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

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,

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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.

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

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;

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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.

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\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.

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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.

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[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.

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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\

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\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).

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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