DEF 14A 1 s001493x5_def14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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 ☒

Filed by a Party other than the Registrant o

Check the appropriate box:

o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material under Rule 14a-12

L3 Technologies, Inc.
(Name of Registrant as Specified in Its Charter)

 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required
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2017 Notice of
Annual Meeting
of Shareholders
and Proxy Statement


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600 Third Avenue
New York, NY 10016

Dear Fellow Shareholder:

On behalf of the Board of Directors, I cordially invite you to attend the Annual Meeting of Shareholders of L3 Technologies, Inc., to be held at 2:30 p.m., Eastern Daylight Time, on Tuesday, May 9, 2017, at The Ritz-Carlton New York, Battery Park, located at Two West Street, New York, New York 10004. This year we are also offering a virtual shareholder experience through which you can view the meeting and vote online at LLL.onlineshareholdermeeting.com. The question and answer session will include both live questions from shareholders attending the meeting at the physical location as well as questions submitted to us in advance at www.proxyvote.com. We will respond to as many inquiries as time allows. The notice and proxy statement for the Annual Meeting are attached to this letter and describe the business to be conducted at the Annual Meeting.

In accordance with the rules of the Securities and Exchange Commission, we sent a Notice of Internet Availability of Proxy Materials on or about March 27 , 2017 to our shareholders of record as of the close of business on March 13, 2017. We also provided access to our proxy materials over the Internet beginning on that date. If you received a Notice of Internet Availability of Proxy Materials by mail and did not receive, but would like to receive, a printed copy of our proxy materials, you should follow the instructions for requesting such materials included on page 6 of this proxy statement or in the Notice of Internet Availability of Proxy Materials.

To have your vote recorded, you should vote over the Internet or by telephone. In addition, if you have requested or received a paper copy of the proxy materials, you may vote by signing, dating and returning the proxy card sent to you in the envelope accompanying the proxy materials sent to you. We encourage you to vote by any of these methods 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 Annual Meeting. If you decide to attend, you can still vote your shares in person if you wish. If you wish to attend the Annual Meeting in person, you will need to register and request an admission ticket in advance. You can register and request a ticket by following the instructions set forth on page 9 of this proxy statement.

On behalf of the Board of Directors, I thank you for your cooperation and look forward to seeing you on May 9, 2017.

March 27 , 2017

Very truly yours,


Michael T. Strianese
Chairman and Chief Executive Officer

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NOTICE OF 2017 ANNUAL MEETING OF
SHAREHOLDERS OF L3 TECHNOLOGIES, INC. 

DATE AND TIME:
Tuesday, May 9, 2017 at 2:30 p.m., Eastern Time
PLACE:
The Ritz-Carlton New York, Battery Park
Two West Street
New York, New York 10004
ITEMS OF BUSINESS:
1)
To elect the 10 Directors listed in the accompanying proxy statement (the “Proxy Statement”);
 
2)
To ratify the appointment of our independent registered public accounting firm for 2017 (the “Auditor Ratification Proposal”);
 
3)
To approve the amendment and restatement of the Company’s Restated Certificate of Incorporation (the “Certificate of Incorporation”) to eliminate all provisions that require more than a simple majority vote (the “Supermajority Proposal”);
 
4)
To approve the L3 Technologies, Inc. Amended and Restated 2012 Cash Incentive Plan (the “Cash Incentive Proposal”);
 
5)
To approve, in a non-binding, advisory vote, the compensation paid to our named executive officers as described herein (the “Say-on-Pay Proposal”);
 
6)
To determine, in a non-binding, advisory vote, whether a shareholder vote to approve the compensation paid to our named executive officers should occur every one, two or three years (the “Say-on-Frequency Proposal”); and
 
7)
To transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.
WHO CAN VOTE:
You are entitled to vote if you were a shareholder of record at the close of business on Monday, March 13, 2017 (the “Record Date”).
VOTING:
We urge you to participate in the meeting, either by attending and voting in person or by voting through other acceptable means as promptly as possible. You may vote by telephone, through the Internet or by mailing your completed and signed proxy card (or voting instruction form, if you hold your shares through a broker, bank or other nominee). Each share is entitled to one vote on each matter to be voted upon at the Annual Meeting. Your vote is important and we urge you to vote.
MEETING ADMISSION:
If you plan to attend the meeting, you must request an admission ticket in advance. To request an admission ticket, please follow the instructions on page 9 in response to Question 13 of the accompanying Proxy Statement. If you are unable to attend the meeting in person, you may also attend our meeting and vote your shares virtually via the Internet by visiting LLL.onlineshareholdermeeting.com and following the instructions to enter and participate in the meeting.
2016 ANNUAL REPORT:
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 accompanies this Proxy Statement.
March 27 , 2017
New York, New York
By Order of the Board of Directors,

Ann D. Davidson
Senior Vice President, General Counsel and
Corporate Secretary

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on May 9, 2017.
The following proxy materials are available for you to view online at http://www.L3T.com: (1) this Proxy Statement (including all attachments, if any); (2) our Summary Annual Report and Annual Report on Form 10-K, in each case for the year ended December 31, 2016 (which is not deemed to be part of the official proxy soliciting materials); and (3) any amendments to the foregoing materials that are required to be furnished to shareholders. In addition, if you have not received a copy of our proxy materials and would like one, you may download an electronic copy of our proxy materials or request a paper copy at http://www.L3T.com. You will also have the opportunity to request paper or email copies of our proxy materials for all future Annual Meetings.

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PROXY STATEMENT – TABLE OF CONTENTS  

NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS OF L3 TECHNOLOGIES, INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Proxy Statement i

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PROXY STATEMENT SUMMARY 

This summary highlights information about L3 Technologies, Inc. (the “Company,” “L3,” “we,” “our” or “us”) and certain information contained elsewhere in this Proxy Statement for L3’s 2017 Annual Meeting of Shareholders (the “Annual Meeting” or the “meeting”). This summary does not contain all of the information that you should consider in voting your shares of L3 common stock, par value $0.01 per share (the “Common Stock”). You should read the entire Proxy Statement carefully before voting.

VOTING MATTERS AND BOARD RECOMMENDATIONS

Proposal
Board Vote
Recommendation
Page
Reference
Proposal 1 –   Election of Directors
FOR
 
 
Proposal 2 –   Auditor Ratification Proposal
FOR
 
 
Proposal 3 –   Supermajority Proposal
FOR
 
 
Proposal 4 –   Cash Incentive Plan Proposal
FOR
 
 
Proposal 5 –   Say-on-Pay Proposal
FOR
 
 
Proposal 6 –   Say-on-Frequency Proposal
ONE YEAR
 
 

CASTING YOUR VOTE

 
How to Vote
Shareholders of Record
(Shares registered in your name with
L3’s transfer agent, Computershare)
Street Name Holders
(Shares held through a Broker,
Bank or Other Nominee)
and 401(k) Participants

Mobile Device
Scan the QR Code to vote using your mobile device:

Refer to voting
instruction form.

Internet
Visit the applicable voting website:
www.proxyvote.com
www.proxyvote.com

Telephone
Within the United States, U.S. Territories and Canada, call toll-free:
1-800-690-6903
Refer to voting
instruction form.

Mail
Complete, sign and mail your proxy card or voting instruction form in the self-addressed envelope provided to you, following your request, if any.

In Person
For instructions on attending the 2017 Annual Meeting in person, please see Question 13 on page 9.

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PROXY STATEMENT SUMMARY

BOARD NOMINEES

You are being asked to vote on the following ten nominees for director. All directors are elected annually by a majority of the votes cast. Information about each director’s experiences, qualifications, attributes and skills can be found beginning on page 10.

Name
Age
Director
Since
Principal Occupation
Independent
Board
Committee
Membership*
Claude R. Canizares
71
2003
Bruno Rossi Professor of Physics, Massachusetts Institute of Technology
Yes
AC
Thomas A. Corcoran
72
1997
President, Corcoran Enterprises, LLC
Yes
AC
Ann E. Dunwoody
64
2013
General (Ret.), U.S. Army and Chief Executive Officer, First 2 Four LLC
Yes
NC
Lewis Kramer
69
2009
Retired Partner, Ernst & Young LLP
Yes
AC, CC, EC
Robert B. Millard
66
1997
Chairman, Massachusetts Institute of Technology Corporation
Yes
CC, EC, LD
Lloyd W. Newton
74
2012
General (Ret.), U.S. Air Force and Retired Executive Vice President, Pratt & Whitney Military Engines
Yes
CC
Vincent Pagano, Jr.
66
2013
Retired Partner, Simpson Thacher & Bartlett LLP
Yes
AC, NC, EC
H. Hugh Shelton
75
2011
General (Ret.), U.S. Army
Yes
NC
Arthur L. Simon
85
2001
Retired Partner, Coopers & Lybrand LLP
Yes
AC, NC
Michael T. Strianese
61
2006
Chairman and CEO, L3
No
EC
* AC   Audit CommitteeNC   Nominating/Corporate Governance Committee      LD   Lead Independent Director
    CC   Compensation CommitteeEC   Executive Committee

CORPORATE GOVERNANCE HIGHLIGHTS

   Annual election of directors
   Directors elected by majority voting
   Early adoption of proxy access
   9 of our 10 director nominees are independent
   Independent lead director
   All NYSE-required Board committees consist solely of independent directors
   Regular executive sessions of independent directors
   Shareholder right to call special meetings
   Over 75% average Board and Committee meeting attendance for each director in 2016
   Annual Board and Committee self-evaluations
   Comprehensive code of ethics and business conduct and corporate governance guidelines
   No shareholder rights plan or “poison pill”
   Strong pay-for-performance philosophy
   Comprehensive political contributions disclosure policy and compliance program
   Board participation in executive succession planning
   Stock ownership guidelines for directors and executive officers
   Policy prohibiting hedging and pledging
   Compensation “clawback” policy

During 2016, we amended our Bylaws to proactively adopt proxy access, which permits a shareholder or a group of up to 20 shareholders, owning shares representing 3% or more of the voting power entitled to vote generally in the election of directors for at least three years, to submit director nominees for up to the greater of 20% of the independent directors on the Board or two shareholder nominees for inclusion in our Proxy Statement if the shareholder(s) and the nominee(s) meet the requirements in our Bylaws.

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PROXY STATEMENT SUMMARY

SHAREHOLDER ENGAGEMENT

In recent years, we have made a concerted effort to engage with our shareholders both during and outside the proxy season in order to have a better understanding of their perspectives on our Company, including matters of corporate governance, as well as our strategies and performance. This dialogue, in which both management and directors participate, as appropriate, has helped inform the Board’s decision-making and ensures our interests remain well-aligned with those of our shareholders.

The Company has a strong record of adopting provisions or modifying practices to reflect shareholder input. During 2016, the Board, on its own initiative, adopted a proxy access bylaw in October 2016, and modified the bylaw in December 2016, to reflect constructive input received from our investors. In addition, in response to investor feedback, we enhanced our corporate governance disclosure in our proxy statement to provide additional information regarding:

Board tenure, refreshment and diversity;
Board committee accomplishments; and
Board committee oversight of political contributions and lobbying.

We also regularly attend investor conferences and hold one-on-one meetings with shareholders and potential investors throughout the United States. In addition, we have telephonic calls with shareholders and analysts on a periodic basis, review correspondence submitted by shareholders to management and/or the Board, and have discussions with proxy advisory services. In 2016, these outreach efforts resulted in dialogue with shareholders representing over 40% in the aggregate of the Company’s outstanding Common Stock.

Shareholders may access investor information about the Company through our website at http://www.L3T.com/investor-relations.

SUMMARY OF 2016 BUSINESS PERFORMANCE

Our diluted earnings per share (“EPS”) and free cash flow (“FCF”) achievements exceeded the corporate goals in our annual incentive plan by 7% for each measure. Our 2016 EPS from continuing operations was $8.21, compared with $3.44 for 2015, and our net cash from operating activities from continuing operations increased by 3% to $1,097 million for 2016, as compared to $1,069 million for 2015. Our 2015 EPS from continuing operations includes certain non-cash goodwill impairment charges and a loss on business divestitures that are described more fully in “Compensation Discussion and Analysis Reconciliation of Non-GAAP Measures to GAAP Measures” on page 59. Excluding these items, our EPS from continuing operations grew by 19% to $8.21 for 2016, as compared to $6.91 for 2015.
Our consolidated net sales grew by 0.4% to $10,511 million for 2016, as compared to $10,466 million for 2015. Our consolidated organic sales growth (that is, net sales excluding the sales impact of business acquisitions and divestitures) was 2% for 2016, led by organic growth of 5% for our U.S. Government business (including the Department of Defense), which compares favorably to the 4% increase in the total Department of Defense budget for the U.S. Government fiscal year ended September 30, 2016. Consolidated organic sales exclude $209 million of sales declines related to business divestitures and $93 million of sales increases related to business acquisitions.
Operating margins increased in every segment as compared to 2015. Our segment operating margin increased by 110 basis points to 9.6% for 2016, as compared to 8.5% for 2015.
Our segment operating income increased by $118 million, or 13%, to $1,008 million for 2016, as compared to $890 million for 2015, driven by our organic sales growth and segment operating margin increases in 2016.
We completed significant strategic actions to reshape and strengthen our business portfolio for future success. In February 2016, we completed the sale of our National Security Solutions business for approximately $550 million. We also invested $388 million to acquire four businesses in 2016 that build and strengthen L3’s core business areas, including RF microwave and power, sensors, commercial aviation simulation and training, and aviation security.
We repurchased $373 million of our Common Stock and paid dividends of $220 million following our 12th consecutive annual dividend increase, returning over $590 million of cash to our shareholders in 2016.
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PROXY STATEMENT SUMMARY

We stabilized our investment grade credit ratings during 2016, with credit rating agencies S&P and Moody’s each raising their outlooks for L3 from “negative” to “stable.” A key factor in restoring our stable credit outlooks was reducing our debt during 2016 by approximately $300 million. We also maintained an efficient capital structure with ample liquidity. We successfully refinanced our $1 billion revolving credit facility for five years to 2021, with improvements in pricing and leverage covenants, and refinanced $550 million of our senior notes due in November 2016 and May 2017 with new senior notes due in December 2026. We ended 2016 with $363 million of cash on hand and an available revolver of $1 billion.
Our total shareholder return (“TSR”) for 2016 was approximately 30%, which exceeded the 75th percentile of the peer group used to measure our TSR performance under the long-term incentives awarded in 2016 to our executive officers named in the “Summary Compensation Table” on page 62 (our “NEOs”).

For more information regarding L3’s 2016 performance, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

EXECUTIVE COMPENSATION PROGRAM SUMMARY

2016 Target Pay and Incentive Plan Payouts

We target base salaries and annual and long-term incentive opportunities for our NEOs to approximate market median compensation levels, subject to adjustments based on experience, performance, other individual factors and as otherwise appropriate. For 2016, the target pay for each of our NEOs was within a range that approximates 80% to 120% of market median.
We exceeded our 2016 annual incentive plan targets for EPS and FCF, which resulted in annual incentive plan payouts for our NEOs that were above target.
Despite our strong operational and stock price performance in 2016, our three-year cumulative EPS and relative TSR results did not meet minimum performance requirements under our long-term incentive awards that vested in 2016. Accordingly, our NEOs did not receive any payouts under these awards.
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PROXY STATEMENT SUMMARY

Key Governance Features of Our Executive Compensation Program

At the 2016 Annual Meeting, more than 95% of the votes cast approved, on a non-binding advisory basis, the compensation of our NEOs, demonstrating the effectiveness of the substantive changes made to our compensation program over the past several years in response to shareholder feedback. The following summary highlights our commitment to executive compensation practices that reinforce our pay-for-performance culture and include corporate governance practices that are considered by investors to reflect market “best practices:”

What We Do
What We Don’t Do

Pay-for-Performance – Emphasis on long-term, performance-based compensation and meaningful stock ownership guidelines to align executive and shareholder interests

No Employment Agreements – All of our NEOs are employed on an at-will basis

Formula-Based Incentive Plans – Transparent, formulaic incentive plans designed to promote annual and long-term business success

No Tax Gross-ups – No excise tax gross-ups on severance or change in control payments

Enhanced CEO Performance Conditions – Chief Executive Officer’s stock options are subject to performance conditions based on consolidated EPS and FCF

No Repricing – No repricing of stock options or other equity-based awards without shareholder approval

“Clawback” Provisions – Clawback policy that applies to all incentive compensation, including equity-based awards

No Unearned Pension Plan/SERP Credit – No pension plan/SERP credit for years not worked with L3 or its predecessor companies

Double Trigger for Severance – Double trigger provisions for cash severance payable in the event of a change in control, and no excessive severance or change in control provisions

No Excessive Perquisites – Perquisites are modest and consistent with competitive practices

Annual Risk Assessment – Annual compensation risk assessment to ensure program does not encourage excessive risk-taking

No Unearned Dividends – No payment of dividends on stock options, or on other equity-based awards prior to vesting

Tally Sheets – Tally sheet analysis to better understand current and accumulated compensation and benefits

No Hedging or Pledging – No hedging or pledging of L3 stock by executives, employees and non-employee directors

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QUESTIONS AND ANSWERS ABOUT THE 2017 ANNUAL MEETING AND VOTING

QUESTIONS AND ANSWERS ABOUT
THE 2017 ANNUAL MEETING AND VOTING  

1.WHY DID I RECEIVE THESE PROXY MATERIALS?

On or about March 27 , 2017, we either mailed you a notice (the “Notice”) notifying you how to vote online and how to electronically access a copy of this Proxy Statement, our Summary Annual Report and our Annual Report on Form 10-K for the year ended December 31, 2016 (together referred to as the “Proxy Materials”) or mailed you a complete set of the Proxy Materials. If you have not received but would like to receive printed copies of these documents, including a proxy card in paper format, you should follow the instructions for requesting such materials contained in the Notice.

This Proxy Statement is being made available to the holders of our Common Stock in connection with the solicitation of proxies for use at the Annual Meeting to be held at The Ritz-Carlton New York, Battery Park, located at Two West Street, New York, New York 10004 at 2:30 p.m., Eastern Daylight Time, on Tuesday, May 9, 2017. The proxies are solicited by our Board of Directors on our behalf for use at the Annual Meeting and any adjournments or postponements of the Annual Meeting.

2.WHAT IS A PROXY?

Shareholders not attending our Annual Meeting may choose to vote their shares of Common Stock by allowing someone else to cast votes on their behalf. We are soliciting your voting instructions (that is, your proxy) on behalf of our Board of Directors for use at the Annual Meeting and any adjournments or postponements of the Annual Meeting. The proxies we are soliciting designate Michael T. Strianese, Christopher E. Kubasik, Ralph G. D’Ambrosio and Ann D. Davidson (the “Proxyholders”) as the persons who would individually be authorized to vote your shares in accordance

with your instructions. Alternatively, if you own your shares of our Common Stock directly in your name in our stock records (a “shareholder of record”) maintained by Computershare Trust Company, N.A. (“Computershare”), you may appoint a person (who need not be a shareholder), other than the Proxyholders, to represent you at the Annual Meeting by completing another proper proxy. Such completed proxy should be returned in the envelope provided to you for that purpose (if you have requested or received a paper copy of the Proxy Materials).

3.WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN?

Our Board of Directors has fixed the close of business on March 13, 2017 as the Record Date for the Annual Meeting. Only shareholders of record at the Record Date are entitled to notice of, and to vote at, the Annual Meeting or at any adjournments or postponements thereof, in person or by proxy.

At the Record Date, there were 77,810,212 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. Each holder of Common Stock is entitled to one vote for each share of our Common Stock held by such holder.

4.WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON STOCK?

By Internet: If you are a shareholder of record, or if you own shares of Common Stock through L3’s 401(k) plan, you can vote at www.proxyvote.com, 24 hours a day, seven days a week. You will need the 16-digit Control Number included on your Notice or your paper voting instruction form (if you received a paper copy of the Proxy Materials).

By Telephone: If you are a shareholder of record, or if you own shares of Common Stock through L3’s 401(k) plan, you can vote using a touch-tone telephone by calling 1-800-690-6903, 24 hours a day, seven days a week. You will need the 16-digit Control Number included on your Annual Meeting Notice card or your paper voting instruction form (if you received a paper copy of the Proxy Materials).

By Mail: If you have received a paper copy of the Proxy Materials by mail, you may complete, sign, date and return by mail the paper proxy card or voting instruction form sent to you in the envelope provided to you with your Proxy Materials or voting instruction form.

In Person: All shareholders of record may vote in person at the meeting. Street name holders must obtain a legal proxy from their broker, bank or other nominee and bring the legal proxy to the meeting in order to vote in person at the meeting. For more detail, please see Question 13.

The Internet and telephone voting procedures, which comply with Delaware law and the Securities and Exchange

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QUESTIONS AND ANSWERS ABOUT THE 2017 ANNUAL MEETING AND VOTING

Commission (the “SEC”) rules, are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.

Through your Bank, Broker or Other Nominee: If you hold your shares through a bank or brokerage firm (i.e. in “street name” as you are not a registered holder), you may vote by

submitting your voting instructions to your bank, broker or other nominee. In most instances, you will be able to do this over the Internet, by telephone, or by mail as indicated above. Please refer to the information from your bank, broker or other nominee on how to submit voting instructions.

See also “Proxy Statement Summary – Casting Your Vote” on page 1.

5.WHAT IS THE DEADLINE FOR SUBMITTING VOTES?

If you are a shareholder of record, proxies submitted over the Internet or by telephone as described above must be received by 11:59 p.m., Eastern Daylight Time, on May 8, 2017.

If you own your shares of our Common Stock through L3’s 401(k) plan, proxies submitted over the Internet or by telephone as described above must be received by 11:59 p.m., Eastern Daylight Time, on May 5, 2017.

If you hold your shares in street name, proxies submitted over the Internet or by telephone as described above must be received by 11:59 p.m., Eastern Daylight Time, on May 8, 2017.

Proxies submitted by mail, as described above, must be received no later than 11:59 p.m., Eastern Daylight Time, on May 8, 2017, if you are a shareholder of record, or by 8:00 a.m., Eastern Daylight Time, on May 5, 2017, if you own your shares through L3’s 401(k) plan.

Notwithstanding the above, if you hold your shares in street name and you submit voting instructions to your bank, broker or other nominee, your instructions must be received by the bank, broker or other nominee prior to the deadline set forth in the information from your bank, broker or other nominee on how to submit voting instructions.

6.HOW MANY VOTES MUST BE PRESENT TO HOLD THE 2017 ANNUAL MEETING?

In order for us to conduct the meeting, the holders of a majority of the outstanding shares of our Common Stock represented in person or by proxy shall constitute a quorum at the Annual Meeting.

Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet, telephone or mail.

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.

7.WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?

Shareholders of Record: If you are a shareholder of record (see Question 3), your shares will not be voted if you do not provide your proxy unless you vote in person at the meeting. It is important that you vote your shares.

Holders of Common Stock through L3’s 401(k) plan: If you own shares of our Common Stock through L3’s 401(k) plan and you do not provide voting instructions, the shares in your 401(k) plan account will be voted by the trustee of the 401(k) plan in the same proportion as the shares of Common Stock held by the 401(k) plan for which voting instructions have been received from other participants in the plan, except as otherwise required by law. It is, therefore, important that you vote your shares.

Street Name Holders: If your shares are held in street name (see Question 4) and you do not provide voting instructions, your shares may be voted by your broker, bank or other nominee but only under certain circumstances. Specifically,

under New York Stock Exchange (“NYSE”) rules, shares held in the name of your broker, bank or other nominee may be voted by your broker, bank or other nominee on certain “routine” matters if you do not provide voting instructions. Only the Auditor Ratification Proposal is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at the meeting (specifically, the election of director nominees, the Supermajority Proposal, the Cash Incentive Plan Proposal, the Say-on-Pay Proposal, and the Say-on-Frequency Proposal) are not considered “routine” under NYSE rules, so the broker, bank or other nominee cannot vote your shares on any of these proposals unless you provide voting instructions for each of these matters. If you do not provide voting instructions on a “non-routine” matter, your shares will not be voted on that matter, which is referred to as a “broker non-vote.” It is, therefore, important that you vote your shares.

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QUESTIONS AND ANSWERS ABOUT THE 2017 ANNUAL MEETING AND VOTING

8.WHAT IF I DO NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY?

If a shareholder delivers a proxy pursuant to this solicitation but does not specify a choice with respect to any proposal set forth in this Proxy Statement, the underlying shares will be voted on that proposal in accordance with the recommendation of our Board of Directors. With respect to

any other matters that may properly come before the Annual Meeting, or any adjournment or postponement thereof, the underlying shares will be voted in accordance with the discretion of the Proxyholders.

9.HOW CAN I REVOKE A PROXY OR CHANGE MY VOTE?

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 by such person(s) voting in person at the Annual Meeting. Unless revoked, all proxies representing shares entitled to vote that 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.

To revoke a proxy previously submitted over the Internet, by telephone or by mail, 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. You may also attend the Annual Meeting and vote in person.

If your shares are held in street name and you previously provided voting instructions to your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee to revoke or change your voting instructions.

10.WHAT ITEMS WILL BE VOTED ON AT THE 2017 ANNUAL MEETING AND WHAT IS THE VOTE REQUIRED?

The vote required to approve all of the proposals listed herein assumes the presence of a quorum.

Proposal 1 – Election of the 10 Directors listed herein: A majority of the votes cast at the Annual Meeting is required for the election of each nominee for director. Abstentions and “broker non-votes” will have no effect on the outcome of this proposal.
 
The Board recommends a vote “FOR” each of the nominees named in the Proxy Statement.
Proposal 2 – Auditor Ratification Proposal: A majority of the votes cast at the Annual Meeting is required for the Auditor Ratification Proposal. Abstentions will have no effect on the outcome of this proposal. Your broker will have discretion to vote your uninstructed shares on this proposal.
 
The Board recommends a vote “FOR” this proposal.
Proposal 3 – Supermajority Proposal: The affirmative vote of all of the outstanding Common Stock of the Company is required to approve the Supermajority Proposal. Abstentions and “broker non-votes” will have the same effect as votes “against” this proposal.
 
The Board recommends a vote “FOR” this proposal.
Proposal 4 – Cash Incentive Plan Proposal: A majority of the votes cast at the Annual Meeting is required to approve the Cash Incentive Plan Proposal. Abstentions will have the same effect as a vote “against” this proposal and “broker non-votes” will have no effect on the outcome of this proposal.
 
The Board recommends a vote “FOR” this proposal.
Proposal 5 – Say-on-Pay Proposal: A majority of the votes cast at the Annual Meeting is required to approve the Say-on-Pay Proposal. Abstentions and “broker non-votes” will have no effect on the outcome of this proposal.
 
The Board recommends a vote “FOR” this proposal.
Proposal 6Say-on-Frequency Proposal: The frequency option receiving the most affirmative votes will be considered the advisory vote of the shareholders. Abstentions and “broker non-votes” will have no effect on the outcome of this proposal.
 
The Board recommends a vote of “ONE YEAR” for this proposal.

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QUESTIONS AND ANSWERS ABOUT THE 2017 ANNUAL MEETING AND VOTING

11.WHAT DOES IT MEAN IF I RECEIVE MULTIPLE COPIES OF THE NOTICE OR PROXY MATERIALS?

Please note that you may receive multiple copies of the Notice or Proxy Materials (electronically and/or by mail). These materials may not be duplicates as you may receive separate copies of the Notice or Proxy Materials for each type of account in which you hold shares of our Common

Stock. Please be sure to vote all of your shares in each of your accounts in accordance with the directions on the proxy card(s) and/or voting instruction form(s) that you receive. In the case of duplicate votes for shares in a particular account, your last vote is the one that counts.

12.WHO WILL PAY THE COST OF THIS PROXY SOLICITATION?

The cost of this solicitation of proxies will be paid by the Company. The solicitation will be made primarily via the Internet and by mail, but our officers and regular employees may also solicit proxies by telephone, telegraph, facsimile,

or in person. We also have retained Georgeson Inc. to assist in soliciting proxies. We expect to pay Georgeson Inc. approximately $10,000 plus expenses in connection with its solicitation of proxies.

13.HOW DO I OBTAIN ADMISSION TO THE 2017 ANNUAL MEETING?

If you wish to attend the Annual Meeting and vote in person, you must be a shareholder on the Record Date and you must register and request an admission ticket in advance.

Tickets will be issued to registered and beneficial owners. If you hold your shares of our Common Stock through a bank or brokerage firm (i.e., you are not a registered holder), you may register and request an admission ticket by visiting www.proxyvote.com and following the instructions provided (you will need the 16-digit Control Number included on your Notice or your paper voting instruction form (if you received a paper copy of the Proxy Materials)). If you own your shares of our Common Stock directly in your name in our stock records maintained by Computershare, you may register and request an admission ticket by visiting www.proxyvote.com and following the instructions provided (you will need the 16-digit Control Number included on your Annual Meeting Notice card).

Requests for admission tickets will be processed in the order in which they are received and must be requested no later than May 8, 2017. Please note that seating is limited and admission to the meeting will be on a first-come, first-served

basis. On the day of the meeting, each shareholder will be required to present valid picture identification such as a driver’s license or passport with their admission ticket. Seating will begin at 2:00 p.m. and the meeting will begin at 2:30 p.m. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the in-person Annual Meeting. You will be required to enter through a security check point before being granted access to the Annual Meeting.

Even if you plan to attend the Annual Meeting, we encourage you to vote in advance by Internet, telephone or (if you received a paper copy of the Proxy Materials) by mail so that your vote will be counted even if you later decide not to attend the Annual Meeting. Voting your proxy by the Internet, telephone or mail will not limit your right to vote at the Annual Meeting if you later decide to attend in person. If you own your shares of our Common Stock in street name and wish to vote in person at the Annual Meeting, you must request a legal proxy from your bank or broker or obtain a proxy from the record holder.

14.CAN I ATTEND THIS ANNUAL MEETING VIRTUALLY?

You may attend this year’s Annual Meeting via the Internet by visiting LLL.onlineshareholdermeeting.com. The accompanying Proxy Materials include instructions on how to enter and participate in the meeting and how you may vote your shares of our Common Stock. To submit your

question in advance, please log on to www.proxyvote.com. You will need your 16-digit control number included on your Notice or your paper voting instruction form (if you received a paper copy of the Proxy Materials) to enter and participate at the meeting.

 – 2017 Proxy Statement9

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PROPOSALS REQUIRING YOUR VOTE

PROPOSALS REQUIRING YOUR VOTE 

PROPOSAL 1 – ELECTION OF DIRECTORS

The full Board of Directors has considered and nominated the following slate of nominees for a one-year term expiring in 2018: Claude R. Canizares, Thomas A. Corcoran, Ann E. Dunwoody, Lewis Kramer, Robert B. Millard, Lloyd W. Newton, Vincent Pagano, Jr., H. Hugh Shelton, Arthur L. Simon and Michael T. Strianese. Action will be taken at the Annual Meeting for the election of these 10 nominees.

It is intended that the proxies delivered pursuant to this solicitation will be voted in favor of the election of each of Claude R. Canizares, Thomas A. Corcoran, Ann E. Dunwoody, Lewis Kramer, Robert B. Millard, Lloyd W. Newton, Vincent Pagano, Jr., H. Hugh Shelton, Arthur L. Simon and Michael T. Strianese except in cases of proxies bearing contrary instructions. In the event that these nominees should become unavailable for election due to any presently unforeseen reason, the persons named in the proxy will have the right to use their discretion to vote for a substitute.

Nominees for Election to the Board of Directors in 2017

The following information describes the offices held and other business directorships of each nominee. Beneficial ownership of equity securities of the nominees is described in “Security Ownership of Management” on page 38.

The particular experiences, qualifications, attributes or skills of each nominee that the Nominating/Corporate Governance Committee believes will advance the Company’s goals are included in the individual biographies below. The Nominating/Corporate Governance Committee and the Board believe that each of the nominees for election at the 2017 Annual Meeting possesses a strong and unique set of attributes. The Nominating/Corporate Governance Committee and the Board believe that, as a group, these nominees provide the Board with an optimal balance of experience, leadership, competencies, qualifications and skills.


   
Director Since: 2003
   
Board Committees:
 Audit
   
Age: 71
CLAUDE R. CANIZARES

Position, Principal Occupation and Professional Experience:
Bruno Rossi Professor of Physics, Massachusetts Institute of Technology. Since 1971, Professor Canizares has been at MIT, where until recently he served as Vice President. Prior positions include Vice President for Research, Associate Provost, and Director of the Center for Space Research. In addition, he is a principal investigator on NASA’s Chandra X-ray Observatory and Associate Director of its science center.
   
Other Directorships, Trusteeships and Memberships: Member of the National Academy of Sciences and the International Academy of Astronautics; Fellow of the American Academy of Arts and Sciences, the American Physical Society and the American Association for the Advancement of Science. Professor Canizares serves on the Department of Commerce’s Emerging Technology and Research Advisory Committee and the National Research Council’s (NRC) Committee on Science, Technology and the Law. He chairs the Auditing Committee of the National Academy of Sciences. Professor Canizares has served on the Air Force Scientific Advisory Board, the NASA Advisory Council, and the Council of the National Academy of Sciences.
   
Director Qualifications:
The Board of Directors considered Professor Canizares’ distinguished career as a tenured professor at MIT including his past responsibility for over 20 research laboratories, including Lincoln Laboratory, with an aggregate annual research budget of $1.5 billion, as well as his extensive knowledge of the aerospace industry.

   
 
 
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Director Since: 1997
   
Board Committees:
 Audit
   
Age: 72
THOMAS A. CORCORAN

Position, Principal Occupation and Professional Experience:
President, Corcoran Enterprises, LLC. Mr. Corcoran has been a Senior Advisor of The Carlyle Group, a private equity investment firm, and the President of Corcoran Enterprises, LLC, a private management consulting firm, since 2001. From March 2001 to April 2004, Mr. Corcoran was the President and Chief Executive Officer of Gemini Air Cargo. Mr. Corcoran was the President and Chief Executive Officer of Allegheny Teledyne Incorporated from October 1999 to December 2000. From April 1993 to September 1999, he was the President and Chief Operating Officer of the Electronic Systems Sector and Space & Strategic Missiles Sector of Lockheed Martin Corporation. Prior to that he worked for General Electric for 26 years and held various management positions with GE Aerospace.
   
Other Current Public Directorships: Aerojet Rocketdyne Holdings, Inc. (Director, Member of the Organization & Compensation and Corporate Governance & Nominating Committees)
   
Prior Public Company Directorships (within the last five years): ARINC (until December 2013)
   
Director Qualifications:
The Board of Directors considered Mr. Corcoran’s business operations background, including his service as the chief executive officer of a number of businesses, and his expertise in the aerospace and defense industries.

   
 
 
 

   
Director Since: 2013
   
Board Committees:
• Nominating/Corporate
  Governance
   
Age: 64
ANN E. DUNWOODY

Position, Principal Occupation and Professional Experience:
General (U.S. Army – Ret) and Chief Executive Officer, First 2 Four LLC. General Dunwoody was the first woman in U.S. military history to achieve the rank of four-star general. From 2008 until her retirement in 2012, she led and ran the largest global logistics command in the Army comprising 69,000 military and civilian individuals, located in all 50 states and over 140 countries with a budget of $60 billion dollars. General (Ret.) Dunwoody also served as a strategic planner for the Chief of Staff of the Army. During her 38-year military career, she was decorated for distinguished service and has received many major military and honorary awards.
   
Other Current Public Directorships: Republic Services, Inc. (Director and Member of the Audit Committee) and Kforce Inc. (Director and Member of the Corporate Governance Committee)
   
Other Directorships, Trusteeships and Memberships: The Association of the United States Army (Council of Trustees), ThanksUSA (Director), Florida Institute of Technology (Director), Army Historical Foundation (Director) and Logistics Management LLC (Director)
   
Director Qualifications:
The Board of Directors considered General (Ret.) Dunwoody’s distinguished career in the United States Army and her extensive knowledge of the defense industry.

   
 
 
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Director Since: 2009
   
Board Committees:
• Audit (Chair)
 Compensation
 Executive
   
Age: 69
   
LEWIS KRAMER

Position, Principal Occupation and Professional Experience:
Retired Partner, Ernst & Young LLP. Mr. Kramer was a partner at Ernst & Young from 1981 until he retired in June 2009 after a nearly 40-year career at Ernst & Young. At the time of his retirement, Mr. Kramer served as the Global Client Service Partner for worldwide external audit and all other services for major clients, and served on the firm’s United States Executive Board. He previously served as Ernst & Young’s National Director of Audit Services.
   
Director Qualifications:
The Board of Directors considered Mr. Kramer’s significant experience, expertise and background with regard to accounting and internal control matters as well as the breadth of his business knowledge gained while serving as an independent auditor for numerous organizations across many industries.

   
 
 
 

   
Director Since: 1997
 Lead Independent Director
   
Board Committees:
 Compensation (Chair)
 Executive (Chair)
   
Age: 66
   
ROBERT B. MILLARD

Position, Principal Occupation and Professional Experience:
Chairman, Massachusetts Institute of Technology Corporation. Mr. Millard has been the Chairman of the Massachusetts Institute of Technology Corporation since 2014. Prior to becoming Chairman of MIT, Mr. Millard held various positions in business, including Managing Director at Lehman Brothers and its predecessors from 1976 to 2008 and Chairman of Realm Partners L.L.C.
   
Other Current Public Directorships: Evercore Partners Inc.
   
Prior Public Company Directorships (within the last five years): Gulfmark Offshore, Inc. (until June 2013)
   
Other Directorships, Trusteeships and Memberships: Member, Council on Foreign Relations and Fellow of the American Academy of Arts and Sciences
   
Director Qualifications:
The Board of Directors considered Mr. Millard’s extensive financial background.

   
 
 
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Director Since: 2012
   
Board Committees:
 Compensation
   
Age: 74
LLOYD W. NEWTON

Position, Principal Occupation and Professional Experience:
General (U.S. Air Force – Ret). General Newton was a four-star General and Commander of the Air Force, Air Education and Training Command, where he was responsible for the recruiting, training and education of all Air Force personnel from 1997 until his retirement in 2000. Following his retirement from the Air Force, General (Ret.) Newton was Executive Vice President of Pratt & Whitney Military Engines until 2006. During his 34 year military career, General (Ret.) Newton also served as an Air Force congressional liaison officer with the U.S. House of Representatives and was a member of the Air Force’s Air Demonstration Squadron, the Thunderbirds.
   
Other Current Public Directorships: Torchmark Corporation (Lead Director, Member of the Compensation Committee)
   
Prior Public Company Directorships (within the last five years): Sunoco Products Co. (until December 2014) and Goodrich Corporation (until August 2012)
   
Director Qualifications:
The Board of Directors considered General (Ret.) Newton’s distinguished career in the Air Force, his experience as an Executive Vice President of Pratt & Whitney Military Engines and his knowledge as a director of public companies.

   
 
 
 

   
Director Since: 2013
   
Board Committees:
 Audit
 Nominating/Corporate
  Governance (Chair)
 Executive
   
Age: 66
VINCENT PAGANO, JR.

Position, Principal Occupation and Professional Experience:
Retired Partner, Simpson Thacher & Bartlett LLP. Mr. Pagano was a partner at Simpson Thacher & Bartlett LLP until his retirement at the end of 2012. He was the head of the firm’s capital markets practice from 1999 to 2012 and, before that, administrative partner of the firm from 1996 to 1999. He was a member of the firm’s executive committee during substantially all of the 1996-2012 period.
   
Other Current Public Directorships: Cheniere Energy Partners GP, LLC, the general partner of Cheniere Energy Partners, L.P. (Director and Member of the Audit and Conflicts Committees) and Hovnanian Enterprises, Inc. (Director and Member of the Audit and Corporate Governance and Nominating Committees)
   
Other Directorships, Trusteeships and Memberships: Engineering Advisory Council of Lehigh University
   
Director Qualifications:
The Board of Directors considered Mr. Pagano’s significant experience, expertise and background with regard to legal, capital markets and corporate governance matters, including his broad perspective brought by his experience advising clients in many diverse industries.

   
 
 
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Director Since: 2011
   
Board Committees:
 Nominating/Corporate
  Governance
   
Age: 75
H. HUGH SHELTON

Position, Principal Occupation and Professional Experience:
General (U.S. Army-Ret). General Shelton 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 the National Security Council when he served as the fourteenth Chairman of the Joint Chiefs of Staff from 1997 until his retirement in 2001. He had previously served as Commander-in-Chief of U.S. Special Operations Command (SOCOM). From January 2002 until April 2006, General (Ret.) Shelton served as the President, International Sales of M.I.C. Industries, an international manufacturing company. General (Ret.) Shelton was knighted by Queen Elizabeth II in 2001 and awarded the Congressional Gold Medal in 2002.
   
Other Current Public Directorships: Red Hat, Inc. (Chairman and Member of the Compensation Committee)
   
Other Directorships, Trusteeships and Memberships: Executive Director of the General H. Hugh Shelton Leadership Center at North Carolina State University, National Association of Corporate Directors (NACD) Fellow
   
Director Qualifications:
The Board of Directors considered General (Ret.) Shelton’s distinguished career as the Chairman of the Joint Chiefs of Staff, Department of Defense and as the Commander in Chief of U.S. Special Operations Command (SOCOM) and his extensive knowledge of the defense industry.

   
 
 
 

   
Director Since: 2001
   
Board Committees:
 Audit
 Nominating/Corporate
  Governance
   
Age: 85
   
ARTHUR L. SIMON

Position, Principal Occupation and Professional Experience:
Retired Partner, Coopers & Lybrand LLP. Before his retirement, Mr. Simon was a partner at Coopers & Lybrand LLP, Certified Public Accountants, from 1968 to 1994 and was the co-founder of the firm’s Defense Contracting Industry Group.
   
Other Current Public Directorships: Loral Space & Communications Inc. (Chairman and Member of the Audit Committee)
   
Director Qualifications:
The Board of Directors considered Mr. Simon’s significant experience, expertise and background with regard to accounting and internal control matters and the breadth of his business knowledge gained while serving as an independent auditor for numerous organizations across many industries and as the Chair of the Audit Committee of Loral Space & Communications Inc.

   
 
 
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Director Since: 2006
 Chairman
 CEO
   
Board Committees:
 Executive
   
Age: 61
   
MICHAEL T. STRIANESE

Position, Principal Occupation and Professional Experience:
Chairman and Chief Executive Officer, L3. Mr. Strianese became Chairman on October 7, 2008 and has served as Chief Executive Officer since October 2006. He also served as President from October 2006 until October 2015. Until February 2007, Mr. Strianese was also our Corporate Ethics Officer. He was our interim Chief Executive Officer and Chief Financial Officer from June 2006. Mr. Strianese became Chief Financial Officer in March 2005. From March 2001 to March 2005 he was our Senior Vice President – Finance. He joined us in April 1997 as Vice President – Finance and Controller and was our Controller until July 2000. In 2014, Mr. Strianese served as Chairman of the Aerospace Industries Association.
   
Director Qualifications:
The Board of Directors considered Mr. Strianese’s position as Chief Executive Officer and his expertise and experience in the aerospace and defense industries.

   
 
 

The Board of Directors recommends a vote FOR each of the proposed nominees
listed above for election to the Board of Directors. 

 – 2017 Proxy Statement15

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PROPOSAL 2 – SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company’s financial statements. Following its annual evaluation of its independent registered public accounting firm, the Audit Committee considered whether there should be a rotation of such a firm and decided to select PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017. PwC has continuously been retained as our independent registered public accounting firm since our formation in 1997, and the Audit Committee and the Board of Directors believe that the continued retention of PwC to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. In conjunction with the mandated rotation of the independent registered public accounting firm’s lead engagement partner, the Audit Committee and its chairperson have been directly involved in the selection of PwC’s lead engagement partner. Representatives of PwC will be present at the Annual Meeting. These 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.

Although ratification is not required by our Bylaws or otherwise, the Board of Directors is submitting the selection of PwC to our shareholders for ratification because the Audit Committee and the Board value our shareholders’ views on the Company’s independent registered public accounting firm. If the foregoing proposal is not approved by the holders of a majority of the votes cast, it will be considered as notice to the Board of Directors and the Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

The Board of Directors recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm.

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PROPOSAL 3 – PROPOSAL TO AMEND L3’S CERTIFICATE OF INCORPORATION TO ELIMINATE ALL PROVISIONS REQUIRING MORE THAN A SIMPLE MAJORITY VOTE

The Board of Directors is proposing an amendment to the Certificate of Incorporation to eliminate all provisions requiring more than a simple majority vote, which would expand shareholders’ ability to take action by written consent by reducing the vote required to act by written consent from the unanimous consent of all shareholders to the consent of a majority of the outstanding shares of capital stock of the Company entitled to vote on the matter, as described below and set forth on Annex A.

Background of the Proposal

At our 2016 annual meeting, a shareholder proposal requested that the Board take the steps necessary so that each voting requirement in our Certificate of Incorporation and Bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws (the “2016 Shareholder Proposal”). Although the 2016 Shareholder Proposal did not receive the required unanimous vote to pass, it did receive the support of a majority of the votes cast at our 2016 meeting. Accordingly, in response to this support, we are including this management proposal to eliminate the only provision in our Certificate of Incorporation and Bylaws that calls for a greater than simple majority vote and replace it with the default majority standard under applicable Delaware law.

Proposed Amendment to Certificate of Incorporation

Currently, pursuant to Article Tenth of the Certificate of Incorporation, in order for shareholders to act by written consent, all of the shareholders entitled to vote on the matter must sign such consent. In addition, Article Tenth currently also requires the unanimous consent of all shareholders entitled to vote on the matter to amend Article Tenth.

This Supermajority Proposal, if adopted by shareholders, would amend Article Tenth of the Certificate of Incorporation by: (1) permitting shareholders to act by written consent if a majority of the outstanding shares of capital stock of the Company entitled to vote on the matter sign such consent, and (2) reducing the required vote to amend Article Tenth from the unanimous consent of all shareholders to a majority of the outstanding shares of capital stock of the Company entitled to vote on the matter.

Annex A shows the proposed changes to Article Tenth of the Certificate of Incorporation, with deletions indicated by strikeouts and additions indicated by underlining.

Effective Date

If this Supermajority Proposal is approved by shareholders, the proposed amendment to Article Tenth of the Certificate of Incorporation shown in Annex A will become effective upon the filing of appropriate amendment documentation with the Delaware Secretary of State. As required by Delaware law, if this proposal is not approved by the shareholders at the Annual Meeting, the proposed amendment to Article Tenth of the Certificate of Incorporation will not be implemented and the existing vote required to act by written consent and amend Article Tenth will remain the unanimous consent of all shareholders.

Voting Standard

The affirmative vote of all of the outstanding common stock of the Company is required to approve this Supermajority Proposal. Abstentions and “broker non-votes” will have the same effect as votes against the proposal.

The Board of Directors recommends a vote FOR the amendment of L3’s Certificate of Incorporation to eliminate all provisions requiring more than a simple majority vote.

 – 2017 Proxy Statement17

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PROPOSAL 4 APPROVAL OF THE L3 TECHNOLOGIES, INC. AMENDED AND RESTATED 2012 CASH INCENTIVE PLAN

The Company’s 2012 Cash Incentive Plan was originally approved by our shareholders on April 24, 2012, and has since been amended and restated (as amended and restated, the “Cash Incentive Plan”). We are asking our shareholders to again approve the Cash Incentive Plan in order to satisfy the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) with respect to performance awards to be granted under the Cash Incentive Plan. The terms of the Cash Incentive Plan are substantially similar to the terms of the plan that was initially approved by shareholders in 2012, except that as amended, the plan allows the Committee to delegate its authority to take certain actions under the plan to the Company’s officers or employees as more fully described under the heading “Administration” below. The following is a description of the purpose and the material provisions of the Cash Incentive Plan. The following description of the Cash Incentive Plan is not complete and is qualified by reference to the full text of the Cash Incentive Plan, which is attached as Annex B to this Proxy Statement.

Purpose

The Cash Incentive Plan is an incentive compensation plan that is designed to attract, retain, motivate and reward participants by providing them with the opportunity to earn competitive compensation directly linked to our performance.

Administration

The Cash Incentive Plan is administered by the Compensation Committee of our Board of Directors or such other committee of our Board of Directors to which it has delegated such power (the “Committee”). The Committee may delegate to the officers or employees of the Company the authority to make grants under the Cash Incentive Plan and to execute and deliver such instruments and documents and to take actions necessary, advisable or convenient for the effective administration of the Cash Incentive Plan, except that the Committee may not delegate any discretionary authority to grant awards to, or to take any other action or make any other decision with respect to awards held by, any executive officer of the Company.

Eligibility; Awards

Awards may be granted to our officers and key employees in the sole discretion of the Committee. The Cash Incentive Plan provides for the payment of cash-based incentive awards. For performance-based incentive awards intended to comply with the performance-based compensation exemption under Section 162(m) of the Code, by no later than the end of the first quarter of a given performance period (or the 90th day of the performance period, if sooner), the Committee will establish incentive awards for each individual participant in the Cash Incentive Plan. However, the Committee may, in its sole discretion, grant such awards, if any, to such participants as the Committee may choose, in respect of any given performance period, that are not intended to comply with the performance-based exemption under Section 162(m) of the Code. No participant may receive incentive compensation under the Cash Incentive Plan, with respect to any fiscal year, in excess of $10,000,000 (with proportionate adjustments for performance periods that are shorter or longer than one year).

Performance Goals

The Committee will establish the performance periods over which performance objectives will be measured. A performance period may be for a fiscal year or a shorter or longer period, as determined by the Committee. In the case of incentive awards intended to comply with the performance-based exemption under Section 162(m) of the Code, no later than the last day of the first quarter of a given performance period begins (or the 90th day of the performance period, if sooner), the Committee will establish (1) the performance objective or objectives that must be satisfied for a participant to receive incentive compensation for such performance period and (2) the incentive award opportunity for each participant. Performance objective(s) will be based upon one or more of the following criteria, as determined by the Committee: (i) consolidated income before or after taxes, including income before interest, taxes, depreciation and amortization (“EBITDA”); (ii) operating income or operating margin; (iii) net income; (iv) net income or earnings per share; (v) book value per share; (vi) return on equity; (vii) expense management (including without limitation, total general and administrative expense percentages); (viii) return on investment or on invested capital; (ix) improvements in capital structure; (x) profitability of an identifiable business unit or product; (xi) maintenance or improvement of profit margins; (xii) stock price; (xiii) market share; (xiv) revenue or sales (including, without limitation, net loans charged off and average finance receivables); (xv) costs; (xvi) cash flow or net funds provided; (xvii) working capital; (xviii) total debt (including, without limitation, total debt as a

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multiple of EBIT or EBITDA); (xix) orders; and (xx) total shareholder return. The foregoing criteria may relate to us, one or more of our subsidiaries or one or more of our divisions or units, or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more of our peer group companies or indices, or any combination thereof, all as the Committee will determine in its sole discretion. The performance measures and objectives established by the Committee may be different for different fiscal years and different objectives may be applicable to different officers and key employees.

As soon as practicable after the applicable performance period ends, the Committee will (A) determine (i) whether and to what extent any of the performance objective(s) established for such performance period have been satisfied and certify to such determination, and (ii) the actual incentive compensation to which such participant will be entitled, taking into consideration the extent to which the performance objective(s) have been met and such other factors as the Committee may deem appropriate and (B) cause such incentive compensation to be paid to such participant. The Committee has absolute discretion to reduce or eliminate the amount otherwise payable to any participant under the Cash Incentive Plan and to establish rules or procedures that have the effect of limiting the amount payable to each participant to an amount that is less than the maximum amount otherwise authorized as that participant’s incentive compensation opportunity. In addition, to the extent the Committee determines that all or a portion of an award is not intended to comply with the performance-based exemption under Section 162(m) of the Code, the Committee may award a participant more than the maximum amount authorized as that participant’s incentive compensation opportunity.

To the extent permitted under Section 162(m) of the Code, if a participant is hired or rehired by us after the beginning of a performance period (or such corresponding period if the performance period is not a fiscal year) for which incentive compensation is payable, such participant may, if determined by the Committee, receive incentive compensation equal to the amount otherwise payable to such participant based upon our actual performance for the applicable performance period prorated for the days of employment during such period or such other amount as the Committee may deem appropriate.

Forfeiture and Clawback

The Committee may in its sole discretion specify that the participant’s rights, payments, and benefits with respect to any incentive compensation will be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions contained in such award. Such events may include, but are not limited to, termination of employment for cause, termination of the participant’s provision of services to us, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the participant, or restatement of our financial statements to reflect adverse results from those previously released financial statements as a consequence of errors, omissions, fraud, or misconduct.

Change in Control

Unless otherwise specified by the Committee at the time when performance objectives are established with respect to a performance period, in the event of a change in control prior to the last day of any performance period, each participant eligible to receive incentive compensation thereunder shall receive an amount of incentive compensation based upon achievement at the “target” level of the applicable performance objectives (or, if otherwise determined in the sole discretion of the Committee as constituted immediately prior to the change in control, an amount of incentive compensation based upon such higher level of Company performance actually achieved when considered in light of the reduced performance period), prorated to reflect the portion of the performance period elapsed through the change in control date.

Termination of Employment

Unless otherwise specified by the Committee, if prior to the last day of any performance period for which a participant is eligible to receive incentive compensation, the participant’s employment is terminated due to death, disability, retirement at least one year after the commencement of the performance period, or due to an involuntary termination without cause, then the participant will receive an amount of incentive compensation equal to the incentive compensation otherwise payable to such participant based upon actual Company performance for the applicable performance period, prorated to reflect the portion of the performance period elapsed through the termination date. In the case of any other termination of employment by a participant prior to the end of a performance period, the participant shall not be entitled to payment of incentive compensation for such performance period (unless otherwise determined by the Committee).

 – 2017 Proxy Statement19

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Payment of Awards

Payment of any incentive compensation amount is made to participants as soon as is practicable after the Committee certifies that one or more of the applicable performance objectives has been attained or after the Committee determines the amount of such incentive compensation. All payments thus made will be in accordance with or exempt from the requirements of Section 409A of the Code.

Amendment and Termination of Plan

Our Board of Directors or the Committee may at any time amend, suspend, discontinue or terminate the Cash Incentive Plan, subject to shareholder approval if such approval is necessary to continue to qualify the amounts payable under the Cash Incentive Plan under Section 162(m) of the Code if such amounts are intended to be so qualified; provided, that no such amendment, suspension, discontinuance or termination will adversely affect the rights of any participant in respect of any performance period that has already begun.

Voting Standard

The affirmative vote of a majority of the votes cast at the Annual Meeting is required to approve this Cash Incentive Plan Proposal. Abstentions will have the same effect as a vote “against” this proposal and “broker non-votes” will have no effect on the outcome of this proposal.

Assuming shareholders approve the Cash Incentive Plan Proposal, it is anticipated that shareholders will be requested to re-approve the Cash Incentive Plan no later than the day of the first meeting of shareholders that occurs in 2022.

The Board of Directors recommends a vote FOR approval of the L3 Technologies, Inc.
Amended and Restated 2012 Cash Incentive Plan.

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PROPOSAL 5 – ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION

We are asking our shareholders to approve, in a non-binding, advisory vote, the compensation paid to our named executive officers as disclosed beginning on page 39 of this Proxy Statement. In connection with this vote, shareholders may also wish to consider the discussion appearing under “The Board of Directors and Certain Governance Matters — Committees of the Board of Directors” beginning on page 27. While the results of this vote are advisory, our Compensation Committee intends to consider the results of this vote when making future compensation decisions. The following is a summary of key points that shareholders may wish to consider in connection with their voting decision.

Our compensation program emphasizes our pay-for-performance philosophy and reflects our commitment to compensation best practices. Our compensation program highlights include:

Formula-Based Bonus Plan. We apply a formula-based approach for determining annual incentive awards that uses pre-established goals to assess financial and individual performance achievements.
Emphasis on performance-based variable pay. In 2016, 68% of our Chief Executive Officer’s target pay was in the form of performance-based annual and long-term incentives, including:
29% of target pay in the form of performance awards that will be forfeited unless our company’s performance during fiscal 2016-2018 meets pre-established goals for cumulative diluted earnings per share and relative total shareholder return.
22% of target pay in the form of stock options that have value only based on, and to the extent of, future increases in our stock price. In addition, these options are forfeited if vesting conditions based on 2016 financial performance are not satisfied.
17% of target pay under our formula-based bonus plan described above.

Our executives are subject to meaningful stock ownership and retention guidelines that align their interests with those of our shareholders. Under our policies:

Our Chief Executive Officer is required to hold L3 stock worth at least 6 times his base salary, while our other executives have ownership requirements ranging from 1.5 to 3 times base salary.
Executives must retain 75% of their net after-tax shares earned from equity awards until their ownership requirement is met.
Stock options, including vested stock options, do not count towards satisfying the ownership requirement.
Executives are prohibited from reducing their economic exposure to L3 stock through hedging or pledging transactions, regardless of whether they own more than their ownership requirement.

Our compensation program reflects sound pay practices. In addition to the practices described above, our compensation program reflects the following:

Our perquisites are modest.
We do not provide any tax reimbursements or “gross-ups” on severance or change in control payments.
Our equity plans prohibit repricings of stock options or other equity-based awards without shareholder approval.
We do not pay dividends on stock options, or on other equity-based awards prior to vesting.
Our retirement plans only provide age or service credit for years worked with L3 and its predecessor companies.
 – 2017 Proxy Statement21

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We believe that the information disclosed in this Proxy Statement demonstrates that our executive compensation program is well-designed and is working as intended. In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the related rules of the SEC, we are submitting for shareholder consideration the following resolution to approve, in a non-binding, advisory vote, the compensation paid to our named executive officers for fiscal 2016 as disclosed beginning on page 39 of this Proxy Statement:

“RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed in this Proxy Statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and any related narrative discussion, is hereby APPROVED.”

The Board of Directors recommends a vote FOR approval of
the compensation paid to our named executive officers.

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PROPOSAL 6 – ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF SHAREHOLDER VOTES ON EXECUTIVE COMPENSATION

In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act) and the related rules of the SEC, we are submitting for shareholder consideration a proposal to determine, in a non-binding advisory vote, whether a shareholder vote to approve the compensation paid to our named executive officers (that is, votes similar to the non-binding, advisory vote in Proposal 5 on page 21) should occur every one, two or three years. While the results of the vote are non-binding and advisory in nature, the Board intends to carefully consider the results of this vote.

After careful consideration of this proposal, our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate policy for L3 at this time, and, therefore, our Board of Directors recommends that you vote for future advisory votes on executive compensation to occur each year.

In formulating its recommendation, our Board of Directors recognized that the Company’s executive compensation programs are designed to promote a long-term connection between pay and performance. However, because executive compensation disclosures are made annually, the Board of Directors considered that an annual advisory vote on executive compensation will allow our shareholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. Additionally, an annual advisory vote on executive compensation is consistent with our policy of seeking input from, and engaging in discussions with, our shareholders on corporate governance matters and our executive compensation philosophy, policies and practices. We understand that our shareholders may have different views as to what is the best approach for L3, and we look forward to hearing from our shareholders on this proposal.

The Board of Directors recommends a vote of “ONE YEAR” with respect to the frequency with
which shareholders are provided an advisory vote on the compensation paid to our
named executive officers. 

 – 2017 Proxy Statement23

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THE BOARD OF DIRECTORS AND CERTAIN GOVERNANCE MATTERS  

Our Board of Directors oversees the management of our business and affairs, as provided by Delaware law, and conducts its business through meetings of the Board of Directors and four standing committees: Audit, Compensation, Nominating/Corporate Governance and Executive 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.

LEADERSHIP STRUCTURE

How We Select Our Leadership Structure

Board structures vary greatly among U.S. public corporations. According to a recent survey, 52% of S&P 500 companies combine the positions of Chief Executive Officer and Chairman, and only 27% of the S&P 500 have an independent chairman. The Board of Directors is of the view that “one-size” does not fit all. One leadership structure is not more effective at creating long-term shareholder value and the decision of whether to combine or separate the positions of Chief Executive Officer and Chairman should vary company to company and depend upon a company’s particular circumstances at a given point in time. The Board of Directors believes that an effective leadership structure could be achieved either by combining or separating the Chief Executive Officer and Chairman positions, if the structure encourages the free and open dialogue of competing views and provides for strong checks and balances. Specifically, an effective governance structure must balance the powers of the Chief Executive Officer and the independent directors and ensure that the independent directors are fully informed, able to discuss and debate the issues that they deem important, and able to provide effective oversight of management.

Our Current Leadership Structure

While L3’s approach regarding its leadership structure has varied depending on what was best for L3 at a particular point in time, the Board of Directors believes that its current structure of combining the roles of Chairman and Chief Executive Officer and electing a strong lead independent director is in the best interest of L3 at this time as it allows for a balance of power between the Chief Executive Officer and the independent directors and provides an environment in which its independent directors are fully informed, have significant input into the content of Board meeting agendas and are able to provide objective and thoughtful oversight of management. The Board also believes that L3’s current leadership structure does not affect the Board’s role in risk oversight of the Company. In addition, the Board of Directors also believes that combining the roles of Chairman and Chief Executive Officer gives L3 the best chance to continue its strong performance over the long term. With the competitive environment as challenging as it is, it continues to be important for L3 to increasingly seek out business opportunities in the international community. In L3’s industry, the Board of Directors believes that access to decision-makers in foreign countries is made easier when the roles of Chairman and Chief Executive Officer are combined as their customs often dictate having comparable titles when conducting negotiations. Moreover, since most of L3’s industry peers have combined the roles of Chairman and Chief Executive Officer, L3 believes that separating such roles would put us at a competitive disadvantage.

Responsibilities of Our Lead Independent Director

The Board of Directors believes that if the positions of Chief Executive Officer and Chairman are combined, then appointing a lead independent director is necessary for effective governance. Accordingly, the Company’s Corporate Governance Guidelines provide that, in the event the Chief Executive Officer and Chairman positions are combined, the independent members of the Board of Directors will elect a “Lead Independent Director.” The Lead Independent Director focuses on optimizing the Board’s processes and ensuring that the Board is prioritizing the right matters. Specifically, the lead independent director has the following responsibilities (and may also perform other functions at the Board’s request), as clearly set forth in the Company’s Corporate Governance Guidelines:

Board leadershippresides at all meetings of the Board of Directors at which the Chairman is not present;
Additional meetings – calls meetings of the independent directors, as needed;
Board agenda, schedule & informationapproves schedules, agendas and information sent to Board of Directors for Board of Directors meetings;
Board materialsspecifically requests the inclusion of certain materials for Board of Directors meetings, when appropriate;
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Shareholder communications – make himself available for consultation and direct communication with major shareholders, if requested;
Retention of consultantsrecommends, as appropriate, that the Board of Directors retain consultants who will report directly to the Board of Directors; and
Chairman-independent director liaison – acts as a liaison between the independent directors and the Chairman.

The Board of Directors believes that the responsibilities delegated to the Lead Independent Director are substantially similar to many of the functions typically fulfilled by a board chairman. The Board of Directors believes that its Lead Independent Director position balances the need for effective and independent oversight of management with the need for strong, unified leadership. The Board of Directors believes that one of the key elements of effective, independent oversight is that the independent directors meet in executive session on a regular basis without the presence of management. Accordingly, in 2016, the independent directors met in executive session eight times with the Lead Independent Director presiding at such meetings.

INDEPENDENCE

The Board of Directors has affirmatively determined that no director nominee other than Mr. Strianese, including those who serve on the Audit, Compensation and Nominating/Corporate Governance Committees of the Board of Directors, has a material relationship with us, either directly or as a partner, shareholder or officer of an organization that has a relationship with us. Therefore, all of our director nominees, other than Mr. Strianese, are “independent” under all applicable standards.

In connection with its determination that Mr. Millard and Professor Canizares are independent directors, the Board of Directors considered the fact that we conducted business: (1) with MIT where Mr. Millard is chair of the MIT Corporation and Professor Canizares is employed as a full time professor, and (2) with Sandia National Laboratories, where Professor Canizares is a consultant. Payments made to or received from MIT and Sandia National Laboratories, as applicable, were less than 1% of their respective annual consolidated gross revenues for their last completed fiscal years. Mr. Millard and Professor Canizares did not have any interest in these transactions and were not involved in decisions regarding L3 with respect to these transactions.

General (Ret.) Dunwoody serves as a director (but not as an executive officer or employee) for a non-profit organization to which we have made charitable contributions. Contributions to this organization did not exceed either $120,000 or 1% of the organization’s annual consolidated gross revenues during its last completed fiscal year and was below the thresholds set forth under our categorical standards of director independence.

In addition, the Board of Directors has determined that Professor Canizares and Messrs. Corcoran, Kramer, Pagano and Simon, members of the Audit Committee, and Messrs. Millard and Kramer and General (Ret.) Newton, members of the Compensation Committee, are “independent” in accordance with the NYSE standards applicable to members of the Audit Committee and Compensation Committee, respectively.

The Board of Directors has adopted Corporate Governance Guidelines that meet the independence standards of the NYSE. Also, as part of our Corporate Governance Guidelines, the Board of Directors has adopted categorical standards to assist it in evaluating the independence of each of its directors. The categorical standards are intended to assist the Board of Directors in determining whether or not certain relationships between our directors and us, either directly or as a partner, shareholder or officer of an organization that has a relationship with us, are “material relationships” for purposes of the NYSE independence standards. The categorical standards establish thresholds at which such relationships are deemed not to be material. Our Corporate Governance Guidelines, which include our categorical standards of independence, can be obtained through our website at http://www.L3T.com.

 – 2017 Proxy Statement25

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Directors are expected to attend board meetings and meetings of the committees on which they serve, to spend the time needed, and to meet as frequently as necessary, in order to properly discharge their responsibilities. In addition, to the extent reasonably practicable, directors are expected to attend shareholder meetings. During the fiscal year ended December 31, 2016, the Board of Directors held eight meetings. Each director attended at least 75% of the combined number of meetings of the Board of Directors and meetings of committees on which he or she served during the period in 2016 in which he or she served as a director or member of such committee, as applicable. All of our directors attended the 2016 Annual Meeting in person. In accordance with applicable NYSE listing requirements, our independent directors hold regular executive sessions at which management, including the Chairman and Chief Executive Officer, is not present. Mr. Millard, our Lead Independent Director of the Board of Directors, presides at the regularly held executive sessions of the independent directors.

BOARD OF DIRECTORS COMPOSITION

The Board and the Nominating/Corporate Governance Committee takes a long-term approach to the composition of the Board of Directors. Since 2011, four new directors have joined the Board. We believe that our Board’s blend of tenure strikes a balance that provides superior Company, regulatory and industry knowledge, while executing effective oversight and independence in the best interests of our shareholders.


The Board of Directors seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board of Directors to satisfy its oversight responsibilities effectively. In that regard, the Nominating/Corporate Governance Committee is responsible for recommending candidates for all directorships to be filled by the Board of Directors or by the shareholders at an annual or special meeting. In identifying candidates for membership on the Board of Directors, the Nominating/Corporate Governance Committee takes into account (1) minimum individual qualifications, such as strength of character, mature judgment, industry knowledge or experience and an ability to work collegially with the other members of the Board of Directors, and (2) all other factors it considers appropriate.

Although the Board of Directors does not have a formal policy with regard to the consideration of diversity in identifying director nominees, among the many factors that the Nominating/Corporate Governance Committee carefully considers are the benefits to the Company of diversity, including gender and racial diversity, in board composition. Women and minority candidates are included in every pool from which board nominees are chosen, and our director searches also include nominees from non-traditional environments, including military, government and academia. Thirty percent of our Board is currently comprised of female or minority directors, including one female, one African-American and one Cuban-American.

As part of its recurring activities, the Nominating/Corporate Governance Committee seeks to identify qualified candidates to sit on the Board of Directors. To identify and recruit qualified candidates for the Board, the Nominating/Corporate Governance Committee has previously utilized the services of professional search firms and has also sought referrals from other members of the Board, management, shareholders and other sources. After conducting an initial evaluation of a candidate, one or more members of the Nominating/Corporate Governance Committee will interview that candidate if the Nominating/Corporate

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Governance Committee believes the candidate might be suitable to be a director and may also ask the candidate to meet with other directors and management. If the Nominating/Corporate Governance Committee believes a candidate would be a valuable addition to the Board of Directors, it will recommend to the full Board of Directors that candidate’s election.

The Nominating/Corporate Governance Committee will consider candidates for nomination as a director recommended by shareholders, directors, officers, third party search firms and other sources.

The Nominating/Corporate Governance Committee will review all candidates for director in the same manner, regardless of the source of the recommendation. Individuals recommended by shareholders for nomination as a director will be considered in accordance with the procedures described under “Questions and Answers About Board Communications, Company Documents and Shareholder Proposals” on page 87 of this Proxy Statement.

When considering whether the Board’s directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of L3’s business and structure, the Board of Directors focused primarily on results of the annual Board and committee evaluations and on the information discussed in each of the Board members’ or nominees’ biographical information set forth on pages 10 to 15. In addition, in connection with the nominations of the current slate of director nominees, the Board of Directors considered their valuable contributions to L3’s success during their years of Board service.

Board and Committee Assessments

Each year, the Nominating/Corporate Governance Committee evaluates each director to obtain his or her assessment of the effectiveness of the Board and the committees. The purpose of these assessments is to identify opportunities for improvement on a number of relevant metrics such as composition, conduct of meetings, relationship between the Board and management, succession planning and strategy and performance. The Chairman of the Nominating/Corporate Governance Committee conducts the evaluation through written questionnaires and one-on-one meetings with individual directors, reviews all of the responses and reports the results to the Nominating/Corporate Governance Committee. The Nominating/Corporate Governance Committee then summarizes the evaluations and identifies areas in which the Board and its committees could improve its performance and discusses its findings with the Board and each of the other committees. The Nominating/Corporate Governance Committee also evaluates the composition of the Board to ensure that its members have the requisite skills, experience and diversity to effectively oversee the business of the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board has established various committees to assist it with the performance of its responsibilities. The Board designates the members of these committees and the committee chairs based on the recommendations of the Nominating/Corporate Governance Committee. The chair of each committee develops the agenda for its committee and each committee regularly provides a full report to the Board.

The Board has adopted written charters for each of the Audit, Compensation and Nominating/Corporate Governance Committees. These charters are available on the Company’s website at http://www.L3T.com/investor-relations/corporate-governance. The following table summarizes the primary responsibilities of the committees:

 – 2017 Proxy Statement27

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Committee
Primary Responsibilities
Audit
The Audit Committee is generally responsible for, among other things:
   
selecting, appointing, compensating, retaining and terminating our independent registered public accounting firm;
overseeing the auditing work of any independent registered public accounting firm employed by us, including the resolution of any disagreements, if any, between management and the independent registered public accounting firm regarding financial reporting, for the purpose of preparing or issuing an audit report or performing other audit, review or attest services;
pre-approving audit, other audit, audit-related and permitted non-audit services to be performed by the independent registered public accounting firm and related fees;
meeting with our independent registered public accounting firm to review the proposed scope of the annual audit of our financial statements and to discuss such other matters that it deems appropriate;
reviewing the findings of the independent registered public accounting firm with respect to the annual audit;
meeting to review and discuss with management and the independent registered public accounting firm our periodic financial reports prior to our filing them with the SEC and reporting annually to the Board of Directors with respect to such matters;
reviewing with our financial and accounting management, the independent registered public accounting firm and internal auditor the adequacy and effectiveness of our internal control over financial reporting, financial reporting procedures and disclosure controls and procedures;
reviewing the internal audit function;
oversight of the Company’s ethics program and all investigations; and
reporting to the Board of Directors regarding matters covered at each committee meeting on a timely basis.
   
In 2016, the Audit Committee held 10 meetings. During 2016, among other things, the Audit Committee:
   
met with the senior members of the Company’s financial management team at each regularly scheduled meeting;
met in executive session with each of the independent auditor, Vice President of Internal Audit and Corporate Ethics Officer;
regularly met with various members of the Company’s ethics organization, including the Corporate Ethics Officer to (i) discuss the effectiveness of the Company’s ethics program and (ii) receive updates on the management training program for supervisors;
received periodic updates on management’s evaluation and compliance with, the Company’s system of internal control over financial reporting, and management’s conclusions on the effectiveness of the Company’s internal control over financial reporting;
reviewed and discussed with management and the independent auditors the Company’s earnings releases and quarterly reports on Form 10-Q and annual reports on Form 10-K prior to filing with the SEC;
met with the independent auditors and management to review and approve the scope of the audit proposed for 2016 and the audit procedures to be utilized and any subsequent changes to such scope and/or procedures;
discussed the Company’s anti-bribery compliance program, network structure, threat landscape and cyber defenses;
received regular updates regarding the status of legal and government investigations; and
discussed with management the guidelines and policies with respect to risk assessment and risk management including major financial risk exposure, the steps taken to monitor and control such risks and material changes to the Company’s Enterprise Risk Management since they last met.
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Committee
Primary Responsibilities
Compensation
The Compensation Committee is generally responsible for, among other things:
   
reviewing and approving corporate goals and objectives relevant to the Chief Executive Officer’s compensation;
evaluating the performance of the Chief Executive Officer in light of these corporate goals and objectives and, either as a committee or together with other independent directors (as directed by the Board of Directors), determining and approving the annual salary, bonus, equity and equity-based incentives and other benefits, direct and indirect, of the Chief Executive Officer based on such evaluation;
reviewing and approving the annual salary, bonus, equity and equity-based incentives and other benefits, direct and indirect, of the other executive officers;
discussing the results of the shareholder advisory vote on the compensation paid to our named executive officers;
reviewing and making recommendations to the Board of Directors with respect to director compensation;
reviewing and recommending to the Board of Directors, or approving, all equity-based awards, including pursuant to the Company’s equity-based plans;
reviewing and approving, or making recommendations to the Board of Directors with respect to, the Company’s equity-based plans and executive officer incentive compensation plans, and overseeing the activities of the individuals responsible for administering those plans;
reviewing and discussing with management, on at least an annual basis, management’s assessment of whether risks arising from the Company’s compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company;
reviewing and discussing the “Compensation Discussion and Analysis” section contained in this Proxy Statement;
retaining or terminating, as necessary or appropriate, and approving the fees and any other retention terms for, compensation and benefits consultants and other outside consultants, legal counsels or advisors hired to provide independent advice to the committee;
evaluating on at least an annual basis whether any work provided by a compensation consultant retained by the committee raised any conflict of interest; and
reporting to the Board of Directors regarding matters covered at each committee meeting on a timely basis.
   
In 2016, the Compensation Committee held 5 meetings. During 2016, among other things, the Compensation Committee:
   
reviewed and approved all elements of target pay for senior executives, including the terms and performance goals for new annual and long-term incentive awards;
assessed historical performance achievements under annual and long-term incentive plans, and reviewed and approved related performance-based payouts to senior executives;
approved equity-based awards for non-executive employees, and evaluated equity plan share usage and share dilution;
evaluated the suitability of the Company’s compensation peer group used to benchmark the Company’s pay programs;
evaluated the Company’s executive and non-employee director compensation programs as compared to peer company pay practices and pay levels;
reviewed current and accumulated compensation for named executive officers using tally sheets;
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Committee
Primary Responsibilities
 
reviewed executive and non-employee director compliance with stock ownership guidelines;
 
reviewed and discussed the 2016 compensation risk assessment with management; and
 
reviewed and discussed the executive compensation disclosures to be included in our 2016 Proxy Statement, including the Compensation Discussion and Analysis.
   
 
In fulfilling its responsibilities, the Compensation Committee can delegate any or all of its responsibilities to a subcommittee of the committee consisting of two or more members. The Compensation Committee may also delegate to the Chief Executive Officer of the Company the authority to make grants of awards under the Company’s equity-based plans to any person who is not an officer of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended. For a discussion concerning the processes and procedures for considering and determining executive and director compensation and the role of executive officers and compensation consultants in determining or recommending the amount or form of executive and director compensation, see “Compensation Discussion and Analysis” beginning on page 39 and “Compensation of Directors” beginning on page 79.
   
Nominating/ Corporate Governance
The Nominating/Corporate Governance Committee is generally responsible for, among other things:
   
developing, recommending and monitoring corporate governance policies and procedures for the Company and the Board of Directors;
overseeing the Company’s political contributions, lobbying activities, and the Company’s Federal political action committee;
recommending to the Board of Directors criteria for the selection of new directors;
identifying and recommending to the Board of Directors individuals to be nominated as directors;
evaluating candidates recommended by shareholders in a timely manner;
conducting all necessary and appropriate inquiries into the backgrounds and qualifications of possible candidates;
the evaluation of the Board of Directors and management;
approving the management continuity planning process; and
reporting to Board of Directors regarding matters covered at each committee meeting on a timely basis.
   
In 2016, the Nominating/Corporate Governance Committee held 4 meetings. During 2016, among other things, the Nominating/Corporate Governance Committee:
   
reviewed changes to the governance landscape;
assessed the independence of the non-management directors;
recommended changes to the Company’s Certificate of Incorporation and Bylaws;
adopted changes to the Company’s Political Contributions Policy;
reviewed and evaluated the succession plans relating to the Chief Executive Officer and other executive officer positions;
considered the proposals submitted by shareholders;
evaluated changes to the Committee’s charter and Company’s Governance Guidelines;
discussed the composition of the Board of Directors, the nomination process and potential candidates for the Board of Directors;
monitored directors’ ongoing continuing education activities and engaged outside experts to provide continuing director education for the Board of Directors;
discussed the results of Board and Committee self-evaluations; and
reviewed the process for conducting Board and Committee self-evaluations and any recommendations for improvements to the self-evaluation process.
Executive
The Executive Committee may exercise most board powers during periods between board meetings. The Executive Committee did not meet during 2016.
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COMPENSATION COMMITTEE USE OF CONSULTANTS

As set forth in its charter, the Compensation Committee has the sole authority to retain or terminate, as necessary or appropriate, outside consultants to provide advice to the Compensation Committee in connection with its fulfillment of its responsibilities. The Compensation Committee engages Frederic W. Cook (“FW Cook”) to serve as the Compensation Committee’s independent consultant. FW Cook and its affiliates do not provide any services to the Company or any of the Company’s affiliates other than advising the Compensation Committee on director and executive officer compensation. In 2016, the Compensation Committee requested that FW Cook advise it directly on a variety of compensation-related matters, including:

validating the compensation peer group to be used for competitive benchmarking;
preparing analyses and recommendations of senior executive compensation levels as compared to the compensation peer group and published compensation surveys;
assessing the pay recommendations that the Chief Executive Officer developed for senior executives, including the named executive officers;
developing pay recommendations for the Chief Executive Officer;
assessing the alignment of senior executive pay and company performance;
preparing analyses and recommendations of non-employee director pay levels as compared to the peer group;
preparing analyses of equity plan share usage and share dilution as compared to the peer group;
assessing performance measures and targets for annual and long-term incentive awards;
updating the Compensation Committee on executive compensation trends; and
recommending executive compensation program changes in response to executive compensation trends and shareholder concerns identified through investor engagement efforts or otherwise.

In the course of conducting its activities, FW Cook attended meetings of the Compensation Committee and presented its findings and recommendations to the Compensation Committee for discussion. During 2016, FW Cook also met with management to obtain and validate data and review materials. In March of 2017, the Compensation Committee evaluated whether any work performed by FW Cook raised any conflict of interest and determined that it did not.

 – 2017 Proxy Statement31

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The following table sets forth the current members of each of the Committees and the number of meetings held during 2016:

Name
Audit(1)
Compensation(2)
Nominating/
Corporate
Governance(3)
Executive
Claude R. Canizares*
 
 
 
Thomas A. Corcoran*
 
 
 
Ann E. Dunwoody*
 
 
 
Lewis Kramer*
 
Robert B. Millard*(4)
 
 
Lloyd W. Newton*
 
 
 
Vincent Pagano, Jr.*
 
H. Hugh Shelton*
 
 
 
Arthur L. Simon*
 
 
Michael T. Strianese
 
 
 
2016 Meetings
   10
   5
   4
   0
*Independent Director.
(1)The Audit Committee consists entirely of non-management directors all of whom the Board has determined are independent within the meaning of the listing standards of the NYSE and Rule 10A-3 of the Exchange Act. The Board has determined that all members of the Audit Committee are financially literate and that Messrs. Kramer and Simon are both “audit committee financial experts” within the meaning set forth in the regulations of the SEC.
(2)The Compensation Committee consists entirely of non-management directors all of whom the Board has determined are independent within the meaning of the listing standards of the NYSE; are non-employee directors for the purposes of Rule 16b-3 of the Exchange Act; and satisfy the requirements of Internal Revenue Code Section 162(m) for outside directors.
(3)The Nominating/Corporate Governance Committee consists entirely of non-management directors all of whom the Board has determined are independent within the meaning of the listing standards of the NYSE and our standards of independence.
(4)Lead Independent Director.

OVERSIGHT OF RISK MANAGEMENT

L3 is exposed to various risks including, but not limited to, strategic, operational, financial, liquidity and reputational, and also risks relating to reporting, pending and threatened litigation, and regulatory and legal compliance. L3’s enterprise risk profile is also affected by changes in the yearly U.S. Department of Defense (“DoD”) budget and spending levels, priorities and procurement practices, and also the fiscal situations and general economic conditions affecting our major customers, especially the DoD. L3’s management designed the Company’s enterprise risk management process to identify, monitor and evaluate these risks and develop an approach to address each identified risk. L3’s enterprise risk management process is a company-wide initiative and involves each of our reportable segments and business units. The Company takes a multi-disciplinary approach to risk.

L3’s Chief Financial Officer, at the direction of the Chief Executive Officer, is responsible for overseeing the Company’s enterprise risk management process and periodically reports enterprise risk information to each of the Chief Executive Officer, the Audit Committee and the Board of Directors. In fulfilling his risk management responsibilities, the Chief Financial Officer works closely with members of the senior management team, including the Company’s Chief Operating Officer, General Counsel, the Executive Vice President of Corporate Strategy and Development, the Controller and Principal Accounting Officer, Treasurer, the Vice President — Planning and each of the business unit group presidents and group chief financial officers.

On behalf of the Board of Directors, the Audit Committee plays a key role in the oversight of the Company’s enterprise risk management function. In this regard, the Audit Committee discusses policies with respect to risk assessment and risk management, and the Company’s Chief Financial Officer meets with the Audit Committee at least five times per year to specifically discuss the enterprise risks facing the Company, highlighting any new risks that may have arisen since they last met. Additionally, at each Board of Directors meeting, the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer report information about major risks facing the company.

322017 Proxy Statement

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BOARD AND GOVERNANCE MATTERS

POLITICAL CONTRIBUTIONS AND LOBBYING

Pursuant to the Company’s political contributions policy, the Company has a global policy against making contributions to political parties, political committees or candidates using Company resources (including monetary and in-kind services), even where permitted by law. In the United States, the Company maintains a political action committee (the “PAC”) which operates under the regulations of the Federal Election Commission and makes federal political contributions to federal candidates that meet specified criteria aligned with the Company’s interests. The contributions made by the PAC are not funded by corporate funds and are fully funded by voluntary contributions made by eligible employees. Corporate funds and facilities, as permitted by law, are used to provide administrative support, including the solicitation of funds from eligible employees and the distribution of contributions. The Company does not penalize in any way eligible employees who do not contribute to the PAC.

The PAC operates in compliance with all applicable laws governing PACs, including laws requiring public disclosure of contributions. The Nominating/Corporate Governance Committee oversees the Company’s political activities. The Company’s political contributions policy is available through the “Corporate Governance” section of our website accessible through http://www.L3T.com/investor-relations/corporate-governance.

 – 2017 Proxy Statement33

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EXECUTIVES AND CERTAIN OTHER OFFICERS OF THE COMPANY

EXECUTIVES AND CERTAIN OTHER OFFICERS OF THE COMPANY  

Set forth below is certain information regarding each of our current executives, other than Mr. Strianese who is presented under “Proposals Requiring Your Vote – Proposal 1 – Election of Directors – Nominees For Election to the Board of Directors in 2017,” and certain of our other officers.

CHRISTOPHER E. KUBASIK
 
President and Chief Operating Officer
   
Age 55
Principal Occupation And Other Information
Mr. Kubasik became our President and Chief Operating Officer in October 2015. From March 2014 to October 2015, Mr. Kubasik served as President and Chief Executive Officer of the Seabury Advisory Group. From 2013 to 2014, Mr. Kubasik served as President and Chief Executive Officer of Ackuity Advisors, Inc. Prior to that, Mr. Kubasik held various executive positions with Lockheed Martin Corporation including Vice Chairman, President and Chief Operating Officer from 2010 to 2012; Executive Vice President of Electronic Systems division from 2007 to 2009; and Executive Vice President and Chief Financial Officer from 2001 to 2007. In 1983, Mr. Kubasik began his career in public accounting at Ernst & Young, LLP, and served in a number of increasingly responsible positions until becoming a partner in 1996. Mr. Kubasik graduated magna cum laude from the University of Maryland School of Business.
   
 
CURTIS BRUNSON
 
Former Executive Vice President of Corporate Strategy and Development
   
Age 69
Principal Occupation And Other Information
Mr. Brunson became an Executive Vice President in February 2009 and is responsible for leading the execution of L3’s business strategy, including customer relationships, technical development and business development. The Company announced that Mr. Brunson transitioned from this role on March 1, 2017 and will be retiring in the second quarter of 2017. Prior to that, he was a Senior Vice President. Mr. Brunson began his career in 1972 with Sperry Systems Management Division, prior to its merger into Unisys Government Services. At Unisys for over 20 years, he held several management positions of increasing responsibility. When Loral acquired Unisys Communication Systems in Salt Lake City, he was General Manager. That division became part of the Company during L3’s formation in 1997, with Mr. Brunson becoming President at that time. Mr. Brunson holds a Bachelor of Science degree in Computer Science from the New York Institute of Technology and a Master’s of Science degree in Computer Science from Polytechnic Institute of New York University.
   
 
RALPH G. D’AMBROSIO
 
Senior Vice President and Chief Financial Officer
   
Age 49
Principal Occupation And Other Information
Mr. D’Ambrosio became our Chief Financial Officer in January 2007 and a Senior Vice President in April 2010. From March 2005 to January 2007, he was Vice President – Finance and Principal Accounting Officer, and he continued to be our Principal Accounting Officer until April 2008. He became Controller in August 2000 and a Vice President in July 2001 and was Vice President and Controller until March 2005. He joined L3 in August 1997 and was Assistant Controller until July 2000. Prior to joining L3, he was a senior manager at Coopers & Lybrand LLP, where he held a number of positions since 1989. Mr. D’Ambrosio holds a Bachelor’s degree, summa cum laude, in Business Administration from Iona College and a Master’s degree, with honors, in Business Administration from the Stern School of Business at New York University.
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EXECUTIVES AND CERTAIN OTHER OFFICERS OF THE COMPANY

ANN D. DAVIDSON
 
Senior Vice President, General
Counsel and Corporate
Secretary
   
Age 65
Principal Occupation And Other Information
Ms. Davidson became our Senior Vice President, General Counsel and Corporate Secretary in August 2016. Prior to joining L3, Ms. Davidson was the Senior Vice President, Chief Legal Officer and Corporate Secretary of Exelis Inc. from September 2011 to May 2015. Her legal career includes two decades of working in the aerospace and defense industry with ITT Corporation, Alliant Techsystems Inc., Thales North America Inc., Parker Hannifin Corporation and Honeywell International Inc. Earlier in her career she was an attorney advisor and trial attorney for the Office of the General Counsel of the U.S. Department of the Navy. Ms. Davidson received her Bachelor of Arts degree from Ohio University and her Juris Doctor degree from the University of Dayton School of Law. She is a member of the bar in Virginia and New York.
   
 
TODD W. GAUTIER
 
Senior Vice President and
President of Electronic
Systems
   
Age 53
Principal Occupation And Other Information
Mr. Gautier became our Senior Vice President and President of Electronic Systems in March 2017. Prior to that, he was President of the Precision Engagement and Training Sector, from January 2014 to March 2017, President of the Precision Engagement Sector, from January 2010 to January 2014, and Vice President of Business Development and Strategy for the Sensors and Simulation Group from January 2005 to January 2010. With 30 years of defense, aerospace and leadership experience, Mr. Gautier joined L3 in 2001. Prior to joining L3, Mr. Gautier served in the U.S. Navy for 15 years as a Strike/Fighter Pilot, where he held a variety of leadership, operational, and instructional positions across combat and peacetime operations. After leaving the Navy in 2000, he served as the Vice President of Navy Operations for BGI, LLC, and as a pilot for United Airlines. Mr. Gautier received his Bachelor’s degree in Business Administration, Finance, from Southern Methodist University in 1986.
   
 
STEVE KANTOR
 
Former Senior Vice President and President of Electronic Systems
   
Age 72
Principal Occupation And Other Information
Mr. Kantor has been our Senior Vice President and President of Electronic Systems since August 2012. The Company announced that Mr. Kantor transitioned from this role on March 1, 2017 and will be retiring in the second quarter of 2017. Prior to that, he was Senior Vice President and President of L-3 Services Group from June 2010 to August 2012 and, prior to that, from 2005 until 2010, Mr. Kantor was President of L3’s Power & Controls Systems Group which was later renamed Marine & Power Systems Group. Mr. Kantor joined L3 in 2003 and has over 35 years of experience in the defense electronics industry, serving the U.S. Department of Defense, prime contractors and original equipment manufacturers, and foreign allies. Previously, Mr. Kantor served as president of BAE Systems’ Reconnaissance and Surveillance Systems, a position he held since 1998. Prior to that, Mr. Kantor held various executive positions at Lockheed Martin, Loral and United Technologies. Mr. Kantor holds a Bachelor of Science degree in electrical engineering from the New York Institute of Technology.
 – 2017 Proxy Statement35

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EXECUTIVES AND CERTAIN OTHER OFFICERS OF THE COMPANY

JOHN S. MEGA
 
Senior Vice President and President of Communication Systems
   
Age 64
Principal Occupation And Other Information
Mr. Mega has been our Senior Vice President and President of Communication Systems since its formation in March 2014. Prior to that, Mr. Mega was President of the Microwave Group since he joined L3 in 1997. Having started his career at Raytheon and held executive positions at Loral, Lockheed Martin and, since its inception, L3 Technologies, Inc., Mr. Mega has worked his entire career in the defense electronics industry. He received his Bachelor of Science degree, magna cum laude, from Boston College and is a member of American Mensa.
   
 
JEFF MILLER
 
Senior Vice President and
President of Sensor
Systems
   
Age 53
Principal Occupation And Other Information
Mr. Miller became our Senior Vice President and President of Sensor Systems in March 2017. Mr. Miller joined L3 in April 2014 as Sector President of Integrated Sensor Systems. Prior to joining L3, Mr. Miller held executive positions with Raytheon. Earlier in his career, he was an F-16 product line manager for identification and electronic warfare programs at Teledyne Electronics. Mr. Miller has over 30 years of industry experience in U.S. and international sensors and fire control systems, battlefield information systems, networked communication, command and control, electronic warfare, missiles, and force protection systems. Mr. Miller studied electronic engineering at California Polytechnic State University. In addition, he has studied electronic engineering at various university programs and participated in executive management development and business leadership programs.
   
 
MARK VON SCHWARZ
 
Senior Vice President and President of Aerospace Systems
   
Age 57
Principal Occupation And Other Information
Mr. Von Schwarz was appointed to Senior Vice President and President of Aerospace Systems in June 2015. Prior to that, he was Sector President for Intelligence, Reconnaissance and Surveillance (ISR) and Aircraft Systems for Aerospace Systems, from 2012 to 2015, and President of L-3 Mission Integration, from 2008 to 2015. Before serving as President of L-3 Mission Integration, Mr. Von Schwarz served as President of L-3 ComCept, from 2003 to 2008, and Chief of Operations, from 2001 to 2003. Prior to joining L3, Mr. Von Schwarz served as Vice President of Engineering for Raytheon’s Aircraft Integration Systems. Mr. Von Schwarz also served as an Electronic Warfare Specialist in the Army Security Agency. Mr. Von Schwarz holds a Bachelor of Science degree with Academic Distinction in Physics and Mathematics from Texas A&M University-Commerce and graduated with honors from the U.S. Army Intelligence Schools.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  

Based on information available to us as of March 13, 2017, the Record Date, we know of no person who beneficially owned more than five percent of the Common Stock, except as set forth below.

Name and Address of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Percent of Class
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355(1)
 
7,618,575(1
)
 
9.9
%(1)
ClearBridge Investments, LLC
620 8th Avenue
New York, NY 10018(2)
 
6,048,342(2
)
 
7.8
%(2)
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055(3)
 
5,341,632(3
)
 
6.9
%(3)
(1)Information shown is based on information reported by the filer on a Schedule 13G filed with the SEC on February 10, 2017, in which The Vanguard Group, Inc. reported that it has sole dispositive power over 7,481,940 shares of Common Stock, shared dispositive power over 136,635 shares of Common Stock and sole voting power over 122,687 shares of Common Stock. The Vanguard Group, Inc. reported that Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., wholly-owned subsidiaries of The Vanguard Group, Inc., are the beneficial owners of 99,630 shares or 0.12% and 60,062 shares or 0.07%, respectively, of the Common Stock outstanding as a result of its serving as investment manager of collective trust accounts.
(2)Information shown is based on information reported by the filer on a Schedule 13G filed with the SEC on February 14, 2017 in which ClearBridge Investments, LLC reported that it has sole dispositive power over 6,048,342 shares of Common Stock and sole voting power over 5,813,523 shares of Common Stock.
(3)Information shown is based on information reported by the filer on a Schedule 13G filed with the SEC on January 25, 2017 in which BlackRock, Inc. reported that it has sole dispositive power over 5,341,632 shares of Common Stock and sole voting power over 4,706,885 shares of Common Stock.
 – 2017 Proxy Statement37

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SECURITY OWNERSHIP OF MANAGEMENT

SECURITY OWNERSHIP OF MANAGEMENT  

As of March 10, 2017, there were 77,805,809 shares of our Common Stock outstanding. The following table shows the amount of Common Stock beneficially owned (unless otherwise indicated) by our named 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 10, 2017.

Name of Beneficial Owner
Common
Stock
Beneficially
Owned
Directly or
Indirectly(1)
Common
Stock
Acquirable
Within
60 Days(2)
Total
Common
Stock
Beneficially
Owned
Percentage of
Shares of
Common Stock
Outstanding(3)
Directors and Named Executive Officers:
 
 
 
 
 
 
 
 
 
 
 
 
Michael T. Strianese
 
75,125
 
 
1,357,399
 
 
1,432,524
 
 
1.8
%
Christopher E. Kubasik
 
311
 
 
36,525
 
 
36,836
 
*
Ralph G. D’Ambrosio
 
35,166
 
 
237,831
 
 
272,997
 
*
Curtis Brunson
 
70,034
 
 
142,863
 
 
212,897
 
*
Steve Kantor
 
29,699
 
 
49,364
 
 
79,063
 
*
Claude R. Canizares
 
4,717
 
 
14,212
 
 
18,929
 
*
Thomas A. Corcoran
 
2,502
 
 
17,544
 
 
20,046
 
*
Ann E. Dunwoody
 
 
 
7,268
 
 
7,268
 
*
Lewis Kramer
 
1,300
 
 
10,855
 
 
12,155
 
*
Robert B. Millard(4)
 
322,535
 
 
21,160
 
 
343,695
 
*
Lloyd W. Newton
 
 
 
5,995
 
 
5,995
 
*
Vincent Pagano, Jr.
 
 
 
5,365
 
 
5,365
 
*
H. Hugh Shelton
 
 
 
8,301
 
 
8,301
 
*
Arthur L. Simon
 
 
 
11,231
 
 
11,231
 
*
Directors and Executive Officers as a Group (17 persons)(5)
 
461,594
 
 
1,785,257
 
 
2,246,851
 
 
2.9
%
(1)The number of shares shown includes shares that are individually or jointly owned and over which the individual has either sole or shared investment or voting authority. The shares of our Common Stock directly owned include the number of shares allocated to the accounts of executive officers under our savings plan as follows: Mr. Strianese, 3,631 shares; Mr. Kubasik, 222 shares; Mr. D’Ambrosio, 2,691 shares; Mr. Brunson, 5,130 shares; Mr. Kantor, 1,339 shares; and 15,720 shares held by the executive officers as a group.
(2)Shares that are deemed to be beneficially owned by the individual either by virtue of the individual’s right to acquire the shares upon the exercise of outstanding stock options within 60 days from March 10, 2017 and, in the case of non-employee directors, by virtue of the fact that shares issuable upon termination of board service under outstanding restricted stock unit awards have vested or will vest within 60 days of March 10, 2017.
(3)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 the acquisition rights described above. 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 10, 2017.
(4)Includes 82,270 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.
(5)Messrs. Brunson and Kantor are named executive officers of the Company for the fiscal year ended December 31, 2016, but transitioned from their roles as executive officers of the Company, effective March 1, 2017, and are not included in the executive officer group.
*Share ownership does not exceed one percent, including stock options exercisable within 60 days of March 10, 2017 and, in the case of non-employee directors, shares issuable upon termination of board service under outstanding restricted stock units that have vested or will vest within 60 days of March 10, 2017.
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COMPENSATION DISCUSSION AND ANALYSIS

COMPENSATION DISCUSSION AND ANALYSIS 

This Compensation Discussion and Analysis describes L3’s executive compensation program related to the year ended December 31, 2016 (our 2016 fiscal year). This section details the compensation framework applied by the Compensation Committee of our Board of Directors (the “Committee”) in determining the pay levels and programs available to our named executive officers for whom compensation is disclosed in the compensation tables included in the Tabular Executive Compensation Disclosure section of this proxy statement beginning on page 62. Our named executive officers for the 2016 fiscal year are:

Michael T. Strianese, Chairman and Chief Executive Officer
Christopher E. Kubasik, President and Chief Operating Officer
Ralph G. D’Ambrosio, Senior Vice President and Chief Financial Officer
Curtis Brunson, Former Executive Vice President of Corporate Strategy and Development
Steve Kantor, Former Senior Vice President and President of Electronic Systems Group

On January 25, 2017, L3 announced that Messrs. Brunson and Kantor will be retiring from the Company in the second quarter of 2017. In advance of their retirement, Messrs. Brunson and Kantor transitioned from their above roles effective March 1, 2017.

COMPANY BACKGROUND, 2016 OPERATING ENVIRONMENT AND 2016 PERFORMANCE ACHIEVEMENTS

Company Background. L3 is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment, and security and detection systems. L3 is also a leading provider of a broad range of communication, electronic and sensor systems used on military and commercial platforms. Approximately 73% of our consolidated net sales for 2016 were made to the U.S. Government (the “USG”), including 70% to the Department of Defense (the “DoD”). Accordingly, our sales, results of operations and cash flows are correlated to DoD budget and spending levels. The remaining 27% of our sales were made to international and commercial customers. Additionally, most of our businesses are short-cycle in nature, with programs or contracts that have performance periods of a year or less, and, consequently, changes in business trends can rapidly affect our sales volume, results of operations and cash flows.

2016 Operating Environment. For the year ended December 31, 2016, conditions began to improve in our USG/DoD business, which is our primary end market, but constraints and challenges remained. Our performance in 2016 was influenced by the following factors:

The DoD budget for the USG fiscal year ended September 30, 2016, which increased by 4% from the prior USG fiscal year.
The completion of the final stages of the U.S. military drawdown in Afghanistan.
The continuation of the DoD’s efficiency and Better Buying Power initiatives, which have resulted in increased competition and contract turnover, and lower profit margins, especially in the Vertex Aerospace sector of our Aerospace Systems segment.
Near-term softness in (i) foreign government procurement cycles for ISR systems and communication terminals, (ii) avionics for the general aviation market, and (iii) radio frequency (RF) microwave and power equipment for the commercial satellite market, which contributed to declining sales in our international and commercial business.

2016 Performance Achievements. L3 delivered strong financial performance for 2016, highlighted by the items described below.

Our diluted earnings per share (“EPS”) and free cash flow (“FCF”) achievements exceeded the corporate goals in our annual incentive plan by 7% for each measure. Our 2016 EPS from continuing operations was $8.21, compared with $3.44 for 2015, and our net cash from operating activities from continuing operations increased by 3% to $1,097 million for 2016, as compared to $1,069 million for 2015. Our 2015 EPS from continuing operations
 – 2017 Proxy Statement39

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COMPENSATION DISCUSSION AND ANALYSIS

includes certain non-cash goodwill impairment charges and a loss on business divestitures that are described more fully in “– Reconciliation of Non-GAAP Measures to GAAP Measures” on page 59. Excluding these items, our EPS from continuing operations grew by 19% to $8.21 for 2016, as compared to $6.91 for 2015.

Our consolidated net sales grew by 0.4% to $10,511 million for 2016, as compared to $10,466 million for 2015. Our consolidated organic sales growth (that is, net sales excluding the sales impact of business acquisitions and divestitures) was 2% for 2016, led by organic growth of 5% for our USG business (including the DoD), which compares favorably to the 4% increase in the total DoD budget for the USG fiscal year ended September 30, 2016. Consolidated organic sales exclude $209 million of sales declines related to business divestitures and $93 million of sales increases related to business acquisitions.
Operating margins increased in every segment as compared to 2015. Our segment operating margin increased by 110 basis points to 9.6% for 2016, as compared to 8.5% for 2015.
Our segment operating income increased by $118 million, or 13%, to $1,008 million for 2016, as compared to $890 million for 2015, driven by our organic sales growth and segment operating margin increases in 2016.
We completed significant strategic actions to reshape and strengthen our business portfolio for future success. In February 2016, we completed the sale of our National Security Solutions business for approximately $550 million. We also invested $388 million to acquire four businesses in 2016 that build and strengthen L3’s core business areas, including RF microwave and power, sensors, commercial aviation simulation and training, and aviation security.
We repurchased $373 million of our Common Stock and paid dividends of $220 million following our 12th consecutive annual dividend increase, returning over $590 million of cash to our shareholders in 2016.
We stabilized our investment grade credit ratings during 2016, with credit rating agencies S&P and Moody’s each raising their outlooks for L3 from “negative” to “stable.” A key factor in restoring our stable credit outlooks was reducing our debt during 2016 by approximately $300 million. We also maintained an efficient capital structure with ample liquidity. We successfully refinanced our $1 billion revolving credit facility for five years to 2021, with improvements in pricing and leverage covenants, and refinanced $550 million of our senior notes due in November 2016 and May 2017 with new senior notes due in December 2026. We ended 2016 with $363 million of cash on hand and an available revolver of $1 billion.
Our total shareholder return (“TSR”) for 2016 was approximately 30%, which exceeded the 75th percentile of the peer group used to measure our TSR performance under the long-term incentives awarded to our named executive officers in 2016.
402017 Proxy Statement

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COMPENSATION DISCUSSION AND ANALYSIS

COMPENSATION PHILOSOPHY, 2016 TARGET PAY AND 2016 INCENTIVE PLAN PAYOUTS

Compensation Philosophy. Our compensation philosophy supports a pay-for-performance culture. We target base salaries and annual and long-term incentive opportunities to approximate market median compensation levels, subject to adjustments based on experience, performance, the other individual factors as described in “– Use of Market Data and Competitive Compensation Positioning” beginning on page 45 and as otherwise appropriate. The majority of each executive’s target pay is in the form of incentive compensation, which is subject to future performance to have any realized value. See the information in “– Mix of Pay” on page 44.

2016 Target Pay. The table below details each named executive officer’s 2016 base salary, target annual incentive opportunity (“target bonus”) and grant date target value of long-term incentive awards (collectively, “target pay”), and changes in target pay relative to 2015 levels.

 
Salary
Target Bonus
as % of Salary
Target Value of
Long-Term Incentives
Target Pay
 
($)
(% Change)
(%)
(Change)
($)
(% Change)
($)
(% Change)
Michael T. Strianese
 
1,390,000
 
 
 
 
165
%
 
 
 
10,000,000
 
 
 
 
13,683,500
 
 
 
Christopher E. Kubasik(1)
 
907,500
 
 
0.8
%
 
100
%
 
 
 
3,200,000
 
 
N/A
 
 
5,015,000
 
 
N/A
 
Ralph G. D’Ambrosio
 
709,000
 
 
2.0
%
 
90
%
 
 
 
2,625,000
 
 
5
%
 
3,972,100
 
 
4
%
Curtis Brunson
 
683,500
 
 
2.0
%
 
90
%
 
 
 
2,700,000
 
 
 
 
3,998,650
 
 
1
%
Steve Kantor
 
706,000
 
 
2.0
%
 
100
%
 
 
 
1,650,000
 
 
 
 
3,062,000
 
 
1
%
(1)Mr. Kubasik was hired by L3 on October 28, 2015 at an initial annual base salary of $900,000 and a target bonus of 100% of base salary. The Committee further approved a special, one-time grant of stock options for Mr. Kubasik in 2015 in connection with his hire, which is excluded from this table because it was not relevant to the Committee’s determination of Mr. Kubasik’s target pay for 2016.

For 2016, our Chief Executive Officer’s base salary, target bonus and grant date target value of long-term incentive awards were held constant at 2015 levels. The Committee made no increases to the target pay of our other named executive officers except for ordinary course increases in base salary (prorated, in the case of Mr. Kubasik, to reflect his hire date) and a 5% increase in the target value of Mr. D’Ambrosio’s long-term incentive awards intended to bring his pay closer to market median. Following these pay adjustments, the target pay for each of our named executive officers in 2016 was within a range that approximates 80% to 120% of market median. For a further discussion, see “– Use of Market Data and Competitive Compensation Positioning” beginning on page 45.

2016 Incentive Plan Payouts. Payouts under our annual incentive plan and our long-term incentive plan performance awards are subject to the achievement of pre-established targets.

With respect to our annual incentive plan, our overall 2016 corporate performance was above plan targets, which are based on consolidated EPS and FCF, and performance at our Electronic Systems segment also exceeded plan targets, which are based on segment operating income and FCF. Accordingly, calculated payouts under our annual incentive plan were above target for both our corporate named executive officers (Messrs. Strianese, Kubasik, D’Ambrosio and Brunson) and for our group named executive officer (Mr. Kantor) who served as the president of our Electronic Systems segment during 2016. For a further discussion, see “– Elements of 2016 Target Pay – Annual Incentives” beginning on page 47.

Despite the Company’s strong operational and stock price performance in 2016, our three-year performance under the long-term incentive awards that vested on December 31, 2016 was below the minimum performance requirements for these awards, which are based on cumulative EPS and relative TSR. Accordingly, our named executive officers did not receive any payouts under these awards. For a further discussion, see “– Payment of Performance Awards for the 2014-2016 Award Cycle” on page 56.

 – 2017 Proxy Statement41

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COMPENSATION DISCUSSION AND ANALYSIS

2016 SHAREHOLDER ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY”)

At our 2016 annual shareholders meeting, more than 95% of the votes cast on our Say-On-Pay proposal were voted in favor of the compensation paid to our named executive officers for 2015. We believe that this strong level of shareholder support demonstrates, among other things, the effectiveness of the significant changes made to our compensation program over the past several years in response to shareholder feedback. The Committee considers the outcome of Say-On-Pay votes and other shareholder input in making decisions regarding the executive compensation program.

SOUND PAY PRACTICES

The Committee has adopted a broad range of program changes in response to shareholder feedback that began in connection with our first Say-On-Pay vote in 2011. As a result of these changes and other actions taken by the Committee, the Committee believes L3’s executive compensation program reinforces its pay-for-performance culture and includes corporate governance practices that are considered by investors to reflect market “best practices.” The table below highlights key features of our executive compensation program.

Executive Compensation Program Features
Executive Compensation
Program Includes
Emphasis on long-term, performance-based compensation and meaningful stock ownership guidelines to align executive and shareholder interests
Transparent, formulaic incentive plans designed to promote short- and long-term business success
Performance conditions on the Chief Executive Officer’s stock options
Clawback policy that applies to all incentive compensation, including equity-based awards
Modest perquisites consistent with competitive practices
Double trigger provisions for severance payable in the event of a change in control
Annual compensation risk assessment to ensure program does not encourage excessive risk-taking
Tally sheet analysis to better understand current and accumulated compensation and benefits
Executive Compensation
Program Does Not
Include or Prohibits
Employment agreements
Excise tax gross-ups on severance/change in control payments
Repricing of stock options or other equity-based awards without shareholder approval
Pension plan/SERP credit for years not worked with L3 or its predecessor companies
Excessive severance or change in control provisions
Payment of dividends on stock options, or on other equity-based awards prior to vesting
Hedging or pledging of L3 stock by executives, employees and non-employee directors

422017 Proxy Statement

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COMPENSATION DISCUSSION AND ANALYSIS

PROGRAM OVERVIEW

The table below outlines the principal elements of our executive compensation program. Detailed descriptions of each element of compensation and discussion of how the Committee determined compensation levels for 2016 can be found in the section “– Elements of 2016 Target Pay” beginning on page 46.


DETERMINING EXECUTIVE COMPENSATION

Role of the Compensation Committee. L3’s executive compensation program is administered by the Committee. The Committee is ultimately responsible for the review and approval of compensation for L3’s Chief Executive Officer and all other executive officers, including the other named executive officers. Key areas of responsibility for the Committee are described in “The Board of Directors and Certain Governance Matters — Committees of the Board of Directors” beginning on page 27.

Role of Management and the Chief Executive Officer. The Company’s human resources, finance and legal departments assist the Committee in the design and development of competitive compensation programs by providing data and analyses to the Committee and FW Cook, the Committee’s independent compensation consultant, in order to ensure that L3’s programs and incentives align with and support the Company’s business strategy. Management also recommends incentive plan metrics, performance targets and other plan objectives to be achieved, based on expected Company performance and subject to Committee approval.

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On an annual basis, the Chief Executive Officer reviews the performance of the other executive officers relative to their individual goals and Company performance and submits recommendations to the Committee for proposed base salary adjustments, target bonuses and personal ratings, and grant date target values for long-term incentive awards. In connection with reviewing the performance of, and making compensation recommendations with respect to, group presidents (all of whom directly report to the Chief Operating Officer), the Chief Executive Officer also takes into account the recommendations of the Chief Operating Officer. The Chief Executive Officer further provides the Committee with an annual assessment of his own performance, but otherwise has no role in determining his own compensation. Except as described above, no other executive officer participates in the setting of compensation for himself or any other executive officer.

Role of Compensation Consultant. The Committee has the sole authority to select, retain, terminate and approve the fees payable to outside consultants to provide it with advice on various aspects of executive compensation design and delivery. The Committee has retained FW Cook to advise the Committee on executive and non-employee director compensation generally. For a detailed description of FW Cook’s activities for the Committee, see “The Board of Directors and Certain Governance Matters — Compensation Committee Use of Consultants” on page 31.

MIX OF PAY

The Committee believes that L3’s pay mix strongly supports the Company’s pay-for-performance culture. In 2016, 68% of the Chief Executive Officer’s 2016 target pay was “at risk” and subject to future performance to have any realized value.

Base salary and restricted stock units (“RSUs”) are the only elements of 2016 target pay that are not contingent on future performance to have value (“fixed” pay). However, they both serve to attract and retain top executive talent, and the use of these pay elements is consistent with competitive market practices. As illustrated below, the mix of incentive compensation for our named executive officers is balanced to avoid the risk of emphasizing short-term gains at the expense of long-term performance. The emphasis on long-term incentives demonstrates our strong commitment to the alignment of management and shareholder interests over time.

2016 Target Pay Mix


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USE OF MARKET DATA AND COMPETITIVE COMPENSATION POSITIONING

Use of Market Data. The Committee believes that the success of our Company is dependent upon its ability to continue to attract and retain high-performing executives. To ensure the comparability of our executive compensation practices and pay levels, the Committee has historically monitored executive pay at leading defense, aerospace and other industrial companies (the “compensation peer group”) with whom L3 competes for business, executive talent or investor capital. The table below shows the composition of our peer group used to benchmark target pay in 2016, which is identical to the peer group used to benchmark target pay in 2015.

2016 Compensation Peer Group
Danaher Corporation
Huntington Ingalls Industries, Inc.
Parker Hannifin Corporation
Eaton Corporation
Leidos Holdings, Inc.
Raytheon Company
General Dynamics Corporation
Lockheed Martin Corporation
Rockwell Collins, Inc.
Harris Corporation
Northrop Grumman Corporation
Textron, Inc.
Honeywell International, Inc.
 
 

The Committee evaluates each peer company on an annual basis to determine its continued suitability from a pay benchmarking perspective. The selection criteria examined include:

Operational Fit: companies in the same or similar industries with a comparable business mix and client base, and diversified global operations. Due to the limited number of “pure defense” companies of comparable size, the Committee believes that it is appropriate to include other companies in L3’s compensation peer group that are similar in size and compete with L3 for executive talent or investor capital.
Financial Scope: companies of similar size as measured by annual corporate revenues. At the time this peer group was approved, most of the peers fell within a range of one-third to three times the size of L3. In limited circumstances, we have found it appropriate to include companies with revenues that fall both above and below this range when they are proven competitors for business, executive talent or investor capital.

In June 2016, the Committee conducted its annual review of the suitability of the peer group companies, taking into account L3’s projected revenues from continuing operations following the sale of its National Security Solutions business in February 2016. As part of its annual review, the Committee also considered a number of business transactions that occurred during the past year with respect to the 2016 peer group companies. Among other things, Danaher completed its acquisition of Pall Corporation and split itself into two publicly traded companies. In consideration of these changes, the Committee determined to remove Danaher from the 2017 peer group, and to add Ingersoll-Rand, Spirit AeroSystems and TransDigm Group to the 2017 peer group. Ingersoll-Rand is an industrial machinery company that shares many business characteristics and is similar in size to L3. Spirit AeroSystems and TransDigm Group are both aerospace and defense companies that, while smaller in size than L3, compete with L3 for business, investor capital or executive talent. The table below shows the revised peer group that the Committee has determined to use to benchmark executive officer target pay levels for fiscal 2017.

2017 Compensation Peer Group
Eaton Corporation
Ingersoll-Rand plc
Raytheon Company
General Dynamics Corporation
Leidos Holdings, Inc.
Rockwell Collins, Inc.
Harris Corporation
Lockheed Martin Corporation
Spirit AeroSystems Holdings, Inc.
Honeywell International, Inc.
Northrop Grumman Corporation
Textron, Inc.
Huntington Ingalls Industries, Inc.
Parker Hannifin Corporation
TransDigm Group Incorporated

In reviewing competitive compensation levels, it is the Committee’s practice to consider compensation peer group data for all named executive officers and, for named executive officers who are group presidents (for 2016, Mr. Kantor), to also consider general industry compensation data included in third-party surveys because it believes that including a broader industry group more accurately reflects the labor market for group presidents and ensures a meaningful sample size given the revenue of the

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groups they lead. With respect to compensation decisions made by the Committee for Mr. Kantor in 2016, the Committee considered competitive compensation levels based on the average of the compensation peer group data and survey data from the Willis Towers Watson Executive Compensation Database General Industry survey. The survey data was size-adjusted by FW Cook to reflect the annual revenue of Mr. Kantor’s group (Electronic Systems), and was used to provide a supplemental market reference.

Competitive Market Positioning. The Committee’s practice is to make pay decisions regarding the elements of compensation that compose each named executive officer’s target pay (base salary, target bonus and grant date target value of long-term incentives) in February of each fiscal year. As part of its decision-making process, the Committee compares each named executive officer’s target pay for the fiscal year against the market median; however, the Committee does not use market data in isolation in determining pay. Instead, competitive market data serves as one of many considerations used by the Committee in determining base salary adjustments and target pay opportunities for both annual and long-term incentives. The primary factors considered by the Committee in making its annual pay determinations is shown below.

Target Pay Determinants
Positioning to competitive market median
Long-term financial and individual performance
Role and responsibilities relative to benchmark
Competitive mix of fixed and at-risk pay
Tenure and experience in role
Internal pay equity
Competitive mix of cash and equity
Expected future contributions and market conditions
Prior year’s compensation levels

For 2016, the target pay for each of our named executive officers was within a range that approximates 80% to 120% of market median.

ELEMENTS OF 2016 TARGET PAY

Base Salary

Base salary serves as the foundation of an executive’s compensation and is an important component in L3’s ability to attract and retain executive talent. On an individual basis, the Committee considers each executive’s role and responsibilities, experience, tenure, business results and individual performance, competitive market pay levels, and internal pay equity considerations in making base salary adjustments. In 2016, the Committee did not increase the Chief Executive Officer’s base salary. The Committee approved base salary increases of 0.8% to 2.0% for the other named executive officers to maintain competitive positioning as compared to market levels. In the case of Mr. Kubasik, his base salary increase was prorated to reflect his hire date in October 2015. All base salary increases for 2016 were approved by the Committee on February 16, 2016 and made effective as of April 1, 2016.

 
2016 Salary
(in thousands)
2015 Salary
(in thousands)
Percent Change
Michael T. Strianese
$
 1,390
 
$
 1,390
 
 
 
Christopher E. Kubasik
 
908
 
 
900
 
 
0.8
%
Ralph G. D’Ambrosio
 
709
 
 
695
 
 
2.0
%
Curtis Brunson
 
684
 
 
670
 
 
2.0
%
Steve Kantor
 
706
 
 
692
 
 
2.0
%

Note: Amounts reflect annualized base salary rates in effect at the end of the fiscal years indicated.

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Annual Incentives

The annual incentive plan provides senior executives with the opportunity to earn annual cash incentive awards based on corporate, group and individual performance relative to pre-established internal targets.

Award Determination under Annual Incentive Plan
Performance criteria defined at the beginning of the performance period
Performance compared to pre-established goals
For corporate named executive officers, financial performance is based on consolidated EPS and FCF results
For group presidents, financial performance is primarily based on the operating income (“OI”) and FCF results for their respective groups, with additional consideration given to consolidated EPS and FCF results
Individual performance measured based on pre-established goals and assigned specific weighting
Payouts can range from 0% to 225% of target bonus based on performance
 
0% to 200% of target bonus can be earned by the CEO and the other named executive officers who are not group presidents
 
For group presidents, up to an additional 25% of the target bonus can be earned based on achievement of organic OI growth

The Committee established the 2016 corporate and group financial targets under the annual incentive plan, as well as individual performance goals and weightings, in February 2016. The corporate financial targets were based on management’s most recent consolidated internal financial plan presented to L3’s Board of Directors (the “2016 Plan”), which formed the basis for L3’s financial guidance for 2016 EPS and FCF disclosed to investors in January 2016. The individual group financial targets were based on internal group financial plans that were consistent with the 2016 Plan.

Based on L3’s actual 2016 financial performance relative to plan and the Committee’s assessment of the named executive officers’ individual performance for 2016, the Committee approved 2016 annual incentive payouts for the named executive officers as detailed in the steps below.

STEP 1. Determine target bonus at beginning of fiscal year

Annual incentive plan (“AIP”) target bonuses are set as a percent of base salary in connection with the determination of target pay for each named executive officer. The 2016 target bonus for each of the named executive officers was held constant, as a percentage of their respective base salaries, from 2015 levels (or in the case of Mr. Kubasik, from the level established for him at the time he was hired by L3 in October 2015).

 
2016 Salary
(in thousands)
2016 AIP
Target Bonus (%)
2016 AIP
Target Bonus (in thousands)
Michael T. Strianese
$
1,390
 
 
165
%
$
2,294
 
Christopher E. Kubasik
 
908
 
 
100
%
 
908
 
Ralph G. D’Ambrosio
 
709
 
 
90
%
 
638
 
Curtis Brunson
 
684
 
 
90
%
 
615
 
Steve Kantor
 
706
 
 
100
%
 
706
 

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STEP 2. Determine the financial rating based on performance for the fiscal year

Financial ratings are based on a weighted-average assessment of L3’s consolidated performance (or, for group presidents, both L3’s and their respective group’s performance) relative to pre-established targets for key financial measures.

For corporate named executive officers, our annual incentive plan is focused on L3’s consolidated EPS and FCF performance (with FCF calculated as net cash from operating activities, less capital expenditures, net of dispositions) because we believe that these metrics constitute two of the most important financial measures that create shareholder value. For 2016, our consolidated EPS and FCF plan targets, and the measurement of our actual consolidated EPS and FCF performance, were based solely on continuing operations (that is, on a basis that excludes the results of our National Securities Solutions business that was sold in February 2016).

For group presidents, our plan emphasizes the respective group’s OI and FCF performance because we consider those to be important financial measures that group presidents can directly influence in order to increase L3’s consolidated EPS and FCF. Our plan also takes into account L3’s consolidated EPS and FCF results in evaluating group presidents’ financial ratings in order to provide a degree of alignment for group presidents with L3’s overall performance.

The table below provides the relative weightings of these performance measures that are utilized in evaluating each named executive officer’s financial rating. We believe that the weightings appropriately reflect the importance of these measures to our overall financial success.

Corporate Executives
Group Presidents
Financial Measure
Weight
Financial Measure
Weight (by measure)
 
Weight
(corporate/group)
Final Effective
Weighting
Consolidated EPS
 
80
%
Consolidated EPS
 
80
%
 
}
 
 
25
%
 
20
%
Consolidated FCF
 
  20
%
Consolidated FCF
 
20
%
 
5
%
 
 
 
 
Group OI
 
80
%
 
}
 
 
75
%
 
60
%
 
 
 
 
Group FCF
 
20
%
 
   15
%
Total
 
100
%
Total
 
 
 
 
 
 
 
 
 
 
100
%

Pay-for-Performance: A financial rating of 100% indicates weighted-average performance at target levels (that is, at plan). Performance that exceeds plan by 15% (or by 25% for group presidents) results in a maximum financial rating of 200%. If performance is below plan by 15% (or by 25% for group presidents), this results in a threshold financial rating of 50%. If performance is below threshold, this results in a financial rating of zero. Performance is interpolated between these points. Based on the increased range of volatility for group-level financial results as compared to L3’s consolidated financial results, we believe it is appropriate to consider a wider range of performance at the group level.

Performance Level
Corporate Executives
(% of Plan Performance)
Group Presidents
(% of Plan Performance)
Financial
Rating
Maximum
 
≥ 115
%
 
≥ 125
%
 
200
%
Target
 
100
%
 
100
%
 
100
%
Threshold
 
85
%