OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS OF
L-3 COMMUNICATIONS HOLDINGS, INC.
1. Purpose of the Plan
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The 1998 Directors Stock Option Plan for Non-Employee Directors of L-3
Communications Holdings, Inc. (the "Plan") is designed:
(a) to promote the long-term financial interests and growth of L-3
Communications Holdings, Inc. (the "Corporation") and its Subsidiaries by
attracting and retaining Non-Employee Directors with the training, experience
and ability to enable them to make a substantial contribution to the success of
the Corporation's business; and
(b) to further the alignment of interests of Non-Employee Directors with
those of the stockholders of the Corporation through opportunities for increased
stock, or stock-based, ownership in the Corporation.
2. Definitions
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As used in the Plan, the following words shall have the following meanings:
(a) "Board of Directors" means the Board of Directors of the Corporation.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board of Directors.
(d) "Common Stock" or "Share" means common stock, par value $.01 per share
of the Corporation which may be authorized but unissued, or issued and
reacquired.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(f) "Fair Market Value" means, unless otherwise defined in an Option
Agreement, and/or determined in accordance with any applicable resolutions or
regulations of the Committee in effect at the relevant time, on any date, the
closing price of the Common Stock on the New York Stock Exchange Composite Tape,
as published in the Eastern Edition of The Wall Street Journal or otherwise
reliably reported, or, if there is no trading of the Common Stock on such date,
then the closing price of the Common Stock as quoted on such New York Stock
Exchange Composite Tape on the immediately preceding date on which there was
trading in such Shares.
(g) "Non- Employee Director" means a director of the Corporation who is not
(i) an employee of the Corporation or any of its Subsidiaries, (ii) a director,
officer or employee of any entity that owns, beneficially or of record, directly
or indirectly, 10% or more of the Common Stock outstanding on the date of grant
of the Option or (iii) a person that owns, beneficially or of record, directly
or indirectly, 10% or more of the Common Stock outstanding on the date of grant
of the Option.
(f) "Option Agreement" means an agreement between the Corporation and a
Participant that sets forth the terms, conditions and limitations applicable to
a grant of Options pursuant to the Plan.
(g) "Option" means an option to purchase shares of the Common Stock granted
to a Participant pursuant to Section 6 of the Plan which will not be an
"incentive stock option" (within the meaning of Section 422 of the Code).
(h) "Participant" means a Non-Employee Director to whom one or more grants
of Options have been made and such grants have not all been forfeited or
terminated under the Plan.
(i) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Corporation 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.
3. Stock Subject to the Plan
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(a) Subject to the provisions of Section 8 and this Section 3, the maximum
number of shares of Common Stock in respect of which Options may be granted is
200,000. If and to the extent that an Option shall expire, terminate or be
cancelled for any reason without having been exercised, the shares of Common
Stock subject to such expired, terminated or cancelled portion of the Option
shall again become available for purposes of the Plan.
(b) Shares of Common Stock deliverable under the terms of the Plan may be,
in whole or in part, authorized and unissued shares of Common Stock, or issued
shares of Common Stock held in the Corporation's treasury, or both.
(c) The Corporation shall at all times reserve a number of shares of Common
Stock (authorized and unissued Common Stock, issued Common Stock held in the
Corporation's treasury, or both) equal to the maximum number of shares of Common
Stock that may be subject to outstanding Option grants and future Option grants
under the Plan.
4. Administration of the Plan
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(a) The Plan shall be administered by the Committee or a subcommittee
appointed by the Committee. The Committee may adopt its own rules of procedure,
and action of a majority of the members of the Committee taken at a meeting, or
action taken without a meeting by unanimous written consent, shall constitute
action by the Committee. The Committee shall have the power and authority to
administer, construe and interpret the Plan, to make rules for carrying it out
and to make changes in such rules. Any such interpretations, rules and
administration shall be consistent with the basic purposes of the Plan.
(b) As to decisions in respect of Participants who are subject to Section
16 of the Exchange Act, the participating members of the Committee administering
the Plan shall include only those members of the Committee who are non-Employee
Directors (as defined in Rule 16b-3 promulgated under the Exchange Act.
(c) Unless in contravention to any laws, rules and regulations governing
the Plan, including the Exchange Act, the Committee may delegate to the Chief
Executive Officer and to other senior officers of the Corporation its duties
under the Plan subject to such conditions and limitations as the Committee shall
prescribe.
(d) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons in respect of the administration of the
Plan, who may be employees of the Corporation or outside advisers to the
Corporation. The Committee, the Corporation, and the officers and directors of
the Corporation shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Participants, the Corporation 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 Option grants,
and all members of the Committee shall be fully protected, indemnified and held
harmless by the Corporation with respect to any such action, determination or
interpretation.
5. Eligibility
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Option grants may be made under this Plan only to Non-Employee Directors of
the Corporation. The terms, conditions and limitations of each Option grant
under the Plan shall be set forth in an Option Agreement, in a form approved by
the Committee, consistent, however, with the terms of the Plan; provided,
however, that such Option Agreement shall contain provisions dealing with the
treatment of Option grants in the event of the termination, death or disability
of a Participant, and may also include provisions concerning the treatment
(including acceleration of vesting) of Option grants in the event of a change of
control of the Corporation.
6. Grants
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Each Non-Employee Director shall receive an annual grant for 1,500 shares
of Common Stock (the "Annual Grant"). The initial Annual Grant to any
Non-Employee Director will be made as of the date of the first meeting of the
Board of Directors attended by such Director. Each subsequent Annual Grant shall
be made on the date of the first meeting of the Board of Directors following the
Annual Meeting of Stockholders of the Corporation.
The Options contained in each Annual Grant shall be subject to vesting in
three equal annual installments on the first three anniversaries of the grant
date, such that 500 shares of Common Stock shall vest on the first anniversary
of the date of grant, so long as the Participant has had continuous service as a
Non-Employee Director of the Corporation through the first anniversary, 500
shares of Common stock shall vest on the second anniversary on the date of grant
so long as the Participant has had continuous services as a Non-Employee
Director of the Corporation through the second anniversary, and 500 shares of
Common Stock shall vest on the third anniversary on the date of grant so long as
the Participant has had continuous service as a Non-Employee Director of the
Corporation through the third anniversary. All vested Options shall be
exercisable through the tenth anniversary of the grant date, after which such
unexercised Options shall expire. All Options and shall have an exercise price
equal to the Fair Market Value of the Common Stock on the grant date.
At the time of the grant of the Option the Committee shall determine, and
shall include in the Option Agreement, such other conditions or restrictions on
the grant or exercise of the Option as the Committee deems appropriate. In
addition to other restrictions contained in the Plan, an Option granted under
this Paragraph 6, may not be exercised more than 10 years after the date it is
granted. Payment of the option price shall be made in cash or in shares of
Common Stock, or a combination thereof, in accordance with the terms of the
Plan, the Option Agreement and of any applicable guidelines of the Committee in
effect at the time.
The exercise price of an Option shall be paid in full at the time of
exercise (i) in cash, (ii) through the surrender of previously acquired shares
of Common Stock having a Fair Market Value equal to the exercise price of the
Option, (iii) through the withholding by the Company (at the election of the
Participant) of shares of Common Stock (that would otherwise be issuable upon
the exercise price or (iv) by a combination of (i), (ii) and (iii). If shares of
Common Stock are surrendered by the Participant or withheld by the Company, the
Company shall be permitted to withhold such amounts as may then be required by
the Code or applicable regulations thereunder, as provided in Section 11.
7. Limitations and Conditions
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(a) No Options shall be granted under the Plan beyond ten years after the
effective date of the Plan, but the terms of Options granted on or before the
expiration of the Plan shall extend beyond such expiration, as provided in
Section 6 above. At the time an Option is granted or amended or the terms or
conditions of an Option are changed, the Committee may provide for limitations
or conditions on such Grant.
(b) Nothing contained herein shall affect the right of the Corporation or
its directors or stockholders to remove any Non-Employee Director in accordance
with the Certificate of Incorporation, By-laws of the Corporation or applicable
law.
(c) Other than as specifically provided with regard to the death of a
Participant, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Participant, be in any manner or subject to attachment,
satisfaction or discharge of the debts, contracts, liabilities, engagements, or
obligations arising in respect of torts of the Participant.
(d) Participants shall not be, and shall not have any of the rights or
privileges of, stockholders of the Corporation in respect of any shares of
Common Stock purchasable in connection with any Option grant unless and until
such Option has been exercised in accordance with the terms of this Plan and any
applicable Option Agreement.
(e) No election as to benefits or exercise of Options may be made during a
Participant's lifetime by anyone other than the Participant except by a legal
representative, trustee or other guardian appointed for or by the Participant.
(f) Absent express provisions to the contrary, any grant of Options under
this Plan shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Corporation or its Subsidiaries
and shall not affect any benefits under any other benefit plan of any kind now
or subsequently in effect under which the availability or amount of benefits is
related to level of compensation. This Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.
(g) Unless the Committee determines otherwise, no benefit, Option or other
promise under the Plan shall be secured by any specific assets of the
Corporation or any of its Subsidiaries, nor shall any assets of the Corporation
or any of its Subsidiaries be designated as attributable or allocated to the
satisfaction of the Corporation's obligations under the Plan or any applicable
Option Agreement.
8. Adjustments
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In the event of any change in the outstanding Common Stock by reason of a
stock split, spin-off, stock dividend, stock combination or reclassification,
recapitalization or merger, change of control, or similar event, the Committee
shall adjust appropriately and equitably the number of Shares subject to the
Plan and available for or covered by Option grants and exercise prices related
to outstanding Option grants and make such other revisions to outstanding Option
grants as it deems, in its sole discretion are equitably required.
9. Merger, Consolidation, Exchange,
Acquisition, Liquidation or Dissolution
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In its absolute discretion, and on such terms and conditions as it deems
appropriate, coincident with or after the grant of any Option, the Committee may
provide that such Option cannot be exercised after the merger or consolidation
of the Corporation into another corporation, the exchange of all or
substantially all of the assets of the Corporation for the securities of another
corporation, the acquisition by another corporation of 80% or more of the
Corporation's then outstanding shares of voting stock or the recapitalization,
reclassification, liquidation or dissolution of the Corporation, and if the
Committee so provides, it shall also provide, either by the terms of such Option
or by a resolution adopted prior to the occurrence of such merger,
consolidation, exchange, acquisition, recapitalization, reclassification,
liquidation or dissolution, that, for a period of at least thirty (30) days
prior to such event, such Option (whether or not vested) shall be exercisable as
to all Shares subject thereto, notwithstanding anything to the contrary herein
(but subject to the provisions of Paragraph 7(b)) and that, upon the occurrence
of such event, such Option shall terminate and be of no further force or effect;
provided, however, that the Committee may also provide, in its absolute
discretion, that even if the Option shall remain exercisable after any such
event, from and after such event, any such Option shall be exercisable only for
the kind and amount of securities and/or other property, or the cash equivalent
thereof, receivable as a result of such event by the holder of a number of
shares of Common Stock for which such Option could have been exercised
immediately prior to such event.
10. Amendment and Termination
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The Committee shall have the authority to make such amendments to any terms
and conditions applicable to outstanding Option grants as are consistent with
this Plan provided that, except for adjustments under Paragraph 8 or 9 hereof,
no such action shall modify such Option grant in a manner adverse to the
Participant without the Participant's consent.
The Board of Directors may amend, suspend or terminate the Plan except that
no such action, other than an action under Paragraph 8 or 9 hereof, may be taken
which would decrease the exercise price of outstanding Options, change the
requirements relating to the Committee or extend the term of the Plan.
11. Withholding Taxes
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The Corporation shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with respect to such payment. It shall be a condition to the
obligation of the Corporation to deliver shares of Common Stock upon the
exercise of an Option that the Participant pay to the Corporation such amount as
may be requested by the Corporation for the purpose of satisfying any liability
for such withholding taxes. Any Option Agreement may provide that the
Participant may elect, in accordance with any conditions set forth in such
Option Agreement, to pay a portion or all of such withholding taxes in shares of
Common Stock.
12. Effective Date and Termination Dates
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The Plan shall be effective on and as of the date of its approval by the
Board of Directors of the Corporation and shall terminate ten years later,
subject to earlier termination by the Board of Directors pursuant to Paragraph
10.
13. Governing Law
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The validity, interpretation, construction and performance of this Plan and
all Option Agreements hereunder shall be governed by the laws of the State of
Delaware without giving effect to the doctrine of conflict of laws.
14. Severability
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If any provisions of this Plan or any applicable Option Agreement shall be
held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.