96-10560. Lockheed Martin Corporation; Proposed Consent Agreement With Analysis To Aid Public Comment

[Federal Register Volume 61, Number 83 (Monday, April 29, 1996)]
[Notices]
[Pages 18732-18743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10560]



=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 961-0026]


Lockheed Martin Corporation; Proposed Consent Agreement With 
Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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

SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would require Lockheed Martin, a Bethesda, 
Maryland-based defense and space contractor, to divest its systems 
engineering and technical services contract with the Federal Aviation 
Administration; would prohibit Lockheed Martin from providing certain 
technical services or information to the space business subsidiary of 
Loral Space & Communications Ltd.; would restrict participation and 
compensation of persons who serve as directors or officers of both 
Lockheed Martin and Loral Space; would limit Lockheed Martin's 
ownership of Loral Space; and would require ``firewalls'' to limit 
information flow about competitors tactical fighter aircraft and 
unmanned aerial vehicles. The Consent Agreement settles allegations 
that Lockheed Martin's proposed $9.1 billion acquisition of Loral 
Corporation would violate the antitrust laws.

DATES: Comments must be received on or before June 28, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pennsylvania Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: William J. Baer, Federal Trade 
Commission, H-374, 6th and Pennsylvania Ave, NW, Washington, DC 20580. 
[phone]. Steven K. Bernstein, Federal Trade Commission, S-2308, 
6th and Pennsylvania Ave, NW, Washington, DC 20580. [phone].

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the following consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of sixty (60) days. Public comment is invited. Such 
comments or views will be considered by the Commission and will be 
available for inspection and copying at its principal office in 
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of 
Practice (16 CFR 4.9(b)(6)(ii)).

    In the Matter of: Lockheed Martin Corporation, a corporation. 
File No. 961-0026.

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission''), having initiated an 
investigation of the proposed acquisition by Lockheed Martin 
Corporation (``Lockheed Martin'') of Loral Corporation (``Loral''), and 
it now appearing that Lockheed Martin, hereinafter sometimes referred 
to as ``Proposed Respondent,'' is willing to enter into an agreement 
containing an order to divest assets, to refrain from certain acts and 
to provide for certain other relief:
    It is hereby agreed by and between Proposed Respondent Lockheed 
Martin, by its duly authorized officers and attorneys, and counsel for 
the Commission that:
    1. Proposed Respondent Lockheed Martin is a corporation organized, 
existing and doing business under and by virtue of the laws of the 
state of Maryland with its office and principal place of business 
located at 6801 Rockledge Drive, Bethesda, Maryland 20817.
    2. Proposed Respondent admits all the jurisdictional facts set 
forth in the draft of complaint here attached.
    3. Proposed Respondent waives:
    a. any further procedural steps;
    b. the requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    c. all rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    d. any claim under the Equal Access to Justice Act.
    4. Proposed Respondent shall submit within thirty (30) days of the 
date this agreement is signed by Proposed Respondent, an initial 
report, pursuant to Section 2.33 of the Commission's Rules, signed by 
Proposed Respondent setting forth in detail the manner in which the 
Proposed Respondent will comply with Paragraphs II. through XVI. of the 
order when and if entered. Such report will not become part of the 
public record unless and until the accompanying agreement and order are 
accepted by the Commission for public comment.
    5. This agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either

[[Page 18733]]

withdraw its acceptance of this agreement and so notify the Proposed 
Respondent, in which event it will take such action as it may consider 
appropriate, or issue and serve its complaint (in such form as the 
circumstances may require) and decision, in disposition of the 
proceeding.
    6. This agreement is for settlement purposes only and does not 
constitute an admission by Proposed Respondent that the law has been 
violated as alleged in the draft of complaint here attached, or that 
the facts as alleged in the draft complaint, other than jurisdictional 
facts, are true.
    7. This agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Section 2.34 of the 
Commission's Rules, the Commission may, without further notice to 
Proposed Respondent, (1) issue its complaint corresponding in form and 
substance with the draft of complaint here attached and its decision 
containing the following order to divest and refrain from certain acts 
in disposition of the proceeding, and (2) make information public with 
respect thereto. When so entered, the order shall have the same force 
and effect and may be altered, modified, or set aside in the same 
manner and within the same time provided by statute for other orders. 
The order shall become final upon service. Delivery by the U.S. Postal 
Service of the complaint and decision containing the agreed-to order to 
Proposed Respondent's address as stated in the agreement shall 
constitute service. Proposed Respondent waives any right it may have to 
any other manner of service. The complaint may be used in construing 
the terms of the order, and no agreement, understanding, representation 
or interpretation not contained in the order or the agreement may be 
used to vary or contradict the terms of the order.
    8. Proposed Respondent has read the proposed complaint and order 
contemplated hereby. Proposed Respondent understands that once the 
order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the order. 
Proposed Respondent further understands it may be liable for civil 
penalties in the amount provided by law for each violation of the order 
after it becomes final.

Order

I

    It is ordered that, as used in this order, the following 
definitions shall apply:
    A. ``Respondent'' or ``Lockheed Martin'' means Lockheed Martin 
Corporation, its directors, officers, employees, agents, 
representatives, predecessors, successors and assigns; its 
subsidiaries, divisions, groups, affiliates, partnerships and joint 
ventures controlled by Lockheed Martin Corporation, and the respective 
directors, officers, employees, agents, representatives, successors and 
assigns of each. Lockheed Martin includes Loral Corporation, which 
prior to the Acquisition had its principal office and place of business 
located at 600 Third Avenue, New York, New York 10016; except that 
Lockheed Martin does not include any of the foregoing that will be part 
of Loral Space after the Acquisition.
    B. ``Loral'' means Loral Corporation, a New York corporation, with 
its principal office and place of business located at 600 Third Avenue, 
New York, New York 10016, its directors, officers, employees, agents, 
representatives, predecessors, successors and assigns; its 
subsidiaries, divisions, groups, affiliates, partnerships and joint 
ventures controlled by Loral Corporation, and the respective directors, 
officers, employees, agents, representatives, successors and assigns of 
each; except that Loral does not include any of the foregoing that will 
be part of Loral Space after the Acquisition.
    C. ``Commission'' means the Federal Trade Commission.
    D. ``SETA Services'' means systems engineering, technical 
assistance services and support services relating to Air Traffic 
Control Systems provided by Lockheed Martin to the Federal Aviation 
Administration, pursuant to Paragraphs C.2.2.1.3., C.2.2.1.5., 
C.2.2.1.12. and C.2.2.4. of Task Area 2 and Paragraphs C.9.1.3., 
C.9.2.2., C.9.2.3., C.9.2.4., C.9.2.6., C.9.2.7., C.9.2.8. and 
C.9.2.10. of Task Area 9 of the National Implementation and Support 
Contract, DTFA01-93-C-00031, that involve the development of technical 
and other specifications for procurements and programs; the assessment 
of bid and other proposals; the evaluation, testing or monitoring of 
any service, equipment or product provided by any company; the 
modification or change of any performance requirements of any 
contractor; or the development of financial, cost or budgetary plans, 
procedures or policies.
    E. ``SETA Services Operations'' means all assets, properties, 
business and goodwill, tangible and intangible, held by Respondent and 
used in the provision of SETA Services including, without limitation, 
the following:
    1. all rights, obligations and interests in Paragraphs C.2.2.1.3., 
C.2.2.1.5., C.2.2.1.12., C.2.2.4., C.9.1.3., C.9.2.2., C.9.2.3., 
C.9.2.4., C.9.2.6., C.9.2.7., C.9.2.8. and C.9.2.10. of contract 
DTFA01-93-C-00031 relating to the provision of SETA Services;
    2. all customer lists, vendor lists, catalogs, sales promotion 
literature, advertising materials, research materials, financial 
information, technical information, management information and systems, 
software, software licenses, inventions, copyrights, trademarks, trade 
secrets, intellectual property, patents, technology, know-how, 
specifications, designs, drawings, processes and quality control data;
    3. all rights, titles and interests in and to owned or leased real 
property, together with appurtenances, licenses and permits;
    4. all rights, titles and interests in and to the contracts entered 
into in the ordinary course of business, including, but not limited to, 
contracts with customers (together with associated bid and performance 
bonds), suppliers, subcontractors, sales representatives, distributors, 
agents, personal property lessors, personal property lessees, 
licensors, licensees, consignors and consignees;
    5. all rights under warranties and guarantees, express or implied;
    6. all books, records and files;
    7. all data developed, prepared, received, stored or maintained; 
and
    8. all items of prepaid expense.
    F. ``Non-Public Air Traffic Control Information'' means any 
information not in the public domain disclosed by the Federal Aviation 
Administration or any company to Respondent in its capacity as a 
provider of SETA Services.
    G. ``Standard Terminal Automation Replacement System'' means any 
current or future equipment and services designed, developed, proposed 
or provided by Loral Air Traffic Control to upgrade the traffic control 
equipment and systems in the Federal Aviation Administration's U.S. air 
traffic control terminals.
    H. ``Traffic Flow Management System'' means any current or future 
equipment and services designed, developed, proposed or provided by 
Loral Air Traffic Control to predict arrival and departure traffic 
flows at U.S. airports for the Federal Aviation Administration.

[[Page 18734]]

    I. ``Operational and Supportability Implementation Service'' means 
any current or future equipment and services designed, developed, 
proposed or provided by Loral Air Traffic Control to upgrade Federal 
Aviation Administration flight server stations.
    J. ``Air Traffic Control Systems'' means any current or future air 
traffic control equipment, system or service designed, developed, 
proposed or provided by Loral Air Traffic Control, including, but not 
limited to, the Standard Terminal Automation Replacement System, the 
Traffic Flow Management System and the Operational and Supportability 
Implementation Service, for the Federal Aviation Administration.
    K. ``Military Aircraft'' means fixed-wing aircraft manufactured for 
sale to the United States or foreign governments.
    L. ``NITE Hawk Systems'' means any airborne forward-looking 
infrared targeting system researched, developed, designed, manufactured 
or sold by Loral for use on the F/A-18 series of Military Aircraft.
    M. ``Simulation and Training Systems'' means the operational and 
weapons systems trainers designed, developed, manufactured or sold by 
Loral that simulate Military Aircraft.
    N. ``Electronic Countermeasures'' means systems designed, 
developed, manufactured or sold by Loral, including, but not limited 
to, the ALR-56A and ALR-56C, that detect, jam and deceive hostile 
radars and radar and infrared guided weapons for use on Military 
Aircraft.
    O. ``Mission Computers'' means any computer designed, developed, 
manufactured or sold by Loral, including, but not limited to, the AP1, 
AAAP1R and CP1075A/B/C, that control, monitor or manage the operations 
and electronics of any Military Aircraft.
    P. ``Unmanned Aerial Vehicle'' means any unmanned aircraft used for 
tactical or strategic reconnaissance missions manufactured for sale to 
the United States or foreign governments.
    Q. ``Integrated Communications Systems'' means systems designed, 
developed, manufactured or sold by Loral, including, but not limited 
to, the 367-6000-59-R-012 and the 367-6000-59-R-013, that are capable 
of both wideband satellite and line-of- sight data link communications 
and command and control data links for use on Unmanned Aerial Vehicles.
    R. ``Loral Air Traffic Control'' means Loral Air Traffic Control, 
an entity with its principal place of business at 9211 Corporate Blvd., 
Rockville, Maryland 20850, or any other entity within or controlled by 
Lockheed Martin that is engaged in, among other things, the research, 
development, manufacture or sale of Air Traffic Control Systems, and 
its directors, officers, employees, agents, representatives, 
predecessors, successors and assigns; its subsidiaries, divisions, 
groups, affiliates, partnerships and joint ventures controlled by Loral 
Air Traffic Control (or such similar entity), and the respective 
directors, officers, employees, agents, representatives, successors and 
assigns of each; except that Loral Air Traffic Control does not include 
any of the foregoing that will be part of Loral Space after the 
Acquisition.
    S. ``Lockheed Martin Military Aircraft Business'' means any entity 
within or controlled by Lockheed Martin that is engaged in, among other 
things, the research, development, manufacture or sale of Military 
Aircraft or Unmanned Aerial Vehicles, and its directors, officers, 
employees, agents, representatives, predecessors, successors and 
assigns; its subsidiaries, divisions, groups, affiliates, partnerships 
and joint ventures controlled by a Lockheed Martin Military Aircraft 
Business and the respective directors, officers, employees, agents, 
representatives, successors and assigns of each.
    T. ``Management and Data Systems'' means Lockheed Martin Management 
and Data Systems Division, an entity with its principal place of 
business at 7000 Geerdes Blvd., King of Prussia, Pennsylvania 19406, or 
any other entity within or controlled by Lockheed Martin that is 
engaged in, among other things, the provision of SETA Services, and its 
directors, officers, employees, agents, representatives, predecessors, 
successors and assigns; its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures controlled by Lockheed 
Martin Management and Data Systems Division (or such similar entity), 
and the respective directors, officers, employees, agents, 
representatives, successors and assigns of each.
    U. ``Non-Public Military Aircraft Information (NITE Hawk)'' means 
(1) any information not in the public domain disclosed by any Military 
Aircraft manufacturer, other than Lockheed Martin, to Respondent or 
Loral in its capacity as a provider of NITE Hawk Systems and (a) if 
written information, designated in writing by the Military Aircraft 
manufacturer as proprietary information by an appropriate legend, 
marking, stamp or positive written identification on the face thereof, 
or (b) if oral, visual or other information, identified as proprietary 
information in writing by the Military Aircraft manufacturer prior to 
the disclosure or within thirty (30) days after such disclosure; or (2) 
any information not in the public domain disclosed by any Military 
Aircraft manufacturer prior to the Acquisition to Loral in its capacity 
as a provider of NITE Hawk Systems. Non-Public Military Aircraft 
Information (NITE Hawk) shall not include: (1) information known or 
disclosed to Respondent, excluding Loral, at the time Respondent signed 
the Agreement Containing Consent Order in this matter, (2) information 
that subsequently falls within the public domain through no violation 
of this order by Respondent, (3) information that subsequently becomes 
known to Respondent from a third party not in breach of a confidential 
disclosure agreement (information obtained from Loral or otherwise 
obtained as a result of the Acquisition shall not be considered 
information known to Respondent from a third party), or (4) information 
after six (6) years from the date of disclosure of such Non-Public 
Military Aircraft Information (NITE Hawk) to Respondent, or such other 
period as agreed to in writing by Respondent and the provider of the 
information.
    V. ``Non-Public Military Aircraft Information (Simulation and 
Training)'' means (1) any information not in the public domain 
disclosed by any Military Aircraft manufacturer, other than Lockheed 
Martin, to Respondent or Loral in its capacity as a provider of 
Simulation and Training Systems and (a) if written information, 
designated in writing by the Military Aircraft manufacturer as 
proprietary information by an appropriate legend, marking, stamp or 
positive written identification on the face thereof, or (b) if oral, 
visual or other information, identified as proprietary information in 
writing by the Military Aircraft manufacturer prior to the disclosure 
or within thirty (30) days after such disclosure; or (2) any 
information not in the public domain disclosed by any Military Aircraft 
manufacturer prior to the Acquisition to Loral in its capacity as a 
provider of Simulation and Training Systems. Non-Public Military 
Aircraft Information (Simulation and Training) shall not include: (1) 
information known or disclosed to Respondent, excluding Loral, at the 
time Respondent signed the Agreement Containing Consent Order in this 
matter, (2) information that subsequently falls within the public 
domain through no violation of this order by Respondent, (3) 
information

[[Page 18735]]

that subsequently becomes known to Respondent from a third party not in 
breach of a confidential disclosure agreement (information obtained 
from Loral or otherwise obtained as a result of the Acquisition shall 
not be considered information known to Respondent from a third party), 
or (4) information after six (6) years from the date of disclosure of 
such Non-Public Military Aircraft Information (Simulation and Training) 
to Respondent, or such other period as agreed to in writing by 
Respondent and the provider of the information.
    W. ``Non-Public Military Aircraft Information (Electronic 
Countermeasures)'' means (1) any information not in the public domain 
disclosed by any Military Aircraft manufacturer, other than Lockheed 
Martin, to Respondent or Loral in its capacity as a provider of 
Electronic Countermeasures and (a) if written information, designated 
in writing by the Military Aircraft manufacturer as proprietary 
information by an appropriate legend, marking, stamp or positive 
written identification on the face thereof, or (b) if oral, visual or 
other information, identified as proprietary information in writing by 
the Military Aircraft manufacturer prior to the disclosure or within 
thirty (30) days after such disclosure; or (2) any information not in 
the public domain disclosed by any Military Aircraft manufacturer prior 
to the Acquisition to Loral in its capacity as a provider of Electronic 
Countermeasures. Non-Public Military Aircraft Information (Electronic 
Countermeasures) shall not include: (1) information known or disclosed 
to Respondent, excluding Loral, at the time Respondent signed the 
Agreement Containing Consent Order in this matter, (2) information that 
subsequently falls within the public domain through no violation of 
this order by Respondent, (3) information that subsequently becomes 
known to Respondent from a third party not in breach of a confidential 
disclosure agreement (information obtained from Loral or otherwise 
obtained as a result of the Acquisition shall not be considered 
information known to Respondent from a third party), or (4) information 
after six (6) years from the date of disclosure of such Non-Public 
Military Aircraft Information (Electronic Countermeasures) to 
Respondent, or such other period as agreed to in writing by Respondent 
and the provider of the information.
    X. ``Non-Public Military Aircraft Information (Mission Computers)'' 
means (1) any information not in the public domain disclosed by any 
Military Aircraft manufacturer, other than Lockheed Martin, to 
Respondent or Loral in its capacity as a provider of Mission Computers, 
and (a) if written information, designated in writing by the Military 
Aircraft manufacturer as proprietary information by an appropriate 
legend, marking, stamp or positive written identification on the face 
thereof, or (b) if oral, visual or other information, identified as 
proprietary information in writing by the Military Aircraft 
manufacturer prior to the disclosure or within thirty (30) days after 
such disclosure; or (2) any information not in the public domain 
disclosed by any Military Aircraft manufacturer prior to the 
Acquisition to Loral in its capacity as a provider of Mission 
Computers. Non-Public Military Aircraft Information (Mission Computers) 
shall not include: (1) information known or disclosed to Respondent, 
excluding Loral, at the time Respondent signed the Agreement Containing 
Consent Order in this matter, (2) information that subsequently falls 
within the public domain through no violation of this order by 
Respondent, (3) information that subsequently becomes known to 
Respondent from a third party not in breach of a confidential 
disclosure agreement (information obtained from Loral or otherwise 
obtained as a result of the Acquisition shall not be considered 
information known to Respondent from a third party), or (4) information 
after six (6) years from the date of disclosure of such Non-Public 
Military Aircraft Information (Mission Computers) to Respondent, or 
such other period as agreed to in writing by Respondent and the 
provider of the information.
    Y. ``Non-Public Unmanned Aerial Vehicle Information'' means (1) any 
information not in the public domain disclosed by any Unmanned Aerial 
Vehicle manufacturer, other than Lockheed Martin, to Respondent or 
Loral in its capacity as a provider of Integrated Communications 
Systems, and (a) if written information, designated in writing by the 
Unmanned Aerial Vehicle manufacturer as proprietary information by an 
appropriate legend, marking, stamp or positive written identification 
on the face thereof, or (b) if oral, visual or other information, 
identified as proprietary information in writing by the Unmanned Aerial 
Vehicle manufacturer prior to the disclosure or within thirty (30) days 
after such disclosure; or (2) any information not in the public domain 
disclosed by any Unmanned Aerial Vehicle manufacturer prior to the 
Acquisition to Loral in its capacity as a provider of Integrated 
Communications Systems. Non-Public Unmanned Aerial Vehicle Information 
shall not include: (1) information known or disclosed to Respondent, 
excluding Loral, at the time Respondent signed the Agreement Containing 
Consent Order in this matter, (2) information that subsequently falls 
within the public domain through no violation of this order by 
Respondent, (3) information that subsequently becomes known to 
Respondent from a third party not in breach of a confidential 
disclosure agreement (information obtained from Loral or otherwise 
obtained as a result of the Acquisition shall not be considered 
information known to Respondent from a third party), or (4) information 
after six (6) years from the date of disclosure of such Non-Public 
Unmanned Aerial Vehicle Information to Respondent, or such other period 
as agreed to in writing by Respondent and the provider of the 
information.
    Z. ``Satellite'' means an unmanned machine that is launched from 
the Earth's surface for the purpose of transmitting data back to Earth 
and which is designed either to orbit the Earth or travel away from the 
Earth.
    AA. ``Restructuring Agreement'' means the Restructuring, Financing 
and Distribution Agreement, dated as of January 7, 1996, by and among 
Loral Corporation, Loral Aerospace Holdings, Inc., Loral Aerospace 
Corp., Loral General Partner, Inc., Loral Globalstar, L.P., Loral 
Globalstar Limited, Loral Telecommunications Acquisition, Inc. (to be 
renamed Loral Space & Communications Ltd.) and Lockheed Martin 
Corporation.
    BB. ``Loral Space'' means Loral Space & Communications Ltd., a 
company organized under the laws of the Islands of Bermuda, with its 
principal office and place of business located at 600 Third Avenue, New 
York, New York 10016, as described by the Restructuring Agreement; its 
directors, officers, employees, agents, representatives, predecessors, 
successors and assigns; its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures controlled or managed by 
Loral Space & Communications Ltd., including, but not limited to, 
Globalstar, L.P., Space Systems/Loral, Inc. and K&F Industries, Inc., 
and the respective directors, officers, employees, agents, 
representatives, successors and assigns of each; except that Loral 
Space does not include any of the foregoing that will be part of Loral 
or Lockheed Martin after the Acquisition.
    CC. ``Space Systems/Loral'' means Space Systems/Loral, Inc., an 
entity

[[Page 18736]]

with its principal place of business at 3825 Fabian Way, Palo Alto, 
California 94303, or any other entity within or controlled by Loral 
Space that is engaged in, among other things, the research, 
development, manufacture or sale of Satellites, and its directors, 
officers, employees, agents, representatives, predecessors, successors 
and assigns; its subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures controlled by Space Systems/Loral, Inc. 
(or such similar entity), and the respective directors, officers, 
employees, agents, representatives, successors and assigns of each; 
except that Space Systems/Loral does not include any of the foregoing 
that will be part of Loral or Lockheed Martin after the Acquisition and 
does not include any entity or line of business, outside of Space 
Systems/Loral, Inc., within or controlled by Loral Space that is not 
engaged in the research, development, manufacture or sale of 
Satellites.
    DD. ``Defensive Missiles Systems'' are the research, development, 
manufacture or sale of defensive missiles systems and components, 
including, among other things, the Theater High Altitude Area Defense 
System, Corps SAM/MEADS, the Advanced Intercept Technology, National 
Missile Defense, Naval Upper Tier, the Airborne Laser, target programs 
and other related activities.
    EE. ``Fleet Ballistic Missiles'' are the research, development, 
manufacture, sale or life cycle support including disposal of strategic 
offensive missiles and associated support equipment, including, among 
other things, the Trident missile.
    FF. ``Missile System Products Center'' is the research, 
development, manufacture or sale of missile systems, missile 
components, missile technology, propulsion systems, seekers, 
electronics, avionics, composites, bombs, rockets and mortars, 
including, among other things, the Composites Initiative, the 
Propulsion Initiative, BLU-109 and Precision Guided Mortar Munition.
    GG. ``Space & Strategic Missiles'' means Lockheed Martin Space & 
Strategic Missiles Sector, an entity with its principal place of 
business at 6801 Rockledge Drive, Bethesda, Maryland 20817, or any 
other entity within or controlled by Lockheed Martin that is engaged 
in, among other things, the research, development, manufacture or sale 
of Satellites; and its directors, officers, employees, agents, 
representatives, predecessors, successors and assigns; its 
subsidiaries, divisions, groups, affiliates, partnerships and joint 
ventures controlled by Lockheed Martin Space & Strategic Missiles 
Sector (or such similar entity), and the respective directors, 
officers, employees, agents, representatives, successors and assigns of 
each; except that Space & Strategic Missiles does not include Defensive 
Missile Systems, Fleet Ballistic Missiles, and Missile System Products 
Center, and any other entity or line of business, outside of Lockheed 
Martin Space & Strategic Missiles Sector, within or controlled by 
Lockheed Martin that is not engaged in the research, development, 
manufacture or sale of Satellites.
    HH. ``Common LM/Loral Space Director'' means any person who is 
simultaneously a member of the Board of Directors of Lockheed Martin or 
an officer of Lockheed Martin and a member of the Board of Directors of 
Loral Space or an officer of Loral Space.
    II. ``Non-Public Space Information of Lockheed Martin'' means any 
information not in the public domain relating to Space & Strategic 
Missiles.
    JJ. ``Non-Public Space Information of Loral Space'' means any 
information not in the public domain relating to Space Systems/Loral.
    KK. ``Lockheed Martin/Loral Space Technical Services Agreement'' 
means the technical services agreement between Lockheed Martin and 
Loral Space, as described by Article VI, Section 6.7, Paragraph (d), of 
the Restructuring Agreement.
    LL. ``Merger Agreement'' means the Agreement and Plan of Merger, 
dated as of January 7, 1996, by and among Loral Corporation, Lockheed 
Martin Corporation and LAC Acquisition Corporation.
    MM. ``Stockholders Agreement'' means the Stockholders Agreement 
referred to in the Restructuring Agreement.
    NN. ``Non-Voting Equity Securities'' means any share of stock that 
does not entitle the shareholder to vote for any member of the Board of 
Directors.
    OO. ``Voting Equity Securities'' means any share of stock that 
entitles the shareholder to vote for any member of the Board of 
Directors.
    PP. ``Acquisition'' means the transaction described by the Merger 
Agreement and the Restructuring Agreement, including, but not limited 
to: (1) The acquisition by Respondent of all of the outstanding voting 
common stock of Loral; (2) the transfer of the space and 
telecommunications businesses of Loral and its subsidiaries to Loral 
Space; (3) the acquisition by Respondent of a 20% convertible preferred 
stock interest in Loral Space, which in turn owns a 33% interest in 
Space Systems/Loral; (4) the Lockheed Martin/Loral Space Technical 
Services Agreement; and (5) the appointment of Mr. Bernard Schwartz, 
Chairman of the Board of Directors and Chief Executive Officer of Loral 
Space, to the position of Vice Chairman of the Board of Directors of 
Lockheed Martin.

II

    It is further ordered that:
    A. Respondent shall divest, absolutely and in good faith, within 
six (6) months of the date Respondent signed the Agreement Containing 
Consent Order in this matter, the SETA Services Operations, and shall 
not charge any costs associated with the divestiture to the Federal 
Aviation Administration.
    B. Respondent shall divest the SETA Services Operations only to an 
acquirer or acquirers that receive the prior approval of the Commission 
and only in a manner that receives the prior approval of the 
Commission. The purpose of the divestiture is to ensure the continued 
provision of SETA Services in the same manner as provided by Respondent 
at the time of the proposed divestiture and to remedy the lessening of 
competition alleged in the Commission's complaint.
    C. Pending divestiture of the SETA Services Operations, Respondent 
shall take such actions as are necessary to ensure the continued 
provision of SETA Services, to maintain the viability and marketability 
of the assets used to provide SETA Services, to prevent the 
destruction, removal, wasting, deterioration or impairment of the 
assets used to provide SETA Services, and to prevent the disclosure of 
Non-Public Air Traffic Control Information to Loral Air Traffic 
Control.
    D. Upon reasonable notice from any acquirer or the Federal Aviation 
Administration to Respondent, Respondent shall provide such technical 
assistance to the acquirer as is reasonably necessary to enable the 
acquirer to provide SETA Services in substantially the same manner and 
quality as provided by Respondent prior to divestiture. Such assistance 
shall include reasonable consultation with knowledgeable employees and 
training at the acquirer's facility for a period of time sufficient to 
satisfy the acquirer's management that its personnel are appropriately 
trained in the skills necessary to perform the SETA Services 
Operations. Respondent shall convey all know-how necessary to perform 
the SETA Services Operations in substantially the same manner and 
quality provided by Respondent prior to divestiture, provided, however, 
that the Respondent may retain the right to use

[[Page 18737]]

the know-how. However, Respondent shall not be required to continue 
providing such assistance for more than one (1) year from the date of 
the divestiture. Respondent shall charge the acquirer at a rate no more 
than its own costs for providing such technical assistance.
    E. At the time of the execution of the purchase agreement between 
Respondent and a proposed acquirer of the SETA Services Operations 
(``Purchase Agreement''), Respondent shall provide the acquirer(s) with 
a complete list of all full-time, non-clerical, salaried employees of 
Respondent who were engaged in the provision of SETA Services on the 
date of the Acquisition, as well as all current full-time, non-
clerical, salaried employees of Respondent engaged in the provision of 
SETA Services on the date of the purchase agreement. Such list(s) shall 
state each such individual's name, position, address, business 
telephone number, or if no business telephone number exists, a home 
telephone number, if available and with the consent of the employee, 
and a description of the duties and work performed by the individual in 
connection with the SETA Services Operations.
    F. Following the execution of the Purchase Agreement(s) and subject 
to the consent of the employees, Respondent shall provide the proposed 
acquirer(s) with an opportunity to inspect the personnel files and 
other documentation relating to the individuals identified in Paragraph 
II.E. of this order to the extent permissible under applicable laws. 
For a period of six (6) months following the divestiture, Respondent 
shall further provide the acquirer(s) with an opportunity to interview 
such individuals and negotiate employment contracts with them.
    G. Respondent shall provide all employees identified in Paragraph 
II.E. of this order with reasonable financial incentives, if necessary, 
to continue in their employment positions pending divestiture of the 
SETA Services Operations, and to accept employment with the acquirer(s) 
at the time of the divestiture. Such incentives shall include 
continuation of all employee benefits offered by Respondent until the 
date of the divestiture, and vesting of all pension benefits (as 
permitted by law). In addition, respondent shall not enforce any 
confidentiality restrictions relating to the SETA Services or SETA 
Services Operations that apply to any employee identified in Paragraph 
II.E. who accepts employment with any proposed acquirer. Respondent 
also shall not enforce any non-compete restrictions that apply to any 
employee identified in Paragraph II.E. who accepts employment with any 
proposed acquirer.
    H. For a period of one (1) year commencing on the date of the 
individual's employment by any acquirer, Respondent shall not re-hire 
any of the individuals identified in Paragraph II.E. of this order who 
accept employment with any acquirer, unless such individual has been 
separated from employment by the acquirer against that individual's 
wishes.
    I. Prior to divestiture, Respondent shall not transfer, without the 
consent of the Federal Aviation Administration, any of the individuals 
identified in Paragraph II.E. of this order whose employment 
responsibilities involve access to Non-Public Air Traffic Control 
Information from Management and Data Systems to any other position 
involving business with the Federal Aviation Administration.

III

    It is further ordered that:
    A. Respondent shall not provide, disclose or otherwise make 
available to Loral Air Traffic Control any Non-Public Air Traffic 
Control Information.
    B. Respondent shall use any Non-Public Air Traffic Control 
Information obtained by Management and Data Systems only in 
Respondent's capacity as provider of technical assistance to an 
acquirer, pursuant to Paragraph II.D. of this order.

IV

    It is further ordered that:
    A. If Respondent has not divested, absolutely and in good faith and 
with the Commission's prior approval, the SETA Services Operations 
within six (6) months of the date Respondent signed the Agreement 
Containing Consent Order in this matter, the Commission may appoint a 
trustee to divest the SETA Services Operations. In the event that the 
Commission or the Attorney General brings an action pursuant to 
Sec. 5(l) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(l), or 
any other statute enforced by the Commission, Respondent shall consent 
to the appointment of a trustee in such action. Neither the appointment 
of a trustee nor a decision not to appoint a trustee under this 
Paragraph IV. shall preclude the Commission or the Attorney General 
from seeking civil penalties or any other relief available to it, 
including a court-appointed trustee, pursuant to Sec. 5(l) of the 
Federal Trade Commission Act, or any other statute enforced by the 
Commission, for any failure by Respondent to comply with this order.
    B. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph IV.A. of this order, Respondent shall consent to the 
following terms and conditions regarding the trustee's powers, duties, 
authority, and responsibilities:
    1. The Commission shall select the trustee, subject to the consent 
of Respondent, which consent shall not be unreasonably withheld. The 
trustee shall be a person with experience and expertise in acquisitions 
and divestitures. If Respondent has not opposed, in writing, including 
the reasons for opposing, the selection of any proposed trustee within 
ten (10) days after notice by the staff of the Commission to Respondent 
of the identity of any proposed trustee, Respondent shall be deemed to 
have consented to the selection of the proposed trustee.
    2. Subject to the prior approval of the Commission, the trustee 
shall have the exclusive power and authority to divest the SETA 
Services Operations.
    3. Within ten (10) days after appointment of the trustee, 
Respondent shall execute a trust agreement that, subject to the prior 
approval of the Commission and, in the case of a court-appointed 
trustee, of the court, transfers to the trustee all rights and powers 
necessary to permit the trustee to effect the divestiture required by 
this order.
    4. The trustee shall have twelve (12) months from the date the 
Commission approves the trust agreement described in Paragraph IV.B.3. 
to accomplish the divestiture, which shall be subject to the prior 
approval of the Commission. If, however, at the end of the twelve (12) 
month period, the trustee has submitted a plan of divestiture or 
believes that divestiture can be achieved within a reasonable time, the 
divestiture period may be extended by the Commission, or, in the case 
of a court-appointed trustee, by the court; provided, however, the 
Commission may extend this period only two (2) times.
    5. The trustee shall have full and complete access to the 
personnel, books, records and facilities related to the SETA Services 
Operations, or to any other relevant information, as the trustee may 
request. Respondent shall develop such financial or other information 
as the trustee may request and shall cooperate with the trustee. 
Respondent shall take no action to interfere with or impede the 
trustee's accomplishment of the divestiture. Any delays in divestiture 
caused by Respondent shall extend the time for divestiture under this 
Paragraph in an

[[Page 18738]]

amount equal to the delay, as determined by the Commission or, for a 
court- appointed trustee, by the court.
    6. The trustee shall use his or her best efforts to negotiate the 
most favorable price and terms available in each contract that is 
submitted to the Commission, subject to Respondent's absolute and 
unconditional obligation to divest at no minimum price. The divestiture 
shall be made in the manner and to an acquirer or acquirers as set out 
in Paragraph II. of this order; provided, however, if the trustee 
receives bona fide offers from more than one acquiring entity, and if 
the Commission determines to approve more than one such acquiring 
entity, the trustee shall divest to the acquiring entity selected by 
Respondent from among those approved by the Commission.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of Respondent, on such reasonable and customary terms 
and conditions as the Commission or a court may set. The trustee shall 
have the authority to employ, at the cost and expense of Respondent, 
such consultants, accountants, attorneys, investment bankers, business 
brokers, appraisers, and other representatives and assistants as are 
necessary to carry out the trustee's duties and responsibilities. The 
trustee shall account for all monies derived from the divestiture and 
all expenses incurred. After approval by the Commission and, in the 
case of a court-appointed trustee, by the court, of the account of the 
trustee, including fees for his or her services, all remaining monies 
shall be paid at the direction of Respondent, and the trustee's power 
shall be terminated. The trustee's compensation shall be based at least 
in significant part on a commission arrangement contingent on the 
trustee's divesting the SETA Services Operations.
    8. Respondent shall indemnify the trustee and hold the trustee 
harmless against any losses, claims, damages, liabilities, or expenses 
arising out of, or in connection with, the performance of the trustee's 
duties, including all reasonable fees of counsel and other expenses 
incurred in connection with the preparation for, or defense of any 
claim, whether or not resulting in any liability, except to the extent 
that such liabilities, losses, damages, claims, or expenses result from 
misfeasance, gross negligence, willful or wanton acts, or bad faith by 
the trustee.
    9. If the trustee ceases to act or fails to act diligently, a 
substitute trustee shall be appointed in the same manner as provided in 
Paragraph IV.A. of this order.
    10. The Commission or, in the case of a court-appointed trustee, 
the court, may on its own initiative or at the request of the trustee 
issue such additional orders or directions as may be necessary or 
appropriate to accomplish the divestiture required by this order.
    11. The trustee may also divest such additional ancillary assets 
and businesses and effect such arrangements as are necessary to assure 
the marketability, viability and competitiveness of the SETA Services 
Operations.
    12. The trustee shall have no obligation or authority to operate or 
maintain the SETA Services Operations.
    13. The trustee shall report in writing to Respondent and the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish divestiture.

V

    It is further ordered that within forty-five (45) days after the 
date this order becomes final and every forty-five (45) days thereafter 
until Respondent has fully complied with Paragraphs II. through IV. of 
this order, Respondent shall submit to the Commission a verified 
written report setting forth in detail the manner and form in which it 
intends to comply, is complying, and has complied with Paragraphs II. 
through IV. of this order. Respondent shall include in its compliance 
reports, among other things that are required from time to time, a full 
description of the efforts being made to comply with Paragraphs II. 
through IV. including a description of all substantive contacts or 
negotiations for the divestiture required by this order, including the 
identity of all parties contacted. Respondent shall include in its 
compliance reports copies of all written communications to and from 
such parties, all internal memoranda and all reports and 
recommendations concerning the divestiture.

VI

    It is further ordered that:
    A. Respondent shall not, absent the prior written consent of the 
proprietor of Non-Public Military Aircraft Information (NITE Hawk), 
provide, disclose or otherwise make available to any Lockheed Martin 
Military Aircraft Business any Non-Public Military Aircraft Information 
(NITE Hawk).
    B. Respondent shall use any Non-Public Military Aircraft 
Information (NITE Hawk) only in Respondent's capacity as a provider of 
NITE Hawk systems, absent the prior written consent of the proprietor 
of Non-Public Military Aircraft Information (NITE Hawk).

VII

    It is further ordered that:
    A. Respondent shall not, absent the prior written consent of the 
proprietor of Non-Public Military Aircraft Information (Simulation and 
Training), provide, disclose or otherwise make available to any 
Lockheed Martin Military Aircraft Business any Non-Public Military 
Aircraft Information (Simulation and Training).
    B. Respondent shall use any Non-Public Military Aircraft 
Information (Simulation and Training) only in Respondent's capacity as 
a provider of Simulation and Training Systems, absent the prior written 
consent of the proprietor of Non-Public Military Aircraft Information 
(Simulation and Training).

VIII

    It is further ordered that: 
    A. Respondent shall not, absent the prior written consent of the 
proprietor of Non-Public Military Aircraft Information (Electronic 
Countermeasures), provide, disclose or otherwise make available to any 
Lockheed Martin Military Aircraft Business any Non-Public Military 
Aircraft Information (Electronic Countermeasures).
    B. Respondent shall use any Non-Public Military Aircraft 
Information (Electronic Countermeasures) only in Respondent's capacity 
as a provider of Electronic Countermeasures, absent the prior written 
consent of the proprietor of Non-Public Military Aircraft Information 
(Electronic Countermeasures).

IX

    It is further ordered that:
    A. Respondent shall not, absent the prior written consent of the 
proprietor of Non-Public Military Aircraft Information (Mission 
Computers), provide, disclose or otherwise make available to any 
Lockheed Martin Military Aircraft Business any Non-Public Military 
Aircraft Information (Mission Computers).
    B. Respondent shall use any Non-Public Military Aircraft 
Information (Mission Computers) only in Respondent's capacity as a 
provider of Mission Computers, absent the prior written consent of the 
proprietor of Non-Public Military Aircraft Information (Mission 
Computers).

X

    It is further ordered that Respondent shall deliver a copy of this 
order to any

[[Page 18739]]

United States Military Aircraft manufacturer prior to obtaining any 
information outside the public domain relating to that manufacturer's 
Military Aircraft, either from the Military Aircraft manufacturer or 
through the Acquisition.

XI

    It is further ordered that:
    A. Respondent shall not, absent the prior written consent of the 
proprietor of Non-Public Unmanned Aerial Vehicle Information, provide, 
disclose or otherwise make available to any Lockheed Martin Military 
Aircraft Business any Non-Public Unmanned Aerial Vehicle Information.
    B. Respondent shall use any Non-Public Unmanned Aerial Vehicle 
Information only in Respondent's capacity as a provider of Integrated 
Communications Systems, absent the prior written consent of the 
proprietor of Non-Public Unmanned Aerial Vehicle Information.

XII

    It is further ordered that Respondent shall deliver a copy of this 
order to any United States Unmanned Aerial Vehicle manufacturer prior 
to obtaining any information outside the public domain relating to that 
manufacturer's Unmanned Aerial Vehicle, either from the Unmanned Aerial 
Vehicle manufacturer or through the Acquisition.

XIII

    It is further ordered that:
    A. Respondent shall not discuss, provide, disclose or otherwise 
make available, directly or indirectly, to any Common LM/Loral Space 
Director any Non-Public Space Information of Lockheed Martin.
    B. Respondent shall require any Common LM/Loral Space Director to 
refrain from discussing, providing, disclosing or otherwise making 
available, directly or indirectly, any Non-Public Space Information of 
Loral Space to any member of the Board of Directors of Lockheed Martin, 
any officer of Lockheed Martin or any employee of Lockheed Martin.
    C. Respondent shall conduct all matters relating to Space & 
Strategic Missiles without the vote, concurrence or other participation 
of any kind whatsoever of any Common LM/Loral Space Director.
    D. Any Common LM/Loral Space Director shall not be counted for 
purposes of establishing a quorum in connection with any matter 
relating to Space & Strategic Missiles.
    E. Respondent shall not provide any Common LM/Loral Space Director 
with any type of compensation that is based in whole or in part on the 
profitability or performance of Space & Strategic Missiles; provided, 
however, that any Common LM/Loral Space Director may receive as 
compensation for his or her serving on the Lockheed Martin Board of 
Directors such stock options or other stock-based compensation as is 
provided generally to other members of the Lockheed Martin Board of 
Directors in accordance with Respondent's ordinary practice.

XIV

    It is further ordered that:
    A. Respondent shall not provide or otherwise make available, 
directly or indirectly, any personnel, information, facilities, 
technical services or support from Space & Strategic Missiles to Space 
Systems/Loral pursuant to any provision contained in the Lockheed 
Martin/Loral Space Technical Services Agreement.
    B. Respondent shall not disclose or otherwise make available to 
Space & Strategic Missiles any information received in connection with 
the Lockheed Martin/Loral Space Technical Services Agreement.
    C. Respondent shall not disclose to any Space & Strategic Missile 
employee any information or technical services provided to Space 
Systems/Loral by Lockheed Martin pursuant to the Lockheed Martin/Loral 
Space Technical Services Agreement.

XV

    It is further ordered that if Respondent's ownership of the equity 
securities of Loral Space increases to more than twenty percent (20%) 
of the total equity securities (including both Voting Equity Securities 
and Non-Voting Equity Securities) of Loral Space as the result of 
repurchases of equity securities by Loral Space or for any other 
reason, Respondent shall, following its obtaining actual knowledge of 
an event leading to such increase (``Event''), reduce its equity 
security ownership interest to a level of not more than twenty percent 
(20%). Those equity securities which must be sold are hereinafter 
referred to as the ``Excess Securities.'' Respondent shall have a 
period of 185 days following its obtaining actual knowledge of the 
Event to sell the Excess Securities (the ``Sale Period''); provided, 
however, that, if within ten (10) business days of Respondent's receipt 
of such knowledge, Respondent requests that Loral Space file a 
registration statement providing for such sale, the Sale Period shall 
be deemed to begin on the effective date of such registration 
statement, and shall extend for 150 days thereafter, and provided 
further that, if Respondent elects to sell the Excess Securities in a 
manner that does not require Loral Space to file a registration 
statement, and such sales cannot be accomplished within the Sale Period 
without violating Rule 144 (or any successor provision) under the 
Securities Act of 1933, then the Sale Period shall be extended by the 
minimum amount necessary to allow such securities to be sold pursuant 
to Rule 144 (or any successor provision). Pending the sale of Excess 
Securities, Respondent shall not exercise any voting rights relating to 
the Excess Securities. Respondent shall amend the Stockholders 
Agreement to provide Respondent the means of complying with the 
foregoing provisions and shall thereafter not amend the applicable 
provisions of the Stockholders Agreement in a fashion so as to impair 
Respondent's ability to comply with this paragraph. The provisions of 
this paragraph shall terminate ten (10) years from the date this order 
becomes final.

XVI

    It is further ordered that Respondent shall comply with all terms 
of the Interim Agreement, attached to this order and made a part hereof 
as Appendix I. Said Interim Agreement shall continue in effect until 
the provisions in Paragraphs II. through XVI. of this order are 
complied with or until such other time as is stated in said Interim 
Agreement.

XVII

    It is further ordered that within sixty (60) days of the date this 
order becomes final and annually for the next ten (10) years on the 
anniversary of the date this order becomes final, and at such other 
times as the Commission may require, Respondent shall file a verified 
written report with the Commission setting forth in detail the manner 
and form in which it has complied and is complying with Paragraphs VI. 
through XVI. of this order. To the extent not prohibited by United 
States Government national security requirements, Respondent shall 
include in its reports information sufficient to identify all United 
States Military Aircraft and Unmanned Aerial Vehicle manufacturers with 
whom Respondent has entered into an agreement for the research, 
development, manufacture or sale of NITE Hawk Systems, Simulation and 
Training Systems, Electronic Countermeasures, Mission Computers or 
Integrated Communications Systems.

[[Page 18740]]

XVIII

    It is further ordered that Respondent shall notify the Commission 
at least thirty (30) days prior to any proposed change in the corporate 
respondent such as dissolution, assignment, sale resulting in the 
emergence of a successor corporation, or the creation or dissolution of 
subsidiaries or sale of any division or any other change in the 
corporation in each instance where such change may affect compliance 
obligations arising out of the order.

XIX

    It is further ordered that, for the purpose of determining or 
securing compliance with this order, and subject to any legally 
recognized privilege and applicable United States Government national 
security requirements, upon written request, and on reasonable notice, 
Respondent shall permit any duly authorized representatives of the 
Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of Respondent, relating to any matters contained in this 
order; and
    B. Upon five (5) days' notice to Respondent, and without restraint 
or interference from Respondent, to interview officers, directors, or 
employees of Respondent, who may have counsel present, regarding any 
such matters.

XX

    It is further ordered that this order shall terminate twenty (20) 
years from the date this order becomes final, except as otherwise 
provided in this order.

Appendix I

    In the Matter of: Lockheed Martin Corporation, a corporation. 
File No. 961-0026.

Interim Agreement

    This Interim Agreement is by and between Lockheed Martin 
Corporation (``Lockheed Martin''), a corporation organized and existing 
under the laws of the State of Maryland, 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, Lockheed Martin has proposed to acquire all of the 
outstanding voting common stock of Loral Corporation and engage in a 
series of related transactions and acts; 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, if the Commission accepts the Agreement Containing Consent 
Order (``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 competition 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, Lockheed Martin entering into this Interim Agreement shall 
in no way be construed as an admission by Lockheed Martin that the 
proposed Acquisition constitutes a violation of any statute; and
    Whereas, Lockheed Martin understands that no act or transaction 
contemplated by this Interim Agreement 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 Interim 
Agreement.
    Now, therefore, Lockheed Martin agrees, upon the understanding that 
the Commission has not yet determined whether the proposed Acquisition 
will be challenged, 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, as follows:
    1. Lockheed Martin agrees to execute and be bound by the terms of 
the Order contained in the Consent Agreement, as if it were final, from 
the date Lockheed Martin signs the Consent Agreement.
    2. Lockheed Martin agrees to deliver, within three (3) days of the 
date the Consent Agreement is accepted for public comment by the 
Commission, a copy of the Consent Agreement and a copy of this Interim 
Agreement to the United States Department of Defense, the Federal 
Aviation Administration, McDonnell Douglas Corporation, Northrop 
Grumman Corporation, The Boeing Company and Teledyne Inc.
    3. Lockheed Martin agrees to submit, within thirty (30) days of the 
date the Consent Agreement is signed by Lockheed Martin, an initial 
report, pursuant to Section 2.33 of the Commission's Rules, signed by 
Lockheed Martin setting forth in detail the manner in which Lockheed 
Martin will comply with Paragraphs II. through XVI. of the Consent 
Agreement.
    4. Lockheed Martin agrees that, from the date Lockheed Martin signs 
the Consent Agreement until the first of the dates listed in 
subparagraphs 4.a. and 4.b., it will comply with the provisions of this 
Interim Agreement:
    a. ten (10) business days after the Commission withdraws its 
acceptance of the Consent Agreement pursuant to the provisions of 
Section 2.34 of the Commission's Rules; or
    b. the date the Commission finally issues its Complaint and its 
Decision and Order.
    5. Lockheed Martin waives all rights to contest the validity of 
this Interim Agreement.
    6. For the purpose of determining or securing compliance with this 
Interim Agreement, subject to any legally recognized privilege and 
applicable United States Government national security requirements, and 
upon written request, and on reasonable notice, to Lockheed Martin made 
to its principal office, Lockheed Martin shall permit any duly 
authorized representative or representatives of the Commission:
    a. access, during the office hours of Lockheed Martin and in the 
presence of counsel, to inspect and copy all books, ledgers, accounts, 
correspondence, memoranda, and other records and documents in the 
possession or under the control of Lockheed Martin relating to 
compliance with this Interim Agreement; and
    b. upon five (5) days' notice to Lockheed Martin and without 
restraint or interference from it, to interview officers, directors, or 
employees of Lockheed Martin, who may have counsel present, regarding 
any such matters.
    7. This Interim Agreement shall not be binding until accepted by 
the Commission.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an agreement containing a proposed Consent Order 
from Lockheed Martin Corporation (``Lockheed Martin''). The proposed 
Consent Order contains a number of

[[Page 18741]]

provisions designed to remedy the anticompetitive effects likely to 
result from Lockheed Martin's proposed acquisition of Loral Corporation 
(``Loral''). The proposed Consent Order requires Lockheed Martin to 
divest its operations used to perform systems engineering and technical 
assistance (``SETA'') services for the Federal Aviation Administration 
(``FAA'') under the National Implementation and Support Contract 
(``NISC Services Contract'') within six months of the date Lockheed 
Martin signed the proposed Consent Order. The proposed Consent Order 
also prohibits Lockheed Martin's space business from providing 
technical services or information to Space Systems/Loral, a subsidiary 
of the newly created Loral Space and Communications Ltd. (``Loral 
Space''), pursuant to a technical services agreement between Lockheed 
Martin and Loral Space.
    The proposed Consent Order further prohibits any Lockheed Martin 
board member or officer, who is also a board member or officer of Loral 
Space from: (1) participating in any matters involving Lockheed 
Martin's space business; (2) having access to any non-public 
information relating to Lockheed Martin's space business; or (3) 
providing any non-public information relating to Space Systems/Loral to 
Lockheed Martin. The proposed Consent Order would also prohibit 
Lockheed Martin from providing to such common board member or officer 
compensation that is based on the profitability or performance of 
Lockheed Martin's space business. Additionally, the proposed Consent 
Order would require Lockheed Martin to reduce its investment in Loral 
Space to 20% if, due to a repurchase by Loral Space of its outstanding 
common stock shares, or for any other reason, Lockheed Martin's 
interest in Loral Space is effectively raised above 20%. Finally, the 
proposed Consent Order prohibits Lockheed Martin's military aircraft 
and unmanned aerial vehicle divisions from gaining access to any non-
public information that certain Lockheed Martin divisions will receive 
after the acquisition from competing military aircraft manufacturers or 
unmanned aerial vehicle manufacturers.
    The proposed Consent Order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and any comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
Order.
    Pursuant to a January 8, 1996 cash tender offer, Lockheed Martin 
agreed to acquire one hundred percent of the voting securities of Loral 
for approximately $9.1 billion. As part of the transaction, Loral's 
space and telecommunications businesses, including its 33% ownership 
interest in Space Systems/Loral, a direct satellite competitor of 
Lockheed Martin, will be transferred to a new entity, Loral Space. In 
addition, Lockheed Martin will purchase a 20% convertible preferred 
stock interest in Loral Space which effectively amounts to a 6.6% 
interest in the competing Space Systems/Loral business. Lockheed Martin 
also agreed to provide Loral Space with technical support services, 
including research and development support, at cost upon request by 
Loral Space. Finally, Bernard Schwartz, Chairman of the Board of 
Directors and Chief Executive Officer of Loral Space, will be appointed 
to the position of Vice Chairman of the Board of Directors of Lockheed 
Martin.
    The proposed Complaint alleges that the transaction, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, in the following markets:
    (1) the research, development, manufacture and sale of air traffic 
control systems;
    (2) the research, development, manufacture and sale of commercial 
low earth orbit (``LEO'') satellites;
    (3) the research, development, manufacture and sale of commercial 
geosynchronous earth orbit (``GEO'') satellites;
    (4) the research, development, manufacture and sale of military 
aircraft; and
    (5) the research, development, manufacture and sale of unmanned 
aerial vehicles.
    The proposed Consent Order would remedy the alleged violations in 
each market. First, Lockheed Martin is currently a supplier of SETA 
services to the FAA under the NISC Services Contract and Loral is the 
largest supplier of air traffic control systems to the FAA. In its 
capacity as an FAA SETA contractor, Lockheed Martin is responsible for, 
among other things, developing technical and other specifications for 
FAA procurements, assessing bid and other proposals submitted by 
companies competing for FAA procurements, testing and evaluating 
equipment and systems supplied to the FAA, and evaluating the cost and 
quality performance of FAA contractors. Following the acquisition, 
Lockheed Martin would be both an FAA SETA contractor and the largest 
supplier of air traffic control systems to the FAA and would be in a 
position to gain access to its air traffic control systems competitors' 
competitively sensitive cost and design information and disadvantage 
its competitors and the FAA in a number of ways. For instance, with 
access to its competitors' cost and design information, Lockheed Martin 
would be able to raise its bid price for procurements of air traffic 
control systems if, based on this information, it determined that it 
was the low-cost supplier or that it had the superior technological 
approach. Moreover, access to its competitors' proprietary technical 
information could also allow Lockheed Martin to ``free-ride'' off its 
competitors' research and development efforts thereby reducing the 
incentive for those competitors to invest in future innovations. 
Finally, Lockheed Martin could disadvantage its competitors or raise 
their costs by setting unfair procurement specifications or submitting 
unfair proposal or performance evaluations.
    The proposed Consent Order requires Lockheed Martin to divest all 
of the assets relating to the provision of FAA SETA services within six 
(6) months of the date it signed the proposed Consent Order. The 
proposed Consent Order states that this divestiture shall be to an 
acquirer or acquirers that receive the prior approval of the 
Commission. If Lockheed Martin fails to divest the assets within six 
(6) months, a trustee may be appointed to accomplish the divestiture. 
The proposed Consent Order also requires Lockheed Martin to provide 
technical assistance to the acquirer or acquirers for a period not 
greater than one (1) year, at the request of the acquirer or of the 
FAA. The purpose of the divestiture is to ensure the continued 
provision of FAA SETA services under the NISC Services Contract, to 
maintain the viability and marketability of the assets used to provide 
SETA services and to remedy the lessening of competition resulting from 
the acquisition in the market for the research, development, 
manufacture and sale of air traffic control systems. Recently, in 
Litton Industries, Inc., File No. 961-0022 (accepted, subject to final 
approval, by the Commission on February 15, 1996 and awaiting public 
comments), the Commission voted unanimously to accept a Consent Order 
following an acquisition that raised similar competitive concerns. In 
that matter, the Consent Order required Litton, who is one of only two 
manufacturers of Aegis Destroyers, to divest assets used to provide 
Aegis

[[Page 18742]]

Destroyer SETA services in order to remedy the anticompetitive effects 
resulting from its acquisition of PRC Inc., a long-standing provider of 
SETA services to the U.S. Navy.
    Second, after the transaction, Lockheed Martin and Loral Space, 
through its 33% ownership of Space Systems/Loral, will be two of the 
leading competitors in the markets for commercial LEO and commercial 
GEO satellites. These markets are highly concentrated and significant 
barriers to entry exist. Lockheed Martin has agreed to purchase a 20% 
convertible preferred stock interest in Loral Space which effectively 
amounts to a 6.6% interest in Space Systems/Loral. In addition, 
Lockheed Martin has agreed to provide technical assistance, including 
research and development support, at cost upon request from Loral 
Space. Finally, Bernard Schwartz, Chairman of the Board of Directors 
and Chief Executive Officer of Loral Space, will be appointed to the 
position of Vice Chairman of the Board of Directors of Lockheed Martin.
    The acquisition as structured is likely to lead to anticompetitive 
effects in the commercial LEO and GEO satellite markets. The technical 
services agreement creates an ongoing relationship between Lockheed 
Martin and Loral Space which could be used as a mechanism for Lockheed 
Martin to monitor Loral Space's competitive activities or as a 
signaling device for Loral Space to alert Lockheed Martin as to the 
satellite procurements where it expects to submit a bid. As such, the 
agreement could facilitate coordinated interaction between the 
companies.
    The technical services agreement would also likely reduce Loral 
Space's incentives to invest in commercial LEO and GEO satellite 
research and development. If, pursuant to the technical services 
agreement, Loral Space would be able to obtain proven technologies from 
Lockheed Martin at cost, it would have little incentive to undertake 
expensive and risky investment in commercial LEO and GEO satellite 
research and development. Thus, the agreement would likely lead to a 
reduction in innovation competition between the companies. Because the 
technical services agreement between Lockheed Martin and Loral Space, 
two of the leading competitors in the highly concentrated commercial 
LEO and GEO satellite markets, creates the potential for the exchange 
of competitively sensitive information and could lead to a reduction in 
Loral Space's incentives to innovate, the agreement is likely to result 
in anticompetitive effects.
    Mr. Schwartz's service as an officer or director of competing 
companies does not violate Section 8 of the Clayton Act because 
Lockheed Martin's sales in competition with Loral Space are less than 
2% of Lockheed Martin's total sales. For this reason, Lockheed Martin 
meets the Section 8(a)(2)(B) de minimus exception to the statute. 
Nevertheless, Mr. Schwartz's positions with each company still raise 
significant competitive concerns. For example, by serving on the boards 
of both companies, Mr. Schwartz would have access to competitively 
sensitive information from Lockheed Martin and Loral Space, including 
information on bid strategies, pricing, and research and development 
plans. In addition, Lockheed Martin would be in a position to use Mr. 
Schwartz to exercise influence over Loral Space, thereby reducing head-
to-head competition between the companies. Lockheed Martin could also 
offer Mr. Schwartz compensation based on the profitability of Lockheed 
Martin's space business, thereby reducing his incentive to aggressively 
compete Loral Space against Lockheed Martin.
    In order to remedy the acquisition's anticompetitive effects in the 
commercial LEO and commercial GEO satellite markets, the proposed 
Consent Order prohibits Lockheed Martin's space business from providing 
technical services, personnel, information or facilities, pursuant to 
the technical services agreement, to Space Systems/Loral. The proposed 
Consent Order would also prohibit any person who is simultaneously a 
board member or officer of Lockheed Martin and a board member or 
officer of Loral Space, including Mr. Schwartz, from: (1) participating 
in any matters involving Lockheed Martin's space business; (2) having 
access to any non-public information relating to Lockheed Martin's 
space business; or (3) providing any non-public information relating to 
Space Systems/Loral to Lockheed Martin. Further, the proposed Consent 
Order would prohibit Lockheed Martin from providing to any such common 
board member or officer compensation that is based on the profitability 
or performance of Lockheed Martin's space business. Additionally, if 
Lockheed Martin's interest in Loral Space is effectively raised above 
20% due to a stock repurchase by Loral Space, or for any other reason, 
the proposed Consent Order would require Lockheed Martin to reduce its 
investment in Loral Space back down to 20%.
    Third, Lockheed Martin is a significant competitor in the research, 
development, manufacture and sale of military aircraft and Loral is the 
sole supplier of a number of critical systems used on or with military 
aircraft, including simulation and training systems, the NITE Hawk 
forward-looking infrared targeting system, electronic countermeasures 
and mission computers. Following the acquisition, Lockheed Martin would 
be the sole source supplier for a number of these systems, as well as a 
competitor in the military aircraft market. In order to integrate or 
interface these critical systems with a military aircraft, a military 
aircraft manufacturer will have to provide a wide range of 
competitively sensitive proprietary information to the Lockheed Martin 
divisions that manufacture these systems. As a result, the proposed 
acquisition increases the likelihood that competition between military 
aircraft suppliers would decrease because Lockheed Martin's military 
aircraft division could gain access to its competitors' proprietary 
information, which could affect the prices and services that Lockheed 
Martin would offer. In addition, advancements in military aircraft 
research, innovation and quality would be reduced because Lockheed 
Martin's military aircraft competitors would fear that Lockheed Martin 
could ``free ride'' off of their technological developments.
    To remedy the proposed acquisition's likely anticompetitive effects 
in the military aircraft market, the proposed Consent Order preserves 
the confidentiality of military aircraft suppliers' proprietary 
information by prohibiting Lockheed Martin's divisions that provide 
these critical systems from making any proprietary information from 
competing aircraft manufacturers available to Lockheed Martin's 
aircraft division. Under the proposed Consent Order, Lockheed Martin 
may only use such information in its capacity as a provider of these 
military aircraft systems. Non-public information in this context 
includes any information not in the public domain that is designated as 
proprietary information by any military aircraft manufacturer that 
provides such information to Lockheed Martin as well as information not 
in the public domain provided by any military aircraft manufacturer to 
Loral prior to the acquisition. The purpose of the proposed Consent 
Order is to preserve the opportunity for full competition in the market 
for the research, development, manufacture and sale of military 
aircraft. The Commission has issued similar orders limiting potentially 
anticompetitive information transfers following mergers or 
acquisitions, including Martin Marietta

[[Page 18743]]

Corp., (C3500) (June 28, 1994), Alliant Techsystems Inc., (C3567) 
(April 7, 1995), and Lockheed Martin Corp., (C3576) (May 9, 1995). 
Industry participants have indicated that these prior orders have been 
effective in protecting their confidential information and preserving 
competition. In addition, the Department of Defense has stated that the 
proposed Consent Order resolves all of the competitive issues that they 
have identified.
    Finally, Lockheed Martin is a significant competitor in the market 
for the research, development, manufacture and sale of unmanned aerial 
vehicles and Loral is the sole supplier of integrated communications 
systems, a critical unmanned aerial vehicle component. After the 
acquisition, Lockheed Martin would be the sole supplier of integrated 
communications systems for unmanned aerial vehicles and also a 
competitor in the unmanned aerial vehicle market. Because unmanned 
aerial vehicle manufacturers will have to provide proprietary 
information to the Lockheed Martin division that manufactures 
integrated communication systems, Lockheed Martin's military aircraft 
division, which manufactures unmanned aerial vehicles, could gain 
access to competitively sensitive non-public information relating to 
competing unmanned aerial vehicles. As a result, the proposed 
acquisition increases the likelihood that competition between unmanned 
aerial vehicle suppliers would decrease because Lockheed Martin would 
have access to its competitors' proprietary information, which could 
affect the prices and services that Lockheed Martin would offer. In 
addition, advancements in unmanned aerial vehicle research, innovation 
and quality would be reduced because Lockheed Martin's unmanned aerial 
vehicle competitors would fear that Lockheed Martin could ``free ride'' 
off of their technological developments.
    To remedy the proposed acquisition's likely anticompetitive effects 
in the unmanned aerial vehicle market, the proposed Consent Order 
preserves the confidentiality of unmanned aerial vehicle suppliers' 
proprietary information by prohibiting Lockheed Martin's communications 
systems divisions from making any proprietary information from 
competing unmanned aerial vehicle manufacturers available to Lockheed 
Martin's military aircraft division. Under the proposed Consent Order, 
Lockheed Martin may only use such information in its capacity as a 
provider of integrated communications systems. Non-public information 
in this context includes any information not in the public domain that 
is designated as proprietary information by any unmanned aerial vehicle 
manufacturer that provides such information to Lockheed Martin as well 
as information not in the public domain provided by any unmanned aerial 
vehicle manufacturer to Loral prior to the acquisition. The purpose of 
the proposed Consent Order is to preserve the opportunity for full 
competition in the market for the research, development, manufacture 
and sale of unmanned aerial vehicles.
    Under the provisions of the proposed Consent Order, Lockheed Martin 
is required to deliver a copy of the Order to any United States 
military aircraft manufacturer and to any United States unmanned aerial 
vehicle manufacturer prior to obtaining any information from them that 
is outside the public domain. The Order also requires Lockheed Martin 
to provide the Commission a report of compliance with the provisions of 
the Order relating to its divestiture of its FAA SETA services assets 
within forty-five (45) days following the date the Order becomes final, 
and every forty-five (45) days thereafter until it has completed the 
required divestiture of its FAA SETA services assets. In addition, the 
Order also requires Lockheed Martin to provide the Commission a report 
of compliance with all other provisions of the Order within sixty (60) 
days following the date the Order becomes final, and annually for the 
next (10) years on the anniversary of the date the Order becomes final.
    In order to preserve competition in the relevant markets during the 
period prior to the final acceptance of the proposed Consent Order 
(after the 60-day public notice period), Lockheed Martin has entered 
into an Interim Agreement with the Commission in which it has agreed to 
be bound by the proposed Consent Order as of the date the Commission 
accepted the proposed Consent Order subject to final approval.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Order, and it is not intended to constitute an 
official interpretation of the agreement and proposed Consent Order or 
to modify in any way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 96-10560 Filed 4-26-96; 8:45 am]
BILLING CODE 6750-01-P