UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the matter of 

ABB AB, a corporation and
ABB AG, a corporation.

File No. 991-0040

AGREEMENT TO HOLD SEPARATE

This Agreement to Hold Separate is by and between ABB AB, a corporation headquartered in Sweden, ABB AG, a corporation headquartered in Switzerland (collectively "ABB"), Elsag Bailey Process Automation, N.V. ("Elsag Bailey"), a company headquartered in Amsterdam, The Netherlands, and the Federal Trade Commission (the "Commission"), an independent agency of the United States Government, established under the Federal Trade Commission Act of 1914, 15 U.S.C. § 41, et seq.

PREMISES

WHEREAS, ABB has proposed to acquire one hundred percent of the issued and outstanding voting securities of Elsag Bailey ("Proposed Acquisition"); and

WHEREAS, ABB manufactures and markets, among other things, process gas chromatographs and process mass spectrometers; and

WHEREAS, Elsag Bailey, through its Applied Automation, Inc., subsidiary, manufactures and markets, among other things, process gas chromatographs, and is involved in the research and development of process mass spectrometers; and

WHEREAS, the Commission is now investigating the Proposed Acquisition to determine if it would violate any of the statutes the Commission enforces; and

WHEREAS, ABB has entered into an Agreement Containing Consent Order ("Consent Agreement"), which requires, among other things, ABB to divest the Analytical Division Assets of Elsag Bailey, as defined in Paragraph I of the Consent Agreement, or the Applied Automation Assets, as defined in Paragraph I of the Consent Agreement; and

WHEREAS, if the Commission accepts the Consent Agreement, the Commission will place it on the public record for a period of at least sixty (60) days and subsequently may either withdraw such acceptance or issue and serve its Complaint and decision in disposition of the proceeding pursuant to the provisions of Section 2.34 of the Commission’s Rules; and

WHEREAS, the Commission is concerned that if an understanding is not reached, preserving the status quo ante of the Analytical Division Assets and the Applied Automation Assets, as defined in Paragraph I. of the Consent Agreement, during the period prior to the final issuance of the Consent Agreement by the Commission (after the 60-day public notice period), there may be interim competitive harm, and divestiture or other relief resulting from a proceeding challenging the legality of the proposed acquisition might not be possible, or might be less than an effective remedy; and

WHEREAS, the purposes of this Agreement to Hold Separate and the Consent Agreement are:

A. to preserve the Analytical Division Assets and the Applied Automation Assets as viable, competitive, and independent businesses pending divestiture of the Analytical Division Assets or the Applied Automation Assets, as required by the Consent Agreement, and

B. to remedy any anticompetitive effects of the Proposed Acquisition; and

WHEREAS, ABB and Elsag Bailey entering into this Agreement to Hold Separate shall in no way be construed as an admission by ABB or Elsag Bailey that the Proposed Acquisition constitutes a violation of any law; and

WHEREAS, ABB and Elsag Bailey understand that no act or transaction contemplated by this Agreement to Hold Separate shall be deemed immune or exempt from the provisions of the antitrust laws or the Federal Trade Commission Act by reason of anything contained in this Agreement to Hold Separate.

NOW, THEREFORE, upon the understanding that the Commission has not yet determined whether it will challenge the Proposed Acquisition, and in consideration of the Commission’s agreement that, at the time it accepts the Consent Agreement for public comment, it will grant early termination of the Hart-Scott-Rodino waiting period applicable to the Proposed Acquisition, ABB and Elsag Bailey agree as follows:

1. ABB and Elsag Bailey agree to execute and be bound by the terms of the order contained in the Consent Agreement, as if it were final, from the date ABB and Elsag Bailey sign the Consent Agreement.

2. ABB and Elsag Bailey agree that from the date ABB and Elsag Bailey sign the Consent Agreement until the earlier of the dates listed in subparagraphs 2.a. - 2.b., they will comply with the provisions of Paragraph 3 of this Agreement to Hold Separate:

a. three (3) business days after the Commission withdraws its acceptance of the Consent Order pursuant to the provisions of Section 2.34 of the Commission’s rules;

b. the day after the divestiture required by the Consent Order is completed.

3. To ensure the complete independence and viability of the Analytical Division Assets and the Applied Automation Assets and to assure that no Material Confidential Information ("Material Confidential Information" as used herein, means competitively sensitive or proprietary information not independently known to an entity from sources other than the entity to which the information pertains, and includes, but is not limited to, customer lists, price lists, marketing methods, patents, technologies, processes or other trade secrets) is exchanged between ABB and the Analytical Division Assets or the Applied Automation Assets, ABB shall hold the Applied Automation Assets separate and apart on the following terms and conditions:

a. The Applied Automation Assets shall be held separate and apart and shall be managed and operated independently of ABB, except to the extent that ABB must exercise direction and control over such assets to assure compliance with this Agreement to Hold Separate, or with the Consent Agreement, and except as otherwise provided in this Agreement to Hold Separate.

b. ABB will appoint a Manager ("the Manager") within three (3) business days of the date the Proposed Acquisition is consummated to manage and maintain the Applied Automation Assets. The Manager shall not make any changes to the Applied Automation Assets other than changes made in the ordinary course of business. The Manager shall manage the Applied Automation Assets independently of the management of ABB’s other businesses. The Manager shall not be involved in any way in the operations or management of any other ABB business.

c. The Manager shall have exclusive control over the Applied Automation Assets, with responsibility for the management of the Applied Automation Assets and for maintaining the independence of that business.

d. ABB shall not exercise direction or control over, or influence directly or indirectly the Manager relating to the operation of the Applied Automation Assets; provided, however, that ABB may exercise only such direction and control over the Manager and the Applied Automation Assets as is necessary to assure compliance with this Agreement to Hold Separate and with all applicable laws.

e. ABB and Elsag Bailey shall maintain the marketability, viability, and competitiveness of the Applied Automation Assets and shall not sell, transfer, encumber them (other than in the normal course of business or to assure compliance with the Consent Agreement), and shall not cause or permit the destruction, removal, wasting or deterioration, or otherwise impair the marketability, viability or competitiveness of the Applied Automation Assets.

f. ABB and Elsag Bailey shall ensure that the Applied Automation Assets have appropriate funds for research and development, quality control, manufacturing and marketing of the products produced by the Applied Automation Assets at a level not lower than that budgeted for the 1998 fiscal year, and shall increase such spending as the Manager shall reasonably determine. ABB and Elsag Bailey shall also ensure that the Applied Automation Assets have sufficient working capital to operate at a level no less than that described in the regularly prepared annual operating plan(s) in effect during the twelve (12) months preceding the date of this Hold Separate Agreement.

g. Employees of the Applied Automation Assets shall not be involved in any other ABB business.

h. Except as required by law, and except to the extent that necessary information is exchanged in the course of evaluating the Proposed Acquisition, defending investigations or litigation, obtaining legal advice, negotiating agreements to divest assets, or complying with this Agreement to Hold Separate or the Consent Agreement, ABB shall not receive or have access to any Material Confidential Information about the Applied Automation Assets or the activities of the Manager or support service employees involved in the Applied Automation Assets.

i. ABB and Elsag Bailey shall circulate to all their salaried, non-clerical employees employed in the research, development, manufacture, or sale of Process Gas Chromatographs or Process Mass Spectrometers and all other salaried, non-clerical employees of the Applied Automation Assets, and appropriately display, a copy of this Agreement to Hold Separate and the Consent Agreement.

j. If the Manager ceases to act or fails to act diligently, ABB shall appoint a substitute Manager, subject to Commission approval.

k. The Manager shall have access to and be informed about all companies who inquire about, seek or propose to buy the Analytical Division Assets or the Applied Automation Assets. ABB may require the Manager to sign a confidentiality agreement prohibiting the disclosure of any Material Confidential Information gained as a result of his or her role as Manager to anyone other than the Commission.

l. Within thirty (30) days after the date this Agreement to Hold Separate is signed and every thirty (30) days thereafter until this Agreement to Hold Separate terminates, the Manager shall report in writing to the Commission concerning his or her efforts to accomplish the purposes of this Agreement to Hold Separate.

4. Should the Commission seek in any proceeding to compel ABB to divest itself of the Analytical Division Assets or the Applied Automation Assets, as provided in the Consent Agreement, or to seek any other injunctive or equitable relief, ABB and Elsag Bailey shall not raise any objection based on the expiration of the applicable Hart-Scott-Rodino Antitrust Improvements Act waiting period or the fact that the Commission has permitted the Proposed Acquisition. ABB and Elsag Bailey shall also waive all rights to contest the validity of this Agreement to Hold Separate.

5. To the extent that this Agreement to Hold Separate requires ABB or Elsag Bailey to take, or prohibits ABB or Elsag Bailey from taking, certain actions that otherwise may be required or prohibited by contract, ABB and Elsag Bailey shall abide by the terms of this Agreement to Hold Separate or the Consent Agreement, and shall not assert as a defense such contract requirements in any action brought by the Commission to enforce the terms of this Agreement to Hold Separate or the Consent Agreement.

6. For the purpose of determining or securing compliance with this Agreement to Hold Separate, subject to any legally recognized privilege, and upon written request, and on reasonable notice, to ABB made to its principal office, ABB shall permit any duly authorized representative or representatives of the Commission:

a. access during the office hours of ABB and in the presence of counsel to inspect any facilities and to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of ABB relating to compliance with this Agreement to Hold Separate; and

b. upon five (5) days’ notice to ABB and without restraint or interference from it, to interview officers, directors, or employees of ABB, who may have counsel present, regarding any such matters.

7. For the purpose of determining or securing compliance with this Agreement to Hold Separate, subject to any legally recognized privilege, and upon written request, and on reasonable notice, to Elsag Bailey made to its principal office, Elsag Bailey shall permit any duly authorized representative or representatives of the Commission:

a. access during the office hours of Elsag Bailey and in the presence of counsel to inspect any facilities and to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of Elsag Bailey relating to compliance with this Agreement to Hold Separate; and

b. upon five (5) days’ notice to Elsag Bailey and without restraint or interference from it, to interview officers, directors, or employees of Elsag Bailey, who may have counsel present, regarding any such matters.

8. This Agreement to Hold Separate shall not be binding until accepted by the Commission.

Dated: