Raytheon Company (RTN)

2. Conditions to Award

Pursuant to this Award, you will entitled to payment of up to one-half of the total target number of shares set out above based on Raytheon’s “free cash flow” per share over the Performance Cycle, and up to one-half of the total target number of shares set out above based on the total return to Raytheon’s shareholders (compounded annually), relative to that of its “peers,” over the Performance Cycle. The precise extent to which any such shares will have been earned will be determined by the Management Development and Compensation Committee of Raytheon’s Board of Directors (the “Committee”) as soon as possible following the close of the Performance Cycle from the following tables:

“Internal Free Cash Flow:” Raytheon’s cash from operations per share, after capital expenditures and interest payments, all as determined in accordance with generally accepted accounting principles and rounded to the nearest cent per share.

“Peers:” Boeing, General Dynamics, Goodrich, Honeywell, L-3 Communications, Lockheed Martin, Northrop Grumman, Rockwell Collins, Textron, and United Technologies. In the event of any mergers or other corporate events affecting the foregoing companies during the Performance Cycle, the Committee may make such adjustments to the peer group of companies, the total return calculations of the affected companies and the metrics set out above as it may determine in its sole discretion would most nearly carry out the original purposes and intent of this Award.