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:
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 daylight time, on Tuesday, April 22, 2003, 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 22nd.
Very truly yours,
/s/ Frank C. Lanza
Frank C. Lanza
Chairman and Chief Executive Officer
L-3 COMMUNICATIONS HOLDINGS, INC.
[GRAPHIC OMITTED]
NOTICE OF 2003 ANNUAL MEETING OF
STOCKHOLDERS AND PROXY STATEMENT
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Stockholders (the
"Annual Meeting") of L-3 Communications Holdings, Inc. will be held at the
Rihga Royal Hotel, 151 West 54th Street, New York, New York on Tuesday, the
22nd day of April, 2003, at 2:30 p.m., eastern daylight time, for the following
purposes:
1. Election of two Class III Directors whose terms expire in 2003;
2. Ratification of the appointment of our independent auditors for 2003;
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
Senior Vice President, Secretary
and General Counsel
April 1, 2003
-------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
PLEASE VOTE OVER THE TELEPHONE OR THE INTERNET OR COMPLETE, DATE, SIGN AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED FOR THAT PURPOSE.
YOU MAY REVOKE YOUR PROXY IF YOU ATTEND THE ANNUAL MEETING AND WISH TO VOTE
YOUR SHARE IN PERSON.
-------------------------------------------------------------------------------
L-3 COMMUNICATIONS HOLDINGS, INC.
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
----------------
PROXY STATEMENT
This proxy statement is furnished to the holders of the common stock, par
value $0.01 per share, of L-3 Communications Holdings, Inc. in connection with
the solicitation of proxies for use at the 2003 Annual Meeting of Stockholders
to be held at the Rihga Royal Hotel, 151 West 54th Street, New York, New York
at 2:30 p.m., eastern daylight time, on Tuesday, April 22, 2003 (the "Annual
Meeting").
RECORD DATE
The board of directors has fixed the close of business on March 21, 2003
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 95,451,708 shares of our
common stock outstanding. This proxy statement, the accompanying proxy card and
our Annual Report to stockholders are intended to be mailed on or about April
1, 2003 to each Stockholder entitled to vote at the Annual Meeting.
PROXIES
The proxy accompanying this proxy statement is solicited on behalf of our
board of directors for use at the Annual Meeting and any adjournments of the
Annual Meeting, and the expenses of solicitation of proxies will be borne by
us. The solicitation will be made primarily by mail, but our officers and
regular employees may also solicit proxies by telephone, telegraph, facsimile,
via the Internet or in person. We also have retained Georgeson Shareholder
Services to assist in soliciting proxies. Each holder of common stock is
entitled to one vote for each share of our common stock held. The holders in
person or by proxy of a majority of the common stock entitled to be voted at
the Annual Meeting shall constitute a quorum.
Each Stockholder may appoint a person (who need not be a shareholder)
other than the persons named in the enclosed proxy to represent him or her at
the meeting by completing another proper proxy. In either case, such completed
proxy should be returned in the enclosed envelope provided for that purpose for
delivery before the meeting or should be delivered to our Secretary at 600
Third Avenue, New York, New York 10016, not later than 5 p.m., eastern daylight
time, on Monday, April 21, 2003.
Any proxy delivered pursuant to this solicitation is revocable at the
option of the person(s) executing the proxy upon our receipt, prior to the time
the proxy is voted, of a duly executed instrument revoking it, or of a duly
executed proxy bearing a later date, or in the case of death or incapacity of
the person(s) executing the proxy, of written notice of such death or
incapacity, or by such person(s) voting in person at the Annual Meeting. Unless
revoked, all proxies representing shares entitled to vote which are delivered
pursuant to this solicitation will be voted at the Annual Meeting and, where a
choice has been specified on the proxy card, will be voted in accordance with
such specification. WHERE A CHOICE HAS NOT BEEN SPECIFIED ON THE PROXY CARD,
THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF YOUR BOARD OF
DIRECTORS.
Assuming a quorum is present, a majority of the shares of common stock
present in person or represented by proxy at the Annual Meeting is required for
the election of directors and for approval of all other items submitted to
Stockholders for their consideration. Abstentions and instances where brokers
are prohibited from exercising discretionary authority for beneficial owners
who have not returned a proxy (so-called "broker non-votes") will be counted
for purposes of determining a quorum, but will not be counted as either voting
for or against any proposal.
1
VOTING BY TELEPHONE OR INTERNET
Instead of submitting your vote by mail on the enclosed proxy card, you
can vote by telephone or over the Internet. The telephone and Internet voting
procedures, which comply with Delaware law, are designed to authenticate
Stockholders' identities, to allow Stockholders to vote their shares and to
confirm that their instructions have been properly recorded.
Voting your proxy by mail, telephone or the Internet will not limit your
right to vote at the Annual Meeting if you later decide to attend in person. If
your shares are held in the name of a broker, bank or other record holder, you
must obtain a proxy from the record holder as to how to vote your shares or
obtain a proxy from the record holder to vote at the Annual Meeting.
Stockholders with shares registered directly in their name in our stock
records maintained by our transfer agent, EquiServe Trust Company, N.A., may
vote their shares (1) by making a toll-free telephone call from the U.S. and
Canada to EquiServe at 1-877-PRX-VOTE (1-877-779-8683), (2) by submitting their
proxy over the Internet at the following address on the World Wide Web:
http://www.eproxyvote.com/lll, or (3) by mailing their signed proxy card.
Specific instructions to be followed by registered Stockholders are set forth
on the enclosed proxy card. Proxies submitted by telephone or over the Internet
as described above must be received by 5:00 p.m., eastern daylight time, on
April 21, 2003.
REVOCATION OF PROXIES SUBMITTED BY TELEPHONE OR INTERNET
To revoke a proxy previously submitted by telephone or over the Internet,
you may simply vote again at a later date, using the same procedures, in which
case your later submitted vote will be recorded and your earlier vote revoked,
or by attending the meeting and voting in person.
PROPOSAL 1. ELECTION OF DIRECTORS
Our Amended and Restated Certificate of Incorporation and the Bylaws
provide for a board of directors whose number shall be fixed from time to time
exclusively pursuant to a resolution adopted by the board of directors. We have
eight directors. Our Amended and Restated Certificate of Incorporation provides
for a classified board of directors divided into three classes as follows:
Frank C. Lanza, Robert V. LaPenta and John M. Shalikashvili constitute a class
with a term that expires at the annual meeting in 2005 (the "Class I
Directors"); Thomas A. Corcoran, John E. Montague and Alan H. Washkowitz
constitute a class with a term that expires at the annual meeting in 2004 (the
"Class II Directors"); and Robert B. Millard and Arthur L. Simon constitute a
class with a term that expires at the upcoming annual meeting (the "Class III
Directors"). The full board of directors has considered and nominated, the
following slate of Class III nominees for a three year term expiring in 2006:
Robert B. Millard and Arthur L. Simon. Action will be taken at the Annual
Meeting for the election of these Class III nominees.
It is intended that the proxies delivered pursuant to this solicitation
will be voted in favor of the election of Mr. Millard and Mr. 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 describes the offices held, other business
directorships and the class and term of each nominee and of each director whose
term of office will continue after the 2003 Annual Meeting. Beneficial
ownership of equity securities of the nominees is shown under the caption
"Security Ownership of Management" on page 10.
2
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS IN 2003
CLASS III -- NOMINEES FOR TERMS EXPIRING IN 2006
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------- ----- ------------------------------------------------------------------
Robert B. Millard 52 Director since April 1997. Chairman of the compensation
committee. Mr. Millard is a Managing Director of Lehman
Brothers Inc., head of Lehman Brothers' Principal Trading &
Investments Group and principal of the Merchant Banking Group.
Mr. Millard joined Lehman Brothers Inc. in 1978 when Kuhn Loeb
& Co. was acquired by Lehman Brothers and became a Managing
Director of Lehman Brothers Inc. in 1983. Mr. Millard joined
Kuhn Loeb & Co. in 1976. Mr. Millard is a director of GulfMark
Offshore, Inc. and Weatherford International, Inc.
Arthur L. Simon 71 Director since April 2000. Member of the audit committee. Mr.
Simon is an independent consultant. Before his retirement, Mr.
Simon was a partner at Coopers & Lybrand L.L.P., Certified Public
Accountants, from 1968 to 1994. He is a director of Loral Space &
Communications Ltd.
The nominees for election to the board of directors are hereby proposed
for approval by the Stockholders. The affirmative vote of the holders of a
majority of the shares present or represented and entitled to vote at the
Annual Meeting will be necessary to approve each nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSED NOMINEES
FOR ELECTION TO THE BOARD OF DIRECTORS.
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE 2003 ANNUAL MEETING AND WHO ARE
NOT SUBJECT TO ELECTION THIS YEAR.
CLASS I -- DIRECTORS WHOSE TERMS EXPIRE IN 2005
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
---------------- ----- ----------------------------------------------------------------------
Frank C. Lanza 71 Chairman and Chief Executive Officer and Director since April
1997. From April 1996, when Loral Corporation was acquired by
Lockheed Martin Corporation, until April 1997, Mr. Lanza was
Executive Vice President of Lockheed Martin, a member of
Lockheed Martin's Executive Council and Board of Directors and
President and Chief Operating Officer of Lockheed Martin's
command, control, communications and intelligence ("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 DalmoVictor and Philco
Western Development Laboratory.
3
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
----------------------- ----- ----------------------------------------------------------------------
Robert V. LaPenta 57 President and Chief Financial Officer and Director since April
1997. From April 1996, when Loral was acquired by Lockheed
Martin, until April 1997, Mr. LaPenta was a Vice President of
Lockheed Martin and was Vice President and Chief Financial
Officer of Lockheed Martin's 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, the Board of Trustees of The
American College of Greece and the Board of Directors of Core
Software Technologies.
John M. Shalikashvili 66 Director since August 1998. Chairman of the audit committee.
General Shalikashvili (U.S. Army-ret.) is an independent
consultant and a Visiting Professor at Stanford University. General
Shalikashvili was the senior officer of the United States military
and principal military advisor to the President of the United States,
the Secretary of Defense and National Security Council by serving
as the thirteenth Chairman of the Joint Chiefs of Staff,
Department of Defense, for two terms from 1993 to 1997. Prior to
his tenure as Chairman of the Joint Chiefs of Staff, he served as
the Commander in Chief of all United States forces in Europe and
as NATO's tenth Supreme Allied Commander, Europe
(SACEUR). He has also served in a variety of command and staff
positions in the continental United States, Alaska, Belgium,
Germany, Italy, Korea, Turkey and Vietnam. General Shalikashvili
is a director of The Boeing Company, United Defense Industries
Inc., Frank Russell Trust Company and Plug Power, Inc.
CLASS II -- DIRECTORS WHOSE TERMS EXPIRE IN 2004
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
-------------------- ----- ---------------------------------------------------------------------
Thomas A. Corcoran 58 Director since July 1997. Member of the audit committee. Since
March 2001, Mr. Corcoran has been the President and Chief
Executive Officer of Gemini Air Cargo. Mr. Corcoran is also
president of Corcoran Enterprises, a private management
consulting firm. Mr. Corcoran was the President and Chief
Executive Officer of Allegheny Teledyne Incorporated from
October 1999 to December 2000. From October 1998 to September
1999, he was President and Chief Operating Officer of the Space &
Strategic Missiles Sector of Lockheed Martin Corporation. From
March 1995 to September 1998 he was the President and Chief
Operating Officer of the Electronic Systems Sector of Lockheed
Martin Corporation. From 1993 to 1995, Mr. Corcoran was
President of the Electronics Group of Martin Marietta
Corporation. Prior to that he worked for General Electric for 26
years and from 1983 to 1993 he held various management positions
with GE Aerospace and was a company officer from 1990 to 1993.
Mr. Corcoran is a member of the Board of Trustees of Worcester
Polytechnic Institute, the Board of Trustees of Stevens Institute of
Technology and the Board of Directors of REMEC Corporation.
4
CLASS II -- DIRECTORS WHOSE TERMS EXPIRE IN 2004 -- CONTINUED
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
-------------------- ----- -------------------------------------------------------------------
John E. Montague 49 Director since April 1997. Member of the compensation
committee. Mr. Montague has been a managing director at CSP
Associates since April 2002. From August 2001 to April 2002, he
was Vice President, Financial Strategies of Lockheed Martin
Corporation. From September 1998 to August 2001, he was Vice
President and Chief Financial Officer of Lockheed Martin Global
Telecommunications, Inc., a wholly owned subsidiary of Lockheed
Martin. He served as Vice President, Financial Strategies at
Lockheed Martin, responsible for mergers, acquisitions and
divestiture activities and shareholder value strategies from March
1995 until September 1998. Previously, he was Vice President,
Corporate Development and Investor Relations at Martin Marietta
Corporation from 1991 to 1995. From 1988 to 1991, he was
Director of Corporate Development at Martin Marietta
Corporation, which he joined in 1977 as a member of the
engineering staff.
Alan H. Washkowitz 62 Director since April 1997. Member of the compensation
committee. Mr. Washkowitz is a Managing Director of Lehman
Merchant Banking Group, and is responsible for the oversight of
Lehman Brothers Inc. Merchant Banking Portfolio Partnership L.P.
Mr. Washkowitz joined Lehman Brothers Inc. in 1978 when Kuhn
Loeb & Co. was acquired by Lehman Brothers. Mr. Washkowitz is
a director of Peabody Energy Corporation and K&F Industries,
Inc.
5
THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
Our board of directors directs the management of our business and affairs,
as provided by Delaware law, and conducts its business through meetings of the
board of directors and two standing committees: the audit and compensation
committees. In addition, from time to time, special committees may be
established under the direction of the board of directors when necessary to
address specific issues. We have no nominating committee; however, the audit
committee has agreed to perform the functions of the nominating committee. Each
executive officer serves at the discretion of the board of directors. During
the fiscal year ended December 31, 2002, the board of directors held four
regularly scheduled meetings and one special meeting. All of our directors
attended at least 75% of the combined number of board of directors meetings and
committee meetings during the past fiscal year.
The audit committee currently consists of Messrs. Corcoran, Shalikashvili
(Chairman) and Simon. This committee, which met nine times during 2002,
including four meetings by telephone, is responsible generally for recommending
to the board of directors the independent accountants to be nominated to audit
our financial statements; approving the compensation of the independent
accountants; meeting with our independent accountants to review the proposed
scope of the annual audit of our financial statements; reviewing the findings
of the independent accountants with respect to the annual audit; and reviewing
with management and the independent accountants our periodic financial reports
prior to our filing them with the SEC and reporting annually to the board of
directors with respect thereto.
The compensation committee consists of Messrs. Millard (Chairman),
Montague and Washkowitz. This committee, which acted by written consent four
times during 2002, is responsible for administering our 1997 Stock Option Plan
for Key Employees (the "1997 Plan") and our 1999 Long Term Performance Plan
(the "1999 Plan") and has limited authority to adopt amendments to those plans.
This committee is also responsible for recommending to the board of directors
the salaries to be paid to our Chief Executive Officer and the President, and
reviewing and approving the Chief Executive Officer's and the President's other
annual cash compensation and long-term incentives and the total compensation to
be paid to certain of our other executive officers.
COMPENSATION OF DIRECTORS
The directors who are also our employees or employees of our subsidiaries
or affiliates do not receive compensation for their services as directors. The
non-affiliated directors receive annual compensation of $30,000 for service on
the board of directors, of which $25,000 is paid in cash on a quarterly basis,
and $5,000 is paid in shares of our common stock. The chairman of both the
audit committee and the compensation committee each receives additional cash
annual compensation of $3,500. In addition, non-affiliated directors receive
annual stock option grants of shares of our common stock, which 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 $1,250 per meeting attended, including committee meetings, up to a
maximum of $2,500 per day.
Non-affiliated directors may defer up to 100 percent of the cash portion
of their annual cash compensation (including meeting fees) otherwise payable to
the director. Subject to certain limitations, a participating director's
deferred compensation will be distributed in a lump sum on, or distributed 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 of the calendar year in which
his/her compensation is earned. Interest is accrued on deferred amounts.
Depending on a director's investment election, deferred amounts earn interest
at a rate based on the 90-day U.S. Government Treasury Bill or the performance
of our common stock.
6
EXECUTIVE AND CERTAIN OTHER OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of our current
executive officers, other than Messrs. Lanza and LaPenta who are presented
under "Class I -- Directors Whose Terms Expire in 2005" and other officers of
the Company.
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
------------------------ ----- --------------------------------------------------------------------
Christopher C. Cambria 44 Senior Vice President -- Secretary and General Counsel. Mr.
Cambria became a Senior Vice President in March 2001. He joined
us in June 1997 as Vice President -- General Counsel and
Secretary. From 1994 until joining us, Mr. Cambria was an
associate with Fried, Frank, Harris, Shriver & Jacobson. From 1986
until 1993, he was an associate with Cravath, Swaine & Moore. Mr.
Cambria is a director of Core Software Technologies.
Michael T. Strianese 47 Senior Vice President -- Finance. Mr. Strianese became a Senior
Vice President in March 2001. He joined us in April 1997 as Vice
President -- Finance and Controller and was our Controller until
July 2000. From April 1996, when Loral was acquired by Lockheed
Martin, until April 1997, Mr. Strianese was Vice President and
Controller of Lockheed Martin's C3I and Systems Integration
Sector. From 1991 to the April 1996 acquisition of Loral, he was
Director of Special Projects at Loral. Mr. Strianese is a Certified
Public Accountant.
Charles J. Schafer 55 Senior Vice President -- Business Operations and President of the
Products Group. Mr. Schafer became a Senior Vice President in
April 2002. Mr. Schafer was appointed President of the Products
Group in September 1999. He joined us in August 1998 as Vice
President -- Business Operations. Prior to August 1998, he was
President of Lockheed Martin's Tactical Defense Systems Division,
a position he also held at Loral since September 1994. Prior to the
April 1996 acquisition of Loral, Mr. Schafer held various executive
positions with Loral, which he joined in 1984.
Jimmie V. Adams 66 Vice President -- Washington, D.C. Operations. General Jimmie V.
Adams (U.S.A.F.-ret.) joined us in May 1997. From April 1996
until April 1997, he was Vice President of Lockheed Martin's
Washington Operations for the 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.
7
NAME AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
--------------------- ----- ---------------------------------------------------------------------
David T. Butler III 46 Vice President -- Planning. Mr. Butler became a Vice President in
December 2000. He joined us in 1997 as our corporate Director of
Planning and Strategic Development. Prior to joining us, he was
the Controller for Lockheed Martin Fairchild Systems from 1996 to
1997. Prior to the acquisition of Loral, Mr. Butler was Controller
of Loral Fairchild Systems from 1992 to 1996. From 1981 to 1992,
Mr. Butler held a number of financial positions with Loral
Electronic Systems.
Ralph G. D'Ambrosio 35 Vice President and Controller. Mr. D'Ambrosio became Vice
President in July 2001 and Controller in August 2000. He joined us
in August 1997, and until July 2000 was our Assistant Controller.
Prior to joining us, he was a senior manager at Coopers & Lybrand
L.L.P., where he held a number of positions since 1989. Mr.
D'Ambrosio is a Certified Public Accountant.
Joseph S. Paresi 47 Vice President -- Product Development and President of the
Security Systems Division. Mr. Paresi joined us in April 1997. From
April 1996 until April 1997, Mr. Paresi was Corporate Director of
Technology for Lockheed Martin's C3I and Systems 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. Mr. Paresi is currently a director of
AnnisTech, Inc. and Millivision, Inc.
Robert RisCassi 67 Vice President -- Washington, D.C. Operations. General Robert
W. RisCassi (U.S. Army-ret.) joined us in April 1997. From April
1996 until April 1997, he was Vice President of Land Systems for
Lockheed Martin's 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. General RisCassi is currently a director of Alliant
Techsystems Inc.
Stephen M. Souza 50 Vice President and Treasurer. Mr. Souza joined us in August 2001.
Prior to joining us he was the Treasurer of ASARCO Inc. from
1999 to August 2001 and Assistant Treasurer from 1992 to 1999.
Jill H. Wittels 53 Vice President -- Business Development. Ms. Wittels joined us in
March 2001. From July 1998 to February 2001 she was President
and General Manager of BAE Systems' Information and
Electronic Warfare Systems/Infrared and Imaging Systems division
and its predecessor company. From January 1997 to July 1998,
Ms. Wittels was Vice President -- Business Development and
Operations for IR Focalplane Products at Lockheed Martin.
Ms. Wittels is on the Board of Overseers for the Department of
Energy's Fermi National Accelerator Lab. Ms. Wittels is also a
director of Innovative Micro Technology, Inc. and Millivision, Inc.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 21, 2003, there were 95,451,708 shares of our common stock
outstanding. We know of no person who, as of March 21, 2003, beneficially owned
more than five percent of the common stock, except as set forth below.
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS(1)
-------------------------------------- ------------------------- ------------
Citigroup Inc.(2)
153 East 53rd Street
New York, New York 10043 ............ 10,675,192 11.2%
Frank C. Lanza(3)
c/o L-3 Communications Holdings, Inc.
600 Third Avenue, 34th Floor
New York, New York 10016 ............ 4,913,248 5.1%
Robert V. LaPenta(4)
c/o L-3 Communications Holdings, Inc.
600 Third Avenue, 34th Floor
New York, New York 10016 ............ 5,268,735 5.4%
----------
(1) Under Rule 13d-3, certain shares may be deemed to be beneficially owned
by more than one person (if, for example, persons share the power to vote
or the power to dispose of the shares). In addition, shares are deemed to
be beneficially owned by a person if the person has the right to acquire
the shares (for example, upon exercise of an option) within 60 days of
the date as of which the information is provided. In computing the
percentage ownership of any person, the amount of shares outstanding is
deemed to include the amount of shares beneficially owned by such person
(and only such person) by reason of these acquisition rights. As a
result, the percentage of outstanding shares of any person as shown in
this table does not necessarily reflect the person's actual ownership or
voting power with respect to the number of shares of common stock
actually outstanding at March 21, 2003.
(2) Based on a Schedule 13G/A filed with the S.E.C., dated February 4, 2003,
in which Citigroup Inc. reported that it had shared voting and
dispositive power over 10,675,192 shares of common stock.
(3) The shares of common stock beneficially owned includes 1,661,906 shares
issuable under employee stock options and exercisable within 60 days of
March 21, 2003.
(4) The shares of common stock beneficially owned includes 1,661,906 shares
issuable under employee stock options and exercisable within 60 days of
March 21, 2003 and 887 shares allocated to the account of Mr. LaPenta
under our savings plans.
9
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the amount of common stock beneficially owned
(unless otherwise indicated) by our executive officers, our directors, and by
all of our current executive officers and directors as a group. Except as
otherwise indicated, all information listed below is as of March 21, 2003.
SHARES OF COMMON PERCENTAGE OF SHARES
STOCK BENEFICIALLY OF COMMON
NAME OF BENEFICIAL OWNER OWNED(1)(2) STOCK OUTSTANDING(3)
--------------------------------------------------------------------- -------------------- ---------------------
Directors and Executive Officers
Frank C. Lanza ...................................................... 4,913,248 5.1%
Robert V. LaPenta ................................................... 5,268,735 5.4%
Michael T. Strianese ................................................ 75,835 --
Christopher C. Cambria .............................................. 90,631 --
Charles J. Schafer .................................................. 27,800 --
Thomas A. Corcoran(4) ............................................... 9.334 --
Robert B. Millard(4)(5)(6) .......................................... 141,512 --
John E. Montague(4) ................................................. 9,334 --
John M. Shalikashvili(4) ............................................ 10,018 --
Arthur L. Simon(4) .................................................. 12,594 --
Alan H. Washkowitz(4)(5)(7) ......................................... 273,056 --
Directors and Executive Officers as a Group (18 persons)(8) ......... 11,030,603 11.1%
----------
(1) The shares of our common stock beneficially owned include the number of
shares (i) issuable under employee stock options and exercisable within
60 days of March 21, 2003 and (ii) allocated to the accounts of executive
officers under our savings plans. Of the number of shares shown above,
(i) the following represent shares that may be acquired upon exercise of
employee stock options for the accounts of: Mr. Lanza, 1,661,906 shares;
Mr. LaPenta, 1,661,906 shares; Mr. Strianese, 75,000 shares, Mr. Cambria,
89,800 shares and Mr. Schafer, 27,000 shares; and (ii) the following
represent shares allocated under our saving plans to the accounts of: Mr.
LaPenta, 887 shares; Mr. Strianese, 835 shares; Mr. Cambria, 831 shares;
and Mr. Schafer, 800 shares.
(2) The number of shares shown includes shares that are individually or
jointly owned, as well as shares over which the individual has either
sole or shared investment or voting authority.
(3) Share ownership does not exceed one percent of the class unless otherwise
indicated. Under Rule 13d-3, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons
share the power to vote or the power to dispose of the shares). In
addition, shares are deemed to be beneficially owned by a person if the
person has the right to acquire the shares (for example, upon exercise of
an option) within 60 days of the date as of which the information is
provided. In computing the percentage ownership of any person, the amount
of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect
the person's actual ownership or voting power with respect to the number
of shares of common stock actually outstanding at March 21, 2003.
(4) Includes 9,334 shares issuable and exercisable under director stock
options within 60 days of March 21, 2003 in the case of Messrs. Corcoran,
Montague, and Shalikashvili, 6,334 shares in the case of Mr. Simon and
3,334 shares in the case of Messrs. Millard and Washkowitz.
(5) Robert B. Millard and Alan H. Washkowitz, each of whom is a member of our
board of directors, are each a Managing Director of Lehman Brothers Inc.
and limited partners of Lehman Brothers Capital Partners III, L.P. As
limited partners of Lehman Brothers Capital Partners III, L.P., Messrs.
Millard and Washkowitz may be deemed to share beneficial ownership of
shares of our common stock held by Lehman Brothers Capital Partners III,
L.P. Such individuals disclaim any such beneficial ownership and those
shares of common stock are not reflected in the numbers shown in this
table.
(6) Includes 105,278 shares owned by a charitable foundation of which Mr.
Millard and his wife are the sole trustees, and as to which Mr. Millard
disclaims beneficial ownership.
(7) Includes 111,330 shares in trust, for the benefit of Mr. Washkowitz's
children, for which Mr. Washkowitz and his wife are co-trustees and as to
which Mr. Washkowitz disclaims beneficial ownership.
(8) Includes 3,738,785 shares issuable under employee stock options and
exercisable under employee stock options within 60 days of March 21,
2003, and 13,804 shares allocated to the accounts of executive officers
under our savings plans.
10
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table provides summary information concerning compensation
paid or accrued by us to or on behalf of our Chief Executive Officer and each
of our four other most highly compensated executive officers who served in such
capacities as of December 31, 2002, collectively referred to herein as the
named executive officers, for services rendered to us during each of the last
three years.
LONG-TERM
COMPENSATION
AWARDS
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
-------------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)(1)
----------------------------------------- ------ ------------ ----------- ------------- --------------------
Frank C. Lanza 2002 $825,000 $850,000 400,000 $ 11,125
(Chairman and Chief Executive 2001 750,000 750,000 -- 11,125
Officer) ............................... 2000 750,000 500,000 -- 6,858
Robert V. LaPenta 2002 625,000 750,000 400,000 39,287
(President and Chief Financial 2001 545,577 650,000 -- 34,306
Officer) ............................... 2000 500,000 400,000 -- 32,907
Michael T. Strianese 2002 331,250 375,000 -- 19,690
(Senior Vice President, 2001 255,000 300,000 54,000 13,790
Finance) ............................... 2000 209,673 225,000 -- 73,515
Christopher C. Cambria 2002 235,000 375,000 -- 12,038
(Senior Vice President, 2001 235,000 300,000 54,000 10,838
Secretary and General Counsel) ......... 2000 228,025 225,000 -- 10,827
Charles J. Schafer
(Senior Vice President, Business 2002 268,750 350,000 -- 24,449
Operations and President of 2001 248,230 250,000 36,000 118,438
the Products Group) .................... 2000 230,000 175,000 -- 118,368
----------
(1) Amounts for the year ended December 31, 2002 include: (a) our matching
contributions of $8,800 under our savings plan for Messrs. LaPenta and
Schafer and $8,000 for Messrs. Strianese and Cambria; and (b) the value
of supplemental life insurance programs in the amounts of $11,125 for Mr.
Lanza, $30,487 for Mr. LaPenta, $11,690 for Mr. Strianese, $4,038 for Mr.
Cambria and $15,649 for Mr. Schafer.
11
OPTION GRANTS IN FISCAL YEAR 2002
The following table shows the options to purchase common stock granted in
fiscal year 2002 to the named executive officers.
% TOTAL PER SHARE
OPTIONS OPTIONS EXERCISE EXPIRATION GRANT DATE
NAME GRANTED (#) GRANTED PRICE ($) DATE VALUE ($)
-------------------------------- ------------- ----------- ----------- ------------ --------------
Frank C. Lanza ................. 400,000 18.44% $ 53.75 3/25/12 $ 7,922,667
Robert V. LaPenta .............. 400,000 18.44% 53.75 3/25/12 7,922,667
Michael T. Strianese ........... -- 0.00% -- -- --
Christopher C. Cambria ......... -- 0.00% -- -- --
Charles J. Schafer ............. -- 0.00% -- -- --
------- -----------
800,000 $15,845,334
======= ===========
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information on options to purchase our common
stock that were exercised during fiscal year 2002 by our named executive
officers; the total numbers of exercisable and non-exercisable options to
purchase our common stock owned by our named executive officers at December 31,
2002, and the aggregate dollar value of such options that were in-the-money at
December 31, 2002.
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS OPTIONS AT
ACQUIRED VALUE AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ON REALIZED -------------------------------- -------------------------------
NAME AND PRINCIPAL POSITION EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
----------------------------- ------------- ------------ ------------- ------------------ ------------- -----------------
Frank C. Lanza
(Chairman and Chief
Executive Officer) ......... -- $ -- 1,828,572 400,000 $76,205,738 $ --
Robert V. LaPenta
(President and Chief
Financial Officer) ......... 100,000 5,029,000 1,528,572 400,000 63,703,238 --
Michael T. Strianese
(Senior Vice President,
Finance) ................... 50,000 1,790,950 75,000 36,000 1,547,490 187,740
Christopher C. Cambria
(Senior Vice President,
Secretary and General
Counsel) ................... -- -- 89,800 36,000 1,934,658 187,740
Charles J. Schafer
(Senior Vice President,
Business Operations and
President of the Products
Group) ..................... 27,000 994,680 27,000 24,000 454,980 125,160
----------
(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, 2002 closing stock price of our common stock of $44.91.
(2) These options are unexercisable because they have not yet vested under
their terms.
12
REPORT OF THE AUDIT COMMITTEE
The directors who serve on the audit committee are all "independent" in
accordance with the New York Stock Exchange listing standards. We have reviewed
and discussed with management the Company's audited financial statements as of
and for the year ended December 31, 2002.
As part of our governance practices, the Audit Committee periodically
reviews its charter and recommends to the board of directors changes to its
charter. The board of directors adopted changes to the audit committee charter
in March, 2003, in part to comply with the Sarbanes-Oxley Act of 2002. The
revised audit committee charter is included in this proxy statement as Exhibit
A.
We have discussed with the independent auditors, PricewaterhouseCoopers
LLP, the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as amended, by the Auditing
Standards Board of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
PricewaterhouseCoopers LLP, required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, by the Independence
Standards Board, and have discussed with the auditors their independence. Based
on the activities referred to above, we recommended to the board of directors
that the financial statements referred to above be included in our Annual
Report on Form 10-K for the year ended December 31, 2002.
Members of the audit committee are Thomas A. Corcoran, John M.
Shalikashvili (Chairman) and Arthur L. Simon.
INDEPENDENT AUDITOR FEES
For services rendered in 2002 by PricewaterhouseCoopers LLP, our
independent auditors, we incurred the following fees:
o AUDIT FEES (for the audit of the 2002 financial statements and quarterly
reviews).................................................. $2,038,300
o FINANCIAL INFORMATION SYSTEMS DESIGN AND
IMPLEMENTATION FEES ........................................ $0
o ALL OTHER FEES ($1,851,000 for tax services, $1,062,000 for a business
process review and $1,414,126 for other audit services, which include
acquisition audits, review of SEC registrations, benefit plan audits,
other statutory audits and $128,000 applicable to the audit of
our 2001 financial statements)............................. $4,327,126
The audit committee has considered and determined that the provision of
the services covered under the caption All Other Fees is compatible with
maintaining the auditor's independence.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee is responsible for reviewing the design of, and
pay levels generated by, our compensation and benefit programs for our
executive officers. The committee is also responsible for administering our
stock option program.
The committee is committed to ensuring an executive compensation program
that supports our mission -- to maximize stockholder value. Thus, the executive
compensation is structured around the following tenets:
o Total compensation programs should strengthen the relationship between
pay and performance by emphasizing variable, at-risk compensation that is
dependent on our achievements 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.
13
o We must maintain our ability to attract, retain, and encourage the
development of qualified, capable executives. Total compensation
opportunities will mirror those offered by comparably sized organizations
within the aerospace and defense industries -- for those positions where
the labor market is not limited to these industries, we will reference
broader general industry information for similarly sized organizations.
The comparative group used for compensation purposes will generally be
broader than the group that comprises the published industry index in the
performance graph included in this proxy statement. The compensation committee
believes that our competition for executive talent is not limited to the
companies included in the published industry index established for comparing
stockholder returns.
The key elements of our executive compensation program are base salary,
annual incentives, and long-term compensation. These key elements are addressed
separately below.
BASE SALARIES
The compensation committee will regularly review the base salary for the
Chief Executive Officer and the President. We have established internal
relationships of other senior executive positions to those of the Chief
Executive Officer and the President, and base salaries for these other
positions flow from those relationships. Base salaries will be targeted at the
median of market levels with adjustments above or below market to recognize
varying levels of responsibility, prior experience, breadth of knowledge, as
well as external pay practices.
Increases to base salaries will be driven primarily by individual
performance. Individual performance will be evaluated based on sustained levels
of individual contribution.
As reflected in the Summary Compensation Table, Mr. Lanza's base salary
was $825,000 in 2002 and $750,000 in 2001 and 2000 as provided for in his
employment agreement. In determining future increases to Mr. Lanza's base
salary, the compensation committee will consider his individual performance as
measured by short-term achievements as well as his contributions to long-term
organizational success. The compensation committee will also compare Mr.
Lanza's base salary to base salaries of chief executive officers among
comparable companies.
ANNUAL INCENTIVES
The annual incentive plan is structured to provide a variable pay
opportunity based on performance. Actual bonuses are based on an assessment of
the participant's contributions toward organizational success.
Mr. Lanza received a bonus of $850,000 in 2002 and $750,000 in 2001. Mr.
LaPenta received a bonus of $750,000 in 2002 and $650,000 in 2001.
LONG-TERM INCENTIVES
Long-term incentives are provided pursuant to the 1997 Plan and the 1999
Plan.
Stock options will be granted at a price not less than the fair market
value of our common stock on the date of grant. The ultimate value of an option
grant to the recipient depends on the stockholder value created between the
date of grant and the date of exercise. Option award size is based primarily on
competitive practice but may also be adjusted to reflect factors such as
individual and our company's performance.
Mr. Lanza and Mr. LaPenta were each granted options to purchase 400,000
shares of our common stock in 2002.
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.
14
The compensation committee will consider the impact of this provision when
making compensation decisions. However, the compensation committee will weigh
all pertinent factors to determine appropriate plan design and incentive
awards.
Members of the compensation committee are Robert B. Millard (Chairman),
John E. Montague and Alan H. Washkowitz.
15
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return of our common stock,
as adjusted for our 2 for 1 stock split on May 20, 2002, with the cumulative
total return of the Standard & Poor's 500 Composite Stock Index, the Standard &
Poor's 1500 Aerospace & Defense Index and a peer group index, for the period
from May 19, 1998 to December 31, 2002. We are one of the companies included in
the Standard & Poor's 1500 Aerospace & Defense Index. The peer group index is
composed of Alliant Techsystems Inc., General Dynamics Corporation and Northrop
Grumman Corporation. These figures assume that all dividends paid over the
performance period were reinvested, and that the starting value of each index
and the investment in our common stock was $100 on May 19, 1998. The starting
point for the measurement of our common stock cumulative total return was our
initial public offering price of $11.00 per share, as adjusted for our stock
split. The graph is not, and is not intended to be, indicative of future
performance of our common stock.
In the future, we will replace our peer group index with the Standard &
Poor's 1500 Aerospace & Defense Index because this published industry index
comprises a more comprehensive list of companies that operate in the defense
industry than the peer group index we have historically presented. In
accordance with Item 402 of Regulation S-K, we present for comparison with our
total return the returns of both the newly selected index and the peer group
index used in our proxy statement of last year.
L-3 COMMUNICATIONS HOLDINGS, INC.
CUMULATIVE TOTAL STOCKHOLDER RETURNS FOR
PERIOD OF MAY 19, 1998 TO DECEMBER 31, 2002
TOTAL SHAREHOLDER RETURNS
[GRAPHIC OMITTED]
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDING
-------------------------------------------------------------------------------------------------------------------------------
BASE
PERIOD DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
MAY 1998 1998 1999 2000 2001 2002
-------------------------------------------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc. o 100 211.65 189.20 350.00 409.09 408.27
-------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index o 100 111.75 135.27 122.95 108.34 84.40
-------------------------------------------------------------------------------------------------------------------------------
S&P 1500 Aerospace & Defense Index o 100 98.28 96.06 120.19 99.12 92.02
-------------------------------------------------------------------------------------------------------------------------------
Peer Group o 100 97.21 82.41 125.77 140.57 142.02
-------------------------------------------------------------------------------------------------------------------------------
(as prepared by Standard & Poor's Compustat)
16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 2002 fiscal year, Messrs. Robert Millard, John Montague and
Alan Washkowitz served as members of the compensation committee of the board of
directors. None of these individuals has served us or any of our subsidiaries
as an officer or employee.
None of our executive officers serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of our board of directors or
compensation committee.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement (the "Employment Agreements")
effective on April 30, 1997 with each of Mr. Lanza, our Chairman and Chief
Executive Officer, and Mr. LaPenta, our President and Chief Financial Officer.
The Employment Agreements provided for an initial term of five years, which
would automatically renew for one-year periods thereafter, unless a party
thereto gave notice of its intent to terminate at least 90 days prior to the
expiration of the term. Mr. Lanza's employment agreement was renewed in April,
2002. Mr. LaPenta's employment agreement expired in April, 2002.
Upon a termination without cause or resignation for good reason, we will
be obligated, through the end of the term, to (i) continue to pay the base
salary and (ii) continue to provide life insurance and medical and
hospitalization benefits comparable to those provided to other senior
executives; provided, however, that any such coverage shall terminate to the
extent that Mr. Lanza is offered or obtains comparable benefits coverage from
any other employer. The Employment Agreements provided for confidentiality
during employment and at all times thereafter. There was also a noncompetition
and non-solicitation covenant which was effective during the employment term
and for one year thereafter; provided, however, that if the employment
terminated following the expiration of the initial term, the noncompetition
covenant would only be effective during the period, if any, that we paid the
severance described above.
17
PENSION PLAN TABLE
The following table shows the estimated annual pension benefits payable
under the L-3 Communications Corporation Pension Plan and Supplemental
Executive Retirement Plan to a covered participant upon retirement at normal
retirement age (65), based on the career average compensation (salary and
bonus) and years of credited service with us.
YEARS OF CREDITED SERVICE
----------------------------------------------------------------------------
AVERAGE
COMPENSATION
AT RETIREMENT 5 10 15 20 25 30 35
------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$300,000 ......... $18,952 $ 34,171 $ 46,357 $ 60,278 $ 71,497 $ 80,603 $ 87,955
400,000 ......... 25,605 46,159 62,629 81,361 96,446 108,652 118,496
500,000 ......... 32,258 58,152 78,905 102,452 121,399 136,704 149,032
600,000 ......... 38,909 70,140 95,176 123,536 146,344 164,749 179,563
700,000 ......... 45,562 82,131 111,451 144,624 171,295 192,799 210,100
800,000 ......... 52,213 94,119 127,722 165,708 196,243 220,847 240,638
900,000 ......... 58,865 106,111 143,997 186,798 221,194 248,898 271,175
1,000,000 ......... 65,517 118,100 160,270 207,883 246,141 276,946 301,711
1,100,000 ......... 72,169 130,089 176,543 228,970 271,092 304,993 332,245
1,200,000 ......... 78,820 142,078 192,814 250,054 296,040 333,039 362,779
1,300,000 ......... 85,473 154,069 209,089 271,142 320,988 361,088 393,315
1,400,000 ......... 92,124 166,058 225,360 292,228 345,938 389,138 423,851
1,500,000 ......... 98,776 178,047 241,633 313,314 370,886 417,186 454,385
As of December 31, 2002, the current annual compensation and current years
of credited service (including for Messrs. LaPenta and Strianese, years of
credited service as an employee of Loral and Lockheed Martin) for each of the
following persons were: Mr. Lanza, $1,575,000 and six years; Mr. LaPenta,
$1,275,000 and 31 years; Mr. Strianese, $631,250 and 13 years; Mr. Cambria,
$535,000 and six years; and Mr. Schafer, $518,750 and four years.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
In connection with our incorporation we, Lehman Brothers Capital Partners
III, L.P. and certain of its affiliates, Messrs. Lanza and LaPenta and Lockheed
Martin Corporation entered into the Stockholders Agreement, which has
terminated except for the terms relating to registration rights.
Pursuant to the Stockholders Agreement, at this time Messrs. Lanza and
LaPenta and the Lehman Partnership have the right, subject to certain
conditions, to require L-3 Communications Holdings to register their shares of
our common stock under the Securities Act of 1933. The Lehman Partnership has
four demand rights and each of Messrs. Lanza and LaPenta has one demand
registration right. Lockheed Martin Corporation sold all of its shares of our
common stock in 1999. As of March 21, 2003, the Lehman Partnership owned 2.3%
of our common stock.
In addition, the Stockholders Agreement also provides Messrs. Lanza and
LaPenta and the Lehman Partnership with piggyback registration rights. The
Stockholders Agreement provides, among other things, that we will pay expenses
incurred in connection with:
o up to three demand registrations requested by the Lehman Partnership and
the two demand registrations requested by each of Messrs. Lanza and
LaPenta; and
o any registration in which those parties participate through piggyback
registration rights granted under the agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than 10% of a registered class of our
equity securities, to file reports of ownership and changes in ownership with
the SEC and the NYSE. Officers, directors and greater than 10% shareholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms
they file. All Section 16(a) forms required to be filed were filed on a timely
basis, except that Mr. Robert LaPenta failed to file one Form 4 on a timely
basis that reported entering into a hedging arrangement termed a "variable
prepaid forward agreement."
19
PROPOSAL 2. SELECTION OF INDEPENDENT AUDITORS
The board of directors has selected PricewaterhouseCoopers LLP to act as
our independent auditors for the 2003 fiscal year, and a proposal to ratify
this selection will be submitted to the Annual Meeting. PricewaterhouseCoopers
LLP has acted as our independent auditors since our formation in 1997 and
management believes it desirable and in our best interests to continue the
employment of that firm. Representatives of PricewaterhouseCoopers LLP will be
present at the Annual Meeting. Such representatives will have the opportunity
to make a statement if they desire to do so, and are expected to be available
to respond to appropriate questions.
If the foregoing proposal is not approved by the holders of a majority of
the shares represented at the Annual Meeting and voting on the proposal, the
selection of independent auditors will be reconsidered by the board of
directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal to be presented for
consideration in our 2004 proxy statement must submit such proposal to us no
later than the close of business on December 26, 2003. 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.
GENERAL AND OTHER MATTERS
At the date of this proxy statement, we know of no business that will be
brought before the Annual Meeting other than the matters set forth above.
However, if any further business properly comes before the Annual Meeting or
any adjournments of the Annual Meeting, the persons named as proxies in the
accompanying proxy will vote them in accordance with their discretion and
judgment on such matters.
We have provided each Stockholder whose proxy is being solicited hereby, a
copy of our Annual Report for the year ended December 31, 2002, including our
consolidated financial statements. Written requests for additional copies
should be directed to: Corporate Communications, L-3 Communications Holdings,
Inc., 600 Third Avenue, New York, New York 10016.
PLEASE COMPLETE, DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED REPLY ENVELOPE. NO POSTAGE IS REQUIRED IF RETURNED IN THE ACCOMPANYING
ENVELOPE AND MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
[GRAPHIC OMITTED]
/s/ Christophre C. Cambria
Christopher C. Cambria
Senior Vice President, Secretary and
General Counsel
New York, New York
April 1, 2003
20
EXHIBIT A
L-3 COMMUNICATIONS HOLDINGS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee is established for the primary purpose of assisting the
Board of Directors in oversight of the:
1. Quality and integrity of the Company's financial statements and reports,
2. Company's compliance with legal and regulatory requirements,
3. Qualifications and independence of the independent auditors, and
4. Performance of the Company's internal audit function and independent
auditors.
In addition, the Audit Committee shall prepare the report that SEC rules
require to be included in the Company's annual proxy statement.
In fulfilling its responsibilities, the Audit Committee has the authority to
obtain advice and assistance from outside legal, accounting, financial, or
other advisors to perform its duties and responsibilities.
The Company shall provide appropriate funding, as determined by the Audit
Committee, for compensation to the independent auditor and to any advisors that
the Audit Committee chooses to engage.
ORGANIZATION
MEMBERS:
The Audit Committee shall consist of at least three directors, all of whom are
determined by the Board of Directors to meet the independence and expertise
requirements required by the New York Stock Exchange (NYSE) Listed Company
Manual and Securities and Exchange Commission (SEC) rules.
The chairperson and members of the Committee shall be appointed by the Board of
Directors.
All members of the Committee shall be financially literate and at least one
member of the Committee shall be an "audit committee financial expert" as
determined by the Board, in compliance with the criteria established by the SEC
and the NYSE.
If an Audit Committee member simultaneously serves on the audit committee of
more than three public companies (including the Company), the Board must
determine that such service will not impair such member's ability to
effectively serve on the Audit Committee and disclose such determination in the
Company's annual proxy statement.
No member of the Committee shall receive compensation other than (i) director's
fees for service as a director of the Company, including reasonable
compensation for serving on the Committee and regular benefits that other
directors receive and (ii) a pension or similar compensation for past
performance, provided that such compensation is not conditioned on continued or
future service to the Company.
MEETINGS:
The Audit Committee shall meet at least five times a year, or more often if
circumstances so require.
The Committee shall act only on the affirmative vote of at least a simple
majority of its members.
RESPONSIBILITIES:
The Audit Committee's policies and procedures should remain flexible, in order
to best react to changing conditions and help ensure that the Company's
accounting and reporting practices accord with all requirements and are of the
highest quality. The Audit Committee shall:
A-1
1. Be directly responsible for the selection, appointment, compensation,
and termination of the Company's independent auditors.
2. Inform each independent auditor performing auditing work for the Company
that such firm shall report directly to the Committee.
3. Be directly responsible for the oversight of the auditing work of any
independent auditor employed by the Company (including the resolution of
any disagreement between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
related work.
4. Pre-approve both audit and permitted non-audit services to be performed
by the independent auditors and related fees. The Audit Committee may (i)
delegate to one or more of its members the ability to pre-approve such
services and fees, provided that any such pre-approval is presented to
the full Committee at its next scheduled meeting and/or (ii) pre-approve
audit and non-audit services based on policies and procedures adopted by
the Committee, provided (a) the policies and procedures are detailed as
to the particular service, (b) the Committee is informed of each service,
(c) such policies and procedures do not include delegation of the
Committee's responsibilities to management and (d) such policies and
procedures are disclosed in the Company's annual reports.
5. Meet with the independent auditors and the financial management to
review the scope of the audit proposed for the current year and the audit
procedures to be utilized and any subsequent changes to such scope and/or
procedures.
6. Discuss with the independent auditors and with management, as
appropriate, the following:
(a) The matters required to be discussed by Statement on Auditing
Standards No. 61 and the Sarbanes-Oxley Act of 2002 relating
to the conduct of the audit or quarterly reviews;
(b) Independent auditors' responsibilities under auditing
standards generally accepted in the United States of America,
and under applicable rules and regulations, and any exchange,
which lists the Company's securities;
(c) Management judgments and accounting estimates;
(d) Audit adjustments, both those recorded in the Company's
financial statements and those not recorded;
(e) Disagreements with management, if any, and management's
response to such disagreements;
(f) Consultations with other accountants, if any;
(g) Major issues, if any, regarding accounting principles and
financial statement presentation, including any analysis
prepared by management and/or the independent auditor setting
forth significant financial reporting issues and judgments
made in connection with the preparation of the financial
statements; and
(h) Difficulties encountered in performing the audit, if any, and
management's response.
7. Discuss with the independent auditors prior to the filing by the Company
of its annual report and at such other times as the Committee deems
appropriate:
(a) All critical accounting policies and practices of the Company;
(b) All alternative treatments of financial information under
generally accepted accounting principles (GAAP) related to
material items that have been discussed with management,
ramifications of such alternative disclosures and treatments,
and the treatment preferred by the independent auditors; and
A-2
(c) Other material written communications between the independent
auditors and management of the Company.
8. At least annually, obtain and review a report by the independent
auditors describing: the auditing firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality control review, or peer review, of the auditing firm, or by any
inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the auditing firm, and any steps taken to deal with
any such issues; and (to assess the auditor's independence) all
relationships between the independent auditor and the Company.
9. Ensure that all auditing personnel are rotated in accordance with, and
to the extent required by, applicable laws and regulations.
10. Confirm with the independent auditors that none of their auditing
personnel assigned to the audit of the Company's financial statements
earns or receives any compensation based on selling engagements to the
Company to provide any services, other than audit, review or attest
services, to the extent such compensation would compromise the
independence of such auditing personnel or the auditor under the rules
promulgated by the SEC.
11. Review with the independent auditors, the internal auditor, and the
financial and accounting management, the adequacy and effectiveness of
the Company's accounting and disclosure controls and financial reporting
processes, and elicit any recommendations for improvement or particular
areas where augmented controls are desirable. Particular emphasis should
be given to the adequacy of such controls to provide that information
required to be disclosed by the Company in its periodic reports is
recorded, processed, summarized, and reported in an appropriate and
timely manner.
12. Review the internal audit function, including the independence and
authority of its reporting obligations, the audit plans proposed for the
coming year, and the coordination of such plans with the work of the
independent auditors.
13. Review periodically a summary of findings from completed internal
audits and a progress report on the proposed internal audit plan, with
explanations for any deviations from the original plan and review such
summary and plan with the internal audit department.
14. Review the adequacy of the internal audit staff and review and concur
in the appointment, replacement or dismissal of the Internal Audit
Director.
15. Review annually with management and the independent auditors the effect
of regulatory and accounting initiatives, as well as review and approve
any off-balance sheet structures on the Company's financial statements.
16. Review the annual audited financial statements and quarterly financial
statements with management and the independent auditors, and related
disclosure under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Determine that the independent
auditors are satisfied with the disclosure and content of the financial
statements. Any year-to-year changes in accounting principles or
practices should be reviewed.
17. Recommend to the Board of Directors as to whether the annual financial
statements of the Company should be included in the Annual Report on Form
10-K to be filed with the SEC.
18. Discuss with management, in general terms, earnings press releases, as
well as financial information and earnings guidance provided to analysts
and rating agencies.
19. Discuss with management policies with respect to risk assessment and
risk management.
20. Set clear hiring policies for employees or former employees of the
independent auditors in accordance with applicable laws and regulations.
A-3
21. Establish procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, auditing matters, or violations of the Company's
Code of Conduct, and (ii) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters.
22. Periodically meet separately in executive session with each of
management, the internal audit director, and the independent auditors to
discuss any appropriate matters.
23. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, including in the Company's
periodic reports to the SEC.
24. Periodically inquire of the Company's General Counsel, as to the
Company's compliance with relevant legal and regulatory requirements, and
as to the adequacy of control systems in place to assure such compliance.
25. Annually review and evaluate the performance of the Committee relative
to the Audit Committee's purpose, duties and responsibilities outlined
herein.
26. Annually review and assess the adequacy of this charter and recommend
any changes to the Board of Directors for approval.
27. Annually report to the Board of Directors regarding the execution of
the Committee's duties and responsibilities.
28. Report to the Board of Directors the matters discussed at each Audit
Committee meeting. A copy of the minutes shall be placed with the
Company's minute books.
29. Investigate any matter brought to the attention of the Committee that
is considered appropriate and is within the scope of its
responsibilities.
30. Prepare an Audit Committee report required to be included in the
Company's annual proxy statement. The report will include at least the
following:
(a) A statement that the Committee has reviewed and discussed the
audited financial statements with management;
(b) A statement that the Committee has discussed with the
independent auditors the matters required by Statement on
Auditing Standards No. 61, Required Communications with Audit
Committees;
(c) A statement that the Committee has received written
disclosures from, and held discussions with, the independent
auditors on matters required by Independence Standards Board
Statement No. 1, Independence Discussions with Audit
Committees; and
(d) A conclusion as to the Committee's recommendation to the Board
of Directors as to the filing of the Annual Report on Form
10-K with the SEC.
A-4
DETACH HERE ZLCOC2
P
R
O
X
Y
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 22, 2003, AND SHOULD BE READ IN
CONJUNCTION WITH THE NOTICE OF MEETING AND PROXY STATEMENT PERTAINING THERETO.
The undersigned shareholder hereby appoints Frank C. Lanza, Robert V. LaPenta,
Christopher C. Cambria or Michael T. Strianese, or any one of them, attorneys
and agents, or proxy or proxies, with full power of substitution, in the name
and on behalf of the undersigned, to attend, vote and act at the Annual Meeting
of Stockholders to be held on April 22, 2003, at 2:30 p.m., eastern daylight
time, at the Rihga Royal Hotel, 151 West 54th Street, New York, NY, and at any
and all adjournments thereof, upon the matters set forth below and in
accordance with their discretion on any other matters that may properly come
before the meeting or adjournment thereof:
A STOCKHOLDER DESIRING TO APPOINT SOME OTHER PERSON, WHO NEED NOT BE A
STOCKHOLDER, TO REPRESENT HIM AT THE MEETING MAY DO SO BY INSERTING SUCH
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 ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors.
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PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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------------------------------- ---------------------------
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L-3 COMMUNICATIONS
HOLDINGS, INC.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8599
EDISON, NJ 08818-8599
ADMISSION TICKET
L-3 COMMUNICATIONS HOLDINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, APRIL 22, 2003, 2:30 P.M. EASTERN DAYLIGHT TIME
RIHGA ROYAL HOTEL
151 WEST 54TH STREET
NEW YORK, NY
Please indicate whether you plan to attend the 2003 Annual Meeting of
Stockholders by marking the appropriate box on the Proxy Card, or if you use
the telephone system, when prompted. Only the stockholder(s) whose name(s)
appears on this ticket, or the proxy of that stockholder, will be admitted.
Due to space limitations, admission to the meeting will be on a first-come,
first-served basis. Registration will begin at 2:30 p.m.
[L-3 COMMUNICATIONS LOGO]
VOTER CONTROL NUMBER
-------------------------------
-------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
-------------------------------------- --------------------------------------
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
VOTE-BY-INTERNET VOTE BY TELEPHONE
1. LOG ON THE INTERNET AND 1. CALL TOLL-FREE
GO TO HTTP://WWW.EPROXYVOTE.COM/III 1-877-PRX-VOTE (1-877-779-8683)
2. ENTER YOUR VOTER CONTROL NUMBER 2. ENTER YOUR VOTER CONTROL NUMBER
LISTED ABOVE AND FOLLOW THE EASY LISTED ABOVE AND FOLLOW THE EASY
STEPS OUTLINED ON THE SECURED RECORDED INSTRUCTIONS.
WEBSITE.
-------------------------------------- --------------------------------------
IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
|
[X] PLEASE MARK _ |
VOTES AS IN | |__
THIS EXAMPLE. |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
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1. Election of Directors FOR AGAINST ABSTAIN
NOMINEES: (01) Robert B. Millard and (02) Arthur L. Simon. 2. Appointment of PricewaterhouseCoopers [ ] [ ] [ ]
LLP as independent auditors.
FOR WITHHELD
[ ] [ ]
[ ]
--------------------------------------------
For all nominee(s) except as written above.
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Mark box at right if you plan to attend the Annual Meeting. [ ]
Mark box at right if an address change or comment [ ]
has been noted on the reverse side of this card.
NOTE: Please sign exactly as names appear hereon. When signing
as attorney, administrator, trustee, authorized officer of a
corporation or in any representative capacity, please insert your
name and title as such. Joint owners should each sign
individually.