: December 18, 1997.

For Plaintiff, United States of America

John F. Greaney,

Chief, Computers and Finance Section, Antitrust Division, U.S.

Department of Justice, Bicentennial Building, 600 E Street, NW., Suite

9300, Washington, DC 20530, (202) 307-6122.

For Defendant, International Business Machines Corporation

Evan R. Chesler,

Paul C. Saunders (Bar No. 973388),

Cravath, Swaine & Moore, Counsel for Defendant International, Business

Machines Corporation, Worldwide Plaza, 825 Eighth Avenue, New York, NY

10019, (212) 474-1000.

For Defendant, Storage Technology Corporation

J. Edd Stepp, Jr.,

Phillip H. Rudolph (Bar No. 392189),

Gibson, Dunn & Crutcher LLP, Counsel for Defendant Storage, Technology

Corporation, 1050 Connecticut Avenue, NW., Washington, DC 20036-5306,

(202) 955-8500.

Disclosure Pursuant to Rule 108(K)

Pursuant to Rule 108(k) of the Local Rules of this Court, the

following is a list of all individuals entitled to be notified of the

entry of the foregoing Stipulation and of the entry of the proposed

Final Judgment:

John F. Greaney,

U.S. Department of Justice, Bicentennial Building, 600 E Street, N.W.,

Suite 9300, Washington, D.C. 20530, (202) 307-6122.

Evan R. Chesler,

Cravath, Swaine & Moore, Counsel for Defendant International Business

Machines Corporation, Worldwide Plaza, 825 Eighth Avenue, New York, NY

10019, (212) 474-1000.

J. Edd Stepp, Jr.,

Gibson, Dunn & Crutcher LLP, Counsel for Defendant Storage Technology

Corporation, 333 South Grand Ave., Los Angeles, CA 90071, (213) 229-

7000.

Final Judgment

WHEREAS, the United States of America, having filed its Complaint

herein on December 18, 1997, and the United States and Defendants, by

their respective attorneys, having consented to the entry of this Final

Judgment without trial or adjudication of any issue of fact or law, and

without this Final Judgment constituting any evidence against or an

admission by any party with respect to any issue of fact or law;

And whereas, Defendants having agreed to be bound by the provisions

of this Final Judgment pending approval by the Court;

And whereas, the essence of this Final Judgment being prompt and

certain action to ensure that the OEM agreement referred to herein will

not substantially lessen competition in the development, production, or

marketing of DASD as hereinafter defined;

And whereas, Defendants having represented to Plaintiff that the

provisions of this Final Judgment can and will be accomplished;

Now, therefore, before the taking of 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 the

subject matter of this action. Venue is proper in this Court. The

Complaint states a claim upon which relief may be granted against the

Defendants under Section 1 of the Sherman Act (15 U.S.C. 1).

II. Definitions

A. IBM means International Business Machines Corporation, its

successors and assigns, each subsidiary and division thereof, and each

officer, director, employee, agency and other person acting for or on

behalf of any of them.

B. STK means Storage Technology Corporation, its successors and

assigns, each subsidiary and division thereof, and each officer,

director, employee, agent and other person acting for or on behalf of

any of them.

C. Defendants means, collectively or individually as the context

request, IBM and/or STK.

D. DASD means direct access magnetic disk storage subsystems

configured for attachment to IBM System 390 mainframe computers, any

future versions, models, or generations of IBM System 390 mainframe

computers (regardless of name or other product designation), and plug-

compatible mainframe computers, without regard to whether or not such

subsystems also attach to any other computer processor product. The

term ``DASD'' does not include parts of

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subassemblies sold or shipped to repair or upgrade existing DASD

installations, and it does not include any used DASD.

E. STK DASD means any DASD product developed, manufactured, or

supplied by STK at any time prior to the expiration of this Final

Judgment, including but not limited to Iceberg, Kodiak, the products

marketed by IBM as RAMAC Virtual Array and RAMAC Scaleable Array, and

any future versions, models, or generations of any of the

aforementioned products (regardless of name or other product

designation). The term ``STK DASD'' does not include Virtual Storage

Manager, any future versions, models, or generations thereof

(regardless of name or other product designation), or any existing or

future STK Nearline storage products, or any used DASD.

F. Agreement means any agreement or understanding, whether written

or oral, formal or informal.

G. OEM agreement means the agreement dated June 7, 1996, pursuant

to which IBM has purchased STK DASD, including all attachments,

exhibits, schedules, and other documents referenced therein, and all

amendments, additions, updates, or modifications to any of the

foregoing.

H. Modified OEM agreement means the agreement dated December 18,

1997, pursuant to which IBM has agreed to purchase STK DASD from STK,

and STK has agreed to sell STK DASD to IBM, including all attachments,

exhibits, schedules, and other documents referenced therein, and all

amendments, additions, updates, or modifications to any of the

foregoing.

I. STK Minimum Means a number of terabytes of STK DASD determined

for a twelve-month period by multiplying the number of months before

January 1, 2000, included in such period by 10.5; multiplying the

number of months after December 31, 1999, included in the period by 16;

and adding the two products together. For example, the STK Minimum for

the period from October 1, 1998, through September 30, 1999, would be

126 terabytes (10.5 x 12), and the STK Minimum for the period from

October 1, 1999, through September 30, 2000, would be 175.5 terabytes

((10.5 x 3)+(16 x 9)).

J. Purchase means, in connection with IBM purchases of STK DASD, a

transaction in which IBM requires title to the STK DASD purchased,

other than a financing transaction that meets each of the following

conditions: (1) IBM Credit Corporation acquires title to STK DASD,

ordered by a customer from STK or an STK remarketer other than IBM, in

order to finance the STK DASD; (2) such STK DASD carries an STK logo

and conforms in appearance to other STK DASD sold by STK, or an STK

remarketer other than IBM, to non-IBM purchasers; (3) the price for the

STK DASD is negotiated between the customer and STK or an STK

remarketer other than IBM, without participation by IBM; (4) such STK

DASD is not installed on the customer's premises by IBM or any person

acting on its behalf; (5) warranty service, if any, for such STK DASD

is not provided by IBM or any person acting on its behalf; and (6) the

transaction if financed by other than IBM would be considered a sale by

STK under Section VI.A. of this Final Judgment. The term ``purchase''

does not include a transaction in which IBM may act as sales agent,

distributor, or other channel of distribution in which IBM does not

acquire title to the STK DASD.

K. Change of control means the acquisition by an entity of more

than 20 percent of the outstanding common shares of STK representing

the right to vote for STK's board of directors, the sale of all or

substantially all of the assets of the assets of STK, or any

consolidation, merger, or other reorganization of STK in which STK is

not the continuing or surviving corporation or pursuant to which shares

of such common stock would be converted into cash, securities, or other

property.

L. Derivative work means a work that is based on an underlying work

that would be a copyright infringement if prepared without the

authorization of the copyright owner of the underlying work, Derivative

works are subject to the ownership rights and licenses of others in the

underlying work.

III. Applicability

A. The provisions of this Final Judgment apply to the Defendants,

their successors and assigns, their subsidiaries, affiliates,

directors, officers, managers, agents, employees, attorneys 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. Defendants and each person bound by this Final

Judgment shall cooperate in ensuring that the provisions of this Final

Judgment are carried out.

B. Each Defendant shall require, as a condition of the sale or

other disposition of all or substantially all of the assets used in its

business for developing, manufacturing and selling DASD that the

acquiring party or parties agree to be bound by the provisions of this

Final Judgment.

C. Nothing contained in this Final Judgment is or has been created

for the benefit of any third party, and nothing herein shall be

construed to provide any rights to any third party.

IV. Terms of IBM Purchases From STK

A. Defendants may enter into or carry out any agreement pursuant to

which IBM may in any manner distribute STK DASD, including any such

agreement pursuant to which IBM may act as sales agent, distributor, or

any other channel of distribution for STK DASD in which IBM does not

acquire title to the STK DASD to be distributed, provided that in each

such instance such agreement is not inconsistent with the provisions of

this Final Judgment. The volume of STK DASD distributed under any such

agreement, except in an agency agreement in which IBM acts only as

agent for the end-user customer, shall be included in IBM's and not

STK's volumes of terabytes computed pursuant to Section VI of this

Final Judgment. Where IBM acts as agent to procure the STK DASD for the

end-user customer and also finances the transaction, the STK DASD so

distributed shall also be included in IBM's and not STK's volumes of

terabytes computed pursuant to Section VI of this Final Judgment.

B. Defendants shall not make any changes to any of the terms of the

modified OEM agreement, or enter into any other agreement, that would

be inconsistent with any of the unexpired provisions of this Final

Judgment. Defendants shall provide to the Antitrust Division of the

United States Department of Justice written notice (or a copy) no later

than 15 business days after receipt by the Defendants' Contract

Administrators of any written amendment, executed by authorized

representatives of Defendants, of the following documents included

within the modified OEM agreement: the ``OEM Agreement Between IBM and

STK'' dated December 18, 1997; the ``IBM Developer Base Agreement;''

the ``Statement of Work'' referenced in the IBM Developer Base

Agreement; and the ``Description of Licensed Works'' (but not including

any exhibits, attachments, or schedules to such documents, or other

documents referenced in such documents).

C. Except to the extent set forth in this Final Judgment,

Defendants shall not enter into or carry out any agreement that: (1)

sets any IBM volume commitments, or provides for recovery payments or

liquidated damages from IBM as a consequence of IBM's failure to

purchase a certain volume of STK DASD; or (2) contains any provision

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under which any IBM obligation to STK is contingent upon any level of

sales or shipments of STK DASD by STK to persons other than IBM.

D. Except to the extent set forth in this Final Judgment,

Defendants shall not enter into or carry out any agreement pursuant to

which IBM is bound to purchase any volume of STK DASD, or that contains

any provision requiring IBM to make payments for IBM's failure to

purchase a certain volume of STK DASD; provided, however, that IBM may

provide STK with non-binding monthly, quarterly, and/or 12-month

estimates, expressed in terabytes or other units of storage capacity,

of anticipated purchases of STK DASD, and IBM, subject to Section VI of

this Final Judgment, may become contractually obligated to purchase STK

DASD as follows: (1) On or after the 30th day before the beginning of a

calendar quarter, IBM may bind itself to purchase up to 80 percent of

its estimate of purchases for that quarter; (2) IBM may thereafter

issue binding purchase orders for deliveries within such quarter

without regard to the estimate; (3) to the extent that IBM's purchases

of STK DASD for a given quarter are less than IBM's estimate for that

quarter, IBM may bind itself to purchase during the subsequent quarter

some or all of the difference between IBM's estimated and actual

purchases from the prior quarter, in addition to up to 80 percent of

its estimate for the subsequent quarter; and (4) in the event of

termination or winding down of the modified OEM agreement, in the last

quarter in which IBM provides an estimate of purchases, IBM may issue

purchase orders for volumes to satisfy its future needs and such

volumes may be delivered in that quarter or subsequent quarters. IBM

shall issue purchase orders for STK DASD only to the extent that they

reflect IBM's actual intention to purchase and take delivery of the STK

DASD ordered. IBM shall purchase and pay for all STK DASD for which it

becomes contractually obligated pursuant to the foregoing provisions;

provided, however, that nothing in this Final Judgment shall preclude

IBM and STK, in the event of a bona fide dispute concerning IBM's

obligation to purchase or accept delivery of STK DASD under a purchase

order, or concerning whether or to what extent IBM is obligated to

purchase STK DASD under a specific binding estimate, from pursuing

their remedies at law or resolving the dispute in a commercially

reasonable manner.

E. Defendants: (1) May establish prices and volume discounts for

the purchase of STK DASD by IBM, provided, however, that such discounts

are based upon actual volumes of STK DASD and upgrades purchased,

rather than projected volumes, and may reflect credits obtained as a

result of STK's failure to meet on-time delivery, quality, or product

deliverable requirements; but (2) shall not enter into or carry out any

agreement in which any prices or other terms applicable to IBM's

purchases of STK DASD are contingent upon any prices or other terms

offered by STK to any prospective end-user customer for STK DASD.

F. If demand for STK DASD exceeds supply, Defendants shall not

enter into or carry out any agreement that favors allocation to IBM

over other purchasers if STK cannot meet delivery commitments. In all

such situations, STK will allocate production for shipment to IBM and

to other customers based upon the delivery dates requested in purchase

orders received by STK for STK DASD from IBM or other customers. For a

given date, STK will allocate production for shipment to IBM and to

other customers on a pro rata terabyte basis.

V. Licenses; Product Development

A. IBM shall grant STK licenses effective immediately to all

hardware and software developments and enhancements that have been

funded by IBM under the OEM agreement or modified OEM agreement or that

IBM is obligated to fund under the modified OEM agreement to Iceberg,

Kodiak, future versions or models thereof, IXFP, and Snapshot

(hereinafter, ``Funded Enhancements''), which shall be at least

equivalent in scope to the licenses set forth in Attachment A of this

Final Judgment.

B. STK may pay hardware and software royalties to IBM. For STK's

sales, shipments, licenses, or other distribution of STK DASD, hardware

upgrades or components therefor, and IXFP and Snapshot software to

persons other than IBM that are shipped or otherwise distributed prior

to April 1, 1999, royalties for Funded Enhancements and derivative

works thereof used with the following (but not including royalties for

customer service that include the right to install basic enhancements

and maintenance modifications, and software and microcode, other than

IXFP and Snapshot, distributed separately from hardware or major

enhancements or hardware that are not based on capacity) may not exceed

the amounts set forth below:

1. STK shall make a nonrefundable payment to IBM of $4 million

during 1998, payable in equal quarterly installments beginning January

1, 1998. This payment will initially be applied to any royalties that

become due under the modified OEM agreement for shipments before April

1, 1999. Unused portions of this payment that do not exceed $2 million

may be credited toward royalties due for shipments after March 31,

1999.

2. For sales, leases, licenses, or any other distribution by STK of

STK DASD, STK DASD hardware upgrades, or components to customers other

than IBM, STK may pay IBM up to: (a) $0.08 per megabyte through

December 31, 1998; and (b) $0.067 per megabyte from January 1, 1999,

through March 31, 1999;

3. For each copy of IXFP software licensed or otherwise distributed

by STK to customers other than IBM for use on STK DASD, STK may pay IBM

up to: (a) $5,400 through December 31, 1997; (b) $5,500 from January 1,

1998 through December 31, 1998; and (c) $3,000 from January 1, 1999,

through March 31, 1999;

4. For each copy of Snapshot software licensed or otherwise

distributed by STK to customer other than IBM for use on STK DASD, STK

may pay IBM up to: (a) $18,000 through December 31, 1998; and (b)

$10,000 from January 1, 1999, through March 31, 1999. Except as

provided above, STK may pay hardware and software royalties to IBM

under the provisions of the modified OEM agreement, including but not

limited to, to provision that beginning April 1, 1999, the royalties

for each STK DASD subsystem or controller sold, leased, licensed, or

otherwise conveyed by STK to customers other than IBM will not exceed

the lesser of $3,500 or five percent of the revenue received. Except as

otherwise provided in the modified OEM agreement with respect to a

change of control or termination for cause, all royalties will become

fully paid-up no later than (a) when the sum of all payments made by

STK on account of such royalties, including any portion of the initial

$4 million payment that can be credited to royalties after March 31,

1999, but excluding royalties paid under Section V.B.2., V.B.3., and

V.B.4. above, equals $18 million, or (b) on December 31, 2002,

whichever first occurs.

C. For the duration of the modified OEM agreement, IBM shall offer

to sell to STK IBM disk drives and IBM disk drive replacements for use

in STK DASD that IBM has assisted in enhancing or developing under the

OEM agreement, regardless of whether such STK DASD are shipped to other

customers, provided that IBM makes such disk drives generally

available. Such offers shall be made under terms

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no less favorable to STK than IBM's standard non-price terms and

conditions, and at a price no greater than the average of the five

lowest prices paid by IBM's OEM customers who have committed to

purchase comparable quantities during the same calendar quarter.

D. The provisions of this Section V shall terminate on December 31,

2002.

VI. IBM Purchase Volumes

A. For each calendar year during the period January 1, 1999,

through December 31, 2002, IBM's total purchases of STK DASD (measured

in terabytes) for use in the United States shall not exceed 67 percent

of the volume of STK DASD (measured in terabytes) purchased by IBM

during the calendar year 1998 for use in the United States, unless (1)

STK has already shipped a total of at least the STK Minimum to STK's

United States customers other than IBM during the preceding 12 months,

or (2) IBM and STK obtain prior approval of the United States under the

provisions of section VI.B. below.

B. IBM may purchase STK DASD without regard to the limitation of

Section VI.A. above if approved by the United States Department of

Justice. The United States may approve such purchases upon the

submission of a written request to the Antitrust Division of the United

States Department of Justice, supported by both Defendants, and setting

forth the additional purchase volumes requested, the time period(s) for

which the additional purchases are requested, and the reasons and

circumstances related to the request. The United States will approve

the request if it concludes that notwithstanding STK's failure to

supply the STK Minimum to United States customers, IBM faces vigorous

competition from STK in the United States for the development,

production and marketing of DASD, and IBM's proposed additional

purchases would not substantially lessen that competition. The United

States will not unreasonably withhold approval, and if it does not deny

a request in writing setting forth the reasons for the denial within 30

days of submission, the request will be deemed approved. If the United

States denies a request, the Court may review the matter upon the

filing of an application by both Defendants. The Court may overrule a

denial by the United States of a request made before January 1, 2001,

only if Defendants establish that notwithstanding STK's failure to

supply the STK Minimum to United States customers, IBM faces vigorous

competition from STK in the United States for the development,

production and marketing of DASD, and IBM's proposed additional

purchases would not substantially lessen that competition. The Court

may overrule a denial by the United States of a request made on or

after January 1, 2001, only if Defendants establish either (1) that

notwithstanding STK's failure to supply the STK Minimum to United

States customers, IBM faces vigorous competition from STK in the United

States for the development, production and marketing of DASD, and IBM's

proposed additional purchases would not substantially lessen that

competition or (2) that because of technological advances, the entry of

new competitors, or otherwise, a material change has occurred since the

date of this Final Judgment in the competition in the United States for

the development, production and marketing of DASD, such that IBM's

proposed additional purchases would not substantially lessen such

competition.

C. The provisions of this Section VI shall terminate on December

31, 2002.

VII. Compliance Inspection

For the purposes of determining or securing compliance with the

Final Judgment and subject to any legally recognized privilege or

doctrine:

A. Duly authorized representatives of the 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 a Defendant made to its principal office, shall be permitted:

1. Access during regular 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 any matters

contained in this Final Judgment; and

2. Subject to the reasonable convenience of Defendants and without

restraint or interference from them, to interview or depose officers,

employees, and agents of Defendants, who may have counsel present,

regarding any such matters.

B. Defendants shall submit written reports with respect to matters

contained in this Final Judgment as follows:

1. On the 30th day after the beginning of each calendar quarter,

STK shall submit to the Antitrust Division of the United States

Department of Justice a written report setting forth: (a) The total of

IBM's purchases of STK DASD for use in the United States during the

preceding quarter, measured in terabytes; (b) the total of IBM's

distribution of STK DASD for use in the Untied States, through a means

of distribution in which IBM did not acquire title to the STK DASD,

during the preceding quarter, measured in terabytes; (c) the total of

IBM Credit Corporation's purchases of STK DASD bearing STK's logo for

use in the United States during the preceding quarter, measured in

terabytes; (d) the total of STK's shipments of STK DASD to United

States customers other than IBM pursuant to transactions in which IBM

ordered such STK DASD as agent for such customers, during the preceding

quarter, measured in terabytes; (e) the total of all other STK

shipments of STK DASD to United States customers other than IBM during

the preceding quarter, measured in terabytes.

2. Apart from the foregoing, upon the written request of the

Attorney General or of the Assistant Attorney General in charge of the

Antitrust Division made to Defendants' principal office, Defendants

shall submit such written reports, under other if requested, with

respect to any matters contained in this Final Judgment as may be

requested.

C. No information or documents obtained by the means provided in

this Section shall be divulged by a representative of the Department of

Justice to any person other than a duly authorized representative of

the Executive Branch of the United States, except in the courts 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 Plaintiff, 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 by Plaintiff to Defendants prior to divulging such

material in any legal proceeding (other than a grand jury proceeding)

to which a defendant is not a party.

VIII. 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

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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.

IX. Termination

This Final Judgment shall expire on the fifth anniversary of the

date of its entry.

X. Public Interest

Entry of this Final Judgment is in the public interest.

United States District Judge.

Dated:

Attachment A

A. An STK Incidental Use License for any purpose.

B. For IKA Storage Systems, an STK Material Use License for any

purpose.

C. For products other than IKA Storage Systems, an STK Material Use

License for any purpose.

D. STK Incidental Use License means a nonexclusive, worldwide

license to use (1) the ideas, concepts, and techniques contained in,

(2) the structure, sequence and organization of, and (3) other

nonliteral aspects of IBM Materials and their Derivative Works. Such

license shall not include the right of STK to make a copy of any of the

IBM Materials or any Derivative Work thereof owned by IBM which is

substantially similar thereto and would constitute literal infringement

under applicable copyright law.

E. STK Material Use License means a nontransferable, nonexclusive,

worldwide, license to use, execute, reproduce, display, perform,

transfer, distribute, sublicense, and prepare Derivative Works, of the

IBM Materials and its Derivative Works. Such license includes the right

of STK to authorize others to do any of the above, and also applies to

associated audio and visual works. Except for the right to sublicense

STK subsidiaries pursuant to Section 11.0 of the IDA, the right to

sublicense under this definition is limited to granting sublicenses for

microcode which include terms and conditions substantially similar to

the STK Customer Agreement, to granting sublicenses for software other

than microcode under the terms and conditions that STK uses for similar

software of its own, and to granting sublicenses to third-party

maintainers under reasonable terms and conditions. Nothing in this

definition of STK Material Use License or elsewhere in the Modified OEM

Agreement shall be construed, subject to the payment of royalities due,

to prevent STK from distributing through OEMs other than IBM, Funded

Enhancements that are incorporated in STK DASD, provided that nothing

in the Final Judgment to which this definition is attached shall

obligate IBM to grant to obligate IBM to permit STK to grant rights

under such license to OEMs other than the right of STK to permit OEMs

to distribute Funded Enhancements contained in STK products. In the

event of a Change of Control, subject to the payment of royalties due

and the acquiring entity's agreement to be bound by the Modified OEM

Agreement, nothing in this license shall be construed to prevent the

acquiring entity from developing, producing, or marketing Funded

Enhancements incorporated in DASD.

F. Change of Control means the acquisition by an entity of more

than 20 percent of the outstanding common shares of STK representing

the right to vote for STK's board of directors, the sale of all or

substantially all of the assets of STK, or any consolidation, merger,

or other reorganization of STK in which STK is not the continuing or

surviving corporation or pursuant to which shares of such common stock

would be converted into cash, securities, or other property.

G. Derivative Work means a work that is based on a underlying work

that would be a copyright infringement if prepared without the

authorization of the copyright owner of the underlying work. Derivative

works are subject to the ownership rights and licenses of others in the

underlying work.

H. Funded enhancements means hardware and software developments and

enhancements that have been funded by IBM under the OEM agreement of

June 7, 1996 or the Modified OEM Agreement, or that IBM is obligated to

fund under the Modified OEM Agreement.

I. IBM means International business Machines Corporation, its

successors and assigns, each subsidiary and division thereof, and each

officer, director, employee, agent and other person acting for or on

behalf of any of them.

J. IBM Materials means deliverables funded in accordance with the

IBM Developer Agreement, attached as Exhibit 3 to the Modified OEM

Agreement.

K. IDA means the IBM Developer Agreement, attached as Exhibit 3 to

the Modified OEM Agreement.

L. IKA Storage Systems means Iceberg, Kodiak, and Arctic Fox

storage systems, as defined in the IDA Description of Licensed Work

(Attachment 2 to Exhibit 3 of the Modified OEM Agreement as

Attachment).

M. Modified OEM Agreement means the agreement dated December 18,

1997, pursuant to which IBM has agreed to purchase STK DASD from STK

and STK has agreed to sell STK DASD to IBM, including all attachments,

exhibits, schedules, and other documents referenced therein, and all

amendments, additions, updates, or modifications to any of the

foregoing.

N. STK means Storage Technology Corporation, its successors and

assigns, each subsidiary and division thereof, and each officer,

director, employee, agent and other person acting for or on behalf of

any of them.

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 December 18, 1997, The United States filed a civil antitrust

complaint alleging that an ``OEM agreement'' dated June 7, 1996,

between International Business Machines Corporation (``IBM'') and

Storage Technology Corporation (``STK'') unreasonably restrained

competition in the United States and worldwide in the sale of disk

storage subsystems (``DASD'') for mainframe computers, in violation of

Section 1 of the Sherman Act (15 U.S.C. 1). Before entering into the

OEM agreement, IBM and STK competed with each other, and with only two

other major competitors, in the development, production, and marketing

of mainframe DASD in the United States and worldwide. With the OEM

agreement, however, IBM became STK's exclusive outlet for STK's

mainframe DASD products, thereby eliminating competition between them

for sales of mainframe DASD to end-users.

At the same time as it filed the Complaint, the United States also

filed a Stipulation and a proposed Final Judgment in settlement of the

suit. As described in greater detail below, the proposed that made the

OEM agreement an exclusive arrangement between IBM and STK, and will

provide positive incentives for STK to resume its position as an

independent competitor in the market.

The United States, IBM, and STK have stipulated that the proposed

Final Judgment may be entered after compliance with the APPA. Entry of

the proposed Final Judgment would

[[Page 1505]]

terminate this 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 Events Giving Rise to the Alleged Violation

A. The Defendants and Mainframe DASD

IBM is incorporated in the State of New York and is headquartered

in Armonk, New York. IBM is by far the world's largest supplier of

mainframe computers and related products. For the year 1996, IBM posted

worldwide revenues of about $75 billion. In 1995, the last full year in

which the IBM and STK were separate competitors in the mainframe DASK

market, IBM had mainframe DASD sales of over $2 billion, representing

shipments of about 588 ``terabytc'' of data storage capacity. The

terabyte--equivalent to the amount of data that can be stored in

hundreds of millions of pages of paper--is a standard industry measure

of sales volume. In 1995, IBM sold 275 terabytes of mainframe DASD, for

over $1.2 billion, in the United States.

STK is a Delaware corporation headquartered in Louisville,

Colorado. STK reported total worldwide revenues of about $2 billion in

1996. STK's core businesses are computer data storage and retrieval

systems, especially those for mainframe computer systems. Other than

mainframe DASD, STK's major products are automated tape library storage

systems for mainframe computers, and it is the world's dominant

supplier of these tape systems. STK's 1995 worldwide sales of mainframe

DASD were over $300 million, representing shipments of about 155

terabytes. Its U.S. sales of mainframe DASD were about $190 million,

representing shipments of 100 terabytes.

DASD are computer data storage systems that utilize rotating

magnetic disks. As defined in the Complaint and proposed Final

Judgment, ``mainframe DASD,'' are DASD specifically designed to attach

to and operate with IBM's System 390 computers, predecessor and

successor models, and other manufacturers' IBM-plug-compatible

computers.\1\ As described in the Complaint, mainframe DASD perform

high-speed and high-capacity data storage and retrieval functions that

are essential to the operation of mainframe computers, which is turn

are commonly and widely used for mission-critical data processing by

business, educational, governmental, and other organizations throughout

the world.\2\

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\1\ These mainframe computers are distinguishable from other

computers in that they all operate with IBM mainframe computer

operating systems, principal examples of which are IBM's OS-390,

MVS, VSE, and VM operating systems. Some ``mainframe DASD'' attaches

to and operates with other types of computers as well.

\2\ Data search times measurable in milliseconds and high data-

transfer rates make DASD suitable for on-line transaction

processing, large volume batch processing, and other applications in

which rapid access to large amounts of data is important.

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B. The OEM Agreement

On June 7, 1996, IBM and STK entered into an OEM agreement pursuant

to which STK agreed to supply IBM, and IBM committee to purchase for

resale purposes, mainframe DASD products developed and manufactured by

STK.\3\ The parties agreed to extend the arrangement through the end of

1999, subject to terms for renewal. Before the OEM agreement, STK sold

its mainframe DASD products in direct competition with IBM's internally

developed and manufactured mainframe DASD products. Under the OEM

agreement, however, IBM became STK's exclusive outlet for its mainframe

DASD, and this relationship displaced the competition that had

previously existed between them.

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\3\ The OEM agreement was not subject to the prenotification

requirements of Sec. 7a of the Clayton Act, 15 U.S.C. 18a.

---------------------------------------------------------------------------

The OEM agreement required IBM to purchase certain minimum volumes

and to make substantial payments to STK if it failed to meet the

minimum purchases. The OEM agreement committed IBM to purchase annual

and quarterly minimum volumes of STK's DASD products. For each of the

years 1997 and 1998, IBM had to purchase minimum volumes of 710

terabytes, and thereafter, the parties were to negotiate new volume

terms. If IBM failed to purchase the minimum volumes, STK would be free

to terminate the agreement, and IBM would be obligated to pay

liquidated damages of $75 million for a termination based on IBM's

failure to meet the 1997 minimum volumes and $27 million for a

termination based on IBM's failure to meet the 1998 minimum volumes.

Under the OEM agreement, IBM was also required to pay STK

``recovery payments,'' which increased proportionately with lower

levels of purchases by IBM, but declined to zero as the purchases

approached 400 terabytes in 1996 and 1500 terabytes in 1997 and 1998.

For example, if IBM sold only the minimum 710 terabytes in 1997, it

would owe STK up to $60 million in recovery payments for falling 790

terabytes short of the 1500. These recovery payments also took into

account the proportion of IBM's total sales of STK's DASD products

versus IBM's sales of its own DASD, so that the higher the proportion

of STK products sold by IBM, the lower the recovery payments. The OEM

agreement also required IBM to contribute $100 million over three years

to help fund STK's on-going efforts and plans to improve the

performance and capabilities of its mainframe DASD products.

Although the OEM agreement did not expressly provide that IBM would

be STK's exclusive mainframe DASD distributor, it contained provisions

that made independent sales by STK so unattractive economically that it

gave IBM de facto exclusively. The OEM agreement provided that if STK

sold mainframe DASD to anyone other than IBM, IBM would be freed from

its purchase volume commitments, its obligation to make recovery

payments or pay liquidated damages upon failure to achieve those

commitments, and its duty to help fund STK's product development

programs--obligations that in total were worth hundreds of millions of

dollars to STK. Due to these prohibitive contractual consequences,

internal STK documents referred to STK sales of mainframe DASD to

anyone other than IBM as ``forbidden'' under the OEM agreement.\4\

Shortly after entering into the OEM agreement, STK stopped all efforts

to sell mainframe DASD to customers other than IBM; and STK became

completely dependent on its former competitor to sell STK mainframe

DASD to end-users.

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\4\ To protect STK in the event it unintentionally entered into

transactions that would trigger these severe financial penalties,

STK insisted that it be allowed to make up to 12 otherwise

``forbidden sales'' over the life of the agreement. Another

exception allowed STK to sell its mainframe DASD to others without

penalty so long as STK first sold it to IBM and then repurchased it

from IBM.

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C. The OEM Agreement Violates Section 1 of the Sherman Act

The Complaint alleges that the OEM agreement unlawfully restrained

competition in the mainframe DASD market in the United States and

worldwide, in violation of Section 1 of the Sherman Act. Mainframe DASD

is a relevant antitrust market because there are no substitute products

to which mainframe DASD purchasers would turn even if prices of

mainframe DASD were to increase substantially.\5\ The

[[Page 1506]]

OEM agreement greatly increased the level of concentration in a market

that was already highly concentrated. In 1995, the last full year in

which IBM and STK competed against each other, IBM had a worldwide

market share of about 36 percent (based on total shipments of about 558

terabytes), while STK's share was about 10 percent (shipments of about

155 terabytes). The Herfindahl-Hirschman Index, a standard measure of

market concentration, increased by 720 points, to a post-agreement

level of 3767, as a result of the OEM agreement.\6\ The reduction of

competition from the OEM agreement has not been alleviated by new entry

into the manufacture and marketing of mainframe DASD, and because such

new entry would be extremely difficult and time-consuming, it is

unlikely to occur in the foreseeable future.

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\5\ Although other types of data storage devices exist--for

example, tape, optical and electronic memory products--because of

performance or cost differences, none of these other products are

effective substitutes for DASD. Conversion to a non-mainframe

computer system is also not an effective way to substitute away from

mainframe DASD because of the substantial costs and risk of

switching to an alternative computer platform.

\6\ The HHI is well accepted as a measure of market

concentration. It is calculated by squaring the market share of each

firm competing in the market and then summing the resulting numbers.

For example, for a market consisting of four firms with shares of

thirty, thirty, twenty, and twenty percent, the HHI is 2600

(302 + 302 + 202 + 202 =

2600). The HHI takes into account the relative size and distribution

of the firms in a market and approaches zero when a market consists

of a large number of firms of relatively equal size. The HHI

increases both as the number of firms in the market decreases and as

the disparity in size between those firms increases. Markets in

which the HHI is between 1000 and 1800 are considered to be

moderately concentrated and those in which the HHI is in excess of

1800 points are considered to be highly concentrated. Transactions

that increase the HHI by more than 100 points in moderately

concentrated and concentrated markets presumptively raise antitrust

concerns under the Department of Justice and Federal Trade

Commission Horizontal Merger Guidelines (rev. 1997).

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The Complaint further alleges that the OEM agreement removed a

significant competitive force from the marketplace. STK had been the

low price bidder for numerous DASD sales, and IBM and STK products had

been the top two choices for many customers. Competition from STK had

contributed to the substantial erosion in prices of mainframe DASD in

the years immediately prior to the OEM agreement. In this marketplace

setting, the OEM agreement eliminated direct and significant

competition between IBM and STK and deprived mainframe DASD customers

of the benefits of that competition. As a consequence of the OEM

agreement, the rapid decline in the price of mainframe DASD eased, and

the parties' output of mainframe DASD fell below levels they had

projected prior to the agreement. Thus, the OEM agreement has been

anticompetitive and its violates Section 1 of the Sherman Act.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment bars IBM and STK from including in an

OEM agreement terms that would prevent STK from selling mainframe DASD

in competition with IBM. The modifications to the OEM agreement remove

the provisions that made the agreement a de facto exclusive

arrangement.\7\ As a result, STK will suffer no economic penalty if it

sells to customers other than IBM. The elimination of these

restrictions makes the relationship between IBM and STK non-exclusive,

and provides an incentive to STK to begin selling mainframe DASD as an

independent competitor. Furthermore, the proposed Final Judgment

creates additional incentives for STK to begin selling DASD

independently by limiting the amount of mainframe DASD that STK may

sell through IBM, unless STK sells significant amounts of mainframe

DASD on its own. The purpose of these limitations, which are described

in detail below, is to make it economically attractive for STK to seek

out business from customers other than IBM. In setting these

limitations, the proposed Final Judgment does not preclude STK sales

though IBM that may arise under a non-exclusive OEM arrangement between

them, but adds a positive incentive for STK to re-enter the mainframe

DASD market as a seller independent of IBM.

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\7\ See modified OEM agreement dated December 18, 1997, a

redacted copy of which is attached hereto as a determinative

document under the APPA. The redactions are necessary to avoid

disclosure of competitively sensitive information. An unredacted

copy will be made available to the Court upon request.

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Section IV of the proposed Final Judgment enjoins the

anticompetitive contractual arrangements that have prevented STK from

selling mainframe DASD independently of IBM. Except in limited

specified contexts common in normal supply contracts,\8\ Section IV

prohibits IBM and STK from entering into or maintaining any agreement

as to price, volume, or other terms that would be contingent upon

either the level of IBM's mainframe DASD purchases from STK, or the

level of STK's sales to customers other than IBM. The provisions of the

OEM agreement that imposed upon IBM minimum purchase commitments and

obligated it to pay recovery payments and liquidated damaged if those

commitments were not met, and that established contractual penalties to

STK for making mainframe DASD sales to customers other than IBM, are

prohibited by Section IV.

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\8\ The proposed Final Judgment allows IBM to provide STK with

monthly and quarterly forecasts of its purchases, in order to enable

STK to anticipate capacity requirements to fill IBM orders, while

imposing strict limits on the extent to which IBM may actually bind

itself to make purchases (Section IV.D.); permits IBM and STK to set

prices for IBM purchases that reflect volume-based discounts and any

credits obtained as a result of STK's failure to meet on-time

delivery, quality, or product deliverable requirements (Section

IV.E.); and allows STK to pay IBM specified unit based royalties for

its sales of DASD to other customers, which would enable IBM to

recover a portion of its investments in STK DASD product

improvements (Section V).

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Section V of the proposed Final Judgment contains technology

licensing provisions designed to ensure that STK will not be prevented

from independently marketing mainframe DASD improvements that STK had

developed with IBM funding. These provisions require IBM to grant STK a

license to all mainframe DASD hardware or software product improvements

funded by IBM or for which it provided assistance under the OEM

agreement. The license is subject to STK's payment of reasonable

royalties, however, to allow IBM an appropriate return on its

contributions.

Section VI.A. of the proposed Final Judgment provides a positive

incentive for STK to compete against IBM, by requiring that STK must

sell DASD on its own as a condition of making unconstrained sales to

IBM. Under Section VI.A., beginning on January 1, 1999, IBM's U.S.

purchases from STK in a calendar year may not exceed 67 percent of

IBM's U.S. purchases in 1998, unless STK has shipped over the preceding

twelve months a substantial volume of mainframe DASD to U.S. customers

other than IBM. If STK fails to sell the specified amount to customers

other than IBM, it may make additional sales to IBM only if the parties

obtain prior approval from the United States pursuant to Section VI.B.

The United States will grant or deny such approval on the basis of

whether vigorous competition from STK has been restored, and whether

such competition would be substantially lessened as a result of

additional purchases by IBM. Section VI.B. also sets out a process and

standard for judicial review should IBM or STK contest a denial by the

United States.\9\

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\9\ The proposed Final Judgment imposes on Defendants the burden

of proof in such proceedings. For the period up to January 1, 2001,

the proposed Final Judgment permits the Court to overrule a denial

by the United States of a request for additional IBM purchases only

if Defendants establish that, notwithstanding STK's failure to

supply the STK Minimum to United States customers, IBM faces

vigorous and ongoing competition from STK in the United States for

the development, production and marketing of DASD, and IBM's

proposed additional purchases would not substantially lessen that

competition. Beginning on January 1, 2001, the proposed Final

Judgment expands the review criteria beyond whether STK is a

vigorous DASD competitor in the United States. Here, the proposed

Final Judgment also permits the Court to overrule a denial by the

United States if the Defendants establish that, because of

technological advances, the entry of new competitors, or other

material competitive changes, IBM's proposed additional purchases

would not substantially lessen competition in the United States in

the development, production or marketing of mainframe DASD.

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[[Page 1507]]

Other provisions of the proposed Final Judgment are also aimed at

fostering STK's competitive independence from IBM. Section IV.C.

prohibits IBM and STK from avoiding the proscriptions of the Judgment

by entering into a sales agency or distribution agreement that would

not entail actual IBM purchases of mainframe DASD. Section IV.D

restricts STK's reliance on IBM purchases by limiting the extent to

which IBM volume forecasts and purchase orders may become binding.

Section IV.E. limits the parties' ability to set IBM's prices on terms

other than actual amounts purchased. Section IV.F. requires STK to

allocate fairly production between the needs of IBM and that of other

STK customers in the event of supply constraints. Finally, Section V.C.

guarantees that IBM will continue to sell IBM disk drives used in STK's

mainframe DASD products, at competitive prices and terms, so long as

IBM makes such drives generally available to other purchasers.

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 the 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 has

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

filed with the Court and published in the Federal Register. Written

comments should be submitted to: John F. Greaney, Chief, Computers &

Finance Section, Antitrust Division, United States Department of

Justice, Suite 9500, 600 E Street, N.W., 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 Final Judgment.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed

Final Judgment, proceeding to a full trial on the merits of its

Complaint. The United States is satisfied, however, that the relief

contained in the proposed Final Judgment should reestablish and

maintain viable and effective competition in the mainframe DASD market

that has otherwise been adversely affected by the OEM agreement. Thus,

the proposed Final Judgment will benefit competition substantially to

the same extent that the government could have obtained through

litigation, but avoids the time, expense and uncertainty of a full

trial on the merits of the government's Complaint, including the

uncertainty over whether a remedy imposed after a long delay would be

efficacious.

The United States also considered a claim for damages arising from

increased prices paid by the United States for its purchases of

mainframe DASD as a result of the reduction of competition caused by

the OEM agreement. However, calculation and proof of such damages to

the United States is likely to be complex and difficult, and the

litigation necessary to secure the damages would be costly and

protracted. During the pendency of the litigation, moreover, the OEM

agreement would remain in effect, depriving the United States and all

other mainframe DASD purchasers of the benefit of STK as an independent

competitive source of supply. Purchases by the United States constitute

only a modest percentage of all domestic DASD purchases. The United

States concluded, therefore, that the public interest is better served

overall by securing the immediate, certain, and substantial relief set

forth in the proposed Final Judgment.

VII. Determinative Documents

One determinative document within the meaning of the APPA--the IBM-

STK agreement dated December 18, 1997, which modifies the July 7, 1996,

agreement in conformity with the terms of the proposed Final Judgment--

was considered by the United States in formulating the proposed Final

Judgment. A redacted copy of this document is attached hereto, is being

filed with the Court, and will be available for public inspection.\10\

\10\ Certain confidential business information contained in the

modified OEM agreement, but not significant to consideration of the

proposed Final Judgment by the United States, has been redacted from

the filed and publicly available copies. Due to the length of the

modified OEM agreement, it will not be published in the Federal

Register.

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Dated: December 18, 1997.

Weeun Wang,

James J. Tierney,

Sanford M. Adler,

Richard I. Irvine,

Don Allen Resnikoff,

Molly L. DeBusschere,

J. Roberto Hizon,

Attorneys, Antitrust Division, U.S. Department of Justice, Computers &

Finance Section, Suite 9500, 600 E Street, N.W., Washington, D.C.

20530, (202) 307-6200.

United States Memorandum Regarding Antitrust Consent Decree

Procedures

The United States files this Memorandum to set forth the procedures

regarding entry of the proposed Final Judgment, pursuant to the

Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the

``APPA''). The APPA applies only to antitrust cases brought by the

United States.

1. On December 18, 1997, the United States filed a proposed Final

Judgment and a Stipulation between the plaintiff and defendant in which

both parties agreed to entry of the proposed Final Judgment.

2. The United States also filed a Competitive Impact Statement

relating to the proposed Final Judgment, pursuant to the APPA, 15

U.S.C. 16(b).

[[Page 1508]]

3. The APPA requires the United States to publish the proposed

Final Judgment and Competitive Impact Statement in the Federal Register

and in newspapers 60 days prior to entry of the Final Judgment. The

Notice will inform members of the public that they may submit comments

about the Final Judgment to the United States Department of Justice,

Antitrust Division.

4. The United States will consider any comments it receives,

respond to them, and publish the comments and responses in the Federal

Register.

5. Pursuant to the APPA, at the expiration of the 60-day period,

the United States will file with the Court the comments, its responses,

and a Motion For Entry of The Final Judgment, unless it withdraws its

consent to entry of the Final Judgment pursuant to Paragraph 2 of the

December 18 Stipulation.

6. When the United States files its Motion For Entry of The Final

Judgment, pursuant to the APPA the Final Judgment may be entered with

or without further hearing, if the Court determines that entry is in

the public interest.

Dated: December 18, 1997.

Weeun Wang,

James J. Tierney,

Sanford M. Adler,

Richard I. Irvine,

Don Allen Resnikoff,

Molly L. DeBusschere,

J. Roberto Hizon,

Attorneys, Antitrust Division, U.S. Department of Justice, Computers &

Finance Section, Suite 9500, 600 E Street, N.W., Washington, D.C.

20530, (202) 307-6200.

Certificate of Service

The undersigned certifies that he is a paralegal employed by the

Antitrust Division of the United States Department of Justice, and is a

person of such age and discretion to be competent to serve papers. The

undersigned further certifies that on December 18, 1997, he caused true

copies of:

1. Complaint;

2. Stipulation;

3. proposed Final Judgment;

4. Competitive Impact Statement;

5. Plaintiff's Memorandum Regarding Antitrust Consent Decree

Procedures;

and this certificate of service, to be served upon the persons at the

place and addresses stated below, which are the last known addresses:

Counsel for International Business Machines Corporation

Evan R. Chessler, Esq., Cravath, Swaine & Moore, Worldwide Plaza,

825 Eighth Avenue, New York, NY 10019 (by facsimile (212-474-3700) and

by overnight courier).

Counsel for Storage Technology Corporation

J. Edd Stepp, Jr., Esq., Gibson, Dunn & Crutcher 333 South Grand

Avenue Los Angeles, CA 90071 (by facsimile (213-229-6466) and by

overnight courier).

Pursuant to 28 U.S.C. 1746, I declare under penalty of perjury that

the foregoing is true and correct.

Executed at Washington, D.C. this ______th day of December,

1997.

J. Cory Allen,

Paralegal, Antitrust Division, U.S. Department of Justice, Computers &

Finance Section, Suite 9500, 600 E Street, N.W., Washington, D.C.

20530, (202) 307-6200.

[FR Doc. 98-522 Filed 1-8-98; 8:45 am]

BILLING CODE 4410-11-M