Raytheon 2004 Annual Report Download - page 44

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26
Court denied the Company’s and the individual defendants’ motion to dismiss the complaint. Thereafter, the
defendants filed a petition with the District Court requesting permission to seek an immediate appeal of the District
Court’s decision to the United States Court of Appeals for the Ninth Circuit, which the District Court granted on July
1, 2002. In August 2002, the Ninth Circuit issued an order denying the petition for interlocutory appeal. In April 2003,
the District Court conditionally certified the class and defined the class period as that between April 17, 2000 and
March 2, 2001, inclusive. Defendants have filed their answer to the amended complaint and discovery is proceeding.
As previously reported, the Company has been named as a nominal defendant and all of its directors at the time
have been named as defendants in two identical purported derivative lawsuits filed in Chancery Court in New
Castle County, Delaware in July 2001, entitled Melvin P. Haar v. Barbara M. Barrett, et. al., (Civil Action No. 19018)
and Howard Lasker v. Barbara M. Barrett, et. al., (Civil Action No. 19027). The Haar and Lasker derivative
complaints contain allegations similar to those included in the Muzinich class action complaint and further allege
that the individual defendants breached fiduciary duties to the Company and purportedly failed to maintain
systems necessary for prudent management and control of the Company’s operations. The Haar and Lasker actions
have been consolidated under the caption In re Raytheon Company Shareholders Litigation (No. 19018-NC). On
January 30, 2004, the plaintiffs filed a Consolidated Amended Derivative Complaint in which the Company’s
outside auditor is also named as a defendant. In March 2004, all defendants filed a motion to dismiss the
Consolidated Amended Derivative Complaint. Without admitting any liability or wrongdoing, in November 2004,
the individual defendants, the Company and its outside auditor reached a tentative agreement to settle this
derivative action. The settlement, which is subject to court approval, will resolve all claims in the case and is not
expected to have a material effect on the Company’s financial position or results of operations.
As previously reported, in May 2003 two purported class action lawsuits entitled, Benjamin Wall v. Raytheon
Company et al. (Civil Action No. 03-10940-RGS) and Joseph I. Duggan, III v. Raytheon Company et al. (Civil Action
No. 03-10995-RGS), were filed in federal court in Boston, Massachusetts on behalf of participants in the
Company’s savings and investment plans who invested in the Company’s stock between August 19, 1999 and May
27, 2003. The two class action complaints are brought pursuant to the Employee Retirement Income Security Act
(ERISA). Both complaints allege that the Company and certain officers and directors breached ERISA fiduciary and
co-fiduciary duties arising out of the Company’s savings and investment plans’ investment in the Company stock.
In September 2003, these actions were consolidated. In April 2004, a second consolidated amended complaint (the
“Second Consolidated Amended, ERISA Complaint”, was filed on behalf of participants and beneficiaries in the
Company’s savings and investment plans who invested in the Company’s stock since October 7, 1998. In October
2004, the defendants filed a motion to dismiss the Second Consolidated Amended ERISA Complaint.
Although the Company believes that it has meritorious defenses to the claims made in each and all of the
aforementioned complaints and intends, except as to tentative settlements noted above, to contest each proceeding
vigorously, an adverse resolution of any of the proceedings could have a material adverse effect on the Company’s
financial position and results of operations. Other than the matters noted above as to which tentative settlements
have been reached, the Company is not presently able to reasonably estimate potential losses, if any, related to any
of the lawsuits.
The Company continues to cooperate with the staff of the Securities and Exchange Commission (SEC) on a
formal investigation related to the Company’s accounting practices primarily related to the commuter aircraft
business and the timing of revenue recognition at Raytheon Aircraft. The Company has been providing documents
and information to the SEC staff. In addition, certain present and former officers and employees of the Company
have provided testimony in connection with this investigation. The Company is unable to predict the outcome of
the investigation or any action that the SEC might take.
As previously reported, several claims have been or were asserted and certain proceedings have been or were
commenced against the Company and certain third parties seeking schedule and performance liquidated damages