Stockholders Agreement

EXHIBIT 10.3


STOCKHOLDERS AGREEMENT


DATED AS OF APRIL 30, 1997


Among


L-3 COMMUNICATIONS HOLDINGS, INC.


LOCKHEED MARTIN CORPORATION,


LEHMAN BROTHERS CAPITAL PARTNERS III, L.P.,


LEHMAN BROTHERS HOLDINGS INC.,


FRANK C. LANZA,


and


ROBERT V. LAPENTA


TABLE OF CONTENTS


Page


ARTICLE I
DEFINITIONS


Section 1.1. Definitions . . . . . . . . . . . . . . . . . . 2


ARTICLE II
RESTRICTIONS ON TRANSFERS


Section 2.1. Transfers in Accordance with this Agreement . . 6
Section 2.2. Agreement to be Bound . . . . . . . . . . . . . 6
Section 2.3. Legend . . . . . . . . . . . . . . . . . . . . 6
Section 2.4. Transfers to Permitted Transferees and the
Company . . . . . . . . . . . . . . . . . . . 6
Section 2.5. No Transfer Period; Rights of First Offer . . . 7
Section 2.6. Tag Along Right . . . . . . . . . . . . . . . . 8
Section 2.7. Bring Along Right . . . . . . . . . . . . . . . 9
Section 2.8. Registration Rights . . . . . . . . . . . . . . 10


ARTICLE III
CLOSING


Section 3.1. Closing . . . . . . . . . . . . . . . . . . . . 10
Section 3.2. Deliveries at Closing; Method of Payment
of Purchase Price . . . . . . . . . . . . . . 10


ARTICLE IV
ADDITIONAL RIGHTS AND OBLIGATIONS
OF STOCKHOLDERS AND THE COMPANY


Section 4.1. Preemptive Rights . . . . . . . . . . . . . . . 11
Section 4.2. Future Services . . . . . . . . . . . . . . . . 11
Section 4.3. Regulatory Event . . . . . . . . . . . . . . . 12
Section 4.4. Regulatory Compliance . . . . . . . . . . . . . 12
Section 4.5. Standstill Agreement . . . . . . . . . . . . . 13
Section 4.6. Certain Other Agreements . . . . . . . . . . . 13


ARTICLE V
CERTAIN VOTING AGREEMENTS


Section 5.1. Board of Directors of the Company . . . . . . . 13
Section 5.2. Charter Documents . . . . . . . . . . . . . . . 15
Section 5.3. Consent to an Initial Public Offering;
Required IPO . . . . . . . . . . . . . . . . 15


ARTICLE VI
TERMINATION


Section 6.1. Termination . . . . . . . . . . . . . . . . . . 15


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ARTICLE VII
MISCELLANEOUS


Section 7.1. No Inconsistent Agreements . . . . . . . . . . 16
Section 7.2. Recapitalization, Exchanges, etc . . . . . . . 16
Section 7.3. Successors and Assigns . . . . . . . . . . . . 16
Section 7.4. No Waivers, Amendments . . . . . . . . . . . . 16
Section 7.5. Notices . . . . . . . . . . . . . . . . . . . . 16
Section 7.6. Inspection . . . . . . . . . . . . . . . . . . 17
SECTION 7.7. GOVERNING LAW . . . . . . . . . . . . . . . . . 17
Section 7.8. Section Headings . . . . . . . . . . . . . . . 17
Section 7.9. Entire Agreement . . . . . . . . . . . . . . . 17
Section 7.10. Severability . . . . . . . . . . . . . . . . . 17
Section 7.11. Counterparts . . . . . . . . . . . . . . . . . 17
Section 7.12. Option Plan . . . . . . . . . . . . . . . . . . 18


Exhibit A Bylaws Exhibit B Certificate of Incorporation Exhibit C Registration Rights Exhibit D Form of Agreement to be Bound Exhibit E 1997 Option Plan for Key Employees of L-3
Communications Holdings, Inc.


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STOCKHOLDERS AGREEMENT


STOCKHOLDERS AGREEMENT dated as of April 30, 1997 among L-3 Communications Holdings, Inc., a Delaware corporation (the "Company"), Lockheed Martin Corporation, a Maryland corporation ("Lockheed Martin"), Lehman Brothers Capital Partners III, L.P., a Delaware limited partnership ("Lehman"), Lehman Brothers Holders Inc., a Delaware corporation and the general partner of Lehman ("LBHI"), Frank C. Lanza ("Lanza") and Robert V. LaPenta ("LaPenta" and, together with Lanza, the "Management Investors"). Each of the parties to this Agreement (other than the Company) and any other Person (as hereinafter defined) who or which shall become a party to or agree to be bound by the terms of this Agreement after the date hereof is sometimes hereinafter referred to as a "Stockholder."


WITNESSETH


WHEREAS, this Agreement shall become effective (the "Effective Date") on the date of, and simultaneously with, the Closing under the Subscription Agreements (as hereinafter defined);


WHEREAS, as of the Effective Date, the Company will have an authorized capital stock consisting of 25,000,000 shares of Class A common stock, par value $0.01 per share (the "Class A Common Stock"), 3,000,000 shares of Class B common stock, par value $0.01 per share (the "Class B Common Stock") and 3,000,000 shares of Class C common stock, par value $0.01 per share (the "Class C Common Stock") and, together with the Class A Common Stock, the "Common Stock").


WHEREAS, the Company, Lockheed Martin, Lehman and the Management Investors have entered into a Transaction Agreement dated as of March 28, 1997 (the "Transaction Agreement") pursuant to which, among other things, the Company has agreed, subject to the terms and conditions thereof, to purchase certain assets and assume certain related liabilities of Lockheed Martin;


WHEREAS, in connection with the consummation of the transactions pursuant to the Transaction Agreement, each of Lockheed Martin, Lehman and LBHI has entered into a Common Stock Subscription Agreement with the Company dated as of the date of this Agreement pursuant to which each such Stockholder has agreed, subject to the terms and conditions thereof, to purchase shares of Class A Common Stock;


WHEREAS, in connection with the consummation of the transactions pursuant to the Transaction Agreement, each of the Management Investors has entered into a Common Stock Subscription Agreement with the Company dated as of the date of this Agreement (such Common Stock Subscription Agreements, together with the Common Stock Subscription Agreements referred to in the preceding recital, the "Subscription Agreements") pursuant to which each such Management Investor has agreed, subject to the terms and conditions thereof, to purchase shares of Class B Common Stock; and


WHEREAS, the parties hereto desire to restrict the sale, assignment, transfer, encumbrance or other disposition of the Shares (as hereinafter defined) and to provide for certain rights and obligations and other agreements in respect of the Shares, all as hereinafter provided.


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NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:


ARTICLE I
DEFINITIONS


Section 1.1. Definitions. As used in this Agreement, the following terms have the following meanings:


"Acquisition Transaction" shall have the meaning set forth in Section 4.6.


"Adverse Clearance Status" shall have the meaning set forth in Section 4.3.


"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, 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. Notwithstanding the foregoing, for purposes of this Agreement, Lockheed Martin shall not be considered an Affiliate of Lehman or of either of the Management Investors and the employee benefit plans of Lockheed Martin and its Subsidiaries shall not be considered Affiliates of Lockheed Martin.


"Board of Directors" shall mean the Board of Directors of the Company.


"Business" shall have the meaning set forth in the Transaction Agreement.


"Buyer's Notice" shall have the meaning set forth in Section 2.5(c).


"Buyout Notice" shall have the meaning set forth in Section 2.7.


"Bylaws" shall mean the Bylaws of the Company, in the form of Exhibit A, as amended from time to time, consistent with the terms hereof.


"Certificate of Incorporation" shall mean the Amended and Restated Certificate of Incorporation of the Company, in the form of Exhibit B, as amended from time to time, consistent with the terms hereof.


"Charter Documents" shall have the meaning set forth in Section 5.2(a).


"Class A Common Stock" shall have the meaning set forth in the recitals of this Agreement.


"Class B Common Stock" shall have the meaning set forth in the recitals of this Agreement.


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"Class C Common Stock" shall have the meaning set forth in the recitals of this Agreement.


"Common Stock" shall have the meaning set forth in the recitals of this Agreement.


"Company" shall have the meaning set forth in the preamble of this Agreement.


"Effective Date" shall have the meaning set forth in the recitals of this Agreement.


"FOCI" shall have the meaning set forth in Section 4.3.


"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).


"Lanza" shall have the meaning set forth in the preamble of this Agreement.


"LaPenta" shall have the meaning set forth in the preamble of this Agreement.


"Lehman" shall have the meaning set forth in the preamble of this Agreement.


"LBHI" shall have the meaning set forth in the preamble of this Agreement.


"Lehman Nominees" shall have the meaning set forth in Section 5.1(a).


"Lockheed Martin" shall have the meaning set forth in the preamble of this Agreement.


"Lockheed Martin Nominees" shall have the meaning set forth in Section 5.1(a).


"Management Investors" shall have the meaning set forth in the preamble of this Agreement.


"Offer Price" shall have the meaning set forth in Section 2.5(b).


"Offered Shares" shall have the meaning set forth in Section 2.5(b).


"Option Plan" shall mean the 1997 Option Plan for Key Employees of L-3 Communications Holdings, Inc., in the form of Exhibit E hereto.


"Payment in Full of the Preference Amount" shall have the meaning given such term in the Certificate of Incorporation.


"Permitted Transferee" shall mean:


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(i) in the case of Lehman or LBHI and Permitted Transferees of Lehman
and LBHI, (A) LBHI or Lehman, as the case may be, or any controlled
Affiliate (other than an individual) of LBHI, (B) any general or limited
partner, director, officer or employee of Lehman, LBHI or any controlled
Affiliate (other than an individual) of LBHI, (C) the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any of
the individuals referred to in clause (B), (D) any trust, the
beneficiaries of which include only (1) Lehman, (2) Permitted Transferees
referred to in clauses (A), (B) and (C) and (3) spouses and lineal
descendants of Permitted Transferees referred to in clause (B) and (E) a
corporation or partnership, a majority of the equity of which is owned and
controlled by Lehman and/or Permitted Transferees referred to in clauses
(A), (B), (C) and (D);


(ii) in the case of Lockheed Martin and Permitted Transferees of
Lockheed Martin, any controlled Affiliate of Lockheed Martin; and


(iii) in the case of each Management Investor and Permitted Transferees
of such Management Investor, his or her spouse or any of his or her lineal
descendants or legatees or a testamentary trust for such legatees, or a
trust or individual retirement account, the beneficiaries of which or a
corporation or partnership the stockholders or partners of which include
only such Stockholder, his or her spouse and his or her lineal descendants
or a corporation or partnership wholly owned by them;


provided, that any such Permitted Transferee referred to in clauses
(i)(iii) agrees in writing to be bound by the terms of this Agreement in
accordance with Section 2.2.


"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.


"Proposed Transferee" shall have the meaning set forth in Section 2.6.


"Public Offering" shall mean any underwritten public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act.


"Put" shall have the meaning set forth in Section 4.3.


"Reduced Transfer Price" shall have the meaning set forth in Section 2.5(d).


"Reduced Transfer Price Notice" shall have the meaning set forth in Section 2.5(d).


"Regulatory Event Notice" shall have the meaning set forth in Section 4.3.


"Regulatory Portion" shall have the meaning set forth in Section 4.3.


"Restriction Lapse" shall have the meaning given such term in the Certificate of Incorporation.


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"Second Reduction Transfer Price" shall have the meaning set forth in Section 2.5(e).


"Second Reduction Transfer Price Notice" shall have the meaning set forth in Section 2.5(e).


"Securities Act" shall mean the Securities Act of 1933, as amended.


"Seller" shall have the meaning set forth in Section 2.5(b).


"Seller's Notice" shall have the meaning set forth in Section 2.5(b).


"Share Equivalents" shall mean securities of any kind issued by the Company convertible into or exchangeable for Shares or options, warrants or other rights to purchase or subscribe for Shares or securities convertible into or exchangeable for Shares.


"Shares" shall mean, with respect to any Stockholder, shares of Common Stock, whether now owned or hereafter acquired (including upon exercise of options, preemptive rights or otherwise), held by such Stockholder.


"Shares Subject to Forfeiture" shall have the meaning given such term in the Certificate of Incorporation.


"Stockholder" shall have the meaning set forth in the preamble of this Agreement.


"Subscription Agreements" shall have the meaning set forth in the recitals of this Agreement.


"Subsidiary" shall mean, with respect to any Person, any corporation or other entity of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar function at the time directly or indirectly owned by such Person.


"Third Party" shall mean any prospective Transferee of Shares (other than the Company) that is not a Permitted Transferee of the Stockholder proposing the Transfer of such Shares to such prospective Transferee.


"Transaction Agreement" shall have the meaning set forth in the recitals of this Agreement.


"Transfer" shall have the meaning set forth in Section 2.1.


"Transfer Closing Date" shall have the meaning set forth in Section 3.1.


"Transferee" shall mean any Person who or which acquires Shares from a Stockholder or a Transferee (including Permitted Transferees) of a Stockholder subject to this Agreement.


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ARTICLE II
RESTRICTIONS ON TRANSFERS


Section 2.1. Transfers in Accordance with this Agreement. No Stockholder shall, directly or indirectly, transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of all or any portion of any Shares or any economic interest therein (including without limitation by means of any participation or swap transaction) (each, a "Transfer") to any Person, except in compliance with the Securities Act, applicable state and foreign securities laws and this Agreement. No Stockholder shall Transfer any Shares if the consummation of such Transfer may result in the Company becoming subject to FOCI or Adverse Clearance Status. Any attempt to Transfer any Shares in violation of the terms of this Agreement shall be null and void, and neither the Company, nor any transfer agent shall register upon its books any Transfer of Shares by a Stockholder to any Person except a Transfer in accordance with this Agreement.


Section 2.2. Agreement to be Bound. No Transfer of Shares (other than Transfers (i) in the Initial Public Offering, if any, or (ii) to the Company) shall be effective unless (i) the certificates representing such Shares issued to the Transferee shall bear the legend provided in Section 2.3 and (ii) the Transferee, if not already a party hereto, shall have executed and delivered to each other party hereto, as a condition precedent to such Transfer, an instrument or instruments substantially in the form of Exhibit D or otherwise reasonably satisfactory to such parties confirming that the Transferee agrees to be bound by the terms of this Agreement with respect to the Shares so Transferred to the same extent applicable to the Transferor thereof.


Section 2.3. Legend. A copy of this Agreement shall be filed with the Secretary of the Company and kept with the records of the Company. Each Stockholder hereby agrees that each certificate representing Shares issued to any Stockholder, or any certificate issued in exchange for any similarly legended certificate, shall bear a legend reading substantially as follows:


THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND
SOLD ONLY IF SO REGISTERED OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.


THE SHARES REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS
AGREEMENT, DATED AS OF APRIL 30, 1997, COPIES OF WHICH MAY BE
OBTAINED FROM L-3 COMMUNICATIONS HOLDINGS, INC. (THE "COMPANY"). NO
TRANSFER OF SUCH SHARES WILL BE MADE ON THE BOOKS OF THE COMPANY
UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH
AGREEMENT.


Section 2.4. Transfers to Permitted Transferees and the Company. (a) None of the restrictions contained in this Agreement with respect to Transfers of Shares (other than Sections 2.2, 2.3 and 2.4(b)) shall apply to any Transfer of Shares by any Stockholder (i) to a Permitted Transferee of such Stockholder or (ii) to the Company.


(b) Each Permitted Transferee of any Stockholder shall, and such Stockholder shall cause such Permitted Transferee to, transfer back to such


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