L-3 COMMUNICATIONS HOLDINGS, INC.
1999 LONG TERM PERFORMANCE PLAN
TABLE OF CONTENTS
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SECTION 1. Purpose ....................................................... A-2
SECTION 2. Definitions; Rules of Construction ............................ A-2
SECTION 3. Eligibility ................................................... A-3
SECTION 4. Awards ........................................................ A-4
SECTION 5. Shares of Stock and Share Units Available Under Plan .......... A-6
SECTION 6. Award Agreements .............................................. A-7
SECTION 7. Adjustments; Change in Control; Acquisitions .................. A-8
SECTION 8. Administration ................................................ A-10
SECTION 9. Amendment and Termination of this Plan ........................ A-11
SECTION 10. Miscellaneous ................................................. A-11
L-3 COMMUNICATIONS HOLDINGS, INC.
1999 LONG TERM PERFORMANCE PLAN
SECTION 1. PURPOSE.
The purpose of this Plan is to benefit the Corporation's stockholders by
encouraging high levels of performance by individuals who contribute to the
success of the Corporation and its Subsidiaries and to enable the Corporation
and its Subsidiaries to attract, motivate, retain and reward talented and
experienced individuals. This purpose is to be accomplished by providing
eligible individuals with an opportunity to obtain or increase a proprietary
interest in the Corporation and/or by providing eligible individuals with
additional incentives to join or remain with the Corporation and its
SECTION 2. DEFINITIONS; RULES OF CONSTRUCTION.
(a) Defined Terms. The terms defined in this Section shall have the
following meanings for purposes of this Plan:
"Award" means an award granted pursuant to Section 4.
"Award Agreement" means an agreement described in Section 6 entered into
between the Corporation and a Participant, setting forth the terms and
conditions of an Award granted to a Participant.
"Beneficiary" means a person or persons (including a trust or trusts)
validly designated by a Participant or, in the absence of a valid
designation, entitled by will or the laws of descent and distribution, to
receive the benefits specified in the Award Agreement and under this Plan
in the event of a Participant's death.
"Board of Directors" or "Board" means the Board of Directors of the
"Cash Flow" means cash and cash equivalents derived from either (i) net
cash flow from operations or (ii) net cash flow from operations, financings
and investing activities, as determined by the Committee at the time an
Award is granted.
"Change in Control" means change in control as defined in Section 7(c).
"Code" means the Internal Revenue Code of 1986, as amended from time to
"Committee" means the Committee described in Section 8(a).
"Corporation" means L-3 Communications Holdings, Inc.
"Employee" means any person, including an officer (whether or not also a
director) in the regular full-time employment of the Corporation or any of
its Subsidiaries who, in the opinion of the Committee is, or is expected to
be, primarily responsible for the management, growth or protection of some
part or all of the business of the Corporation or any of its Subsidiaries,
but excludes, in the case of an Incentive Stock Option, an Employee of any
Subsidiary that is not a "subsidiary corporation" of the Corporation as
defined in Code Section 424(f).
"EPS" means earnings per common share on a fully diluted basis determined
by dividing (a) net earnings, less dividends on preferred stock of the
Corporation by (b) the weighted average number of common shares and common
share equivalents outstanding.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Executive Officer" means executive officer as defined in Rule 3b-7 under
the Exchange Act. If the Board has designated the executive officers of the
Corporation for purposes of reporting under the Exchange Act, the
designation shall be conclusive for purposes of this Plan.
"Fair Market Value" means the closing price of the relevant security as
reported on the composite tape of New York Stock Exchange issues (or if, at
the date of determination, the security
is not so listed or if the principal market on which it is traded is not
the New York Stock Exchange, such other reporting system as shall be
selected by the Committee) on the relevant date, or, if no sale of the
security is reported for that date, the next preceding day for which there
is a reported sale. The Committee shall determine the Fair Market Value of
any security that is not publicly traded, using criteria as it shall
determine, in its sole direction, to be appropriate for the valuation.
"Insider" means any person who is subject to Section 16(b) of the
"Option" means a Nonqualified Stock Option or an Incentive Stock Option
as described in Section 4(a)(1) or (2).
"Participant" means a person who is granted an Award, pursuant to this
Plan, that remains outstanding.
"Performance-Based Awards" is defined in Section 4(b).
"Performance Goal" means EPS or ROE or Cash Flow or Total Stockholder
Return or such other Performance Goal or Goals that the Committee in its
sole discretion establishes in accordance with the requirements of Section
162(m) of the Code for which applicable shareholder approval requirements
are met, and "Performance Goals" means any combination thereof.
"ROE" means consolidated net income of the Corporation (less preferred
dividends), divided by the average consolidated common stockholders'
"Rule 16b-3" means Rule 16b-3 under Section 16 of the Exchange Act, as
amended from time to time.
"Share Units" means the number of units under an Award that is payable
solely in cash or is actually paid in cash, determined by reference to the
number of shares of Stock by which the Award is measured.
"Stock" means shares of Common Stock of the Corporation, par value $0.01
per share, subject to adjustments made under Section 7 or by operation of
"Subsidiary" means, as to any person, any corporation, association,
partnership, joint venture or other business entity of which 50% or more of
the voting stock or other equity interests (in the case of entities other
than corporations), is owned or controlled (directly or indirectly) by that
entity, or by one or more of the Subsidiaries of that entity, or by a
"Total Stockholder Return" means with respect to the Corporation or other
entities (if measured on a relative basis), the (1) change in the market
price of its common stock (as quoted in the principal market on which it is
traded as of the beginning and ending of the period) plus dividends and
other distributions paid, divided by (ii) the beginning quoted market
price, all of which is adjusted for any changes in equity structure,
including but not limited to stock splits and stock dividends.
(b) Financial and Accounting Terms. Except as otherwise expressly provided
or the context otherwise requires, financial and accounting terms, including
terms defined herein as Performance Goals, are used as defined for purposes of,
and shall be determined in accordance with, generally accepted accounting
principles and as derived from the audited consolidated financial statements of
the Corporation, prepared in the ordinary course of business.
(c) Rules of Construction. For purposes of this Plan and the Award
Agreements, unless otherwise expressly provided or the context otherwise
requires, the terms defined in this Plan include the plural and the singular,
and pronouns of either gender or neuter shall include, as appropriate, the
other pronoun forms.
SECTION 3. ELIGIBILITY.
Any one or more Awards may be granted to any Employee, or any non-Employee
who provides services to or on behalf of the Corporation or any of its
Subsidiaries, who is designated by the Committee to receive an Award.
SECTION 4. AWARDS.
(a) Type of Awards. The Committee may from time to time grant any of the
following types of Awards, either singly, in tandem or in combination with
(1) Nonqualified Stock Options. A Nonqualified Stock Option is an Award
in the form of an option to purchase Stock that is not intended to comply
with the requirements of Code Section 422. The exercise price of each
Nonqualified Stock Option granted under this Plan shall be not less than
the Fair Market Value of the Stock on the date that the Option is granted.
All Nonqualified Stock Options granted in accordance with this clause (1)
shall be treated as Performance-Based Awards subject to the applicable
restrictions of Section 4(b).
(2) Incentive Stock Options. An Incentive Stock Option is an Award in the
form of an option to purchase Stock that is intended to comply with the
requirements of Code Section 422 or any successor section of the Code. The
exercise price of each Incentive Stock Option granted under this Plan shall
be not less than the Fair Market Value of the Stock on the date the Option
is granted. If a Participant on the date an Incentive Stock Option is
granted owns, directly or indirectly within the meaning of Section 424(d)
of the Code, stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation, the
exercise price per share of the Incentive Stock Option shall not be less
than one hundred and ten percent (110%) of the Fair Market Value per share
of the Stock at the time of grant, and such Incentive Stock Option shall
not be exercisable after the expiration of five (5) years from the date
such Incentive Stock Option is granted. To the extent that the aggregate
"fair market value" of Stock with respect to which one or more incentive
stock options first become exercisable by a Participant in any calendar
year exceeds $100,000, taking into account both Stock subject to Incentive
Stock Options under this Plan and stock subject to incentive stock options
under all other plans of the Corporation or of other entities referenced in
Code Section 422(d)(1), the options shall be treated as Nonqualified Stock
Options. For this purpose, the "fair market value" of the Stock subject to
options shall be determined as of the date the Options were awarded. All
Incentive Stock Options granted in accordance with this clause (2) shall be
treated as Performance-Based Awards subject to the applicable restrictions
of Section 4(b).
(3) Stock Appreciation Rights. A Stock Appreciation Right is an Award in
the form of a right to receive, upon surrender of the right, but without
other payment, an amount based on appreciation in the value of Stock over a
base price established in the Award, payable in cash, Stock or such other
form or combination of forms of payout, at times and upon conditions (which
may include a Change in Control), as may be approved by the Committee. The
minimum base price of a Stock Appreciation Right granted under this Plan
shall be not less than the Fair Market Value of the underlying Stock on the
date the Stock Appreciation Right is granted or, in the case of a Stock
Appreciation Right related to an Option (whether already outstanding or
concurrently granted), the exercise price of the related Option. All Stock
Appreciation Rights granted in accordance with this clause (3) shall be
treated as Performance-Based Awards subject to the applicable restrictions
under Section 4(b).
(4) Restricted Stock. Restricted Stock is an Award of shares of Stock of
the Corporation that are issued, but subject to restrictions on transfer
and/or such other restrictions on incidents of ownership as the Committee
may determine. Restricted Stock Awards to Executive Officers that are
either granted or vest upon attainment of one or more of the Performance
Goals shall only be granted as Performance-Based Awards under Section 4(b).
(5) Other Share-Based Awards. The Committee may from time to time grant
Awards under this Plan that provide the Participants with Stock or the
right to purchase Stock, or provide other incentive Awards (including, but
not limited to phantom stock or units, performance stock or units, bonus
stock, dividend equivalent units, or similar securities or rights) that
have a value derived from the value of, or an exercise or conversion
privilege at a price related to, or that are otherwise payable in shares of
Stock. The Awards shall be in a form determined by the Committee, provided
that the Awards shall not be inconsistent with the other express terms of
this Plan. Awards under this Section 4(a)(5) to Executive Officers that are
either granted or become vested, exercisable or payable based on attainment
of one or more of the Performance Goals shall only be granted as
Performance-Based Awards under Section 4(b).
(b) Special Performance-Based Awards. Without limiting the generality of
the foregoing, any of the type of Awards listed in Section 4(a) may be granted
as awards that satisfy the requirements for "performance-based compensation"
within the meaning of Code Section 162(m) ("Performance-Based Awards"), the
grant, vesting, exercisability or payment of which depends on the degree of
achievement of the Performance Goals relative to preestablished targeted levels
for the Corporation or any of its Subsidiaries, divisions or other business
units. Notwithstanding anything contained in this Section 4(b) to the contrary,
any Option or Stock Appreciation Right granted in accordance with paragraph (a)
shall be subject only to the requirements of clauses (1) and (3)(A) below in
order for such Awards to satisfy the requirements for Performance-Based Awards
under this Section 4(b) (with such Awards hereinafter referred to as a
"Qualifying Option" or a "Qualifying Stock Appreciation Right", respectively).
With the exception of any Qualifying Option or Qualifying Stock Appreciation
Right, an Award that is intended to satisfy the requirements of this Section
4(b) shall be designated as a Performance-Based Award at the time of grant.
(1) Eligible Class. The eligible class of persons for Awards under this
Section 4(b) shall be all Employees.
(2) Performance Goals. The performance goals for any Awards under this
Section 4(b) (other than Qualifying Options and Qualifying Stock
Appreciation Rights) shall be, on an absolute or relative basis, one or
more of the Performance Goals. The specific performance target(s) with
respect to Performance Goal(s) must be established by the Committee in
advance of the deadlines applicable under Code Section 162(m) and while the
performance relating to the Performance Goal(s) remains substantially
(3) Individual Limits. Subject to adjustment as provided in Section 7,
(A) the maximum number of shares of Stock with respect to which Options and
Stock Appreciation Rights may be granted to any employee in any fiscal year
shall be 500,000 and (B) the maximum number of shares of Stock with respect
to which Performance-Based Awards (other than Qualifying Options and
Qualifying Stock Appreciation Rights) may be granted to any Employee in any
fiscal year shall be 500,000 or, in the event such Performance-Based Award
is paid in cash, the equivalent cash value thereof as of the date of
payment of such Performance-Based Award. Awards that are cancelled or
repriced during the year shall be counted against this limit to the extent
required by Code Section 162(m).
(4) Committee Certification. Before any Performance-Based Award under
this Section 4(b) (other than Qualifying Options and Qualifying Stock
Appreciation Rights) is paid, the Committee must certify in writing (by
resolution or otherwise) that the applicable Performance Goal(s) and any
other material terms of the Performance-Based Award were satisfied;
provided, however, that a Performance-Based Award may be paid without
regard to the satisfaction of the applicable Performance Goal in the event
of a Change in Control as provided in Section 7(b).
(5) Terms and Conditions of Awards; Committee Discretion to Reduce
Performance Awards. The Committee shall have discretion to determine the
conditions, restrictions or other limitations, in accordance with the terms
of this Plan and Code Section 162(m), on the payment of individual
Performance-Based Awards under this Section 4(b). To the extent set forth
in an Award Agreement, the Committee may reserve the right to reduce the
amount payable in accordance with any standards or on any other basis
(including the Committee's discretion), as the Committee may impose.
(6) Adjustments for Material Changes. In the event of (i) a change in
corporate capitalization, a corporate transaction or a complete or partial
corporate liquidation, or (ii) any extraordinary gain or loss or other
event that is treated for accounting purposes as an extraordinary item
under generally accepted accounting principles, or (iii) any material
change in accounting policies or practices affecting the Corporation and/or
the Performance Goals or targets, then, to the extent any of the foregoing
events (or a material effect thereof) was not anticipated at the time the
targets were set, the Committee may make adjustments to the Performance
Goals and/or targets, applied as of the date of the event, and based solely
on objective criteria, so as to neutralize, in the Committee's judgment,
the effect of the event on the applicable Performance-Based Award.
(7) Interpretation. Except as specifically provided in this Section 4(b),
the provisions of this Section 4(b) shall be interpreted and administered
by the Committee in a manner consistent with the requirements for exemption
of Performance-Based Awards granted to Executive Officers as
"performance-based compensation" under Code Section 162(m) and regulations
and other interpretations issued by the Internal Revenue Service
(8) Maximum Term of Awards. No Award that contemplates exercise or
conversion may be exercised or converted to any extent, and no other Award
that defers vesting, shall remain outstanding and unexercised, unconverted
or unvested more than ten years after the date the Award was initially
SECTION 5. SHARES OF STOCK AND SHARE UNITS AVAILABLE UNDER PLAN.
(a) Aggregate Share Limit. The maximum number of shares of Stock that may
be issued pursuant to all Awards (including Incentive Stock Options) is
1,000,000, subject to adjustment as provided in this Section 5 or Section 7.
Any Restricted Stock grant may not exceed, in aggregate with all other
Restricted Stock grants under this Plan, two percent of the shares of Stock
outstanding at the time of grant.
(b) Aggregate Share Unit Limit. The maximum number of Share Units that may
be paid pursuant to all Awards shall not be more than 750,000, subject to
adjustment as provided in this Section 5 or Section 7. Notwithstanding the
foregoing, if an Award paid or payable in Units satisfies the requirements for
an exclusion from the definition of a derivative security under Rule 16a-l(c)
that does not require that the Award be made under a Rule 16b-3 plan, the Share
Units that may be paid under the Award shall not be counted against the Share
Unit limit of this Section 5(b).
(c) Reissue of Shares and Share Units. Any unexercised, unconverted or
undistributed portion of any expired, cancelled, terminated or forfeited Award,
or any alternative form of consideration under an Award that is not paid in
connection with the settlement of an Award or any portion of an Award, shall
again be available for Award under Section 5(a) or 5(b), as applicable, whether
or not the Participant has received benefits of ownership (such as dividends or
dividend equivalents or voting rights) during the period in which the
Participant's ownership was restricted or otherwise not vested. Shares of Stock
that are issued pursuant to Awards and subsequently reacquired by the
Corporation pursuant to the terms and conditions of the Awards shall be
available for reissuance under the Plan.
(d) Interpretive Issues. Additional rules for determining the number of
shares of Stock or Share Units authorized under this Plan may be adopted by the
Committee, as it deems necessary or appropriate.
(e) Treasury Shares; No Fractional Shares. The Stock which may be issued
(which term includes Stock reissued or otherwise delivered) pursuant to an
Award under this Plan may be treasury or authorized but unissued Stock or Stock
acquired, subsequently or in anticipation of a transaction under this Plan, in
the open market or in privately negotiated transactions to satisfy the
requirements of this Plan. No fractional shares shall be issued but fractional
interests may be accumulated.
(f) Consideration. The Stock issued under this Plan maybe issued (subject
to Section 10(d)) for any lawful form of consideration, the value of which
equals the par value of the Stock or such greater or lesser value as the
Committee, consistent with Sections 10(d) and 4(a)(1), (2) and (3), may
(g) Purchase or Exercise Price; Withholding. The exercise or purchase
price (if any) of the Stock issuable pursuant to any Award and any withholding
obligation under applicable tax laws shall be paid in cash or, subject to the
Committee's express authorization and the restrictions, conditions and
procedures as the Committee may impose, any one or combination of (i) cash,
(ii) the delivery of shares of Stock, (iii) a reduction in the amount of Stock
or other amounts otherwise issuable or payable pursuant to such Award, or (iv)
the delivery of a promissory note, or other obligation for the future payment
in money, the terms and conditions of which shall be determined (subject to
Section 10(d)) by the Committee. In the case of a payment by the means
described in clause (ii) or (iii) above, the Stock to be so delivered or offset
shall be determined by reference to the Fair Market Value of the Stock on the
date as of which the payment or offset is made.
(h) Cashless Exercise. The Committee may permit the exercise of the Award
and payment of any applicable withholding tax in respect of an Award by
delivery of written notice, subject to the Corporation's receipt of a third
party payment in full in cash for the exercise price and the applicable
withholding prior to issuance of Stock, in the manner and subject to the
procedures as may be established by the Committee.
SECTION 6. AWARD AGREEMENTS.
Each Award under this Plan shall be evidenced by an Award Agreement in a
form approved by the Committee setting forth the number of shares of Stock or
Share Units, as applicable, subject to the Award, and the price (if any) and
term of the Award and, in the case of Performance-Based Awards, the applicable
Performance Goals. The Award Agreement shall also set forth (or incorporate by
reference) other material terms and conditions applicable to the Award as
determined by the Committee consistent with the limitations of this Plan.
(a) Incorporated Provisions. Award Agreements shall be subject to the
terms of this Plan and shall be deemed to include the following terms, unless
the Committee in the Award Agreement otherwise (consistent with applicable
legal considerations) provides:
(1) Transferability: An Award shall not be assignable nor transferable,
except by will or by the laws of descent and distribution, and during the
lifetime of a Participant the Award shall be exercised only by such
Participant or by his or her guardian or legal representative, except that
Awards other than Incentive Stock Options may be transferred to and
exercised by a family member or family members of a Participant, or
transferred to an irrevocable trust or trusts established for the benefit
of a Participant's family members, during the Participant's lifetime. The
designation of a Beneficiary hereunder shall not constitute a transfer
prohibited by the foregoing provisions.
(2) Rights as Stockholder: A Participant shall have no rights as a holder
of Stock with respect to any unissued securities covered by an Award until
the date the Participant becomes the holder of record of these securities.
Except as provided in Section 7, no adjustment or other provision shall be
made for dividends or other stockholder rights, except to the extent that
the Award Agreement provides for dividend equivalents or similar economic
(3) Withholding: The Participant shall be responsible for payment of any
taxes or similar charges required by law to be withheld from an Award or an
amount paid in satisfaction of an Award and these obligations shall be paid
by the Participant on or prior to the payment of the Award. In the case of
an Award payable in cash, the withholding obligation shall be satisfied by
withholding the applicable amount and paying the net amount in cash to the
Participant. In the case of an Award paid in shares of Stock, a Participant
shall satisfy the withholding obligation as provided in Section 5(g).
(4) Option Holding Period: Subject to the authority of the Committee
under Section 7, a minimum six-month period shall elapse between the date
of initial grant of any Option and the sale of the underlying shares of
Stock, and the Corporation may impose legend and other restrictions on the
Stock issued on exercise of the Options to enforce this requirement.
(b) Other Provisions. Award Agreements may include other terms and
conditions as the Committee shall approve, including but not limited to the
(1) Termination of Employment: A provision describing the treatment of an
Award in the event of the retirement, disability, death or other
termination of a Participant's employment with or services to the Company,
including any provisions relating to the vesting, exercisability,
forfeiture or cancellation of the Award in these circumstances, subject, in
the case of Performance-Based Awards, to the requirements for
"performance-based compensation" under Code Section 162(m).
(2) Vesting; Effect of Termination; Change in Control: Any other terms
consistent with the terms of this Plan as are necessary and appropriate to
effect the Award to the Participant, including but not limited to the
vesting provisions, any requirements for continued employment, any other
restrictions or conditions (including performance requirements) of the
Award, and the method by which (consistent with Section 7) the restrictions
or conditions lapse, and the effect on the Award of a Change in Control.
(3) Replacement and Substitution: Any provisions permitting or requiring
the surrender of outstanding Awards or securities held by the Participant
in whole or in part in order to exercise or realize rights under or as a
condition precedent to other Awards, or in exchange for the grant of new or
amended Awards under similar or different terms.
(4) Reloading: Any provisions for successive or replenished Awards,
including but not limited to reload Options.
(c) Contract Rights, Forms and Signatures. Any obligation of the
Corporation to any Participant with respect to an Award shall be based solely
upon contractual obligations created by this Plan and an Award Agreement. No
Award shall be enforceable until the Award Agreement or a receipt has been
signed by the Participant and on behalf of the Corporation by an Executive
Officer (other than the recipient) or his or her delegate. By executing the
Award Agreement or receipt, a Participant shall be deemed to have accepted and
consented to the terms of this Plan and any action taken in good faith under
this Plan by and within the discretion of the Committee, the Board of Directors
or their delegates. Unless the Award Agreement otherwise expressly provides,
there shall be no third party beneficiaries of the obligations of the
Corporation to the Participant under the Award Agreement.
SECTION 7. ADJUSTMENTS; CHANGE IN CONTROL; ACQUISITIONS.
(a) Adjustments. If there shall occur any recapitalization, stock split
(including a stock split in the form of a stock dividend), reverse stock split,
merger, combination, consolidation, or other reorganization or any
extraordinary dividend or other extraordinary distribution in respect of the
Stock (whether in the form of cash, Stock or other property), or any split-up,
spin-off, extraordinary redemption, or exchange of outstanding Stock, or there
shall occur any other similar corporate transaction or event in respect of the
Stock, or a sale of substantially all the assets of the Corporation as an
entirety, then the Committee shall, in the manner and to the extent, if any, as
it deems appropriate and equitable to the Participants and consistent with the
terms of this Plan, and taking into consideration the effect of the event on
the holders of the Stock:
(1) proportionately adjust any or all of
(A) the number and type of shares of Stock and Share Units which
thereafter may be made the subject of Awards (including the specific maxima
and numbers of shares of Stock or Share Units set forth elsewhere in this
(B) the number and type of shares of Stock, other property, Share Units
or cash subject to any or all outstanding Awards,
(C) the grant, purchase or exercise price, or conversion ratio of any or
all outstanding Awards, or of the Stock, other property or Share Units
underlying the Awards,
(D) the securities, cash or other property deliverable upon exercise or
conversion of any or all outstanding Awards,
(E) subject to Section 4(b), the performance targets or standards
appropriate to any outstanding Performance-Based Awards, or
(F) any other terms as are affected by the event; and
(2) subject to any applicable limitations in the case of a transaction to
be accounted for as a pooling of interests under generally accepted accounting
principles, provide for
(A) an appropriate and proportionate cash settlement or distribution, or
(B) the substitution or exchange of any or all outstanding Awards, or the
cash, securities or property deliverable on exercise, conversion or vesting
of the Awards.
Notwithstanding the foregoing, in the case of an Incentive Stock Option,
no adjustment shall be made which would cause this Plan to violate Section
424(a) of the Code or any successor provisions thereto, without the written
consent of the Participant adversely affected thereby. The Committee may act
to an event described in this paragraph (a) (including at the time of an Award
by means of more specific provisions in the Award Agreement) if deemed
necessary or appropriate to permit the Participant to realize the benefits
intended to be conveyed by an Award in respect of the Stock in the case of an
event described in paragraph (a).
(b) Change in Control. The Committee may, in the Award Agreement, provide
for the effect of a Change in Control on an Award. Such provisions may include,
but are not limited to any one or more of the following with respect to any or
all Awards: (i) the specific consequences of a Change in Control on the Awards;
(ii) a reservation of the Committee's right to determine in its discretion at
any time that there shall be full acceleration or no acceleration of benefits
under the Awards; (iii) that only certain or limited benefits under the Awards
shall be accelerated; (iv) that the Awards shall be accelerated for a limited
time only; or (v) that acceleration of the Awards shall be subject to
additional conditions precedent (such as a termination of employment following
a Change in Control).
In addition to any action required or authorized by the terms of an Award,
the Committee may take any other action it deems appropriate to ensure the
equitable treatment of Participants in the event of or in anticipation of a
Change in Control, including but not limited to any one or more of the
following with respect to any or all Awards: (i) the acceleration or extension
of time periods for purposes of exercising, vesting in, or realizing gain from,
the Awards; (ii) the waiver of conditions on the Awards that were imposed for
the benefit of the Corporation, (iii) provision for the cash settlement of the
Awards for their equivalent cash value, as determined by the Committee, as of
the date of the Change in Control; or (iv) such other modification or
adjustment to the Awards as the Committee deems appropriate to maintain and
protect the rights and interests of Participants upon or following the Change
in Control. The Committee also may accord any Participant a right to refuse any
acceleration of exercisability, vesting or benefits, whether pursuant to the
Award Agreement or otherwise, in such circumstances as the Committee may
Notwithstanding the foregoing provisions of this Section 7(b) or any
provision in an Award Agreement to the contrary, (i) in no event shall the
Committee be deemed to have discretion to accelerate or not accelerate or make
other changes in or to any or all Awards, in respect of a transaction, if such
action or inaction would be inconsistent with or would otherwise frustrate the
intended accounting for a proposed transaction as a pooling of interests under
generally accepted accounting principles; and (ii) if any Award to any Insider
is accelerated to a date that is less than six months after the date of the
Award, the Committee may prohibit a sale of the underlying Stock (other than a
sale by operation or law in exchange for or through conversion into other
securities), and the Corporation may impose legend and other restrictions on
the Stock to enforce this prohibition.
(c) Change in Control Definition. For purposes of this Plan, with respect
to any Award other than an Award issued pursuant to an Award Agreement that
separately defines the term "change of control," a change of control shall
include and be deemed to occur upon the following events:
(1) The acquisition by any person or group (including a group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, other than the
Corporation or any of its Subsidiaries, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 51 percent or more of the
combined voting power of the Corporation's then outstanding voting
securities, other than by any employee benefit plan maintained by the
(2) The sale of all or substantially all of the assets of the Corporation
or of L-3 Communications Corporation or any successor thereto; or
(3) The election, including the filling of vacancies, during any period
of 24 months or less, of 50 percent or more, of the members of the Board,
without the approval of Continuing Directors, as constituted at the
beginning of such period. "Continuing Directors" shall mean any director of
the Company who either (i) is a member of the Board on the date of grant of
the relevant Award, or (ii) is nominated for election to the Board by a
majority of the Board which is comprised of Directors who were, at the time
of such nomination, Continuing directors.
(d) Business Acquisitions. Awards may be granted under this Plan on the
terms and conditions as the Committee considers appropriate, which may differ
from those otherwise required by this Plan to the extent necessary to reflect a
substitution for or assumption of stock incentive awards held by employees of
other entities who become employees of the Corporation or a Subsidiary as the
result of a merger of the employing entity with, or the acquisition of the
property or stock of the employing entity by, the Corporation or a Subsidiary,
directly or indirectly.
SECTION 8. ADMINISTRATION.
(a) Committee Authority and Structure. This Plan and all Awards granted
under this Plan shall be administered by the Compensation Committee of the
Board or such other committee of the Board or subcommittee of the Compensation
Committee as may be designated by the Board and constituted so as to permit
this Plan to comply with the disinterested administration requirements of Rule
16b-3 under the Exchange Act and the "outside director" requirement of Code
Section 162(m). The members of the Committee shall be designated by the Board.
A majority of the members of the Committee (but not fewer than two) shall
constitute a quorum. The vote of a majority of a quorum or the unanimous
written consent of the Committee shall constitute action by the Committee.
(b) Selection and Grant. The Committee shall have the authority to
determine the individuals (if any) to whom Awards will be granted under this
Plan, the type of Award or Awards to be made, and the nature, amount, pricing,
timing, and other terms of Awards to be made to any one or more of these
individuals, subject to the terms of this Plan.
(c) Construction and Interpretation. The Committee shall have the power to
interpret and administer this Plan and Award Agreements, and to adopt, amend
and rescind related rules and procedures. All questions of interpretation and
determinations with respect to this Plan, the number of shares of Stock, Stock
Appreciation Rights, or units or other Awards granted, and the terms of any
Award Agreements, the adjustments required or permitted by Section 7, and other
determinations hereunder shall be made by the Committee and its determination
shall be final and conclusive upon all parties in interest. In the event of any
conflict between an Award Agreement and any non-discretionary provisions of
this Plan, the terms of this Plan shall govern.
(d) Express Authority to Change Terms of Awards. The Committee may at any
time alter or amend any or all Award Agreements under this Plan in any manner
that would be authorized for a new Award under this Plan, including but not
limited to any manner set forth in Section 8(d) (subject to any applicable
limitations thereunder) except that no amendment may reduce the exercise price
or base price of an Award to a price less than Fair Market Value on the date of
the amendment. Without limiting the Committee's authority under this Plan
(including Sections 7 and 9), but subject to any express limitations of this
Plan (including under Sections 7 and 9), the Committee shall have the authority
to accelerate the exercisability or vesting of an Award, to extend the term or
waive early termination provisions of an Award (subject to the maximum ten-year
term under Section 4(b)), to waive the Corporation's rights with respect to an
Award or restrictive conditions of an Award (including forfeiture conditions),
and, except as set forth above, to reduce by amendment the exercise or purchase
price of an outstanding Award, with or without adjusting any holding period or
other terms of the Award, in any case in such circumstances as the Committee
(e) Rule 16b-3 Conditions; Bifurcation of Plan. It is the intent of the
Corporation that this Plan and Awards hereunder satisfy and be interpreted in a
manner, that, in the case of Participants who are or may be Insiders, satisfies
any applicable requirements of Rule 16b-3, so that these persons will be
entitled to the benefits of Rule 16b-3 or other exemptive rules under Section
16 under the Exchange Act and will not be subjected to avoidable liability
thereunder as to Awards intended to be entitled to the benefits of Rule 16b-3.
If any provision of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed in this Section 8(e), that provision to the
extent possible shall be interpreted and deemed amended so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with this
intent, the provision shall be deemed disregarded as to Awards intended as Rule
16b-3 exempt Awards. Notwithstanding anything to the contrary in this Plan, the
provisions of this Plan may at any time be bifurcated by the Board or the
Committee in any manner so that certain provisions of this Plan or any
Award Agreement intended (or required in order) to satisfy the applicable
requirements of Rule 16b-3 are only applicable to Insiders and to those Awards
to Insiders intended to satisfy the requirements of Rule 16b-3.
(f) Delegation and Reliance. The Committee may delegate to the officers or
employees of the Corporation the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective
administration of this Plan in accordance with its terms and purpose, except
that the Committee may not delegate any discretionary authority to grant or
amend an award or with respect to substantive decisions or functions regarding
this Plan or Awards as these relate to the material terms of Performance-Based
Awards to Executive Officers or to the timing, eligibility, pricing, amount or
other material terms of Awards to Insiders. In making any determination or in
taking or not taking any action under this Plan, the Board and the Committee
may obtain and may rely upon the advice of experts, including professional
advisors to the Corporation. No director, officer, employee or agent of the
Corporation shall be liable for any such action or determination taken or made
or omitted in good faith.
(g) Exculpation and Indemnity. Neither the Corporation nor any member of
the Board of Directors or of the Committee, nor any other person participating
in any determination of any question under this Plan, or in the interpretation,
administration or application of this Plan, shall have any liability to any
party for any action taken or not taken in good faith under this Plan or for
the failure of an Award (or action in respect of an Award) to satisfy Code
requirements as to incentive stock options or to realize other intended tax
consequences, to qualify for exemption or relief under Rule 16b-3 or to comply
with any other law, compliance with which is not required on the part of the
SECTION 9. AMENDMENT AND TERMINATION OF THIS PLAN.
The Board of Directors may at any time amend, suspend or discontinue this
Plan, subject to any stockholder approval that may be required under applicable
law. Notwithstanding the foregoing, no such action by the Board or the
Committee shall, in any manner adverse to a Participant other than as expressly
permitted by the terms of an Award Agreement, affect any Award then outstanding
and evidenced by an Award Agreement without the consent in writing of the
Participant or a Beneficiary, a Participant's family member or a trust
established for the benefit of a Participant's family member entitled to an
SECTION 10. MISCELLANEOUS.
(a) Unfunded Plans. This Plan shall be unfunded. Neither the Corporation
nor the Board of Directors nor the Committee shall be required to segregate any
assets that may at any time be represented by Awards made pursuant to this
Plan. Neither the Corporation, the Committee, nor the Board of Directors shall
be deemed to be a trustee of any amounts to be paid or securities to be issued
under this Plan.
(b) Rights of Employees.
(1) No Right to an Award. Status as an Employee shall not be construed as
a commitment that any one or more Awards will be made under this Plan to an
Employee or to Employees generally. Status as a Participant shall not
entitle the Participant to any additional Award.
(2) No Assurance of Employment. Nothing contained in this Plan (or in any
other documents related to this Plan or to any Award) shall confer upon any
Employee or Participant any right to continue in the employ or other
service of the Corporation or any Subsidiary or constitute any contract (of
employment or otherwise) or limit in any way the right of the Corporation
or any Subsidiary to change a person's compensation or other benefits or to
terminate the employment of a person with or without cause.
(c) Effective Date; Duration. This Plan has been adopted by the Board of
Directors of the Corporation. This Plan shall become effective upon and shall
be subject to the approval of the stockholders the Corporation. This Plan shall
remain in effect until any and all Awards under this Plan
have been exercised, converted or terminated under the terms of this Plan and
applicable Award Agreements. Notwithstanding the foregoing, no Award may be
granted under this Plan after April 27, 2009. Notwithstanding the foregoing,
any Award granted prior to such date may be amended after such date in any
manner that would have been permitted prior to such date, except that no such
amendment shall increase the number of shares subject to, comprising or
referenced in such Award.
(d) Compliance with Laws. This Plan, Award Agreements, and the grant,
exercise, conversion, operation and vesting of Awards, and the issuance and
delivery of shares of Stock and/or other securities or property or the payment
of cash under this Plan, Awards or Award Agreements, are subject to compliance
with all applicable federal and state laws, rules and regulations (including
but not limited to state and federal insider trading, registration, reporting
and other securities laws and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Corporation, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions (and the person acquiring such securities shall, if requested by
the Corporation, provide such evidence, assurance and representations to the
Corporation as to compliance with any thereof) as the Corporation may deem
necessary or desirable to assure compliance with all applicable legal
(e) Applicable Law. This Plan, Award Agreements and any related documents
and matters shall be governed in accordance with the laws of the State of New
York, except as to matters of Federal law.
(f) Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed
to limit the authority of the Corporation, the Board or the Committee to grant
awards or authorize any other compensation, with or without reference to the
Stock, under any other plan or authority.