Non-qualified Stock Option Agreement (f.lanza)

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 Frank C. Lanza, 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 Lehman, LBHI and Lockheed Martin 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 - Lehman


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"Lehman" shall mean Lehman Brothers Capital Partners III, L.P., a Delaware limited partnership.


Section 1.28 - Lockheed Martin


"Lockheed Martin" shall mean Lockheed Martin 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, Lehman, Lockheed Martin, the Optionee and LaPenta.


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, Lehman, Lockheed Martin, the Optionee and LaPenta.


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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.


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