NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of April 30, 1997 is made by and between L-3
Communications Holdings, Inc., a Delaware corporation hereinafter referred to
as the "Company", and Xxxxx X. Xxxxx, an employee of the Company or a
Subsidiary (as defined below) or Affiliate (as defined below) of the Company,
hereinafter referred to as "Optionee".
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Class A Common Stock ("Class A Common
Stock");
WHEREAS, the Company wishes to carry out the Plan (as hereinafter
defined), the terms of which are hereby incorporated by reference and made a
part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Non-Qualified Options
provided for herein to the Optionee as an incentive for increased efforts
during his term of office with the Company or its Subsidiaries or Affiliates,
and has advised the Company thereof and instructed the undersigned officers to
issue said Options;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.
Section 1.1 - Active Trading Market
"Active Trading Market" shall mean, as to the Company's common stock,
that the Company's common stock is listed or quoted on a national exchange or
the NASDAQ National Market.
Section 1.2 - Affiliate
"Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control
with, that person. For the purposes of this definition "control" (including,
with correlative meanings,
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the terms "controlling", "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise.
Section 1.3 - Applicable Percentage
"Applicable Percentage" shall mean the percentage set forth on
Schedule B attached hereto.
Section 1.4 - Board of Directors
"Board of Directors" shall mean the Board of Directors of the Company.
Section 1.5 - Cause
"Cause" shall have the meaning of "Cause" set forth in Section 6.2(b)
of the Employment Agreement.
Section 1.6 - Change of Control
"Change of Control" shall mean an acquisition of all or substantially
all of the direct and indirect assets of the Company and its Subsidiaries (by
merger, consolidation, stock or asset sale or otherwise), unless immediately
following any such transaction Xxxxxx, LBHI and Lockheed Xxxxxx and their
affiliates own 50% or more of the combined voting power of the then outstanding
voting securities entitled to vote generally of the Company or the acquiror of
such assets, as the case may be.
Section 1.7 - Class A Common Stock
"Class A Common Stock" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.8 - Class B Common Stock
"Class B Common Stock" shall mean the Class B Common Stock, par value
$.01 per share, of the Company.
Section 1.9 - Class C Common Stock
"Class C Common Stock" shall mean the Class C Common Stock, par value
$.01 per share, of the Company.
Section 1.10 - Closing Date
"Closing Date" shall mean date on which the consummation of the
transactions contemplated by the Transaction Agreement occurs.
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Section 1.11 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.12 - Committee
"Committee" shall mean the Compensation Committee of the Company.
Section 1.13 - Common Stock
"Common Stock" shall mean the Class A Common Stock, Class B Common
Stock and Class C Common Stock of the Company.
Section 1.14 - Common Stock Subscription Agreement
"Common Stock Subscription Agreement" shall mean that certain Common
Stock Subscription Agreement dated as of the date hereof between the Optionee
and the Company.
Section 1.15 - Cumulative EBITDA Target
"Cumulative EBITDA Target" shall mean the Cumulative EBITDA Targets as
set forth in Schedule A attached hereto.
Section 1.16 - Disability
"Disability" shall have the meaning of "Disability" set forth in
Section 6.3 of the Employment Agreement.
Section 1.17 - EBITDA
"EBITDA" shall mean, with respect to the Company and its Subsidiaries
on a consolidated basis as of the last day of any fiscal year, the audited
consolidated net income (excluding without duplication, (a) extraordinary gains
and losses in accordance with GAAP, (b) gains and losses in connection with
asset dispositions whether or not constituting extraordinary gains and losses
and (c) gains or losses on discontinued operations) for such period, plus (x)
consolidated interest expense for such period and (y) to the extent deducted in
computing such consolidated net income, the sum of income taxes, depreciation
and amortization for the year ended on such date; provided, however, that for
any calculation of EBITDA for the year ending December 31, 1997, EBITDA shall
be deemed to be EBITDA from March 31, 1997 to the last day of such period.
Section 1.18 - EBITDA Target
"EBITDA Target" shall mean the EBITDA Targets as set forth in Schedule
A attached hereto.
Section 1.19 - Employment Agreement
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"Employment Agreement" shall mean the employment agreement between the
Optionee and the Company dated as of the date hereof, and as amended from time
to time.
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Section 1.20 - Exercise Price
"Exercise Price" shall mean $6.47 per share of Class A Common Stock,
as adjusted pursuant to Section 2.4 herein.
Section 1.21 - Fiscal Year
"Fiscal Year" shall mean the most recently completed fiscal year of
the Company.
Section 1.22 - FMV per Share
"FMV per Share" shall mean: (i) if determined upon a Public Offering,
the offering price per share of Common Stock; (ii) if determined upon a Change
of Control, the value of the equity of the Company divided by the total number
of outstanding shares of Common Stock of the Company; and (iii) otherwise, fair
market value of the equity of the Company, as determined by the Board of
Directors in good faith (based on the opinion of an independent
nationally-recognized investment banking firm), divided by total number of
outstanding shares of Common Stock of the Company; provided, however, that in
the case of clause (iii) of this Section 1.19 if there is an Active Trading
Market for the Common Stock at the time of the determination of the FMV per
Share, FMV per Share shall be the average of the per share closing prices of
the Common Stock for the 20 trading days immediately preceding such
determination date.
Section 1.23 - Good Reason
"Good Reason" shall have the meaning of "Good Reason" set forth in
Section 6.1(b) of the Employment Agreement.
Section 1.24 - Grant Date
"Grant Date" shall mean the date hereof.
Section 1.25 - Group
"Group" means two or more Persons acting together as a partnership,
limited partnership, syndicate or other group for the purpose of acquiring,
holding or disposing of securities of the Company.
Section 1.26 - Initial Public Offering
"Initial Public Offering" shall mean the initial Public Offering
(other than pursuant to a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company).
Section 1.27 - Xxxxxx
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"Xxxxxx" shall mean Xxxxxx Brothers Capital Partners III, L.P., a
Delaware limited partnership.
Section 1.28 - Lockheed Xxxxxx
"Lockheed Xxxxxx" shall mean Lockheed Xxxxxx Corporation, a Maryland
Corporation.
Section 1.29 - Missed Year
"Missed Year" shall mean a Fiscal Year in which the Company's EBITDA
is less than 100% of the EBITDA Target for such Fiscal Year.
Section 1.30 - Options
"Options" shall mean the non-qualified options, which may include a
Time Option and/or a Performance Option, to purchase Common Stock granted under
this Agreement.
Section 1.31 - Performance Option
"Performance Option" shall mean an Option with respect to which the
commencement of exercisability is governed by Section 3.2 hereof.
Section 1.32 - Person
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, limited liability company, unincorporated
association, joint venture or other entity of whatever nature.
Section 1.33 - Plan
"Plan" shall mean the 1997 Option Plan for Key Employees of L-3
Communications Holdings, Inc. and Subsidiaries.
Section 1.34 - Pronouns
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
Section 1.35 - Public Offering
"Public Offering" shall mean the sale of shares of any class
of the Company's stock to the public pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8 or any
similar or successor form) filed under the Securities Act of 1933 which results
in an Active Trading Market of 25% or more of the outstanding shares of the
Common Stock of the Company.
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Section 1.36 - Put/Call Percentage
"Put/Call Percentage" shall mean, initially, 75%, which Put/Call
Percentage shall be reduced by 15 percentage points on each anniversary
(including the first) of the date hereof.
Section 1.37 - Retirement
"Retirement" shall mean normal retirement under the terms of any
tax-qualified retirement plan of the Company, which retirement occurs more than
three years after the Purchase Date. Any purported retirement prior to the
third anniversary of the Purchase Date shall be treated the same as a
termination without Good Reason.
Section 1.38 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.39 - Stockholders' Agreement
"Stockholders' Agreement" shall mean the Stockholders' Agreement dated
as of the date hereof among the Company, Xxxxxx, Lockheed Xxxxxx, the Optionee
and XxXxxxx.
Section 1.40 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group
of commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Section 1.41 - Termination of Employment
"Termination of Employment" shall mean a termination of the Optionee's
employment with the Company (regardless of the reason therefor).
Section 1.42 - Time Option
"Time Option" shall mean an Option with respect to which the
commencement of exercisability is governed by Section 3.1 hereof.
Section 1.43 - Transaction Agreement
"Transaction Agreement" shall mean the Transaction Agreement dated as
of March 28, 1997, as amended, by and among the Company, Xxxxxx, Lockheed
Xxxxxx, the Optionee and XxXxxxx.
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ARTICLE II
GRANT OF OPTIONS
Section 2.1 - Grant of Options
For good and valuable consideration, on and as of the date hereof the
Company irrevocably grants to the Optionee a Time Option and/or a Performance
Option to purchase any part or all of an aggregate of the number of shares set
forth with respect to each such Option on the signature page hereof of its
Class A Common Stock upon the terms and conditions set forth in this Agreement.
Section 2.2 - Exercise Price
The exercise price of the shares of Class A Common Stock covered by
the Options shall be $6.47 per share subject to adjustment pursuant to Section
2.4 herein without commission or other charge.
Section 2.3 - No Obligation of Employment
Nothing in this Agreement or in the Plan shall confer upon the
Optionee any right to continue in the employ of the Company or any Subsidiary
or Affiliate or shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries or Affiliates, which are hereby expressly
reserved, to terminate the employment of the Optionee at any time for any
reason whatsoever, with or without Cause.
Section 2.4 - Adjustments in Options
Subject to Section 9 of the Plan, in the event that the outstanding
shares of the stock subject to an Option are, from time to time, changed into
or exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares, or otherwise, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares or other consideration as to which
such Option, or portions thereof then unexercised, shall be exercisable and the
exercise price therefor. Any such adjustment made by the Committee shall be
final and binding upon the Optionee, the Company and all other interested
persons.
ARTICLE III
EXERCISABILITY of Options
Section 3.1 - Time Options
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Unless otherwise provided in this Agreement, the Time Options shall
become exercisable as follows:
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Percentage of Class A Common
Date Time Option Stock As to which Time Option
Becomes Exercisable Is Exercisable
------------------- -----------------------------
After the first anniversary 20%
of the Closing Date
After the second anniversary 40%
of the Closing Date
After the third anniversary 60%
of the Closing Date
After the fourth anniversary 80%
of the Closing Date
After the fifth anniversary 100%
of the Closing Date
Section 3.2 - Performance Options
(a) Unless otherwise provided in this Agreement, the Performance
Option shall become exercisable with respect to 20% of the shares of Class A
Common Stock subject to such Performance Option on each of the first five
anniversaries of the Closing Date to the extent that the Company's EBITDA for
the Fiscal Year equals or exceeds the EBITDA Target.
(b) If any Fiscal Year is a Missed Year, such Performance Option shall
become exercisable with respect to a portion of the shares subject to
Performance Options in an amount equal to the product of (i) 20%, (ii) the
Applicable Percentage and (C) 571,429.
(c) If either all or a portion of Optionee's Performance Options do
not become exercisable in any year pursuant to the above, the Optionee may
"catch-up" based on the Cumulative EBITDA Target in an amount equal to (i) the
product of (A) 40%, if the determination is on the second anniversary of the
Closing Date, 60%, if on the third anniversary of the Closing Date, 80%, if on
the fourth anniversary of the Closing Date and 100%, if on the fifth
anniversary of the Closing Date, (B) the Applicable Percentage and (C) 571,429
less (ii) the total number of shares of Common Stock subject to Optionee's
Performance Option which have become exercisable.
(d) Notwithstanding the foregoing, the Performance Option shall become
exercisable as to 100% of the shares of Class A Common Stock subject to the
Performance Option after nine years after the Closing Date (but only to the
extent such Performance Option has not otherwise terminated or become
exercisable) at an exercise price of $6.47 per share, as adjusted pursuant to
Section 2.4 herein, whether or not the EBITDA Targets are achieved.
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Section 3.3 - Acceleration Events
Notwithstanding anything in this Article III to the contrary:
(a) The Time Option shall become immediately exercisable as to 100% of
the shares of Class A Common Stock subject to such Time Option (but only to the
extent such Time Option has not otherwise terminated or become exercisable)
upon the first to occur of: (i) Termination of Employment (A) on account of
death or Disability or (B) without Cause or with Good Reason and (ii) a Change
of Control.
(b) The Performance Options shall become fully exercisable early upon
the first to occur of: (i) Termination of Employment without Cause or with Good
Reason and (ii) a Change of Control; provided, however, that the acceleration
provided for in this subsection (b) shall occur if, and only if, (A) 100% or
more of the EBITDA Target has been achieved in each Fiscal Year prior to such
Termination of Employment or such Change of Control or (B) 100% of the
Cumulative EBITDA Target has been achieved in the Fiscal Year immediately
preceding such Termination of Employment or such Change of Control.
Section 3.4 - Effect of Termination of Employment
(a) Except as otherwise provided in this Article III, no Option shall
become exercisable as to any additional shares of Common Stock following
Termination of Employment.
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Section 3.5 - Expiration of Options
The Options may not be exercised to any extent by Optionee after the
first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) The first anniversary of the date of Termination of Employment (i)
by reason of death, Disability, or Retirement or (ii) without Cause or for
Good Reason; or
(c) The date of a Termination of Employment for Cause or without Good
Reason; or
(d) If the Committee so determines pursuant to Section 9 of the Plan,
the effective date of either the merger or consolidation of the Company
into another Person, or the exchange or acquisition by another Person of
all or substantially all of the Company's assets or 80% or more of its
then outstanding voting stock, or the recapitalization, reclassification,
liquidation or dissolution of the Company; provided, that the Optionee is
either cashed out of such Options or permitted to exercise such Options
for a period of at least thirty (30) days prior to the effective date or
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such event. At least thirty (30) days prior to the effective date of such
merger, consolidation, exchange, acquisition, recapitalization,
reclassification, liquidation or dissolution, the Committee shall give the
Optionee notice of such event if the Option has then neither been fully
exercised nor become unexercisable under this Section 3.5.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may exercise an Option or
any portion thereof. After the death of the Optionee, any exercisable portion
of an Option may, prior to the time when an Option becomes unexercisable under
Section 3.5, be exercised by his personal representative or by any person
empowered to do so under the Optionee's will or under the then applicable laws
of descent and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of an Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
3.5; provided, however, that any partial exercise shall be for whole shares of
Class A Common Stock only.
Section 4.3 - Manner of Exercise
An Option, or any exercisable portion thereof, may be exercised solely
by delivering to the Secretary or his office all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.5:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that the
Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Committee;
(b) Full payment (in cash, by check or by a combination thereof) for
the shares with respect to which such Option or portion thereof is
exercised;
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Option or portion thereof, stating that the
shares of stock are being acquired for his own account, for investment and
without any present intention of distributing or reselling
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said shares or any of them except as may be permitted under the Securities
Act of 1933, as amended (the "Act"), and then applicable rules and
regulations thereunder, and that the Optionee or other person then
entitled to exercise such Option or portion thereof will indemnify the
Company against and hold it free and harmless from any loss, damage,
expense or liability resulting to the Company if any sale or distribution
of the shares by such person is contrary to the representation and
agreement referred to above; provided, however, that the Committee may, in
its absolute discretion, take whatever additional actions it deems
appropriate to ensure the observance and performance of such
representation and agreement and to effect compliance with the Act and any
other federal or state securities laws or regulations;
(d) Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the
Option; and
(e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
option.
Without limiting the generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any subsequent transfer
of shares acquired on exercise of an Option does not violate the Act, and may
issue stop-transfer orders covering such shares. Share certificates evidencing
stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of subsection (c) above and the agreements herein.
The written representation and agreement referred to in subsection (c) above
shall, however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Act, and such registration is then
effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of an Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The obtaining of approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
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(b) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish for reasons
of administrative convenience.
Section 4.5 - Rights as Stockholder
The holder of an Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of the Option or any portion thereof unless and
until certificates representing such shares shall have been issued by the
Company to such holder.
ARTICLE V
Puts and Calls
Section 5.1 - Company's Right to Purchase. (a) In the event of any Termination
of Employment (i) by the Company without Cause, (ii) due to resignation by the
Optionee with Good Reason or (iii) due to the Optionee's Retirement, the
Company (or its designee) shall have the right to purchase and cancel, and the
Optionee shall be required upon exercise of such right to sell to the Company
(or its designee), all of the exercisable Options held by Optionee for an
amount equal to the product of (A) the total number of shares of Class A Common
Stock subject to exercisable Options held by the Optionee and (B) the Put/Call
Percentage as of the date of Termination of Employment, at a price per share
equal to the FMV per Share as of the date of such Termination of Employment
less the Exercise Price.
(b) In the event of any Termination of Employment due to (i)
death of the Optionee or (ii) Disability of the Optionee, the Company (or its
designee) shall have the right to purchase and cancel, and the Optionee shall
be required upon exercise by the Company of such right to sell to the Company
(or its designee), all of the exercisable Options held by the Optionee for an
amount equal to the product of (A) the total number of shares of Class A Common
Stock subject to exercisable Options held by Optionee and (B) the FMV per Share
as of the date of such Termination of Employment less the Exercise Price.
(c) In the event of any Termination of Employment (i) by the
Company for Cause or (ii) by the Optionee without Good Reason, all Options
(whether or not then exercisable) shall terminate without any payment.
(d) If the Company desires to exercise its right to purchase
any Common Stock subject to Options pursuant to this Section 5.1, the Company
shall, not later than the date of seventy-five (75) days following such
Termination of Employment, send written notice to the Optionee or his estate of
its intention to purchase such Options. The closing of such purchase shall take
place at the principal office of the Company within
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thirty (30) days after the giving of such written notice by the Company. The
Company's rights to purchase under this Section 5.1 may not be exercised in
part. If the Company chooses not to exercise such right, the Company shall not
later than seventy-five (75) days after the date of such Termination of
Employment send written notice to the Optionee or his estate of its intention
not to exercise such right.
Section 5.2 - Optionee's Right to Put. (a) In the event of any Termination of
Employment (i) by the Company without Cause, (ii) due to resignation by the
Optionee with Good Reason or (iii) due to the Optionee's Retirement, the
Optionee shall have the right to put to the Company, and the Company (or its
designee) shall be required upon exercise of such right to purchase and cancel,
all of the exercisable Options held by Optionee for an amount equal to the
product of (A) the total number of shares of Class A Common Stock subject to
exercisable Options held by the Optionee and (B) the Put/Call Percentage as of
the date of Termination of Employment, at a price per share equal to the FMV
per Share as of the date of such Termination of Employment less the Exercise
Price.
(b) In the event of any Termination of Employment due to (i) death of
the Optionee or (ii) Disability of the Optionee, the Optionee shall have the
right to put to the Company, and the Company (or its designee) shall be
required upon exercise of such right to purchase and cancel, all of the
exercisable Options held by the Optionee for an amount equal to the product of
(A) the total number of shares of Class A Common Stock subject to exercisable
Options held by Optionee and (B) the FMV per Share as of the date of such
Termination of Employment less the Exercise Price.
(c) In the event of any Termination of Employment (i) by the Company
for Cause or (ii) by the Optionee without Good Reason, all Options (whether or
not then exercisable) shall terminate without any payment.
(d) If the Optionee or his estate desires to exercise his or its
rights pursuant to this Section 5.2, the Optionee or his estate shall give
written notice of such intent to the Company no later than the earlier of (i)
90 days after the Company gives notice that it will not exercise its rights
under Section 5.1 and (ii) 15 days after the expiration of the Company's rights
under Section 5.1. The closing of such purchase shall take place at the
principal office of the Company within thirty (30) days after the giving of
such written notice to the Company. The Optionee's or his estate's rights to
put under this Section 5.2 may not be exercised in part.
Section 5.3 - Payment of Purchase Price by the Company. Notwithstanding the
foregoing, the Company shall not be required to purchase for cash any shares of
Common Stock subject to Options pursuant to Section 5.1 or Section 5.2 if (a)
such
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purchase would be or would result in a violation by the Company or any of its
Subsidiaries of (i) the terms of any debt agreements or other documents related
thereto to which the Company or any of its Subsidiaries is a party or (ii)
applicable law or (b) the Board of Directors (excluding Messrs. Xxxxx and
XxXxxxx or their respective nominees) unanimously determines that such purchase
would be reasonably likely to materially impact the Company's available cash,
require unsuitable additional debt to be incurred by the Company or otherwise
have a material adverse effect on the financial condition of the Company. If
the Company is precluded from paying for all or any portion of the Options in
cash pursuant to the preceding sentence, the Company shall issue a subordinated
note to the Optionee or his estate in respect of the Options not purchased for
cash, which note shall be repaid in cash (i) from the proceeds obtained by the
Company from the sale of Common Stock in an Initial Public Offering and (ii) at
such time that the Board of Directors determines that the conditions described
in the preceding sentence no longer exist; provided, that such note shall (A)
bear pay-in-kind interest at a rate per annum which, in the opinion of an
independent, mutually acceptable nationally-recognized investment banking firm,
will result in such note having a fair market value on the date of issuance
equal to the aggregate principal amount thereof, (B) be payable in full on
April 30, 2007 except as otherwise provided herein, (C) be subordinated to the
Company's obligations under any guarantee of any bank credit obligations of its
subsidiaries and (D) contain such other covenants, events of default and other
terms and conditions customary for notes of that kind. If in connection with
the exercise of rights pursuant to Section 5.1 or 5.2, the Company is required
to issue a subordinated note, at the request of the Optionee, the Company (by
action of the Board) will in good faith endeavor to cause the Company to
purchase the Options to be purchased pursuant to Section 5.1 or 5.2 in exchange
for the issuance of a subordinated note so long as such purchase is permitted
by the terms of any debt agreements or other documents related thereto to which
the Company or any of its subsidiaries is a party; provided, that in no event
shall the Company (or the Board) be required to cause the Company to purchase
such Options unless in its judgment such purchase on the terms set forth herein
would not have a material adverse impact on the Company's ability to raise debt
financing on commercially reasonable terms. Any subordinated note issued by the
Company pursuant to the foregoing shall contain such covenants, events of
default and other terms and conditions customary for notes of that kind,
including terms described in (A)-(C) above, except that (x) interest on such
note shall be payable in cash and (y) such note shall be payable in full on
August 15, 2007 except as otherwise provided herein and shall be subordinated
to the Company's obligations under any bank credit obligations or senior
subordinated debt. In the event that the Company is precluded from paying for
all or any portion of the Options in cash because such purchase would be or
would result in a violation by the Company or any of its Subsidiaries of the
terms of any debt agreements or other documents related thereto to which the
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Company or any of its Subsidiaries is a party, the Company shall use its
reasonable best efforts to obtain, or cause any such Subsidiary to obtain, a
waiver under such debt agreements or other agreements of such term or terms to
allow the Company to pay for all or any portion of the Options in cash.
Section 5.4 - Termination of Put/Call Rights. The rights and obligations set
forth in this Article 5 shall lapse upon a Public Offering.
ARTICLE VI
MISCELLANEOUS
Section 6.1 - Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons. No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Options. In its absolute discretion, the
Board of Directors may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan and this Agreement.
Section 6.2 - Options Not Transferable
Neither the Options nor any interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 6.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
Section 6.3 - Shares to Be Reserved
The Company shall at all times during the term of the Options reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
19
Section 6.4 - Notices
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
6.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall,
if the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of
his status and address by written notice under this Section 6.4. Any notice
shall have been deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.
Section 6.5 - Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
Section 6.6 - Applicability of Plan, Common Stock Subscription Agreement and
Stockholders' Agreement.
The Options and the shares of Common Stock issued to the Optionee upon
exercise of the Options shall be subject to all of the terms and provisions of
the Plan, Common Stock Subscription Agreement and the Management Stockholders'
Agreement, to the extent applicable to the Options and such shares. In the
event of any conflict between this Agreement and the Plan, the terms of the
Plan shall control. In the event of any conflict between this Agreement or the
Plan and the Common Stock Subscription Agreement, the terms of the Common Stock
Subscription Agreement shall control. In the event of any conflict between this
Agreement or the Plan or the Common Stock Subscription Agreement and the
Stockholders' Agreement, the terms of the Stockholders' Agreement shall
control.
Section 6.7 - Amendment
This Agreement may be amended only by a writing executed by the
parties hereto which specifically states that it is amending this Agreement.
Section 6.8 - Governing Law
The laws of the State of New York shall govern the interpretation,
validity and performance of the terms of this Agreement regardless of the law
that might be applied under principles of conflicts of laws.
20
Section 6.9 - Jurisdiction
Any suit, action or proceeding against the Optionee with respect to
this Agreement, or any judgment entered by any court in respect of any thereof,
shall be brought in any court of competent jurisdiction in the State of New
York, as the Company may elect in its sole discretion, and the Optionee hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any
such suit, action, proceeding or judgment. The Optionee hereby irrevocably
waives any objections which he may now or hereafter have to the laying of the
venue of any suit, action or proceeding arising out of or relating to this
Agreement brought in any court of competent jurisdiction in the State of New
York, and hereby further irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in any
inconvenient forum. No suit, action or proceeding against the Company with
respect to this Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a court of
competent jurisdiction in the State of New York, and the Optionee hereby
irrevocably waives any right which he may otherwise have had to bring such an
action in any other court, domestic or foreign, or before any similar domestic
or foreign authority. The Company hereby submits to the jurisdiction of such
courts for the purpose of any such suit, action or proceeding.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
L-3 COMMUNICATIONS HOLDINGS, INC.
By /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------
Its Vice President, Finance
and Controller
--------------------------
/s/ Xxxxx X. Xxxxx
----------------------------------- Aggregate number of shares of
Xxxxx X. Xxxxx Class A Common Stock for which
the Time Option granted
hereunder is exercisable:
571,428
L-3 Communications Corporation
-----------------------------------
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 Aggregate number of shares of
----------------------------------- Class A Common Stock for which
Address the Performance Option granted
hereunder is exercisable:
571,429
Xxxxx X. Xxxxx'x Taxpayer
Identification Number:
-------------------------------
Schedule A
----------
EBITDA Targets
--------------
($ in millions)
EBITDA Target* Cumulative EBITDA Target*
-------------- -------------------------
1997 (9 months only) $70.5
1998 97.4 $167.9
1999 104.1 272.0
2000 112.4 384.4
2001 120.5 504.9
-------------
* Upon disposition or acquisition of any business or substantial portion of the
assets of the Company or another company, the EBITDA Targets for the year of
such disposition or such acquisition and each subsequent year shall be
adjusted to eliminate or include, as the case may be, the income and expense
related to the business or assets that were subject to disposition or
acquisition.
Such adjustments must be consented to by all non-management directors
of the Board of Directors. If such directors cannot so consent, the adjustment
proposal shall be submitted to the Company's independent auditors, who can
consult with the necessary consultants for binding resolution.
Schedule B
----------
Applicable Percentage
---------------------
Target Achieved Percentage of EBITDA Applicable
(annual or cumulative) (Pct.) Percentage
------------------------------------ ----------
Less than 85 0.00
85 but less than 89 25.00
89 but less than 95 50.00
95 but less than 99 75.00
99 or more 100.00
