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

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.

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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.

(202) 326-2932. Steven K. Bernstein, Federal Trade Commission, S-2308,

6th and Pennsylvania Ave, NW, Washington, DC 20580. (202) 326-2423.

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