SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
--------------------------------------------------------------------------------
L-3 COMMUNICATIONS HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
L-3 COMMUNICATIONS HOLDINGS, INC.
[L-3 LOGO]
To Our Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Stockholders of L-3 Communications Holdings, Inc., to be
held at 2:30 p.m., eastern daylight time, on Tuesday, April 23, 2002, at the
Rihga Royal Hotel located at 151 West 54th Street, New York, NY. The formal
notice and proxy statement for the Annual Meeting are attached to this letter.
To have your vote recorded, you should vote by telephone or over the
Internet or sign, date and return your proxy card in the enclosed envelope as
soon as possible, even if you currently plan to attend the Annual Meeting. By
doing so, you will ensure that your shares are represented and voted at the
meeting. If you decide to attend, you can still vote your shares in person, if
you wish. Please let us know whether you plan to attend the meeting by marking
the appropriate box on the proxy card or indicating your plans when prompted
over the telephone or Internet voting systems.
On behalf of the Board of Directors, I thank you for your cooperation
and look forward to seeing you on April 23rd.
Very truly yours,
/s/ Frank C. Lanza
Frank C. Lanza
Chairman and Chief Executive Officer
L-3 COMMUNICATIONS HOLDINGS, INC.
[L-3 LOGO]
NOTICE OF 2002 ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders
(the "Annual Meeting") of L-3 Communications Holdings, Inc. will be held at the
Rihga Royal Hotel, 151 West 54th Street, New York, New York on Tuesday, the 23rd
day of April, 2002, at 2:30 p.m., eastern daylight time, for the following
purposes:
1. Election of three Class I Directors whose terms expire in 2005;
2. Approval of an amendment to our Amended and Restated Certificate of
Incorporation to (i) increase the number of authorized shares of
common stock, par value $.01 per share (the "Common Stock") from
100,000,000 to 300,000,000 and (ii) increase the number of authorized
shares of preferred stock (the "Preferred Stock") from 25,000,000 to
50,000,000;
3. Ratification of the appointment of our independent auditors for 2002;
and
4. Transaction of such other business as may properly come before the
Annual Meeting and any adjournments thereof.
By Order of the Board of Directors,
/s/ Christopher C. Cambria
Christopher C. Cambria
Senior Vice President, Secretary and
General Counsel
March __, 2002
--------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
VOTE OVER THE TELEPHONE OR THE INTERNET OR COMPLETE, DATE, SIGN AND RETURN
PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. YOU MAY
REVOKE YOUR PROXY IF YOU ATTEND THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARE
IN PERSON.
--------------------------------------------------------------------------------
L-3 COMMUNICATIONS HOLDINGS, INC.
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
-------------------------
PROXY STATEMENT
This proxy statement is furnished to the holders of the common stock,
par value $0.01 per share of L-3 Communications Holdings, Inc. in connection
with the solicitation of proxies for use at the 2002 Annual Meeting of
Stockholders to be held at the Rihga Royal Hotel, 151 West 54th Street, New
York, New York at 2:30 p.m., eastern daylight time, on Tuesday, April 23, 2002
(the "Annual Meeting").
RECORD DATE
The board of directors has fixed the close of business on March 15,
2002 as the record date for the Annual Meeting (the "Record Date"). Only
stockholders of record at the Record Date (the "Stockholders") are entitled to
notice of and to vote at the Annual Meeting or at any adjournments thereof, in
person or by proxy. At the Record Date, there were 39,608,831 shares of our
common stock outstanding. This proxy statement, the accompanying proxy card and
our Annual Report to stockholders are intended to be mailed on or about April 1,
2002 to each Stockholder entitled to vote at the Annual Meeting.
PROXIES
The proxy accompanying this proxy statement is solicited on behalf of
our board of directors for use at the Annual Meeting and any adjournments of the
Annual Meeting, and the expenses of solicitation of proxies will be borne by us.
The solicitation will be made primarily by mail, but our officers and regular
employees may also solicit proxies by telephone, telegraph, facsimile or in
person. We also have retained to assist in soliciting proxies. Each
holder of common stock is entitled to one vote for each share of our common
stock held. The holders in person or by proxy of a majority of the common stock
entitled to be voted at the Annual Meeting shall constitute a quorum.
Each Stockholder may appoint a person (who need not be a shareholder)
other than the persons named in the enclosed proxy to represent him or her at
the meeting by completing another proper proxy. In either case, such completed
proxy should be returned in the enclosed envelope provided for that purpose for
delivery before the meeting or should be delivered to our Secretary at 600 Third
Avenue, New York, New York 10016, not later than 5 p.m., eastern daylight time,
on Monday, April 22, 2002.
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person(s) executing the proxy upon our receipt, prior to the time
the proxy is voted, of a duly executed instrument revoking it, or of a duly
executed proxy bearing a later date, or in the case of death or incapacity of
the person(s) executing the proxy, of written notice of such death or
incapacity, or by such person(s) voting in person at the Annual Meeting. Unless
revoked, all proxies representing shares entitled to vote which are delivered
pursuant to this solicitation will be voted at the Annual Meeting and, where a
choice has been specified on the proxy card, will be voted in accordance with
such specification. WHERE A CHOICE HAS NOT BEEN SPECIFIED ON THE PROXY CARD, THE
PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF YOUR BOARD OF
DIRECTORS.
Assuming a quorum is present, a majority of the shares of common stock
present in person or represented by proxy at the Annual Meeting is required for
the election of directors and for approval of all other items submitted to
Stockholders for their consideration. Abstentions and instances where brokers
are prohibited from exercising discretionary authority for beneficial owners who
have not returned a proxy (so-called "broker non-votes") will be counted for
purposes of determining a quorum, but will not be counted as either voting for
or against any proposal.
1
VOTING BY TELEPHONE OR INTERNET
Instead of submitting your vote by mail on the enclosed proxy card, you
can vote by telephone or over the Internet. The telephone and Internet voting
procedures, which comply with Delaware law, are designed to authenticate
Stockholders' identities, to allow Stockholders to vote their shares and to
confirm that their instructions have been properly recorded.
Voting your proxy by mail, telephone or the Internet will not limit
your right to vote at the Annual Meeting if you later decide to attend in
person. If your shares are held in the name of a broker, bank or other record
holder, you must obtain a proxy from the record holder as to how to vote your
shares or obtain a proxy from the record holder to vote at the Annual Meeting.
Stockholders with shares registered directly in their name in our stock
records maintained by our transfer agent, EquiServe Trust Company, N.A., may
vote their shares (1) by making a toll-free telephone call from the U.S. and
Canada to EquiServe at 1-877-PRX-VOTE (1-877-779-8683), (2) by submitting
their proxy over the Internet at the following address on the World Wide Web:
http://www.eproxyvote.com/lll, or (3) by mailing their signed proxy card.
Specific instructions to be followed by registered Stockholders are set forth on
the enclosed proxy card. Proxies submitted by telephone or over the Internet as
described above must be received by 5:00 p.m., eastern daylight time, on April
22, 2002.
REVOCATION OF PROXIES SUBMITTED BY TELEPHONE OR INTERNET
To revoke a proxy previously submitted by telephone or over the
Internet, you may simply vote again at a later date, using the same procedures,
in which case your later submitted vote will be recorded and your earlier vote
revoked, or by attending the meeting and voting in person.
PROPOSAL 1. ELECTION OF DIRECTORS
Our Amended and Restated Certificate of Incorporation and the Bylaws
provide for a board of directors whose number shall be fixed from time to time
exclusively pursuant to a resolution adopted by the board of directors. We have
eight directors. Our Amended and Restated Certificate of Incorporation provides
for a classified board of directors divided into three classes as follows: Frank
C. Lanza, Robert V. LaPenta, Robert B. Millard and John M. Shalikashvili
constitute a class with a term that expires at the upcoming annual meeting (the
"Class I Directors"); Thomas A. Corcoran, John E. Montague and Alan H.
Washkowitz constitute a class with a term that expires at the annual meeting in
2004 (the "Class II Directors"); and Arthur L. Simon constitutes a class with a
term that expires at the annual meeting in 2003 (the "Class III Director"). The
audit committee, acting as the nominating committee, has nominated, and the full
board of directors has ratified, the following slate of Class I nominees for a
three year term expiring in 2005: Mr. Lanza, Mr. LaPenta and Mr. Shalikashvili.
Action will be taken at the Annual Meeting for the election of these Class I
Director nominees. Mr. Millard has resigned from his position as a Class I
Director, effective at the upcoming annual meeting, and has been elected by the
board of directors to fill a vacancy as a Class III Director. Mr. Millard's term
as a Class III Director will expire at the annual meeting in 2003.
It is intended that the proxies delivered pursuant to this solicitation
will be voted in favor of the election of Mr. Lanza, Mr. LaPenta and Mr.
Shalikashvili, except in cases of proxies bearing contrary instructions. In the
event that these nominees should become unavailable for election for any
presently unforeseen reason, the person named in the proxy will have the right
to use his discretion to vote for a substitute.
The following information details offices held, other business
directorships, the classes and terms of the nominees and each director whose
term of office will continue after the 2002 Annual Meeting. Beneficial ownership
of equity securities of the nominees is shown under the caption "Security
Ownership of Management" on page 9.
2
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS IN 2002
CLASS I -NOMINEES FOR TERMS EXPIRING IN 2005
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------------- --------- -----------------------------------------------------------------
Frank C. Lanza........... 70 Chairman and Chief Executive Officer and Director since April
1997. From April 1996, when Loral Corporation was acquired
by Lockheed Martin Corporation, until April 1997, Mr. Lanza
was Executive Vice President of Lockheed Martin, a member of
Lockheed Martin's Executive Council and Board of Directors
and President and Chief Operating Officer of Lockheed
Martin's command, control, communications and intelligence
("C(3)I") and Systems Integration Sector, which comprised
many of the businesses Lockheed Martin acquired from Loral.
Prior to the April 1996 acquisition of Loral, Mr. Lanza was
President and Chief Operating Officer of Loral, a position
he held since 1981. He joined Loral in 1972 as President of
its largest division, Electronic Systems. His earlier
experience was with Dalmo Victor and Philco Western
Development Laboratory.
Robert V. LaPenta........ 56 President and Chief Financial Officer and Director since
April 1997. From April 1996, when Loral was acquired by
Lockheed Martin, until April 1997, Mr. LaPenta was a Vice
President of Lockheed Martin and was Vice President and
Chief Financial Officer of Lockheed Martin's C(3)I and
Systems Integration Sector. Prior to the April 1996
acquisition of Loral, he was Loral's Senior Vice President
and Controller, a position he held since 1981. He joined
Loral in 1972 and was named Vice President and Controller of
its largest division in 1974. He became Corporate Controller
in 1978 and was named Vice President in 1979. Mr. LaPenta is
on the Board of Trustees of Iona College, the Board of
Trustees of The American College of Greece and the Board of
Directors of Core Software Technologies.
3
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------------- --------- -----------------------------------------------------------------
John M. Shalikashvili.... 65 Director since August 1998. Chairman of the audit committee.
General Shalikashvili (U.S. Army-ret.) is an independent
consultant and a Visiting Professor at Stanford University.
General Shalikashvili was the senior officer of the United
States military and principal military advisor to the
President of the United States, the Secretary of Defense and
National Security Council by serving as the thirteenth
Chairman of the Joint Chiefs of Staff, Department of
Defense, for two terms from 1993 to 1997. Prior to his
tenure as Chairman of the Joint Chiefs of Staff, he served
as the Commander in Chief of all United States forces in
Europe and as NATO's tenth Supreme Allied Commander, Europe
(SACEUR). He has also served in a variety of command and
staff positions in the continental United States, Alaska,
Belgium, Germany, Italy, Korea, Turkey and Vietnam. General
Shalikashvili is a director of The Boeing Company, United
Defense Industries Inc., and Frank Russell Trust Company.
The nominees for election to the board of directors are hereby proposed
for approval by the Stockholders. The affirmative vote of the holders of a
majority of the shares present or represented and entitled to vote at the Annual
Meeting will be necessary to approve each nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSED
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2002 ANNUAL MEETING AND WHO
ARE NOT SUBJECT TO ELECTION THIS YEAR.
CLASS II - DIRECTORS WHOSE TERMS EXPIRE IN 2004
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------------- --------- -----------------------------------------------------------------
Thomas A. Corcoran....... 57 Director since July 1997. Member of the audit committee.
Since March 2001, Mr. Corcoran has been the President and
Chief Executive Officer of Gemini Air Cargo. Mr. Corcoran is
also president of Corcoran Enterprises, a private management
consulting firm. Mr. Corcoran was the President and Chief
Executive Officer of Allegheny Teledyne Incorporated from
October 1999 to December 2000. From October 1998 to
September 1999, he was President and Chief Operating Officer
of the Space & Strategic Missiles Sector of Lockheed Martin
Corporation. From March 1995 to September 1998 he was the
President and Chief Operating Officer of the Electronic
Systems Sector of Lockheed Martin Corporation. From 1993 to
1995, Mr. Corcoran was President of the Electronics Group of
Martin Marietta Corporation. Prior to that he worked for
General Electric for 26 years and from 1983 to 1993 he held
various management positions with GE Aerospace and was a
company officer from 1990 to 1993. Mr. Corcoran is a member
of the Board of Trustees of Worcester Polytechnic Institute,
the Board of Trustees of Stevens Institute of Technology and
the Board of Directors of REMEC Corporation.
4
John E. Montague...... 48 Director since April 1997. Member of the compensation
committee. Mr. Montague has been Vice President, Financial
Strategies of Lockhead Martin Corporation since August 2001.
From September 1998 to August 2001, he was Vice President
and Chief Financial Officer of Lockheed Martin Global
Telecommunications, Inc., a wholly owned subsidiary of
Lockheed Martin. He served as Vice President, Financial
Strategies at Lockheed Martin responsible for mergers,
acquisitions and divestiture activities and shareholder
value strategies from March 1995 until September 1998.
Previously, he was Vice President, Corporate Development and
Investor Relations at Martin Marietta Corporation from 1991
to 1995. From 1988 to 1991, he was Director of Corporate
Development at Martin Marietta Corporation, which he joined
in 1977 as a member of the engineering staff. Mr. Montague
is a director of Rational Software Corporation.
Alan H. Washkowitz.... 61 Director since April 1997. Member of the compensation
committee. Mr. Washkowitz is a Managing Director of Lehman
Brothers Inc. and head of the Merchant Banking Group, and is
responsible for the oversight of Lehman Brothers Inc.
Merchant Banking Portfolio Partnership L.P. Mr. Washkowitz
joined Lehman Brothers Inc. in 1978 when Kuhn Loeb & Co. was
acquired by Lehman Brothers. Mr. Washkowitz is a director of
Peabody Energy Corporation.
CLASS III -DIRECTOR WHOSE TERM EXPIRES IN 2003
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------------- -------- -----------------------------------------------------------------
Arthur L. Simon.......... 70 Director since April 2000. Member of the audit committee.
Mr. Simon is an independent consultant. Before his
retirement, Mr. Simon was a partner at Coopers & Lybrand
L.L.P., Certified Public Accountants, from 1968 to 1994. He
is a director of Loral Space & Communications, Inc.
CLASS III - ELECTED BY THE BOARD OF DIRECTORS TO FILL VACANCY
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------------- --------- -----------------------------------------------------------------
Robert B. Millard........ 51 Director since April 1997. Chairman of the compensation
committee. Mr. Millard is a Managing Director of Lehman
Brothers Inc., head of Lehman Brothers' Principal Trading &
Investments Group and principal of the Merchant Banking
Group. Mr. Millard joined Kuhn Loeb & Co. in 1976 and became
a Managing Director of Lehman Brothers Inc. in 1983. Mr.
Millard is a director of GulfMark International, Kirch Media
GmbH and Weatherford International, Inc.
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
Our board of directors directs the management of our business and
affairs, as provided by Delaware law, and conducts its business through meetings
of the board of directors and two standing committees: the audit and
5
compensation committees. In addition, from time to time, special committees may
be established under the direction of the board of directors when necessary to
address specific issues. We have no nominating committee; however, the audit
committee has agreed to perform the functions of the nominating committee. Each
executive officer serves at the discretion of the board of directors. During the
fiscal year ended December 31, 2001, the board of directors held four regularly
scheduled meetings and one special meeting. All of our directors attended at
least 75% of the combined number of board of directors meetings and committee
meetings during the past fiscal year.
The audit committee currently consists of Messrs. Corcoran,
Shalikashvili (Chairman) and Simon. This committee, which met five times during
2001, is responsible generally for recommending to the board of directors the
independent accountants to be nominated to audit our financial statements;
approving the compensation of the independent accountants; meeting with our
independent accountants to review the proposed scope of the annual audit of our
financial statements; reviewing the findings of the independent accountants with
respect to the annual audit; and reviewing with management and the independent
accountants our periodic financial reports prior to our filing them with the
SEC and reporting annually to the board of directors with respect thereto. In
addition, the audit committee, acting as the nominating committee, nominated the
Class I members for reelection to the board of directors.
The compensation committee consists of Messrs. Millard (Chairman),
Montague and Washkowitz. This committee, which met one time and acted by written
consent three times during 2001, is responsible for administering our 1997 Stock
Option Plan for Key Employees (the "1997 Plan") and our 1999 Long Term
Performances Plan (the "1999 Plan") and has limited authority to adopt
amendments to those plans. This committee is also responsible for recommending
to the board of directors the salaries to be paid to our Chief Executive Officer
and the President, and reviewing and approving the Chief Executive Officer's and
the President's other annual cash compensation and long-term incentives and the
total compensation to be paid to certain of our other executive officers.
COMPENSATION OF DIRECTORS
The directors who are also our employees or employees of our
subsidiaries or affiliates do not receive compensation for their services as
directors. The non-affiliated directors receive annual compensation of $30,000
for service on the board of directors, of which $25,000 is paid in cash, and
$5,000 is paid in shares of our common stock. In addition, non-affiliated
directors receive an annual stock option grant of 1,500 shares of our common
stock, which will vest in three equal annual installments. The non-affiliated
directors are entitled to reimbursement for their reasonable out-of-pocket
expenses in connection with their travel to and attendance at meetings of the
board of directors or committees thereof. In addition, the non-affiliated
directors will be compensated $1,000 per meeting attended, including committee
meetings, up to a maximum of $2,000 per day.
Non-affiliated directors may defer up to 100 percent of the cash
portion of their annual cash compensation (including meeting fees) otherwise
payable to the director. Subject to certain limitations, a participating
director's deferred compensation will be distributed in a lump sum on, or
distribution in annual installments commencing on, the 30th day following the
date he or she ceases to be a director. Deferral elections are irrevocable
during any calendar year and must be made before the beginning the calendar year
in which his/her compensation is earned. Interest is accrued on deferred
amounts. Depending on a director's investment election, deferred amounts earn
interest at a rate based on the 90-day U.S. Government Treasury Bill or the
performance of our common stock.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of our current
executive officers, other than Messrs. Lanza and LaPenta who are presented under
"Nominees For Election to the Board of Directors in 2002-- Class I -- Nominees
for Terms Expiring in 2005".
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
---------------------------- ------- ------------------------------------------------------------------------
Christopher C. Cambria...... 43 Senior Vice President--Secretary and General Counsel. Mr. Cambria
became a Senior Vice President in March 2001. He joined us in June 1997
6
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
---------------------------- ------- ------------------------------------------------------------------------
as Vice President--General Counsel and Secretary. From 1994
until joining us, Mr. Cambria was an associate with Fried,
Frank, Harris, Shriver & Jacobson. From 1986 until 1993, he
was an associate with Cravath, Swaine & Moore.
Michael T. Strianese......... 46 Senior Vice President--Finance. Mr. Strianese became a
Senior Vice President in March 2001. He joined us in April
1997 as Vice President--Finance and Controller and was our
Controller until July 2000. From April 1996, when Loral was
acquired by Lockheed Martin, until April 1997, Mr. Strianese
was Vice President and Controller of Lockheed Martin's C(3)I
and Systems Integration Sector. From 1991 to the April 1996
acquisition of Loral, he was Director of Special Projects at
Loral. Mr. Strianese is a Certified Public Accountant.
Jimmie V. Adams.............. 65 Vice President--Washington, D.C. Operations. General Jimmie
V. Adams (U.S.A.F.-ret.) joined us in May 1997. From April
1996 until April 1997, he was Vice President of Lockheed
Martin's Washington Operations for the C(3)I and Systems
Integration Sector. Prior to the April 1996 acquisition of
Loral, he had held the same position at Loral since 1993.
Before joining Loral in 1993, he was Commander in Chief,
Pacific Air Forces, Hickam Air Force Base, Hawaii, capping a
35-year career with the U.S. Air Force. He was also Deputy
Chief of Staff for plans and operation for U.S. Air Force
headquarters and Vice Commander of Headquarters Tactical Air
Command and Vice Commander in Chief of the U.S. Air Forces
Atlantic at Langley Air Force Base. He is a command pilot
with more than 141 combat missions.
David T. Butler III........... 45 Vice President--Planning. Mr. Butler became a Vice President
in December 2000. He joined us in 1997 as our corporate
Director of Planning and Strategic Development. Prior to
joining us, he was the Controller for Lockheed Martin
Fairchild Systems from 1996 to 1997. Prior to the
acquisition of Loral, Mr. Butler was Controller of Loral
Fairchild Systems from 1992 to 1996. From 1981 to 1992 Mr.
Butler held a number of financial positions with Loral
Electronic Systems.
Ralph G. D'Ambrosio............ 34 Vice President and Controller. Mr. D'Ambrosio became Vice
President in 2001 and Controller in August 2000. He joined
us in August 1997, and until July 2000 was our Assistant
Controller. Prior to joining us, he was a senior manager
at Coopers & Lybrand L.L.P., where he held a number of
positions since 1989. Mr. D'Ambrosio is a Certified Public
Accountant.
Joseph S. Paresi.............. 46 Vice President--Product Development and President of the
Security Systems Division. Mr. Paresi joined us in April
1997. From April 1996 until April 1997, Mr. Paresi was
Corporate Director of Technology for Lockheed Martin's C(3)I
and System Integration Sector. Prior to the April 1996
acquisition of Loral, Mr. Paresi was Corporate Director of
Technology for Loral, a position he held since 1993. From
1978 to 1993, Mr. Paresi was a Systems Engineer, Director of
Marketing and Director of International Programs at Loral
Electronic Systems.
Robert RisCassi............... 66 Vice President--Washington, D.C. Operations. General Robert
W. RisCassi (U.S. Army-ret.) joined us in April 1997. From
April 1996 until April 1997, he was Vice President of Land
Systems for Lockheed Martin's C(3) I and Systems Integration
Sector. Prior to the April 1996 acquisition of Loral, he had
held the same position for Loral since 1993. He joined Loral
in 1993 after retiring as U.S. Army Commander in Chief,
United Nations Command/Korea. His 35-year military career
included posts as Army Vice Chief of Staff; Director, Joint
Staff, Joint Chiefs of Staff; Deputy Chief of Staff for
Operations and Plans; and Commander of the Combined Arms
7
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
---------------------------- ------- ---------------------------------------------------------------
Center. General RisCassi is currently a director of Alliant
Techsystems Inc.
Charles J. Schafer............. 54 Vice President--Business Operations and President of the
Products Group. Mr. Schafer was appointed President of the
Products Group in September 1999. He joined us in August
1998 as Vice President--Business Operations. Prior to August
1998, he was President of Lockheed Martin's Tactical Defense
Systems Division, a position he also held at Loral since
September 1994. Prior to the April 1996 acquisition of
Loral, Mr. Schafer held various executive positions with
Loral, which he joined in 1984.
Stephen M. Souza............... 49 Vice President and Treasurer. Mr. Souza joined us in August
2001. Prior to joining us he was the Treasurer of ASARCO
Inc. from 1999 to August 2001 and assistant treasurer from
1992 to 1999.
Jill H. Wittels................ 52 Vice President--Business Development. Ms. Wittels joined us
in March 2001. From July 1998 to February 2001 she was
president and general manager of BAE Systems' Information
and Electronic Warfare Systems/Infrared and Imaging Systems
division and its predecessor company. From January 1997 to
July 1998, Ms. Wittels was Vice President - Business
Development and Operations for IR Focalplane Products at
Lockheed Martin. Ms. Wittels is on the Board of Overseers
for the Department of Energy's Fermi National Accelerator Lab.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 15, 2002, there were 39,608,831 shares of our common stock
outstanding. We know of no person who, as of March 15, 2002, beneficially owned
more than five percent of the common stock, except as set forth below.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS(1)
-------------------------------------- ----------------- -----------
Citigroup Inc.(2)
153 East 53rd Street
New York, New York 10043.............. 5,426,024 13.7%
Frank C. Lanza(3)
c/o L-3 Communications Holdings, Inc.
600 Third Avenue, 34th Floor
New York, New York 10016.............. 2,389,957 5.9%
Robert V. LaPenta(4)
c/o L-3 Communications Holdings, Inc.
600 Third Avenue, 34th Floor
New York, New York 10016.............. 2,567,593 6.4%
------------------
(1) Under Rule 13d-3, certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or
the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually outstanding at
March 15, 2002.
8
(2) Based on a Schedule 13G/A filed with the S.E.C., dated January 24, 2002, in
which Citigroup Inc. reported that it had shared voting and dispositive
power over 5,426,024 shares of common stock.
(3) The shares of common stock beneficially owned includes 914,286 shares
issuable under employee stock options and exercisable within 60 days of
March 15, 2002.
(4) The shares of common stock beneficially owned includes 814,286 shares
issuable under employee stock options and exercisable within 60 days of
March 15, 2002 and 336 shares allocated to the account of Mr. LaPenta under
our savings plans.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the amount of common stock beneficially owned
(unless otherwise indicated) by our executive officers, our directors, and by
all of our current executive officers and directors as a group. Except as
otherwise indicated, all information listed below is as of March 15, 2002.
SHARES OF PERCENTAGE OF
COMMON SHARES OF
STOCK COMMON
BENEFICIALLY STOCK
NAME OF BENEFICIAL OWNER OWNED(1)(2) OUTSTANDING(3)
------------------------------------------------------------------ ------------- -----------------
Directors and Executive Officers
Frank C. Lanza................................................. 2,389,957 5.9%
Robert V. LaPenta.............................................. 2,567,593 6.4%
Michael T. Strianese........................................... 42,147 --
Christopher C. Cambria......................................... 24,552 --
Charles J. Schafer............................................. 13,807 --
Thomas A. Corcoran(5).......................................... 2,500 --
Robert B. Millard(4)(6)........................................ 69,089 --
John E. Montague(5)............................................ 2,500 --
John M. Shalikashvili(5)....................................... 2,788 --
Arthur L. Simon(5)............................................. 4,076 --
Alan M. Washkowitz(4)(7)....................................... 134,861 --
Directors and Executive Officers as a Group (18 persons)(8)........ 5,318,552 12.8%
----------------
(1) The shares of our common stock beneficially owned include the number of
shares (i) issuable under employee stock options and exercisable within 60
days of March 15, 2002 and (ii) allocated to the accounts of executive
officers under our savings plans. Of the number of shares shown above, (i)
the following represent shares that may be acquired upon exercise of
employee stock options for the accounts of: Mr. Lanza, 914,286 shares; Mr.
LaPenta, 814,286 shares; Mr. Strianese, 41,833 shares, Mr. Cambria, 24,233
shares and Mr. Schafer, 13,500 shares; and (ii) the following represent
shares allocated under our saving plans to the accounts of: Mr. LaPenta,
336 shares; Mr. Strianese, 314 shares; Mr. Cambria, 319 shares; and Mr.
Schafer, 307 shares.
(2) The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or
shared investment or voting authority.
(3) Share ownership does not exceed one percent of the class unless otherwise
indicated. Under Rule 13d-3, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share
the power to vote or the power to dispose of the shares). In addition,
shares are deemed to be beneficially owned by a person if the person has
the right to acquire the shares (for example, upon exercise of an option)
within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned by
such person (and only such person) by reason of these acquisition rights.
As a result, the percentage of outstanding shares of any person as shown in
this table does not necessarily reflect the person's actual ownership or
voting power with respect to the number of shares of common stock actually
outstanding at March 15, 2002.
(4) Robert B. Millard and Alan H. Washkowitz, each of whom is a member of our
board of directors, are each a Managing Director of Lehman Brothers Inc. As
limited partners of Lehman Brothers Capital Partners III, L.P., Messrs.
Millard and Washkowitz may be deemed to share beneficial ownership of
shares of our common stock held by Lehman Brothers Capital Partners III,
L.P. Such individuals disclaim any such beneficial ownership.
9
(5) Includes 2,500 shares issuable and exercisable under director stock options
within 60 days of March 15, 2002 in the case of Messrs. Corcoran, Montague,
and Shalikashvili and 1,000 shares in the case of Mr. Simon.
(6) Includes 52,639 shares owned by a charitable foundation of which Mr.
Millard and his wife are the sole trustees, and as to which Mr. Millard
disclaims beneficial ownership.
(7) Includes 55,665 shares in trust, for the benefit of Mr. Washkowitz's
children, for which Mr. Washkowitz and his wife are co-trustees and as to
which Mr. Washkowitz disclaims beneficial ownership.
(8) Includes 1,873,954 shares issuable under employee stock options and
exercisable under employee stock options within 60 days of March 15, 2002,
and 5,794 shares allocated to the accounts of executive officers under our
savings plans.
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table provides summary information concerning
compensation paid or accrued by us to or on behalf of our Chief Executive
Officer and each of our four other most highly compensated executive officers
who served in such capacities as of December 31, 2001, collectively referred to
herein as the named executive officers, for services rendered to us during each
of the last three years.
LONG TERM
COMPENSATION
AWARDS
-----------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
------------------------ STOCK COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
---------------------------------------- ---- ------------- ----------- ----------------- ----------------------
2001 $ 750,000 $ 750,000 -- $ 11,125
Frank C. Lanza 2000 750,000 500,000 -- 6,858
(Chairman and Chief Executive Officer).. 1999 750,000 200,000 -- 9,536
Robert V. LaPenta 2001 545,577 650,000 -- 34,306
(President and Chief Financial 2000 500,000 400,000 -- 32,907
Officer)............................. 1999 500,000 200,000 -- 27,900
2001 255,000 300,000 27,000 13,790
Michael T. Strianese 2000 209,673 225,000 -- 73,515
(Senior Vice President, Finance)........ 1999 180,000 175,000 47,500 69,969
Christopher C. Cambria 2001 235,000 300,000 27,000 10,838
(Senior Vice President, Secretary and 2000 228,025 225,000 -- 10,827
General Counsel)...................... 1999 207,000 190,000 47,500 7,317
Charles J. Schafer 2001 248,230 250,000 18,000 118,438
(Vice President, Business Operations 2000 230,000 175,000 -- 118,368
and President of the Products Group).. 1999 212,608 85,000 22,500 215,873
-------------
(1) Amounts for the year ended December 31, 2001 include: (a) our matching
contributions of $6,800 under our savings plan for Messrs. LaPenta,
Strianese, Cambria and Schafer; (b) the value of supplemental life
insurance programs in the amounts of $11,125 for Mr. Lanza, $27,506 for Mr.
LaPenta, $6,990 for Mr. Strianese, $4,038 for Mr. Cambria and $8,638 for
Mr. Schafer; and (c) an employment signing bonus of $103,000 for Mr.
Schafer.
10
OPTION GRANTS IN FISCAL YEAR 2001
The following table shows the options to purchase common stock granted
in fiscal year 2001 to the named executive officers.
% TOTAL GRANT
OPTIONS OPTIONS SHARE EXPIRATION DATE
NAME GRANTED(#) GRANTED PRICE ($) DATE VALUE ($)
------------------------ ------------ ------------- -------------- --------------- ----------------
Frank C. Lanza.......... -- 0.00% -- --
Robert V. LaPenta....... -- 0.00% -- --
Michael T. Strianese.... 27,000 2.44% $79.39 11/15/11 $ 877,410
Christopher C. Cambria.. 27,000 2.44% 79.39 11/15/11 877,410
Charles J. Schafer...... 18,000 1.63% 79.39 11/15/11 584,940
------- ---------
72,000 $2,339,760
======= ==========
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information on options to purchase our
common stock that were exercised during fiscal year 2001 by our named executive
officers; the total numbers of exercisable and non-exercisable options to
purchase our common stock owned by our named executive officers at December 31,
2001, and the aggregate dollar value of such options that were in-the-money at
December 31, 2001.
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS OPTIONS AT
ACQUIRED VALUE AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ON REALIZED --------------------------------- ---------------------------------
NAME AND PRINCIPAL POSITION EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
---------------------------- -------------- ------------ ------------- ------------------ ------------- -----------------
Frank C. Lanza
(Chairman and Chief
Executive Officer)........ -- -- 800,000 114,286 $66,824,000 $9,546,310
Robert V. LaPenta
(President and Chief
Financial Officer)........ -- -- 700,000 114,286 58,471,000 9,546,310
Michael T. Strianese
(Senior Vice
President, Finance)....... 17,000 $1,192,295 37,666 42,834 2,045,467 1,105,255
Christopher C. Cambria
(Senior Vice
President,
Secretary and
General Counsel).......... 25,000 1,552,136 20,066 42,834 1,028,467 1,105,255
Charles J. Schafer
(Vice President,
Business Operations
and President of
the Products Group)....... 17,500 124,750 13,500 25,500 801,750 584,730
---------------
(1) In accordance with SEC rules, the values of the in-the-money options
were calculated by subtracting the exercise prices of the options from
the December 31, 2001 closing stock price of our common stock of
$90.00.
(2) These options are unexercisable because they have not yet vested under
their terms.
REPORT OF THE AUDIT COMMITTEE
The directors who serve on the audit committee are all "independent" in
accordance with the New York Stock Exchange listing standards.
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2001.
11
We have discussed with the independent auditors, PricewaterhouseCoopers
LLP, the matters required to be discussed by Statement on Auditing Standards No.
61, Communication with Audit Committees, as amended, by the Auditing Standards
Board of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter
from PricewaterhouseCoopers LLP, required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the Independence
Standards Board, and have discussed with the auditors their independence.
Based on the activities referred to above, we recommended to the board
of directors that the financial statements referred to above be included in our
Annual Report on Form 10-K for the year ended December 31, 2001.
INDEPENDENT AUDITOR FEES
For services rendered in 2001 by PricewaterhouseCoopers LLP, our
independent auditors, we incurred the following fees:
o Audit Fees (for the audit of the 2001 financial statements and
quarterly reviews) -- $1,087,000
o Financial Information Systems Design and Implementation Fees --$0
o All Other Fees ($1,510,036 for tax services and $1,155,343 for other
audit services, including acquisition audits, review of SEC
registrations, benefit plan and other statutory audits, and $200,000
applicable to the audit of our 2000 financial statements) --
$2,665,379
As set forth in the Audit Committee Charter, the audit committee has
considered and determined that the provision of the services covered under the
caption All Other Fees is compatible with maintaining the auditor's
independence.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee is responsible for reviewing the design of,
and pay levels generated by, our compensation and benefit programs for our
executive officers. The committee is also responsible for administering our
stock option program.
The committee is committed to ensuring an executive compensation
program that supports our mission -- to maximize stockholder value. Thus, the
executive compensation is structured around the following tenets:
o Total compensation programs should strengthen the relationship between
pay and performance by emphasizing variable, at-risk compensation that
is dependent on our achievement and individual performance goals.
o Management should be focused on the long-term interests of
stockholders. Thus, a significant portion of the compensation
opportunity should be long-term, at-risk pay in the form of stock
options.
o We must maintain our ability to attract, retain, and encourage the
development of qualified, capable executives. Total compensation
opportunities will mirror those offered by comparably sized
organizations within the aerospace and defense industries -- for those
positions where the labor market is not limited to these industries,
we will reference broader general industry information for similarly
sized organizations.
The comparative group used for compensation purposes will generally be
broader than the group that comprises the published industry index in the
performance graph included in this proxy statement. The compensation committee
believes that our competition for executive talent is not limited to the
companies included in the published industry index established for comparing
stockholder returns.
12
The key elements of our executive compensation program are base salary,
annual incentives, and long-term compensation. These key elements are addressed
separately below.
BASE SALARIES
The compensation committee will regularly review the base salary for
the Chief Executive Officer and the President. We have established internal
relationships of other senior executive positions to those of the Chief
Executive Officer and the President, and base salaries for these other positions
flow from those relationships. Base salaries will be targeted at the median of
market levels with adjustments above or below market to recognize varying levels
of responsibility, prior experience, breadth of knowledge, as well as external
pay practices.
Increases to base salaries will be driven primarily by individual
performance. Individual performance will be evaluated based on sustained levels
of individual contribution.
As reflected in the Summary Compensation Table, Mr. Lanza's base salary
was $750,000 in 2001, 2000 and 1999 as provided for in his employment agreement.
In determining future increases to Mr. Lanza's base salary, the compensation
committee will consider his individual performance as measured by short-term
achievements as well as his contributions to long-term organizational success.
The compensation committee will also compare Mr. Lanza's base salary to base
salaries of chief executive officers among comparable companies.
ANNUAL INCENTIVES
The annual incentive plan is structured to provide a variable pay
opportunity based on performance. Actual bonuses are based on an assessment of
the participant's contributions toward organizational success.
Mr. Lanza received a bonus of $750,000 in 2001.
On April 30, 1997 at the time Messrs. Lanza and LaPenta entered into
their respective employment agreements they were each granted a stock option on
1,142,857 shares of common stock, 50% of which vested over time and 50% of which
the vesting date was determined based on our achievement of certain annual or
cumulative performance targets. On April 5, 1999, in recognition of their
superior performance, the compensation committee amended the option grants to
Messrs. Lanza and LaPenta to eliminate the performance targets and to provide
that the unvested portion of the performance options vest and become exercisable
as of April 30, 2000. In determining to amend the option grants, the
compensation committee also took into account the fact that the existing
performance targets were no longer applicable as a result of the acquisitions
completed by us in 1998 and of our ongoing acquisition activities. See
"Employment Agreements."
LONG-TERM INCENTIVES
Long-term incentives are provided pursuant to the 1997 Plan and the
1999 Plan.
Stock options will be granted at a price not less than the fair market
value of our common stock on the date of grant. The ultimate value of an option
grant to the recipient depends on the stockholder value created between the date
of grant and the date of exercise. Option award size is based primarily on
competitive practice but may also be adjusted to reflect factors such as
individual and our company's performance.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the
corporate deduction for compensation paid to the named executive officers to $1
million, unless certain requirements are met. The compensation committee will
consider the impact of this provision when making compensation decisions.
However, the compensation committee will weigh all pertinent factors to
determine appropriate plan design and incentive awards.
Members of the compensation committee are Robert B. Millard (Chairman),
John E. Montague and Alan H. Washkowitz.
13
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return of our common
stock with the cumulative total return of the Standard & Poor's 500 Composite
Stock Index and a peer group index, for the period from May 19, 1998 to December
31, 2001. These figures assume that all dividends paid over the performance
period were reinvested, and that the starting value of each index and the
investment in our common stock was $100 on May 19, 1998. The starting point for
the measurement of our common stock cumulative total return was our initial
public offering price of $22.00 per share. The peer group index is composed of
Alliant Techsystems Inc., General Dynamics Corporation and Northrop Grumman
Corporation. The graph is not, and is not intended to be, indicative of future
performance of our common stock.
14
L-3 COMMUNICATIONS HOLDINGS, INC.
CUMULATIVE TOTAL STOCKHOLDER RETURNS FOR
PERIOD OF MAY 19, 1998 TO DECEMBER 31, 2001
TOTAL SHAREHOLDER RETURNS
[GRAPHIC OMITTED]
QUARTER ENDING
BASE --------------------------------------------------------------------
PERIOD DECEMBER DECEMBER DECEMBER DECEMBER
COMPANY / INDEX MAY 1998 1998 1999 2000 2001
---------------------------------------------------------------------------------------------------------------------------------
L-3 COMMUNICATIONS HOLDINGS INC.............. 100 211.65 189.20 350.00 409.09
S&P 500 INDEX................................ 100 111.75 135.27 122.95 108.34
PEER GROUP................................... 100 97.21 82.41 125.77 140.57
---------------------------------------------------------------------------------------------------------------------------------
(as prepared by Standard & Poor's Compustat)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 2001 fiscal year, Messrs. Robert Millard, John Montague and
Alan Washkowitz served as members of the compensation committee of the board of
directors. None of these individuals has served us or any of our subsidiaries as
an officer or employee. Messrs. Millard and Washkowitz are limited partners of
Lehman Brothers Capital Partners III, L.P., which, together with Lehman Brothers
Holdings, Inc. and certain of their affiliates, owned 15.9 % of our outstanding
common stock as of March 12, 2001 and, as of March 15, 2002 owned less than
five percent of our outstanding common stock.
Pursuant to a Stockholders Agreement entered into in connection with
our incorporation, Lehman Brothers Capital Partners III, L.P. and its affiliates
that directly own our common stock (the "Lehman Partnership"), have the right
from time to time subject to certain conditions, to require us to register under
the Securities Act shares of our common stock that the Lehman Partnership holds.
The Lehman Partnership has the right to request up to four demand registrations
and also has piggyback registration rights. We have agreed in the Stockholders
Agreement to pay expenses in connection with, among other things, (i) up to
three demand registrations requested by the Lehman Partnership and (ii) any
registration in which the existing stockholders participate through piggyback
registration rights granted under such agreement.
None of our executive officers serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of our board of directors or compensation
committee.
15
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement (the "Employment
Agreements") effective on April 30, 1997 with each of Mr. Lanza, our Chairman
and Chief Executive Officer, who will receive a base salary of $750,000 per
annum and appropriate executive level benefits, and Mr. LaPenta, our President
and Chief Financial Officer, who will receive a base salary of $500,000 per
annum and appropriate executive level benefits. The Employment Agreements
provide for an initial term of five years, which will automatically renew for
one-year periods thereafter, unless a party thereto gives notice of its intent
to terminate at least 90 days prior to the expiration of the term. We are
currently negotiating the terms of a renewal of these contracts.
Upon a termination without cause or resignation for good reason, we
will be obligated, through the end of the term, to (i) continue to pay the base
salary and (ii) continue to provide life insurance and medical and
hospitalization benefits comparable to those provided to other senior
executives; provided, however, that any such coverage shall terminate to the
extent that Mr. Lanza or Mr. LaPenta, as the case may be, is offered or obtains
comparable benefits coverage from any other employer. The Employment Agreements
provide for confidentiality during employment and at all times thereafter. There
is also a noncompetition and non-solicitation covenant which is effective during
the employment term and for one year thereafter; provided, however, that if the
employment terminates following the expiration of the initial term, the
noncompetition covenant will only be effective during the period, if any, that
we pay the severance described above.
We have granted each of Messrs. Lanza and LaPenta nonqualified options
to purchase, at $6.47 per share, 1,142,857 shares of our common stock. In each
case, half of the options were structured as "time options" and half were
structured initially as "performance options," collectively referred to herein
as the options. The time options became exercisable with respect to 20% of the
shares subject to the time options on each of March 2, 1998, April 30, 1999 and
April 30, 2000 and will become exercisable with respect to an additional 20% of
the shares subject to the time options on each of April 30, 2001 and 2002 if
employment continues through and including these dates. The performance options
were initially structured to become exercisable nine years after the grant date,
but became exercisable earlier if certain targets for our earnings before
interest, income taxes, depreciation and amortization were achieved. On April 5,
1999, we amended the performance options to eliminate the performance target
acceleration provisions and to provide that the unvested portion of the
performance options vest and become exercisable as of April 30, 2000. The option
term is ten years through April 30, 2007; except that if (i) the option-holder
is fired for cause or resigns without good reason, the options will expire upon
termination of employment or (ii) the option-holder is fired without cause,
resigns for good reason, dies, becomes disabled or retires, the options will
expire one year after termination of employment. Unexercisable options will
terminate upon termination of employment, unless acceleration is expressly
provided for. Upon a change of control, we may terminate the options, so long as
the option-holders are cashed out or permitted to exercise their options prior
to this change of control.
We also have entered into a split-dollar life insurance agreement with
Mr. LaPenta. Under the split-dollar agreement, we own and pay the premiums on
the life insurance policy, and Mr. LaPenta has the right to designate a
beneficiary to receive a fixed portion of the policy death benefit. The balance
of the death benefit will be payable to us as a recovery of our investment.
PENSION PLAN TABLE
The following table shows the estimated annual pension benefits payable
under the L-3 Communications Corporation Pension Plan and Supplemental Executive
Retirement Plan to a covered participant upon retirement at normal retirement
age (65), based on the career average compensation (salary and bonus) and years
of credited service with us.
AVERAGE YEARS OF CREDITED SERVICE
COMPENSATION --------------------------------------------------------------------------------------------
AT RETIREMENT 5 10 15 20 25 30 35
--------------------- ------------ ------- -------- ------- ------- ------- -------
$ 300,000..... $19,000 $34,244 $46,461 $60,403 $71,670 $80,793 $88,154
400,000..... 25,652 46,235 62,735 81,492 96,621 108,844 118,693
500,000..... 32,305 58,225 79,009 102,577 121,568 136,890 149,226
16
600,000..... 38,954 70,212 95,278 123,664 146,519 164,944 179,765
700,000..... 45,607 82,203 111,553 144,749 171,467 192,988 210,297
800,000..... 52,259 94,193 127,827 165,838 196,418 221,038 240,837
900,000..... 58,911 106,182 144,099 186,923 221,365 249,086 271,370
1,000,000..... 65,564 118,174 160,374 208,011 246,313 277,135 301,907
1,100,000..... 72,214 130,162 176,646 229,097 271,263 305,183 332,442
1,200,000..... 78,867 142,153 192,920 250,184 296,212 333,232 362,979
1,300,000..... 85,519 154,143 209,194 271,270 321,161 361,280 393,513
1,400,000..... 92,171 166,132 225,466 292,357 346,112 389,331 424,053
1,500,000..... 98,823 178,123 241,741 313,445 371,062 417,380 454,587
As of December 31, 2001, the current annual compensation and current
years of credited service (including for Messrs. LaPenta and Strianese, years of
credited service as an employee of Loral and Lockheed Martin) for each of the
following persons were: Mr. Lanza, $1,250,000 and five years; Mr. LaPenta,
$945,577 and 30 years; Mr. Strianese, $480,000 and 12 years; Mr. Cambria,
$460,000 and five years; and Mr. Schafer, $423,320 and three years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 15, 2002 the Lehman Partnership owned 4.4% of our common
stock; and prior to their sale of our common stock pursuant to Rule 144A on
September 17, 2001, the Lehman Partnership beneficially owned more than five
percent of our common stock.
STOCKHOLDERS AGREEMENT
In connection with our incorporation we, Lehman Brothers Capital
Partners III, L.P. and certain of its affiliates, Messrs. Lanza and LaPenta and
Lockheed Martin entered into the Stockholders Agreement, which terminated upon
the completion of our initial public offering and upon the sale of our common
stock to less than 10% of our outstanding common stock, except for the terms
relating to:
o registration rights; and
o the standstill agreement by Lockheed Martin.
Pursuant to the Stockholders Agreement, at this time Messrs. Lanza and
LaPenta and the Lehman Partnership have the right, subject to certain
conditions, to require L-3 Communications Holdings to register their shares of
our common stock under the Securities Act of 1933. The Lehman Partnership has
four demand rights and each of Messrs. Lanza and LaPenta has one demand
registration right. Lockheed Martin sold all of its shares of our common stock
in 1999. In addition, the Stockholders Agreement also provides some existing
stockholders with piggyback registration rights. The Stockholders Agreement
provides, among other things, that we will pay expenses incurred in connection
with:
o up to three demand registrations requested by the Lehman
Partnership and the two demand registrations requested by each of
Messrs. Lanza and LaPenta; and
o any registration in which those parties participate through
piggyback registration rights granted under the agreement.
The Lehman Partnership sold 2.0 million of their shares of our common
stock through the exercise of their piggyback registration rights in our
February 1999 common stock offering.
Under the Stockholders Agreement, Lockheed Martin is subject to a
standstill arrangement that expires on April 30, 2002, which generally prohibits
its share ownership percentage in us, if any, from exceeding 34.9%.
17
TRANSACTIONS WITH AFFILIATES
One provision of the Stockholders Agreement which expired after the Lehman
Partnership no longer owned 10% of our common stock, gave Lehman Brothers Inc.
the exclusive right to provide investment banking services to us, other than in
connection with cash acquisitions undertaken by us, through April 2002.
Over the past three years, Lehman Brothers Inc. has entered into various
transactions with us and our subsidiaries. As required by the Stockholders
Agreement, all fees paid in connection with such transactions and services were
mutually agreed upon and, in our opinion, based on similar transactions and
practices in the investment banking industry. We believe that all of these
transactions were entered into on terms and conditions at least as favorable to
us as they would have been had we entered into these transactions with other
investment banks.
CAPITAL MARKETS SERVICES
In May 1998, Lehman Brothers Inc. acted as one of several initial
purchasers and placement agents of $180.0 million of 8-1/2% Senior Subordinated
Notes due 2008 issued by our subsidiary, L-3 Communications. In May 1998, Lehman
Brothers Inc. acted as lead underwriter of our common stock we sold in our
initial public offering. Lehman Brothers Inc. also acted as one of several
initial purchasers and placement agents of $200.0 million of 8% Senior
Subordinated Notes due 2008 issued by L-3 Communications in December 1998. In
February 1999, Lehman Brothers Inc. acted as lead underwriter of the 5.0 million
shares we sold in a follow-on public offering. Additionally, as part of that
transaction, the Lehman Partnership sold 6.5 million shares of their shares of
our common stock in a secondary public offering. In November and December 2000,
Lehman Brothers Inc. was the sole initial purchaser of $300.0 million of our
5.25% Convertible Senior Subordinated Notes due 2009. In October 2001, Lehman
Brothers Inc. acted as one of several initial purchasers of $420.0 million of
our 4% Senior Subordinated Convertible Contingent Debt Securities due 2011. In
each of these financing transactions, Lehman Brothers Inc. received customary
fees, underwriting discounts and commissions.
In addition, Lehman Brothers Inc. has been engaged as joint book running
manager and/or joint book running initial purchaser of a contemplated offering
of debt securities to replace our bridge loan facility entered into in March
2002 in connection with the Raytheon Acquisition, as defined below.
MERGER AND ACQUISITIONS ADVISORY SERVICES
In January 1999, Lehman Brothers Inc. acted as our advisor in connection
with our acquisition of Microdyne Corporation. In April 1999, Lehman Brothers
Inc. acted as our advisor in connection with our acquisition of Aydin
Corporation. In 2002, Lehman Brothers Inc., acted as our advisor in connection
with the acquisition of all of the assets of Aircraft Integration Systems, a
division of Raytheon Company (the "Raytheon Acquisition"). For these services,
Lehman Brothers Inc. received customary fees.
SENIOR CREDIT FACILITIES
In May 1998, Lehman Brothers Inc. acted as joint lead arranger and joint
book manager and Lehman Commercial Paper Inc., an affiliate of Lehman Brothers
Inc., acted as documentation agent, syndicate agent and lender in connection
with two of L-3 Communications' senior credit facilities. In connection with
those transactions both Lehman Brothers Inc. and Lehman Commercial Paper Inc.
received customary fees and interest. In connection with L-3 Communications'
$300.0 million 364-day revolving senior credit facility entered into in April
2000, Lehman Brothers Inc. acted as joint lead arranger and joint book manager
and Lehman Commercial Paper Inc. acted as documentation agent, syndicate agent
and lender. L-3 Communications entered into its senior credit facilities after
arms-length negotiations and on the same terms with all of the other parties
thereunder. During the twelve-month period ended February 28, 2002 Lehman
Brothers Inc. and Lehman Commercial Paper Inc. received interest payments and
fees under these senior credit facilities totaling approximately $ million.
In connection with the Raytheon Acquisition, Lehman Brothers Inc. acted
as joint book running manager and joint lead arranger and Lehman Commercial
Paper Inc. acted as administrative agent with respect to our bridge loan
facility entered into in March 2002. In connection with those transactions both
Lehman Brothers Inc. and Lehman Commercial Paper Inc. received customary fees
and interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers and directors, and persons who own more than 10% of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the SEC and the NYSE. Officers, directors and greater than 10% shareholders
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file. All Section 16(a) forms required to be filed were filed on a
timely basis.
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PROPOSAL 2. INCREASING THE AUTHORIZED COMMON AND PREFERRED STOCK
On February 5, 2002, subject to stockholder approval, the Board of
Directors authorized an amendment to our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
one hundred million (100,000,000) shares to three hundred million (300,000,000)
shares and the number of authorized shares of our preferred stock ("Preferred
Stock"), from twenty-five million (25,000,000) to fifty million (50,000,000)
shares. If approved by the stockholders, the first paragraph of Section 4 of our
Amended and Restated Certificate of Incorporation would be amended to provide as
follows:
"Fourth: The total number of shares of all classes of
stock which the Corporation shall have the authority to issue
is 350,000,000 shares, consisting of 300,000,000 shares of
Common Stock, par value $.01 per share (the "Common Stock")
and 50,000,000 share of preferred stock, par value $0.01 per
share (the "Preferred Stock"). Set forth below with respect to
each class of stock of the Corporation is a statement of the
voting powers and the designations, preferences, rights,
qualifications, limitations and restrictions thereof:"
We are currently authorized to issue 100,000,000 shares of Common
Stock. As of the Record Date, 39,608,831 shares of Common Stock were issued and
outstanding, and 15,392,774 shares of Common stock were reserved for the (1)
potential conversion of our convertible notes and convertible contingent debt
securities into shares of Common Stock, (2) issuance upon exercise of
outstanding stock options, (3) options that may be granted in the future under
our stock option plan, and (4) the issuance of Common Stock pursuant to our
employee stock purchase plan. Accordingly, there are only 44,998,395 shares of
Common Stock available for issuance. The Company is currently authorized to
issue 25,000,000 shares of Preferred Stock. As of the Record Date, no shares of
preferred stock were issued and outstanding.
The Board of Directors believes that it is advisable and in our best
interest and in the best interest of our stockholders to have available
authorized but unissued shares of Common Stock and Preferred Stock in an amount
adequate to provide for our future financing needs. The additional shares will
be available for issuance from time to time in the discretion of the Board of
Directors, normally without further stockholder action (except as may be
required for a particular transaction by applicable law, requirements of
regulatory agencies or by New York Stock Exchange rules), for any proper
corporate purpose including, among other things, stock splits, stock dividends,
future acquisitions of property or securities of other corporations, convertible
debt financing and equity financings. As previously announced, we intend to
finance part of the Raytheon Acquisition with the sale of our Common Stock,
which if such sale is successfully completed, will use a portion of our
authorized but unissued shares of Common Stock. As we are not contemplating
offerings of the Preferred Stock in the proximate future, the terms of such
securities have not been determined. The rights and preferences of Preferred
Stock, such as dividends or interest rates, conversion prices, voting rights,
liquidation preferences, redemption prices, maturity dates and similar matters,
will be determined by the Board of Directors, without further authorization of
the stockholders. No stockholder has any preemptive rights regarding future
issuance of any shares of Common Stock and Preferred Stock.
We have no present plans, understandings or agreements for the issuance
or use of the proposed additional shares of Common Stock and Preferred Stock.
Further, the Board of Directors believes that if an increase in the authorized
number of shares of Common Stock and Preferred Stock were to be postponed until
a specific need arose, the delay and expense incident to obtaining the approval
of the Company's stockholders at that time could significantly impair the
Company's ability to meet financing requirements or other objectives.
The issuance of additional shares of Common Stock and Preferred Stock
may have the effect of diluting the stock ownership of persons seeking to obtain
control of us. Although the Board of Directors has no present intention of doing
so, our authorized but unissued Common Stock and Preferred Stock could be issued
in one or more transactions that would make a takeover of the Company more
difficult or costly, and less likely. The proposed amendment to the Amended and
Restated Certificate of Incorporation is not being recommended in response to
any specific effort of which we are aware to obtain control of the Company, nor
is the Board of Directors currently proposing to stockholders any anti-takeover
measures.
19
A majority of the outstanding voting stock is required to amend our
Amended and Restated Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE AMOUNT OF OUR AUTHORIZED COMMON AND PREFERRED STOCK.
PROPOSAL 3. SELECTION OF INDEPENDENT AUDITORS
The board of directors has selected PricewaterhouseCoopers LLP to act
as our independent auditors for the 2002 fiscal year, and a proposal to ratify
this selection will be submitted to the Annual Meeting. PricewaterhouseCoopers
LLP has acted as our independent auditors since our formation in 1997 and
management believes it desirable and in our best interests to continue the
employment of that firm. Representatives of PricewaterhouseCoopers LLP will be
present at the Annual Meeting. Such representatives will have the opportunity to
make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
If the foregoing proposal is not approved by the holders of a majority
of the shares represented at the Annual Meeting and voting on the proposal, the
selection of independent auditors will be reconsidered by the board of
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information
contained in documents that we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this proxy
statement. Information in this proxy statement supersedes information
incorporated by reference that we filed with the SEC prior to the date of this
prospectus, while information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below:
o The Financial Statements and Other Information section of our
Annual Report to stockholders for the year ended December 31,
2001, to be mailed to stockholders with our annual proxy
statement.
You can request a copy of these filings at no cost, by writing or
calling us at the following address:
L-3 Communications Holdings, Inc.
600 Third Avenue
New York, New York 10016
(212) 697-1111
Attention: Corporate Secretary.
You should not assume that the information in this proxy statement is
accurate as of any date other than the date on the front of this document.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal to be presented for
consideration in our 2003 proxy statement must submit such proposal to us no
later than the close of business on December 26, 2002. Such proposals should be
sent by Certified Mail -- Return Receipt Requested to the attention of the
Secretary, L-3 Communications Holdings, Inc., 600 Third Avenue, New York, New
York 10016.
Under the current rules of the SEC, a stockholder submitting a proposal
is required to be a record or beneficial owner of at least 1% or $2,000 in
market value of the common stock and to have held such stock for at
20
least one year prior to the date of submission of the proposal, and he or she
must continue to own such securities through the date on which the meeting is
held.
GENERAL AND OTHER MATTERS
At the date of this proxy statement, we know of no business that will
be brought before the Annual Meeting other than the matters set forth above.
However, if any further business properly comes before the Annual Meeting or any
adjournments of the Annual Meeting, the persons named as proxies in the
accompanying proxy will vote them in accordance with their discretion and
judgment on such matters.
We have provided each Stockholder whose proxy is being solicited
hereby, a copy of our Annual Report for the year ended December 31, 2001,
including our consolidated financial statements. Written requests for additional
copies should be directed to: Corporate Communications, L-3 Communications
Holdings, Inc., 600 Third Avenue, New York, New York 10016.
Please complete, date and sign the proxy and return it promptly in the
enclosed reply envelope. No postage is required if returned in the accompanying
envelope and mailed in the United States.
By Order of the Board of Directors,
/s/ Christopher C. Cambria
Christopher C. Cambria
Senior Vice President, Secretary and General
Counsel
New York, New York
March , 2002
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PROXY
L-3 COMMUNICATIONS HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF L-3
COMMUNICATIONS HOLDINGS, INC. (THE "COMPANY") FOR THE ANNUAL MEETING OF
STOCKHOLDERS OF THE COMPANY TO BE HELD APRIL 23, 2002, AND SHOULD BE READ IN
CONJUNCTION WITH THE NOTICE OF MEETING AND PROXY STATEMENT PERTAINING THERETO.
The undersigned shareholder hereby appoints Frank C. Lanza, Robert V. LaPenta,
Christopher C. Cambria or Michael T. Strianese, or any one of them, attorneys
and agents, or proxy or proxies, with full power of substitution, in the name
and on behalf of the undersigned, to attend, vote and act at the Annual Meeting
of Stockholders to be held on April 23, 2002, at 2:30 p.m., eastern daylight
time, at the Rihga Royal Hotel, 151 West 54th Street, New York, NY, and at any
and all adjournments thereof, upon the matters set forth below and in accordance
with their discretion on any other matters that may properly come before the
meeting or adjournment thereof:
A STOCKHOLDER DESIRING TO APPOINT SOME OTHER PERSON, WHO NEED NOT BE A
STOCKHOLDER, TO REPRESENT HIM AT THE MEETING MAY DO SO by inserting such other
person's name in the space provided above.
This proxy, when properly executed, will be voted in accordance with the
directions of the undersigned stockholder. IN THE ABSENCE OF SUCH DIRECTIONS,
THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ON THE REVERSE HEREOF, FOR THE
APPROVAL OF THE AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION INCREASING THE AMOUNT OF AUTHORIZED CAPITAL STOCK AND FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS.
PLEASE COMPLETE, DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
NO POSTAGE IS REQUIRED IF RETURNED IN THE ENVELOPE AND MAILED IN THE UNITED
STATES.
-------------------------------------------------------------------------------
[ ] FOLD AND DETACH HERE [ ]
[X] Please mark your
choices like this in
blue or black ink.
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS A, B AND C
-------------------------------------------------------------------------------
(a) Election of FOR WITHHELD Class I Nominees:
Directors [ ] [ ] 01. Frank C. Lanza
02. Robert V. LaPenta
03. John M. Shalikashvili
FOR, except vote withheld from the following nominee(s):
(b) Approval of Increase FOR AGAINST ABSTAIN
in Authorized Capital [ ] [ ] [ ]
Stock
(c) Appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers [ ] [ ] [ ]
LLP as Auditors
I plan to attend the Annual Meeting of Stockholders
-------------------------------------------------------------------------------
NOTE: Please sign exactly as names appears hereon. When
signing as attorney, executor, administrator, trustee,
authorized officer of a corporation or in any representative
capacity, please insert your name and title as such. Joint
owners should each sign individually.
-----------------------------------------------------
------------------------------------------------------
SIGNATURE OF STOCKHOLDER(S) DATE
(If not dated, this proxy is deemed to bear the date when
mailed by the Company.)
[L-3 GRAPHIC]
--------------------------------------------------------------------------------
- - FOLD AND DETACH HERE - -
RETAIN ADMISSION TICKET
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
L-3 Communications Holdings, Inc. encourages you to take advantage of new and
convenient ways to vote your shares. You may use the telephone or Internet to
vote your shares electronically, 24 hours a day, 7 days a week. To access the
telephone or Internet voting system, you must use the control number printed in
the box above.
1. To vote over the telephone: Using a touch-tone telephone, call 1-877-PRX-VOTE
(1-877-779-8683).
2. To vote over the Internet: Log onto the Internet and go to the web site
http://www.eproxyvote.com/lll
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card. If you choose to vote your
shares electronically, there is no need for you to mail back your proxy card.
ADMISSION TICKET
Please indicate whether you plan to attend the 2002 Annual Meeting of
Stockholders by marking the appropriate box on the Proxy Card, or if you use the
telephone system, when prompted. Only the stockholder(s) whose name(s) appears
on this ticket, or the proxy of that stockholder, will be admitted. Due to space
limitations, admission to the meeting will be on a first-come, first-served
basis. Registration will begin at 2:30 p.m.
L-3 COMMUNICATIONS HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, APRIL 23rd, 2002, 2:30 P.M. EASTERN DAYLIGHT TIME
RIHGA ROYAL HOTEL
151 WEST 54TH STREET
NEW YORK, NY
22