<PAGE>
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
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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:
- --------------------------------------------------------------------------------
<PAGE>
L-3 COMMUNICATIONS HOLDINGS, INC.
[GRAPHIC OMITTED]
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 standard time, on Tuesday, April 25, 2000, 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 25th.
Very truly yours,
/s/ Frank C. Lanza
-----------------------------------
Frank C. Lanza
Chairman and Chief Executive Officer
<PAGE>
L-3 COMMUNICATIONS HOLDINGS, INC.
[GRAPHIC OMITTED]
NOTICE OF 2000 ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of L-3 Communications Holdings, Inc. (the "Company") will be
held at the Rihga Royal Hotel, 151 West 54th Street, New York, NY, on Tuesday,
the 25th day of April, 2000, at 2:30 p.m., eastern standard time, for the
following purposes:
1. Election of two Class III Directors whose terms expire in 2003;
2. Ratification of the appointment of the Company's independent auditors
for 2000; and
3. 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
Vice President, Secretary and
General Counsel
April 6, 2000
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 DECIDE TO ATTEND THE ANNUAL MEETING AND WISH
TO VOTE YOUR SHARES IN PERSON.
<PAGE>
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 ("Common Stock"), of L-3 Communications Holdings, Inc.
(the "Company") in connection with the solicitation of proxies for use at the
2000 Annual Meeting of Stockholders to be held at the Rihga Royal Hotel, 151
West 54th Street, New York, NY at 2:30 p.m., eastern standard time, on Tuesday,
April 25, 2000 (the "Annual Meeting").
RECORD DATE
The Board of Directors has fixed the close of business on Wednesday, March
15, 2000 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 32,884,786 shares of Common
Stock outstanding. This Proxy Statement, the accompanying proxy card and the
Company's Annual Report to Stockholders are intended to be mailed on or about
April 10, 2000 to each Stockholder entitled to vote at the Annual Meeting.
PROXIES
The proxy accompanying this Proxy Statement is solicited on behalf of the
Board of Directors of the Company for use at the Annual Meeting and any
adjournments thereof, and the expenses of solicitation of proxies will be borne
by the Company. The solicitation will be made primarily by mail, but officers
and regular employees of the Company may also solicit proxies by telephone,
telegraph, facsimile or in person. The Company also has retained Corporate
Investor Communications, Inc. to assist in soliciting proxies. Each holder of
Common Stock is entitled to one vote for each share of such 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 the Secretary of the
Company at 600 Third Avenue, New York, New York 10016, not later than 5 p.m. on
Monday, April 24, 2000.
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person(s) executing the same upon receipt by the Company, 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 same, of written notice thereof, 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
<PAGE>
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 the
Company's stock records maintained by our transfer agent, First Chicago Trust
Company of New York, may vote their shares (1) by making a toll-free telephone
call from the U.S. and Canada to First Chicago 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.
on April 24, 2000.
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
The Amended and Restated Certificate of Incorporation and the Bylaws of
the Company 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. The number of directors of the Company was recently reduced to ten.
The Company's 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 Annual Meeting in 2002 (the
"Class I Directors"); David J. Brand, Thomas A. Corcoran, John E. Montague and
Alan H. Washkowitz constitute a class with a term that expires at the Annual
Meeting in 2001 (the "Class II Directors"); and Alberto M. Finali constitutes
the remaining member of a class with a term that expires at the upcoming Annual
Meeting (the "Class III Directors"). Frank H. Menaker, Jr. and Eliot M. Fried
have resigned as directors of the Company and will not stand for reelection.
The Board of Directors has reduced the number of Class III Directors to two and
has nominated Arthur L. Simon to fill the remaining vacancy. Accordingly,
action will be taken at the Annual Meeting for the election of both Class III
Director nominees, Mr. Finali and Mr. Simon, for a three year term expiring in
2003.
It is intended that the proxies delivered pursuant to this solicitation
will be voted in favor of the election of Alberto M. Finali and Arthur L.
Simon, 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 2000 Annual Meeting. Beneficial
ownership of equity securities of the nominees is shown under the caption
"Security Ownership of Management" on page 11.
2
<PAGE>
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS IN 2000
CLASS III -- NOMINEES FOR TERM EXPIRING IN 2003
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------- ----- -------------------------------------------------------------------
<S> <C> <C>
Alberto M. Finali 45 Director since April 1997. Mr. Finali is a Managing Director of
Lehman Brothers Holdings Inc. ("Lehman Brothers") and principal
of the Merchant Banking Group, based in New York. Prior to
joining the Merchant Banking Group, Mr. Finali spent four years
in Lehman Brothers' London office as a senior member of the
Mergers & Acquisitions Group. Mr. Finali joined Lehman Brothers
in 1987 as a member of the M&A Group in New York and became
a Managing Director in 1997. Prior to joining Lehman Brothers,
Mr. Finali worked in the Pipelines and Production Technology
Group of Bechtel, Inc. in San Francisco.
Arthur L. Simon 68 Mr. Simon is an independent consultant. Before his retirement, Mr.
Simon was a partner at Cooper & Lybrand L.L.P., Certified Public
Accountants, from 1968 to 1994. He is a Director of Loral Space &
Communications, Inc.
</TABLE>
The nominees for election to the Board of Directors is 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.
3
<PAGE>
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2000 ANNUAL MEETING AND WHO ARE
NOT SUBJECT TO ELECTION THIS YEAR.
CLASS I -- DIRECTORS WHOSE TERM EXPIRES IN 2002
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------- ----- ---------------------------------------------------------------------
<S> <C> <C>
Frank C. Lanza 68 Chairman and Chief Executive Officer and Director of the
Company since April 1997. From April 1996, when Loral
Corporation ("Loral") was acquired by Lockheed Martin
Corporation ("Lockheed Martin"), 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 ("C3I") 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 54 President and Chief Financial Officer and Director the Company
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 C3I 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 and The
American College of Greece.
Robert B. Millard 49 Director since April 1997. Chairman of the Compensation
Committee. Mr. Millard is a Managing Director of Lehman
Brothers, 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 in 1983. Mr. Millard is
currently a director of GulfMark Offshore, Inc. and Weatherford
International, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ----------------------- ----- ----------------------------------------------------------------------
<S> <C> <C>
John M. Shalikashvili 63 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 currently a director of
United Defense Industries Inc., Plug Power, Inc. and Frank Russell
Trust Company.
CLASS II -- DIRECTORS WHOSE TERM EXPIRES IN 2001
David J. Brand 38 Director since April 1997. Member of the Audit Committee. Mr.
Brand is a Managing Director of Lehman Brothers and a principal
in the Global Mergers & Acquisitions Group, leading Lehman
Brothers' Technology Mergers and Acquisitions business. Mr.
Brand joined Lehman Brothers in 1987 and has been responsible
for merger and corporate finance advisory services for many of
Lehman Brothers' technology and defense industry clients. Mr.
Brand is currently a director of K&F Industries, Inc.
Thomas A. Corcoran 55 Director since July 1997. Member of Audit Committee. Mr.
Corcoran has been the President and Chief Executive Officer of
Allegheney Teledyne Incorporated ("ATI") since October 1999.
Mr. Corcoran had been the President and Chief Operating Officer
of the Space & Strategic Missiles Sector of Lockheed Martin from
October 1998 to September 1999. From March 1995 to September
1998, he was the President and Chief Operating Officer of Lockheed
Martin's Electronic System Sector. From 1993 to 1995, Mr. Corcoran
was President of the Electronics Group of Martin Marietta
Corporation. Prior to that he worked for General Electric Company
for 26 years and from 1983 to 1993 he held various management
positions with GE Aerospace. Mr. Corcoran is a Director of ATI
and Chairman of the Board of Teledyne Technologies Incorporated.
Mr. Corcoran is also a member of the Board of Trustees of Stevens
Institute of Technology and a Director of Lincoln Electric Holdings,
Inc. and REMEC, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------- ----- ---------------------------------------------------------------------
<S> <C> <C>
John E. Montague 46 Director since April 1997. Member of Compensation Committee.
Mr. Montague has been Vice President and Chief Financial Officer
of Lockheed Martin Global Telecommunications, Inc., a wholly
owned subsidiary of Lockheed Martin, since September 1998. 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 August 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 59 Director since April 1997. Member of Compensation Committee.
Mr. Washkowitz is a Managing Director of Lehman Brothers and
head of the Merchant Banking Group, and is responsible for the
oversight of Lehman Brothers Merchant Banking Portfolio
Partnership L.P. Mr. Washkowitz joined Lehman Brothers in 1978
when Kuhn Loeb & Co. was acquired by Lehman Brothers. Mr.
Washkowitz is currently a director of K&F Industries, Inc., McBride
plc. and Peabody Coal Co.
</TABLE>
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
The Board of Directors of the Company directs the management of the
business and affairs of the Company, as provided by Delaware law, and conducts
its business through meetings of the Board and two standing committees: the
Audit and Compensation Committees. In addition, from time to time, special
committees may be established under the direction of the Board when necessary
to address specific issues. The Company has no nominating or similar committee.
Each executive officer serves at the discretion of the Board of Directors.
During the fiscal year ended December 31, 1999, the Board of Directors held
four regularly scheduled meetings and two special meetings. All of the
Company's 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. Brand, Corcoran and
Shalikashvili (Chairman). This committee, which met twice during 1999, is
responsible generally for recommending to the Board of Directors the
independent accountants to be nominated to audit the financial statements of
the Company; approving the compensation of the independent accountants; meeting
with the Company's independent accountants to review the proposed scope of the
annual audit of the Company's financial statements; reviewing the findings of
the independent accountants with resect to the annual audit; and supervising
the implementation of the Company's management integrity policies and reporting
annually to the Board of Directors with respect thereto.
The Compensation Committee consists of Messrs. Millard (Chairman),
Montague and Washkowitz. This Committee, which acted by written consent four
times during 1999, is responsible for administering the Company's 1997 Stock
Option Plan for Key Employees of Holdings (the "1997 Plan") and the Company's
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 the Chief
Executive Officer and the President of the Company, 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 other officers of the Company.
6
<PAGE>
COMPENSATION OF DIRECTORS
The directors who are employees of the Company or its 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
Common Stock. In addition, non-affiliated directors receive an annual stock
option grant of 1,500 shares of 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 the fees (including meeting fees) otherwise payable to the director. Subject
to certain limitations, a participating director's deferred fees 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 fees are earned. Earnings are 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 the Common Stock.
7
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of the current
executive officers of the Company, other than Messrs. Lanza and LaPenta who are
presented under "Directors Whose Terms Continue Beyond the 2000 Annual Meeting
and Who Are Not Subject to Election This Year -- Class I -- Directors Whose
Term Expires in 2002".
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ------------------------ ----- --------------------------------------------------------------------
<S> <C> <C>
Michael T. Strianese 44 Vice President -- Finance and Controller. Mr. Strianese joined the
Company in April 1997. From April 1996, when Loral was
acquired by Lockheed Martin, until April 1997, Mr. Strianese was
Vice President and Controller of Lockheed Martin's C3I and
Systems Integration Sector. From 1991 to the April 1996 acquisition
of Loral, he was Director of Special Projects at Loral. Prior to
joining Loral, he spent 11 years with Ernst & Young. Mr. Strianese
is a Certified Public Accountant.
Christopher C. Cambria 41 Vice President -- Secretary and General Counsel. Mr. Cambria
joined the Company in June 1997. From 1994 until joining the
Company, Mr. Cambria was an associate with Fried, Frank, Harris,
Shriver & Jacobson. From 1986 until 1993, he was an associate
with Cravath, Swaine & Moore.
Robert F. Mehmel 37 Vice President -- Planning and Assistant Secretary. Mr. Mehmel
joined the Company in April 1997. From April 1996, when Loral
was acquired by Lockheed Martin, until April 1997, Mr. Mehmel
was the Director of Financial Planning and Capital Review for
Lockheed Martin's C3I and Systems Integration Sector. From 1984
to 1996, Mr. Mehmel held several accounting and financial analysis
positions at Loral Electronic Systems and Loral. At the time of
Lockheed Martin's acquisition of Loral, he was Corporate Manager
of Business Analysis.
Lawrence W. O'Brien 50 Vice President -- Treasurer. Mr. O'Brien joined the Company in
June 1997. Prior to joining the Company, he was the Vice President
and Treasurer of Pechiney Corporation, the North American arm
of the Pechiney Group of France, where he held a number of
financial positions since 1981.
Joseph S. Paresi 44 Vice President -- Product Development. Mr. Paresi joined the
Company in April 1997. From April 1996 until April 1997, Mr.
Paresi was Corporate Director of Technology for Lockheed Martin's
C3I 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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
- ---------------------- ----- ----------------------------------------------------------------------
<S> <C> <C>
Lawrence H. Schwartz 62 Vice President -- Business Development. Mr. Schwartz joined the
Company in May 1997. From April 1996 until May 1997, Mr.
Schwartz was Vice President of Technology for the C3I and System
Integration Sector of Lockheed Martin. Prior to the April 1996
acquisition of Loral, he was Corporate Vice President of
Technology for Loral, a position he held since 1987. Between 1976
and 1987, Mr. Schwartz was Vice President of Engineering, Senior
Vice President of Business Development, Senior Vice President of
the Rapport Program and Senior Vice President of Development
Programs at Loral Electronic Systems.
Jimmie V. Adams 63 Vice President -- Washington, D.C. Operations. General Jimmie
V. Adams (U.S.A.F.-ret.) joined the Company in April 1997. From
April 1996 until April 1997, he was Vice President of Lockheed
Martin's Washington Operations for the C3I 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.
Robert RisCassi 63 Vice President -- Washington, D.C. Operations. General Robert
W. RisCassi (U.S. Army-ret.) joined the Company in April 1997.
From April 1996 until April 1997, he was Vice President of Land
Systems for Lockheed Martin's C3I 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 Center.
Charles J. Schafer 52 Vice President -- Business Operations and President of the
Products Group. Mr. Schafer joined the Company in August 1998
as Vice President -- Business Operations and was appointed
President of the Products Group in September 1999. 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.
</TABLE>
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 28, 2000, there were 32,900,408 shares of Common Stock
outstanding. The Company knows of no person who, as of March 28, 2000,
beneficially owned more than five percent of the Common Stock, except as set
forth below.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
- ------------------------------------------ ------------------------- -----------
<S> <C> <C>
Lehman Brothers Capital Partners III, L.P.
and affiliates (1)
c/o Lehman Brothers Holdings Inc.
Three World Financial Center
New York, New York 10285 ................ 5,501,027 16.7%
David L. Cohen (2)
Harold J. Levy (2)
Iridian Asset Manager LLC
and affiliates(2)
c/o Iridian Asset Mangement LLC
276 Post Road West
Westport, CT 06880-4704 ................. 3,672,700 11.2%
Frank C. Lanza (3)
c/o L-3 Communications Holdings, Inc.
600 Third Avenue, 34th Floor
New York, New York 10016 ................ 2,386,286(4)(5) 7.3%
Robert V. LaPenta (3)
c/o L-3 Communications Holdings, Inc.
600 Third Avenue, 34th Floor
New York, New York 10016 ................ 2,386,448(5) 7.3%
Citigroup Inc.
153 East 53rd Street
New York, NY 10043 ...................... 1,668,743 5.1%
</TABLE>
- ----------
(1) David J. Brand, Alberto M. Finali, Robert B. Millard and Alan H.
Washkowitz, each of whom is director of the Company, are each Managing
Directors of Lehman Brothers. As limited partners of Lehman Brothers
Capital Partners III, L.P. or other affiliated partnerships sponsored by
Lehman Brothers ("the Lehman Partnership"), all such individuals may be
deemed to have shared beneficial ownership of shares of the Common Stock
held by the Lehman Partnership. Such individuals disclaim any such
beneficial ownership.
(2) Based on a Schedule 13G dated February 8, 2000, in which Messrs. Cohen and
Levy reported that they had shared voting and dispositive power over
3,672,700 shares of Common Stock, including 3,409,800 shares of Common
Stock over which Iridian Asset Management LLC ("Iridian") had shared voting
and dispositive power. According to the Schedule 13G, Iridian has direct
beneficial ownership of the 3,340,800 shares of Common Stock that it
manages and has voting and dispositive power over the 69,000 shares owned
by its affiliates. According to the Schedule 13G, Messrs. Cohen and Levy
each own 50% of the common stock of, and serve as a director of the
entity indirectly controlling Iridian, and serve as a principal of and
portfolio manager for Iridian, and therefore, may be deemed to have shared
voting and dispositive power over the shares of Common Stock beneficially
owned by Iridian and its affiliates; and, they perform investment advisory
services for First Eagle Trust, an opened-end non-diversified mutual fund
and have the power to vote or dispose of the 262,900 shares of Common Stock
owned by First Eagle Trust.
(3) Excluding the number of shares exercisable within 60 days after March 28,
2000 under employee stock options, Mr. Lanza and Mr. LaPenta each hold
options to purchase an additional 228,571 shares of the Common Stock.
10
<PAGE>
(4) Includes 75,000 shares held by Mr. Lanza's sons, Anthony Lanza, James
Lanza and Louis Lanza, as to which Mr. Lanza disclaims beneficial
ownership.
(5) The shares of Common Stock beneficially owned include 685,715 shares
exercisable within 60 days after March 28, 2000 under employee stock
options for each of Mr. Lanza and Mr. LaPenta and 162 shares allocated to
the account of Mr. LaPenta under the Company's savings plans.
(6) Based on Schedule 13G dated February 14, 2000, in which Citigroup Inc.
reported that it had shared voting and dispositive power over 1,668,743
shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the amount of Common Stock beneficially owned
(unless otherwise indicated) by the executive officers of the Company named in
the Summary Compensation Table below, the Company's directors, and by all
current executive officers and directors of the Company as a group. Except as
otherwise indicated, all information is as of March 28, 2000.
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENTAGE OF
STOCK BENEFICIALLY SHARES OF COMMON
OWNED(1) STOCK OUTSTANDING(3)
------------------------ ---------------------
<S> <C> <C>
Frank C. Lanza ............................ 2,386,286(2) 7.3%
Robert V. LaPenta ......................... 2,386,448 7.3%
Michael T. Strianese ...................... 44,807 --
Christopher C. Cambria .................... 32,318 --
Lawrence H. Schwartz ...................... 27,233 --
David J. Brand ............................ 49,479(4) --
Thomas A. Corcoran ........................ 500(5) --
Alberto M. Finali ......................... 30,938(4) --
Robert B. Millard ......................... 52,639(4) --
John E. Montague .......................... 500(5) --
John M. Shalikashvili ..................... 618(5) --
Alan M. Washkowitz ........................ 102,132(4)(6) --
Directors and Executive
Officers as a Group (18 persons) ......... 5,231,964(7) 15.9%
</TABLE>
- ----------
(1) The shares of Common Stock beneficially owned include the number of
shares (i) exercisable within 60 days after March 28, 2000 under employee
stock options and (ii) allocated to the accounts of executive officers
under the Company's 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, 685,715 shares;
Mr. LaPenta, 685,715 shares; Mr. Strianese, 28,667 shares; Mr. Cambria,
18,167 shares; and Mr. Schwartz, 14,733 shares, and (ii) the following
represent shares allocated under the Company's saving plans to the
accounts of: Mr. LaPenta, 162 shares; Mr. Strianese, 140 shares; and Mr.
Cambria, 151 shares.
(2) The number of shares shown above include shares that are individually or
jointly owned, as well as shares over which the individual has either
sole or shared investment or voting authority. Mr. Lanza's holdings of
the Common Stock includes 75,000 shares held by Mr. Lanza's sons, Anthony
Lanza, James Lanza and Louis Lanza, as to which Mr. Lanza disclaims
beneficial ownership.
(3) Share ownership does not exceed one percent of the class unless otherwise
indicated.
(4) David J. Brand, Alberto M. Finali, Robert B. Millard and Alan
H.Washkowitz, each of whom is director of the Company, are each Managing
Directors of Lehman Brothers. As limited partners of the Lehman
Partnership, all such individuals may be deemed to share beneficial
ownership of 5,501,027 shares of common stock of the Company held by the
Lehman Partnership. Such individuals disclaim any such beneficial
ownership.
(5) Includes 500 shares exercisable under director stock options within 60
days after March 28, 2000.
(6) Includes 41,748 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.
(7) Includes 1,509,047 shares exercisable under employee stock options within
60 days after March 28, 2000, and 3,819 shares allocated to the accounts
of executive officers under the Company's savings plans.
11
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company who served in such capacities as of December
31, 1999 (collectively, the "Named Executive Officers") for services rendered
to the Company during each of the last three years.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
----------------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS ($) OPTIONS (#) COMPENSATION ($)(2)
- ------------------------------- ------ --------------- ----------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
Frank C. Lanza 1999 $750,000 $200,000 -- $ 9,536
(Chairman and Chief Executive 1998 750,000 -- -- 11,341
Officer) ..................... 1997 542,654 -- 1,142,857 --
Robert V. LaPenta 1999 500,000 200,000 -- 27,900
(President and Chief Financial 1998 500,000 -- -- 27,591
Officer) ..................... 1997 356,538 -- 1,142,857 --
Lawrence H. Schwartz 1999 229,000 85,000 23,500 21,352
(Vice President, Business 1998 229,000 85,000 -- 22,090
Development) ................. 1997 145,327 80,000 17,000 --
Christopher C. Cambria 1999 207,000 190,000 47,500 7,317
(Vice President, Secretary 1998 190,000 140,000 -- 7,351
and General Counsel) ......... 1997 97,596 75,000 20,000 --
Michael T. Strianese 1999 180,000 175,000 47,500 69,969
(Vice President, Finance and 1998 165,000 140,000 -- 69,993
Controller) .................. 1997 107,386 95,000 35,000 1,956
</TABLE>
- ----------
(1) 1997 only included the pay periods ending during the nine months ended
December 31, 1997.
(2) Amounts for 1999 include (a) Company matching contributions of $3,200
under the Company's savings plan for Messrs. LaPenta, Cambria and
Strianese; (b) the value of supplemental life insurance programs in the
amounts of $9,536 for Mr. Lanza, $24,700 for Mr. LaPenta, $21,352 for Mr.
Schwartz, $4,117 for Mr. Cambria and $6,769 for Mr. Strianese; and (c) a
special bonus of $60,000 for Mr. Strianese related to the Company's
formation, which amount is also payable to Mr. Strianese in 2000.
12
<PAGE>
OPTION GRANTS
The following table sets forth information concerning individual grants of
options to purchase Common Stock made during the year ended December 31, 1999
to each of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT-DATE
NAME AND PRINCIPAL POSITION GRANTED (#) FISCAL YEAR ($/SH) DATE VALUE(1)
- ------------------------------------- ------------- -------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Frank C. Lanza (Chairman and Chief
Executive Officer) ................. -- -- -- -- --
Robert V. LaPenta (President and
Chief Financial Officer) ........... -- -- -- -- --
Lawrence H. Schwartz (Vice
President) ......................... 8,500 0.84% $ 40.50 01/19/2009 $122,940
15,000 1.49 37.50 10/25/2009 227,967
Christopher C. Cambria (Vice
President, Secretary and General
Counsel) ........................... 12,500 1.24 40.50 01/19/2009 180,795
35,000 3.47 37.50 10/25/2009 531,903
Michael T. Strianese (Vice President,
Finance and Controller) ............ 12,500 1.24 40.50 01/19/2009 180,795
35,000 3.47 37.50 10/25/2009 531,903
</TABLE>
- ----------
(1) In accordance with Securities and Exchange Commission ("SEC") rules, the
Black-Scholes option pricing model was used to estimate the grant date
present value of options set forth in this table based on the following
assumptions: an average discount rate of 4.6%; a volatility rate of
31.0%; a dividend yield of 0%; and, a weighted average expected option
life of 5.0 years. The approach used in developing the assumptions upon
which the Black-Scholes valuations were performed is consistent with the
requirements of Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. The Company's use of this valuation model should not be
construed as an endorsement of its accuracy for valuing options. All
stock option valuation models, including the Black-Scholes model, require
an assumption about the future movement of the price of the stock
underlying the option. The real value of the options in this table
depends upon the actual changes in the market price of the Common Stock
during the applicable period.
13
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information as to options to purchase Common
Stock exercised during 1999 by the Named Executive Officers; the total number
of exercisable and non-exercisable options to purchase the Common Stock
(including options granted in 1999 and prior years) owned by the Named
Executive Officers at December 31, 1999; and, aggregate dollar value of such
options that were in-the-money at December 31, 1999.
<TABLE>
<CAPTION>
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)
- ------------------------------- ------------- --------- ------------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Frank C. Lanza
(Chairman and Chief Executive
Officer) ..................... -- -- 228,571 685,715 $ 8,035,413 $24,106,311
Robert V. LaPenta
(President and Chief Financial
Officer) ..................... -- -- 228,571 685,715 8,035,413 24,106,311
Lawrence H. Schwartz
(Vice President, Business
Development) ................. -- -- 11,900 28,600 418,345 250,728
Christopher C. Cambria
(Vice President, Secretary and
General Counsel) ............. -- -- 14,000 53,500 492,170 369,368
Michael T. Strianese
(Vice President, Finance and
Controller) .................. -- -- 19,500 63,000 654,463 579,100
</TABLE>
- ----------
(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, 1999 closing stock price of the Common Stock of $41.625.
(2) These options are unexercisable because they have not yet vested under
their terms.
14
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for reviewing the design of, and
pay levels generated by, the Company's compensation and benefit programs for
the executive officers of the Company. The Committee is also responsible for
administering the Company's stock option program.
The Committee is committed to ensuring an executive compensation program
that supports the Company's 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 the achievement of Company 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 The Company must maintain its 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 secure, space, satellite, and military
communications industries -- for those positions where the labor
market is not limited to these industries, the Company 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 the Company's competition for executive talent is not limited to
the companies included in the published industry index established for
comparing stockholder returns.
The key elements of the Company's executive compensation program are base
salary, annual incentives, and long-term compensation. These key elements are
addressed separately below.
BASE SALARIES
The Committee will regularly review the base salary for the Chief
Executive Officer and the President. The Company has 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 to the Company.
As reflected in the Summary Compensation Table, Mr. Lanza's base salary
was $750,000 in 1999 and 1998 as provided for in his employment agreement. In
determining future increases to Mr. Lanza's base salary, the Committee will
consider his individual performance as measured by short-term achievements as
well as his contributions to long-term organizational success. The 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. For the Named Executive Officers, target
payouts are 40% of base pay. Actual bonuses are based on an assessment of the
participant's contributions toward organizational success.
Messrs. Lanza and LaPenta each received a bonus of $200,000 in 1999 to
recognize their contributions to the superior performance of the Company.
Messrs. Lanza and LaPenta were not eligible for a bonus in 1998 and 1997. In
lieu of a bonus for those years, on April 30, 1997 at the time Messrs. Lanza
and LaPenta entered into their respective employment agreements they were each
granted a stock
15
<PAGE>
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 the Company's 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
will vest and become exercisable as of April 30, 2000, if employment continues
through and including such date. 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 the Company in 1998 and of the Company's 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 the 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 will be based
primarily on competitive practice but may also be adjusted to reflect factors
such as individual and Company 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
Committee will weigh all pertinent factors to determine appropriate plan design
and incentive awards.
Members of the Compensation Committee:
Robert B. Millard (Chairman)
John E. Montague
Alan H. Washkowitz
16
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return of the 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 (the first
trading date following the Company's initial public offering (the "IPO")) to
December 31, 1999. 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 the Common Stock was $100 on May 19, 1998. The starting
point for the measurement of the Common Stock cumulative total return was the
IPO price of $22.00 per share. The Peer Group index is composed of Alliant
Techsystems Inc., General Dynamics Corporation, Litton Industries, Inc. and
Northrup Grumman Corporation. The graph is not, and is not intended to be,
indicative of future performance of the Common Stock.
L-3 COMMUNICATIONS HOLDINGS, INC.
CUMULATIVE TOTAL SHAREHOLDER RETURN FOR
PERIOD OF MAY 19, 1998 THROUGH DECEMBER 31, 1999
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
BASE PERIOD DECEMBER 31, JUNE 30, DECEMBER 31,
MAY 19, 1998 1998 1999 1999
------------ ------------- --------- ------------
<S> <C> <C> <C> <C>
L-3 Communications 100 211.65 219.60 189.20
S&P 500 Index 100 111.75 125.59 135.27
Peer Group 100 99.73 107.40 83.05
</TABLE>
(as prepared by Standard & Poor's Compustat)
17
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1999 fiscal year, Messrs. Millard, Montague and Washkowitz
served as members of the Compensation Committee. None of these individuals has
served at any time as an officer or employee of the Company or any subsidiary
of the Company. Messrs. Millard and Washkowitz are affiliated with the Lehman
Partnership which in aggregate holds 16.7% of the Common Stock outstanding as
of the date of this Proxy Statement. Pursuant to a stockholders agreement among
the Company, the Lehman Partnership, Lockheed Martin and Messrs. Lanza and
LaPenta (the "Stockholders Agreement"), the Lehman Partnership has the right,
from time to time subject to certain conditions, to require the Company to
register under the Securities Act of 1933, as amended, shares of the Common
Stock held by it. The Lehman Partnership has the right to request up to four
demand registrations and also has piggyback registration rights. The Company
has 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.
In February 1999, the Lehman Partnership sold 2 million shares of Common Stock
through the exercise of its piggyback registration right in a public offering
of Common Stock by the Company. In December 1999, the Lehman Partnership
distributed approximately 3.8 million shares of its Common Stock to its
partners. The Stockholders Agreement also provides that Lehman Brothers has the
exclusive right to provide investment banking services to the Company for the
five-year period through April 30, 2002 (except that the exclusivity period is
through April 30, 2000 as to cash acquisitions undertaken by the Company or L-3
Communications Corporation) so long as the Lehman Partnership owns at least 10%
of the outstanding Common Stock. In the event that Lehman Brothers agrees to
provide any investment banking services to the Company or L-3 Communications
Corporation, it will be paid fees that are mutually agreed upon based on
similar transactions and practices in the investment banking industry. See
"Certain Relationships and Related Transactions".
No executive officer of the Company 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 the Company's Board of Directors or
Compensation Committee.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement (the "Employment
Agreements") effective on April 30, 1997 with each of Mr. Lanza, Chairman and
Chief Executive Officer of the Company, who will receive a base salary of
$750,000 per annum and appropriate executive level benefits, and Mr. LaPenta,
President and Chief Financial Officer of the Company, 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.
Upon a termination without cause or resignation for good reason, the
Company 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
the Company pays the severance described above.
The Company has granted each of Messrs. Lanza and LaPenta (together, the
"Equity Executives") nonqualified options to purchase, at $6.47 per share,
1,142,857 shares of Common Stock. In each case, half of the options were
structured as "Time Options" and half were structured initially as "Performance
Options" (collectively, 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 and April 30, 1999 and will become exercisable with respect to an
additional 20% of the shares subject to the Time Options on each of
18
<PAGE>
April 30, 2000, 2001 and 2002 if employment continues through and including
such date. The Performance Options were initially structured to become
exercisable nine years after the Closing, but became exercisable with respect
to up to 20% of the shares subject to the Performance Options on each of March
2, 1998 and April 30, 1999 and were to become exercisable with respect to an
additional 20% of the shares subject to the Performance Options on each of
April 30, 2000, 2001 and 2002, to the extent certain targets for the Company's
earnings before interest, income taxes, depreciation and amortization were
achieved. On March 2, 1998, each of Mr. Lanza and Mr. LaPenta exercised options
to acquire 228,571 shares of Common Stock. On April 5, 1999, the Company
amended the Performance Options to eliminate the performance target
acceleration provisions and to provide that the unvested portion of the
Performance Options will vest and become exercisable as of April 30, 2000, if
employment continues through and including such date. The Options will become
fully exercisable under certain circumstances, including a change in control.
The Option term is ten years through April 30, 2007; except that if (i) the
Equity Executive is fired for cause or resigns without good reason, the Options
will expire upon termination of employment or (ii) the Equity Executive 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, the Company
may terminate the Options, so long as the Equity Executives are cashed out or
permitted to exercise their Options prior to such change of control.
The Company also has entered into a split-dollar life insurance agreement
with Mr. LaPenta. Under the split-dollar agreement, the Company owns and pays
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 the Company as a recovery
of its investment.
PENSION PLAN TABLE
The following table shows the estimated annual pension benefits payable
under the L-3 Communications Corporation Pension Plan and Supplemental Employee
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 the Company.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
--------------------------------------------------------------
CAREER AVERAGE
COMPENSATION 15 20 25 30 35
- ------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000 ......... $ 18,981 $ 24,937 $ 29,833 $ 33,856 $ 37,164
150,000 ......... 23,172 30,408 36,355 41,243 45,260
175,000 ......... 27,364 35,879 42,877 48,629 53,357
200,000 ......... 31,556 41,349 49,399 56,015 61,454
225,000 ......... 35,747 46,820 55,921 63,402 69,550
250,000 ......... 39,939 52,291 62,444 70,788 77,647
300,000 ......... 48,322 63,233 75,488 85,561 93,840
400,000 ......... 65,089 85,116 101,577 115,106 126,226
450,000 ......... 73,472 96,057 114,621 129,879 142,420
500,000 ......... 81,855 106,999 127,665 144,651 158,613
750,000 ......... 123,772 161,707 192,887 218,515 239,579
</TABLE>
As of December 31, 1999, 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, $778,846 and 3 years; Mr. LaPenta, $519,231
and 28 years; Mr. Strianese, $332,801 and 10 years; Mr. Cambria, $354,473 and 3
years; and Mr. Schwartz, $322,808 and 3 years.
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of the date of this Proxy Statement, the Lehman Partnership owns 16.7%
of the Common Stock. Certain affiliates of the Lehman Partnership provide
services to the Company. In 1999, Lehman Brothers provided underwriting and
investment banking services to the Company, for which services it received fees
of $8.3 million. In addition, Lehman Brothers Commercial Paper Inc., an
affiliate of Lehman Brothers, is a lender to the Company under the Company's
bank credit facilities, for which it received fees of $24,107 in 1999.
As of the date of this Proxy Statement, Lockheed Martin no longer owns any
shares of Common Stock. Through October 1999, however, Lockheed Martin owned in
excess of 5% of the Common Stock outstanding. In February 1999, Lockheed Martin
sold 4.5 million shares in a public offering by the Company and, in October
1999, sold all the remaining shares of Common Stock it owned in a private
transaction.
In connection with the acquisition by the Company of its initial ten
business units (the "Businesses") from Lockheed Martin (the "L-3 Acquisition"),
Lockheed Martin has agreed to indemnify the Company and L-3 Communications
Corporation, subject to certain limitations, for Lockheed Martin's breach of
representations and warranties and the Company and L-3 Communications
Corporation have assumed certain obligations relating to environmental matters
and benefits plans. These obligations include certain on-site and off-site
environmental liabilities related to events or activities of the Businesses
occurring prior to the L-3 Acquisition. Lockheed Martin has agreed to indemnify
the Company, subject to certain limitations, for its breach of (i)
non-environmental representations and warranties up to $50 million (subject to
a $5 million threshold) and (ii) through April 30, 2005, to pay 50% of all
costs incurred by the Company above those reserved for on the Company's balance
sheet at April 1997 relating to certain Company-assumed environmental
liabilities and, for the seven years thereafter, 40% of certain reasonable
operation and maintenance costs relating to any environmental remediation
projects undertaken in the first eight years (subject to a $6 million
threshold).
Lockheed Martin provides to certain divisions of the Company certain
management information systems services at Lockheed Martin's fully-burdened
cost but without profit. The Company, L-3 Communications Corporation and
Lockheed Martin have entered into certain subleases of real property and
cross-licenses of intellectual property.
In addition, the Company and Lockheed Martin have entered into a Limited
Noncompetition Agreement (the "Noncompetition Agreement") which, for up to
three years from April 1997, in certain circumstances, precludes Lockheed
Martin from engaging in the sale of any products that compete with the products
of the Company that are set forth in the Noncompetition Agreement for
specifically identified application of the products. Under the Noncompetition
Agreement, Lockheed Martin is prohibited, with certain exceptions, from
acquiring any business engaged in the sale of the specified products referred
to in the preceding sentence, although Lockheed Martin may acquire such a
business under circumstances where the exceptions do not apply provided that it
offers to sell such business to the Company within 90 days of its acquisition.
The Noncompetition Agreement does not, among other exceptions, (i) apply to
businesses operated and managed by Lockheed Martin on behalf of the U.S.
government, (ii) prohibit Lockheed Martin from engaging in any existing
businesses and planned businesses as of the closing of the L-3 Acquisition or
businesses that are reasonably related to existing or planned businesses or
(iii) apply to selling competing products where such products are part of a
larger system sold by Lockheed Martin.
The Company sells products to Lockheed Martin and its affiliates. Such net
sales amounted to $65.8 million and $70.4 million for 1999 and 1998,
respectively.
Sales of products to Lockheed Martin, excluding those under intercompany
work transfer agreements existing at the time of the L-3 Acquisition, are made
on terms no less favorable than those which would be available from
non-affiliated third party customers. A significant portion of the Company's
sales to Lockheed Martin are either based on competitive bidding or catalog
prices.
20
<PAGE>
STOCKHOLDERS AGREEMENT
In connection with the L-3 Acquisition, the Company, Lockheed Martin, the
Lehman Partnership and Messrs. Lanza and LaPenta entered into the Stockholders
Agreement which, except for the terms relating to (i) the registration rights,
(ii) provision of services by Lehman Brothers and (iii) the standstill
agreement by Lockheed Martin, terminated upon the completion of the IPO.
Pursuant to the Stockholders Agreement, Messrs. Lanza and LaPenta,
Lockheed Martin and the Lehman Partnership have the right, from time to time
and subject to certain conditions, to require Holdings to register under the
Securities Act of 1933 shares of Common Stock held by them. Lockheed Martin,
the Lehman Partnership and each of the Messrs. Lanza and LaPenta has three,
four and one demand registration rights, respectively. In addition, the
Stockholders Agreement also provides certain existing stockholders with certain
piggyback registration rights. The Stockholders Agreement provides, among other
things, that the Company will pay expenses in connection with (i) up to two
demand registrations requested by Lockheed Martin, up to three demand
registrations requested by the Lehman Partnership and the two demand
registrations requested by Messrs. Lanza and LaPenta and (ii) any registration
in which the existing stockholders participate through piggyback registration
rights granted under such agreement. In February, 1999, Lockheed Martin and the
Lehman Partnership sold 4.5 million shares and 2 million shares, respectively,
through the exercise of their piggyback registration rights in a public
offering of Common Stock by the Company.
The Stockholders Agreement also provides that Lehman Brothers has the
exclusive right to provide investment banking services to the Company through
April 30, 2002 (except that the exclusivity period through April 30, 2000 as to
cash acquisitions undertaken by the Company or L-3 Communications Corporation)
so long as the Lehman Partnership owns at least 10% of the outstanding Common
Stock. In the event that Lehman Brothers agrees to provide any investment
banking services to the Company or L-3 Communications Corporation, it will be
paid fees that are mutually agreed upon based on similar transactions and
practices in the investment banking industry.
Under the Stockholders Agreement, Lockheed Martin is subject to a
standstill arrangement which generally prohibits any increase in its share
ownership percentage over 34.9%.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's 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 the Company with copies of all Section 16(a) forms they file.
Lockheed Martin filed a Form 4 relating to the sale by Lockheed Martin of
4.5 million shares of Common Stock in a public offering by the Company in
February 1999 after the applicable deadline. Lawrence Schwartz, Michael
Strianese, Robert Mehmel and Robert Riscassi filed Form 4's relating to their
sale of 5,000 shares, 5,000 shares, 8,500 shares and 1,500 shares of Common
Stock in August 1999 after the applicable deadline.
PROPOSAL 2. SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP to act as
independent auditors for the Company for the 2000 fiscal year, and a proposal
to ratify this selection will be submitted to the Annual Meeting.
PricewaterhouseCoopers LLP has acted as independent auditors for the Company
since its formation in 1997 and management believes it desirable and in the
best interests of the Company 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.
21
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
Any Stockholder desiring to submit a proposal to be presented for
consideration in the Company's 2001 Proxy Statement must submit such proposal
to the Company no later than the close of business on December 11, 2000. 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 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.
22
<PAGE>
GENERAL AND OTHER MATTERS
At the date of this Proxy Statement, the Company knows 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 thereof, the persons named as proxies in the
accompanying proxy will vote them in accordance with their discretion and
judgment on such matters.
The Company has herewith provided each Stockholder whose proxy is being
solicited hereby, a copy of the Company's 1999 Annual Report, including
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
Vice President, Secretary and General
Counsel
New York, New York
April 6, 2000
23
<PAGE>
P
R
O
X
Y
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 25, 2000, 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. Y 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 25, 2000,
at the Rihga Royal Hotel, 151 West 54th Street, New York, New York, 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 AND FOR 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 -
<PAGE>
3 2 1 8
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
Directors FOR WITHHELD FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
Class III Nominees: (b) Appointment of
01. Alberto M. Finali PricewaterhouseCoopers LLP
02. Arthur L. Simon as Auditors
FOR, except vote withheld from the following nominee(s):
----------------------------------------
I plan to attend the Annual Meeting of Stockholders
[ ]
YES
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 named 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.)
[GRAPHIC OMITTED]
- FOLD AND DETACH HERE -
RETAIN ADMISSION TICKET
TELEPHONE AND INTERNET VOTING INSTRUCTIONS
L-3 Communications 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 2000 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 1:30 p.m.
L-3 COMMUNICATIONS HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, APRIL 25, 2000, 2:30 P.M. EASTERN STANDARD TIME
RIHGA ROYAL HOTEL
151 WEST 54TH STREET
NEW YORK, NEW YORK
