Where is Kryder's Money?

In The Wake of C.F. Kryder: Clarence Frank Kryder (third from the left) examines blueprints for the proposed Fairfield Avenue Elevation of the Nickel Plate Railroad, Fort Wayne, Indiana, June 2 , 1942. Inextricably tied to his missing real estate and insurance fortune through North American Properties, Inc., are (left to right) the Fort Wayne International Harvester and Magnavox Companies, Lincoln Tower, and the Fort Wayne Bank Building.

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UNITED STATES OF AMERICA ) ) Criminal No.: 96-CR-00640 v. ) ) Filed: [10/15/96] ARCHER DANIELS MIDLAND COMPANY, ) ) Violation: 15 U.S.C. § 1 Defendant. )

DESCRIPTION OF THE OFFENSE 12. ARCHER DANIELS MIDLAND COMPANY is made a defendant on the charge stated below. 13. Beginning at least as early as January 1993 and continuing until June 27, 1995, the exact dates being unknown to the United States, the defendant and co-conspirators entered into and engaged in a combination and conspiracy to suppress and eliminate competition by fixing the price and allocating the sales volumes of citric acid offered for sale to customers in the United States and elsewhere. The combination and conspiracy, engaged in by the defendant and co-conspirators, is an unreasonable restraint of interstate trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). 14. The charged combination and conspiracy consisted of a continuing agreement, understanding, and concert of action among the conspirators, the substantial terms of which were: (a) to agree to fix and maintain prices and to coordinate price increases for the sale of citric acid in the United States and elsewhere; and (b) to agree to allocate the volumes of sales of citric acid among the corporate conspirators. 15. For the purpose of forming and carrying out the charged combination and conspiracy, the defendant and co-conspirators did those things that they combined and conspired to do, including, among other things: (a) participating in meetings and conversations to discuss the prices and volumes of sales of citric acid sold in the United States and elsewhere; (b) agreeing, during those meetings and conversations, to charge prices at certain -------------------------------------------------------------------------------- Page 6 levels and otherwise to increase and maintain prices of citric acid sold in the United States and elsewhere; (c) agreeing, during those meetings and conversations, to allocate among the corporate conspirators the volume of sales of citric acid to be sold by each corporate conspirator in the United States and elsewhere; (d) issuing price announcements and price quotations in accordance with the agreements reached; and (e) participating in meetings and conversations to discuss prices and volumes of sales of citric acid sold in the United States and elsewhere for the purpose of monitoring and enforcing adherence to the agreed-upon prices and sales volumes.

UNITED STATES OF AMERICA v. ATLAS IRON PROCESSORS, INC.; SUNSHINE METAL PROCESSING, INC.; ANTHONY J. GIORDANO, SR.; ANTHONY J. GIORDANO, JR.; DAVID GIORDANO; and RANDOLPH J. WEIL, Defendants. ____________________________________ | | | | | | | | | | | | | | CASE NO. ______________ 15 U.S.C. § 1 INDICTMENT The Grand Jury charges that: I DESCRIPTION OF THE OFFENSE 1. The following corporations and individuals are hereby indicted and made defendants on the charge stated below: (a) ATLAS IRON PROCESSORS, INC.; (b) SUNSHINE METAL PROCESSING, INC.; (c) ANTHONY J. GIORDANO, SR.; (d) ANTHONY J. GIORDANO, JR.; (e) DAVID GIORDANO; and (f) RANDOLPH J. WEIL. 2. Beginning at least as early as October 24, 1992, and continuing at least until November 23, 1992, the exact dates being unknown to the Grand Jury, the defendants and co-conspirators entered into and engaged in a combination and conspiracy to suppress and restrain competition by fixing the price of scrap metal, and allocating suppliers of scrap metal, in southern Florida. The combination and conspiracy engaged in by the defendants and co-conspirators is an unreasonable restraint of interstate and foreign trade and commerce in violation of Section 1 of the Sherman Act (15 U.S.C. § 1). 3. The charged combination and conspiracy consisted of a continuing agreement, understanding, and concert of action among the defendants and co-conspirators, the substantial terms of which were: (a) to fix and maintain prices paid for scrap metal; (b) to coordinate price decreases for the purchase of scrap metal; and (c) to allocate suppliers of scrap metal.

II MEANS AND METHODS OF THE CONSPIRACY 4. For the purpose of forming and carrying out the charged combination and conspiracy, the defendants and co-conspirators did the following things, among others: (a) met at various restaurants and elsewhere, and discussed and agreed upon fixing the price of scrap metal; (b) discussed and agreed to reduce the prices to be paid for scrap metal; (c) discussed and agreed upon the maximum price to be paid to specific suppliers of scrap metal; (d) discussed and agreed upon the maximum price to be paid to suppliers of scrap metal located in specific geographic areas of southern Florida; (e) discussed and agreed upon the prices to be paid for various categories and grades of scrap metal (e.g., sheet metal, appliances and white goods, whole cars, unprepared #2 scrap, prepared #2 scrap, unprepared #1 scrap and "logs"); (f) discussed and agreed upon allocating suppliers of scrap metal, denying such suppliers a competitive price; (g) discussed and agreed upon the price to be paid for scrap metal resulting from the destruction caused by Hurricane Andrew; (h) bought scrap metal from suppliers at collusive, non-competitive prices; (i) paid suppliers for scrap metal at the agreed-upon, fixed prices; and (j) enlisted the support of others to help carry out the collusive agreement.

III DEFENDANTS AND CO-CONSPIRATORS 5. Defendant ATLAS IRON PROCESSORS, INC., ("ATLAS") is a corporation organized and existing under the laws of Florida, with its principal places of business in Miami, Florida and Cleveland, Ohio. During the period covered by this Indictment, ATLAS did business in the Miami, Florida area under the name Miami River Recycling, Inc. During the period covered by this Indictment, Miami River Recycling, Inc., was a corporation organized and existing under the laws of the State of Florida. Miami River Recycling, Inc. changed its name to ATLAS IRON PROCESSORS, INC. (defendant ATLAS) on or about December 29, 1993. (For purposes of this Indictment, any reference to ATLAS includes its business activities in Miami, Florida, under the name Miami River Recycling, Inc.) During the period covered by the Indictment, ATLAS purchased scrap metal primarily from suppliers located in southern Florida. ATLAS processed the scrap metal it purchased at a shredding facility located in Miami, Florida, and then sold and shipped, or caused to be sold and shipped, the processed scrap metal. 6. During the period covered by this Indictment, SUNSHINE METAL PROCESSING, INC., ("SUNSHINE") was a corporation organized and existing under the laws of the State of Florida, with its principal place of business in Opa Locka, Florida. During the period covered by this Indictment, SUNSHINE purchased scrap metal primarily from suppliers located in southern Florida. SUNSHINE processed the scrap metal it purchased at a shredding facility located in Opa Locka, Florida, and then sold and shipped, or caused to be sold and shipped, the processed scrap metal. 7. During the period covered by this Indictment, ANTHONY J. GIORDANO, SR. was the Chairman of ATLAS. 8. During the period covered by this Indictment, ANTHONY J. GIORDANO, JR. was the President and Chief Executive Officer of ATLAS. 9. During the period covered by this Indictment, DAVID GIORDANO was the Treasurer of ATLAS. In addition, DAVID GIORDANO was the Executive Vice-President and Chief Operations Officer of ATLAS. 10. During the period covered by this Indictment, RANDOLPH J. WEIL was the President of SUNSHINE. 11. Various persons, not made defendants in this Indictment, participated as co-conspirators in the offense charged herein and performed acts and made statements in furtherance of it. 12. Whenever this Indictment refers to any act, deed, or transaction of any corporation or other legal entity, it means that the corporation or other legal entity engaged in the act, deed, or transaction by or through its owners, officers, directors, employees, agents, or other representatives while they were actively engaged in the management, direction, control, or transaction of its business or affairs.

IV TRADE AND COMMERCE 13. During the period covered by this Indictment, the defendants and co-conspirators purchased and shipped scrap metal, or caused scrap metal to be shipped, from suppliers located in and outside the State of Florida, including scrap metal purchased and imported from at least one country other than the United States. 14. During the period covered by this Indictment, the defendants and co-conspirators sold and shipped scrap metal, or caused scrap metal to be sold and shipped, to individuals and companies located in and outside the State of Florida, including scrap metal sold and exported to countries other than the United States. 15. During the period covered by this Indictment, the defendants and co-conspirators purchased, sold, and shipped scrap metal, or caused scrap metal to be purchased, sold and shipped, in a continuous and uninterrupted flow of interstate and foreign commerce involving individuals and companies located in states other than Florida and in countries other than the United States. 16. The business activities of the defendants and co- conspirators that are the subject of this Indictment were within the flow of, and substantially affected, interstate and foreign trade and commerce.

UNITED STATES OF AMERICA c/o Department of Justice Washington, D.C. 20530, Plaintiff v. BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P. 345 Park Avenue New York, N.Y. 10154, and HOWARD ANDREW LIPSON 345 Park Avenue New York, N.Y. 10154, Defendants. ______________________________________ | | | | | | | | | | | | | | | | | | | | | | Civil Action No. 1 : 99CV00795 COMPLAINT FOR CIVIL PENALTIES FOR FAILURE TO COMPLY WITH THE PREMERGER REPORTING REQUIREMENTS OF THE HART-SCOTT-RODINO ACT The United States of America, Plaintiff, by its attorneys, acting under the direction of the Attorney General of the United States and at the request of the Federal Trade Commission, brings this civil action to obtain monetary relief in the form of civil penalties against the Defendants named herein for failing to comply with the premerger reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and alleges as follows:

JURISDICTION AND VENUE 1. This Complaint is filed and these proceedings are instituted under Section 7A of the Clayton Act, 15 U.S.C. § 18a, ("HSR Act" or "Act") added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, to recover civil penalties for violations of that section. 2. This Court has jurisdiction over the Defendants and over the subject matter of this action pursuant to Section 7A(g) of the Clayton Act, 15 U.S.C. § 18a(g), and pursuant to 28 U.S.C. §§ 1331, 1337(a), 1345 and 1355. 3. Venue is properly based in this District under 28 U.S.C. §§ 1391 and 1395, and by virtue of Defendants' consent in the Stipulation relating hereto, to the maintenance of this action and entry of the Final Judgment in this District.

THE DEFENDANTS 4. Defendant Blackstone Capital Partners II Merchant Banking Fund L.P. ("Defendant Blackstone") is a limited partnership organized under the laws of Delaware, with its principal office and place of business at 345 Park Avenue, New York, N.Y. 10154. Defendant Blackstone is an investment fund specializing in leveraged buyouts and other principal investments. Defendant Blackstone has one general partner, Blackstone Management Associates II L.L.C., a Delaware limited liability company, and numerous limited partners. Defendant Blackstone is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. § 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. § 18a(a)(1). At all times relevant to this complaint, Defendant Blackstone had total assets in excess of $100 million. 5. Defendant Howard Andrew Lipson ("Defendant Lipson") is a natural person and is a member of Blackstone Management Associates II L.L.C., the general partner of Defendant Blackstone, with his principal place of business at 345 Park Avenue, New York, N.Y. 10154. OTHER ENTITIES 6. Prime Succession, Inc. [also (Prime)| (Prime2)] ("Prime") was, at times relevant to this complaint, a corporation organized under the laws of Delaware with its principal place of business in Batesville, Indiana. At times relevant to this complaint, Prime directly or indirectly owned and operated funeral homes and cemeteries in the United States, and was engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. § 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. § 18a(a)(1). 7. Golder, Thoma, Cressey Fund III Limited Partnership ("Golder") is a limited partnership organized under the laws of Illinois, with its principal office and place of business at 6100 Sears Tower, Chicago, Illinois, 60606. Golder invests in the securities of companies in the United States, and is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. § 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. § 18a(a)(1). Until August 26, 1996, Prime was controlled by Golder, or by entities controlled by Golder, within the meaning of 16 C.F.R. § 801.1(b), and Golder was the "ultimate parent entity" of Prime, as that term is defined in 16 C.F.R. § 801.1(a)(3). At all times relevant to this complaint, Golder had total assets in excess of $10 million. 8. The Loewen Group Inc. is a corporation organized under the laws of Canada, with its principal office and place of business at 4126 Norland Avenue, Burnaby, B.C. V5G 3S8, Canada. Loewen Group International, Inc., a wholly-owned subsidiary of The Loewen Group Inc., is a corporation organized under the laws of Delaware, with its principal office and place of business at 50 East River Center Boulevard, Suite 820, Covington, KY 41011. (The Loewen Group Inc. and Loewen Group International, Inc. will hereafter be referred to collectively as "Loewen.") Loewen directly or indirectly owns and operates funeral homes and cemeteries in North America, including the United States, and is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. § 12, and Section 7A(a)(1) of the Clayton Act, 15 U.S.C. § 18a(a)(1).

THE HART-SCOTT-RODINO ACT AND RULES 9. The HSR Act requires certain acquiring persons and certain persons whose voting securities or assets are acquired to file notifications with the Federal Trade Commission and the Department of Justice ("federal antitrust agencies") and to observe a waiting period before consummating certain acquisitions of voting securities or assets. 15 U.S.C. § 18a(a) and (b). The notification and waiting period are intended to give the federal antitrust agencies prior notice of, and information about, proposed transactions. The waiting period is also intended to provide the federal antitrust agencies with an opportunity to investigate proposed transactions and to determine whether to seek an injunction to prevent the consummation of transactions that may violate the antitrust laws. The HSR Act provides that the federal antitrust agencies may grant early termination of a waiting period. 15 U.S.C. § 18a(b)(2). 10. The HSR Act provides that the Federal Trade Commission or Department of Justice may require the parties to an acquisition reportable under the HSR Act to provide additional information or documentary material relevant to the acquisition. 15 U.S.C. § 18a(e)(1). Such a request extends the waiting period for an additional period of not more than 20 days after the date the federal antitrust agencies receive the information required to be submitted pursuant to such request. 15 U.S.C. § 18a(e)(2). 11. Section (d)(1) of the HSR Act, 15 U.S.C. § 18a(d)(1), authorizes the Federal Trade Commission, with the concurrence of the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice, to require that the notification required by the Act be in such form and contain such documentary material and information relevant to a proposed acquisition as is necessary and appropriate to determine whether such acquisition, if consummated, may violate the antitrust laws. 12. Pursuant to Section (d)(2) of the HSR Act, 15 U.S.C. § 18a(d)(2), Premerger Notification Rules were promulgated to carry out the purposes of the HSR Act. 16 C.F.R. Part 800 et. seq. ("Rules"). These Rules require that notification be provided to the federal antitrust agencies in accordance with a Notification and Report Form which is made part of the Rules. 16 C.F.R. § 803.1, and appendix to 16 C.F.R. Part 803. 13. The Instructions to the Notification and Report Form, appendix to 16 C.F.R. Part 803, require the submission of the following documentary material in response to Item 4(c) of the Notification and Report Form: all studies, surveys, analyses and reports which were prepared by or for any officer(s) or director(s) (or, in the case of unincorporated entities, individuals exercising similar functions) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets . . . . 14. Section 803.6(a) of the Rules, 16 C.F.R. § 803.6(a), requires that each Notification and Report Form "shall be certified: (1) In the case of a partnership, by any general partner thereof; (2) In the case of a corporation, by any officer or director thereof; (3) In the case of a person lacking officers, directors, or partners, by any individual exercising similar functions; . . . ." The Notification and Report Form requires the following certification: This NOTIFICATION AND REPORT FORM, together with any and all appendices and attachments thereto, was prepared and assembled under my supervision in accordance with instructions issued by the Federal Trade Commission. Subject to the recognition that, where so indicated, reasonable estimates have been made because books and records do not provide the required data, the information is, to the best of my knowledge, true, correct, and complete in accordance with the statute and rules. 15. Section 7A(g)(1) of the Clayton Act, 15 U.S.C. § 18a(g)(1), provides that any person, or any officer, director, or partner thereof, who fails to comply with any provision of the HSR Act is liable to the United States for a civil penalty for each day during which such person is in violation. The maximum amount of civil penalty is $10,000 per day through November 19, 1996, pursuant to § 18a(g)(1), and $11,000 per day thereafter, pursuant to the Debt Collection Improvement Act of 1996, Pub. L. 104-134, § 31001(s) (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461 note), and Federal Trade Commission Rule 1.98, 16 C.F.R. § 1.98, 61 Fed. Reg. 54548 (Oct. 21, 1996). THE ACQUISITION 16. On August 26, 1996, ( SEE ALSO: 8/23/1996) Defendant Blackstone, two other entities related to Defendant Blackstone, and Loewen purchased Prime from Golder through a leveraged buyout ("Acquisition"). (The two other entities related to Defendant Blackstone - Blackstone Family Investment Partnership II L.P., a Delaware limited partnership, and Blackstone Offshore Capital Partners II L.P., a Cayman Islands limited partnership - will hereafter be referred to as "the two other Blackstone limited partnerships.") Defendant Blackstone paid $37 million for 54 percent of Prime's voting securities. The two other Blackstone limited partnerships collectively paid $15 million for 22 percent of Prime's voting securities. Loewen paid $16 million for 24 percent of Prime's voting securities, and $62 million for non-voting securities of Prime. The remaining $190 million of the $320 million cost of purchasing Prime was raised through debt issued by Prime. 17. Pursuant to an agreement with Loewen dated August 26, 1996, Defendant Blackstone and the two other Blackstone limited partnerships will each sell all of their interest in Prime to Loewen, if either they or Loewen elect such a sale. 18. Pursuant to an agreement with Golder dated June 14, 1996, Defendant Blackstone, the two other Blackstone limited partnerships, and Loewen would have forfeited their right to acquire Prime if they had not met certain deadlines for consummating the Acquisition. 19. Prior to the consummation of the Acquisition on August 26, 1996, Loewen did not file Notification and Report Forms for its acquisition of voting securities of Prime with the federal antitrust agencies. Loewen eventually filed Notification and Report Forms on or about October 1996, more than a month after the acquisition was consummated. On March 31, 1998, Loewen agreed to pay civil penalties to settle federal charges that its failure to file a Notification and Report Form prior to the acquisition had violated the HSR Act. United States v. The Loewen Group Inc., Civ. Action No. 98-815, 1998-1 Trade Cas. (CCH) ¶ 72,151 (D.D.C. March 31, 1998).

VIOLATION BY DEFENDANT BLACKSTONE 20. The allegations contained in paragraphs 1 through 19 are repeated and realleged as though fully set forth herein. 21. Defendant Blackstone was required by the HSR Act to submit a Notification and Report Form and observe the Act's waiting period before it acquired in excess of $15 million of the securities of Prime. On June 28, 1996, Blackstone Management Associates II L.L.C. filed on behalf of Defendant Blackstone a Notification and Report Form ("June 28 premerger filing") for the acquisition by Defendant Blackstone of voting securities of Prime. 22. Defendant Blackstone submitted no documents responsive to Item 4(c) with the June 28 premerger filing. 23. At the time of the June 28 premerger filing, Defendant Blackstone had in its possession an internal decision-making document responsive to Item 4(c) entitled Project Blackrose Investment Committee Memorandum ("Investment Committee Memorandum"), which had been prepared for a May 30, 1996, meeting of Defendant Blackstone's Investment Committee ("Investment Committee"). The Investment Committee had the ultimate authority to approve or disapprove Defendant Blackstone's acquisition of an interest in Prime. 24. A memorandum to the Investment Committee is routinely prepared prior to major investments by Defendant Blackstone. 25. Information in the Investment Committee Memorandum formed the basis of the Investment Committee's decision to proceed with the acquisition of an interest in Prime. Therefore, at the time of the June 28 premerger filing, the Investment Committee Memorandum was one of the most central documents in Defendant Blackstone's possession relating to its acquisition of an interest in Prime. 26. Each of the four officials responsible for Defendant Blackstone's acquisition of an interest in Prime had participated in writing the Investment Committee Memorandum and had a copy of the Investment Committee Memorandum in his files at the time of the June 28 premerger filing. 27. The Investment Committee Memorandum identified Loewen as an operator of cemeteries and funeral homes, and contained substantial information concerning those operations. In addition, the Investment Committee Memorandum described the collateral agreement, described in Paragraph 17 above, pursuant to which Loewen was likely to obtain complete ownership and control of Prime, which also operated cemeteries and funeral homes. 28. The Investment Committee Memorandum had the characteristics of a document required to be submitted in response to Item 4(c) of the Notification and Report Form. Those characteristics are enumerated in the Instructions to the Notification and Report Form, as described in Paragraph 13 above. Specifically, the Investment Committee Memorandum was prepared by or for individuals exercising functions similar to those of officers and directors of corporations. In addition, the document described, inter alia, (a) market shares for both Loewen and Prime in funeral homes and cemeteries, (b) the nature of competition in the death care industry, (c) barriers to entry into that industry, and (d) the trend toward concentration in the industry. Blackstone was required to submit the Investment Committee Memorandum in response to Item 4(c) of the Notification and Report Form before consummating its acquisition of voting securities of Prime. 29. As a result of Defendant Blackstone's failure to submit the Investment Committee Memorandum with the June 28 premerger filing, as required by Item 4(c) of the Notification and Report Form, Defendant Blackstone did not comply with the reporting and waiting requirements of the HSR Act and Rules. 30. Defendant Blackstone's failure to submit the Investment Committee Memorandum with the June 28 premerger filing hindered the ability of the federal antitrust agencies to analyze the competitive effects of the Acquisition prior to its consummation. The Notification and Report Forms submitted by Defendant Blackstone and Golder prior to the Acquisition did not reveal that Loewen, like Prime, was an operator of cemeteries and funeral homes. As described in Paragraph 19, Loewen itself failed to submit a Notification and Report Form prior to the Acquisition. On the basis of the Notification and Report Forms submitted prior to the Acquisition, neither the Federal Trade Commission nor the Department of Justice ascertained that Loewen's acquisition of an interest in Prime was an acquisition between competitors, and, therefore, that the Acquisition raised potential antitrust concerns. 31. As a consequence of the failure of Defendant Blackstone to submit the Investment Committee Memorandum with the June 28 premerger filing, neither the Federal Trade Commission nor the Department of Justice investigated the Acquisition before it was consummated. Neither the Federal Trade Commission nor the Department of Justice issued, pursuant to the HSR Act, Requests for Additional Information and Documentary Material ("Second Requests") prior to the Acquisition. On July 11, 1996, the federal antitrust agencies granted Defendant Blackstone early termination of the 30-day waiting period for its acquisition of voting securities of Prime. 32. The parties to the Acquisition knew that the federal antitrust agencies were likely to investigate the Acquisition if they learned that Loewen's acquisition of an interest in Prime was an acquisition of one operator of cemeteries and funeral homes by another operator of cemeteries and funeral homes. 33. By consummating the Acquisition before the federal antitrust agencies investigated it, Defendant Blackstone and Loewen avoided the risk that the Acquisition would be delayed by a premerger antitrust investigation. Any such delay could have jeopardized the Acquisition. 34. In October 1996, when Loewen submitted a Notification and Report Form in connection with another transaction, the Premerger Office of the Federal Trade Commission discovered that Loewen should have submitted a Notification and Report Form prior to its acquisition of an interest in Prime. Thereafter, Loewen belatedly submitted that Notification and Report Form. 35. Included with Loewen's Notification and Report Form was a copy of a document that was also addressed to Defendant Blackstone. The document appeared to be one that Defendant Blackstone had been required to submit with its June 28 premerger filing in response to Item 4(c) of the Notification and Report Form. Sometime between October 15, 1996, and October 31, 1996, the Premerger Office of the Federal Trade Commission asked Defendant Blackstone for an explanation of why this document had not been submitted with the June 28 premerger filing. 36. On November 1, 1996, Defendant Blackstone filed a supplementary Notification and Report Form recertifying the June 28 premerger filing. Filed with this supplementary Notification and Report Form were eight documents responsive to Item 4(c), including the Investment Committee Memorandum. 37. On November 15, 1996, the Federal Trade Commission issued Second Requests to Defendant Blackstone, Loewen, and Golder with respect to the Acquisition. 38. The HSR Act waiting period for Defendant Blackstone's acquisition of voting securities of Prime expired on May 13, 1997, twenty days after compliance with the Second Requests. 15 U.S.C. § 18a(e)(2). 39. Defendant Blackstone was in continuous violation of the HSR Act from August 26, 1996, when it acquired in excess of $15 million of the voting securities of Prime, until May 13, 1997, when the waiting period expired.

VIOLATION BY DEFENDANT LIPSON 40. The allegations contained in paragraphs 1 through 39 are repeated and realleged as though fully set forth herein. 41. Defendant Lipson was the Blackstone executive responsible for negotiating Defendant Blackstone's acquisition of an interest in Prime. The three other Blackstone executives who worked on the Acquisition reported to Defendant Lipson. 42. Defendant Lipson knew that the federal antitrust agencies were likely to investigate the Acquisition if they learned that Loewen's acquisition of an interest in Prime was an acquisition of one operator of cemeteries and funeral homes by another operator of cemeteries and funeral homes. He also knew that any significant delay of the Acquisition might have jeopardized its consummation. 43. Defendant Lipson was fully aware of the existence and the importance of the Investment Committee Memorandum. He was one of the authors of that memorandum. He was a member of the Investment Committee to which the memorandum was addressed. He attended the meeting of the Investment Committee at which the memorandum was discussed. He knew that the memorandum contained the detailed information described in paragraph 28 concerning competition in markets for cemeteries and funeral homes. He had a copy of the memorandum in his own files. 44. Defendant Lipson provided to the staff of the Federal Trade Commission inconsistent and contradictory explanations for the failure to submit the Investment Committee Memorandum with the June 28 premerger filing. 45. Defendant Lipson signed the certification of the June 28 premerger filing. As described in Paragraph 14 above, he attested in the certification to the fact that the June 28 premerger filing was, "to the best of [his] knowledge, true, correct, and complete." 46. Defendant Lipson knew, or should have known, that his certification of the June 28 premerger filing was inaccurate because the premerger filing itself was not "true, correct, and complete." 47. Defendant Lipson was in continuous violation of the HSR Act from August 26, 1996, until May 13, 1997, when the waiting period expired.

PRAYER WHEREFORE, Plaintiff prays: 1. That the Court adjudge and decree that the August 26, 1996 acquisition by Defendant Blackstone of voting securities of Prime was in violation of the HSR Act, 15 U.S.C. § 18a; and that Defendant Blackstone was in violation of the HSR Act each day from August 26, 1996 through May 13, 1997. 2. That the Court adjudge and decree that the signing by Defendant Lipson of the certification of the June 28 premerger filing was in violation of the HSR Act, 15 U.S.C. § 18a; and that Defendant Lipson is liable for a civil penalty for each day that Defendant Blackstone was in violation of the HSR Act. 3. That the Court order Defendants to pay to the United States appropriate civil penalties as provided by the HSR Act, 15 U.S.C. § 18a(g)(1), the Debt Collection Improvement Act of 1996, Pub. L. 104-134, § 31001(s) (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461 note), and Federal Trade Commission Rule 1.98, 16 C.F.R. § 1.98, 61 Fed. Reg. 54548 (Oct. 21, 1996). 4. That the Court order such other and further relief as the Court may deem just and proper. 5. That the Court award the Plaintiff its costs of this suit. Dated: ____________,1999. FOR THE PLAINTIFF UNITED STATES OF AMERICA: ____________/s/____________

November 25, 1998

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ___________________________________________ UNITED STATES OF AMERICA, United States Department of Justice Antitrust Division Merger Task Force 1401 H Street, NW Suite 4000 Washington, DC 20530 Plaintiff, v. CHANCELLOR MEDIA CORPORATION 300 Crescent Court, Suite 600 Dallas, TX 75201 and WHITECO INDUSTRIES, INC. 1000 E. 80th Place, Suite 700 North Merriville, IN 46410 and METRO MANAGEMENT ASSOCIATES 1000 E. 80th Place, Suite 700 North Merriville, IN 46410 Defendants. ___________________________________________ | | | | | | | Action No. 1 98CV02876 | | | Judge Colleen Kollar-Koetelly | | | | | | COMPLAINT FOR INJUNCTIVE | RELIEF AGAINST COMBINATION | IN VIOLATION OF SECTION 7 | OF THE CLAYTON ACT | | | | | | | | | | | | The United States of America, acting under the direction of the Attorney General of the United States, brings this action to prevent the proposed acquisition of Metro -------------------------------------------------------------------------------- Page 2 Management Associates and Whiteco Industries, Inc. (Collectively "Whiteco") by Chancellor Media Corporation ("Chancellor"). I. Nature of the Action 1. Chancellor and Whiteco sell outdoor advertising space, such as on billboards, to local and national customers. They compete head-to-head to sell outdoor advertising in seven counties: (1) Hartford County, Connecticut; (2) Shawnee County, Kansas; (3) Leavenworth County, Kansas; (4) Potter County, Texas; (5) Nolan County, Texas; (6) Westmoreland County, Pennsylvania; and (7) Washington County, Pennsylvania ("the Seven Counties"). 2. If Chancellor acquires Whiteco, competition will be lessened substantially in the Seven Counties. In some of these counties, the transaction would give Chancellor a virtual monopoly in some outdoor advertising markets and in others a 48 percent or higher share of the revenues. 3. Unless the acquisition is blocked, the loss of competition in the Seven Counties likely will result in advertisers paying higher prices and receiving a reduction. II. Jurisdiction and Venue 4. This action is filed pursuant to Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to obtain equitable relief to prevent a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. -------------------------------------------------------------------------------- Page 3 5. In each of the Seven Counties, Chancellor and Whiteco regularly contract with customers for the sale of outdoor advertising, a commercial activity that substantially affects, and is in the flow of, interstate commerce. The Court has jurisdiction over the subject matter of this action and over the parties pursuant to 15 U.S.C. §§ 22 and 25, and 28 U.S.C. §§ 1331 and 1337. 6. Venue in this District is proper under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c). III. Defendants and the Transaction 7. Chancellor, a large nationwide operator of media businesses, including outdoor advertising, is a Delaware corporation headquartered in Dallas, Texas. Chancellor conducts some outdoor advertising business through its subsidiary, Martin Media, L.P. ("Martin"), a limited Partnership also headquartered in Dallas, Texas. Martin sells outdoor advertising in twenty-three markets throughout the United States, including in each of the Seven Counties. 8. Whiteco is a Nebraska corporation headquartered in Merrillville, Indiana. Whiteco sells outdoor advertising in thirty-two states, including in each of the Seven Counties. 9. Metro is an Indiana General Partnership headquartered in Merrillville, Indiana and sells outdoor advertising in association with Whiteco. -------------------------------------------------------------------------------- Page 4 10. On August 30, 1998, Chancellor entered into an Asset Purchase Agreement with Whiteco. Chancellor agreed to purchase certain assets of Whiteco used or useful in the outdoor advertising business of Whiteco in the United States. The transaction is valued at approximately $930 million. IV. Trade and Commerce 11. Outdoor advertising companies generate their revenue from the sale of advertising space to local and/or national businesses that want to promote their products and services. 12. Advertisers select outdoor advertising based on a number of factors, including, interalia, the size of the target audience (individuals most likely to purchase the advertiser's products or services), the traffic patterns of the audience, and other audience characteristics. Many advertisers seek to reach a large percentage of their target audience by selecting outdoor advertising on highways and roads where vehicle traffic is high, so that the advertising will be viewed frequently by the target audience, or where the vehicle traffic is close to the advertiser's location. If outdoor advertising spaces owned by different firms would efficiently reach that target audience, advertisers benefit from the competition among outdoor advertising providers to offer better prices or services. Many local and/or national advertisers purchase outdoor advertising because outdoor advertising space is less expensive and more cost-efficient than other media at reaching -------------------------------------------------------------------------------- Page 5 the advertiser's target audience with the type of advertising message that the advertiser prefers to deliver. 13. Outdoor advertising has prices and characteristics that are distinct from other advertising media. An advertiser's evaluation of the importance of these characteristics depends on the type of advertising message the advertiser wishes to convey and the price the advertiser is willing to pay to deliver that message. Many advertisers who use outdoor advertising also advertise in other media, including radio, television, newspapers and magazines, but use outdoor advertising when they want a large number of exposures to consumers at a low cost per exposure. Because each exposure is brief, outdoor advertising is most suitable for highly visual, limited information advertising. V. Relevant Product and Geographic Markets 14. For many advertising customers, outdoor advertising's particular combination of characteristics makes it an advertising medium for which there are no close substitutes. Such customers who want or need to use outdoor advertising would not switch to another advertising medium if outdoor advertising prices increased by a small but significant amount. 15. Although some local and national advertisers may switch some of their advertising to other media, rather than absorb a price increase in outdoor advertising space, the existence of such advertisers would not prevent outdoor advertising companies in the Seven Counties from profitably raising their prices a small but significant amount. -------------------------------------------------------------------------------- Page 6 At a minimum, outdoor advertising companies could profitably raise prices to those advertisers who view outdoor advertising as a necessary advertising medium for them, or as a necessary advertising complement to other media. Outdoor advertising companies negotiate prices individually with advertisers. During individual price negotiations between advertisers and outdoor advertising companies, advertisers provide the outdoor advertising companies with information about their advertising needs, including their target audience and the desired exposure. Outdoor advertising companies thus have the ability to charge advertisers differing prices based in part on the number and attractiveness of competitive outdoor advertising companies that can meet a particular advertiser's specific target needs. Because of this ability to price discriminate among customers, outdoor advertising companies may charge higher prices to advertisers that view outdoor advertising as particularly effective for their needs, while maintaining lower prices for other advertisers. 16. For those advertisers who desire to use outdoor advertising to reach consumers in the Seven Counties, there are no reasonable substitutes for outdoor advertising located within each of the Seven Counties; in particular, a small but significant increase in the price of outdoor advertising in each of the Seven Counties would not cause advertisers to turn to outdoor advertising in other counties or to other types of advertising media. -------------------------------------------------------------------------------- Page 7 17. In the Seven Counties, outdoor advertising constitutes a relevant product market and a line of commerce; each county constitutes a relevant geographic market and a section of the country. VI. Concentration 18. In each of the Seven Counties, the market for outdoor advertising is highly concentrated. Using a measure of market concentration called the Herfindahl-Hirschman Index ("HHI"), explained in Appendix A annexed hereto, a combination of Chancellor and Whiteco would increase concentration substantially in each of the Seven relevant markets. 19. In Hartford County, Connecticut, Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to 100 percent. The approximate post-merger HHI would be 10000, representing an increase of about 4992. 20. In Shawnee County, Kansas, Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to about 48 percent. The approximate post-merger HHI would be 5008, representing an increase of about 1144. 21. In Leavenworth County, Kansas. Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to about 60 percent. The approximate post-merger HHI would be 4130, representing an increase of about 822. -------------------------------------------------------------------------------- Page 8 22. In Potter County, Texas, Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to about 82 percent. The approximate post-merger HHI would be 6959, representing an increase of about 1050. 23. In Nolan County, Texas, Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to about 76 percent. The approximate post-merger HHI would be 6049, representing an increase of about 1920. 24. In Westmoreland County, Pennsylvania, Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to about 71 percent. The approximate post-merger HHI would be 5454 representing an increase of about 2516. 25. In Washington County, Pennsylvania, Chancellor's share of the outdoor advertising market, based on advertising revenues, would increase to about 88 percent. The approximate post-merger HHI would be 8888 representing an increase of about 1560. VII. Anticompetitive Effects 26. In each of the Seven Counties, Chancellor and Whiteco compete head-to- head and, for many local and/or national advertisers buying outdoor advertising space, they are close substitutes for each other. During individual price negotiations, advertisers that desire to reach a certain audience can help ensure competitive prices by "playing off" Whiteco against Chancellor. Chancellor's acquisition of Whiteco will end this competition. After the acquisition, such advertisers will be unable to reach their desired audiences with equivalent efficiency without using Chancellor's outdoor advertising. -------------------------------------------------------------------------------- Page 9 Because advertisers seeking to reach these audiences would have inferior alternatives to the merged entity as a result of the acquisition, the acquisition would give Chancellor the ability to raise prices and reduce the quality of its service to some of its advertisers in each of the Seven Counties. 27. New entry into the outdoor advertising market in response to a small but significant price increase by the merged parties in any of these markets is unlikely to be timely and sufficient to render the price increase unprofitable. VIII. Violation Alleged 28. In each of the Seven Counties, the effect of the proposed acquisition of Whiteco by Chancellor would be to lessen competition substantially in interstate trade and commerce, in violation of Section 7 of the Clayton Act in the following ways, among others: (a) actual and potential competition between Chancellor and Whiteco in the business of outdoor advertising will be eliminated; (b) competition generally in the business of outdoor advertising would be lessened substantially; and (c) the prices for outdoor advertising would likely increase, and services would likely decline. -------------------------------------------------------------------------------- Page 10 IX. Requested Relief The plaintiff requests: (a) adjudication that Chancellor's proposed acquisition of Whiteco would be a violation of Section 7 of the Clayton Act; (b) preliminary and permanent injunctive relief preventing the consummation of the proposed acquisition; (c) an award to the United States of the costs of this action; and (d) such other relief as is proper. Dated: November 25, 1998

UNITED STATES OF AMERICA U.S. Department of Justice Antitrust Division 1401 H Street, N.W., Suite 3000 Washington, D.C. 20530, Plaintiff, v. GENERAL DYNAMICS CORPORATION 3190 Fairview Park Drive Falls Church, Virginia 22042-4523 and NEWPORT NEWS SHIPBUILDING INC. 4101 Washington Avenue Newport News, Virginia 23607-2270 Defendants. -------------------------------------------------------------------------------- | | | | | | | | | | | | | | | | | | | | | | | | Civil No: 1:01CV02200 Filed: October 23, 2001 Judge: Gladys Kessler VERIFIED COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain equitable relief against defendants and alleges as follows: 1. The United States seeks to prevent the proposed acquisition of defendant Newport News Shipbuilding Inc. ("Newport News") by defendant General Dynamics Corporation ("General Dynamics") pursuant to an Agreement and Plan of Merger entered into by the defendants on April 24, 2001 and a cash tender offer announced on April 25, 2001 and extended through October 26, 2001. Newport News and General Dynamics are the only two companies that design, develop and construct nuclear submarines for the U.S. Navy. The proposed acquisition of Newport News by General Dynamics would create a monopoly in the design, development and construction of nuclear submarines and would eliminate all competition for a weapons system critical to the national defense. 2. In addition, the proposed acquisition would eliminate all competition for the design, development and integration of electric drive, a new technology that the U.S. Navy plans to incorporate into nuclear submarines and surface combatants. 3. Finally, the proposed acquisition would also substantially lessen competition in the design, development and construction of conventionally powered surface combatants. Acoustical technologies such as hydrodynamic flow, propellor design and machinery noise isolation developed by General Dynamics and Newport News for nuclear submarines are now being applied to surface combatants. If General Dynamics obtains a monopoly position in nuclear submarines it would have the incentive to refuse to make available to its surface combatant competitors technology developed at its submarine yards. I. JURISDICTION AND VENUE 4. This action is filed by the United States under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain the defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. 5. General Dynamics and Newport News design, develop and construct nuclear submarines, and they design, develop and integrate electric drive and acoustical technology, for sale to the U.S. Department of Defense ("DoD") or to military prime contractors in the United States for use in military programs. General Dynamics and Newport News are engaged in interstate commerce and in activities substantially affecting interstate commerce. The Court has subject matter jurisdiction over this action and jurisdiction over the parties pursuant to Sections 12 and 15 of the Clayton Act, 15 U.S.C. §§ 22 and 25, and 28 U.S.C. §§ 1331 and 1337. 6. The defendants transact business and are found within the District of Columbia. Venue is proper in this District under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c). II. THE DEFENDANTS 7. General Dynamics Corporation, a Delaware corporation headquartered in Fairfax, Virginia, reported net sales of about $ 10.4 billion in 2000, approximately 60 percent or $6.24 billion of which was made to the U.S. Government. General Dynamics is the fifth largest DoD contractor. It develops and produces nuclear submarines, destroyers and auxiliary warships, the M-1 Abrams tank, armored troop carriers, Gulfstream aircraft, electric drive technology, acoustical technology and various surveillance, communications, and intelligence systems. General Dynamics' Marine Group consists primarily of four shipyards: Electric Boat, in Groton, Connecticut and Quonset Point, in North Kingstown, Rhode Island, which design and build nuclear submarines; Bath Iron Works, in Bath, Maine, which designs and builds surface combatants and amphibious assault ships for the U.S. Navy; and the National Steel and Shipbuilding Company ( "NASSCO") in San Diego, California, which designs and builds auxiliary ships for the U.S. Navy and commercial ships for private customers, and conducts repair and overhaul services for a variety of U.S. Navy and commercial vessels. In 2000, the Marine Group had net sales of $3.4 billion. 8. Newport News Shipbuilding Inc., is a Delaware corporation headquartered in Newport News, Virginia. In 2000, Newport News reported revenues of about $2.1 billion, $2.0 billion or over 95 percent of which was derived from the U.S. Government. Newport News operates a large main shipyard in Newport News, Virginia, where it produces nuclear submarines and carriers, and a small shipyard in San Diego, California, which does repair work. Newport News is the only company in the United States that designs, develops and constructs nuclear aircraft carriers for the U.S. Navy. III. TRADE AND COMMERCE A. RELEVANT PRODUCT MARKETS 1. Nuclear Submarines 9. Nuclear submarines, a vital weapon platform of America's armed forces, are relied upon to provide undersea superiority. Submarines combine competencies of stealth, endurance, agility and firepower. They perform intelligence gathering, surveillance and reconnaissance, launch and recovery of special operations forces, sea control and power projection missions. 10. Nuclear submarines conduct missions that no other weapon platform can undertake. They require no replenishment at sea and operate without the need for a protective escort. They can provide offensive firepower and other support missions for a battle group at minimal risk. Because of their stealth and sustainability, a nuclear submarine can provide intelligence gathering covertly for an extended period of time without revealing their location. 11. There is no suitable substitute for a nuclear submarine. Surface ships and other weapon platforms cannot perform the missions of a nuclear submarine. 12. The design, development, construction and sale of nuclear submarines to the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. 2. Electric Drive 13. Electric drive technology for submarines and surface combatants is an integrated power system designed so that a single engine or set of engines generate a pool of electricity that can be used both for ship propulsion and to operate the other electrical systems on the ship. The electricity produced by engines or generators is sent by cable to an electrical switchboard where it is divided into two flows -- one for propulsion and one for the ship's other electrical needs. 14. Electric drive eliminates the need for a mechanical drive system where power from a gas or steam turbine is transmitted through a rigid shaft and reduction gears to the ship's propellor. Electric drive technology replaces this mechanical system with quieter generators and connects the generators to motors via cables. Motors, instead of the ship's engine, control the speed of the propellor. In addition, since cables are flexible, the motors can be isolated from the hull to minimize noise transmitted into the water. Electric drive technology is quieter and more fuel efficient than mechanical drive systems. 15. The economic and acoustic benefits of electric drive will significantly enhance the capability and lower the operating costs of nuclear submarines and surface combatants. Electric drive is currently planned for insertion on future nuclear submarines no later than 2010 and on surface combatants as early as 2005. Because of its benefits over mechanical drive, the U.S. Navy has invested significant resources to develop this technology as rapidly as possible. 16. The design, development, integration and sale to the U.S. military of electric drive for submarines and surface combatants is a line of commerce and a relevant product market within the meaning of the Clayton Act. 3. Surface Combatants 17. Surface combatants are designed to engage in combat with enemy aircraft, ships or land targets. The Arleigh Burke class destroyers and the Ticonderoga class cruisers are the main types of surface combatants currently in and being produced for the U.S. Navy fleet. Surface combatants are capable of firing torpedoes for anti-submarine warfare and missiles for anti-surface and anti-air warfare. Destroyers and cruisers usually operate in support of carrier battle groups, surface action groups or amphibious groups. 18. There is no suitable substitute for surface combatants. Other Navy vessels such as submarines or amphibious ships cannot perform the range of missions performed by surface combatants. 19. The design, development, construction and sale of surface combatants to the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. B. RELEVANT GEOGRAPHIC MARKET 20. For national security reasons, the DoD only considers domestic producers for nuclear submarines, electric drive and surface combatants. The DoD is unlikely to turn to any foreign producers in the face of a small but significant price increase by domestic suppliers of nuclear submarines, surface combatants, and electric drive technology. 21. The United States is a relevant geographic market within the meaning of Section 7 of the Clayton Act. C. ANTICOMPETITIVE EFFECTS AND ENTRY 1. Nuclear Submarines 22. General Dynamics and Newport News design, develop and construct nuclear submarines. Construction of the Virginia class submarine is equally shared between General Dynamics and Newport News pursuant to a teaming agreement. General Dynamics produces the pressure hull rings, the engine room and the control room while Newport News produces the stern and bow sections, torpedo room, auxiliary room, machinery room, habitability spaces and the sail. Both firms produce the command and control module. Pursuant to the teaming agreement, General Dynamics is responsible for the test and final assembly of the first and third submarine produced under the program and Newport News is responsible for the test and final assembly of the second and fourth submarine. Each firm builds the power plant portion of the submarine that it is responsible for assembling. After competing against Newport News, General Dynamics won the contract to design the power plant for the Virginia class and to become the overall lead design yard. A Virginia class submarine costs in excess of $2 billion. 23. Although teamed for construction, General Dynamics and Newport News aggressively compete for design improvements to the Virginia class. The Virginia class program is designed to incorporate substantial design changes over the life of the 30-ship program so that subsequent submarines are enhanced to meet future threats. 24. During fiscal year 2000, General Dynamics and Newport News submitted a total of 22 new design improvement proposals for the Virginia class: 12 by Newport News and 10 by General Dynamics. Eighteen of the shipyards' design improvement proposals were approved and funded by the U.S. Navy for further development and evaluation. Over the life of the Virginia class submarine, a total of 110 design improvements have been submitted by General Dynamics and Newport News as of 2000, of which 62 were submitted by Newport News and 48 by General Dynamics. The U.S. Navy has approved and allocated funding for 67 of these design improvements. 25. General Dynamics and Newport News are the only firms with the capability to design, develop and construct a nuclear submarine. General Dynamics designs and builds nuclear submarines at its Electric Boat facilities in Groton, Connecticut and in North Kingstown, Rhode Island. Newport News designs and builds nuclear submarines at its main shipyard in Newport News, Virginia. 26. General Dynamics and Newport News have a long and rich history as competitors in the design and construction of nuclear submarines. In 1995, General Dynamics was selected over Newport News to build the Virginia class after the Navy had awarded contracts for both firms to prepare to start construction. In 1991, General Dynamics won the contract to design the propulsion plant for the Virginia class following an eight-month competition with Newport News. In 1982, following a 17-month competition with Newport News, General Dynamics was selected to design the propulsion plant for the Seawolf. However, after a period of competition for the overall ship design, Newport News was selected as the Seawolf lead design yard over General Dynamics. General Dynamics and Newport News competed aggressively to construct the first two of the three Seawolf submarines. In the early 1960s, Newport News was selected over General Dynamics to design the propulsion plant and become the lead design yard for the Los Angeles class submarine. Newport News and General Dynamics were awarded competitive bids to construct the 62 submarines in the Los Angeles class: 29 by Newport News and 33 by General Dynamics. 27. The acquisition of Newport News by General Dynamics will create a monopoly in the design, development and construction of nuclear submarines. Successful entry into the design, development and construction of nuclear submarines is virtually impossible. Entry would likely take over a decade and cost billions of dollars. Because of the complexity of nuclear submarines and the safety requirements imposed by having a nuclear reactor close to military personnel, it would take years for a new entrant to win the confidence of the U.S. Navy so that it could design and produce a safe nuclear submarine. Moreover, it is highly unlikely that another firm would obtain the necessary regulatory approvals to enter nuclear submarine construction. 2. Electric Drive 28. Newport News and General Dynamics are the two leading firms developing electric drive for use on submarines and surface combatants. General Dynamics is leading one team developing electric drive for incorporation on the Virginia class and is affiliated with a second team developing electric drive technology for the next generation of surface combatants, the DD-21 program. Similarly, Newport News is heading up one team developing electric drive for the Virginia class and is affiliated with a second team developing electric drive for the DD-21 program. On their respective teams for the Virginia class and the DD-21, General Dynamics and Newport News are primarily responsible for the design changes necessary to integrate electric drive onto submarines or surface combatants. Newport News and General Dynamics are the only U.S. firms designing technology to integrate electric drive into submarines and surface combatants. 29. If General Dynamics acquires Newport News, it will control the only two teams developing electric drive and the only two firms capable of integrating electric drive onto submarines and surface combatants. The acquisition would deprive the U.S. Navy of the benefits of competition in the design, development and integration of electric drive onto nuclear submarines and surface combatants. 30. Entry into the design, development and integration of electric drive on nuclear submarines and surface combatants is difficult, time consuming and costly. The development of electric drive for nuclear submarines and surface combatants has thus far taken over 10 years and costed approximately $120 million. 3. Surface Combatants 31. General Dynamics' Bath Iron Works and Northrop Grumman Corp.'s ("Northrop Grumman") Ingalls shipyard are the only two shipyards that have built surface combatants for the U.S. Navy during the past 20 years. General Dynamics and Northrop Grumman are competing to build the next generation of surface combatants, the DD-21. In the DD-21 competition, General Dynamics is the lead on one of two teams, designated as the "Blue team" and Northrop Grumman is the lead on the other team, the "Gold team." 32. The DD-21, and future generations of surface combatants, will need to be stealthier than current combat ships because expected future missions will require operation closer to shore. The stealthiness of these ships will depend to a large extent on advanced acoustics technology, machinery noise reduction, propeller design and aerodynamic flow techniques successfully developed in submarine programs. Engineers at General Dynamics and Newport News are involved in developing and integrating these technologies. General Dynamics has access to these technologies through its ownership of Electric Boat. Northrop Grumman does not have similar access, since it does not develop or produce submarines, though it can currently team with an independent Newport News to learn of such technology. With the acquisition of Newport News, both nuclear submarine yards will be under the control of General Dynamics and General Dynamics will have the incentive to keep the technology in-house for its own competitive benefit. Thus, Northrop Grumman may be denied access to technologies developed in nuclear submarine programs which are necessary for it to be a viable competitor for surface combatants. This foreclosure from discriminating technology will make Northrop Grumman a less viable competitor for surface combatants. 33. The acquisition of Newport News by General Dynamics may substantially lessen competition in surface combatants by weakening General Dynamics' only other rival, possibly leading to a monopoly in surface combatants. 34. Entry into the design, development and integration of submarine technology required for surface combatants and into the design, development and construction of surface combatants is extremely difficult, time consuming and costly. D. HARM TO COMPETITION 35. The DoD has benefited, and likely will benefit in the future, from the ongoing, vigorous competition between General Dynamics and Newport News for the design and construction of nuclear submarines and electric drive technology. Competition will be eliminated in these product markets if General Dynamics acquires Newport News, leading to higher costs, less innovation and higher prices to the DoD. 35. The DoD also relies on ongoing, vigorous competition between General Dynamics and Northrop Grumman in the design and construction of surface combatants. This competition will be substantially lessened if General Dynamics acquires Newport News because of General Dynamics' control of discriminating nuclear submarine technologies necessary for future generations of surface combatants. V. VIOLATION ALLEGED 36. The effect of General Dynamics' proposed acquisition of Newport News is to lessen competition substantially and tend to create a monopoly in interstate trade and commerce in violation of Section 7 of the Clayton Act. 37. The transaction likely will have the following effects among others: competition in the design, development, construction, and sale of products in each of the relevant markets will be eliminated or substantially lessened; actual and future competition between General Dynamics and Newport News in the design, development, construction, and sale of products in each of the relevant markets will be eliminated; costs and/or prices for products in each relevant product market will likely increase; and innovation in each relevant product market will likely decrease. VI. REQUESTED RELIEF Plaintiff requests: That the proposed acquisition by General Dynamics of Newport News be adjudged to violate Section 7 of the Clayton Act, as amended 15 U.S.C. § 18; That the defendants be permanently enjoined and restrained from carrying out the Agreement and Plan of Merger, dated April 24, 2001, or from entering into or carrying out any agreement, understanding or plan, the effect of which would be to combine the business or assets of General Dynamics and Newport News, except for the teaming agreement dated February 25, 1997; That General Dynamics will be permanently enjoined and restrained from acquiring any shares of Newport News pursuant to its proposed tender offer announced on April 25, 2001 and extended to October 26, 2001; That plaintiff be awarded its costs of this action; and That plaintiff have such other relief as the Court may deem just and proper. Respectfully submitted, FOR PLAINTIFF UNITED STATES:

UNITED STATES OF AMERICA, ) Department of Justice ) Antitrust Division ) 325 7th Street, N.W., Suite 500 ) Washington, D.C. 20530, ) Plaintiff, ) ) Civil Action No.: 98-CV-2340 v. ) ) HALLIBURTON COMPANY, ) 3600 Lincoln Plaza ) 500 North Akard Street ) Dallas, Texas 75201-3391, ) and ) ) DRESSER INDUSTRIES, INC. ) 2001 Ross Avenue ) Dallas, Texas 75221, ) Defendants. ) ______________________________ ) COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain equitable and other relief against defendants and alleges as follows: 1. The United States seeks to block the proposed merger of Halliburton Company ("Halliburton") and Dresser Industries, Inc. ("Dresser"), because it would combine two of only four companies that compete to provide logging-while-drilling ("LWD") tools and services for oil and natural gas drilling projects. The merger would also combine two of the four companies that are the only sources of current and likely future innovations in new or improved LWD tools. 2. LWD services are particularly important for companies engaged in offshore oil and gas exploration and drilling, because they provide data on the type of formation being drilled, whether there is oil in the formation, and the ease with which the oil can be extracted from the formation. The LWD tools also provide these data during the drilling so that changes can be made without interrupting the drilling process, thereby increasing productivity and efficiency. 3. If Halliburton and Dresser merge, the reduction in competition likely will lead to higher prices for LWD services, a reduction in LWD service quality, and a slowdown in the pace of LWD-related innovation. As a result, the proposed merger violates Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. I. JURISDICTION, VENUE, AND DEFENDANTS 4. The United States brings this action under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to restrain defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. 5. Halliburton is a Delaware corporation, with its principal offices in Dallas, Texas. Halliburton is a major worldwide provider of products and services for the exploration, development, and production of oil and natural gas. In 1997, Halliburton had revenues of over $8 billion. Halliburton manufactures LWD tools at a facility in Fort Worth, Texas, and provides LWD services from sales and service centers located throughout the world. 6. Dresser is a Delaware corporation, with its principal offices in Dallas, Texas. Dresser is a major worldwide provider of products and services for the exploration, development, and production of oil and natural gas. In 1997, Dresser had revenues of about $7.5 billion. Dresser (through its Sperry-Sun Division) manufactures LWD tools at a facility in Houston, Texas, and provides LWD services from sales and service centers located throughout the world. 7. Halliburton and Dresser are engaged in interstate commerce and in activities substantially affecting interstate commerce. The Court has subject matter jurisdiction over this action and jurisdiction over the parties pursuant to Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. §§ 1331 and 1337. 8. The defendants transact business and are found within the District of Columbia. Venue is proper in this District under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c). II. TRADE AND COMMERCE A. The Relevant Product Market 9. Virtually all oil and natural gas in the United States is discovered and gathered by drilling wells, onshore and offshore, that range from several hundred feet to several miles in depth. Wells are drilled using a drill pipe (or "drill string"), which is a heavy-walled pipe assembled end-to-end in sections. The drill string is suspended from the mast of a drilling rig and lowered gradually as the earth is penetrated. As the drill string is rotated, the earth is cut by a drill bit attached to the end of the drill string or to a motor that is attached to the end of the drill string. As the depth of the well increases, additional sections of drill pipe are added to the drill string. 10. Oil and gas companies rely on oilfield service companies for products and services that enable them to drill for oil and natural gas efficiently. It is increasingly common for oil and gas companies to drill non-vertical, or "directional" wells, particularly offshore. This drilling technique allows the driller to avoid placing multiple rigs at a site or moving the rig, thereby decreasing the total cost of drilling for multiple reserves. But to drill directionally, the driller must be able to determine the precise direction the drill bit is moving during the drilling operation. Measurement-while-drilling ( "MWD") tools enable the driller to do this by transmitting data from the drill bit as it proceeds. These data allow the driller to adjust the drilling path as necessary. 11. In addition to MWD tools, the oil and gas companies use LWD tools, especially when drilling non-vertical wells offshore. While the drilling is ongoing, sensors in these tools send back data that allow the drillers to evaluate the formation through which the drill bit is cutting. These formation evaluation data assist the driller in locating oil and gas reserves. Because LWD tools transmit formation data while the drilling is ongoing, the driller can detect changes in downhole pressure, prevent the drill bit from straying from the zone of oil and gas, and thereby reduce the time and risk of drilling. LWD tools are mounted on the drill string, along with MWD tools, at the drill bit. Because it is necessary that the MWD tools and LWD tools be compatible, customers who want to use both types of tools on a particular drilling project usually obtain them from the same company. 12. There are four types of LWD tools, each of which provides different information about the formation: gamma ray; resistivity; neutron density; and sonic. LWD gamma ray tools identify the type of formation through which the drill string is cutting, and are often combined with other types of LWD tools. Data from LWD resistivity tools help detect the presence of oil, gas, and water in the formation. Data from LWD neutron density and sonic tools help determine how porous the formation is. Knowing the relative porosity helps the driller determine the amount of liquid in the formation and the formation's permeability. 13. There is no realistic substitute for LWD services in offshore drilling. While information about the formation can also be obtained through wireline logging, that technique does not provide data while drilling is ongoing. Instead the drilling must be stopped, the drill string must be removed, and the drilling rig must remain idle while the wireline log is made -- a period of time that can last more than a day. For offshore drilling projects, when the idled rig costs are added to the cost of wireline logging, the aggregate cost of wireline logging services is significantly greater than the cost of using LWD services. The ability of LWD tools to provide formation evaluation while the drilling is ongoing is particularly important, because the operator can save time and lower costs by better guiding of the drill bit towards promising formations. 14. A small but significant and nontransitory increase in LWD services would not cause a significant number of customers drilling offshore wells to substitute other methods of evaluating formations, such as wireline logging. 15. The provision of LWD services for offshore drilling projects is a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act. B. The Relevant Geographic Market 16. United States customers need LWD services available locally from firms with a reputation in the area. Because geological and environmental conditions vary from region to region around the world, a provider in one region is not automatically considered an option in another. Providers of LWD services must have tools physically available in an area and also must maintain service centers in the area in the event that tools malfunction. 17. The United States is a relevant geographic market for this relevant product market within the meaning of Section 7 of the Clayton Act. C. Concentration and Entry 18. The United States market for offshore LWD tools and services is highly concentrated; only four companies compete. Dresser is the second largest provider of LWD services for U.S. offshore drilling projects, with about 27% of total revenues. Halliburton is the fourth largest provider, accounting for about 18% of total revenues. Total 1997 revenues of LWD services provided to U.S. offshore drilling projects were almost $160 million. 19. The United States market for offshore LWD tools and services would become substantially more concentrated if Halliburton and Dresser merge. Using a measure of market concentration called the Herfindahl-Hirschman Index ("HHI") (defined and explained in Appendix A), the proposed transaction will increase the HHI in this market by nearly 1000 points to a post acquisition level of approximately 3600. 20. Successful entry into the provision of U.S. offshore LWD tools and services is difficult, time-consuming, and costly. The development of the full range of LWD tools that Halliburton, Dresser, and the other two firms have would take a number of years and require a large investment. Even if a new entrant could develop the LWD tools, it would have to engage in extensive testing and establish its reputation with customers for high quality products and for reliability in the operation of the tools. Customers require that their LWD suppliers have well- established reputations, because offshore drilling costs are very high and the cost of delay due to failure of the LWD tools can be great. 21. Experience in drilling, significant research and development departments, and the provision of drilling services on a global scale have been the characteristics of virtually all companies responsible for the development and commercialization of new and improved LWD tools. Today only four firms engage in the development and commercialization of new and improved LWD tools, including Halliburton and Dresser. Like Halliburton and Dresser, the other two companies offer drilling services, including LWD services, throughout the world. All four companies have extensive engineering programs underway to devise new LWD tools or improve existing tools. Halliburton and Dresser respond to each other's innovation efforts, as well as to those of the two others. Customers rely on the competition among these four firms for technological innovation in the development, commercialization, and improvement of LWD tools to produce the highest quality tools in as short a period as possible, because these developments assist the oil and natural gas companies in recovering greater quantities of oil and gas reserves, particularly offshore. 22. Successful innovation of LWD tools is unlikely by any firm that lacks the scope and scale of operations possessed by the four current market participants. An established revenue base and reputation are necessary to support LWD innovation, and a successful LWD research and development program is unlikely to be created in a reasonable amount of time for the same reasons that new entry into LWD services is difficult. 23. There are no other domestic or foreign firms whose entry or expansion in the LWD services would be likely, timely and sufficient to thwart an anticompetitive price increase, or to prevent the slowdown or lessening of innovation that the merger of Halliburton and Dresser would likely produce. D. Anticompetitive Effects 24. Competition among Halliburton, Dresser, and the other two firms has given customers lower prices and better services for LWD services and has provided customers with new and improved LWD tools. The proposed merger will remove one of only a few significant suppliers from an already concentrated market. The increase in concentration will make an increase in the price of offshore LWD services in the United States through anticompetitive coordination by the few remaining firms easier and more likely. 25. The merger of Halliburton and Dresser would also eliminate one of only a few firms responsible for the development, commercialization, and improvement of LWD tools. As a result of this reduction in competition, the rate of innovation would likely be slower. III. VIOLATIONS ALLEGED 26. The effect of the proposed merger of Halliburton and Dresser would likely be to lessen competition substantially in interstate trade and commerce in violation of Section 7 of the Clayton Act. 27. Unless restrained, the transaction will likely have the following effects, among others: actual and potential competition between Halliburton and Dresser will be eliminated; competition generally in the provision of LWD services will likely be substantially lessened; prices for LWD services will likely increase; and competition in the development, commercialization, and improvement of LWD tools will likely be substantially lessened. IV. REQUEST FOR RELIEF WHEREFORE, Plaintiff requests: That the proposed merger of Halliburton and Dresser be adjudged to violate Section 7 of the Clayton Act; That the defendants be permanently enjoined from carrying out the Agreement and Plan of Merger dated February 25, 1998, or from entering into or carrying out any agreement, understanding, or plan to merge; That plaintiff be awarded its costs of this action; and That plaintiff have such other relief as the Court may deem just and proper. Dated: September 29, 1998.

UNITED STATES OF AMERICA, Plaintiff, v. HALLIBURTON COMPANY and DRESSER INDUSTRIES, INC., Defendants. -------------------------------------------------------------------------------- | | | | | | | | | | | Civil Action No. FINAL JUDGMENT WHEREAS, plaintiff, the United States of America, filed its Complaint in this action on September 29, 1998, and plaintiff and defendants Halliburton Company ("Halliburton") and Dresser Industries, Inc. ("Dresser") 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 prompt and certain divestiture of Halliburton's LWD Business to assure that competition is not substantially lessened; AND WHEREAS, plaintiff requires defendants to make certain divestitures for the purpose of remedying the loss of competition alleged in the Complaint; AND WHEREAS, defendants have represented to the plaintiff that the divestiture ordered herein can and will be made and that defendants will later raise no claims of hardship or difficulty as grounds for asking the Court to modify any of the divestiture requirements contained below; NOW, THEREFORE, before the taking of any testimony, and without trial or adjudication of any issue of fact or law herein, and upon consent of the parties hereto, it is hereby ORDERED, ADJUDGED, AND DECREED as follows: I. JURISDICTION This Court has jurisdiction over defendants hereto and over the subject matter of this action. The Complaint states a claim upon which relief may be granted against defendants, as hereafter defined, under Section 7 of the Clayton Act, as amended (15 U.S.C. § 18). II. DEFINITIONS As used in this Final Judgment: "Dresser" means Dresser Industries, Inc., a Delaware corporation with its headquarters and principal place of business in Dallas, Texas, and its successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, directors, officers, managers, agents, and employees. "Halliburton" means Halliburton Company, a Delaware corporation with its headquarters and principal place of business in Dallas, Texas, and its successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, directors, officers, managers, agents, and employees. "HESI" means Halliburton Energy Services, Inc., a wholly owned subsidiary of Halliburton. "Intellectual Property" means intellectual property used in connection with the use, manufacture and/or sale of the transferred LWD and MWD tools and related software, including without limitation, foreign and domestic patent applications and patents; trade secrets; foreign and domestic copyrights and copyright registrations; and foreign and domestic common law and registered trademarks or service marks, and trademark or service mark applications. "LWD Services" means the services and products used to provide real-time logging-while-drilling formation evaluation data which is utilized to evaluate the formation characteristics of a given geologic formation. LWD Services also include MWD Services provided in conjunction with LWD Services. "LWD Business" means HESI's worldwide business providing LWD Services and includes the tangible and intangible assets, obligations, and understandings set forth in Schedule A. "MWD Services" means the services and products used in drilling directional wells to provide real-time information about the inclination and azimuth of downhole drilling tools at the bottom of the hole. "Person" means any natural person, corporation, association, firm, relationship, or other business or legal entity. III. APPLICABILITY The provisions of this Final Judgment apply to each of the defendants, their successors and assigns, their subsidiaries, directors, officers, managers, agents, and employers, and all other persons in active concert or participation with any of them who shall have received actual notice of this Final Judgment by personal service or otherwise. Defendants shall require, as a condition of the sale or other disposition of all or substantially all of the LWD Business, that the acquiring party agree to be bound by the provisions of this Final Judgment. IV. DIVESTITURE Defendants are hereby ordered and directed in accordance with the terms of this Final Judgment, within one hundred and eighty (180) calendar days after this Final Judgment is filed by plaintiff or five (5) days after notice of the entry of this Final Judgment by the Court, whichever is later, to divest the LWD Business as an ongoing business, in accordance with the terms and commitments set forth in Schedule A, to an acquirer acceptable to plaintiff in its sole discretion. Defendants shall use their best efforts to accomplish the divestiture ordered by this Final Judgment as expeditiously and timely as possible. Plaintiff, in its sole discretion, may extend the time period for any divestiture for an additional period of time not to exceed thirty (30) days. In accomplishing the divestiture ordered by this Final Judgment, defendants promptly shall make known, by usual and customary means, the availability for sale of the LWD Business. Defendants shall inform any 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 the Final Judgment. Defendants shall also offer to furnish to all prospective purchasers, subject to customary confidentiality assurances, all information regarding the LWD Business 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 plaintiff at the same time that such information is made available to any other person. Defendants shall not interfere with any negotiations by any purchaser to employ any Halliburton employee of the LWD Business. Defendants shall permit prospective purchasers of the LWD Business to have reasonable access to their personnel and to make such inspection of the physical facilities and any and all of their financial, operational, or other documents and information customarily provided as part of a due diligence process. Defendants shall not take any action, direct or indirect, that will impede in any way the operation of the LWD Business. Unless plaintiff otherwise consents in writing, the divestiture pursuant to Section IV, or by trustee appointed pursuant to Section V of this Final Judgment, shall include all of the LWD Business, and shall be accomplished in such a way as to satisfy plaintiff, in its sole discretion, that the LWD Business can and will be used by the purchaser as part of a viable, ongoing business engaged in the provision of LWD Services. The divestiture, whether pursuant to Section IV or Section V of this Final Judgment, shall be made (1) to a purchaser who is demonstrated to plaintiff's sole satisfaction (a) to have the capability and intent of competing effectively in LWD Services, and (b) to have the managerial, operational, and financial capability to compete effectively in LWD Services, and (2) on terms none of which give defendants the ability unreasonably to raise the purchaser's costs, to lower the purchaser's efficiency, or otherwise to interfere in the ability of the purchaser to compete effectively. Defendants shall not sell the LWD Business to Baker Hughes, Inc., Schlumberger Limited, or any of their affiliates or subsidiaries during the life of this decree. V. APPOINTMENT OF TRUSTEE In the event that defendants have not divested the LWD Business within the time specified in Section IV of this Final Judgment, the Court shall appoint, on application of the United States, a trustee selected by plaintiff to effect the divestiture of the LWD Business. Until such time as a trustee is appointed, defendants shall continue their efforts to effect the divestiture as specified in Section IV. After the appointment of a trustee becomes effective, only the trustee shall have the right to sell the LWD Business. The trustee shall have the power and authority to accomplish the divestiture at the best price then obtainable 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 V(C) of this Final Judgment, the trustee shall have the power and authority to hire at the cost and expense of defendants any investment bankers, attorneys, or other agents reasonably necessary in the judgment of the trustee to assist in the divestiture, and such professionals and agents shall be accountable solely to the trustee. The trustee shall have the power and authority to accomplish the divestiture at the earliest possible time to a purchaser acceptable to plaintiff in its sole discretion, and shall have such other powers as this Court shall deem appropriate. Defendants shall not object to a sale by the trustee on any grounds other than the trustee's malfeasance. Any such objections by defendants must be conveyed in writing to plaintiff and the trustee within ten (10) calendar days after the trustee has provided the notice required under Section VI of this Final Judgment. The trustee shall serve at the cost and expense of defendants, on such terms and conditions as the Court may prescribe, and shall account for all monies derived from the sale of the assets 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 such trustee and of any professionals and agents retained by the trustee shall be reasonable in light of the value of the divested business and based on a fee arrangement providing the trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished. Defendants shall use their best efforts to assist the trustee in accomplishing the required divestiture, including their best efforts to effect all necessary regulatory approvals. The trustee and any consultants, accountants, attorneys, and other persons retained by the trustee shall have full and complete access to the personnel, books, records, and facilities of the business to be divested, and Defendants shall develop financial or other information relevant to the business to be divested customarily provided in a due diligence process as the trustee may reasonably request, subject to customary confidentiality assurances. Defendants shall permit bona fide prospective purchasers of the assets to have reasonable access to their personnel and to make such inspection of physical facilities and any and all financial, operational or other documents and other information as may be relevant to the divestiture required by this Final Judgment. After its appointment, the trustee shall file monthly reports with the parties and the Court setting forth the trustee's efforts to accomplish the divestiture ordered under this Final Judgment; 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. 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 business 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 LWD Business. If the trustee has not accomplished such divestiture within six (6) months after its appointment, 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 divestiture has not been accomplished, and (3) the trustee's 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 plaintiff. VI. NOTIFICATION 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 divestiture pursuant to Sections IV or V of this Final Judgment, defendants or the trustee, whichever is then responsible for effecting the divestiture, shall notify plaintiff of the proposed divestiture. 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, together with full details of same. Within fifteen (15) calendar days of receipt by plaintiff of such notice, plaintiff may, in its sole discretion, request from defendants, the proposed purchaser or purchasers, 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 plaintiff has been provided with the additional information requested from defendants, the proposed purchaser or purchasers, and any third party, whichever is later, plaintiff shall provide written notice to defendants and the trustee, if there is one, stating whether or not it objects to the proposed divestiture. If plaintiff provides written notice to defendants and the trustee that it does not object, then the divestiture may be consummated, subject only to defendants' limited right to object to the sale under Section V(B) of this Final Judgment. Absent written notice that plaintiff does not object to the proposed purchaser or upon objection by the plaintiff, a divestiture proposed under Sections IV or V may not be consummated. Upon objection by defendants under the provision in Section V(B), a divestiture proposed under Section V shall not be consummated unless approved by the Court. VII. AFFIDAVITS Within twenty (20) calendar days of the filing of the Complaint in this matter and every thirty (30) calendar days thereafter until the divestiture has been completed, whether pursuant to Section IV or Section V of this Final Judgment, defendants shall deliver to plaintiff an affidavit as to the fact and manner of compliance with Sections IV or V of this Final 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 business 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 a purchaser for the relevant business and to provide required information to prospective purchasers including the limitations, if any, on such information. Within twenty (20) calendar days of the filing of the Complaint in this matter, defendants shall deliver to plaintiff 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 LWD Business pursuant to Section VIII of this Final Judgment. The affidavit also shall describe, but not be limited to, defendants' efforts to maintain and operate the LWD Business as an active competitor, maintain the management, staffing, research and development activities, sales, marketing and pricing of the LWD Business, and maintain the LWD Business in operable condition at current capacity configurations. Defendants shall deliver to plaintiff 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. Until one year after such divestiture has been completed, defendants shall preserve all records of all efforts made to preserve the business to be divested and effect the divestiture. VIII. PRESERVATION OF ASSETS Until the divestiture required by the Final Judgment has been accomplished: Defendants shall take all steps necessary to assure that the LWD Business will be maintained as a separate and independent, economically viable, ongoing business with its assets (including Intellectual Property, management, operations, and books and records) separate, distinct, and apart from those of defendants. Defendants shall use all reasonable efforts on behalf of themselves and the LWD Business to maintain and increase sales of LWD Services, continue current plans for research, development, and testing of LWD Services, and otherwise maintain the business as a viable and active competitor. Defendants shall take no action that would jeopardize the sale of the LWD Business. Defendants shall not sell, lease, assign, transfer or otherwise dispose of, or pledge as collateral for loans (except such loans as are currently outstanding or replacements or substitutes therefore), assets required to be divested pursuant to Section IV or V, except that any component of such assets as is replaced in the ordinary course of business with a newly purchased, assembled, remanufactured or manufactured component may be sold or otherwise disposed of, provided the newly purchased, assembled, remanufactured or manufactured component is so identified as a replacement component for one to be divested. Defendants shall provide and maintain sufficient working capital to maintain the LWD Business as a viable, ongoing business consistent with the requirements of Section VIII(A). Defendants shall preserve the assets required to be divested pursuant to Section IV or V, except those replaced with newly acquired assets in the ordinary course of business, in a state of repair equal to their state of repair as of the date this Final Judgment is filed, ordinary wear and tear excepted. Defendants shall preserve the documents, books, and records relating to the LWD Business until the date of divestiture of the LWD Business. Except in the ordinary course of business, Defendants shall refrain from terminating or altering current employment, salary, or benefit agreements for any executive or managerial person whose principal responsibilities are with the LWD Business, or for any sales, manufacturing, marketing, engineering, or other technical person of the LWD Business. Defendants shall also refrain from transferring any employee so employed without the prior approval of plaintiff. Defendants shall use all reasonable efforts to maintain the manufacturing activities of the LWD Business, and shall maintain at a level no less than the highest level since February 25, 1998, research and development funding, promotional, advertising, sales, technical assistance, marketing, and merchandising support for the LWD Business. Defendants shall provide and maintain sufficient lines and sources of credit to maintain the LWD Business as an economically viable, ongoing business. Defendants shall take all steps necessary to ensure that the facilities associated with the LWD Business are fully maintained in operable condition at no lower than their current rated capacity, and shall maintain and adhere to normal repair and maintenance schedules for the LWD Business. Defendants shall maintain, in accordance with sound accounting principles, separate, true, accurate and complete financial ledgers, books and records that report, on a periodic basis, such as the last business day of every month, consistent with past practices, the assets, liabilities, expenses, revenues, income, profit and loss of the LWD Business. Defendants shall take no action that would interfere with the ability of any trustee appointed pursuant to the Final Judgment to complete the divestiture pursuant to the Final Judgment to a suitable purchaser. Until such time as the LWD Business is divested, the assets to be divested shall be managed by a person appointed by Halliburton within ten (10) business days of consummation of the merger of Halliburton and Dresser, subject to plaintiff's approval. The person so appointed shall have complete managerial responsibility for the LWD Business, subject to the provisions of this Order and the Final Judgment. In the event that the person becomes unable to perform his duties, defendants shall appoint, subject to plaintiff's approval, a replacement within ten (10) business days. Should defendants fail to appoint a replacement acceptable to plaintiff within ten (10) business days, plaintiff shall appoint a replacement. IX. FINANCING Defendants are ordered and directed not to finance all or any part of any purchase by purchaser made pursuant to Sections IV or V of this Final Judgment. X. COMPLIANCE INSPECTION For purposes of determining or securing compliance with the Final Judgment and subject to any legally recognized privilege, from time to time: 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: 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 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. 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. 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 plaintiff 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. If at the time information or documents are furnished by defendants to plaintiff, defendants represent and identify in writing the material in any such information or documents to which a claim of protection may be asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure, and defendants mark each pertinent page of such material: "Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure," then ten (10) calendar days notice, if practicable, shall be given by plaintiff to defendants prior to divulging such material in any legal proceeding (other than a grand jury proceeding) to which each defendant is 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 day of its entry. XIII. PUBLIC INTEREST Entry of this Final Judgment is in the public interest. Dated April 1, 1999 _______________/s/________________ (Thomas Penfield Jackson) UNITED STATES DISTRICT JUDGE

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) UNITED STATES OF AMERICA, ) Department of Justice ) Antitrust Division ) 1401 H Street, N.W., Suite 3000 ) Washington, DC 20530, ) ) Plaintiff, ) Civil No.: ) v. ) ) Filed: LOCKHEED MARTIN ) CORPORATION, ) 6801 Rockledge Drive ) Bethesda, MD 20817, ) ) and ) ) NORTHROP GRUMMAN ) CORPORATION, ) 1840 Century Park East ) Los Angeles, CA 90067, ) ) Defendants. ) ____________________________________ ) VERIFIED COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain equitable relief against defendants and alleges as follows: 1. The United States seeks to prevent the proposed acquisition of defendant Northrop Grumman Corporation ("Northrop") by defendant Lockheed Martin -------------------------------------------------------------------------------- Page 2 Corporation ("Lockheed") pursuant to an Agreement and Plan of Merger entered into by defendants on July 2, 1997. Northrop and Lockheed are two of the leading competitors and major providers of electronics systems and military aircraft to the U.S. military. The proposed acquisition of Northrop by Lockheed would result in unprecedented vertical and horizontal concentration in the defense industry which would substantially lessen, and in several cases eliminate, competition in major product markets critical to the national defense. 2. Lockheed and Northrop are the only two suppliers of airborne early warning ("AEW") radar, directed infrared countermeasures ("IRCM") systems, and the SQQ-89 antisubmarine warfare ("ASW") combat system to the U.S. military. They are also the only effective competitors for U.S. military electro- optical ("EO") missile warning systems, and the two leading suppliers of remote minehunting systems and stealth technology. Lockheed, and a Raytheon Company ("Raytheon") and Northrop team (with Northrop as the supplier of the critical electronics technology), are the only companies developing fiber-optic towed decoys ("FOTDs"). Lockheed and Northrop are two of only three viable suppliers of on-board radio frequency countermeasures ("RFCM") systems and high performance fixed-wing military aircraft for the U.S. military. 3. If Lockheed acquires Northrop, it will obtain a monopoly in AEW radar, EO missile warning systems, directed IRCM systems, FOTDs, and the SQQ-89 ASW combat system. This monopoly position likely will lead to higher costs, higher prices, and less innovation for systems required by the U.S. military. 4. Lockheed's acquisition of Northrop will also substantially reduce -------------------------------------------------------------------------------- Page 3 competition in on-board RFCM systems, high performance fixed-wing military aircraft, stealth technology, and remote minehunting systems. The likely effects of the acquisition will be higher costs, higher prices, and less innovation for U.S. military platforms and systems required by the U.S. military. The acquisition, if consummated, would result in only Lockheed and The Boeing Company ("Boeing") remaining as suppliers of U.S. military high performance fixed-wing military aircraft, with the two companies teamed on virtually every military aircraft currently in production. The increased interdependence between Lockheed and Boeing may lead to reduced competition among aircraft platforms, less price competition, and reduced innovation in the high performance fixed- wing military aircraft market. 5. Northrop's Logicon division provides systems engineering and technical assistance services for many important U.S. military programs, including the Navy's AEGIS program. As part of its systems engineering and technical assistance services, Logicon tests and evaluates products provided by Lockheed and its competitors for U.S. military programs. If Lockheed acquires Logicon, it will be in a position to recommend to the U.S. military that Lockheed's own work is acceptable, test and evaluate Lockheed's products against products of its competitors, and have access to competitively sensitive non-public information concerning Lockheed's competitors, all of which would result in substantial harm to competition. 6. Lockheed is a prime contractor and systems and subsystems provider for U.S. military platforms and major integrated electronics systems such as AEGIS, -------------------------------------------------------------------------------- Page 4 which is used by the Navy on destroyers and cruisers, and submarine combat systems. Northrop is a prime contractor for U.S. military platforms and integrated electronics systems such as the B-2 avionics system. Northrop is also a leading supplier of critical systems and subsystems used on U.S. military platforms and integrated electronic systems, including airborne fire control radar, AEW radar, electronic warfare systems, the SQQ-89 ASW combat system, sonar systems, and space-based electronics. The acquisition of Northrop will give Lockheed additional control of military platforms and integrated electronics systems, and increase its control over electronic systems and subsystems for its platforms and integrated electronics systems. The acquisition will give Lockheed strong economic incentives (1) to favor its in-house capability to the detriment or foreclosure of other system and subsystem competitors and (2) to refuse to sell, to sell inferior quality, or to sell at disadvantageous terms, its in-house capability to its platform and integrated electronic system competitors. The acquisition will likely result in less innovation by Lockheed and other platform, system, and subsystem competitors, possible exit by competitors, fewer opportunities for and increased barriers to competitive entry, and lower quality subsystem, system, and platform products at higher costs and higher prices to the U.S. military. 7. The proposed acquisition of Northrop by Lockheed will substantially lessen competition in all identified product markets. For these reasons, the United States Department of Defense ("DoD") has found that the proposed merger presents "an unprecedented combination of horizontal and vertical problems" which raise "significant competitive problems for the Department of Defense," which has led -------------------------------------------------------------------------------- Page 5 the DoD to conclude that "the Department's interests would be best served if Lockheed Martin and Northrop Grumman do not merge." Letter from Secretary of Defense William S. Cohen to Attorney General Janet Reno (March 23, 1998). I. VENUE 8. This action is filed by the United States under Section 15 of the Clayton Act, as amended, 15 U.S.C. &167; 25, to prevent and restrain the defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. &167; 18. 9. Lockheed and Northrop develop and produce high performance fixed- wing military aircraft and integrated electronics systems for sale to the DoD, an agency of the United States. Lockheed also develops and produces space-based platforms for sale to the DoD. Lockheed and Northrop also develop and produce critical defense systems and subsystems including but not limited to AEW radar, airborne fire control radar, EO missile warning systems, directed IRCM systems, on-board RFCM systems, FOTDs, remote minehunting systems, the SQQ-89 ASW combat system, sonar systems, and space-based electronics for sale to the DoD or to military prime contractors in the United States for use in U.S. military programs. The services provided by Logicon are in the flow of United States interstate commerce. Lockheed and Northrop are engaged in interstate commerce and in activities substantially affecting interstate commerce. The Court has subject matter jurisdiction over this action and jurisdiction over the parties pursuant to Sections 12 and 15 of the Clayton Act, 15 U.S.C. &167;&167; 22 and 25, and 28 U.S.C. &167;&167; 1331 and 1337. 10. The defendants transact business and are found within the District of -------------------------------------------------------------------------------- Page 6 Columbia. Venue is proper in this District under 15 U.S.C. &167; 22 and 28 U.S.C. &167; 1391(c). II. THE DEFENDANTS 11. Lockheed Martin Corporation is a Maryland corporation headquartered in Bethesda, Maryland. This military giant reported net sales of about $27 billion in 1996, approximately 70 percent or $19 billion of which were made to the U.S. government. Lockheed develops and/or produces, inter alia, tactical fighter, airlift, antisubmarine warfare, reconnaissance, surveillance, and special mission military aircraft; high performance military and commercial electronics systems for undersea, shipboard, land-based, airborne, and spaced-based applications, including surface ship and submarine combat systems, air defense systems, aircraft systems integration, and radar, electronic warfare, ASW combat, and sonar systems; space-based electronics; undersea vehicles; satellites and spacecraft; defensive and strategic missiles; and complex information systems and services. Lockheed's Aeronautics Sector, comprised of four divisions, generated approximately $5.3 billion of its total $5.6 billion in 1996 sales from military aircraft programs. Lockheed's Electronics Sector, comprised of 15 divisions, generated approximately $6.1 billion of its total $6.7 billion in 1996 sales from domestic and international military programs. 12. Northrop Grumman Corporation is a Delaware corporation headquartered in Los Angeles, California. In 1996, Northrop reported revenues of about $8.1 billion, $6.7 billion or over 80 percent of which was derived from the U.S. government. Northrop is an aircraft and electronics company which develops -------------------------------------------------------------------------------- Page 7 and/or produces, inter alia, tactical fighter, bomber, early warning, and surveillance/battle management military aircraft and aircraft subassemblies; radar, electronic warfare, ASW combat, and sonar systems; space-based electronics; electronics system integration; precision guided weapons and munitions; missile launchers; shipboard instrumentation and control systems; mine countermeasures and undersea vehicles; marine machinery and advanced propulsion systems; and computer systems. In 1996, sales to the U.S. government comprised approximately $3.2 billion of Northrop's total $4 billion in aircraft revenue, and approximately $3.5 billion of Northrop's total $4 billion in electronics revenue. III. TRADE AND COMMERCE A. RELEVANT PRODUCT MARKETS 1. Airborne Early Warning Radar 13. Airborne Early Warning ("AEW") radars are aircraft-based radars whose primary role is wide-area detection and tracking of numerous airborne targets within a specified airspace. AEW radars must typically cover a 360- degree over- the-horizon field of view. The U.S. military aircraft AEW radar mission is to provide volume surveillance typically capable of simultaneously tracking between 1000 and 5000 targets at ranges of over 200 nautical miles. AEW radars provide an alert when a target enters the volume of space under surveillance, and relay information to fighter aircraft and/or command and control personnel for an -------------------------------------------------------------------------------- Page 8 appropriate intercept response. 14. AEW radars operate at low frequency bands, usually S- band and below, because lower frequency bands permit less atmospheric attenuation, lower clutter backscatter returns, and more efficient power generation, which allows longer detection ranges and wider volume surveillance. AEW radars operate in a unique and difficult interference environment. AEW radars receive clutter (unwanted non-target returns) from multiple sources in the air, land and sea, and must also contend with jamming and electromagnetic interference. Platform motion and antenna scanning motion are other factors that must be compensated for to assure proper performance of an AEW radar. 15. There is no suitable substitute for AEW radar on U.S. military aircraft. Other airborne radars, such as airborne fire control and airborne ground surveillance radar, cannot perform the mission of AEW radar. a. Airborne fire control radar cannot perform the wide area surveillance function required of AEW radar. The mission of airborne fire control radar is to provide detailed information rapidly about selected targets in the environment so that countermeasure weapons can be directed and fired. Airborne fire control radars use narrow "pencil" beams to focus on nearby targets, rather than the wide beams used on AEW volume search radars. Most airborne fire control radars operate at high frequency bands, such as X-band, because higher frequency bands provide greater resolution and more precise target location data. Higher frequency bands, such as X-band, are not practical for use in AEW radars. b. AEW radars are also distinguishable from air-to-ground surveillance radars. Airborne ground surveillance radars employ advanced ground moving target indicator ("GMTI") and synthetic aperture radar ("SAR") signal processing technology to allow the -------------------------------------------------------------------------------- Page 9 aircraft to distinguish moving targets or create photograph-like images of objects on the ground. GMTI and SAR are not used in the AEW mission. AEW radars use airborne moving target indicator ("AMTI") signal processing technology specifically designed to distinguish airborne targets from clutter and to determine the speed of surveilled aircraft. In addition, air-to-ground surveillance radars use higher frequency bands, normally X-band, to meet the greater resolution requirements of the mission. Higher frequency bands, such as X-band, are not suitable for AEW radar. 16. The development, production, and sale of AEW radar for U.S. military aircraft is a line of commerce and a relevant product market within the meaning of the Clayton Act. 2. Electro-Optical Missile Warning Systems 17. Electro-optical ("EO") missile warning systems are electro- optical sensors that search for the ultraviolet ("UV") or infrared ("IR") energy signatures of approaching missiles. EO missile warning systems only receive (and do not transmit) energy. 18. An EO missile warning system consists of two primary components: a sensor head, which contains optics, filters, and a detector; and a processor, which contains the electronics and software that determine whether an IR or UV energy source is an approaching missile or merely a random non-threatening source. 19. There are no substitutes for EO missile warning systems. Radar missile warning systems that search for approaching missiles broadcast their location and reduce the stealthiness of the platform. These systems are therefore not a suitable substitute for EO missile warning systems. -------------------------------------------------------------------------------- Page 10 20. The development, production, and sale of EO missile warning systems for U.S. military programs is a line of commerce and a relevant product market within the meaning of the Clayton Act. 3. Directed Infrared Countermeasures Systems 21. Directed infrared countermeasures ("IRCM") systems are designed to jam incoming IR-homing missiles. The major components of a directed IRCM system are an EO missile warning system to detect incoming missiles, a jammer consisting of either an IR lamp, an IR laser, or both, and a fine track sensor to point the jammer. Once the missile warning system declares a threat, the IRCM system cues a response. 22. Directed IRCM systems are currently designated for helicopters and some large aircraft, such as the C-130. In the near future, directed IRCM systems likely will be used on large military transport aircraft, fighter jets, ships, and ground vehicles. 23. Other products are not acceptable substitutes for a directed IRCM system. Flares, which can be ejected from a platform or towed on a cable, can be used to draw an IR-homing missile away from a platform, but they are not effective against "Band 4" IR- homing missiles. Flares may also be ineffective against modern IR-homing missiles, which contain electronic counter-countermeasures that can identify a flare's burn and flight characteristics and direct the missile back to the real target. 24. Omni-directional IRCM systems are not viable substitutes for directed IRCM systems. Omni-directional systems are less effective than directed systems because they broadcast continuously in all directions which leaves less power for jamming. Because they broadcast continuously, omni-directional IRCM systems can also alert an enemy of the presence of the protected aircraft. -------------------------------------------------------------------------------- Page 11 25. The development, production, and sale of directed IRCM systems for the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. 4. On-Board Radio Frequency Countermeasures 26. Radio-frequency countermeasures ("RFCM") systems are designed to jam or deceive enemy radars. An on-board RFCM system is located on a ship or aircraft. It detects, analyzes and identifies a radar signal, then selects and generates a "technique" (also referred to as a "jam code") to jam or deceive the radar. 27. There are two categories of techniques used to defeat enemy radars. Early systems simply generated large amounts of radio frequency noise to make the radar screen "go white." Such a "noise jammer" immediately alerts the enemy to its presence; it can then be attacked and destroyed by "home-on-jam" missiles. Noise jammers cannot jam many of the more modern radars. 28. Modern on-board RFCM systems rely mostly on deceptive techniques which lead the radar off the real target. Deception is more complex than noise jamming because it requires an intimate knowledge of enemy radars and operator techniques, but it is also much more successful. 29. There are no substitutes for on-board RFCM systems. Chaff dispensers, which dispense a "cloud" of aluminum foil strips to create false targets, have limited effect against modern radars. 30. The development, production, and sale of on-board RFCM systems for the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. -------------------------------------------------------------------------------- Page 12 5. Fiber- Optic Towed Decoys 31. On-board RFCM systems are of only limited effect against a new class of radar known as "monopulse," which is very difficult to jam or deceive. To deal with this threat, the DoD has funded the development of radio frequency ("RF") towed decoys. RF towed decoys are towed behind an aircraft on a cable and are very effective against monopulse-guided missiles. They are discarded if hit, and a new decoy is deployed. 32. There are two types of RF towed decoys. Early repeater decoys simply received a signal, amplified it, and retransmitted it to lure the missile to hit the decoy instead of the protected aircraft. A radar operator, however, could sometimes separately identify the decoy and the towing aircraft, and hit the aircraft. Advanced decoys rely on techniques generated by the on-board RFCM system, to which they are connected by a fiber-optic line. Such fiber-optic towed decoys ("FOTDs") have higher power and more sophisticated techniques to deceive even a skilled radar operator. 33. There are no substitutes for FOTDs. On-board RFCM systems, particularly those used on smaller aircraft such as fighters, do not provide the same degree of protection from monopulse-guided missiles. 34. The development, production, and sale of FOTDs for the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. 6. High Performance Fixed-Wing Military Aircraft 35. High performance fixed-wing military aircraft are advanced design military aircraft that can perform specialized functions and unique missions that no other aircraft can perform. These are manned fighters, bombers, attack aircraft, and advanced support, reconnaissance, and surveillance aircraft, as well as unmanned combat air vehicles. -------------------------------------------------------------------------------- Page 13 Through the application of advanced technologies in design and production, these aircraft have one or more of the following characteristics: low observability; the ability to fly at high speeds; combat maneuverability; weapons delivery; self-defense ability; and/or the ability to take off and land on an aircraft carrier. 36. High performance fixed-wing military aircraft are separate and distinct from other aircraft. Other aircraft do not have the speed or flexibility to perform missions that can be performed by a high performance fixed-wing military aircraft. 37. The development, production, and sale of high performance fixed-wing military aircraft for the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. 7. Low Observable or "Stealth" Technology 38. Low observable or "stealth" technology refers to technology that reduces the radar cross section and/or the infrared and acoustic "signatures" of a platform so that it is less detectable by radar, infrared or acoustic sensors. Stealth technology is often an essential characteristic of military aircraft, ships, and missiles. Stealth is a highly classified technology for which no substitute exists. 39. The development and application of stealth technology to U.S. military platforms and missiles is a line of commerce and a relevant product market within the meaning of the Clayton Act. 8. Remote Minehunting Systems 40. Remote minehunting systems are relatively small, unmanned vehicles that are deployed from a platform, such as a submarine or surface ship. Their objective is detection and avoidance or mapping of mine fields, frequently in shallow water. -------------------------------------------------------------------------------- Page 14 Although remote minehunting systems are optimized for different requirements, all require vehicle development, launch and recovery, and the ability to locate mines in areas remote from the platform. Additionally, remote minehunting systems must be equipped with propulsion, control, energy, and communication systems. Remote minehunting systems also contain sophisticated high-frequency sonar and signal processing systems. 41. There is no substitute for remote minehunting systems. The Navy uses other devices for minehunting purposes, including minehunting ships and minehunting sonars that are affixed to submarines or combat ships, dropped from airplanes or helicopters, or towed by helicopters. Remote minehunting systems, however, have distinct characteristics that distinguish them from these other minehunting devices. Remote minehunting systems find mines located significant distances from the host platform. Remote minehunting systems are specialized vehicles that have unique technologically complex capabilities not applicable to other minehunting devices. 42. The development, production, and sale of remote minehunting systems for the U.S. military is a line of commerce and a relevant product market within the meaning of the Clayton Act. 9. SQQ-89 Integrated ASW Combat System 43. The SQQ-89 ASW combat system is the integrated sonar and torpedo fire control system used on Navy destroyers and cruisers. The SQQ-89 has historically included: (1) an active hull-mounted sonar array, a very large ball in the bow of the ship; (2) a passive towed array, a long line of sonar sensors towed behind the ship; (3) the SRQ-4 LAMPS data link, which enables the ship to receive sonar signals obtained by sonobuoys dropped from helicopters; (4) the Mk-116 fire control system for launching torpedoes; (5) the -------------------------------------------------------------------------------- Page 15 UYQ-25 performance prediction system; (6) display consoles; and (7) on-board trainers. Recently, an acoustic sonar processing subsystem for detecting incoming torpedos was added. 44. There is no substitute for the SQQ-89. Since its inception, the SQQ-89 has been the only integrated ASW combat system installed on Navy destroyers and cruisers. The SQQ-89 permits multiple sonar systems to operate as a unified system in tandem with the fire control system, ensuring that the ship's crew can use effectively the vital information generated by all of the different sonar components to detect enemy submarines and respond to underwater threats. The building and integration of the various components of the system into a properly functioning and integrated system is a process that requires specialized experience and knowledge. 45. The development, production, and sale of the SQQ-89 integrated ASW combat system is a line of commerce and a relevant product market within the meaning of the Clayton Act. 10. Logicon 46. Logicon, owned by Northrop, provides systems engineering and technical assistance ("SETA") services for many important U.S. military programs. SETA services involve the development of draft technical and other specifications for procurements and programs; the assessment of discrete technical aspects of proposals; the evaluation, testing or monitoring of any service, equipment, or product provided by any company; the evaluation of modifications or changes to any performance requirements of any contractor; and/or the development of financial, cost or budgetary plans, procedures or policies. -------------------------------------------------------------------------------- Page 16 47. Logicon provides SETA services for the Navy Standard Missile program, the Navy Seawolf, the Army All Source Analysis Systems, and for Navy surface programs, including the AEGIS ship program for which Lockheed is the prime contractor. Logicon has annual revenues of over $600 million, and its contracts for the AEGIS program are valued at over $250 million over the life of the various contracts. The SETA services provided by Logicon include the training of AEGIS crews and assistance in introducing AEGIS weapon systems into the fleet. In addition, Logicon helps the Navy's AEGIS program office plan what technology should be incorporated into the ships and how to execute the technology. Logicon makes recommendations to the DoD based on its independent evaluation and verification of designs proposed by Lockheed for the AEGIS system, and evaluates and makes recommendations to the DoD about the viability of design and development efforts by system contractors. 48. Logicon has developed considerable expertise in providing program-specific SETA services to the DoD for the AEGIS and other military programs. It would be very difficult, time consuming, and costly for the DoD to replace Logicon on these programs. 49. The provision of SETA services to the DoD on programs such as AEGIS constitute lines of commerce and relevant product markets within the meaning of the Clayton Act. 11. Markets Adversely Affected by Vertical Effects 50. The United States hereby incorporates Paragraphs 1 through 49. 51. The U.S. military contracts directly with prime contractors for military aircraft and space-based platforms, as well as for ship and undersea vehicle integrated electronics systems. Under current DoD procurement initiatives, the prime contractor is responsible -------------------------------------------------------------------------------- Page 17 for sourcing all necessary systems, subsystems, and equipment either internally or from qualified subcontractors. Prime contractors have substantial discretion in selecting suppliers to provide systems, subsystems, and equipment on their platforms and integrated electronics systems with little oversight by the DoD. The DoD relies upon prime contractors to act as neutral brokers in selecting the best system and subsystem solutions to achieve the mission objective of the platform or integrated electronics system for which the prime contractor is responsible. During the competitive stages of a program this selection process is fluid, allowing prime contractors and system and subsystem suppliers to "mix and match" during progressive stages of competition. This helps to ensure that the best systems and subsystems end up on the best platform. Even after a program is awarded, the DoD relies upon prime contractors to remain vigilant for system and subsystem alternatives which could improve the performance or reduce the costs of the overall platform or integrated electronics system. 52. U.S. military airborne platforms encompass many critical systems and subsystems, including AEW radar, airborne fire control radar, electronic warfare ("EW") suites (including EO missile warning systems, directed IRCM systems, on-board RFCM systems, and/or FOTDs), and even sonar systems on some airborne platforms. Likewise, ship and undersea integrated electronics systems encompass many critical systems and subsystems, including EW suites and the SQQ-89 ASW combat system on ships, and a variety of sonar systems on ships and undersea platforms, including side-look minehunting sonar, mine avoidance sonar, acoustic intercept torpedo detection and defense sonar, wide aperture array hull-mounted sonar, and other sonar systems. U.S. military space-based platforms also encompass many critical electronics systems and -------------------------------------------------------------------------------- Page 18 subsystems, most of which are highly classified. 53. The development, production, and sale of AEW radar, airborne fire control radar, EO missile warning systems, directed IRCM systems, on-board RFCM systems, FOTDs, side-look minehunting sonar, mine avoidance sonar, acoustic intercept torpedo detection and defense sonar, wide aperture array hull-mounted sonar, the SQQ-89 ASW combat system, and space-based electronics, as well as the U.S. military platforms and integrated electronic systems in which they are used, are lines of commerce and relevant product markets within the meaning of the Clayton Act. There are no economical substitutes for these military systems and subsystems, and there are no uses for such products other than on the various military aircraft, spaced-based platforms, or ship or undersea integrated electronics systems in which they are used. B. RELEVANT GEOGRAPHIC MARKET 54. The DoD and U.S. military prime contractors performing on U.S. military programs have not and are unlikely to turn to any foreign producers in the face of a small but significant and non-transitory price increase by domestic suppliers in the following markets: AEW radar, airborne fire control radar, EO missile warning systems, directed IRCM systems, on-board RFCM systems, FOTDs, high performance fixed-wing military aircraft, stealth technology, integrated electronics systems, remote minehunting systems, side-look minehunting sonar, mine avoidance sonar, acoustic intercept torpedo detection and defense sonar, wide aperture array hull-mounted sonar, the SQQ-89 ASW combat system, space-based platforms, space-based electronics, or Logicon SETA services. 55. The United States is a relevant geographic market within the meaning of Section 7 of the Clayton Act. -------------------------------------------------------------------------------- Page 19 C. ANTICOMPETITIVE EFFECTS AND ENTRY 1. AEW Radar 56. Northrop and Lockheed produce the only AEW radars in use on U.S. military aircraft. Northrop produces the APY-1 and APY-2 radar, the AEW radars used on the Air Force all-weather tactical warning and control E-3 Sentry Airborne Warning and Control System ("AWACS") aircraft. Lockheed makes the APS-145 radar, an AEW radar that serves on the E-2C Hawkeye, the Navy's all-weather, carrier-based tactical warning and control system aircraft. Northrop, as prime contractor on the E-2C Hawkeye aircraft, also has the platform integration responsibilities for melding the APS-145 radar into the E-2C aircraft. Lockheed and Northrop together received revenue of over $90 million in 1996, and over $100 million in 1997 for U.S. military AEW radar sales and contract research and development for advanced AEW radars. Lockheed's proposed acquisition of Northrop would give it a monopoly in the AEW radar produced for U.S. military aircraft. 57. Internal planning documents of both Lockheed and Northrop identify the other as its primary competitor in the U.S. military AEW radar market. The documents indicate that Northrop is positioning itself to become the supplier of E-2C radar upgrades, and that Lockheed views Northrop as a threat to its current AEW radar position with the U.S. military. 58. Lockheed and Northrop are the two most capable companies in the development and production of advanced AEW radars for U.S. military aircraft. The U.S. military has commenced technology development of advanced AEW radar capabilities for Navy aircraft; and Lockheed and Northrop have both commenced government and internally -------------------------------------------------------------------------------- Page 20 funded research and development projects to develop technology for AEW radar upgrades and for future U.S. military programs. Lockheed's acquisition of Northrop would eliminate substantial competition in the development, production, and sale of AEW radars for future U.S. military AEW upgrades and programs. 59. Lockheed and Northrop are the only companies with proven capability in developing, producing, and integrating AEW radars for use on U.S. military aircraft. Successful entry into the production and sale of AEW radars for U.S. military aircraft would be difficult, time consuming, and costly. A new entrant would have to invest substantial engineering and other resources to overcome the substantial domain and mission knowledge advantage of the two incumbents. Entry into this market would take at least five years and cost well in excess of $100 million for the requisite engineering expertise, product development costs, facilities, and equipment. 2. EO Missile Warning Systems 60. Lockheed and Northrop are the only two U.S. companies that are developing EO missile warning systems. Lockheed produces the AAR-47, the AAR-56, and the AAR- 57 missile warning systems. Northrop produces the AAR-54 missile warning system. Although Raytheon and Cincinnati Electronics Corporation produced the AAR-44(V) missile warning system, the system uses old low performance scanning IR technology that does not have the same quality as the missile warning systems produced by Lockheed and Northrop. The DoD is unlikely to purchase this system in the future. 61. Lockheed and Northrop are the only viable competitors for current and upcoming EO missile warning system programs for the DoD. Both Lockheed and Northrop are producing and developing the advanced IR and UV missile warning systems necessary for -------------------------------------------------------------------------------- Page 21 these programs. No other domestic firm is developing either of these types of systems. 62. Lockheed's acquisition of Northrop would eliminate all competition in development, production, and sale of state of the art EO missile warning systems and effectively give Lockheed a monopoly in EO missile warning systems for the U.S. military. The proposed acquisition will result in a single supplier with the incentive and ability to raise prices and a reduced incentive to minimize costs, perform on schedule, and produce innovative products. 63. Successful entry into the development, production, and sale of EO missile warning systems is difficult, time consuming, and costly. Entry requires advanced technology, skilled engineers, testing facilities, and specialized equipment. A potential entrant would need to engage in difficult, expensive, and time consuming research to develop algorithms and hardware to successfully identify, track, and declare incoming missile threats. It is unrealistic to expect new entry in a timely fashion to protect competition in upcoming EO missile warning system purchases. 3. Directed IRCM Systems 64. Lockheed is producing the Advanced Threat Infrared Countermeasures ("ATIRCM") system. Northrop is producing the Directed Infrared Countermeasures ("DIRCM") system. Both companies are developing smaller, more powerful systems for a major DoD competition ultimately worth over a billion dollars which will be awarded in the next few years. No other company is developing a directed IRCM system for this competition. These are the only directed IRCM systems in development or production in the United States. Lockheed and Northrop are the only competitors for U.S. military directed IRCM systems. -------------------------------------------------------------------------------- Page 22 65. During the next few years, the DoD expects to spend over $450 million on directed IRCM systems. These purchases will include Lockheed's ATIRCM system and Northrop's DIRCM system. The DoD also expects a competition for engineering, manufacturing, and development of a directed IRCM system for tactical aircraft in 2001. Additional competitions may be held for ground vehicle and shipboard directed IRCM systems. 66. Lockheed's acquisition of Northrop would eliminate competition in development, production, and sale of directed IRCM systems. The proposed acquisition will result in a single supplier with the incentive and ability to raise prices and a reduced incentive to minimize costs, perform on schedule, and produce innovative products. 67. Successful entry into the development, production, and sale of directed IRCM systems is difficult, time consuming, and costly. Entry requires advanced technology, skilled engineers, testing facilities, and specialized equipment. A potential entrant would need to engage in difficult, expensive, and time consuming research to develop jamming techniques and hardware to successfully track and jam incoming missile threats. It is unrealistic to expect new entry in a timely fashion to protect competition in upcoming directed IRCM system purchases. 4. On-Board RFCM Systems 68. Lockheed and Northrop are two of the leading suppliers of advanced on-board RFCM systems to the DoD. In 1997, Lockheed and Northrop received over $225 million in revenue for development and manufacture of on-board RFCM systems. The only other credible bidder for future on-board RFCM systems is ITT Industries, Inc. ("ITT"). Raytheon, which produced on-board RFCM systems in the past, has not -------------------------------------------------------------------------------- Page 23 maintained its technical proficiency in RFCM systems and has not developed the technology necessary to counter more modern threats. Raytheon is therefore unlikely to be a credible bidder for future contracts, especially since its systems relied largely on noise jamming rather than sophisticated deceptive techniques. 69. Lockheed and Northrop are involved in the development and production of two of the most advanced on-board RFCM systems. The Integrated Defensive Electronic Countermeasures ("IDECM") system is being developed by a Lockheed/ITT team, and has yet to be produced. Lockheed is the prime on this team. The Airborne Self Protection Jammer ("ASPJ") has been produced by a Northrop/ITT joint venture, and has been fielded on some F/A-18 C/D aircraft. For existing ships and fixed-wing aircraft, many of which are scheduled or expected to receive upgrades to their on-board RFCM systems, the DoD will likely choose between these systems or minor modifications thereof. 70. The combination of Lockheed and Northrop would result in both systems being controlled by cooperative arrangements between Lockheed and ITT. Lockheed and ITT would have the incentive and ability to raise prices and a reduced incentive to minimize costs, perform on schedule, and develop innovative products. 71. Successful entry into the development, production, and sale of on-board RFCM systems is difficult, time consuming, and costly. Entry requires advanced technology, skilled engineers, testing facilities, and specialized equipment. A potential entrant would need to engage in difficult, expensive, and time consuming research to develop the hardware, algorithms and jamming techniques to successfully jam incoming missile threats. It is unrealistic to expect new entry in a timely fashion to protect competition in -------------------------------------------------------------------------------- Page 24 upcoming on-board RFCM system purchases. 5. FOTDs 72. Lockheed is developing an FOTD for the DoD. In 1997, Lockheed received $43.3 million from the DoD to develop this FOTD. Northrop is developing FOTDs with DoD funding and, in conjunction with Raytheon, with funds for the Remote Maritime Patrol Aircraft ("RMPA"), a new United Kingdom aircraft. Under these programs, Northrop is producing the critical FOTD electronics, which produce the high power, wide frequency signals necessary to defeat a monopulse radar. Raytheon is producing the RMPA FOTD shell and fiber-optic converter. Without Northrop's electronics, Raytheon would not be able to produce an FOTD. 73. Raytheon, on its own, only produces the older repeater decoys which the DoD is purchasing as a stopgap measure until FOTDs are available. Because of the improved performance of FOTDs, the DoD is likely to switch from repeater decoys to FOTDs when they are available. 74. Lockheed's acquisition of Northrop would eliminate all competition in development, production, and sale of FOTDs and give Lockheed a monopoly in the U.S. military FOTD market. The proposed acquisition will result in a single supplier with the incentive and ability to raise prices and reduced incentives to minimize costs, perform on schedule, and develop innovative products. 75. Successful entry into the development, production, and sale of FOTDs is difficult, time consuming, and costly. Entry requires advanced technology, skilled engineers, testing facilities, and specialized equipment. A potential entrant would need to engage in -------------------------------------------------------------------------------- Page 25 difficult, expensive, and time consuming research to develop the hardware to successfully receive and transmit RF energy at high power and small volume. It is unrealistic to expect new entry in a timely fashion to protect competition in upcoming FOTD purchases. 6. High Performance Fixed-Wing Military Aircraft 76. In 1996, Lockheed and Northrop had over $7 billion in military aircraft sales. Northrop, Lockheed, and Boeing are the only companies with the military aircraft design, development, and manufacturing experience and capability to provide the U.S. military with high performance fixed-wing military aircraft. The DoD, the only relevant customer, cannot turn to any other company to design or produce high performance fixed-wing military aircraft platforms. 77. Lockheed and Northrop (and their predecessor entities) have a long and rich history as competitors for high performance fixed-wing military aircraft programs, including the F-14, F-16, F/A-18, F-117, B-2 bomber, A-12, F-22, and the Joint Strike Fighter ("JSF"). In addition, Lockheed and Northrop have competed on modifications to existing aircraft. The U.S. military has benefited significantly from Lockheed and Northrop's competition in terms of innovation, price, and performance in the development of new aircraft and in the modification of existing aircraft. 78. Northrop and Lockheed are both currently pursuing and are leading competitors for the most likely new U.S. military high performance fixed-wing aircraft programs, including the Unmanned Combat Air Vehicle ("UCAV"), an unmanned combat vehicle; the Common Support Aircraft ("CSA"), a next generation replacement for four current but aging carrier-based Navy surveillance and support aircraft; and another future aircraft -------------------------------------------------------------------------------- Page 26 program. In addition, Northrop, Lockheed, and Boeing all pursue new ideas and designs for future high performance fixed-wing military aircraft to meet specific combat needs, and these are the only companies that have the capabilities to compete for combined electronics system integration and military airframe upgrades. 79. The loss of Northrop as an independent entity will reduce the number of companies to which the DoD can turn to design, develop, and produce high performance fixed-wing military aircraft from three to two. The DoD relies on a competitive process to develop and produce aircraft for our nation's military defenses. Throughout this competitive process, the DoD purchases a variety of services ranging from innovative design studies to full production of aircraft. Competition is vital to maximize both the innovative ideas associated with each military aircraft program, as well as the quality of the processes used to turn innovative ideas into cost-effective, technically sound, and efficiently produced aircraft. The acquisition will lessen competition at all phases of the process that DoD employs to procure military aircraft, including the early phases where many innovative ideas are born. 80. Post-merger, Lockheed and Boeing would share virtually every military aircraft in production and operation and be highly dependent on each other. For example, on the F- 22 Lockheed controls approximately 67 percent of the platform, and the remaining 33 percent is controlled by Boeing. On the F/A-18, Boeing controls approximately 60 percent of the platform, and the remaining 40 percent will be controlled by Lockheed upon its acquisition of Northrop. In any future production of the B-2, Lockheed will control approximately 60 percent of the platform post-merger, and the remaining 40 percent will be controlled by Boeing. This interdependence may substantially reduce -------------------------------------------------------------------------------- Page 27 competition between aircraft platforms. 81. The barriers to entry into the high performance fixed-wing military aircraft market are extremely high. The need for capital, design and development engineering expertise, low observable or stealth capability, and facilities to test and build high performance fixed-wing military aircraft is too great for any company not currently involved in the market to enter. 7. Low Observable or Stealth Technology 82. Lockheed and Northrop are the recognized leaders in low observable or stealth technology. Lockheed and Northrop each have over two decades of experience applying stealth technology to aircraft, ships, and missiles. Boeing is the only other company with substantial stealth technology. No other company has demonstrated comparable stealth experience, and only Lockheed and Northrop have actually produced stealth aircraft. In the words of J.S. Gordon of Lockheed's famed Skunk Works division, through the Northrop acquisition "Lockheed Martin would consolidate its dominance of stealth- related technology." (Memorandum from J.S. Gordon to J.A. Blackwell (January 24, 1997), at LHSR 000000292) 83. Low observability is often an essential characteristic of military aircraft, ships, and missiles. No other technology can substitute for stealth. The proposed merger will have substantial anticompetitive effects in military programs that require the application of stealth technology. The merged entity will dominate this critical technology. 84. Entry into this market is extremely difficult. Although some other companies have a basic understanding of stealth, the time and cost to develop the expertise to rival Northrop or Lockheed's experience is substantial and prohibitive. -------------------------------------------------------------------------------- Page 28 8. Remote Minehunting Systems 85. Lockheed, with its Remote Minehunting System ("RMS"), launched from a surface ship, and Northrop, with its Near Term Mine Reconnaissance System ("NMRS"), launched from a submarine, are the only companies that have won contracts to produce remote minehunting systems. The only other competitor for remote minehunting systems is Boeing. Northrop and Boeing are currently competing for the Long Term Mine Reconnaissance System ("LMRS"), which will also be launched from a submarine. Revenues from remote minehunting systems were over $25 million in 1997, and may exceed $100 million over the next few years. 86. Lockheed, Northrop, and Boeing are the most likely companies to compete for remote minehunting programs. If Lockheed acquires Northrop, the combined company will be the only competitor to have won a production contract for total design and production of remote minehunting systems. The proposed acquisition of Northrop by Lockheed will eliminate competition between these two companies for future remote minehunting systems. 87. Successful entry into the development, production, and sale of remote minehunting systems is difficult, time consuming, and costly. A potential entrant would need to invest considerable capital to develop the wide range of capabilities needed to produce these complex systems. Absent some prospect of capturing business in the market, such investment would not be warranted. Other companies who may have demonstrated capabilities for some, but not all, of the subsystems contained on these vehicles would see little prospect in competing against a company with such entrenched -------------------------------------------------------------------------------- Page 29 capabilities. 9. SQQ-89 Integrated ASW Combat System 88. The building and integration of the various parts of the SQQ- 89 ASW combat system into a properly-functioning and integrated system is a process that requires specialized experience and knowledge. In the history of the SQQ-89 program, dating back to the mid-1980s, only two companies have ever served as the contractors for that system -- Lockheed (and its predecessor entities) and Northrop (and its predecessor entities). General Electric Company (the relevant part of which is now owned by Lockheed) was the original designer and integrator of the system. In the late 1980s, Westinghouse Electric Company (the relevant part of which is now owned by Northrop) took three years to become qualified as a second supplier of the SQQ-89 at a cost of approximately $80 million. Since 1990, when the SQQ-89 was first competed, Lockheed and Northrop have alternated in winning the contract, with Lockheed winning the last award for the period 1996-2000. This contract is worth a total of approximately $400- $500 million. 89. The Navy will award another two contracts for the SQQ-89, one in 2001 and another in 2006, to provide the SQQ-89 ASW combat systems for the remaining destroyers to be built between the years 2001 and 2005, as well as to provide upgraded systems for destroyers and cruisers that are already in service. These two contracts together may be worth over $500 million. 90. The proposed acquisition will eliminate competition between Lockheed and Northrop for the next two SQQ-89 contracts in the years 2001 and 2006, and will result in there being only one company that has ever provided the SQQ-89. -------------------------------------------------------------------------------- Page 30 91. The Navy is also planning to build a new family of surface combat ships, called the SC-21 (Surface Combatant for the 21st Century) family. The first of this family of ships will be the destroyer version, currently designated the DD-21. Issuance of the Request for Proposal ("RFP") for the first design stage of this program is expected in the second quarter of 1998. It is anticipated that the DD-21 program will be worth about $30 billion. 92. The DD-21 will require an integrated ASW combat system. The ASW combat system that will be used on the DD-21 may not replicate the SQQ-89 exactly, but will in all likelihood be based on the technologies used in the SQQ-89. The SQQ-89 has been the only integrated ASW combat system used by U.S. surface combat ships, and any future ASW combat system for surface combat ships will necessarily have characteristics in common with the SQQ-89. 93. Lockheed and Northrop are in a unique position to serve as the ASW combat system providers for the DD-21, as they are the only companies that have been the contractors for a demonstrated integrated ASW combat system for U.S. surface combat vessels. The proposed acquisition of Northrop by Lockheed will eliminate any competition between these two companies as members of teams competing for the DD- 21 contract. Further, the proposed acquisition will seriously disadvantage any team competing against a team with Lockheed as a member, thus substantially lessening competition for the DD-21 program. 94. Successful entry into the production and sale of the SQQ-89 integrated ASW combat system is difficult, time consuming, and costly. Although other companies -------------------------------------------------------------------------------- Page 31 produce other types of sonar systems, none of them are integrated ASW combat systems for U.S. surface combat ships. In any future competition for the SQQ-89, these other companies, if they bid at all, would be at a significant disadvantage to Lockheed and Northrop. 10. Logicon 95. Lockheed's acquisition of Northrop, and thereby Logicon, may substantially lessen competition. To the extent that Logicon provides SETA services on programs performed by Lockheed's competitors, Lockheed may gain access to competitively sensitive non-public information concerning those competitors. Lockheed would also be in a position to make recommendations which could disadvantage its competitors. 96. By acquiring Logicon, Lockheed would be in a position to develop recommended specifications for procurements and programs which disadvantage its competitors while favoring its own capabilities. Lockheed could, similarly, disadvantage competitors through its assistance in the evaluation of their bids and other proposals, or by obtaining access to competitor's sensitive information. 97. Lockheed, through the acquisition, would be engaged in the research, development, manufacturing, and sale of AEGIS combat systems, as well as the provision of SETA services to the Navy on the AEGIS program. Where Logicon's SETA services consist of evaluating Lockheed's own technologies or products in programs like AEGIS, Lockheed's control of Logicon would conflict with the U.S. military's interest in obtaining an independent assessment of its purchases. 11. Vertical Effects -------------------------------------------------------------------------------- Page 32 98. The United States hereby incorporates paragraphs 1-97. 99. Lockheed is one of two prime contractors competing for the JSF, and it is developing the F-22 fighter and producing the C-130 aircraft. It produced the F-117, U- 2, F-16, S-3B, and ES-3A, which are all still in service. Lockheed is also the electronics systems integrator for many U.S. military ground, air, ship, space and undersea platforms, including Navy submarines, AEGIS class surface combatant vessels, the RMS, and the Space-Based Infrared Systems ("SBIRS"). 100. Through the acquisition, Lockheed would obtain control over all Northrop prime platforms (including the B-2, E-2C, F-14, EA-6B, F-5 (T-38), A-10, and C-2A) in addition to the prime contracts it already holds. 101. Through the acquisition, Lockheed would also acquire all of Northrop's capability in critical systems and subsystems such as AEW radar, airborne fire control radar, EO missile warning systems, directed IRCM systems, on-board RFCM systems, FOTDs, the SQQ-89 ASW combat system, sonar systems, and space-based electronics required for U.S. military platforms and integrated electronics systems. 102. The markets for U.S. military platforms and integrated electronics systems are already highly concentrated. Lockheed and Northrop are two of only three prime contractors for high performance fixed-wing military aircraft platforms; post-merger there will be only two remaining competitors. For ship and undersea integrated electronics systems, Lockheed is currently the only systems integrator for combat systems on surface combat vessels and submarines. In space-based platforms, Lockheed is the prime contractor on SBIRS as well as other DoD spaced-based communication/data relay, remote sensing/early warning, weather, and scientific platforms, and is slated to receive -------------------------------------------------------------------------------- Page 33 nearly 50% of the prime contractor funding already allocated by the DoD for space-based platforms between 1997 and 2003. New entry into aircraft platforms, space-based platforms, and ship and undersea integrated electronics systems is extremely difficult, costly, and time consuming. 103. The markets for many critical systems and subsystems required in military platforms and ship and undersea integrated electronics systems are already highly concentrated. Lockheed and Northrop are the only suppliers of AEW radar on U.S. military aircraft, directed IRCM systems, and the SQQ-89 ASW combat system, and the only effective competitors for EO missile warning systems required on U.S. military air, ship, and undersea platforms. Lockheed and the Raytheon/Northrop team are the only suppliers of FOTDs. Northrop is currently the only supplier of acoustic intercept torpedo detection and defense sonar systems for use on undersea platforms. New entry into these systems and subsystems is difficult, time-consuming, and costly. If Lockheed acquires Northrop, it will hold a monopoly in and control access to all of these systems and subsystems, which are required for several current and future DoD programs. Lockheed will have an incentive to refuse to sell, sell inferior quality, or sell on disadvantageous terms, these in-house systems and subsystems to its platform and integrated electronics system competitors or potential competitors. Without access to these critical systems and subsystems, platform and integrated electronics system competitors (and potential competitors) would be seriously disadvantaged in competing for upcoming military programs requiring these systems and subsystems. As a result, the acquisition likely will result in a -------------------------------------------------------------------------------- Page 34 lessening of competition in the markets for military platforms and integrated electronics systems requiring these systems and subsystems. 104. The markets for airborne fire control radar, on-board RFCM systems, side-look minehunting sonar, wide aperture array hull-mounted sonar systems, are also already highly concentrated. Raytheon, through its acquisition of Hughes Aircraft Company, and Northrop are the only two suppliers of airborne fire control radar on U.S. military aircraft. Lockheed, Northrop, and ITT are the only competitors for on-board RFCM systems for the U.S. military; the merger would reduce competition in on-board RFCM systems to only two competitors. Northrop, Raytheon, and AlliedSignal are the only current competitors for U.S. military side-look minehunting sonar systems. Lockheed and Northrop, with Northrop serving as Lockheed's major subsystem provider, are currently the only providers of wide aperture array hull-mounted sonar on U.S. military platforms, although Litton Industries, Inc. is developing a new technology alternative for lightweight wide aperture array hull-mounted sonar. New entry in the development, production, and sale of each of these products is difficult, time consuming, and expensive. 105. By acquiring Northrop, Lockheed would have much greater incentive and ability to deny access, provide inferior quality, or grant access only on disadvantageous terms, to competing or potentially competing prime contractors to its in-house systems and subsystems such as its airborne fire control radar, on-board RFCM systems, side-look minehunting sonar, and wide aperture array hull-mounted sonar systems. Without access to Lockheed or Northrop systems and subsystems, U.S. military platform and integrated electronics system competitors or potential competitors will often be seriously -------------------------------------------------------------------------------- Page 35 disadvantaged in competing for upcoming military programs. Preventing such conduct on the part of Lockheed is necessary to maintain effective competition in military platforms and integrated electronics systems and to ensure competitive access to critical systems and subsystems by platform and integrated electronics system providers. 106. Lockheed's acquisition of Northrop gives Lockheed a much greater ability and economic incentive to discriminate in favor of its in-house system and subsystem capability and against competing or potentially competing providers of critical systems and subsystems such as airborne fire control radar, on-board RFCM systems, side-look minehunting sonar, mine avoidance sonar, wide aperture array hull-mounted sonar, other ship and submarine sonar systems, and space-based electronics. Lockheed would be in a position to favor its in-house capability and foreclose all competitive access, or grant access only on disadvantageous terms, to its integrated electronics systems on surface combat vessels and submarines, and the many space-based and the aircraft platforms it controls. Preventing such conduct is necessary to maintain effective competition in the innovation, price, and performance of these critical systems and subsystems and to ensure the competitive placement of the best systems and subsystems on prime platforms. 107. To the extent Lockheed granted its prime contractor competitors access to its in- house systems and subsystems or granted its system and subsystem competitors access to its platforms and integrated electronics systems, Lockheed may gain access to competitively sensitive non-public information about its competitors' platforms, integrated electronic systems, systems, or subsystems. Preventing such conduct is necessary to maintain effective competition in the innovation, price, and performance of U.S. military platforms, integrated electronics systems, systems, and subsystems. -------------------------------------------------------------------------------- Page 36 108. Successful entry into the development, production, and sale of military airborne platforms, space platforms, and integrated electronics systems, as well as their required systems and subsystems, is already difficult, time consuming, and costly. Potential entrants into U.S. military platforms and integrated electronics systems would be even less likely to invest the time and resources to enter post-merger, because of possible foreclosure from access to Lockheed/Northrop systems and subsystems and the reduction in system and subsystem supplier alternatives. Likewise, potential entrants into military systems and subsystems would be even less likely to invest the time and resources required to enter post-merger with fewer potential prime contract customers and possible foreclosure from Lockheed platforms and integrated electronics systems. 109. The increase in vertical integration which would result from Lockheed's acquisition of Northrop may substantially lessen competition in many critical military systems and subsystems and in the aircraft and space platforms and integrated electronics systems requiring these systems and subsystems. The acquisition will likely result in less innovation by Lockheed and other system, subsystem and prime contract competitors, possible exit by competitors, fewer opportunities for and increased barriers to competitive entry, and lower quality subsystem and platform products at higher costs and higher prices. D. HARM TO COMPETITION 110. The DoD relies on the ongoing, vigorous competition between Northrop and Lockheed for the development and production of electronics systems and military aircraft. In AEW radar, EO missile warning systems, directed IRCM systems, FOTDs, and the SQQ-89 integrated ASW combat system, competition will be eliminated by the -------------------------------------------------------------------------------- Page 37 merger, leading to higher costs, less innovation, and higher prices. Competition will be substantially lessened in on-board RFCM systems, high performance fixed-wing military aircraft, stealth technology, and remote minehunting systems, where Lockheed and Northrop are either the leading and/or two of only three competitors. The likely result of the diminished competition will be higher costs, higher prices, and less innovation on U.S. military products. 111. The DoD relies on its prime contractors to conduct vigorous competition at the system and subsystem level to obtain the benefits of competition in price and innovation. Competition will be harmed by Lockheed's ability, as a vertically integrated company, to use its position as both a leading prime contractor and a leading system and subsystem supplier to discriminate in favor of its in-house systems and subsystems and against other system and subsystem competitors, and to refuse to sell, or sell at disadvantageous terms, its in-house capability to its platform and integrated electronics system competitors. With decreased competition, there will likely be less innovation by Lockheed and other system, subsystem and prime contractor competitors, possible exit by competitors, fewer opportunities for competitive entry, and lower quality subsystem, system, platform, and integrated electronic system products at higher costs and higher prices. IV. VIOLATION ALLEGED 112. The effect of Lockheed's proposed acquisition of Northrop is to lessen competition substantially and tend to create a monopoly in interstate trade and commerce in violation of Section 7 of the Clayton Act. 113. The transaction likely will have the following effects among others: a. competition in the development, production, and sale of products in each -------------------------------------------------------------------------------- Page 38 of the relevant markets will be eliminated or substantially lessened; b. actual and future competition between Lockheed and Northrop in development, production, and sale of products in each of the relevant markets will be eliminated; c. costs and/or prices for products in each relevant product market will likely increase; d.innovation in each relevant product market will likely decrease; e. competition in critical defense system and subsystem markets and military platform and integrated electronics system markets will be lessened; and f. barriers to entering markets for military platforms, integrated electronics systems, and defense systems and subsystems will be increased. V. REQUESTED RELIEF Plaintiff requests: 1. That the proposed acquisition by Lockheed of Northrop be adjudged to violate Section 7 of the Clayton Act, as amended 15 U.S.C. &167; 18; 2. That the defendants be permanently enjoined and restrained from carrying out the Agreement and Plan of Merger, dated July 2, 1997, or from entering into or carrying out any agreement, understanding or plan, the effect of which would be to combine the business or assets of Lockheed and Northrop; 3. That plaintiff be awarded its costs of this action; and 4. That plaintiff have such other relief as the Court may deem just and proper. Respectfully submitted, FOR PLAINTIFF UNITED STATES:

UNITED STATES OF AMERICA, Department of Justice Antitrust Division 1401 H Street, N.W., Suite 3000 Washington, D.C. 20530, Plaintiff, v. RAYTHEON COMPANY, 141 Spring Street Lexington, MA 02173, and TEXAS INSTRUMENTS INC., 13500 North Central Expressway Dallas, TX 75243, Defendants. -------------------------------------------------------------------------------- | | | | | | | | | | | | | | | | | | | | | | Civil No.: 1:97CV01515 Filed: July 2, 1997 COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain equitable relief against defendants and alleges as follows: 1. The United States brings this antitrust case to block the proposed combination of Raytheon Company ("Raytheon") and the Defense Systems and Electronics Unit ("DS&E") of Texas Instruments Inc. ("TI"), the only two firms able to develop and produce an essential input required in state-of-the-art military radar systems valued at about $10 billion. These radar systems will be used in major weapon systems being developed in the next few years. Raytheon and DS&E are each others' only competitors in the development and production of these inputs, known as X-band high power amplifier monolithic microwave integrated circuits ("MMICs"). Raytheon is also a leading producer or radar systems. DS&E, on the other hand, is an independent supplier of MMICs, often supplying them to Raytheon's radar system competitors. 2. If Raytheon acquires DS&E, it will obtain a monopoly in high power amplifier MMICs. That monopoly position over a critical input to radar systems will give Raytheon an incentive to refuse to sell, or to sell at disadvantageous terms, to its radar competitors. Unless blocked, this monopoly will likely result in higher costs and less innovation for high power amplifier MMICs, and substantial increases in prices paid by the Department of Defense ("DoD") and ultimately taxpayers for advanced military radars. I. JURISDICTION AND VENUE 3. This action is filed by the United States under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain the defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. 4. Both Raytheon and TI develop and produce high power amplifier MMICs for military radars and sell those products to radar manufacturers for use in weapon systems purchased by the Department of Defense, an agency of the United States. Raytheon and TI are engaged in interstate commerce and in activities substantially affecting interstate commerce. The Court has subject matter jurisdiction over this action and jurisdiction over the parties pursuant to Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. §§ 1331 and 1337. 5. The defendants transact business and are found within the District of Columbia. Venue is proper in the District under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c). II. THE DEFENDANTS 6. Raytheon is a Delaware corporation headquartered in Lexington, Massachusetts. Raytheon produces aircraft, guided missiles, space vehicles, radar systems, and defense electronics equipment. It develops and produces high power amplifier MMICs for military radars at its Advanced Device Center in Andover, Massachusetts. In 1996, Raytheon reported total sales of about $12 billion. Raytheon is also a leading designer and producer of radar systems. 7. TI is a Delaware corporation headquartered in Dallas, Texas. In 1996, TI reported total sales of about $13 billion. Its DS&E unit produces guided missiles, electro-optical systems, and defense electronics equipment. DS&E develops and produces high power amplifier MMICs for military radars through its RF/Microwave Business Unit at a facility in Dallas, Texas. In 1996, DS&E reported total sales of about $1.3 billion. III. TRADE AND COMMERCE A. RELEVANT PRODUCT MARKET 8. High power amplifier MMICs are solid state semiconductor components (commonly referred to as "chips") made of gallium arsenide and used in active electronically scanned array ("AESA") radars. MMICs are designed to operate within specified frequency ranges ("bands") of the microwave spectrum. AESA radars for military air defense, which demand the highest performance MMICs, typically use MMICs operating in the X-band, because this band offers the best combination of all-weather capability and ability to detect low-level targets. 9. The performance of high power amplifier MMICs is measured by three primary characteristics: power output, bandwidth and power added efficiency ("PAE"). Higher power output provides greater detection range, particularly for objects with low radar cross sections, such as missiles and stealth aircraft. Bandwidth measures the percentage of the spectrum over which the MMIC operates. Wider bandwidth provides better ranging to the target, so that, for example, a missile warhead can be identified and targeted separately from its booster. PAE measures the percentage of input power that is re-emitted; the remainder is waste heat. High efficiency power amplifiers allow radar systems to be built with lower power and cooling requirements. 10. AESA radars are the second generation of phased array radars. Unlike the older dish-type radar antennas, which have to be physically rotated and elevated to scan a given airspace, phased array radars remain stationary while the radar beam is electronically directed over the same area. Phased array radars can, therefore, scan the same airspace much faster and more efficiently, and with a lower probability of detection by an enemy target. 11. AESA radars are a significant improvement over first generation phased array radars, which are passive (rather than active) electronically scanned arrays. Microwave power in an AESA radar is generated in a series of compact, lightweight transmit and receive modules ("T/R modules") containing the MMICs. Passive array radars (as well as dish-type radars), in contrast, use heavy, bulky traveling wave tubes and waveguides. AESA radars are therefore much smaller and lighter than passive arrays. AESA radars also offer superior reliability, since failures of T/R modules only gradually degrade system performance, while failure of a traveling wave tube disables the radar. Moreover, because power amplifier MMICs are more efficient and thus produce less waste heat than tubes. AESA radars require less power from the engines and generators of the aircraft, ships or other systems in which they are deployed. Power amplifier MMICs are also much less expensive to produce in medium to large production volumes than tubes, resulting in less expensive radars. 12. The Department of Defense ("DoD") has begun the contracting process for several major systems using X-band AESA radars. Among these are the Joint Strike Fighters, the Medium-Extended Air Defense System, the Navy Multifunction Radar and the Theater High Altitude Area Defense System. Competitive radar systems that meet the DoD performance specifications for these projects will require X-band high power amplifier MMICs capable of 8 to 10 watts output, at least 40 percent bandwidth, and at least 50 percent PAE. Because of the importance of the high power amplifier MMIC to the performance of an AESA radar, MMIC capability is an important selection criterion among competing radar systems. 13. Raytheon has produced more high power amplifier MMICs and T/R modules than any other firm. It was chosen in 1992 to supply the power amplifier for the ground-based radar ("GBR") for the Theater High Altitude Area Defense System. Under this program, Raytheon produced and delivered about 42,000 T/R modules containing 6-watt, X-band power amplifiers. In 1996, Raytheon won the development contract for the improved GBR. Raytheon is developing a 10-watt, wide band, high PAE X-band high power amplifier for this program, with a delivery goal of late 1997. 14. TI is the recognized leader in developing high power amplifier MMICs. As a second source to Raytheon on GBR, TI supplied about 28,000 T/R modules containing 6-watt X-band power amplifiers. TI also has been chosen to supply the advanced power amplifiers for the radar on the F-22 fighter; it already has produced 23,000 amplifiers and thousands more will be delivered. TI is very close to production of an X-band 10-watt wide band, high PAE amplifier. It also has developed an X-band 16-watt high power amplifier which is close to meeting DoD specifications. 15. Other products are not realistic substitutes for high power amplifier MMICs. In concept, discrete solid state components can be wired together to perform the functions of a power amplifier MMIC. However, such "hybrid integrated circuits" are larger and heavier than comparable MMICs. Also, because hybrid integrated circuits are less easily and accurately replicated than MMICs, each hybrid integrated circuit requires costly and labor intensive testing and tuning. DoD decided to move away from radar systems incorporating hybrid integrated circuits when it begun funding MMIC technology, and it and the radar system manufacturers who are the direct purchasers of MMICs will not return to hybrid integrated circuits in response to a small but significant and non-transitory price increase in high power amplifier MMICs. 16. Although in concept multiple low power amplifier MMICs could be combined to achieve the output power of a single high power amplifier MMIC, such an approach would result in a more costly, heavier, and larger radar system. Moreover, a multichip approach would result in substantially higher production costs for the T/R module. Radar system manufacturers will not accept a combination of low power chips in place of a single high power amplifier MMIC for AESA radars. 17. The development, production and sale of X-band high power amplifier MMICs with output power of eight to ten watts, bandwidth of at least 40 percent, and PAE of at least 50 percent is a line of commerce and a relevant product market within the meaning of the Clayton Act. B. RELEVANT GEOGRAPHIC MARKET 18. High power amplifier MMICs are purchased by radar system producers for inclusion in weapon systems sold to DoD. In sales for DoD weapon systems, radar producers rely on domestic high power amplifier MMIC suppliers. There are no foreign producers to which domestic radar suppliers could turn in the face of a small but significant and non-transitory price increase by domestic high power amplifier MMIC suppliers. 19. The United States is a relevant geographic market within the meaning of Section 7 of the Clayton Act. C. ANTI-COMPETITIVE EFFECT AND ENTRY 20. Raytheon and TI are the only firms capable of developing and producing the high power amplifier MMICs required for military radar bids scheduled for the next two to three years. TI and Raytheon are the only firms that have established production processes and proven manufacturing capability for these high power amplifier MMICs. 21. In the next two to three years, radar programs with over $10 billion will be competed. The radars for the Joint Strike Fighter, Medium Extended Air Defense System, Navy Multifunction Radar and the Theater High Altitude Area Defense System, among others, will all require X-band high power amplifier MMICs. Raytheon and TI are the only sources for these critical components. 22. Raytheon's acquisition of TI's DS&E would eliminate all competition in the development, production, and sale of X-band high power amplifiers MMICs for military radars being developed over the next two to three years. The proposed acquisition will result in a single supplier with the incentive and ability to raise prices and little or no incentive to minimize cost. 23. The acquisition also likely will result in a lessening of competition in the market for military radars. Raytheon is not only a supplier of high power amplifier MMICs but is also a major supplier of the radar systems of which these devices are critical components. Prior to announcement of the acquisition, TI had teamed with other radar systems suppliers to develop MMICs that met the required specifications for DoD weapon systems. With the acquisition of TI's DS&E, Raytheon will control access to all currently viable high power amplifier MMICs. Raytheon will have an incentive to refuse to sell, or to sell on disadvantageous terms, its state-of-the-art high power amplifier MMICs to its radar competitors. Without access to the latest high power amplifier MMICs, a radar manufacturer is at a serious disadvantage for upcoming military radar competitions. 24. Successful entry into the production and sale of high power amplifier MMICs is difficult, time consuming, and costly. Entry requires advanced technology, skilled engineers, and costly customized equipment. A new gallium arsenide foundry costs over $50-100 million and takes at least two years to construct. A potential entrant would have to engage in difficult, expensive, and time consuming research to develop designs and production processes that can economically and reliably produce high power amplifier MMICs. These designs and production processes must be perfected in order to successfully bid for a military radar program. It is unrealistic to expect new entry in a timely fashion to protect competition in upcoming military radar projects. 25. Nor can low power amplifier MMIC producers reposition their product offerings in a timely manner to provide effective competition. Hughes Aircraft Co., Lockheed Martin Corp., Northrop Grumman Corp., and ITT Corp., incumbent firms that have gallium arsenide foundries and experience in low power amplifier MMICs, would need at least two to three years to become effective competitors for high power amplifier MMICs for military radars. D. HARM TO COMPETITION 26. The armed forces of the United States rely on the ongoing, vigorous competition between Raytheon and TI for the development and production of high power amplifier MMICs for military radars. This competition will lead to lower prices for both the radars and the ships, aircraft, and air and missile defense systems incorporating them. The proposed acquisition will lessen competition and create a monopoly in the development and production of high power amplifier MMICs for military radars. Moreover, because Raytheon will likely deprive its radar system competitors of this essential product, the proposed acquisition will also tend to lessen competition substantially among producers of military radars. This will result in an increase in prices paid by the United States for these products and will, therefore, violate Section 7 of the Clayton Act. V. VIOLATION ALLEGED 27. The effect of Raytheon's proposed acquisition of the DS&E unit of TI is to lessen competition substantially and tend to create a monopoly in interstate trade and commerce in violation of Section 7 of the Clayton Act. 28. The transaction likely will have the following effects among others: competition generally in the innovation, development, and production and sale of X-band high power amplifier MMICs for military radars in the United States would be lessened substantially; actual and future competition between Raytheon and TI in the development, production and sale of X-band high power amplifier MMICs for military radars in the United States will be eliminated; prices for X-band higher power amplifier MMICs for military radars in the United States would likely increase; competition generally in development, production and sale of military radars in the United States would be lessened substantially. VI. REQUESTED RELIEF Plaintiff requests: That the proposed acquisition by Raytheon of the DS&E unit of TI be adjudged to violate Section 7 of the Clayton Act, as amended 15 U.S.C. § 18; That the defendants be permanently enjoined and restrained from carrying out the Asset Purchase Agreement, dated January 4, 1997, or from entering into or carrying out any agreement, understanding or plan, the effect of which would be to combine the MMIC businesses or assets of Raytheon and TI; That plaintiff be awarded its costs of this action; and That plaintiff have such relief as the Court may deem just and proper. Dated: July __2__, 1997. FOR PLAINTIFF UNITED STATES:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA -------------------------------------------------------------------------------- UNITED STATES OF AMERICA, Plaintiff, v. RAYTHEON COMPANY and TEXAS INSTRUMENTS INC., Defendants. -------------------------------------------------------------------------------- | | | | | | | | | | | | Civil No: 97 1515 Entered: November 05, 1997 Filed: Nov. 06, 1997 Nancy Mayer-Whittington, Clerk U.S. District Court FINAL JUDGMENT WHEREAS, plaintiff, the United States of America, and defendants Raytheon Company ("Raytheon") and Texas Instruments, Inc. ("TI"), 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 the prompt and certain divestiture of the gallium arsenide foundry and MMIC business of TI to assure that competition is not substantially lessened; AND WHEREAS, plaintiff requires defendants to make certain divestitures for the purpose of establishing a viable competitor in the development, production and sale of X-band high power amplifier MMICs; AND WHEREAS, defendants have represented to the plaintiff that the divestitures ordered herein can and will be made and that defendants will later raise no claims of hardship or difficulty as grounds for asking the Court to modify any of the divestiture provisions contained below; NOW, THEREFORE, before the taking of any testimony, and without trial or adjudication of any issue of fact or law herein, and upon consent of the parties hereto, it is hereby ORDERED, ADJUDGED, AND DECREED as follows: I. JURISDICTION This Court has jurisdiction over each of the parties hereto and 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: "DoD" means the Department of Defense. "DOJ" means the Antitrust Division of the Department of Justice. "GaAs" means gallium arsenide. "MMIC" means a Monolithic Microwave Integrated Circuit. "MMIC Business" means the GaAs foundry and MMIC business of the R/F Microwave Business Unit of TI purchased by Raytheon, including the GaAs Operations Group, Microwave GaAs Products Business Unit, the MMIC component of the Microwave Integrated Circuits Center of Excellence, the MMIC research and development component of the System Components Laboratory and associated contracting, quality assurance and control personnel located in the North Building and East Building of TI's Expressway site, all employees listed in attachment A, and all assets, including: all tangible assets purchased by Raytheon used in the operation of the MMIC Business including but not limited to: all real property (owned or leased), including interests in the North Building and East Building, used in the operation of that MMIC Business, including research and development activities, as identified pursuant to the Court's Hold Separate and Partition Plan Stipulation and Order; all manufacturing, personal property, inventory, office furniture, fixed assets and fixtures, materials, supplies, on-site warehouses or storage facilities, and other tangible property or improvements used in the operation of the MMIC Business; all licenses, permits and authorizations issued by any governmental organization relating to that MMIC Business; all contracts, teaming arrangements, agreements, leases, commitments and understanding pertaining to the MMIC Business and its operations; supply agreements; all customer lists and credit records; and other records maintained by TI in connection with the MMIC Business; all intangible assets purchased by Raytheon relating to the MMIC Business, including but not limited to all patents, licenses and sublicenses, intellectual property, maskwork rights, technical information, know-how, trade secrets, drawings, blueprints, designs, design protocols, cell libraries, specifications for materials, specifications for parts and devices, safety procedures for the handling of materials and substances, quality assurance and control procedures, design tools and simulation capability, and all manuals and technical information TI provides to its own employees, customers, suppliers, agents or licensees; and all research data concerning historic and current research and development efforts relating to the MMIC Business, including designs of experiments, and the results of unsuccessful designs and experiments. "Module Business" means the transmit and receive module business of the R/F Microwave Business Unit of TI purchased by Raytheon, including the R/F Microwave Manufacturing Group, Microwave Module & Subsystems Center for Excellence, Microwave Packaging Center for Excellence, Microwave Laboratories and Support Systems Center for Excellence, Technology Programs Customer Product Team, module component of the Microwave Integrated Circuits Center for Excellence, and associated contracting, quality assurance and control personnel located in the North Building of TI's Expressway site, and all assets, including: all tangible assets purchased by Raytheon used in the operation of the Module Business including but not limited to: all real property (owned or leased), including interests in the North Building, used in the operation of that Module Business, including research and development activities, all manufacturing, personal property, inventory, office furniture, fixed assets and fixtures, materials, supplies, on-site warehouses or storage facilities, and other tangible property or improvements used in the operation of the Module Business; all licenses, permits and authorizations issued by any governmental organization relating to that Module Business; all contracts, teaming arrangements, agreements, leases, commitments and understandings pertaining to the Module Business and its operations; supply agreements; all customer lists and credit records; and other records maintained by TI in connection with the Module Business; all intangible assets purchased by Raytheon relating to the Module Business, including but not limited to all patents, licenses and sublicenses, intellectual property, technical information, know-how, trade secrets, drawings, blueprints, designs, design protocols, specifications for materials, specifications for parts and devices, safety procedures for the handling of materials and substances, quality assurance and control procedures, design tools and simulation capability, and all manuals and technical information TI provides to its own employees, customers, suppliers, agents or licensees; and all research data concerning historic and current research and development efforts relating to the Module Business, including designs of experiments, and the results of unsuccessful designs and experiments. Raytheon" means Raytheon Company, a Delaware corporation with its headquarters and principal place of business in Lexington, Massachusetts, and its successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, and directors, officers, managers, agents, and employees. "TI" means defendant Texas Instruments, Inc., a Delaware corporation with its headquarters and principal place of business in Dallas, Texas, and its successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, and directors, officers, managers, agents and employees. III. APPLICABILITY The provisions of this Final Judgment apply to Raytheon, its 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. Raytheon shall require, as a condition of the sale or other disposition of all or substantially all of its assets or of a lesser business unit that includes Raytheon's business of developing and producing MMICs, that the transferee agree to be bound by the provisions of this Final Judgment. IV. DIVESTITURE Raytheon is hereby ordered and directed in accordance with the terms of this Final Judgment, within one hundred and eighty (180) calendar days after the filing of the Complaint in this matter, of five (5) days after notice of the entry of this Final Judgment by the Court, whichever is later, to divest the MMIC Business to an acquirer acceptable to DOJ and DoD in their sole discretion. Raytheon shall use its best efforts to accomplish the divestiture as expeditiously and timely as possible. DOJ in its sole determination, in consultation with DoD, may extend the time period for any divestiture an additional period of time not to exceed thirty (30) calendar days. In accomplishing the divestiture ordered by this Final Judgment, Raytheon promptly shall make known, by usual and customary means, the availability of the MMIC Business described in this Final Judgment. Raytheon shall inform any 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. Raytheon shall also offer to furnish to all bona fide prospective purchasers, subject to customary confidentiality assurances, all information regarding the MMIC Business customarily provided in a due diligence process except such information subject to attorney-client privilege or attorney work-product privilege. Raytheon shall make available such information to the DOJ at the same time that such information is made available to any other person. Raytheon shall permit prospective purchasers of the MMIC Business to have reasonable access to personnel and to make such inspection of the physical facilities of the MMIC Business and any and all financial, operational, or other documents and information customarily provided as part of a due diligence process. Raytheon shall not take any action that will impede in any way the operation of the MMIC Business. Unless both DOJ and DoD otherwise consent in writing, the divestiture pursuant to Section IV, or by trustee appointed pursuant to Section V of this Final Judgment, shall include the entire MMIC Business, operated in place pursuant to the Hold Separate and Partition Plan Stipulation and Order, and be accomplished by selling or otherwise conveying the MMIC Business to a purchaser in such a way as to satisfy DOJ and DoD, in their sole discretion, that the MMIC Business can and will be used by the purchaser as part of a viable, ongoing business or businesses engaged in the development, production and sale of MMICs. The divestiture, whether pursuant to Section IV or Section V of this Final Judgment, shall be made to a purchaser for whom it is demonstrated to DOJ's and DoD's sole satisfaction: (1) has the capability and intent of competing effectively in the development, production and sale of MMICs for advanced DoD radar systems; (2) has the managerial, operational, and financial capability to compete effectively in the development, production and sale of MMICs for advanced DoD radar systems; (3) is eligible to receive applicable DoD security clearances; and (4) that none of the terms of any agreement between the purchaser and Raytheon give Raytheon the ability unreasonably to raise the purchaser's costs, to lower the purchaser's efficiency, or otherwise to interfere in the ability of the purchaser to compete effectively. Subject to these provisions, nothing in this Final Judgment shall prohibit TI from seeking to re-acquire the MMIC Business from Raytheon. Nothing in this Final Judgment shall prevent Raytheon and the purchaser of the MMIC Business from entering into a contract under which the purchaser would produce product for Raytheon using any capacity of the MMIC Business not required to support DoD programs. In addition, nothing in this Final Judgment shall prevent Raytheon from licensing technology or know-how from the purchaser. For a period of two years from the filing of the Complaint in this matter, defendants shall not solicit to hire any individual who, on the date of the filing of the Complaint\ in this matter, was an employee of the MMIC Business. For a period of two years from the filing of the Complaint in this matter, defendants shall not hire any individual who, on the date of the filing of the Complaint in this matter, was an employee of the MMIC business unless such individual has a written offer of employment from a third party for a like position. Raytheon shall comply with all agreements with DoD regarding the protection of information related to classified programs. Raytheon shall not charge to DoD any costs directly or indirectly incurred in complying with this Final Judgment. V. APPOINTMENT OF TRUSTEE In the event that Raytheon has not divested the MMIC Business within the time specified in Section IV of this Final Judgment, the Court shall appoint, on application of the United States, a trustee selected by DOJ, in consultation with DoD, to effect the divestiture of the MMIC Business. After the appointment of a trustee becomes effective, only the trustee shall have the right to sell the MMIC Business described in Section II(E) of this Final Judgment. The trustee shall have the power and authority to accomplish the divestiture at the best price then obtainable upon a reasonable effort by the trustee, subject to the provisions of Sections IV and VIII of this Final Judgment, and shall have such powers as the Court shall deem appropriate. The trustee shall have the right, in its sole discretion, to include in the package of assets to be divested the Module Business; in such event, all of the obligations of Raytheon under Section IV of this Final Judgment shall apply to the Module Business as well. Subject to Section V(C) of this Final Judgment, the trustee shall have the power and authority to hire at the cost and expense of Raytheon any investment bankers, attorneys or other agents reasonably necessary in the judgment of the trustee to assist in the divestiture, and such professionals and agents shall be accountable solely to the trustee. The trustee shall have the power and authority to accomplish the divestiture at the earliest possible time to a purchaser acceptable to the DOJ and DoD, and shall have such other powers as this Court shall deem appropriate. Raytheon shall not object to a sale by the trustee on any grounds other than the trustee's malfeasance. Any such objections by Raytheon must be conveyed in writing to DOJ and the trustee within ten (10) calendar days after the trustee has provided the notice required under Section VI of this Final Judgment. The trustee shall serve at the cost and expense of Raytheon, on such terms and conditions as the Court may prescribe, and shall account for all monies derived from the sale of the assets 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 Raytheon and the trust shall then be terminated. The compensation of such trustee and of any professionals and agents retained by the trustee shall be reasonable in light of the value of the divested business and based on a free arrangement providing the trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished. Raytheon shall use its best efforts to assist the trustee in accomplishing the required divestiture, including best efforts to effect all necessary regulatory approvals. The trustee and may consultants, accountants, attorneys, and other persons retained by the trustee shall have full and complete access to the personnel, books, records, and facilities of the business to be divested, and Raytheon shall develop financial or other information relevant to the business to be divested customarily provided in a due diligence process as the trustee may reasonably request, subject to customary confidentiality assurances. Raytheon shall permit bona fide prospective acquirers of the assets to have reasonable access to personnel and to make such inspection of physical facilities and any and all financial, operational or other documents and other information as may be relevant to the divestiture required by this Final Judgment. After its appointment, the trustee shall file monthly reports with the parties and the Court setting forth the trustee's efforts to accomplish the divestiture ordered under this Final Judgment; 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. 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 business to be divested, and shall describe in detail each contact with any such person during the period. The trustee shall maintain full records of all efforts made to divest the business to be divested. If the trustee has not accomplished such divestiture within six (6) months after its appointment, the trustee thereupon shall file promptly with the Court a report setting forth (1) the trustee's efforts to accomplish the required divestiture, (2) the reasons, in the trustee's judgment why the required divestiture has not been accomplished, and (3) the trustee's recommendations; provided, however, that to that 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 DOJ. VI. NOTIFICATION 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 divestiture pursuant to Sections IV or V of this Final Judgment, Raytheon or the trustee, whichever is then responsible for effecting the divestiture, shall notify DOJ and DoD of the proposed divestiture. If the trustee is responsible, it shall similarly notify Raytheon. 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 DOJ and DoD of such notice, DOJ, in consultation with DoD, may request from Raytheon, the proposed purchaser, or any other third party additional information concerning the proposed divestiture and the proposed purchaser. Raytheon 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 DOJ has been provided the additional information requested from Raytheon, the proposed purchaser, and any third party, whichever is later, DOJ and DoD shall each provide written notice to Raytheon and the trustee, if there is one, stating whether or not it objects to the proposed divestiture. If DOJ and DoD provide written notice to Raytheon and the trustee that they do not object, then the divestiture may be consummated, subject only to Raytheon's limited right to object to the sale under Section V(B) of this Final Judgment. Absent written notice that DOJ and DoD do not object to the proposed purchaser or upon objection by DOJ or DoD, a divestiture proposed under Section IV or Section V may be consummated. Upon objection by Raytheon under the provision in Section V(B), a divestiture proposed under Section V shall not be consummated unless approved by the Court. VII. AFFIDAVITS Within twenty (20) calendar days of the filing of the Complaint in this matter and every thirty (30) calendar days thereafter until the divestiture has been completed whether pursuant to Section IV or Section V of this Final Judgment, Raytheon shall deliver to DOJ and DoD an affidavit as to the fact and manner of compliance with Sections IV or V of this Final 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 business 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 Raytheon has taken to solicit a buyer for the relevant assets and to provide required information to prospective purchasers including the limitations, if any, on such information. Assuming the information set forth in the affidavit is true and complete, any objection by DOJ to information provided by Raytheon, including limitations on information, shall be made within fourteen (14) days of receipt of such affidavit. Within twenty (20) calendar days of the filing of the Complaint in this matter, Raytheon shall deliver to DOJ and DoD an affidavit which describes in detail all actions Raytheon has taken and all steps Raytheon has implemented on an on-going basis to preserve the MMIC Business pursuant to Section VIII of this Final Judgment and the Hold Separate and Partition Order entered by the Court. The affidavit also shall describe, but not be limited to, Raytheon's efforts to maintain and operate the MMIC Business as an active competitor, maintain the management, staffing, research and development activities, sales, marketing and pricing of the MMIC Business, and maintain the MMIC Business in operable condition at current capacity configurations. Raytheon shall deliver to DOJ and DoD an affidavit describing any changes to the efforts and actions outlined in Raytheon's earlier affidavit(s) filed pursuant to this Section within fifteen (15) calendar days after the change is implemented. Until one year after such divestiture has been completed, Raytheon shall preserve all records of all efforts made to preserve the business to be divested and effect the divestiture. VIII. HOLD SEPARATE ORDER Until the divestiture required by the Final Judgment have been accomplished, Raytheon shall take all steps necessary to comply with the Hold Separate and Partition Plan Stipulation and Order entered by this Court and to preserve the assets of the Module Business. Defendants shall take no action that would jeopardize the divesture ordered by this Court. IX. FINANCING Raytheon is ordered and directed not to finance all or any part of any purchase by an acquirer made pursuant to Sections IV or V of this Final Judgment without prior written consent of DOJ. X. COMPLIANCE INSPECTION For purposes of determining or securing compliance with the Final Judgment and subject to any legally recognized privilege, from time to time: 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 Raytheon made to its principal offices, shall be permitted: Access during office hours of Raytheon to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of Raytheon, who may have counsel present, relating to the matters contained in this Final Judgment and the Hold Separate Stipulation and Order; and Subject to the reasonable convenience of Raytheon and without restraint or interference from it, to interview, either informally or on the record, its officers, employees, and agents, who may have counsel present, regarding any such matters. Upon the written request of the Attorney General or of the Assistant Attorney General in charge of the Antitrust Division, made to Raytheon's principal offices, Raytheon shall submit such written reports, under oath if requested, with respect to any matter contained in the Final Judgment and the Hold Separate and Partition Order. No information or documents obtained by the means provided in Section VII or X of this Final Judgment shall be divulged by a representative of the plaintiff 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. If at the time information or documents are furnished by Raytheon to DOJ or DoD, Raytheon represents and identifies 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 Raytheon marks each pertinent page of such material, "Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure," then ten (10) calendar days notice shall be given by DOJ or DoD to Raytheon prior to divulging such material in any legal proceeding (other than a grand jury proceeding) to which Raytheon is 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 November 5, 1997.

UNITED STATES OF AMERICA, Department of Justice Antitrust Division 1401 H Street, N.W., Suite 3000 Washington, DC 20530, Plaintiff, v. RAYTHEON COMPANY, 141 Spring Street Lexington, MA 02173, GENERAL MOTORS CORPORATION, 3044 West Grand Boulevard Detroit, MI 48202, and HE HOLDINGS, INC., 3044 West Grand Boulevard Detroit, MI 48202, Defendants. -------------------------------------------------------------------------------- | | | | | | | | | | | | | | | | | | | | | | | | | | | | Civil No.: 1:97CV02397 Filed: 10/16/97 COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, brings this civil action to obtain equitable relief against defendants and alleges as follows: 1. The United States brings this antitrust case to block the proposed combination of Raytheon Company ("Raytheon") and Hughes Aircraft Company ("Hughes") a wholly owned subsidiary of HE Holdings, Inc. ("HE Holdings") and an indirect subsidiary of General Motors Corporation ("General Motors"). Raytheon and Hughes are the only two firms that design, develop, and produce second generation ("2nd Gen.") electro-optical ("EO") systems for Department of Defense ("DoD") ground applications. Raytheon and Hughes are also the only two firms that design, develop, and produce critical infrared ("IR") detectors, called "SADA II" detectors, used in ground EO systems, and are the leading firms that develop and produce staring IR detectors used for sensors in missile seeker heads and aircraft and missile warning system applications. 2. If Raytheon acquires Hughes, it will obtain a monopoly in the production of ground EO systems for all current Army programs. If Raytheon acquires Hughes, it will also obtain a monopoly in the production of SADA II detectors, eliminate its most significant competitor, and become a dominant firm in staring IR detectors. Unless blocked, this combination will likely result in less innovation and increases in prices paid by the DoD. 3. In addition, Hughes and Raytheon are competing with each other for the Follow-on-to-TOW ("FOTT") new advanced antitank missile program that will replace the current inventory of TOW antitank missiles. Raytheon is competing as the majority owner of a joint venture with another large aerospace contractor, Lockheed Martin Corporation ("Lockheed Martin"). Having both the Hughes and Raytheon/Lockheed Martin FOTT teams under the control of the same company likely will lessen competition for the FOTT contract. I. JURISDICTION AND VENUE 4. This action is filed by the United States under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain the defendants from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. 5. Both Raytheon and Hughes design, develop, and produce IR sensing systems for military platforms and sell those products to either platform manufacturers or DoD, an agency of the United States. Raytheon and Hughes are engaged in interstate commerce and in activities substantially affecting interstate commerce. The Court has subject matter jurisdiction over this action and jurisdiction over the parties pursuant to Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. §§ 1331 and 1337. 6. The defendants transact business and are found within the District of Columbia. Venue is proper in this District under 15 U.S.C. § 22 and 28 U.S.C. § 1391(c). II. THE DEFENDANTS 7. Raytheon is a Delaware corporation headquartered in Lexington, Massachusetts. Raytheon produces heavy construction equipment; refrigerators and freezers; radio and TV broadcasting and communications equipment; semiconductors and related devices; aircraft; guided missiles and space vehicles; search, detection and navigation systems; and engineering services. Raytheon TI Systems ("RTIS"), a division of Raytheon, produces ground EO systems at a facility in McKinney, Texas and IR detectors at its Expressway facility in Dallas, Texas. Amber, a separate unit of Raytheon, produces detectors at a facility in Goleta, California. In 1996, Raytheon reported total sales of about $12 billion. 8. General Motors is a Delaware corporation headquartered in Detroit, Michigan. Hughes, a missile and defense electronics company, is an indirect subsidiary of General Motors. Hughes produces ground EO systems at facilities in El Segundo, California and LaGrange, Georgia. Hughes operates the industry's premier detector facility, Santa Barbara Research Center ("SBRC"), in Santa Barbara, California. In 1996, Hughes reported total sales of approximately $6 billion. 9. HE Holdings is a Delaware corporation headquartered in Detroit, Michigan. Hughes is a direct subsidiary of HE Holdings. III. TRADE AND COMMERCE A. RELEVANT PRODUCT MARKETS SADA II Detectors 10. An IR detector is a device that converts IR radiation into an electrical signal. IR sensing devices detect the differences in the heat emissions between an object and its surroundings, and can therefore distinguish among objects in the device's field of view. The detector consists of linear or mosaic arrays of individual diodes made from semiconductor materials such as mercury cadmium telluride ("MCT") or indium antimonide ("InSb"). The detector is attached to a silicon chip or "readout" device that contains the circuitry which stores the energy captured by the detector and converts this energy to a voltage signal. When mated to the readout circuit, the detector is often called a focal plane array ("FPA"). The FPA is typically housed in an evacuated dewar which provides cooling to the FPA. 11. The combination of an FPA, dewar cooler assembly, optics, electronics, software, and a visual display is commonly called a FLIR (Forward Looking Infrared). FLIRs are used in ground and airborne EO systems for surveillance and weapons fire control purposes. FPAs are also used in heat-seeking missile guidance systems and missile warning systems, applications for which no pictorial image is required. Since the Gulf War, great strides have been made in IR technology, and the military is switching from older first generation ("1st Gen.") lower performance technology to more advanced 2nd Gen. technology in a variety of applications. 12. Second generation scanning FPAs consist of detectors arranged in two dimensions, and the array may range in size from 240 x 2 to 480 x 4. The detector is scanned mechanically with mirrors across a field of view. Second generation scanning FPAs differ from 1st. Gen. scanning FPAs in that the readout circuit is mounted directly to the detector material. Second generation FPAs are photovoltaic, while 1st. Gen. FPAs are photo conductive. Scanning FPAs are used on ground vehicles because of their ability to cover a wide field of view. 13. Staring or third generation ("3rd Gen.") FPAs consist of a mosaic of diodes typically square or rectangular in shape. Since they contain no scanning mechanism, staring FPAs provide an image by staring at the scene and rapidly updating changes in the scene. Staring FPAs are lighter weight than scanning, and they can be more economical to use. Staring FPAs are produced in sizes ranging from 64 x 64 to 1024 x 1024. The largest size currently produced for tactical applications, however, is 640 x 480. 14. FPAs are distinguished by the spectrum of the electromagnetic wavelength they detect -- longwave ("LW"), midwave ("MW") or shortwave ("SW"). LW is visible in the 8 to 12 micron range, MW in the 3 to 5 micron range, and SW in the 1 to 2 micron range. Short wave is not typically used for tactical applications. InSb is the primary material used for detecting MW IR radiation, and it is only used in staring arrays. MCT, the leading material for detecting LW IR radiation, is used in virtually all scanned arrays, but is also used in staring FPAs. 15. In the late 1960s, DoD started to develop an IR detector common across all the services. This effort resulted in the 1st Gen. "common module" detectors, which were placed in the field in approximately 1970. Since the common module detector is not mounted directly to a integrated readout circuit, fewer detector elements can be placed on the array. Because it has fewer detector elements, the sensitivity and resolution of 1st Gen. FPAs are not as good as that of 2nd Gen. FPAs. First generation detectors were used in Desert Storm, and it was discovered that U.S. weaponry could fire further than the FLIR systems could see. The desire for EO systems with a range closer to that of the weapon systems motivated the development of 2nd Gen. devices. First generation FPAs are still in use today, although in the early 1990s, the U.S. military stopped placing new 1st Gen. FLIRs in the field. 16. In the late 1980s, the Army's Night Vision Laboratory began development of 2nd Gen. detectors under the Standardized Advanced Dewar Assembly ("SADA") program. SADA assemblies use a two dimensional MCT array sensitive to LW IR radiation. SADA detectors include four different configurations: SADA I, SADA II, SADA III A and SADA III B. Each type has different specifications so that one does not substitute for another. 17. The Army uses a SADA II for ground vehicles. As part of a broader effort undertaken in 1992 to insert a common 2nd Gen. FLIR system into various battlefield platforms, the Army decided to use SADA II detectors in the M1A2 Abrams Tank, the M2A3 Bradley Fighting Vehicle, and the Long Range Advanced Scout Surveillance System ("LRASSS"). The SADA II is also used in the FLIR for the Improved Targeting Acquisition System ("ITAS") for the High Mobility Motorized Wheeled Vehicle ("HMMWV"). 18. Because they do not match the field of view achievable with SADA II detectors, staring FPAs are not viable substitutes for SADA II detectors. Staring FPAs of a size needed to match the field of view obtainable from a scanning FPA are not yet available in LW MCT, which is the only material that meets the Army's needs to see through battlefield smoke, dust, and clutter. 19. Even if large format LW MCT arrays became available in the future, a switch to such arrays would not be economically justified in response to a small but significant and nontransitory price increase in the SADA II detectors, because of the substantial configuration changes and consequent costs required to replace SADA II detectors in ground vehicles with staring detectors. 20. The development, production, and sale of SADA II detectors is a line of commerce and a relevant product market within the meaning of the Clayton Act. Staring FPAs 21. Staring FPAs provide greater sensitivity and resolution than scanning FPAs because they have a larger number of detectors. However, staring FPAs are more difficult to produce than scanning FPAs because of the difficulty in producing large InSb or MCT wafers. Due to their smaller physical size and lighter weight, staring FPAs are used in missile seeker heads and airborne applications where small size and light weight are a premium. Staring FPAs are also the detector of choice for missile warning systems. 22. Staring FPAs have primarily been made of InSb because it was the first technology capable of producing staring FPAs and the material itself is easier to work with. Staring FPAs are now available using MCT technology. 23. The development, production, and sale of staring FPAs is a line of commerce and a relevant product market within the meaning of the Clayton Act. 2nd Gen. Ground EO Systems 24. A ground EO system is an integrated system with a thermal image (usually a FLIR), including an integrated cooler dewar assembly with detector, afocal assemblies, and associated electronics. It might also include the optics, electronics, software, visual displays, fire control, and stabilization necessary to fit the system into a particular platform. 25. Targeting and navigation are the two major types of ground infrared EO systems. Targeting systems, sometimes called "fire control systems," acquire the target and direct the missile or gun round to the target. These systems are much more complex than those used for navigation, which only need to permit the operator to see the general area. 26. A ground EO system operating in or on a ground combat vehicle, in the dust, heat and smoke of a battlefield, faces risks and demands that are different from those faced by an EO system on a fighter aircraft or a helicopter operating substantially above the battlefield. Many problems that are unique to designing EO systems for the ground combat environment are not faced in designing an EO system for airborne applications. Among these is the requirement that any FLIR on a tank be able to absorb the tremendous shock of a direct hit and keep functioning. In addition, the shock of the recoil of the gun and the extreme vibrations that constantly accompany the operation of a ground combat vehicle must also be accounted for in designing and producing a ground EO system. An EO system operating on the ground may also have to see through several miles of battlefield smoke and debris. For these reasons, the Army spent over $90 million in the early 1990 specifically to develop an EO system for its ground vehicles. 27. The development, production, and sale of ground EO systems is a line of commerce and a relevant product market within the meaning of the Clayton Act. FOTT PROGRAM 28. FOTT is a U.S. Army engineering, manufacturing, and development ("EMD") program for an advanced missile to replace the current inventory of TOW anti-tank missiles. The program started on March 30, 1995 when the Army issued a Request for Information. An initial draft Request for Proposal was issued on May 15, 1996, a second draft Request for Proposal was issued on February 12, 1997, and a third draft Request for Proposal was issued on August 8, 1997. The Army currently anticipates issuing a formal Request for Proposal for the FOTT program at the end of 1997 or early 1998. A contract for EMD is expected to be awarded in the first half of 1998. Hughes and a joint venture between RTIS and Lockheed Martin, in which RTIS owns a 60% interest, are competing for the FOTT program. 29. The U.S. Army has determined that development of an advanced anti-tank missile is necessary and that no other missile system meets the mission objectives set for the FOTT program. 30. The development, production, and sale of FOTT missiles is a line of commerce and a relevant product market within the meaning of the Clayton Act. B. RELEVANT GEOGRAPHIC MARKET 31. Ground EO systems and SADA II detectors are purchased directly by DoD, and staring FPAs are purchased by missile and aircraft producers for inclusion in weapon systems sold to DoD. In addition, the FOTT missile is expected to be purchased by DoD. In purchases of ground EO systems, SADA II detectors, and staring FPAs, DOD relies on domestic suppliers. Currently, there are no foreign producers to which DoD could turn in the face of a small but significant and non-transitory price increase by domestic ground EO, qualified SADA II, or staring FPA suppliers. In addition, there is no foreign producer for the FOTT missile to which the DoD is likely to turn in the face of a small but significant and non-transitory price increase by domestic suppliers. 32. The United States is a relevant geographic market within the meaning of Section 7 of the Clayton Act. C. ANTI-COMPETITIVE EFFECT AND ENTRY SADA II Detectors 33. Raytheon and Hughes are the only two firms that have sold SADA II detectors to DoD. Hughes was qualified as a SADA II supplier in mid-1996, and Raytheon was permitted to bid for 1997 purchases based on its demonstrated success toward completing the qualification process. Raytheon is expected to be fully qualified by the end of 1997. 34. DoD projects purchases of 2,945 SADA II detectors through the year 2002, having a total dollar value of about $138.8 million. In 1997, about 103 SADA II detectors having a total dollar value of about $6.6 million were purchased, of which 70 percent were supplied by Hughes and 30 percent by RTIS. 35. Raytheon's acquisition of Hughes would eliminate all competition in the development, production, and sale of SADA II detectors. The proposed acquisition will result in a single supplier with the incentive and ability to raise prices and little or no incentive to minimize cost. 36. Successful entry into the production and sale of SADA II detectors is difficult, time consuming, and costly. A potential entrant would have to design and develop a product, establish production processes, and complete a rigorous qualification process. A new facility capable of producing SADA II detectors could cost over $20 million. Only one other firm, Sofradir of France, is trying to qualify under the SADA II program. Sofradir, which is partially owned by the French government, is beginning the qualification process. It is unrealistic to expect sufficient new entry in a timely fashion to protect competition in upcoming SADA II purchases. Staring FPAs 37. Raytheon and Hughes are the two leading suppliers of staring FPAs for military programs. Raytheon produces staring FPAs at its RTIS facility in Dallas, Texas and its Amber facility, in Goleta, California. Hughes operates SBRC, the industry's premier staring FPA facility, in Santa Barbara, California. Hughes and Raytheon have supplied or are contracted to supply the staring FPAs on most DoD missile and aircraft programs. DoD projects purchases of about 14,000 staring FPAs over the next five years having a value of about $35 million. 38. Raytheon's acquisition of Hughes would combine the two leading suppliers of staring FPAs with over 90 percent of the market. The acquisition would create a clear dominant supplier with the incentive and ability to raise prices and little or no incentive to minimize cost. 39. Boeing Company ("Boeing") and Lockheed Martin make staring FPAs for military applications, but neither is a major supplier in the tactical market. Boeing has focused on space applications, where the FPA must meet more rigid durability and quality standards. Consequently, FPAs for space applications cost significantly more than FPAs for tactical applications. Lockheed Martin operates a very small, research-oriented staring FPA operation. Boeing would need to refocus its staring FPA business from the higher price space applications and Lockheed Martin would need to invest in a production-oriented facility in order for either to be a more significant supplier in the tactical market. 40. Successful entry into the production and sale of staring FPAs is difficult, time consuming, and costly. A potential entrant would have to design and develop a product and establish production processes. A new facility capable of producing staring FPAs could cost over $20 million. It is unrealistic to expect new entry in a timely fashion to protect competition in upcoming staring FPA purchases. 41. The acquisition also likely will result in lessening of competition in the market for missile systems. Raytheon and Hughes are not only suppliers of staring FPAs, but are also major suppliers of the missile systems of which these devices are critical components. With the acquisition of Hughes, Raytheon will control access to virtually all currently viable staring FPAs for tactical applications. Raytheon will have an incentive to refuse to sell, or to sell on disadvantageous terms, its state-of-the-art staring FPAs to its missile competitors. Without access to the latest staring FPAs, a missile manufacturer is at a serious competitive disadvantage. 2nd Gen. Ground EO Systems 42. Raytheon and Hughes are the only two firms that develop and produce 2nd Gen. EO systems for ground vehicles. Raytheon's RTIS and Hughes are the only two firms that have established the developmental capacity and low-cost production processes needed to economically produce 2nd Gen. ground EO systems. 43. During the next five years, DoD expects to spend about $200 million a year for 2nd Gen. ground EO systems to be purchased for the following programs: the Improved Target Acquisition System for the HMMWV; the Improved Bradley Acquisition System for the Bradley Fighting Vehicle; the Commander's Independent Thermal Viewer for the M1 Abrams tank; the Thermal Independent Sight for the M1 Abrams tank; the Commander's Independent Viewer for the Bradley Fighting Vehicle; and the Long Range Advanced Scout Surveillance System. Raytheon and Hughes are the only sources for these ground EO systems. 44. Raytheon's acquisition of Hughes would eliminate all competition in the development, production, and sale of 2nd Gen. ground EO systems for military applications. The proposed acquisition will result in a single supplier with the incentive and ability to raise prices and little or no incentive to minimize cost. 45. Successful entry into the production and sale of 2nd Gen. ground EO systems is difficult, time consuming, and costly. Entry requires advanced technology, skilled engineers and specialized equipment. A potential entrant would have to engage in difficult, expensive, and time consuming research to develop and produce 2nd Gen. ground EO systems. It is unrealistic to expect new entry in a timely fashion to protect competition in upcoming 2nd Gen. ground EO system purchases. FOTT Program 46. If Raytheon acquires Hughes, it will control the Hughes FOTT proposal and it will control a 60 percent interest in the RTIS/Lockheed Martin joint venture FOTT proposal. In such a situation, Raytheon has a strong economic incentive to favor its Hughes proposal, where it stands to win 100 percent of the program, over the team in which it has only a 60 percent interest. Raytheon's acquisition of Hughes will eliminate the aggressive competition that would otherwise exist between these independent teams. FOTT is a potential $8 billion to $10 billion program. 47. It would be very difficult for another firm to successfully enter the FOTT competition at this stage. The Hughes and RTIS/Lockheed Martin joint venture teams have completed the validation and demonstration stage and have each spent over $20 million during the last three years developing a missile to demonstrate during the EMD selection. Selection of a contractor for the EMD contract is expected during the first half of 1998. IV. VIOLATION ALLEGED 48. The effect of Raytheon's proposed acquisition of Hughes is to lessen competition substantially and tend to create a monopoly in interstate trade and commerce in violation of Section 7 of the Clayton Act. 49. The transaction likely will have the following effects among others: competition generally in development, production, and sale of SADA II detectors in the United States would be lessened substantially; actual and future competition between Raytheon and Hughes in the sale of SADA II detectors in the United States would be eliminated; prices for SADA II detectors in the United States would likely increase; competition generally in development, production, and sale of staring FPAs in the United States would be lessened substantially; actual and future competition between Raytheon and Hughes in the sale of staring FPAs in the United States would be eliminated; prices for staring FPAs in the United States would likely increase; competition generally in the innovation, development, production, and sale of ground EO systems in the United States would be lessened substantially; actual and future competition between Raytheon and Hughes in the development, production, and sale of ground EO systems in the United States would be eliminated; prices for ground EO systems in the United States would likely increase; competition generally for the FOTT missile program would be lessened substantially; actual and future competition between Raytheon and Hughes in the development, production, and sale of the FOTT missile in the United States would be eliminated; and prices for the FOTT missile in the United States would likely increase. V. REQUESTED RELIEF Plaintiff requests: 1. That the proposed acquisition by Raytheon of Hughes be adjudged to violate Section 7 of the Clayton Act, as amended 15 U.S.C. § 18; 2. That the defendants be permanently enjoined and restrained from carrying out the Agreement and Plan of Merger by and Between HE Holdings, Inc. and Raytheon Company, dated January 16, 1997, or from entering into or carrying out any agreement, understanding or plan, the effect of which would be to combine the SADA II, staring FPA, ground EO systems, or FOTT businesses or assets of Raytheon and Hughes; 3. That plaintiff be awarded its costs of this action; and 4. That plaintiff have such other relief as the Court may deem just and proper. Dated: October 16, 1997.

REVISIONS BY COURT NOTED BELOW ADDITIONS IN BOLD DELETIONS IN BRACKETS IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA -------------------------------------------------------------------------------- UNITED STATES OF AMERICA, Plaintiff, v. RAYTHEON COMPANY, GENERAL MOTORS CORP. and H E HOLDINGS, INC., Defendant. -------------------------------------------------------------------------------- | | | | | | | | | | | | | | Civil No: 97 2397 Entered: January 27, 1998 FINAL JUDGMENT WHEREAS, plaintiff, the United States of America, filed its Complaint in this action on October 16, 1997, and plaintiff and defendants by their respective attorneys, having consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law 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; -------------------------------------------------------------------------------- Page 2 AND WHEREAS, plaintiff intends defendants to be required to preserve competition by: (1) promptly divesting the second generation ("2nd Gen.") and third generation ("3rd Gen.") focal plane array ("FPA") business of Raytheon TI Systems ("RTIS") and the 2nd Gen. ground electro- optical ("EO") business of Hughes Aircraft Company's Sensors and Communications System Segment; (2) establishing a firewall that prevents the flow of information concerning the Follow-on-to-TOW ("FOTT") missile program between the RTIS Missile Systems Division ("RTIS Missiles") of Raytheon and any other part of Raytheon and between Hughes Missile Systems and any other part of Raytheon; and (3) incentivizing RTIS Missiles to pursue its bid through a joint venture with Lockheed Martin Corp. to ensure competition in bids for the FOTT missile; AND WHEREAS, plaintiff requires defendants to make the divestitures for the purpose of establishing a viable competitor in the development, production, and sale of FPAs and ground EO systems, and to construct firewalls and incentivize RTIS Missiles for the purpose of preserving competition in bidding for the FOTT missile program; AND WHEREAS, defendants have represented to the plaintiff that the divestitures ordered herein can and will be made and that the firewalls can be constructed and that defendants will later raise no claims of hardship or difficulty as grounds for asking the Court to modify any of the divestiture or firewall provisions contained below; -------------------------------------------------------------------------------- Page 3 NOW, THEREFORE, before the taking of any testimony, and without trial or adjudication of any issue of fact or law herein, and upon consent of the parties hereto, it is hereby ORDERED, ADJUDGED, AND DECREED as follows: I. JURISDICTION This Court has jurisdiction over each of the parties hereto and 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. "A-Kit" means all components necessary to fit a B-Kit into a particular ground vehicle, including the optics, electronics, software, visual display, stabilization, and fire control as required. B. "B-Kit" means the common components for 2nd Gen. Forward Looking Infrared Systems ("FLIRs") designed under the HTI program, including SADA II integrated cooler/dewar detector assemblies, afocal assemblies, and associated electronics. C. "DoD" means the Department of Defense. -------------------------------------------------------------------------------- Page 4 D. "DoJ" means the Antitrust Division of the Department of Justice. E. "EO Business" means the 2nd Gen. ground EO business of Hughes operated out of the El Segundo, California and La Grange, Georgia facilities that produces A-Kits and B-Kits for ground vehicles and other applications, including the IBAS, M-1 TIS, LRASSS, and HTI programs, and all employees listed in confidential Attachment A, including: a. all tangible assets used to produce A-Kits and B-Kits; all real property (owned or leased), including interests in theEl Segundo, California and La Grange, Georgia facilities used to produce A-Kits and B-Kits, research and development activities, as identified pursuant to the Court's Hold Separate and Partition Plan Stipulation and Order; all manufacturing, personal property, inventory, office furniture, fixed assets and fixtures, materials, supplies, on-site warehouses or storage facilities, and other tangible property or improvements used in the production of A-Kits and B-Kits; all licenses, permits and authorizations issued by any governmental organization relating to A-Kits and B-Kits; all contracts, teaming arrangements, agreements, leases, commitments and understandings pertaining to A-Kits and B-Kits; supply agreements; all customer lists and credit records; and other records maintained by Hughes in connection with the production of A-Kits and B-Kits; -------------------------------------------------------------------------------- Page 5 b. all intangible assets relating to the research, development, and production of A-Kits and B-Kits, including but not limited to a non-exclusive, transferable, royalty-free license to use all patents utilized by Hughes in the EO Business, licenses and sublicenses, intellectual property, technical information, know-how, trade secrets, drawings, blueprints, designs, design protocols, specifications for materials, specifications for parts and devices, safety procedures for the handling of materials and substances, quality assurance and control procedures, design tools and simulation capability, and all manuals and technical information Hughes provides to its own employees, customers, suppliers, agents or licensees; c. all research data concerning historic and current research and development efforts relating to the production of A-Kits and B-Kits, including designs of experiments, and the results of unsuccessful designs and experiments; d. at the option of the purchasers, a supply contract for computer support services and information and communications services sufficient to support the EO Business over a period of one year; and -------------------------------------------------------------------------------- Page 6 e. at the option of the purchaser, at the time of purchase, an option to purchase or lease an additional 10,000 square feet of manufacturing space for the EO Business in addition to the space set aside for the EO Business in the Hold Separate and Partition Plan and Order. F. "FOTT Information" means all information relating to the FOTT Program, including but not limited to, information relating to any and all proposals, technology, cost data, suppliers, designs, plans, test results, specifications, pricing, technical interface with IBAS and ITAS or other sensitive competitive information. FOTT Information shall be stamped as "Confidential and Competition Sensitive." G. "FOTT Program" means the Follow-on-to-TOW missile program, for which the Hughes FOTT Team and the TI/Martin Javelin Joint Venture (as defined below) will be competing for the Engineering Manufacturing Development ("EMD") contract, scheduled to be awarded by the United States Army in 1998. H. "FPA" means a matrix of detectors or pixels made of material that is sensitive to infrared ("IR") radiation, which is mated to a silicon processor and used to detect and analyze IR radiation. -------------------------------------------------------------------------------- Page 7 I. "FPA Business" means the 2nd Gen. and 3rd Gen. scanning and staring IR detector businesses of RTIS operated out of the Semiconductor Building and the Research West Building located at the Expressway site in Dallas, Texas, including all dewar and cryogenic cooler manufacturing and dewar and cryogenic cooler assembly (except for RTIS' uncooled FPA Business), and including all employees listed in confidential Attachment B, including: a. all tangible assets used to produce scanning IR detectors, including SADA detectors, staring detectors, dewars, and cryogenic coolers, including, but not limited to, all real property (owned or leased), including interests in the Dallas facilities, used in the operation of the RTIS FPA Business, including research and development activities, as identified pursuant to the Court's Hold Separate and Partition Plan Stipulation and Order; all manufacturing, personal property, inventory, office furniture, fixed assets and fixtures, materials, supplies, on-site warehouses or storage facilities, and other tangible property or improvements used in the operation of the RTIS FPA Business; all licenses, permits and authorizations issued by any governmental organization relating to the RTIS FPA Business; all contracts, teaming arrangements, agreements, leases, commitments and understandings pertaining to the RTIS FPA Business and its operations; supply agreements; all customer lists and credit records; and other records maintained by Raytheon in connection with the RTIS FPA Business; -------------------------------------------------------------------------------- Page 8 b. all intangible assets relating to the RTIS FPA Business, including but not limited to all patents, licenses and sublicenses, intellectual property, maskwork rights, technical information, know-how, trade secrets, drawings, blueprints, designs, design protocols, cell libraries, specifications for materials, specifications for parts and devices, safety procedures for the handling of materials and substances, quality assurance and control procedures, design tools and simulation capability, and all manuals and technical information Raytheon provides to its own employees, customers, suppliers, agents or licensees, except that the purchaser shall agree to grant to the seller a non-exclusive, transferable, royalty-free license for any invention disclosed in U.S. Patent No. 5,274,578; and any inventions disclosed in U.S. Patent Applications Nos. 08/474,229, 08/097,522, 08/478,570 and 08/487,820 and Provisional Patent Application No. 60/014, 812; and c. all research data concerning historic and current research and development efforts relating to the RTIS FPA Business, including designs of experiments, and the results of unsuccessful designs and experiments. J. "HTI" means the Horizontal Technology Integration program to develop a common B-Kit to be used on different ground vehicle platforms. -------------------------------------------------------------------------------- Page 9 K. "Hughes" means Hughes Aircraft Company, an indirect subsidiary of General Motors Corp., with its headquarters in Arlington, Virginia, and its successors, assigns, subsidiaries, divisions, groups, affiliates, partnership and joint ventures, and directors, officers, managers, agents, and employees. L. "Hughes FOTT Team" means all Hughes Missile Systems managers and employees who have been assigned to or consulted in connection with the FOTT program. M. "IBAS" means the Integrated Bradley Acquisition System, a program to upgrade the sights on a Bradley Fighting Vehicle. N. "ITAS" means the Improved Target Acquisition System, a program to improve TOW missile launching capabilities. O. "LRASSS" means the Long-Range Advanced Scout Surveillance System, a future surveillance system to be mounted on light ground vehicles. P. "M1-TIS" means the Thermal Imaging System for the M1 Abrams tank. -------------------------------------------------------------------------------- Page 10 Q. "Raytheon" means Raytheon Company, a Delaware corporation with its headquarters and principal place of business in Lexington, Massachusetts, and its successors, assigns, subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, and directors, officers, managers, agents, and employees. R. "RTIS" means Raytheon TI Systems, Inc. S. "RTIS FOTT team" means Mr. Lawrence Schmidt, all RTIS managers and employees of the TI/Martin Javelin Joint Venture, and all other RTIS employees who have been assigned to or consulted in connection with the FOTT program. One attorney in the General Counsel's Office of Raytheon, to be designated by Raytheon, shall be deemed a member of the RTIS FOTT Team and may be consulted for the purpose of obtaining legal or regulatory advice, but shall not receive FOTT Information concerning pricing or other bid information. T. "SADA" means the Standardized Advanced Dewar Assembly and consists of a scanning FPA mounted in an evacuated dewar. The SADA program is an effort by the United States Army to develop a family of IR detectors that can be used in a variety of battlefield systems. -------------------------------------------------------------------------------- Page 11 U. "TI/Martin Javelin Joint Venture" means the joint venture between Texas Instruments a/k/a RTIS and Lockheed Martin, which will be a competitor for the FOTT Program. V. "Uncooled FPA Business" means the technology, production equipment, and all tangible and intangible assets used by RTIS solely in the production of uncooled FPAs. III. APPLICABILITY A. The provisions of this Final Judgment apply to Raytheon, its 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. Raytheon shall require, as a condition of the sale or other disposition of all or substantially all of its assets or of a lesser business unit that includes Raytheon's business of developing and producing FPAs and ground EO Systems, that the transferee agree to be bound by the provisions of this Final Judgment. -------------------------------------------------------------------------------- Page 12 IV. DIVESTITURE A. Raytheon is hereby ordered and directed in accordance with the terms of this Final Judgment, within one-hundred and eighty (180) calendar days after October 3, 1997 or five (5) days after notice of the entry of this Final Judgment by the Court, whichever is later, to divest the FPA Business and the EO Business to an acquirer(s) acceptable to DoJ and DoD in their sole discretion. B. Raytheon shall use its best efforts to accomplish the divestitures as expeditiously and timely as possible. DoJ in its sole determination, in consultation with DoD, may extend the time period for any divestitures for an additional period of time not to exceed thirty (30) calendar days. C. In accomplishing the divestitures ordered by this Final Judgment, Raytheon promptly shall make known, by usual and customary means, the availability of the FPA Business and the EO Business described in this Final Judgment. Raytheon shall inform any 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. Raytheon shall also offer to furnish to all bona fide prospective purchasers, subject to customary confidentiality assurances, all information regarding the FPA Business and the EO Business customarily provided in a due diligence process except such information subject to attorney-client privilege or attorney work- product privilege. Raytheon shall make available such information to DoJ at the same time that such information is made available to any other person. -------------------------------------------------------------------------------- Page 13 D. Raytheon shall permit bona fide prospective purchasers of the FPA Business and the EO Business to have reasonable access to personnel and to make such inspection of the physical facilities of the FPA Business and EO Business and any and all financial, operational, or other documents and information customarily provided as part of a due diligence process. E. Raytheon shall not take any action that will impede in any way the operation of the FPA Business or the EO Business. F. Unless both DoJ and DoD otherwise consent in writing, the divestitures pursuant to Section IV, or by trustee appointed pursuant to Section V of this Final Judgment, shall include the entire FPA Business and the entire EO Business, operated in place pursuant to the Hold Separate and Partition Plan Stipulation and Order, and be accomplished by selling or otherwise conveying the FPA Business and the EO Business to a purchaser(s) in such a way as to satisfy DoJ and DoD, in their sole discretion, that the FPA Business and the EO Business can and will be used by the purchaser(s) as part of a viable, ongoing business or businesses engaged in the development, production, and sale of FPAs and ground EO systems. Divestiture of the FPA Business and the EO Business may be made to one or more purchasers provided that in each instance it is demonstrated to the sole satisfaction of DoJ and DoD that the FPA Business and EO Business will remain viable. The divestitures, whether pursuant to Section IV or Section V of this Final Judgment, shall be made to a purchaser(s) who it is demonstrated to DoJ's and DoD's sole satisfaction: (1) has the capability and intent of competing effectively in the development, production and sale of FPAs or ground EO systems as the case may be; (2) has the managerial, -------------------------------------------------------------------------------- Page 14 operational, and financial capability to compete effectively in the development, production and sale of FPAs or ground EO systems as the case may be; (3) is eligible to receive applicable DoD security clearances; and (4) that none of the terms of any agreement between the purchaser and Raytheon give Raytheon the ability unreasonably to raise the purchaser's costs, to lower the purchaser's efficiency, or otherwise to interfere in the ability of the purchaser to compete effectively. G. For a period of two years from the filing of the Complaint in this matter, Raytheon and Hughes shall not solicit to hire any individual who, on the date of the filing of the Complaint in this matter, was an employee of the FPA Business or the EO Business. For a period of two years from the filing of the Complaint in this matter, Raytheon and Hughes shall not hire any individual who, on the date of the filing of the Complaint in this matter, was an employee of the FPA Business or the EO Business unless such individual has a written offer of employment from a third party for a like position. H. Raytheon shall comply with all agreements with DoD regarding the protection of information related to classified programs. I. Raytheon shall not charge to DoD any costs directly or indirectly incurred in complying with this Final Judgment. -------------------------------------------------------------------------------- Page 15 V. APPOINTMENT OF TRUSTEE A. In the event that Raytheon has not divested the FPA Business and the EO Business within the time specified in Section IV of this Final Judgment, the Court shall appoint, on application of the United States, a trustee selected by DoJ, in consultation with DoD, to effect the divestiture of the FPA Business and the EO Business. B. After the appointment of a trustee becomes effective, only the trustee shall have the right to sell the FPA Business described in Section II(I) and the EO Business described in Section II(E) of this Final Judgment. The trustee shall have the power and authority to accomplish the divestiture at the best price then obtainable upon a reasonable effort by the trustee, subject to the provisions of Sections IV and IX of this Final Judgment, and shall have such other powers as the Court shall deem appropriate. Subject to Section V(C) of this Final Judgment, the trustee shall have the power and authority to hire at the cost and expense of Raytheon any investment bankers, attorneys, or other agents reasonably necessary in the judgment of the trustee to assist in the divestitures, and such professionals and agents shall be accountable solely to the trustee. The trustee shall have the power and authority to accomplish the divestitures at the earliest possible time to a purchaser acceptable to DoJ and DoD, and shall have such other powers as this Court shall deem appropriate. Raytheon shall not object to a sale by the trustee on any grounds other than the trustee's malfeasance. Any such objections by Raytheon must be conveyed in writing to DoJ and the trustee within ten (10) calendar days after the trustee has provided the notice required under Section VII of this Final Judgment. -------------------------------------------------------------------------------- Page 16 C. The trustee shall serve at the cost and expense of Raytheon, on such terms and conditions as the Court may prescribe, and shall account for all monies derived from the sale of the assets 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 Raytheon and the trust shall then be terminated. The compensation of such trustee and of any professionals and agents retained by the trustee shall be reasonable in light of the value of the divested business and based on a fee arrangement providing the trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished. D. Raytheon shall use its best efforts to assist the trustee in accomplishing the required divestitures, including best efforts to effect all necessary regulatory approvals. The trustee and any consultants, accountants, attorneys, and other persons retained by the trustee shall have full and complete access to the personnel, books, records, and facilities of the businesses to be divested, and Raytheon shall develop financial or other information relevant to the business to be divested customarily provided in a due diligence process as the trustee may reasonably request, subject to customary confidentiality assurances. Raytheon shall permit bona fide prospective acquirers of the assets to have reasonable access to personnel and to make such inspection of physical facilities and any and all financial, operational or other documents and other information as may be relevant to the divestitures required by this Final Judgment. -------------------------------------------------------------------------------- Page 17 E. After its appointment, the trustee shall file monthly reports with the parties and the Court setting forth the trustee's efforts to accomplish the divestitures ordered under this Final Judgment; 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. 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 business 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 the trustee has not accomplished such divestitures within six (6) months after its appointment, 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 trustee's 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 DoJ. -------------------------------------------------------------------------------- Page 18 VI. FIREWALL A. Members of the RTIS FOTT Team are prohibited from giving or receiving, either directly or indirectly, any FOTT Information to or from the Hughes FOTT Team or any other Raytheon employee. Members of the Hughes FOTT Team are prohibited from giving or receiving, either directly or indirectly, any FOTT Information to or from the RTIS FOTT Team or any other Raytheon employee. To implement this provision, Raytheon is required to construct a firewall within Raytheon that prevents the flow of FOTT Information between the RTIS FOTT Team and any other segment or official of Raytheon. Raytheon is also required to construct a firewall within Raytheon that prevents the flow of any FOTT Information between the Hughes FOTT Team and any other segment or official of Raytheon. These firewalls are intended to ensure competition between RTIS Missiles and Hughes Missile Systems in bidding on the FOTT Program. Raytheon shall, within five (5) business days of its signing the Stipulation and Order consenting to the entry of this Final Judgment, submit to DoJ and DoD a document setting forth in detail its procedures to effect compliance with this provision. DoJ and DoD shall have the sole discretion to approve Raytheon's compliance plan and shall notify Raytheon within three (3) business days whether they approve of or reject Raytheon's compliance plan. In the event that Raytheon's compliance plan is rejected, the reasons for the rejection shall be provided to Raytheon by DoJ and Raytheon shall be given the opportunity to submit, within two (2) business days of receiving the notice of rejection, a revised compliance plan. If the parties cannot agree on a compliance plan within an additional three (3) business days, a plan will be devised by DoD and implemented by Raytheon. All Raytheon employees shall abide by the provisions of the compliance plan. The prohibitions in this paragraph shall remain in effect until final -------------------------------------------------------------------------------- Page 19 determination of the EMD contract award for the FOTT Program is made by DoD. Raytheon shall use all reasonable efforts to submit a competitive bid by the RTIS FOTT Team for the FOTT Program. B. Raytheon shall delegate to Mr. Lawrence Schmidt, Senior Vice President, Missile Systems Division of RTIS, in his sole discretion, the right to review and determine on behalf of Raytheon all matters relating to the TI/Martin Javelin Joint Venture bid, including any best and final offer and responses to any inquiry from DoD, on the FOTT Program; to invest Raytheon's funds in the FOTT Program; and to draw on other resources within RTIS Missiles to compete for the FOTT Program. C. Raytheon shall provide an economic incentive to the RTIS management personnel of the TI/Martin Javelin Joint Venture to ensure all reasonable efforts will be made by Raytheon to submit a competitive bid by the TI/Martin Javelin Joint Venture for the FOTT Program. As an incentive to win the FOTT Program, Raytheon shall pay, conditioned solely upon the TI/Martin Javelin Joint Venture being awarded the EMD contract for the FOTT Program, bonuses to certain RTIS Missiles employees. Each employee to receive a bonus upon award of the EMD contract for the FOTT Program and the amount of each applicable bonus is listed in confidential Attachment "C." -------------------------------------------------------------------------------- Page 20 D. Raytheon shall notify and train all RTIS Missiles, Hughes Missile Systems, and other Raytheon employees likely to see FOTT Information regarding the restrictions on FOTT Information and require that all such employees sign a statement acknowledging the restrictions on the FOTT Information. In addition, all RTIS Missiles employees having access to FOTT Information must sign a certification stating that they understand the restrictions of the firewall and agree to adhere to the firewall restrictions. VII. NOTIFICATION 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 V of this Final Judgment, Raytheon or the trustee, whichever is then responsible for effecting the divestitures, shall notify DoJ and DoD of the proposed divestitures. If the trustee is responsible, it shall similarly notify Raytheon. 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 businesses 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 DoJ and DoD of such notice, DoJ, in consultation with DoD, may request from Raytheon, the proposed purchaser, or any other third party additional information concerning the proposed divestitures and the proposed purchaser. Raytheon 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 -------------------------------------------------------------------------------- Page 21 the notice or within twenty (20) calendar days after DoJ has been provided the additional information requested from Raytheon, the proposed purchaser, and any third party, whichever is later, DoJ and DoD shall each provide written notice to Raytheon and the trustee, if there is one, stating whether or not it objects to the proposed divestiture. If DoJ and DoD provide written notice to Raytheon and the trustee that they do not object, then the divestiture may be consummated, subject only to Raytheon's limited right to object to the sale under Section V(B) of this Final Judgment. Absent written notice that DoJ and DoD do not object to the proposed purchaser or upon objection by DoJ or DoD, a divestiture proposed under Section IV or Section V may not be consummated. Upon objection by Raytheon under the provision in Section V(B), a divestiture proposed under Section V shall not be consummated unless approved by the Court. VIII. 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 divestiture has been completed whether pursuant to Section IV or Section V of this Final Judgment, Raytheon shall deliver to DoJ and DoD an affidavit as to the fact and manner of compliance with Sections IV or V of this Final Judgment. Each such affidavit shall include, interalia, 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 business 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 Raytheon has taken to solicit a buyer for the relevant -------------------------------------------------------------------------------- Page 22 assets and to provide required information to prospective purchasers including the limitations, if any, on such information. Assuming the information set forth in the affidavit is true and complete, any objection by DoJ to information provided by Raytheon, 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, Raytheon shall deliver to DoJ and DoD an affidavit which describes in detail all actions Raytheon has taken and all steps Raytheon has implemented on an on-going basis to comply with the firewall provisions pursuant to Section VI of this Final Judgment and to preserve the FPA Business and the EO Business pursuant to Section IX of this Final Judgment and the Hold Separate and Partition Order entered by the Court. The affidavit also shall describe, but not be limited to, Raytheon's efforts to maintain and operate the FPA Business and the EO Business as an active competitor, maintain the management, staffing, research and development activities, sales, marketing and pricing of the FPA Business and the EO Business, and maintain the FPA Business and the EO Business in operable condition at current capacity configurations. Raytheon shall deliver to DoJ and DoD an affidavit describing any changes to the efforts and actions outlined in Raytheon's earlier affidavit(s) filed pursuant to this Section within fifteen (15) calendar days after the change is implemented. C. Until one year after such divestiture has been completed, Raytheon shall preserve all records of all efforts made to preserve the business to be divested and effect the divestitures. -------------------------------------------------------------------------------- Page 23 IX. HOLD SEPARATE ORDER Until the divestitures required by the Final Judgment have been accomplished, Raytheon shall take all steps necessary to comply with the Hold Separate and Partition Plan Stipulation and Order entered by this Court and to preserve the assets of the FPA Business and the EO Business. Defendants shall take no action that would jeopardize the divestiture ordered by this Court. X. FINANCING Raytheon is ordered and directed not to finance all or any part of any purchase by an acquirer(s) made pursuant to Sections IV or V of this Final Judgment. XI. COMPLIANCE INSPECTION For purposes of determining or securing compliance with the Final Judgment 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 Raytheon made to its principal offices, shall be permitted: 1. Access during office hours of Raytheon to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of Raytheon, who may -------------------------------------------------------------------------------- Page 24 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 Raytheon and without restraint or interference from it, to interview, either informally or on the record, its 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 Raytheon's principal offices, Raytheon shall submit such written reports, under oath if requested, with respect to any matter contained in the Final Judgment and the Hold Separate and Partition Order. C. No information or documents obtained by the means provided in Sections VIII or XI of this Final Judgment shall be divulged by a representative of the plaintiff 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. -------------------------------------------------------------------------------- Page 25 D. If at the time information or documents are furnished by Raytheon to DoJ or DoD, Raytheon represents and identifies 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 Raytheon marks each pertinent page of such material, "Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure," then ten (10) calendar days notice shall be given by DoJ or DoD to Raytheon prior to divulging such material in any legal proceeding (other than a grand jury proceeding) to which Raytheon is not a party. XII. 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. XIII. TERMINATION Unless this Court grants an extension, this Final Judgment will expire upon the tenth anniversary of the date of its entry. XIV. PUBLIC INTEREST Entry of this Final Judgment is in the public interest. See Citizens for a Better Environment v. Gorsuch, 718 F.2d 1117 (D.C. Cir. 1983), and it is further ORDERED that while this Court retains jurisdiction over this case, the case shall be removed from the active calendar of the Court. Dated: January 27, 1998.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA -------------------------------------------------------------------------------- UNITED STATES OF AMERICA, Department of Justice Antitrust Division 1401 H Street, NW, Suite 3000 Washington, DC 20530, Plaintiff, v. REPUBLIC SERVICES, INC., 110 S.E. 6th Street Ft. Lauderdale, FL 33301, and ALLIED WASTE INDUSTRIES, INC., 15880 Greenway-Hayden Loop, Suite 100 Scottsdale, Arizona 85260, Defendants. -------------------------------------------------------------------------------- | | | | | | | | | | | | | | | | | | | | | | Civil No. 1:00CV02311 Filed: September 27, 2000 COMPLAINT FOR INJUNCTIVE RELIEF The United States of America, acting under the direction of the Attorney General of the United States, brings this civil antitrust action to enjoin the acquisition of certain waste hauling and disposal assets by defendant Republic Services, Inc. ("Republic") from defendant Allied Waste Industries, Inc. ("Allied") and to obtain equitable relief and other relief as appropriate. Plaintiff complains and alleges as follows: 1. Pursuant to a Put/Call Agreement dated December 6, 1999 and a Letter Agreement dated August 1, 2000, Republic will acquire from Allied certain waste-hauling and disposal assets. The proposed transaction, identified below, would lessen competition substantially in waste collection and/or disposal services in Akron and Canton, Ohio. 2. Republic and Allied are two of only a few providers of waste collection services in the Akron/Canton area. Unless the acquisition is enjoined, consumers of waste collection services will likely pay higher prices and receive fewer services as a consequence of the elimination of the vigorous competition between defendants Republic and Allied. I. JURISDICTION AND VENUE 3. This action is filed by the United States of America under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent and restrain the violation by defendants of Section 7 of the Clayton Act, 15 U.S.C. § 18. 4. Republic submits to the personal jurisdiction of the District of Columbia, and Allied is located in and transacts business in the District of Columbia. Venue is therefore proper in this district under Section 12 of the Clayton Act, 15 U.S.C. § 22, and 28 U.S.C. § 1391(c). 5. Defendants Republic and Allied collect municipal solid waste from residential, commercial, and industrial customers. In their waste collection business, defendants make sales and purchases in interstate commerce, ship waste in the flow of interstate commerce, and engage in activities substantially affecting interstate commerce. The Court has jurisdiction over this action and over the parties pursuant to 15 U.S.C. § 22 and 28 U.S.C. §§ 1331 and 1337. II. DEFINITIONS 6. "MSW" means municipal solid waste, a term of art used to describe solid putrescible waste generated by households and commercial establishments such as retail stores, offices, restaurants, warehouses, and non-manufacturing activities in industrial facilities. MSW does not include special handling waste (e.g., waste from manufacturing processes, regulated medical waste, sewage, and sludge), hazardous waste, or waste generated by construction or demolition sites. 7. "Small container commercial waste collection service" means the business of collecting MSW from commercial and industrial accounts, usually in "dumpsters" (i.e., a small container with one to ten cubic yards of storage capacity), and transporting or "hauling" such waste to a disposal site by use of a front-or rear-end loader truck. Typical commercial waste collection customers include office and apartment buildings and retail establishments (e.g.,stores and restaurants). 8. "Akron/Canton, Ohio area" means the Cities of Akron and Canton, Ohio; and Summit, Stark, and Portage counties, Ohio. III. DEFENDANTS AND THE TRANSACTION 9. Republic is a Delaware corporation with its principal office in Ft. Lauderdale, Florida. Republic is engaged in providing waste collection and disposal services throughout the United States. In its 1998 fiscal year, Republic reported total revenues of approximately $1.8 billion. 10. Allied is a Delaware corporation with its principal office in Scottsdale, Arizona. Allied is the nation's second largest waste hauling and disposal company. It is engaged in providing waste collection and disposal services throughout the United States. In 1999, Allied reported total revenues of approximately $6 billion. 11. Pursuant to a Put/Call Agreement dated December 6, 1999 and a Letter Agreement dated August 1, 2000, Republic agreed to acquire from Allied certain waste hauling and disposal assets ("the acquisitions"). Pursuant to the Put/Call and Letter Agreements, Republic would acquire from Allied hauling and disposal assets in the Akron/Canton, Ohio area. IV. TRADE AND COMMERCE A. The Relevant Service Market Small Container Commercial Waste Collection Service 12. Waste collection firms, or "haulers," collect MSW from residential, commercial, and industrial establishments, and transport the waste to a disposal site, such as a transfer station, sanitary landfill, or incinerator, for processing and disposal. Private waste haulers typically contract directly with customers for the collection of waste generated by commercial accounts. MSW generated by residential customers, on the other hand, is often collected by either local governments or by private haulers pursuant to contracts bid by, or franchises granted by, municipal authorities. 13. Small container commercial waste collection differs in many important respects from the collection of residential or other types of waste. An individual commercial customer typically generates substantially more MSW than a residential customer. To handle this high volume of MSW efficiently, haulers provide commercial customers with dumpsters for storing the waste. Haulers organize their commercial accounts into routes, and collect and transport the MSW generated by these accounts in vehicles uniquely well suited for commercial waste collection -- primarily front-end loader ("FEL") trucks. Less frequently, haulers may use more maneuverable, but less efficient, rear-end loader ("REL") trucks, especially in those areas in which a collection route includes narrow alleyways or streets. 14. On a typical small container commercial waste collection route, an operator drives a FEL truck to the customer's container, engages a mechanism that grasps and lifts the container over the front of the truck, and empties the container into the vehicle's storage section, where the waste is compacted and stored. The operator continues along the route, collecting MSW from each of the commercial accounts until the vehicle is full. The operator then drives the FEL truck to a disposal facility, such as a transfer station, landfill, or incinerator, and empties the contents of the vehicle. Often, the operator returns to the route and repeats the process. 15. In contrast to a commercial collection route, a residential waste collection route is significantly more labor intensive. The customer's MSW is stored in much smaller containers (e.g., garbage bags or trash cans) and instead of FEL trucks, waste collection firms routinely use REL or side-load trucks, manned by larger crews (usually, two-or three-person teams). On residential routes, the crews generally hand-load the customer's MSW, typically by tossing garbage bags and emptying trash cans into the vehicle's storage section. Because of the differences in the collection process, residential customers and commercial customers usually are organized into separate routes. For a variety of reasons, other types of collection activities, such as roll-off containers (typically used for construction debris) and collection of liquid or hazardous waste, are also rarely combined with commercial waste collection activities. 16. The differences in the types and volume of MSW collected and in the equipment used in collection distinguish small container commercial waste collection from all other types of waste collection activities. These differences mean that small container commercial waste collection firms can profitably increase their charges for small container commercial waste collection services without losing significant sales or revenues to firms engaged in the provision of other types of waste collection services. Thus, small container commercial waste collection service is a line of commerce, or relevant service, for purposes of analyzing the effects of the acquisitions under Section 7 of the Clayton Act. B. The Relevant Geographic Market Small Container Commercial Waste Collection Service 17. Small container commercial waste collection services are generally provided in highly localized areas because to operate efficiently and profitably, a hauler must have sufficient density in its commercial waste collection operations; i.e., a large number of commercial accounts that are reasonably close together. In addition, a FEL or REL truck cannot be efficiently driven long distances without collecting significant amounts of MSW, which makes it economically impractical for a small container commercial waste collection firm to serve metropolitan areas from a distant base. Haulers, therefore, generally establish garages and related facilities within each major local area served. 18. Local small container commercial waste collection firms in the Akron/Canton, Ohio area can profitably increase charges to local customers without losing significant sales to more distant competitors. The Akron/Canton, Ohio area is therefore a section of the country, or relevant geographic market, for purposes of analyzing the effects of the acquisition under Section 7 of the Clayton Act. C. Reduction in Competition As a Consequence of the Acquisition 19. Republic and Allied directly compete in small container commercial waste collection service in a number of markets nationwide, including the Akron/Canton, Ohio area. In this market, Republic and Allied each account for a substantial share of total revenues from commercial waste collection services. 20. In the Akron/Canton, Ohio area, the proposed acquisition would reduce from four to three the number of significant competitors in the collection of small container commercial waste. After the acquisition, Republic would control approximately 35 percent of total market revenue, which exceeds $25 million annually. D. Entry Into Commercial Waste Collection of MSW 21. Significant new entry into small container commercial waste collection service is difficult and time-consuming in the Akron/Canton, Ohio area. A new entrant into small container commercial waste collection service cannot provide a significant competitive constraint on the prices charged by market incumbents until it achieves minimum efficient scale and operating efficiencies comparable to existing firms. In order to obtain comparable operating efficiency, a new firm must achieve route density comparable to existing firms. However, the incumbents' use of price discrimination and long-term contracts prevents new entrants from winning a large enough base of customers to achieve efficient routes in sufficient time to constrain the post-acquisition firm from significantly raising prices after the transaction. E. Harm to Competition 22. The acquisition of Allied assets by Republic would remove a significant competitor in small container commercial waste collection service in an already highly concentrated and difficult-to-enter market. In this market, the resulting substantial increase in concentration, loss of competition, and absence of reasonable prospect of significant new entry or expansion by market incumbents ensure that consumers will pay substantially higher prices for collection of small container commercial waste. V. VIOLATION ALLEGED 23. Pursuant to a Put/Call Agreement dated December 6, 1999 and a Letter Agreement dated August 1, 2000, Republic would acquire from Allied certain waste hauling assets in the Akron/Canton, Ohio area. The likely effect of this acquisition is to substantially lessen competition and to tend to create a monopoly in interstate trade and commerce in violation of Section 7 of the Clayton Act. 24. The transactions likely will have the following effects, among others: competition generally in small container commercial waste collection service in the Akron/Canton, Ohio area market will be lessened substantially; actual and potential competition between Allied and Republic in small container commercial waste collection service in the Akron/Canton, Ohio area market will be eliminated; and prices charged by small container commercial waste collection firms in the Akron/Canton, Ohio area market will likely increase. VI. REQUESTED RELIEF Plaintiff requests: 1. That Republic's proposed acquisition of Allied's hauling assets in the Akron/Canton, Ohio area market be adjudged and decreed to be unlawful and in violation of Section 7 of the Clayton Act; 2. That defendants be permanently enjoined from carrying out the acquisitions of those assets in the Put/Call Agreement dated December 6, 1999 and Letter Agreement dated August 1, 2000, or from entering into or carrying out any agreement, understanding or plan, the effect of which would be to exchange those assets between the defendants; 3. That plaintiff receive such other and further relief as the case requires and the court deems proper; and 4. That plaintiff recover the costs of this action. Dated: September 27, 2000.

CARTWRIGHT INTERNATIONAL VAN LINES PLEADS GUILTY TO PARTICIPATING IN PRICE-FIXING CONSPIRACY Missouri Company Sentenced To Pay A $250,000 Criminal Fine WASHINGTON, D.C. - Cartwright International Van Lines Inc. today pleaded guilty and was sentenced to pay a $250,000 fine for conspiring to increase the rates paid by the Department of Defense (DOD) for the transportation of military and civilian DOD household goods, the Department of Justice announced. According to the one-count felony charge filed today in the U.S. District Court in Alexandria, Virginia, Cartwright was charged with conspiring to fix prices in connection with the transportation of military and civilian DOD household goods from Germany to the United States in 2002. Under the plea agreement, Cartwright has agreed to assist the government in its ongoing investigation. “Foreign and domestic price fixers must not be allowed to deprive our military of the ability to purchase needed services in a free and open market,” said R. Hewitt Pate, Assistant Attorney General in charge of the Antitrust Division. In recent years, the DOD has spent more than $100 million annually to move the household goods of its military and civilian personnel from Germany to the United States. The charge announced today resulted from an ongoing federal antitrust investigation of anticompetitive and fraudulent conduct in the industry which provides transportation to the DOD for the movement of military household goods. The investigation is being conducted by the Antitrust Division's National Criminal Enforcement Section with the assistance of the DOD Office of Inspector General Defense Criminal Investigative Service and the Army Criminal Investigation Division, and is continuing. As part of the same investigation, on February 18, 2004, the Department filed superseding charges against Belgium-based Gosselin World Wide Moving N.V. and charges against The Pasha Group, headquartered in Corte Madera, California. Cartwright, headquartered in Grandview, Missouri, is charged with price fixing in violation of 15 U.S.C. § 1, which carries a maximum fine for a corporation of $10 million. The maximum fine level may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine. In addition, the defendant may be ordered to pay restitution for the full amount of the victim’s loss. Anyone with information concerning price fixing, bid rigging, or fraud in the military moving and storage industry or concerning conspiratorial conduct for the purpose of reducing or eliminating competition on any government contract should call the National Criminal Enforcement Section of the Antitrust Division at (202) 307-6694 or the Mid-Atlantic Field Office of the Defense Criminal Investigative Service at (410) 529-9054.