☐ |
Preliminary Proxy Statement
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☐ |
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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☒ |
Definitive Proxy Statement
|
☐ |
Definitive Additional Materials
|
☐ |
Soliciting Material Pursuant to §240.14a-12
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☒ |
No fee required |
☐ |
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies: ____________________________________________________
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Aggregate number of securities to which transaction applies:____________________________________________________
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
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4) |
Proposed maximum aggregate value of transaction: ___________________________________________________________
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5) |
Total fee paid: ________________________________________________________________________________________
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid: _______________________________________________________________________________
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3) |
Filing Party: _________________________________________________________________________________________
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4) |
Date Filed: __________________________________________________________________________________________
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OUR
|
|
VALUES
|
When:
Friday, April 23, 2021
9:00 AM Eastern Time
|
Meeting Agenda
Proposal 1: To elect as directors the 12 nominees named in the accompanying proxy statement for a one-year
term expiring at the 2022 Annual Meeting of Shareholders.
Proposal 2: To approve, in an advisory vote, the compensation of our named executive officers as disclosed in
the accompanying proxy statement.
Proposal 3: To ratify our Audit Committee's appointment of Ernst & Young LLP as our independent
registered public accounting firm for our fiscal year 2021.
The accompanying proxy statement more fully describes these matters.
Shareholders also will act on any other business matters that may properly come before the meeting, but we have not received notice of any such matters.
All holders of common stock of record at the close of business on February 26, 2021 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements
thereof.
The Annual Meeting will be virtual-only, held exclusively online, due to the public health impact of COVID and to protect the health and well-being of our shareholders, employees and board
of directors. The platform for the virtual Annual Meeting includes functionality that affords authenticated shareholders the same meeting participation rights and opportunities they would have at an in-person meeting. Instructions to access
and log-in to the virtual Annual Meeting are provided under “Attending the Virtual Annual Meeting” on page 95 in the accompanying proxy statement, and once admitted, shareholders may view reference materials such as our list of shareholders
as of the record date, submit questions and vote their shares by following the instructions that will be available on the meeting website.
By Order of the Board of Directors,
Scott T. Mikuen
Senior Vice President, General Counsel and Secretary
Melbourne, Florida
March 11, 2021
Important notice regarding the availability of proxy materials for the annual meeting of shareholders to be held on Friday, April 23, 2021:
The Proxy Statement and 2021 Annual Report to Shareholders are available at:
www.l3harris.com/company/environmental-social-and-governance.
|
|
Where:
The Annual Meeting will be held exclusively online at
www.virtualshareholdermeeting
.com/LHX2021.
|
||
YOUR VOTE IS IMPORTANT
|
||
Even if you plan to attend the virtual
Annual Meeting, we encourage you to
vote your shares before the meeting to
ensure they are counted.
|
||
L3HARRIS 2021 PROXY STATEMENT i
|
DEAR FELLOW
SHAREHOLDERS
|
L3HARRIS TECHNOLOGIES, INC.
1025 West NASA Boulevard
Melbourne, Florida 32919
|
March 11, 2021
|
||
William M. Brown
Chair & CEO
|
I am proud to convey the tremendous progress L3Harris made in the past year, despite unforeseen challenges, due to the heroic efforts of our employees, suppliers and customers. Thanks to them, we
were able to address the global health, economic and social challenges, while meeting our stakeholder commitments and achieving our merger integration goals ahead of schedule. In the first 18 months since the merger, we made
significant progress integrating two large organizations into a single high-performance, technology-focused operating company – establishing a culture anchored on shared values, embedding operational excellence throughout the
company, and improving efficiencies across the enterprise by harmonizing multiple human resource and IT systems under common platforms. These actions helped foster collaboration throughout the company, leading to both cost and
revenue synergies. These are substantial accomplishments even under ideal circumstances – which 2020 was not – and highlighted the resiliency and dedication of our 48,000 employees, as well as our leadership team and your Board of
Directors.
On behalf of your Board, I am pleased to invite you to attend the 2021 Annual Meeting of Shareholders of L3Harris Technologies, Inc. to be held on Friday, April 23, 2021. The meeting will be
virtual-only, held exclusively online, due to the public health impact of COVID and to protect the health and well-being of you and our employees and directors. You therefore will not be able to attend the meeting in person. The
live, interactive audio webcast of the meeting at www.virtualshareholdermeeting.com/LHX2021 will provide the ability for you to vote and submit questions online, in addition to facilitating shareholder attendance and providing a
consistent experience to all shareholders regardless of location.
The accompanying Notice of 2021 Annual Meeting of Shareholders and Proxy Statement describe the matters to be acted on at the meeting, which include:
> election of the 12 nominees for director named in the accompanying Proxy Statement for a one-year term expiring at the 2022 Annual Meeting of Shareholders;
> approval, in an advisory vote, of the compensation of our named executive officers;
> ratification of the appointment of our independent registered public accounting firm for our fiscal year 2021; and
> such other business as may properly come before the meeting or any adjournments or postponements thereof.
|
|
|
||
Your Board unanimously recommends that you vote FOR election of its nominees for director, FOR approval, in an advisory vote, of the compensation of our named executive officers and FOR
ratification of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year 2021.
|
||
It is important that your shares be represented and voted at the meeting, even if you are unable to attend. You can ensure that your shares are represented and voted at the meeting by submitting
your proxy/voting instruction over the Internet or by telephone, or by mail by using the traditional proxy/voting instruction if you received your proxy materials by mail. You can find instructions for these convenient ways to vote
on both the Notice of Internet Availability of Proxy Materials and the proxy/voting instruction card, as well as in the accompanying Notice of 2021 Annual Meeting of Shareholders and Proxy Statement.
|
||
Sincerely,
|
||
William M. Brown
Chair and Chief Executive Officer
|
ii L3HARRIS 2021 PROXY STATEMENT
|
|
PROXY SUMMARY
|
1
|
7
|
|
7
|
|
8
|
|
9
|
|
17
|
|
18
|
|
18
|
|
22 | |
22
|
|
25
|
|
28
|
|
29
|
|
32
|
|
34
|
|
34
|
|
38 |
|
43 | |
46 | |
52 | |
55 | |
58 | |
60 | |
61
|
|
62
|
|
CEO PAY RATIO |
87 |
88
|
|
90
|
91
|
|
91
|
|
92
|
|
92
|
|
93
|
|
93
|
|
94
|
|
95
|
|
A-1
|
L3HARRIS 2021 PROXY STATEMENT iii
|
PROXY
SUMMARY
|
2021 Annual Meeting
of Shareholders
Friday, April 23, 2021
9:00 AM Eastern Time
The Annual Meeting will be held exclusively online at
www.virtualshareholdermeeting. com/LHX2021.
Record Date: February 26, 2021
|
VOTING MATTERS
|
For more
information
|
Board’s
recommendation
|
|
Proposal 1
|
Elect our Board’s 12 nominees for director for a one-year term expiring at the 2022 Annual Meeting of Shareholders
|
Page 7
|
FOR each nominee
|
Proposal 2
|
Approve, in an advisory vote, the compensation of our named executive officers as disclosed in this proxy statement
|
Page 33
|
FOR the proposal
|
Proposal 3
|
Ratify appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2021
|
Page 90
|
FOR the proposal
|
> |
“Merger” refers to the all-stock merger completed on June
29, 2019 involving Harris Corporation (“Harris”) and L3 Technologies, Inc. (“L3”), with Harris changing its name to “L3Harris Technologies, Inc.” (“L3Harris” or “Company”);
|
> |
“Harris Board,” “L3 Board” and “Harris Compensation Committee” refer to the Harris Board of Directors, the L3 Board of
Directors and the Harris Management Development and Compensation Committee, respectively, prior to the completion of the Merger;
|
> |
“fiscal 2020” refers to our fiscal year ended January 1,
2021;
|
> |
“fiscal transition period” refers to our abbreviated
six-month fiscal transition period of June 29, 2019 through January 3, 2020; and
|
> |
“fiscal 2019” and “fiscal 2018” refer to our full fiscal years ended June 28, 2019 and June 29, 2018, respectively.
|
L3HARRIS 2021 PROXY STATEMENT 1
|
PROXY SUMMARY BOARD AND GOVERNANCE HIGHLIGHTS
|
> |
William M. Brown, Chair and CEO;
|
> |
Christopher E. Kubasik, Vice Chair, President and COO; and
|
> |
Ten independent directors (Sallie B. Bailey, Peter W. Chiarelli, Thomas A. Corcoran, Thomas A. Dattilo, Roger B. Fradin, Lewis Hay III, Lewis Kramer, Rita S. Lane, Robert B. Millard and Lloyd
W. Newton).
|
Other
Current
Public
Company
Boards
|
L3Harris Committee Memberships
|
||||||||
Director nominee
|
Age
|
Director
Since*
|
Principal Occupation/Experience
|
Audit
|
Compensation
|
Finance
|
Nominating
and
Governance
|
Ad Hoc
Technology
|
Sallie B. Bailey
|
61
|
2018
|
Former EVP and CFO of Louisiana- Pacific Corporation
|
2
|
■
|
■
|
|||
William M. Brown
|
58
|
2011
|
Chair and CEO of L3Harris
|
1
|
|||||
Peter W. Chiarelli
|
70
|
2012
|
General, U.S. Army (Retired)
|
—
|
■
|
■
|
|||
Thomas A. Corcoran
|
76
|
1997
|
President of Corcoran Enterprises, LLC; former Senior Advisor for The Carlyle Group
|
1
|
■
|
■
|
|||
Thomas A. Dattilo
|
69
|
2001
|
Advisor for private investment firms; former Chairman and CEO of Cooper Tire & Rubber Company
|
1
|
■
|
■
|
|||
Roger B. Fradin
|
67
|
2016
|
Consultant for The Carlyle Group; former Vice Chairman of Honeywell International Inc.
|
3
|
■
|
■
|
|||
Lewis Hay III
|
65
|
2002
|
Operating Advisor for Clayton Dubilier & Rice, LLC; former Chairman and CEO of NextEra Energy, Inc.
|
1
|
■
|
■
|
|||
Lewis Kramer
|
73
|
2009
|
Former Global Client Service Partner and National Director of Audit Services of Ernst & Young LLP
|
1
|
■
|
■
|
|||
Christopher E. Kubasik
|
59
|
2018
|
Vice Chair, President and COO of L3Harris
|
—
|
|||||
Rita S. Lane
|
58
|
2018
|
Former VP, Operations of Apple Inc.
|
3
|
■
|
■
|
|||
Robert B. Millard
Lead Independent Director
|
70
|
1997
|
Retired Chairman of Massachusetts Institute of Technology Corporation
|
1
|
■
|
■
|
|||
Lloyd W. Newton
|
78
|
2012
|
General, U.S. Air Force (Retired); former EVP of Pratt & Whitney Military Engines
|
—
|
■
|
■
|
*Reflects tenure with L3 or Harris board of directors, as applicable.
|
■ Member
|
■ Chair
|
2 L3HARRIS 2021
PROXY STATEMENT
|
|
PROXY SUMMARY BOARD AND GOVERNANCE
HIGHLIGHTS
|
4
UNDER 5 YEARS
|
3
5 – 10 YEARS
|
5
MORE THAN 10 YEARS
|
Nominee Skills and Background
|
of 12 nominees
|
Senior P&L Experience
|
9
|
|||||||||||||||||||||||
Public Company Board
|
11
|
|||||||||||||||||||||||
M&A/Post Merger Integration
|
9
|
|||||||||||||||||||||||
Aerospace & Defense
|
7
|
|||||||||||||||||||||||
Military Service
|
3
|
|||||||||||||||||||||||
Diverse
|
3
|
|||||||||||||||||||||||
Technology
|
7
|
|||||||||||||||||||||||
Finance Expertise
|
8
|
|||||||||||||||||||||||
Global Operations
|
10
|
> |
Independent directors make up approximately 83% of the Board and 100% of each committee.
|
> |
All directors elected annually; majority voting
standard in uncontested elections.
|
> |
Lead Independent Director broadly empowered with defined responsibilities and authority.
|
> |
Independent directors regularly hold executive
sessions led by Lead Independent Director.
|
> |
Our Board and all standing committees conduct annual
self-evaluations for continuous improvement in performance and effectiveness.
|
> |
Our Board membership criteria take into account diversity of viewpoints, background, experience, personal characteristics, including gender, race, ethnicity, age,
|
> |
Policy requiring directors to retire at age 75 (exception for three years for directors designated pursuant to Merger-related provisions of
our governing documents).
|
> |
Board reviews and evaluates management development and succession plans.
|
> |
Strong ethics and business conduct program, reflecting our commitment to our Code of Conduct and broader compliance principles, to responsible corporate citizenship and sustainability and to our belief that we should conduct all business dealings with honesty, integrity and responsibility.
|
L3HARRIS 2021 PROXY STATEMENT 3
|
PROXY SUMMARY PERFORMANCE HIGHLIGHTS
|
> |
Meaningful stock ownership guidelines for non-employee directors.
|
> |
Prohibition on short sales, hedging, other derivative transactions and pledging of our common stock by directors and executive officers.
|
> |
Robust proxy access By-Law provision allowing eligible shareholders to nominate and include in our proxy materials candidates for election to our Board.
|
> |
Shareholders holding at least 25% of our common stock can call a special meeting.
|
> |
Annual “say-on-pay” advisory vote.
|
> |
Engagement with large shareholders on key aspects of our executive compensation program and on enviromental, social and governance matters.
|
Key Fiscal 2020
Financial Results
Revenue, adjusted EBIT and adjusted
free cash flow results are important
because they are components of
performance measures used in
incentive compensation.
|
|
In 2019, we changed our fiscal year end from the Friday nearest June 30 to the Friday nearest December 31. As a result, some of the information in this proxy
statement, particularly relating to executive compensation matters, relates to the abbreviated six-month transition period of June 29, 2019 through January 3, 2020 (which we sometimes refer to as our “fiscal
transition period”).
|
4 L3HARRIS 2021 PROXY STATEMENT
|
|
PROXY SUMMARY
EXECUTIVE COMPENSATION HIGHLIGHTS
|
> |
Executing seamless integration of L3 and Harris, including achieving at least $500 million in gross cost synergies from the Merger by the end of 2021;
|
> |
Driving flawless execution and margin expansion through our e3 (excellence everywhere every day) operational excellence program;
|
> |
Growing revenue through a well-aligned business portfolio and investments in innovation;
|
> |
Maximizing cash flow with shareholder friendly capital deployment; and
|
> |
Reshaping our portfolio to focus on high margin, high growth businesses.
|
OVERALL OBJECTIVE
Encourage and reward creation
of sustainable, long-term
shareholder value
|
GUIDING PRINCIPLES
> Align with shareholders’ interests
> Be
competitive at target performance level
|
> Motivate achievement of financial goals and strategic objectives
> Align realized pay with performance
|
L3HARRIS 2021 PROXY STATEMENT 5
|
PROXY SUMMARY EXECUTIVE
COMPENSATION HIGHLIGHTS
|
Base Salary
Level
|
Annual Cash
Incentive Payout
|
Target Value of
Annual Cycle Awards
(Equity-Based)
|
|||||||
Mr. Brown
|
|
$1,500,000
|
$2,850,000
110.5% of target
|
|
$10,250,000
|
||||
Mr. Kubasik
|
|
$1,500,000
|
$2,850,000
110.5% of target
|
|
$10,250,000
|
||||
Mr. Malave
|
|
$700,000
|
$775,000
110.7% of target
|
|
$2,100,000
|
||||
Mr. Gautier
|
|
$620,000
|
$575,000
92.7% of target
|
|
$1,600,000
|
||||
Mr. Zoiss
|
|
$620,000
|
$720,000
116.1% of target
|
|
$1,600,000
|
6 L3HARRIS 2021 PROXY STATEMENT
|
Our Board unanimously
recommends voting FOR
election of its 12 nominees
for director for a one-
year term expiring at the
2022 Annual Meeting of
Shareholders.
|
> With a diverse
mix of backgrounds, skills and experience and a track record of driving long-term shareholder value, as well as a deep and unique understanding of our business and the challenges and opportunities
L3Harris faces, our Board is well positioned to discharge its responsibilities.
> Nominees collectively have broad and diverse
leadership experience and many other qualifications, skills and attributes that our Board views as valuable to L3Harris.
> Healthy balance of shorter and longer tenures among nominees, all of whom are independent,
except Mr. Brown, our Chair and CEO, and Mr. Kubasik, our Vice Chair, President and COO.
|
> |
William M. Brown, Chair and Chief Executive Officer;
|
> |
Christopher E. Kubasik, Vice Chair, President and Chief Operating Officer; and
|
> |
Ten independent directors (Sallie B. Bailey, Peter W. Chiarelli, Thomas A. Corcoran, Thomas A. Dattilo, Roger B. Fradin, Lewis Hay III, Lewis
Kramer, Rita S. Lane, Robert B. Millard and Lloyd W. Newton).
|
L3HARRIS 2021 PROXY STATEMENT 7
|
> |
Demonstrated ability and sound judgment;
|
>
|
Personal qualities and characteristics, accomplishments and reputation in the business community or in the individual’s profession,
professional integrity, educational background, business experience and related experience;
|
>
|
Willingness to objectively appraise management performance;
|
>
|
Current knowledge and contacts in the markets in which we do business and in our industry or other relevant industries,
giving due consideration to potential conflicts of interest;
|
>
|
Ability and willingness to commit adequate time to Board and committee matters, including attendance at Board, committee and annual
shareholder meetings;
|
> |
Diversity of viewpoints, background, experience, personal characteristics, including gender, race, ethnicity, age, sexual orientation and similar
demographics;
|
> |
The number of other boards of which the individual is a member; and
|
> |
Compatibility of the individual’s experience, qualifications, attributes or skills and personality with those of other directors and potential
directors in building a Board that is effective, collegial and responsive to the needs of L3Harris and the interests of our shareholders.
|
8 L3HARRIS 2021 PROXY STATEMENT
|
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES
|
> |
Prior to each annual meeting of shareholders, each current director discusses his or her participation on our Board and its committees and other
relevant matters with our Chair.
|
> |
Each current director also is requested to discuss any concerns or issues regarding continued membership on our Board with the Chair of our
Nominating and Governance Committee.
|
> |
In addition, our Nominating and Governance Committee reviews each current director’s experience, qualifications, attributes, skills, tenure,
contributions, other directorships, meeting attendance record, any changes in employment status and other information it deems helpful in considering and evaluating the director for nomination.
|
L3HARRIS 2021 PROXY STATEMENT 9
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES FOR ELECTION
|
L3Harris
Committees
> Audit
> Finance
|
Sallie B. Bailey |
Age: 61
Director since Apr. 2018 |
Independent Director |
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge of corporate finance, capital raising, strategic planning, banking relationships, operations, complex information technology
and other systems, enterprise risk management and investor relations
> Knowledge and experience with complex financial and accounting functions and internal controls
> Knowledge of complex financial, operational, management and strategic issues faced by a large global company
> Public company board and corporate governance experience
|
|||||
>
|
Executive Vice President and Chief Financial Officer of Louisiana-Pacific Corporation (Dec. 2011 - July 2018)
|
>
|
Vice President and Chief Financial Officer of Ferro Corporation (Jan. 2007 - July 2010)
|
>
|
11-year career at The Timken Company in various senior management positions of increasing responsibility (1995 - 2006), lastly as Senior Vice
President, Finance and Controller
|
>
|
Previously with Tenneco Inc. in various finance organization roles (1988 - 1995), lastly as Assistant Treasurer
|
>
|
Previously with Deloitte and Touche LLP as an audit supervisor
|
> |
NVR, Inc. (since 2020)
|
> |
The AZEK Company Inc. (since 2020)
|
> |
General Cable Corporation (2013 - 2018)
|
L3Harris
Committees
> None
|
William M. Brown
|
Age: 58
Director since Dec. 2011
|
Employee Director
(not independent)
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Current role as our Chief Executive Officer and his leadership and management skills
> Knowledge of complex strategic, operational, management and financial issues faced by a large company with international operations
> Knowledge and expertise related to strategic planning, global supply chain and procurement, productivity and lean manufacturing
initiatives, international sales, marketing and operations, domestic and international mergers and acquisitions, regulatory challenges, and enterprise risk management
> Public company board and governance experience
|
|||||
>
|
Chair of the Board and Chief Executive Officer of L3Harris Technologies, Inc. (since June 29, 2019)
|
>
|
Chairman of the Board, President and Chief Executive Officer of Harris Corporation (April 2014 - June 28, 2019)
|
>
|
President and Chief Executive Officer of Harris Corporation (Nov. 2011 - April 2014)
|
>
|
14-year career in U.S. and international roles at United Technologies Corporation (“UTC” and now known as Raytheon Technologies Corporation), a
diversified global building and aerospace company (1997 - 2011), including Senior Vice President, Corporate Strategy and Development; 5 years as President of UTC’s Fire & Security Division;
and President of Asia Pacific Operations of UTC’s Carrier Corporation
|
>
|
Previously with McKinsey & Company as senior engagement manager and with Air Products and Chemicals, Inc. as project engineer
|
> |
Celanese Corporation (since 2016)
|
10 L3HARRIS 2021 PROXY STATEMENT
|
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES FOR
ELECTION
|
L3Harris
Committees
> Ad Hoc Technology
(Chair)
> Audit
|
Peter W. Chiarelli
|
Age: 70
Director since Aug. 2012
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge and expertise in complexities of both U.S. and international militaries, defense communities and defense industries
> Extensive background in military operations and national security
> Experience addressing complex operational and strategic issues, managing
significant operating budgets, and handling legislative and public affairs
|
|||||
>
|
Chief Executive Officer, 1560 LLC, a company engaged in public policy and electoral research and analysis (2018 - 2019)
|
>
|
Chief Executive Officer of One Mind, a non-profit organization bringing together healthcare providers, researchers and academics to cure
brain disorders (April 2012 - Jan. 2018)
|
>
|
General, U.S. Army (Retired), retired in March 2012 after nearly 40 years of service with U.S. Army, commanding troops at all levels from
platoon to Multi-National Corps and holding various senior officer positions, including:
|
■ |
Vice Chief of Staff (Army’s second-highest-ranking officer), with responsibility for oversight of day-to-day operations and for leading
budget planning and execution and efforts to modernize equipment, procedures and formations
|
■ |
Senior Military Assistant, Secretary of Defense
|
■ |
Commander of Multi-National Corps - Iraq
|
■ |
Division Commander, Fort Hood, Texas and Baghdad, Iraq
|
■ |
U.S. Army Chief of Operations, Training and Mobilization
|
■ |
Executive Officer, Supreme Allied Commander, Europe
|
L3Harris
Committees
> Audit
> Finance
|
Thomas A. Corcoran
|
Age: 76
Director since June 29, 2019
(1997 including L3 service)
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge of complex operational, management, financial, strategic and governance issues faced by large public
companies
> Knowledge and expertise related to global supply chain, manufacturing, human resources, accounting and internal
controls, finance and economic analysis and mergers and acquisitions
> Knowledge of, and management experience with, aerospace and defense and technology industries and with the
government procurement process, including with major U.S. Department of Defense programs
> Public company board and governance experience
|
|||||
>
|
President, Corcoran Enterprises, LLC, a private management consulting firm (since 2001)
|
>
|
Senior Advisor, The Carlyle Group, a global alternative asset manager (2001 - 2017)
|
>
|
President and Chief Executive Officer, Gemini Air Cargo, an aircraft, crew, maintenance and insurance cargo airline
(March 2001 - April 2004)
|
>
|
President and Chief Executive Officer, Allegheny Teledyne Incorporated, a global manufacturer of technically advanced specialty
materials and complex components (Oct. 1999 - Dec. 2000)
|
>
|
President and Chief Operating Officer, Electronic Systems Sector and Space & Strategic Missiles Sector, Lockheed Martin
Corporation, a global aerospace, defense, security and advanced technologies company (April 1993 - Sept. 1999)
|
>
|
26-year career at General Electric in various management positions
|
> |
Aerojet Rocketdyne Holdings, Inc. (since 2008)
|
> |
L3 Technologies, Inc. (1997 -
June 28, 2019)
|
L3HARRIS 2021 PROXY STATEMENT 11
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES FOR
ELECTION
|
L3Harris
Committees
> Compensation
> Nominating and
Governance
|
Thomas A. Dattilo
|
Age: 69
Director since Aug. 2001
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge of complex operational, management, financial, strategic and governance issues faced by a large global
public company
> Knowledge and expertise related to global supply chain and distribution, mergers and acquisitions, lean
manufacturing and related initiatives, international operations, human resources and talent management, accounting and internal controls, and investor relations
> Experience and knowledge related to strategic planning, capital raising, mergers and acquisitions, and economic
analysis
> Public company board, governance and executive compensation experience
|
|||||
>
|
Advisor to various private investment firms (currently)
|
>
|
Chairman and Senior Advisor to Portfolio Group, a privately-held provider of outsourced financial services to automobile dealerships
specializing in aftermarket extended warranty and vehicle service contract programs (Jan. 2013 - June 2016)
|
>
|
Senior Advisor for Cerberus Operations and Advisory Company, LLC, a unit of Cerberus Capital Management, a private investment firm
(2007 - 2009)
|
>
|
Chairman, President and Chief Executive Officer of Cooper Tire & Rubber Company (“Cooper”), which specializes in design,
manufacture and sale of passenger car and truck tires (2000 - 2006)
|
>
|
President and Chief Operating Officer of Cooper (1999 - 2000)
|
>
|
Previously held senior positions with Dana Corporation, including President of its sealing products group
|
> |
Canoo Inc. (since 2020)
|
> |
Solera Holdings, Inc. (2013 - 2016)
|
L3Harris
Committees
> Ad Hoc
Technology
> Finance (Chair)
|
Roger B. Fradin
|
Age: 67
Director since Oct. 2016
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge of complex strategic, operational, financial, management and governance
issues faced by a large public company
> Knowledge of domestic and international operations, business development, strategic
planning, product development and marketing, technology innovation, corporate finance, mergers and acquisitions, human resources and talent management, accounting and internal
controls
> Entrepreneurial background, with experience in driving growth for business and entering
new markets, both organically and through acquisitions
> Knowledge and experience in capital markets and finance matters
> Public company board and governance experience
|
|||||
>
|
Chairman of Resideo Technologies, Inc., a residential comfort, thermal and security solutions provider (since 2018)
|
>
|
Chief Executive Officer of Juniper Industrial Holdings, Inc., a special purpose acquisition company focused on
industrial and aerospace acquisitions (Oct. 2019 - Jan. 2020)
|
>
|
Consultant (since 2020) and Operating Executive (Feb. 2017 - 2020) for The Carlyle Group, a global alternative
asset manager
|
>
|
17-year career in senior positions with Honeywell International Inc., a diversified technology and manufacturing
company (2000 - 2017), including:
|
■ |
Vice Chairman (2014 - 2017)
|
■ |
President and Chief Executive Officer, Automation and Controls business unit (2004 - 2014)
|
■ |
President and Chief Executive Officer, Security and Fire Solutions business unit
|
> |
Juniper Industrial Holdings, Inc. (since 2019)
|
> |
Resideo Technologies, Inc. (since 2018)
|
> |
Vertiv Holdings Co (formerly GS Acquisition Holdings Corp) (since 2018)
|
> |
Pitney Bowes Inc. (2012 - 2019)
|
> |
MSC Industrial Direct Co., Inc. (1998 - 2019)
|
12 L3HARRIS 2021 PROXY STATEMENT
|
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES FOR ELECTION
|
L3Harris
Committees
> Compensation
(Chair)
> Nominating and
Governance
|
Lewis Hay III
|
Age: 65
Director since Feb. 2002
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge of complex strategic, operational, management, regulatory, financial and governance issues
faced by a large public company
> Knowledge and expertise related to strategic planning, capital raising, financial planning, enterprise
risk management, accounting and internal controls, mergers and acquisitions, investor relations and renewable energy and other environmental matters
> Public company board, governance and executive compensation experience
|
|||||
> |
Operating Advisor for Clayton, Dubilier & Rice, LLC, a private equity investment firm (since Jan. 2014)
|
> |
14-year career in senior positions with NextEra Energy, Inc. (formerly FPL Group, Inc.) (“NextEra”), one of the nation’s leading
electricity-related services companies and the largest renewable energy generator in North America (1999 - 2013), including:
|
■ |
Chief Executive Officer of NextEra
(June 2001 - July 2012)
|
■ |
Chairman of NextEra
(Jan. 2002 - Dec. 2013)
|
> |
Anthem, Inc. (since 2013)
|
> |
Capital One Financial Corporation (2003 - 2019)
|
L3Harris
Committees
> Audit (Chair)
> Compensation
|
Lewis Kramer
|
Age: 73
Director since June 29, 2019
(2009 including L3 service)
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge and experience with complex financial, audit and accounting matters and
complex information technology and other systems
> Knowledge of capital structure and related credit and finance matters, enterprise
risk management and mergers and acquisitions
> Extensive financial and business knowledge gained while serving as an independent
auditor for numerous organizations across many industries
> Public company board, governance and executive compensation experience
> Expertise on functioning of audit committees and internal-control related matters
|
|||||
> |
Retired from Ernst & Young LLP, a multinational professional services firm, in June 2009 after a nearly 40-year career during
which he served on the firm’s U.S. Executive Board and held various senior positions including:
|
■ |
Global Client Service Partner for worldwide external audit and all other services for major clients
|
■ |
National Director of Audit Services
|
> |
Las Vegas Sands Corp. (since 2017)
|
> |
L3 Technologies, Inc. (2009 -
June 28, 2019)
|
L3HARRIS 2021
PROXY STATEMENT 13
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES
FOR ELECTION
|
L3Harris
Committees
> None
|
Christopher E. Kubasik
|
Age: 59
Director since June 29, 2019
(2018 including L3 service)
|
Employee Director
(not independent)
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Current role as our President and Chief Operating Officer and his leadership and management skills
> Knowledge and experience with complex strategic, operational, management and financial issues faced by
a large aerospace and defense company with international operations
> Knowledge and experience with complex financial and accounting functions and internal controls,
mergers and acquisitions, human resources and talent development
> Broad experience in aerospace, defense, and technology industries and with business development and
the government procurement process, as well as deep knowledge of Department of Defense customers
> Public company board and governance experience
|
|||||
> |
Vice Chair, President and Chief Operating Officer of L3Harris Technologies, Inc. (since June 29, 2019)
|
> |
Chairman, Chief Executive Officer and President of L3 Technologies, Inc. (May 2018 - June 28, 2019)
|
> |
Chief Executive Officer and President of L3 Technologies, Inc. (Jan. 2018 - April 2018)
|
> |
President and
Chief Operating Officer of L3 Technologies, Inc. (Oct. 2015 - Dec. 2017)
|
> |
13-year career in various senior executive positions with Lockheed Martin Corporation, a global aerospace, defense, security
and advanced technologies company, including 3 years as Vice Chairman, President and Chief Operating Officer
|
> |
17-year career with Ernst & Young LLP, where he was named partner in 1996
|
> |
L3 Technologies, Inc. (2018 - June 28, 2019)
|
> |
Spirit AeroSystems Holdings, Inc. (2013 - 2016)
|
L3Harris
Committees
> Compensation
> Finance
|
Rita S. Lane
|
Age: 58
Director since June 29, 2019
(2018 including L3 service)
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge and expertise related to global supply chain and distribution, manufacturing, sales
and marketing and complex information technology and related systems
> Knowledge and expertise related to strategic planning, technology innovation and research and
development
> Knowledge of complex operational, management, financial and operational issues faced by large
global companies
> Public company board and governance experience
|
|||||
> |
Vice President, Operations of Apple Inc., where she oversaw the launch of the iPad® and manufacturing of the Mac® Desktop & Accessories
product lines (July 2008 - Jan. 2014)
|
> |
Senior Vice President, Integrated Supply Chain and Chief Procurement Officer of Motorola Solutions, Inc. (June 2006 - July 2008)
|
> |
14-year career with International Business Machines Corporation serving within the Systems & Personal Computer division and as Vice
President, Integrated Supply Chain
|
> |
Served for 5 years in the U.S. Air Force, ultimately as a Captain
|
> |
Amphenol Corporation (since 2020)
|
> |
Sanmina Corporation (since 2016)
|
> |
Signify N.V. (since 2016)
|
> |
L3 Technologies, Inc. (2018 - June 28, 2019)
|
14 L3HARRIS 2021 PROXY STATEMENT
|
|
PROPOSAL 1: ELECTION OF DIRECTORS NOMINEES FOR ELECTION
|
L3Harris
Committees
> Ad
Hoc Technology
> Nominating
and
Governance
|
Robert B. Millard
|
Age: 70
Director since June 29, 2019
(1997 including L3 service)
|
Lead Independent
Director
(since June 29, 2019)
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge and expertise related to corporate
finance, capital raising, financial planning, accounting, mergers and acquisitions, and economic analysis
> Experience and knowledge related to strategic
planning, product development, technology innovation, and talent management
> Public company board, governance and executive
compensation experience
|
|||||
> |
Chairman of the Massachusetts Institute of Technology Corporation (2014-2020; now Chairman Emeritus)
|
> |
Held various positions in business, including:
|
■ |
Managing Director at Lehman Brothers and its predecessors
(1976 - 2008)
|
■ |
Chairman of Realm Partners L.L.C. (2009 - 2014)
|
> |
Evercore Inc. (since 2012)
|
> |
L3 Technologies, Inc. (1997 - June 28, 2019)
|
L3Harris
Committees
> Ad Hoc Technology
> Nominating and Governance
(Chair)
|
Lloyd W. Newton
|
Age: 78
Director since June 29, 2019
(2012 including L3 service)
|
Independent Director
|
||
Qualifications, Skills and Attributes Valuable to L3Harris
|
|||||
> Knowledge and expertise in complexities of U.S. military and defense industry and
extensive background in U.S. Department of Defense operations and human resources
> Experience addressing complex organizational and strategic issues, managing
significant operating budgets and handling legislative and public affairs
> Knowledge of, and experience with, large aerospace and defense government projects
and with the procurement process, including with major U.S. Department of Defense programs, and with complex operations, business development and technology-driven business
environments
> Public company board and governance experience
|
> |
Executive Vice President, Pratt & Whitney Military Engines, an aerospace manufacturer (Sept. 2000 - March 2006)
|
> |
Four-Star General and Commander, U.S. Air Force (Retired), retired in August 2000, after 34 years of service. Responsible
for the recruiting, training and education of all Air Force personnel from 1997 until his retirement. 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
|
> |
L3 Technologies, Inc. (2012 - June 28, 2019)
|
> |
Torchmark Corporation (2006 - 2018)
|
L3HARRIS 2021
PROXY STATEMENT 15
|
PROPOSAL 1: ELECTION OF DIRECTORS DIRECTOR NOMINATION PROCESS
|
> |
The shareholder or shareholder group must have owned 3% or more of the outstanding shares of our common stock
continuously for at least three years.
|
> |
The maximum number of proxy access nominees permitted is the greater of two or 20% of our Board (rounded down to the
nearest whole number).
|
> |
The shareholder(s) and the nominee(s) must satisfy additional eligibility and procedural requirements set forth in
Article II, Section 11 of our By-Laws, including that a proxy access nomination notice must be delivered to us within a prescribed time period in advance of our Annual
Meeting of Shareholders (see page 94 for the specific timeframe that applies to nominations for our 2022 Annual Meeting of Shareholders) and that all nominees and
nominating shareholder(s) provide certain information, representations and agreements to us.
|
16 L3HARRIS 2021 PROXY
STATEMENT
|
|
PROPOSAL 1: ELECTION OF DIRECTORS
BOARD REFRESHMENT POLICY
|
> |
William M. Brown, Chair and Chief Executive Officer (formerly Harris’ Chairman, President and Chief Executive
Officer);
|
> |
Christopher E. Kubasik, Vice Chair, President and Chief Operating Officer (formerly L3’s Chairman, Chief Executive
Officer and President);
|
> |
Five independent directors from the Harris Board (Sallie B. Bailey, Peter W. Chiarelli, Thomas A. Dattilo, Roger B.
Fradin and Lewis Hay III); and
|
> |
Five independent directors from the L3 Board (Thomas A. Corcoran, Lewis Kramer, Rita S. Lane, Robert B. Millard and
Lloyd W. Newton).
|
L3HARRIS 2021 PROXY STATEMENT 17
|
>
|
Board composition
|
>
|
Director independence
|
>
|
Selection of Chair
|
>
|
Designation and responsibilities of Lead Independent Director
|
>
|
Selection of Board nominees
|
>
|
Board membership criteria
|
>
|
Majority voting for directors
|
>
|
Director retirement policy
|
>
|
Other directorships
|
>
|
Director compensation
|
>
|
Stock ownership guidelines
|
>
|
Prohibitions on hedging
|
>
|
Prohibition on margin accounts and pledging transactions
|
>
|
Meeting schedules and agenda
|
>
|
Executive sessions of independent directors
|
>
|
Access to management
|
>
|
Board committees and membership
|
>
|
Board and director responsibilities
|
>
|
Director orientation and continuing education
|
>
|
CEO performance evaluation and compensation
|
>
|
Succession planning
|
>
|
Board and committee self-evaluations
|
> |
overseeing the conduct of our business and reviewing and approving our long-term strategy, key strategic and financial objectives and
operating plans and other significant actions;
|
> |
overseeing the management of our business and other enterprise risks and our enterprise risk management process;
|
> |
establishing and maintaining an effective governance structure, including appropriate board composition;
|
> |
planning for board succession and appointing directors to fill Board vacancies between annual meetings of shareholders;
|
> |
selecting our CEO and COO, electing our corporate officers, evaluating the performance of our CEO, COO and other executive officers,
planning for CEO succession and monitoring management’s succession planning for other executive officers;
|
> |
determining CEO and COO compensation and overseeing the determination of other executive officer compensation;
|
> |
overseeing our ethics and compliance programs and periodically assessing our culture; and
|
> |
overseeing our systems of control which promote accurate and timely reporting
of financial information to shareholders and our processes for maintaining the integrity of our financial statements and other public disclosures.
|
18 L3HARRIS 2021 PROXY
STATEMENT
|
|
CORPORATE GOVERNANCE OUR BOARD'S ROLE AND RESPONSIBILITIES
|
>
|
Full Board – elements of risk related to Company-wide and business unit
annual operating plans, three-year strategic plans, cybersecurity, merger, acquisition and portfolio shaping opportunities, market environment updates, regular
financial and operations updates and other strategic discussions.
|
>
|
Audit Committee – elements of risk related to financial reporting,
internal audit, internal control over financial reporting, auditor independence and related areas of accounting, taxation, law and regulation.
|
>
|
Compensation Committee – elements of risk related to compensation
policies and practices and talent management and succession planning.
|
>
|
Finance Committee – elements of risk related to liquidity, financial
arrangements, capital structure, ability to access capital markets and the financial and investment aspects of our defined contribution and defined benefit plans.
|
>
|
Nominating and Governance Committee – elements of risk related to
corporate governance issues and various aspects of U.S. and international regulatory compliance, ethics, business conduct, social responsibility, environmental,
health and safety matters and export/import controls.
|
L3HARRIS 2021 PROXY STATEMENT 19
|
CORPORATE GOVERNANCE OUR BOARD'S ROLE AND RESPONSIBILITIES
|
> |
consideration and assessment of key leadership talent throughout our Company;
|
> |
our talent strategy for critical positions, including roles for which it may be necessary to consider external
candidates; and
|
> |
contingency plans in the event the CEO or another executive officer unexpectedly is unable to serve for any
reason, including death or disability.
|
>
|
Respect in the workplace
|
>
|
Health and safety
|
>
|
Privacy of personally identifiable information
|
>
|
Avoiding conflicts of interest
|
>
|
Working with governments
|
>
|
Commitment to quality
|
>
|
Preventing bribery and corruption
|
>
|
Business courtesies
|
>
|
Fair competition
|
>
|
Exports, imports and trade compliance
|
>
|
Confidential information and intellectual property
|
>
|
Material non-public information and insider trading
|
>
|
Communicating L3Harris information
|
>
|
Social media
|
>
|
Business records and record management
|
>
|
Protecting L3Harris and customer assets
|
>
|
Political activities and lobbying
|
>
|
Human rights
|
>
|
Corporate responsibility
|
20 L3HARRIS 2021 PROXY STATEMENT
|
|
CORPORATE GOVERNANCE OUR BOARD'S ROLE AND RESPONSIBILITIES
|
L3HARRIS
2021 PROXY STATEMENT 21
|
CORPORATE GOVERNANCE STOCK OWNERSHIP GUIDELINES FOR NON-EMPLOYEE DIRECTORS
|
> |
Our non-employee directors are expected to own L3Harris stock or stock equivalent units having a
minimum value equal to five times the annual cash retainer for service as a member of our Board.
|
> |
Directors are expected to meet these levels within five years after election or appointment to our
Board (or five years from the closing of the Merger, in the case of non-employee directors designated by Harris or L3 in connection with the Merger).
|
> |
a combined position of Chair of the Board (“Chair”) and CEO;
|
> |
a Vice Chair of the Board (“Vice Chair”);
|
> |
a Lead Independent Director with well-defined duties that support our Board’s oversight
responsibilities;
|
> |
a robust committee structure comprised solely of independent directors; and
|
> |
engaged Board members who are independent (other than our current Chair and CEO and our
current Vice Chair, President and COO) and who conduct candid and constructive discussions and deliberations.
|
22
L3HARRIS 2021 PROXY STATEMENT
|
|
CORPORATE
GOVERNANCE BOARD LEADERSHIP STRUCTURE
|
> |
the Lead Independent Director structure;
|
> |
the independence of each director, other than Messrs. Brown and Kubasik;
|
> |
the ability of independent directors to participate in the agenda-setting process for our Board
and committee meetings;
|
> |
regularly scheduled executive sessions of independent directors; and
|
> |
our directors’ access to management.
|
> |
Mr. Brown will serve as our Chair and CEO through the second anniversary of the Merger (June 29,
2021), then step down as CEO and continue to serve for one additional year as Chair. On the third anniversary of the Merger (June 29, 2022), he will
retire as an officer and employee of L3Harris and resign as a member of our Board.
|
> |
Mr. Kubasik will serve as Vice Chair, President and COO through the second anniversary of the
Merger (June 29, 2021, or, if earlier, the date that Mr. Brown ceases to serve as our CEO), at which point he will become our CEO. On the third
anniversary of the Merger (June 29, 2022), Mr. Kubasik will become our Chair.
|
L3HARRIS
2021 PROXY STATEMENT 23
|
CORPORATE GOVERNANCE BOARD LEADERSHIP STRUCTURE
|
|
Role of Lead Independent Director
When our Chair is not an independent director, our independent directors (by
affirmative majority vote) designate one independent Board member to serve as Lead Independent Director. Service as Lead Independent Director
generally is for a one-year term commencing on the date of our Annual Meeting of Shareholders. Until the third anniversary of the completion of the
Merger, our Lead Independent Director must be a director designated by L3 prior to the Merger, who may be removed as Lead Independent Director prior
to that anniversary only with the approval of at least 75% of the other then-serving independent directors.
The responsibilities and authority of our Lead Independent
Director include:
|
|
||
|
> Presiding at all meetings of our Board at which our Chair is
not present, including executive sessions of our independent directors;
> Serving as liaison between our Chair and our
independent directors;
> Approving the information sent to our Board and the
meeting agendas for our Board;
> Approving our Board meeting schedules to assure
sufficient time for discussion of all agenda items;
> Calling meetings of our independent directors;
> Being available for consultation and direct
communication with major shareholders, if they request and consistent with our policies regarding shareholder communications;
> Providing timely feedback from executive sessions of
our independent directors to our CEO or other members of senior management;
|
|
> Playing
a key role in the annual CEO and COO evaluation process, together with the Chair of our Compensation Committee (or the Chair of our Nominating
and Governance Committee if the same individual is serving as Lead Independent Director and Chair of our Compensation Committee);
> Playing a key role in our Board’s annual
self-evaluation process and related matters, together with the Chair of our Nominating and Governance Committee (or the Chair of our
Compensation Committee if the same individual is serving as Lead Independent Director and Chair of our Nominating and Governance Committee);
> Guiding and playing a key role in the CEO succession
planning process; and
> Other responsibilities and authority as our Board may
determine from time to time.
|
|
|
The designation of a Lead Independent Director is not intended to inhibit communications among our directors or
between any of them and our Chair.
|
|
24
L3HARRIS 2021 PROXY STATEMENT
|
|
CORPORATE GOVERNANCE BOARD COMMITTEES
|
Audit Committee
|
Chair
Lewis Kramer
|
Members
Sallie B. Bailey
Peter W. Chiarelli
Thomas A. Corcoran
|
Key responsibilities
>
|
Assisting our Board in overseeing, among other things: the quality
and integrity of our financial statements; our compliance with relevant legal and regulatory requirements; our internal control over
financial reporting; our independent registered public accounting firm’s qualifications and independence; and the performance of our
internal audit function and our independent registered public accounting firm.
|
>
|
Directly appointing, compensating, retaining, terminating and overseeing the work
of our independent registered public accounting firm.
|
>
|
Pre-approving all audit services, internal control-related services and non-audit
services to be provided by our independent registered public accounting firm.
|
>
|
Reviewing and discussing with our independent registered public accounting firm,
our internal audit department and our management any major issues regarding accounting principles and financial statement
presentations, the effect of regulatory
|
>
|
Discussing guidelines and policies governing management’s risk assessment process.
|
>
|
Reviewing and discussing our earnings press releases, the types of financial
information and earnings guidance we provide, and the types of presentations made by us to analysts and rating agencies.
|
>
|
Reviewing and discussing quarterly and year-end operating results
with our independent registered public accounting firm, our internal audit department and our management; reviewing our interim
financial statements prior to their inclusion in our Form 10-Q filings; and
recommending to our Board the inclusion of our annual financial statements in our Annual Reports on Form 10-K.
|
|
>
|
is independent within the meaning of NYSE listing standards, applicable laws and rules and our
Director Independence Standards; and
|
>
|
satisfies the “financial literacy” requirements of NYSE listing standards and has “accounting or
related financial management expertise.”
|
|
L3HARRIS 2021
PROXY STATEMENT 25
|
CORPORATE GOVERNANCE BOARD COMMITTEES
|
Compensation
Committee
|
Chair
Lewis Hay III
|
Members
Thomas A. Dattilo
Lewis Kramer
Rita S. Lane
|
➢
|
Reviewing management training, development, organizational structure and
succession plans, and recommending to our Board individuals for election as officers, including executive officers.
|
➢
|
Overseeing and reviewing our overall compensation philosophy, establishing
the compensation and benefits of our executive officers and administering our equity-based compensation plans.
|
➢
|
Reviewing and approving corporate goals and objectives relevant to the
compensation of our CEO and COO, evaluating our CEO’s and COO’s respective performance against those goals and objectives, and
together with all independent directors of our Board, determining and approving annual salary, cash and equity incentives and
other executive benefits for our CEO and COO based on this evaluation.
|
➢
|
Reviewing and approving the annual salary, cash and equity incentives and
other benefits for our other executive officers.
|
➢
|
Reviewing and approving employment, separation, severance and change in
control agreements and plans and terms and any special arrangements in the event of termination of employment, death or
retirement of executive officers.
|
➢
|
Determining stock ownership guidelines for our CEO, COO, executive officers
and other corporate officers and overseeing compliance with such guidelines.
|
➢
|
Overseeing regulatory compliance with applicable executive compensation
laws, rules and regulations and with NYSE listing standards regarding shareholder approval of equity compensation plans.
|
➢
|
Reviewing, in consultation with our Nominating and Governance Committee,
responses to shareholder proposals regarding matters falling within the responsibilities and duties of our Compensation
Committee.
|
➢
|
Reviewing management’s assessment of the effect on our business of risks
from our compensation policies and practices and periodically discussing such matters with management.
|
➢
|
Reviewing our diversity and inclusion efforts.
|
➢
|
Reviewing and discussing the “Compensation Discussion and Analysis” section
of our proxy statement with management and making a recommendation to our Board on the inclusion of such section in our proxy
statement.
|
➢
|
Retaining and terminating independent executive compensation consultants,
including approving such consultants’ fees and other retention terms.
|
|
|
Finance
Committee
|
Chair
Roger B.
Fradin
|
Members
Sallie B. Bailey
Thomas A. Corcoran
Rita S. Lane
|
>
|
Periodically reviewing our financial
position, capital structure, working capital, capital transactions, equity investments, debt ratings and other
matters relating to our financial condition.
|
>
|
Reviewing our dividend policy, capital asset plan and share
repurchase policy and making recommendations to our Board relating to such policies.
|
>
|
Overseeing the financial and investment policies and objectives
applicable to our material benefit plans.
|
|
26
L3HARRIS 2021 PROXY STATEMENT
|
|
CORPORATE GOVERNANCE BOARD COMMITTEES
|
|
Nominating and
Governance
Committee
|
Chair
Lloyd
W. Newton
|
Members
Thomas A. Dattilo
Lewis Hay III
Robert B. Millard
|
>
|
Identifying and recommending qualified
individuals for election or re-election to our Board and filling vacancies on our Board.
|
>
|
Adopting a policy and procedures for
considering director candidates recommended by our shareholders.
|
>
|
Developing, reviewing and
recommending to our Board our Corporate Governance Guidelines and monitoring trends and evolving practices
in corporate governance.
|
>
|
Periodically assessing the adequacy
of our corporate governance framework, including our Restated Certificate of Incorporation and By-Laws,
and recommending changes to our Board for approval, as appropriate.
|
>
|
Developing, reviewing and
recommending to our Board director compensation and benefit plans.
|
>
|
Reviewing, and making recommendations
to our Board concerning, the structure, size, composition and operation of our Board and its committees,
including recommending committee assignments.
|
>
|
Developing, reviewing and
recommending to our Board the meeting schedule for our Board and its committees, in consultation with our
Lead Independent Director and each committee chair.
|
>
|
Reviewing, and approving or ratifying,
related person transactions in accordance with relevant policies.
|
>
|
Reviewing and making recommendations to
our Board regarding shareholder proposals and a process for shareholder communications with our Board.
|
>
|
Facilitating our Board’s annual
self-evaluation of its performance and effectiveness.
|
>
|
Retaining and terminating independent
director compensation consultants, including approving such consultants’ fees and other retention terms.
|
>
|
Assisting our Board in overseeing our
ethics and business conduct program consistent with sound, ethical business practices and legal requirements.
|
>
|
Assisting our Board in overseeing our
environmental, health and safety programs and charitable, civic, educational and philanthropic activities.
|
>
|
Reviewing and taking appropriate action
concerning strategic issues and trends relating to corporate citizenship and responsibility, including social
and political trends and public policy issues that may have an impact on our operations, financial performance
or public image.
|
|
|
Ad Hoc Technology
Committee
|
Chair
Peter W. Chiarelli
|
Members
Roger B. Fradin
Robert B. Millard
Lloyd W. Newton
|
|
L3HARRIS 2021 PROXY STATEMENT 27
|
CORPORATE GOVERNANCE OTHER GOVERNANCE MATTERS
|
Board / Committee
|
Number of Meetings Held
|
Average Meeting Attendance
|
Board of Directors
|
10 |
100%
|
Audit Committee
|
8 |
100%
|
Compensation Committee
|
6 |
100%
|
Finance Committee
|
2 |
100%
|
Nominating and Governance Committee
|
5 |
100%
|
Ad Hoc Technology Committee
|
2 |
100%
|
28
L3HARRIS 2021 PROXY STATEMENT
|
|
|
CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS
|
>
|
Board member: $130,000 annual cash retainer and $165,000 annual
equity-based retainer in the form of director share units (described in more detail below)
|
>
|
Lead Independent Director: $35,000 annual cash retainer
|
>
|
Chair of Audit Committee: $30,000 annual cash retainer
|
>
|
Chair of any other committee: $20,000 annual cash retainer
|
|
L3HARRIS 2021 PROXY STATEMENT 29
|
CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS
|
30 L3HARRIS 2021 PROXY STATEMENT
|
|
|
CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS
|
Non-Employee Director |
Fees Earned
or Paid in
Cash
$(1)
|
Stock
Awards
$(2)
|
Option
Awards
$(3)
|
Change in
Pension Value and
Nonqualified
Deferred
Compensation
Earnings
$(4)
|
All Other
Compensation
$(5)
|
Total
$
|
||||||||||||||||||
Sallie B. Bailey
|
$
|
130,000
|
$
|
164,980 |
$
|
0
|
$
|
0
|
$
|
7,500
|
$
|
302,480
|
||||||||||||
Peter W. Chiarelli
|
$
|
150,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
314,980
|
||||||||||||
Thomas A. Corcoran
|
$
|
130,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
294,980
|
||||||||||||
Thomas A. Dattilo
|
$
|
130,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
10,000
|
$
|
304,980
|
||||||||||||
Roger B. Fradin
|
$
|
150,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
10,000
|
$
|
324,980
|
||||||||||||
Lewis Hay III
|
$
|
150,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
314,980
|
||||||||||||
Lewis Kramer
|
$
|
160,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
324,980
|
||||||||||||
Rita S. Lane
|
$
|
130,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
10,000 |
$
|
304,980
|
||||||||||||
Robert B. Millard
|
$
|
165,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
329,980
|
||||||||||||
Lloyd W. Newton
|
$
|
150,000
|
$
|
164,980
|
$
|
0
|
$
|
0
|
$
|
10,000
|
$
|
324,980
|
(1)
|
Reflects
total cash compensation earned in fiscal 2020 for Board, committee, committee chair and
Lead Independent Director retainers.
|
(2)
|
Reflects the aggregate grant date fair
value computed in accordance with the Financial Accounting Standards Board’s Accounting
Standards Codification Topic 718, Compensation — Stock Compensation (“ASC 718”) with
respect to director share units awarded in fiscal 2020.
|
(3)
|
Stock options were not an element of
compensation for our non-employee directors, and consequently, non-employee directors held
no stock options as of January 1, 2021.
|
(4)
|
There were no above-market or
preferential earnings in the L3Harris Director Deferred Compensation Plan, which became
effective December 31, 2019.
|
(5)
|
As noted above, our non-employee
directors were eligible to participate in our foundation’s charitable gift matching
program up to an annual maximum of $10,000 per director, and the amounts shown reflect
charitable gift matching payments made during fiscal 2020. Although directors participated
on the same basis as our employees, SEC rules require disclosure of the amount of a
director’s participation in a gift matching program.
|
|
L3HARRIS 2021 PROXY
STATEMENT 31
|
|
Our Board unanimously
recommends voting
FOR
approval of the
compensation
of our
named
executive officers
as disclosed in this
proxy
statement.
|
|
|
> Executive compensation decisions were made by independent members of our Board and
Compensation Committee.
> Executive compensation for fiscal 2020 reflected pay-for-performance
alignment, with solid fiscal 2020 financial results and solid 3-year and strong 5-year
total shareholder return (“TSR”) results.
|
|
> |
Directly align the interests of our
executives with those of our shareholders.
|
> |
Provide competitive compensation and
benefits to attract, motivate and retain executives that drive our desired business results.
|
> |
Ensure that a significant portion
of compensation is at-risk and based on company and personal performance so as to
motivate achievement of our financial goals and strategic objectives.
|
>
|
Align an executive’s realized pay with
his or her performance through above-target compensation for above-target performance and
below-target compensation for below-target performance.
|
|
32
L3HARRIS 2021 PROXY STATEMENT
|
|
|
PROPOSAL 2: TO APPROVE, IN AN ADVISORY VOTE, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
|
L3HARRIS 2021 PROXY STATEMENT 33
|
Executive Summary | 34 |
Our
Executive Compensation Philosophy and Practices
|
38
|
Overview of Our Main Executive Compensation Elements
|
43
|
Executive Compensation Decisions for Fiscal
2020
|
46
|
Employment Agreements |
52
|
Other Compensation Elements |
55
|
Other Compensation Policies |
58
|
34 L3HARRIS 2021 PROXY
STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE SUMMARY |
William M. Brown
|
Christopher E. Kubasik
|
Jesus Malave, Jr.
|
Todd W. Gautier
|
Edward J. Zoiss
|
Chair and CEO
|
Vice Chair,
President and COO
|
Senior Vice President
and Chief Financial
Officer
|
President, Aviation
Systems
|
President, Space and
Airborne Systems
|
> |
Executing seamless integration of L3
and Harris, including achieving at least $500 million in gross cost synergies from the
Merger by the end of 2021;
|
> |
Driving flawless execution and margin
expansion through our e3 (excellence everywhere every day) operational excellence program;
|
|
|
L3HARRIS 2021 PROXY STATEMENT 35
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE SUMMARY
|
> |
Growing revenue through a
well-aligned business portfolio and investments in innovation;
|
> |
Maximizing cash flow with
shareholder friendly capital deployment; and
|
> |
Reshaping our portfolio to
focus on high margin, high growth businesses.
|
|
(in millions, except per share
amounts)
|
Fiscal 2020
($)
|
Pro Forma 2019
($)***
|
Fiscal Transition
Period ($)
|
|||||||||
Revenue
|
$
|
18,194
|
$
|
18,097 |
$
|
9,263
|
||||||
Net income
|
$
|
1,086
|
$
|
1,650 |
$ |
834
|
||||||
Adjusted EBIT*
|
$
|
3,280
|
$
|
3,039 |
$ |
1,601
|
||||||
Operating cash
flow
|
$
|
2,790
|
$
|
1,655 |
$ | 939 | ||||||
Adjusted free
cash flow*
|
$
|
2,686
|
$
|
2,095 |
$ |
1,449
|
||||||
Cash used to
repurchase shares of our common stock
|
$
|
2,290
|
$
|
1,500 |
$ |
1,500
|
||||||
Annualized cash
dividend rate per share**
|
$
|
3.40
|
$
|
2.87
|
$ |
3.00
|
*
|
See Appendix A
for reconciliations of GAAP to non-GAAP financial measures.
|
**
|
In January
2021, our Board increased our quarterly cash dividend rate from $.85 per share to
$1.02 per share, for an annualized cash dividend rate of $4.08 per share.
|
***
|
Refer to
supplemental unaudited pro forma condensed combined income statement information for
the four quarters ended January 3, 2020 prepared in accordance with the requirements
of Article 11 of Regulation S-X included in L3Harris' Annual Report on Form 10-K for
the fiscal year ended January 1, 2021.
|
■ |
L3Harris Technologies, Inc.
|
■ |
S&P 500
|
■ |
Compensation Comparison Peer Group,
Median
|
(1)
|
TSR results reflect reinvestment of
dividends. As noted above, the closing of the Merger occurred on June 29, 2019, and our TSR
results reflect L3Harris results for fiscal 2020 and our fiscal transition period and Harris
standalone results for prior periods.
|
36 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE SUMMARY
|
|
L3HARRIS 2021 PROXY STATEMENT 37
|
COMPENSATION DISCUSSION AND
ANALYSIS OUR EXECUTIVE
COMPENSATION PHILOSOPHY AND PRACTICES
|
|
|
Align with
Shareholders’ Interests
We believe an executive’s interests are
directly aligned with our shareholders’ interests when our compensation programs appropriately
balance short- and long-term financial performance, create a “pay for profitable growth”
environment, are impacted by our stock price performance and require meaningful ownership of our
stock.
|
|
|
|
Be Competitive at Target Performance
Level
We believe an executive’s total compensation should be
competitive at the target performance level to motivate performance and to attract, retain,
develop and reward executives who possess the abilities and skills to build long- term
shareholder value.
|
|
|
|
|
|
|
|
|
|
Motivate Achievement of Financial Goals
and Strategic Objectives
We believe an effective way to incentivize an executive to
create long-term shareholder value is to make a significant portion of overall compensation
dependent on the achievement of our short- and long-term financial goals and strategic
objectives and on the value of our stock.
|
|
|
|
Align Realized Pay with
Performance
We believe that although an executive’s
total compensation should be tied to achievement of financial goals and strategic objectives and
should be competitive at the target performance level, above-target performance should be
appropriately rewarded and there should be downside risk of below-target compensation if we do
not achieve our financial goals and strategic objectives.
|
|
38 L3HARRIS 2021 PROXY
STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION
PHILOSOPHY AND PRACTICES
|
|
|
|
|
|
|
|
|
WHAT WE DO
|
|
|
|
WHAT WE DON’T DO
|
|
|
>
Place executive compensation decisions in the hands
of independent directors
> Retain an
independent executive compensation consulting firm
> Regularly
review and evaluate plans for management development, succession and diversity
> Periodically
review and change composition of compensation comparison peer group, as appropriate
> Make a
significant portion of each executive’s overall compensation opportunity equity-based
to establish a strong link between compensation and our stock price performance and to
provide rewards in alignment with shareholder returns
> Align
performance share unit award payouts with our stock price performance through a
relative TSR adjustment metric
> Have
meaningful stock ownership guidelines to maintain alignment of executives’ interests
with those of our shareholders
> Hold annual
“say-on-pay” advisory vote and seek input of large shareholders on key aspects of our
executive compensation program
> Pay cash
severance under executive change in control severance agreements or plans only on a
“double trigger” basis
> Have a
“clawback” policy to recover cash and equity incentive payments from executives if our
financial statements are restated due to errors, omissions or fraud
> Provide for
accelerated vesting of equity-based compensation granted after fiscal 2019 only on a
“double trigger” basis
> Maintain a
12-month minimum vesting period for annual cycle awards of equity-based compensation,
except in the case of death, disability or a qualifying termination after a change in
control
> Require
executives to agree to non-competition, non-solicitation, customer non-interference
and other covenants as part of equity-based compensation awards
> Annually
assess whether our compensation strategies, plans, programs, policies or procedures
encourage undertaking unnecessary or excessive risks reasonably likely to have a
material adverse effect on us
|
|
|
|
>
Provide excessive perquisites
>
Permit repricing or back-dating of options
>
Provide excise tax gross-ups under executive
change in control severance agreements or plans
> Pay dividend equivalents to executive officers on performance share unit
and restricted stock unit awards (except to extent earned at end of the applicable
period)
>
Permit directors, executives or other employees to
engage in short sales or enter into hedging, puts, calls or other “derivative”
transactions with respect to our securities
>
Permit directors or executives to hold or
purchase our stock on margin or in a margin account or otherwise pledge our stock as
collateral for margin accounts, loans or any other purpose
>
Provide guaranteed incentive payouts over
multi-year periods
|
|
|
L3HARRIS 2021 PROXY STATEMENT 39
|
COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES
|
40 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND
ANALYSIS OUR
EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES
|
WHAT WE DO PRIOR TO OR EARLY IN A NEW
FISCAL YEAR
|
||||||
|
Consider program
design changes
|
|
|
|
Determine what changes, if any, should be
made to the executive compensation program for the new fiscal year (after receiving input from
our CEO and independent compensation consultant, and an assessment of compensation trends and
competitive market data).
|
|
Set target
compensation
values
|
The process for setting target compensation
values includes a review of:
> the executive’s three-year compensation history, including
base salary level and annual cash incentive and equity
awards;
> the types and levels of other benefits available to the
executive, such as change in control severance agreements; and
> compensation comparison peer group data or broad
compensation market data, including surveys.
|
|||||
Establish
performance
measures
and targets
and individual
performance
objectives
|
Establish:
> short- and long-term financial performance
measures and their relative weighting and associated targets for performance-based, at-risk
elements of compensation for the new fiscal year; and
> individual performance objectives for each
executive and for his or her business unit or organization.
These measures, weightings and targets and
performance objectives are intended to align with our Board-approved annual operating plan and
long-term strategic plan and create a “pay for profitable growth environment” and thereby
encourage and reward the creation of sustainable, long-term value for our shareholders.
|
|||||
Make equity
grants
|
Annual equity award grants to executive
officers are made at Board or Compensation Committee meetings, the dates for which usually are
set one year or more in advance, and annual equity award grants to our other eligible employees
typically are made on the same date. We do not time equity grants to take advantage of
information, either positive or negative, about us that has not been publicly disclosed.
In special circumstances, such as new hires
or promotions or for retention or recognition, grants may occur outside of the typical cycle.
|
|||||
|
WHAT WE DO AFTER THAT
FISCAL YEAR ENDS
|
|
||||
Conduct
performance
reviews
|
> For our CEO and COO, the
independent directors of our Board conduct a performance review, evaluating such
executive officer’s achievement of objectives established early in the fiscal year, other
accomplishments, overall company performance and such executive officer’s self- evaluation of
performance for the fiscal year. This review occurs in executive session, under the leadership
of our Compensation Committee Chair and without our CEO, COO or other members of management
present.
>
For our other executive officers, our CEO, with input
from our COO, provides our Compensation Committee with specific compensation recommendations
based on a review and assessment of each executive officer’s performance, including
achievement of objectives established early in the fiscal year for the executive and his or
her business unit or organization, contribution to company performance and other
accomplishments.
|
|||||
Determine
payouts
|
Payouts of performance-based, at-risk elements of compensation to
executives are determined based on performance reviews relative to pre-determined objectives and
formulaic calculations of our financial results for the fiscal year against pre-determined
targets, typically after audited financial statements become available after the fiscal year
end.
|
|
L3HARRIS 2021 PROXY STATEMENT 41
|
COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES
|
Eaton Corporation plc
|
Lockheed Martin
Corporation
|
Rockwell Automation, Inc.
|
Emerson Electric Co.
|
Motorola Solutions, Inc.
|
Spirit AeroSystems
Holdings, Inc.
|
General Dynamics
Corporation
|
Northrop Grumman
Corporation
|
Textron Inc.
|
Honeywell International
Inc.
|
Parker Hannifin
Corporation
|
United Technologies
Corporation
|
Leidos Holdings, Inc.
|
Raytheon Company
|
42 L3HARRIS 2021 PROXY
STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS OVERVIEW OF OUR MAIN EXECUTIVE
COMPENSATION ELEMENTS
|
>
|
base salary;
|
>
|
annual cash incentive award
compensation; and
|
>
|
equity-based long-term
incentive compensation (for fiscal 2020, performance share units, stock options and restricted
stock units).
|
>
|
our performance against
specific pre-determined financial performance measures; and
|
>
|
named executive officer
performance against pre-determined individual objectives and contribution to our overall
results.
|
>
|
the upside potential of
above-target payouts if our financial performance is above target; and
|
>
|
the downside risk of
below-target payouts if our financial performance is below target.
|
|
L3HARRIS 2021 PROXY STATEMENT 43
|
COMPENSATION DISCUSSION AND ANALYSIS OVERVIEW OF OUR MAIN EXECUTIVE COMPENSATION ELEMENTS
|
>
|
Performance share units. Performance share unit awards motivate our executives
to achieve our multi-year financial and operating goals because the number of units ultimately
earned depends on how we perform, generally over a three-year performance period, against
financial performance measures and their relative weighting and associated targets established
early in the first fiscal year of each performance period. As with all forms of equity-based
compensation, the value of performance share units also is impacted directly by increases or
decreases in our stock price.
|
>
|
Stock options. Stock options motivate our executives to increase shareholder
value because the options have value, and compensation can be realized, only to the extent the
price of our common stock increases between the grant date and the date of exercise.
|
>
|
Restricted stock units. Restricted stock unit awards primarily facilitate
retention and succession planning because they carry restrictions that typically expire only if
the executive is still employed with us at the end of a three-year period.
|
44 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND
ANALYSIS OVERVIEW
OF OUR MAIN EXECUTIVE COMPENSATION ELEMENTS
|
|
L3HARRIS 2021 PROXY STATEMENT 45
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE COMPENSATION DECISIONS FOR FISCAL 2020
|
>
|
Exercise price equal to the closing price of our common
stock on the grant date;
|
>
|
Vesting in equal installments of one-third each on the
first, second and third anniversary of the grant date, subject to the recipient’s
continued employment through the applicable vesting date (except in the case of
performance stock options granted in our fiscal transition period, which have “cliff”
vesting of 100% on June 29, 2022, the third anniversary of the Merger, reflecting
alignment with the performance metric for those options);
|
>
|
Expiration 10 years from the grant date; and
|
>
|
“Double trigger” accelerated vesting (for options granted
after fiscal 2019; accelerated vesting upon a change in control or other events for
options granted through fiscal 2019).
|
Fiscal Transition Period
Annual Base Salary Level
|
Fiscal 2020 Annual
Base Salary Level
|
% Change
|
Reason for Change
|
||||||||||
Mr. Brown
|
$
|
1,450,000
|
$
|
1,500,000
|
3.4%
|
|
merit
|
||||||
Mr. Kubasik
|
$
|
1,450,000
|
$
|
1,500,000
|
3.4%
|
|
merit
|
||||||
Mr. Malave
|
$
|
625,000
|
$
|
700,000
|
12%
|
|
merit/market
|
||||||
Mr. Gautier
|
$
|
600,000
|
$
|
620,000
|
3.3%
|
merit
|
|||||||
Mr. Zoiss
|
$
|
600,000
|
$
|
620,000
|
3.3%
|
merit
|
46 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND
ANALYSIS EXECUTIVE
COMPENSATION DECISIONS FOR FISCAL 2020
|
|
Fiscal 2020 Cash
Incentive Target Value
|
Fiscal Transition
Period Cash
Incentive Target Value
(as % of Base Salary)
|
Fiscal 2020 Cash
Incentive Target Value
(as % of Base Salary)
|
% Change
|
Reason for Change
|
|||||||||||||||
Mr. Brown
|
$
|
2,580,000
|
172%
|
|
172%
|
|
—
|
n/a
|
||||||||||||
Mr. Kubasik
|
$
|
2,580,000
|
172%
|
|
172%
|
|
—
|
n/a
|
||||||||||||
Mr. Malave
|
$
|
700,000
|
100%
|
|
100%
|
|
—
|
n/a
|
||||||||||||
Mr. Gautier
|
$
|
620,000
|
100%
|
100%
|
|
—
|
n/a
|
|||||||||||||
Mr. Zoiss
|
$
|
620,000
|
100%
|
|
100%
|
|
—
|
n/a
|
40%
EARNINGS BEFORE INTEREST
AND TAXES (EBIT)
|
40%
FREE CASH FLOW
(FCF)
|
20%
REVENUE
|
Our ability to generate profits from
revenue: can be increased by efficient management and operation of our business, including
reducing costs, improving procurement and sourcing practices and achieving operational
excellence.
|
The free cash flow (or cash flow from
operations less net capital expenditures) we generate can be increased by accelerating cash
receipts, improving payment terms, reducing inventory, increasing prices and reducing
expenses.
|
What we generate from normal
business activities: can be increased by improving market share, introducing new products,
entering new markets, enhancing execution and pricing effectively.
|
L3Harris
|
Aviation
Systems
|
Space &
Airborne
Systems
|
||||||||||
EBIT
|
$
|
3,305
|
$
|
616
|
$
|
946
|
||||||
FCF |
$ | 2,650 | $ |
583 | $ | 897 | ||||||
Revenue |
$ | 19,250 | $ |
4,209 |
$ | 5,032 |
As the graphic shows, varying performance
levels were linked to specific resulting payout percentages, with performance below threshold
(set at 80% of target performance) resulting in a payout percentage of zero.
|
|
L3HARRIS 2021
PROXY STATEMENT 47
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE COMPENSATION DECISIONS FOR FISCAL 2020
|
Financial Performance Measure
|
Adjusted Target1
(in millions)
|
Result (in millions)
|
Adjusted Result2
(in millions)
|
Adjusted Result Relative to
Adjusted Target
|
Resulting Payout %
|
Weighted Payout %
|
||||||||||||||||||||
L3HARRIS
|
||||||||||||||||||||||||||
EBIT |
— 40
|
%
|
$
|
3,240
|
$
|
1,576.1
|
$
|
3,280.1
|
101.2
|
%
|
102.4
|
%
|
103.5%
|
|||||||||||||
FCF |
— 40
|
%
|
$
|
2,564
|
$
|
2,513.1
|
$
|
2,686.1
|
104.8
|
%
|
109.6
|
%
|
||||||||||||||
Revenue |
— 20
|
%
|
$
|
18,804
|
$
|
18,194.5
|
$
|
18,194.5
|
96.8
|
%
|
93.6
|
%
|
||||||||||||||
AVIATION SYSTEMS SEGMENT
|
||||||||||||||||||||||||||
EBIT |
— 40
|
%
|
$
|
561
|
$
|
(176.6
|
)
|
$
|
476.4
|
84.9
|
%
|
63.1
|
%
|
69.7%
|
||||||||||||
FCF |
— 40
|
%
|
$
|
508
|
$
|
430.6
|
$
|
448.6
|
88.3
|
%
|
72.1
|
%
|
||||||||||||||
Revenue |
— 20
|
%
|
$
|
3,807
|
$
|
3,447.7
|
$
|
3,447.7
|
90.6
|
%
|
78.3
|
%
|
||||||||||||||
SPACE & AIRBORNE SYSTEMS
SEGMENT
|
||||||||||||||||||||||||||
EBIT |
— 40
|
%
|
$
|
942
|
$
|
931.7
|
$
|
931.7
|
98.9
|
%
|
97.8
|
%
|
125.1%
|
|||||||||||||
FCF |
— 40
|
%
|
$
|
893
|
$
|
1,021.2
|
$
|
1,021.2
|
114.4
|
%
|
166.4
|
%
|
||||||||||||||
Revenue |
— 20
|
%
|
$
|
5,022
|
$
|
4,945.9
|
$
|
4,945.9
|
98.5
|
%
|
97.0
|
%
|
(1)
|
For comparability of performance targets
with full-year results due to divestitures of businesses during fiscal 2020 impacting each of
L3Harris, our Aviation Systems segment and our Space and Airborne Systems segment, original
targets were decreased by excluding, as applicable, the pro rata amounts for each divested
business’ EBIT, free cash flow and revenue attributable to the remainder of fiscal 2020
following the applicable divestiture date, based on our original fiscal 2020 annual operating
plan. Also, we note for clarification that the types of Merger-related and other adjustments
reflected in our adjusted results that are indicated as anticipated in footnote (2) below were factored into our fiscal 2020 annual
operating plan and thus were reflected in the original targets, making them comparable for
purposes of evaluating results.
|
(2)
|
Calculations are based on our financial
results calculated in accordance with GAAP, adjusted as permitted under our Annual Incentive Plan
in recognition of unusual or nonrecurring events affecting us or our financial statements. These
adjustments are made in accordance with pre-established guidelines, including that any adjustment
must be objectively measurable under GAAP.
|
48 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND
ANALYSIS EXECUTIVE
COMPENSATION DECISIONS FOR FISCAL 2020
|
Annual Incentive Plan
Target Granted
|
Weighted Payout % Under
Annual Incentive Plan
|
Actual Payout
(in $)
|
Actual Payout (as % of
Target)
|
|||||||||||||
Mr. Brown
|
$
|
2,580,000
|
103.5%
|
|
|
$
|
2,850,000
|
110.5%
|
|
|||||||
Mr. Kubasik
|
$
|
2,580,000
|
103.5%
|
|
$
|
2,850,000
|
110.5%
|
|
||||||||
Mr. Malave
|
$
|
700,000
|
103.5%
|
|
$
|
775,000
|
110.7%
|
|
||||||||
Mr. Gautier
|
$
|
620,000
|
86.6%*
|
|
$
|
575,000
|
92.7%
|
|
||||||||
Mr. Zoiss
|
$
|
620,000
|
114.3%*
|
|
$
|
720,000
|
116.1%
|
Fiscal 2020
Target Value
|
||||
Mr. Brown
|
$
|
10,250,000
|
||
Mr. Kubasik
|
$
|
10,250,000
|
||
Mr. Malave
|
$
|
2,100,000
|
||
Mr. Gautier
|
$
|
1,600,000
|
||
Mr. Zoiss
|
$
|
1,600,000
|
> |
50% as performance share units;
|
> |
25% as stock options; and
|
> |
25% as restricted stock units.
|
L3HARRIS 2021 PROXY STATEMENT 49
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE COMPENSATION DECISIONS FOR FISCAL 2020
|
> |
cumulative EPS for the fiscal 2020-2022 performance period,
weighted at 50%; and
|
> |
3-year average return on invested capital ("ROIC") for the
fiscal 2020-2022 performance period, weighted at 50%.
|
50%
CUMULATIVE EPS
|
50%
3-YEAR AVERAGE ROIC
|
EPS (Earnings Per Share) is
an indicator of profitability, often considered an important factor in
determining a share’s price; impacted by our operating income, our tax rate and
the number of shares outstanding. Calculated as follows:
net
income (after tax)/diluted weighted-average shares of common stock outstanding
|
ROIC (Return on Invested
Capital) is an indicator of efficiency in using capital to generate returns
(allocating capital to profitable investments). Calculated for each year as
follows, and then averaged over the 3-year performance period:
net
operating profit (after tax)/debt + equity + minority interest - cash
|
RELATIVE TSR PAYOUT ADJUSTMENT
Payouts are subject to adjustment of up to +/- 33% based on relative
TSR.
TSR
(Total Shareholder Return) measures cumulative value to shareholders through stock price
appreciation and dividends. Relative TSR compares our TSR percentile ranking with the
ranking of other companies in the S&P 500 (a broad market index of companies with
which we compete for shareholder investment).
|
50 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE COMPENSATION DECISIONS FOR FISCAL 2020
|
Cumulative EPS
EPS
AS % OF PERFORMANCE TARGET
|
3-Year Average ROIC
ROIC AS % OF
PERFORMANCE TARGET
|
Relative
TSR Payout Adjustment
TSR PERCENTILE RANKING (VS. S&P
500)
|
The graphic at left shows how the
potential relative TSR performance payout adjustment (up to +/-33%) is dependent on our
percentile ranking for TSR performance over the fiscal 2020- 2022 performance period
compared with other companies in the S&P 500.
|
>
|
Stock options:
|
■
|
granted to all executive
officers.
|
■
|
vest ratably over 3 years.
|
>
|
Restricted stock units:
|
■
|
granted to all executive
officers and chosen based on their retention
value.
|
■
|
3-year cliff vesting.
|
|
L3HARRIS 2021 PROXY STATEMENT 51
|
COMPENSATION DISCUSSION AND ANALYSIS EMPLOYMENT AGREEMENTS
|
>
|
Mr. Brown will serve as Chair and Chief Executive Officer of
L3Harris through the second anniversary of the closing of the Merger (the “Initial Period”). For the one-year period thereafter (the “Subsequent Period”), he will serve as Chair of L3Harris. On the third anniversary of the
closing of the Merger, he will retire as an officer and employee of L3Harris and will
resign as a member of L3Harris’ Board of Directors.
|
>
|
During the Initial Period, Mr. Brown’s annual base salary is $1,450,000, his target annual cash bonus
award is $2,500,000, the target value of his annual long-term incentive awards is
$10,250,000 and in no case will any such compensation element be less than that paid
or granted to Mr. Kubasik. (The Board maintains discretion to increase these amounts.)
|
>
|
After the closing of the Merger, L3Harris would grant Mr. Brown a
one-time integration-related award composed of performance share units with a target
value of $2,500,000 (subject to certain performance-based multipliers) and
performance-based non-qualified stock options with a grant date value of $5,000,000
and a ten-year term. Both components of the integration-related award are subject to
three-year cliff vesting and will vest (if at all) subject to continued employment and
achievement of performance conditions established by the L3Harris Compensation
Committee. (This award was granted in August 2019; for further information related to
the terms and conditions, see the Outstanding Equity Awards at 2020 Fiscal Year End
Table on page 67 and
related notes.)
|
>
|
If during the Initial Period there is a qualifying termination
of Mr. Brown (as defined in his Executive Change in Control Severance Agreement
entered into with Harris), or if during the Subsequent Period Mr. Brown's
employment is terminated by us without "cause" or by him as a result of a
"constructive termination" (as such terms are defined in the Brown Original
Agreement), then Mr. Brown would be eligible for the compensation, benefits and
other rights provided under that Executive Change in Control Severance Agreement,
with such amounts determined using a “3X” multiple. In addition, his outstanding stock options (other than those
granted as part of the integration award) and restricted stock units would become
fully vested, exercisable, issuable and payable (as applicable), and options would
remain exercisable for their full remaining term.Outstanding performance share units (other than
those granted as part of the integration award) would remain outstanding and
eligible to vest for the remainder of the applicable perfomance period based on
the attainment of performance goals. Mr. Brown would also receive benefit
continuation payments in lieu of providing in-kind medical and prescription drug
coverage after the end of the three year benefit continuation period until he
reaches the age of 65 (or, if earlier, the date he becomes eligible to receive
comparable benefits from another employer). Additionally, if such qualifying
termination occurs during the Initial Period, the integration award components
would remain outstanding and eligible to vest as to a portion of the award based
on the date of termination and attainment of applicable performance goals. If such
qualifying termination occurs during the Subsequent Period, the integration award
components would remain outstanding and eligible to vest based on the greater of
target performance and the actual attainment of applicable performance goals. The
integration award options that vest would remain exercisable for their full
remaining term.
|
>
|
Upon his retirement
at the end of the Subsequent Period, Mr. Brown will not receive any cash severance,
but his equity awards (other than those comprising the integration award) will be
treated as described above regarding a qualifying termination, and his integration
award will pay or vest, as applicable, based on actual performance. In addition, Mr.
Brown
|
52 L3HARRIS 2021
PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS EMPLOYMENT AGREEMENTS
|
>
|
The definition of “cause” under the Brown Original Agreement and
Mr. Brown’s pre-Merger Executive Change in Control Severance Agreement with Harris was modified to
include an act of misconduct in violation of certain L3Harris policies or federal or
applicable state law regarding discrimination or sexual harassment of subordinate
employees that creates a material risk of meaningful harm to L3Harris.
|
>
|
Except as
expressly modified by the Brown Letter Agreement, the terms of Mr. Brown’s pre-Merger
Executive Change in
Control Severance Agreement with Harris and the Brown Original Agreement remain in full
force and effect, including the restrictive covenants and confidentiality provisions of
those agreements.
|
>
|
Mr. Kubasik will serve
as Vice Chair, President and Chief Operating Officer of L3Harris through the Initial
Period. Upon the commencement of the Subsequent Period (or, if earlier, the date that
Mr. Brown ceases to serve as the Chief Executive Officer of L3Harris), Mr. Kubasik will
become the Chief Executive Officer of L3Harris. On the third anniversary of the closing
of the Merger, Mr. Kubasik will also become Chair of L3Harris.
|
>
|
During the Initial Period, Mr. Kubasik’s annual base salary is $1,450,000, his target
annual cash bonus award is $2,500,000, the target value of his annual long-term
incentive awards is $10,250,000 and in no case will any such compensation element be
less than that paid or granted to Mr. Brown. (The Board maintains discretion to increase
these amounts.)
|
>
|
After the closing of the Merger, L3Harris would grant Mr. Kubasik a one-time
integration-related award composed of performance share units with a target value of
$2,500,000 (subject to certain performance-based multipliers) and performance-based
non-qualified stock options with a grant date value of $5,000,000 and a ten-year term.
Both components of the integration-related award are subject to three-year cliff vesting
and will vest (if at all) subject to continued employment and achievement of performance
conditions established by the L3Harris Compensation Committee. (This award was granted
in August 2019; for further information related to the terms and conditions, see the
Outstanding Equity Awards at 2020 Fiscal Year End Table on page 67 and related notes.)
|
>
|
In the event that L3Harris
terminates him without “cause” or he
terminates his employment for “good reason,” Mr. Kubasik’s outstanding stock options (other
than those granted as part of the integration award) and restricted stock units
would become fully vested, exercisable, issuable and payable (as applicable), and
options would remain exercisable for their full remaining term. Outstanding
performance share units (other than those granted as part of the integration award)
would remain outstanding and eligible to vest for the remainder of the applicable
perfomance period based on the attainment of
performance goals. Additionally, if such qualifying termination occurs in the
Initial Period, the integration award would remain outstanding and eligible to vest
as to a portion of the award based on the date of termination and attainment of
applicable performance goals. If such qualifying termination occurs during the
Subsequent Period, the integration award would remain outstanding and eligible to
vest based on the greater of target performance and the actual attainment of
applicable performance goals. The integration award options that vest would remain
exercisable for their full term.
|
>
|
The protection period under which Mr. Kubasik will be covered by
L3’s Amended and Restated Change in Control Severance Plan (the “L3 CIC Plan”) was extended until the fourth
anniversary of the closing of the Merger, in the event of his termination without “cause” or for “good reason” (each as defined in the L3 CIC Plan
and modified in the Kubasik Letter Agreement).
|
>
|
The definition of “cause” under the L3 CIC Plan as applicable to Mr. Kubasik was
modified to include an act of misconduct in violation of certain L3Harris policies or
federal or applicable state law regarding discrimination or sexual harassment of
subordinate employees that creates a material risk of meaningful harm to L3Harris.
|
>
|
The definition of “good reason” under the L3 CIC Plan as
applicable to Mr. Kubasik was modified to include the following events: failure to promote
him to the contemplated new roles upon and after the closing of the Merger;
failure of Mr. Brown to cease providing services to L3Harris on or before the
third anniversary of the closing of the Merger; or L3Harris’ material breach of the Kubasik Letter
Agreement. Mr. Kubasik also agreed to a limited waiver of his “good reason” rights related to his
contemplated relocation to Florida, certain across-the-board changes in employee
benefits and his transition to the role of Vice Chair, President and Chief
Operating Officer at the closing of the Merger.
|
|
L3HARRIS 2021 PROXY STATEMENT 53
|
COMPENSATION DISCUSSION AND ANALYSIS EMPLOYMENT AGREEMENTS
|
>
|
Mr. Kubasik is eligible to
receive an additional payment of up to $1,250,000 for relocation-related expenses, with gross
up of amounts taxed as ordinary income.
|
>
|
Certain restrictive covenants
and confidentiality provisions of the L3 CIC Plan apply as a condition to severance benefits
under the L3 CIC Plan and are extended to 24 months following termination of employment.
|
>
|
base salary at the annual rate
of $625,000 (We maintain discretion to increase this amount.);
|
>
|
eligibility to receive an
annual cash incentive under our Annual Incentive Plan with a target value of 100% of his base
salary;
|
>
|
commencing with calendar
year 2020, eligibility to receive annual equity awards granted under our Equity Incentive Plan
with a target value of $2,000,000;
|
>
|
a one-time restricted stock unit award under our Equity Incentive Plan with a grant date
value of $950,000 and subject to ratable vesting over three years. (This award was granted in
August 2019; for further information related to the terms and conditions, see the Outstanding
Equity Awards at 2020 Fiscal Year End Table on page 67 and related notes.);
|
>
|
a one-time momentum equity award under our Equity Incentive Plan consisting of performance
share units with a target value of $660,000 and performance-based stock options with a grant
date value of $1,340,000 and a term of ten years, both subject to 3-year cliff vesting based on
achievement relative to a specified level for full-year run rate gross synergies from the
Merger. (This award was granted in August 2019 as part of the special one-time
integration-related equity-based awards we granted in our fiscal transition period; for further
information related to the terms and conditions, see the Outstanding Equity Awards at 2020
Fiscal Year End Table on page 67
and related notes.);
|
>
|
a one-time cash sign-on bonus
of $200,000;
|
>
|
eligibility to participate in
our retirement and employee health and welfare plans; and
|
>
|
certain relocation benefits, including a $10,000 “disruption payment” to cover miscellaneous expenses related to
his relocation.
|
54 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS OTHER COMPENSATION ELEMENTS
|
|
L3HARRIS 2021 PROXY STATEMENT 55
|
COMPENSATION DISCUSSION AND ANALYSIS OTHER COMPENSATION ELEMENTS
|
> |
a lump sum cash payment equal to the participant’s base pay (as
determined under the Severance Pay Plan) and annual bonus target; and
|
> |
12 months of
COBRA coverage at active employee rates.
|
56 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND
ANALYSIS OTHER
COMPENSATION ELEMENTS
|
>
|
a lump sum cash payment equal to a multiple (two times in the case of employees
at the officer level, including executive officers) of the participant’s base salary and target bonus;
|
>
|
a lump sum cash payment equal to the participant’s pro-rata target bonus;
|
>
|
continued participation
in our group medical, dental and vision plans for the number of years equal to the
applicable severance multiple; and
|
>
|
if
immediately prior to the date of termination or change in control, the participant is
eligible for professional finance and tax planning assistance services offered by us, continued participation in such services for the balance of the
calendar year in which the termination occurs and the calendar year thereafter.
|
>
|
Our current CEO and COO are not included as participants (due to the
change in control severance benefits provided for under their respective employment
agreements and Legacy CIC Severance Arrangements), unless otherwise expressly designated
by our Compensation Committee as participants in the future; and
|
>
|
Other individuals (including Messrs. Gautier and Zoiss) who are covered
by a Legacy CIC Severance Arrangement as of March 1, 2020 are not entitled to severance
benefits under the CIC Severance Plan until after June 29, 2021 (2 years following the
Merger, when their Legacy CIC Severance Arrangement expires).
|
|
L3HARRIS 2021 PROXY STATEMENT 57
|
COMPENSATION DISCUSSION AND ANALYSIS OTHER COMPENSATION POLICIES
|
CEO
|
|
|
|
|
|
6x
|
President
and COO
|
|
|
|
|
|
6x
|
Other
Senior corporate officers & segment Presidents
(including the other
named executive officers)
|
|
|
3x
|
|
||
Other
corporate officers
|
|
2x
|
|
58 L3HARRIS
2021 PROXY STATEMENT
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS OTHER COMPENSATION POLICIES
|
|
L3HARRIS 2021 PROXY STATEMENT 59
|
60 L3HARRIS 2021 PROXY
STATEMENT
|
> |
An emphasis on long-term compensation that utilizes a
balanced portfolio of compensation elements, such as cash and equity, and
delivers rewards based on sustained performance over time;
|
> |
The Compensation Committee’s power to set short-and long-term
performance objectives for incentive plans, which appropriately correlated
with shareholder value and which use multiple financial metrics to measure
performance;
|
> |
Performance share unit awards that generally are tied to
financial performance measures spanning overlapping three-year performance
periods, creating a focus on driving sustained performance over multiple
performance periods, which mitigates the potential for executives to take
excessive risks to drive one-time, short-term performance spikes in any one
performance period;
|
> |
The use of equity awards with vesting periods to foster
retention and align executives’ interests with those of shareholders;
|
> |
Capping potential payouts under both short-and long-term
incentive plans to eliminate the potential for any windfalls;
|
> |
A
“clawback” policy that allows recovery of all or a portion of any
performance-based compensation if financial statements are restated as a
result of errors, omissions or fraud;
|
> |
Share
ownership guidelines; and
|
> |
A broad array of competitive benefit programs that offer
employees and executives an opportunity to build meaningful retirement
assets and benefit protections throughout their careers.
|
|
L3HARRIS 2021 PROXY STATEMENT 61
|
Name and
Principal Position
|
Year | Salary $(1) |
Bonus $(2) |
Stock Awards $(3) |
Option Awards $(4) |
Non-Equity Incentive Plan Compensation $(5) |
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
$(6) |
All Other Compensation $(7) |
Total $ |
|||||||||||||||||
William |
2020
|
$ |
1,492,308
|
$0 |
$ |
8,232,063
|
$ |
2,562,504
|
$ |
2,850,000
|
$0 | $ |
315,778
|
$ |
15,452,653
|
|||||||||||
M. Brown | FTP | $ |
752,885
|
$0 | $ |
7,625,336
|
$ |
5,000,034
|
$ |
1,467,500
|
$0 |
$ |
899,875
|
$ |
15,745,630
|
|||||||||||
Chair and |
2019
|
$ |
1,338,462
|
$0 |
$ |
7,491,095
|
$ |
2,269,511
|
$ |
3,735,000
|
$0 | $ | 889,464 | $ |
15,723,532
|
|||||||||||
Chief Executive | 2018 | $ |
1,287,500
|
$0 | $ |
6,974,118
|
$ |
2,201,394
|
$ |
2,640,000
|
$0 | $ |
913,101
|
$ |
14,016,113
|
|||||||||||
Officer | ||||||||||||||||||||||||||
Christopher
|
2020
|
$ |
1,492,308
|
$0 | $ |
8,232,063
|
$ |
2,562,504
|
$ |
2,850,000
|
$0 | $ |
2,511,221
|
$ |
17,648,096
|
|||||||||||
E.
Kubasik(8)
|
FTP
|
$ |
752,885
|
$0 | $ |
2,500,194
|
$ |
5,000,034
|
$ |
1,467,500
|
$0 |
$ |
5,495,406
|
$ |
15,216,019
|
|||||||||||
Vice Chair,
|
||||||||||||||||||||||||||
President and Chief
|
||||||||||||||||||||||||||
Operating Officer
|
||||||||||||||||||||||||||
Jesus
|
2020
|
$ |
688,462
|
$0 |
$ |
1,686,846
|
$ |
525,007
|
$ |
775,000
|
$0 | $ |
45,002
|
$ |
3,720,317
|
|||||||||||
Malave, Jr.(9) | FTP | $ |
324,519
|
$200,000 | $ |
1,610,121
|
$ |
1,340,037
|
$ |
367,000
|
$0 |
$ |
140,008
|
$ |
3,981,685
|
|||||||||||
Senior Vice President |
|
|||||||||||||||||||||||||
and Chief Financial
|
||||||||||||||||||||||||||
Officer
|
||||||||||||||||||||||||||
Todd
|
2020
|
$ |
616,923
|
$0 | $ |
1,284,990
|
$ |
400,015
|
$ |
575,000
|
$ 490,349
|
$ |
590,516
|
$ |
3,957,793
|
|||||||||||
W. Gautier(10) | FTP |
$ |
311,538
|
$0 |
$ |
660,027
|
$ |
1,340,037
|
$ |
283,000
|
$ 174,750
|
$ |
2,753,809
|
$ |
5,523,161
|
|||||||||||
President, |
|
|||||||||||||||||||||||||
Aviation Systems
|
||||||||||||||||||||||||||
Edward
|
2020
|
$ |
616,923
|
$0 | $ |
1,284,990
|
$ |
400,015
|
$ |
720,000
|
$0 | $ |
84,217
|
$ |
3,106,145
|
|||||||||||
J. Zoiss(11) | FTP | $ |
311,538
|
$0 |
$ |
1,460,171
|
$ |
1,340,037
|
$ |
388,000
|
$0 |
$ |
116,455
|
$ |
3,616,201
|
|||||||||||
President,
|
|
|||||||||||||||||||||||||
Space and
Airborne
|
||||||||||||||||||||||||||
Systems | ||||||||||||||||||||||||||
(1)
|
The “Salary” column reflects the base salary
amount (not base salary level) for each of our named executive officers for the
respective fiscal year or fiscal transition period. Amounts shown include any
portion of base salary deferred and contributed by our named executive officers
to our RSP or ERSP (or analogous legacy L3 plans prior to fiscal 2020). See the
Fiscal 2020 Nonqualified Deferred Compensation Table on page 72 and related
notes for information regarding contributions by our named executive officers to
our ERSP.
|
(2)
|
The amount shown for Mr. Malave for the
fiscal transition period represents a one-time cash sign-on bonus paid under the
terms of his employment letter agreement.
|
62 L3HARRIS 2021 PROXY STATEMENT
|
|
COMPENSATION
TABLES FISCAL 2020 SUMMARY COMPENSATION TABLE
|
(3) |
The
“Stock Awards” column reflects the aggregate grant date fair value computed in
accordance with ASC 718 for the respective fiscal year or fiscal transition
period with respect to performance share units and restricted stock units
granted to our named executive officers. Amounts reflect our accounting for
these awards and do not necessarily correspond to the actual values that may
be realized by our named executive officers. The grant date fair values of
performance share units granted in fiscal 2020, fiscal 2019 and fiscal 2018
were determined as of the grant date using a multifactor Monte Carlo valuation
model that simulates our stock price and TSR relative to other companies in
the S&P 500, less a discount because dividends are not payable on
performance share units during the performance period. The grant date fair
values of the special, one-time integration-related performance share units
granted in our fiscal transition period were determined as of the grant date
using the closing market price of our common stock on the grant date. Although
dividends also are not payable during the performance period of the special,
one-time integration-related performance share units granted in our fiscal
transition period, the grant date fair values of those performance share units
do not reflect any discounts. The grant date fair values of restricted stock
units were determined as of the grant date using the closing market price of
our common stock on the grant date. Although dividends also are not
payable on restricted stock units during the restriction period, the grant date
fair values of restricted stock units do not reflect any discounts. Pursuant to
SEC rules, we disregarded the estimates of forfeitures related to service-based
vesting conditions.
As noted, the
grant date fair values of performance share units granted in fiscal 2020,
fiscal 2019 and fiscal 2018 reflect discounts (because dividends are not
payable on performance share units during the performance period), which
were approximately: (a) $9.56 per share for fiscal 2020 performance share
units granted in February 2020; (b) $8.54 per share for fiscal 2019
performance share units granted in August 2018; and (c) $7.18 per share for
fiscal 2018 performance share units granted in August 2017. For all grants
of performance share units, each performance share unit earned at the end of
the applicable multi-year performance period and paid out receives accrued
dividend equivalents in an amount equal to the cash dividends or other
distributions, if any, which are paid with respect to an issued and
outstanding share of our common stock during the performance period. Payment
of such dividend equivalents is made in cash at the time of the actual
payout of performance share units ultimately earned as determined after
completion of the performance period. Dividends declared with respect to
issued and outstanding shares of our common stock were $3.40, $1.50, $2.74
and $2.28 per share in fiscal 2020, our fiscal transition period, fiscal
2019 and fiscal 2018, respectively. The dollar value of dividend equivalents
paid on vested performance share units is included in the “All Other
Compensation” column, when the value of such dividend equivalents paid was
not factored into the grant date fair value of the underlying performance
shares units.
The grant date fair
values of performance share units were computed based on the probable
outcome of the performance conditions as of the grant date of such awards,
which was at target. The respective grant date fair values of the
performance share units granted in fiscal 2020, our fiscal transition
period, fiscal 2019 or fiscal 2018, as applicable, assuming at such grant
date the maximum payment (200% of target for performance share units granted
in fiscal 2020, fiscal 2019 and fiscal 2018 and 400% of target for the
special, one-time integration-related performance share units granted in our
fiscal transition period), would have been as follows: Mr. Brown —
$11,338,964, $10,000,776, $10,218,486 and $9,541,398; Mr. Kubasik —
$11,338,964 and $10,000,776; Mr. Malave — $2,323,350 and $2,640,108; Mr.
Gautier — $1,769,964 and $2,640,108; and Mr. Zoiss — $1,769,964 and
$2,640,108. See the Grants of Plan-Based Awards in Fiscal 2020 Table on page
65 and related notes and the “Compensation Discussion and Analysis” section
of this proxy statement for information with respect to equity awards
granted in fiscal 2020 and the Outstanding Equity Awards at 2020 Fiscal Year
End Table on page 67 and related notes for information with respect to
equity awards granted prior to fiscal 2020.
|
(4) |
The “Option Awards” column reflects the
aggregate grant date fair value computed in accordance with ASC 718 for the
respective fiscal year or fiscal transition period with respect to performance
stock options and stock options granted to our named executive officers. Amounts
reflect our accounting for these option grants and do not necessarily correspond
to the actual values that may be realized by our named executive officers. The
grant date fair values of these option grants were calculated as of the grant
date using the Black-Scholes-Merton option-pricing model. The grant date fair
values per share of our common stock underlying these option grants were as
follows: (a) $34.49 for fiscal 2020 stock option grants in February 2020; (b)
$38.61 for fiscal transition period performance stock option grants in August
2019; (c) $30.05 for fiscal 2019 stock option grants in August 2018; and (d)
$18.59 for fiscal 2018 stock option grants in August 2017. The assumptions used
for the valuations are set forth in the Notes to our audited consolidated
financial statements in our Annual Reports on Form 10-K for fiscal 2020 (Note
16), 2019 (Note 15) and 2018 (Note 14), respectively, and in our Transition
Report on Form 10-KT for our fiscal transition period (Note 16). The grant date
fair values of performance stock options were computed based on the probable
outcome of the performance conditions as of the grant date of the performance
stock options, which was at target, and also represents the maximum number of
shares underlying the performance stock option award. Pursuant to SEC rules, we
disregarded the estimates of forfeitures related to service-based vesting
conditions. See the Grants of Plan-Based Awards in Fiscal 2020 Table on page 65
and related notes and the “Compensation Discussion and Analysis” section of this
proxy statement for information with respect to stock options granted in fiscal
2020 and the Outstanding Equity Awards at 2020 Fiscal Year End Table on page 67
and related notes for information with respect to stock options and performance
stock options granted prior to fiscal 2020.
|
(5) |
The “Non-Equity Incentive Plan Compensation”
column reflects payouts to our named executive officers of cash amounts earned
under our Annual Incentive Plan. Amounts shown include any portion of these
payouts deferred and contributed by the recipient to our RSP or ERSP (or
analogous legacy L3 plans prior to fiscal 2020). See the Fiscal 2020
Nonqualified Deferred Compensation Table on page 72 and related notes for
information regarding contributions by our named executive officers to our ERSP.
For additional information about our Annual Incentive Plan and these payouts,
see the “Compensation Discussion and Analysis” section of this proxy statement
and the Grants of Plan-Based Awards in Fiscal 2020 Table on page 65 and related
notes.
|
(6) |
As described in the “Pension Benefits”
section beginning on page 70 and the “Compensation Discussion and Analysis”
section of this proxy statement, Mr. Gautier participates in the Legacy L3 Link
Pension Plan, a tax-qualified, Section 401(a) defined benefit pension plan, and
the Legacy L3 SERP Pension Plan, a nonqualified, defined benefit pension plan
intended to provide supplemental retirement income for participants. The amounts
shown for Mr. Gautier represent the changes in the actuarial present value of
his total accumulated pension benefit under each such plan during fiscal 2020
and the fiscal transition period, respectively. Effective January 1, 2020, Mr.
Gautier (and other plan participants) became ineligible to receive continued
salary credits under the Legacy L3 SERP Pension Plan.
|
(7) |
The following table describes the components
of the “All Other Compensation” column for fiscal 2020:
|
Life
Insurance
Premiums
|
Company
Contributions
to RSP
|
Company
Credits
to
ERSP
(nonqualified)
|
Perquisites
and Other
Personal
Benefits
|
Tax
Reimbursement Payments
|
Other
Payments
|
|||||||||||||||||||||||
Name
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
Total
|
|||||||||||||||||||||
William M. Brown
|
$
|
4,707
|
$
|
6,808 |
$
|
170,781 |
$
|
125,482 |
$
|
0
|
$
|
8,000 |
$
|
315,778 | ||||||||||||||
Christopher E. Kubasik
|
$
|
4,842 |
$
|
17,215 |
$
|
145,760 |
$
|
376,168 |
$
|
47,236 |
$
|
1,920,000 |
$
|
2,511,221 | ||||||||||||||
Jesus Malave, Jr.
|
$
|
2,124 |
$
|
1,615 |
$
|
21,000 |
$
|
20,262 |
$
|
0 |
$
|
0 |
$
|
45,002 | ||||||||||||||
Todd W. Gautier
|
$
|
1,788
|
$
|
17,146 |
$
|
291,582 |
$
|
20,000 |
$
|
0 |
$
|
260,000 |
$
|
590,516
|
||||||||||||||
Edward J. Zoiss
|
$
|
1,788
|
$
|
6,623
|
$
|
53,672
|
$
|
22,134 |
$
|
0 |
$
|
0 |
$
|
84,217
|
L3HARRIS 2021 PROXY STATEMENT 63
|
COMPENSATION TABLES FISCAL 2020
SUMMARY COMPENSATION TABLE
|
(a) |
Reflects
the dollar value of premiums paid by us for life insurance for
our named executive officers under our broad-based group basic
life insurance benefit.
|
(b) |
Reflects our contributions credited to accounts of our named
executive officers under our RSP, which is a tax-qualified,
defined contribution plan.
|
(c) |
Reflects our credits to accounts of our
named executive officers under our ERSP, which is an unfunded,
nonqualified defined contribution retirement plan, including in
the case of Mr. Gautier, $257,000 to offset the impact of freezing
continued credits under the Legacy L3 SERP Pension Plan. For
additional information regarding these credits and our ERSP, see
the “Nonqualified Deferred Compensation” section beginning on page
70 of this proxy statement, including the Fiscal 2020 Nonqualified
Deferred Compensation Table and related notes.
|
(d) |
The amount for Mr.
Brown included $122,632 for personal use of Company-owned
aircraft and $2,850 for a Company-paid physical examination. The
amount for each of Messrs. Kubasik, Malave and Gautier included
$20,000, and for Mr. Zoiss included $19,616, in each case for
Company-paid financial planning and advice, and federal and
state tax preparation services from a designated third-party
provider, including imputed income for such services (but no
gross-up for payment of taxes for such imputed income). The
amount for Mr. Kubasik also included $304,592 for personal use
of Company-owned aircraft and $51,576 for relocation, commuting
and related temporary living expenses and allowances. The amount
for Mr. Malave also included $262 for payment or reimbursement
of relocation, commuting and related temporary living expenses
and allowances. The amount for Mr. Zoiss also included $2,518
for a Company-paid physical examination.
|
|
The incremental cost to us of personal use of
Company-owned aircraft is calculated based on our average variable
operating costs, which include fuel, maintenance,
weather-monitoring, on-board catering, trip-related hangar/parking,
landing/ramp fees and other miscellaneous variable costs. Our total
annual variable operating costs are divided by the annual number of
miles the Company-owned aircraft flew to derive an average variable
cost per mile, which is then multiplied by the miles flown for
personal use to derive the incremental cost. The methodology
excludes fixed costs that do not change based on usage, such as
pilots’ and other employees’ salaries, purchase costs of the
aircraft and non-trip related hangar expenses. The taxable benefit
associated with personal use of Company-owned aircraft is imputed at
“Standard Industry Fare Level” rates to the applicable named
executive officers, who do not receive any gross-up for payment of
taxes for such imputed income. The amount related to the loss of tax
deduction to us due to the personal use of Company-owned aircraft
under the Internal Revenue Code is not included.
|
|
As
noted above, we also offer a supplemental long-term disability
benefit to employees with eligible compensation in excess of
$400,000 and offer our executives the option to participate in a
group excess liability umbrella policy. No premiums are payable by
us for these benefits and there is no incremental cost reflected for
our named executive officers.
|
|
Certain Company-related events may include
meetings and receptions with our customers, executive management or
Board attended by the named executive officer and a spouse or guest.
If the Company-owned aircraft is used and a spouse or guest travels
with the named executive officer, no amounts are included because
there is no incremental cost to us. We also have Company-purchased
tickets to athletic or other events generally for business purposes.
In limited instances, executives, including our named executive
officers, may have personal use of Company-purchased event tickets.
No amounts are included because there is no incremental cost to us
of such personal use. For a discussion of perquisites and other
personal benefits provided to our named executive officers, see the
“Compensation Discussion and Analysis” section of this proxy
statement.
|
(e) |
Reflects
reimbursement for taxes on imputed income associated with payment
or reimbursement of relocation, commuting and related temporary
living expenses and allowances, in accordance with the Kubasik
Letter Agreement.
|
(f) |
In the case of
Mr. Brown, reflects charitable gift matching payments under the
Company foundation's charitable gift matching program. In the case
of Messrs. Kubasik and Gautier, reflects payouts of cash amounts
in respect of awards under a legacy L3 multi-year performance cash
incentive plan as a result of vesting of the awards on December
31, 2020, based on payout determinations made shortly before the
Merger by the compensation committee of the board of directors of
L3 after consultation with Harris.
|
(8) |
Mr. Kubasik was employed with L3 at the time of the Merger
and was not a named executive officer of L3Harris prior to our
fiscal transition period.
The “All Other Compensation” and “Total” column amounts for
Mr. Kubasik for the fiscal transition period have been corrected
to include Company contributions under the former L3 tax-qualified
401(k) defined contribution retirement plan (the “L3 401(k) Plan”)
and the non-qualified SSP-II, which were earned in respect of the
fiscal transition period but not credited to his account until
fiscal 2020.
|
(9) |
Mr. Malave joined L3Harris on June 29, 2019 and was not a
named executive officer of L3Harris prior to our fiscal transition
period.
|
(10) |
Mr. Gautier was
employed with L3 at the time of the Merger and was not a named
executive officer of L3Harris prior to our fiscal transition
period. The “All Other Compensation” and “Total” column amounts
for Mr. Gautier for the fiscal transition period have been
corrected to include Company contributions under the former L3
401(k) Plan and the non-qualified SSP-II, which were earned in
respect of the fiscal transition period but not credited to his
account until fiscal 2020.
|
(11) |
Mr. Zoiss was
not a named executive officer of L3Harris prior to our fiscal
transition period.
|
Name |
Salary
and Bonus as Proportion of
Fiscal
2020 Total Compensation
|
|||
William M. Brown | 9.7 | % | ||
Christopher E. Kubasik
|
8.5 | % | ||
Jesus Malave, Jr.
|
18.5 |
% | ||
Todd W. Gautier
|
15.6 |
% | ||
Edward J. Zoiss
|
19.9 | % |
64
L3HARRIS
2021 PROXY
STATEMENT
|
|
COMPENSATION
TABLES GRANTS OF PLAN-BASED AWARDS IN FISCAL 2020 TABLE
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other |
All
Other Option |
Exercise |
Grant
Date |
||||||||||||||||||||||||||||||
Name/Type of Award | Grant Date |
Approval Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
Stock or Units (#)(3) |
Options (#)(4) |
Awards ($/Share)(5) |
Awards ($)(6) |
|||||||||||||||||||||||
William M. Brown | |||||||||||||||||||||||||||||||||||
Annual Incentive Plan | — | — | $ |
258,000
|
$ | 2,250,000 | $ | 5,160,000 | — | — | — | — | — | — | — | ||||||||||||||||||||
Performance
share units
|
2/28/20 |
2/28/20
|
4,342 | 25,920 | 51,840 |
—
|
— | — | $ |
5,669,482
|
|||||||||||||||||||||||||
Restricted stock units
|
2/28/20 |
2/28/20
|
—
|
—
|
—
|
12,960 | — | — | $ |
2,562,581
|
|||||||||||||||||||||||||
Stock options | 2/28/20 |
2/28/20
|
—
|
—
|
—
|
— |
74,297
|
$ |
197,73
|
$ |
2,562,504
|
||||||||||||||||||||||||
Christopher E. Kubasik
|
|||||||||||||||||||||||||||||||||||
Annual Incentive Plan | — | — | $ |
258,000
|
$ | 2,580,000 | $ | 5,160,000 | — | — | — | — | — | — | — | ||||||||||||||||||||
Performance share units | 2/28/20 |
2/28/20
|
4,342 |
25,920
|
51,840 | — | — | — | $ |
5,669,482
|
|||||||||||||||||||||||||
Restricted stock units | 2/28/20 |
2/28/20
|
—
|
—
|
—
|
12,960 |
—
|
—
|
$ |
2,562,581
|
|||||||||||||||||||||||||
Stock options
|
2/28/20
|
2/28/20 | — | — | — | —
|
74,297 |
$ | 197,73 |
$ | 2,562,504 |
||||||||||||||||||||||||
Jesus Malave, Jr. | |||||||||||||||||||||||||||||||||||
Annual
Incentive Plan
|
— |
—
|
$ |
70,000 |
$ |
700,000 |
$ |
1,400,000 |
— | — | — |
—
|
— | — |
—
|
||||||||||||||||||||
Performance share units
|
2/28/20 |
2/27/20
|
890 |
5,311
|
10,622
|
— | — | — | $ |
1,161,675
|
|||||||||||||||||||||||||
Restricted stock units | 2/28/20 |
2/27/20
|
— | — | — | 2,656 | — | — | $ | 525,171 |
|||||||||||||||||||||||||
Stock options
|
2/28/20 |
2/27/20
|
—
|
—
|
—
|
— |
15,222
|
$ |
197,73
|
$ |
525,007
|
||||||||||||||||||||||||
Todd W. Gautier
|
|||||||||||||||||||||||||||||||||||
Annual Incentive Plan | — | — | $ |
31,000
|
$ |
620,000
|
$ |
1,240,000
|
— | — | — | — | — | — | — | ||||||||||||||||||||
Performance share units | 2/28/20 |
2/27/20
|
678 |
4,046 |
8,092 | — | — |
— | $ | 884,982 | |||||||||||||||||||||||||
Restricted stock units | 2/28/20 |
2/27/20
|
—
|
— | — | 2,023 | — | — | $ |
400,008
|
|||||||||||||||||||||||||
Stock options | 2/28/20 |
2/27/20
|
—
|
—
|
—
|
— | 11,598 | $ |
197,73
|
$ |
400,015
|
||||||||||||||||||||||||
Edward J. Zoiss
|
|||||||||||||||||||||||||||||||||||
Annual Incentive Plan | — | — | $ | 31,000 | $ | 620,000 | $ |
1,240,000
|
— | — | — | — | — | — | — | ||||||||||||||||||||
Performance
share units
|
2/28/20 |
2/27/20
|
678 | 4,046 | 8,092 |
—
|
— | — | $
|
884,982
|
|||||||||||||||||||||||||
Restricted stock units | 2/28/20 |
2/27/20
|
—
|
—
|
—
|
2,023 |
— | — | $ |
400,008
|
|||||||||||||||||||||||||
Stock options
|
2/28/20 |
2/27/20
|
—
|
—
|
—
|
— | 11,598 | $
|
197,73
|
$ |
400,015
|
L3HARRIS
2021 PROXY
STATEMENT 65
|
COMPENSATION TABLES GRANTS OF PLAN-BASED
AWARDS IN FISCAL 2020 TABLE
|
(1) |
The “Estimated Possible Payouts Under Non-Equity Incentive Plan
Awards” column shows the range of cash payouts that were possible in
respect of awards under our Annual Incentive Plan (no payout is made
for performance below threshold) in respect of our fiscal 2020
performance. Amounts actually earned under our Annual Incentive Plan
for fiscal 2020 were determined and approved by our independent
directors, in the case of Messrs. Brown and Kubasik, and our
Compensation Committee, in the case of our other named executive
officers, in February 2021 and paid soon thereafter and are reported
under the “Non-Equity Incentive Plan Compensation” column in the
Fiscal 2020 Summary Compensation Table on page 62. For additional
information related to our Annual Incentive Plan and these payouts,
including financial performance measures and associated weighting and
targets, see the “Compensation Discussion and Analysis” section of
this proxy statement.
|
(2) |
The “Estimated Future Payouts Under Equity Incentive Plan Awards”
column shows the range of shares that were possible to earn at the
time of grant in respect of the grants of performance share units
under our Equity Incentive Plan in fiscal 2020 for the three-year
performance period of fiscal 2020-2022. For these grants of
performance share units, the number of shares that were possible to
earn at the time of grant ranged from 0% to a maximum of 200% of the
target number of performance share units based on the extent of
weighted achievement of targets for the 3-year cumulative EPS and
3-year average ROIC for the performance period, subject to possible
adjustment based on our TSR relative to other companies in the S&P
500.
|
|
For additional information related to the performance measures and
associated weighting, see the “Compensation Discussion and Analysis”
section of this proxy statement. For these grants, cash dividend
equivalents are not payable during the performance period on performance
share units, and instead, each performance share unit earned and paid
out receives accrued dividend equivalents in an amount per share equal
to the cash dividends or other distributions, if any, paid with respect
to an issued and outstanding share of our common stock during the
performance period, with payment of such dividend equivalents to be made
in cash at the time of the actual payout of performance share units
ultimately earned as determined after completion of the performance
period. For these grants, an executive officer must remain employed with
us through the last day of the performance period to earn an award;
however, a pro-rata portion of the award will be earned if employment
terminates (a) subject to a minimum holding period ending on the last
day of the first fiscal year of the three-year performance period, as a
result of qualifying retirement (after age 60 with 5 or more years of
full-time service and meeting certain advance notice and other criteria)
or involuntary termination other than for cause, or (b) as a result of
death or disability (in which cases, the pro-rata portion is based on
target and the period worked during the performance period and paid out
promptly). See the “Potential Payments Upon Termination or a Change in
Control” section of this proxy statement beginning on page 73 for the
treatment of these performance share units upon a termination of
employment or change in control. For additional information related to
the terms and conditions of these performance share units, see the
Outstanding Equity Awards at 2020 Fiscal Year End Table on page 67 and
related notes.
|
(3) |
The “All Other Stock Awards: Number of Shares of Stock or Units”
column shows restricted stock units granted under our Equity Incentive
Plan in fiscal 2020. For these grants, cash dividend equivalents are
not payable during the restriction period on restricted stock units,
and instead, each restricted stock unit paid out receives accrued
dividend equivalents in an amount per share equal to the cash
dividends or other distributions, if any, paid with respect to an
issued and outstanding share of our common stock during the
restriction period, with payment of such dividend equivalents to be
made in cash at the time of the actual payout of restricted stock
units after completion of the restriction period. See the “Potential
Payments Upon Termination or a Change in Control” section of this
proxy statement beginning on page 73 for the treatment of these
restricted stock units upon a termination of employment or change in
control. For additional information related to the terms and
conditions of these restricted stock units, see the Outstanding Equity
Awards at 2020 Fiscal Year End Table on page 67 and related notes.
|
(4) |
The “All Other Option
Awards: Number of Securities Underlying Options” column shows the
number of shares of our common stock underlying stock options granted
under our Equity Incentive Plan in fiscal 2020, which expire no later
than 10 years from the grant date. These options vest in equal
installments of one-third each on the first, second and third
anniversary of the grant date, subject to the recipient’s continued
employment through the applicable vesting date. See the “Potential
Payments Upon Termination or a Change in Control” section of this
proxy statement beginning on page 73 for the treatment of these stock
options upon a termination of employment or change in control. For
additional information related to the terms and conditions of these
stock options, see the Outstanding Equity Awards at 2020 Fiscal Year
End Table on page 67 and related notes.
|
(5) |
The “Exercise or Base Price of Option Awards”
column shows the exercise price per share for the stock options at the
time of grant, which was the closing market price per share of our
common stock on the grant date.
|
(6) |
The “Grant Date Fair Value of Stock and Option Awards” column shows
the aggregate grant date fair value computed in accordance with ASC 718
of performance share units (at target), restricted stock units and stock
options granted in fiscal 2020. In accordance with SEC rules, the
amounts in this column reflect the grant date fair value without
reduction for estimates of forfeitures related to service-based vesting
conditions.
|
|
The grant date fair values of these performance share units were
computed based on the probable outcome of the performance conditions as
of the grant date of such awards (which was at target) and were
determined as of the grant date using a multifactor Monte Carlo
valuation model that simulates our stock price and TSR relative to other
companies in the S&P 500 (which yielded a valuation of approximately
$228.29 per share), less a discount (approximately $9.56 per share)
because dividends are not paid on performance share units during the
performance period, for a grant date fair value of $218.73 per share.
|
|
The grant date fair values of these restricted stock units were
determined as of the grant date using the $197.73 closing market price
of our common stock on the grant date.
|
|
The grant date fair values of these stock options were calculated at
the grant date using the Black-Scholes-Merton option-pricing model. The
grant date fair value per share of our common stock underlying these
stock options was $34.49.
|
|
The assumptions used for the valuations are set forth in Note 16 to
our audited consolidated financial statements in our Annual Report on
Form 10-K for our fiscal year ended January 1, 2021. These amounts
reflect our accounting for these grants and do not necessarily
correspond to the actual values that may be realized by our named
executive officers.
|
66 L3HARRIS 2021 PROXY STATEMENT
|
|
COMPENSATION TABLES OUTSTANDING
EQUITY AWARDS AT 2020 FISCAL YEAR END TABLE
|
Option
Awards
|
Stock
Awards
|
||||||||||||||||||||||||||||||||
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
UnderlyingUnexercised
Options
(#)
Unexercisable(2)
|
Equity Incentive
Plan Awards:
Number ofUnderlying
Unexercised
Unearned Options
(#)(3)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of
Shares or
Units of Stock
That Have
Not Vested
(#)(4)
|
Market Value of
Shares or Units
of Stock
That Have
Not Vested
($)(5)
|
Equity
Incentive Plan Awards:
|
||||||||||||||||||||||||||
Number of
Unearned Shares,
Units or Other
Rights That
Have Not Vested
(#)(6)
|
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(7)
|
||||||||||||||||||||||||||||||||
Name/Option Grant
Date(1)
|
|||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
William M. Brown
8/23/2013
|
177,900
|
0
|
—
|
$ | 56.97 | 8/23/2023 |
25,019
|
$
|
4,729,091
|
48,820
|
$
|
9,227,956 | |||||||||||||||||||||
8/23/2014
|
138,000
|
0
|
—
|
$ | 71.02 | 8/23/2024 | 12,960 | $ | 2,449,699 |
25,920 |
$ | 4,899,398 |
|||||||||||||||||||||
8/28/2015
|
390,290
|
0
|
—
|
$ |
77.54 | 8/28/2025 | 37,979 | $ | 7,178,791 |
74,740 | $ | 14,127,355 | |||||||||||||||||||||
8/27/2016
|
303,820
|
0
|
—
|
$ |
90.84 | 8/27/2026 | |||||||||||||||||||||||||||
8/25/2017
|
118,429
|
0
|
—
|
$ | 119.66 | 8/25/2027 | |||||||||||||||||||||||||||
8/25/2018
|
75,524
|
0
|
—
|
$ | 163.23 | 8/25/2028 | |||||||||||||||||||||||||||
2/28/2020
|
0 |
74,297
|
—
|
$ | 197.73 | 2/28/2030 | |||||||||||||||||||||||||||
8/1/2019
|
1,203,963
—
|
74,297
—
|
129,501
|
$ | 204.85 | 8/1/2029 | |||||||||||||||||||||||||||
Christopher E. Kubasik
10/30/2015
|
66,258
|
0
|
—
|
$ |
97.24 | 10/30/2025 |
31,792
|
$
|
6,009,324
|
48,820
|
$
|
9,227,956
|
|||||||||||||||||||||
2/16/2016
|
76,190
|
0
|
—
|
$ |
89.39 | 2/16/2026 |
12,960
|
$
|
2,449,699
|
25,920 | $ |
4,899,398 | |||||||||||||||||||||
2/21/2017
|
56,624
|
0
|
—
|
$ |
129.85 | 2/21/2027 |
44,752
|
$
|
8,459,023
|
74,740 | $ |
14,127,355 | |||||||||||||||||||||
12/20/2017
|
112,138
|
0
|
—
|
$ |
149.31 | 12/20/2027 | |||||||||||||||||||||||||||
2/20/2018
|
97,171
|
0
|
—
|
$
|
162.30
|
2/20/2028
|
|||||||||||||||||||||||||||
2/28/2020 | 0 |
74,297 |
— | $ |
197.73 | 2/28/2030 | |||||||||||||||||||||||||||
8/1/2019
|
408,381
—
|
74,297
—
|
129,501
|
$
|
204.85
|
8/1/2029
|
|||||||||||||||||||||||||||
Jesus Malave, Jr.
2/28/2020
|
0
|
15,222
|
—
|
$
|
197.73
|
2/28/2030
|
3,092
|
$
|
584,450
|
12,888
|
$
|
2,436,090
|
|||||||||||||||||||||
8/1/2019 |
— | — | 34,707 |
$ |
204,85 |
8/1/2029 |
2,656 | $ |
502,037 | 5,311 | $ |
1,003,885 | |||||||||||||||||||||
5,748 | $ |
1,086,487 |
18,199 | $ |
3,439,975 | ||||||||||||||||||||||||||||
Todd W. Gautier
2/21/2017
|
15,571
|
0
|
—
|
$
|
129,85
|
2/21/2027
|
8,181
|
$
|
1,546,373
|
12,888
|
$
|
2,436,090
|
|||||||||||||||||||||
2/20/2018
|
13,158
|
0
|
—
|
$
|
162,30
|
2/20/2028
|
2,023
|
$
|
382,387
|
4,046 | $ |
764,775 | |||||||||||||||||||||
2/28/2020 |
0 | 11,598 | — | $ |
197.73 | 2/28/2030 | 10,204 | $ |
1,928,760 | 16,934 | $ |
3,200,865 | |||||||||||||||||||||
8/1/2019
|
28,729
—
|
11,598
—
|
34,707
|
$
|
204.85
|
8/1/2029
|
|||||||||||||||||||||||||||
Edward J. Zoiss
8/26/2016
|
27,800
|
0
|
—
|
$
|
90.84
|
8/26/2026
|
3,906
|
$
|
738,312
|
12,888
|
$
|
2,436,090
|
|||||||||||||||||||||
8/25/2017
|
12,277
|
0
|
—
|
$
|
119.66
|
8/25/2027
|
2,023 | $ |
382,387 | 4,046 | $ |
764,775 | |||||||||||||||||||||
8/24/2018
|
9,012
|
0
|
—
|
$
|
163.23
|
8/24/2028
|
5,929 | $ |
1,120,700 | 16,934 | $ |
3,200,865 | |||||||||||||||||||||
2/28/2020
|
0
|
11,598
|
—
|
$
|
197.73
|
2/28/2030
|
|||||||||||||||||||||||||||
8/1/2019
|
49,089
—
|
11,598
—
|
34,707
|
$
|
204.85
|
8/1/2029
|
L3HARRIS 2021 PROXY STATEMENT 67
|
COMPENSATION TABLES OUTSTANDING
EQUITY AWARDS AT 2020 FISCAL YEAR END TABLE
|
(1) |
All options granted are nonqualified stock
options. The exercise price for all stock options, other than stock
options granted to Messrs. Kubasik and Gautier prior to August 1,
2019, is the closing market price of a share of our common stock on
the grant date, except that the grants made to Mr. Brown by Harris’
independent directors on August 23, 2014, August 27, 2016 and August
25, 2018 were annual grants made on a Saturday using the closing
market price on the prior business day in accordance with the terms of
our Equity Incentive Plan. The stock options granted to Messrs.
Kubasik and Gautier prior to August 1, 2019 are stock options
originally granted by L3 to purchase shares of L3 common stock at an
exercise price equal to the closing market price of a share of L3’s
common stock on the grant date, each of which was converted on June
29, 2019 upon completion of the Merger pursuant to the Merger
Agreement into an option to purchase a number of shares of our common
stock equal to the original number of shares of L3 common stock
subject to the L3 stock option multiplied by 1.30 (the exchange ratio
in the Merger), at an exercise price equal to the original exercise
price of the L3 stock option divided by 1.30. The exercise price for
all stock options may be paid in cash and/or shares of our common
stock, or an option holder may use “broker assisted cashless exercise”
procedures. All then-outstanding unvested options immediately vested
on June 29, 2019 as a result of the Merger, which constituted a change
in control pursuant to their terms and conditions. See the “Potential
Payments Upon Termination or a Change in Control” section of this
proxy statement beginning on page 73 for the treatment of these
options upon a termination of employment or change in control.
|
(2) |
The following table details the
regular vesting schedule for all unvested stock options as of January
1, 2021 for each named executive officer. In general, options expire
10 years from the grant date. (As noted in note (1) above, all
then-outstanding unvested options immediately vested on June 29, 2019
as a result of the Merger, which constituted a change in control
pursuant to their terms and conditions.)
|
Name
|
Grant Date
|
Option Vesting Date
|
Number of Shares
Underlying Options |
||||
William M. Brown
|
8/1/2019
|
6/29/2022
|
129,501
|
||||
2/28/2020
|
2/28/2021
|
24,766
|
|||||
2/28/2022
|
24,766
|
||||||
2/28/2023
|
24,765
|
||||||
Christopher
E. Kubasik
|
8/1/2019
|
6/29/2022
|
129,501
|
||||
2/28/2020
|
2/28/2021
|
24,766
|
|||||
2/28/2022
|
24,766
|
||||||
2/28/2023
|
24,765
|
||||||
Jesus
Malave, Jr.
|
8/1/2019
|
6/29/2022
|
34,707
|
||||
2/28/2020
|
2/28/2021
|
5,074
|
|||||
2/28/2022
|
5,074
|
||||||
2/28/2023
|
5,074
|
||||||
Todd W.
Gautier
|
8/1/2019
|
6/29/2022
|
34,707
|
||||
2/28/2020
|
2/28/2021
|
3,866
|
|||||
2/28/2022
|
3,866
|
||||||
2/28/2023
|
3,866
|
||||||
Edward J.
Zoiss
|
8/1/2019
|
6/29/2022
|
34,707
|
||||
2/28/2020
|
2/28/2021
|
3,866
|
|||||
2/28/2022
|
3,866
|
||||||
2/28/2023
|
3,866
|
(3)
|
The options with a grant date of August
1, 2019 are performance stock options shown at target, which were granted
as part of the special, one-time integration-related awards in our fiscal
transition period and for which the number of options that were possible
to earn and vest at the time of grant were either 0% or 100% of the target
number of performance stock options based on the performance vesting
condition of L3Harris achievement by December 31, 2021 of a threshold
level for full-year run rate gross synergies from the Merger. For
additional information related to the performance measure and associated
target, see the “Compensation Discussion and Analysis” section of this
proxy statement. For these performance stock options, an executive officer
must remain employed with us through June 29, 2022 for these options to be
earned and to vest. See the “Potential Payments Upon Termination or a
Change in Control” section of this proxy statement beginning on page 73
for the treatment of these performance stock options upon a termination of
employment or change in control.
|
(4)
|
These are restricted stock unit awards
and restricted stock awards, as follows: (a) in the case of Mr. Brown,
restricted stock units granted on August 1, 2019 and February 28, 2020
that are scheduled to vest on August 1, 2022 and February 28, 2023,
respectively, if he is employed by us on such date; (b) in the case of Mr.
Kubasik, 31,792 shares of restricted stock converted from L3 shares of
restricted stock that are scheduled to vest on December 14, 2021 if he is
employed by us on such date and restricted stock units granted on February
28, 2020 that are scheduled to vest on February 28, 2023 if he is employed
by us on such date; (c) in the case of Mr. Malave, restricted stock units
granted on August 1, 2019 in connection with his hiring as our Senior Vice
President and Chief Financial Officer to offset foregone equity
compensation from his prior employer, of which one-third (1,546) vested on
August 1, 2020, one-third (1,546) are scheduled to vest on August 1, 2021
if he is employed by us on such date, and the remaining one-third (1,546)
are scheduled to vest on August 1, 2022 if he is employed by us on such
date, and restricted stock units granted on February 28, 2020 that are
scheduled to vest on February 28, 2023 if he is employed by us on such
date; (d) in the case of Mr. Gautier, 8,181 restricted stock units
converted from L3 restricted stock units that are scheduled to vest on
February 11, 2022 if he is employed by us on such date and restricted
stock units granted on February 28, 2020 that are scheduled to vest on
February 28, 2023 if he is employed by us on such date; and (e) in the
case of Mr. Zoiss, restricted stock units granted on August 1, 2019 and
February 28, 2020 that are scheduled to vest on August 1, 2022 and
February 28, 2023, respectively, if he is employed by us on such date. In
the case of Messrs. Kubasik and Gautier, the conversions of their shares
of restricted stock or restricted stock units from L3 occurred as of June
29, 2019 upon completion of the Merger pursuant to the Merger Agreement
based on the 1.30:1 exchange ratio in the Merger.
|
68 L3HARRIS 2021 PROXY STATEMENT
|
|
COMPENSATION
TABLES OPTION EXERCISES AND STOCK VESTED IN FISCAL 2020 TABLE
|
(5) |
The market value
shown was determined by multiplying the number of restricted stock units
or shares of restricted stock that had not vested by the $189.02 closing
market price per share of our common stock on December 31, 2020, the last
trading day of our fiscal year ended January 1, 2021.
|
(6)
|
These are performance share units
granted (a) as part of the special, one-time integration-related awards
in our fiscal transition period, in the case of the amount in the first
row for each named executive officer; and (b) in fiscal 2020 for the
three-year performance period of fiscal 2020-2022, in the case of the
amount in the second row for each named executive officer. The numbers
of performance share units and related values as of January 1, 2021
represent: (x) the maximum possible payouts (400% of target) for
integration-related awards, rather than payouts at target, in accordance
with SEC rules requiring reporting of these amounts in this manner
because our performance exceeded target during the last completed fiscal
year or years over which performance is measured; and (y) payouts at
target for fiscal 2020-2022 performance period awards, in accordance
with SEC rules requiring reporting of these amounts in this manner
because our performance did not exceed target during the last completed
fiscal year. For integration-related awards, actual performance will
cause the number of shares that are earned to range from 0% to a maximum
of 400% of the target number of performance share units based on an
award payout formula of 0% to 200% for L3Harris achievement, as of
December 31, 2021, relative to a target level of $500 million for
full-year run rate gross synergies from the Merger (with a minimum
threshold set at 80% of target performance), with a 50% to 200% modifier
(i.e., downward or upward) for L3Harris achievement, as of December 31,
2021, relative to a target for cumulative earnings per share, and an
executive officer must remain employed with us through June 29, 2022 to
earn an award. For fiscal 2020-2022 performance period awards, actual
performance will cause the number of shares that are earned to range
from 0% to a maximum of 200% of the target number of performance share
units based on the extent of weighted achievement of targets for 3-year
cumulative EPS and 3-year average ROIC for the performance period,
subject to possible adjustment based on our TSR relative to other
companies in the S&P 500. Cash dividend equivalents are not payable
during the performance period on performance share units, and instead,
each performance share unit earned and paid out receives accrued
dividend equivalents in an amount per share equal to the cash dividends
or other distributions, if any, paid with respect to an issued and
outstanding share of our common stock during the performance period,
with payment of such dividend equivalents to be made in cash at the time
of the actual payout of performance share units ultimately earned as
determined after completion of the performance period. See the
“Potential Payments Upon Termination or a Change in Control” section of
this proxy statement beginning on page 73 for the treatment of these
performance share units upon a termination of employment or change in
control. For more information regarding performance share units, see the
Grants of Plan-Based Awards in Fiscal 2020 Table on page 65 and related
notes and the “Compensation Discussion and Analysis” section of this
proxy statement.
|
(7)
|
The market value shown was determined
by multiplying the number of unearned and unvested performance share
units (at maximum) by the $189.02 closing market price per share of our
common stock on December 31, 2020, the last trading day of our fiscal
year ended January 1, 2021.
|
Option Awards |
Stock Awards
|
|||||||||||||||
Name
|
Number of Shares
Acquired on Exercise
(#)(1)
|
Value Realized
on Exercise ($)(1)
|
Number of Shares
Acquired on Vesting
(#)(2)
|
Value Realized
on Vesting ($)(2)
|
||||||||||||
William M. Brown
|
181,600
|
$
|
32,991,211
|
—
|
|
|
—
|
|||||||||
Christopher E. Kubasik
|
—
|
—
|
11,830
|
|
$
|
2,236,107
|
||||||||||
Jesus Malave, Jr.
|
—
|
—
|
1,546 | $ | 260,238 | |||||||||||
Todd W. Gautier
|
—
|
—
|
1,602
|
|
$
|
302,810
|
||||||||||
Edward J. Zoiss
|
23,170
|
$
|
3,625,188
|
—
|
|
|
—
|
(1)
|
Value realized on
exercise of stock options was determined by multiplying the number of
options exercised by the difference between the weighted- average
selling price of the shares of our common stock sold on the date of
exercise and the exercise price, irrespective of any taxes owed upon
exercise.
|
(2)
|
In the case of Messrs. Kubasik and
Gautier, consists of shares acquired on vesting on December 31, 2020
of restricted stock units that were converted from L3 performance
stock units in connection with the Merger (based on the greater of the
target and actual level of performance through the effective time of
the Merger, as reasonably determined by the compensation committee of
the Board of Directors of L3 after consultation with Harris), with
vesting on the last day of the original performance period applicable
to such L3 performance stock units; with value realized on vesting
determined by multiplying the number of shares acquired on vesting by
the $189.02 closing market price of our common stock on December 31,
2020. (These share amounts reflect the 1.30:1 exchange ratio in the
Merger.)
|
L3HARRIS 2021 PROXY STATEMENT 69
|
COMPENSATION
TABLES PENSION BENEFITS
|
|
Name
|
Plan Name(1)
|
Number of Years
Credited Service (#)
|
Present Value of Accumulated
Benefit ($)(2)
|
Payments During
Fiscal 2020 ($)
|
|||||||||
Todd W. Gautier
|
Legacy L3 Link Pension Plan
|
17.17 |
$ |
$790,964
|
—
|
||||||||
Legacy L3 SERP Pension Plan
|
17.17 |
$ |
$1,010,268
|
—
|
(1)
|
The “Legacy L3 Link Pension Plan”
refers to the L3Harris Link Simulation and Training Pension Plan, as amended, and
the “Legacy L3 SERP Pension Plan” refers to the L3Harris Technologies, Inc.
Supplemental Executive Retirement Plan.
|
(2)
|
The accumulated benefit is based
on service and earnings considered by the plans for the period through January 1,
2021 and represents the actuarial present value, under the Financial Accounting
Standards Board’s Accounting Standards Codification Topic 715, Compensation —
Retirement Benefits, of pension benefits earned to date and payable at the earliest
date for an unreduced benefit for the named executive officer as defined under each
plan, based on actuarial factors and assumptions, regardless of whether the named
executive officer has vested in this benefit. The actuarial factors and assumptions
used were: measurement date of January 1, 2021; discount rate of 2.39% for each of
the Legacy L3 Link Pension Plan and the Legacy L3 SERP Pension Plan; mortality based
on the Pri-2012 Amount Weighted mortality table with Buck Modified MP-2020
Projection Scale; and present value based on the single life annuity payable
beginning at the earliest time at which the participant may retire under the plan
without any benefit reduction due to age. Amounts shown are estimates only, and
actual benefits will be determined at termination of employment.
|
70
L3HARRIS
2021 PROXY STATEMENT
|
|
COMPENSATION TABLES NONQUALIFIED DEFERRED COMPENSATION
|
|
L3HARRIS 2021 PROXY STATEMENT 71
|
COMPENSATION
TABLES NONQUALIFIED
DEFERRED COMPENSATION
|
|
Name
|
Executive
Contributions
in Last
Fiscal Year
($)(1)
|
Registrant
Contributions
in Last
Fiscal Year
($)(2)
|
Aggregate
Earnings
in Last
Fiscal Year
($)(3)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance
at Last
Fiscal Year End
($)(4)
|
|||||||||||||||
William
M. Brown
|
$
|
572,077
|
$
|
170,781
|
$
|
531,080
|
$
|
0
|
$
|
1,880,963 |
||||||||||
Christopher
E. Kubasik
|
$
|
128,746
|
$
|
178,215
|
$
|
163,008
|
$
|
0
|
$
|
499,538 |
||||||||||
Jesus
Malave, Jr.
|
$
|
39,577 |
$
|
21,000
|
$
|
8,987 |
$
|
0
|
$
|
69,564 |
||||||||||
Todd
W. Gautier
|
$
|
40,723
|
$
|
303,120 |
$
|
31,018
|
$
|
0
|
$
|
390,394 |
||||||||||
Edward
J. Zoiss
|
$
|
375,331
|
$
|
53,672
|
$
|
283,108
|
$
|
0
|
$
|
1,189,457 |
(1)
|
Represents contributions to our ERSP of
base salary, annual cash incentives or other eligible compensation that have been deferred
and credited during fiscal 2020. The portion representing deferral of base salary is
included in the Fiscal 2020 Summary Compensation Table on page 62 in the “Salary” column
for fiscal 2020. The portion representing deferral of annual cash incentives relates to
deferred Annual Incentive Plan payments in fiscal 2020 in respect of fiscal transition
period performance, the amount of which is included in the Fiscal 2020 Summary
Compensation Table on page 62 in the “Non-Equity Incentive Plan Compensation” column for
our fiscal transition period. Any contributions by our named executive officers to our
ERSP of deferred Annual Incentive Plan payments in respect of our fiscal 2020 performance
will be contributions in our fiscal 2021 ending December 31, 2021.
|
(2)
|
Represents contributions by us to our
ERSP credited during fiscal 2020, which are included in the 2020 Fiscal Summary
Compensation Table on page 62 in the “All Other Compensation” column, except for $32,455
in the case of Mr. Kubasik and $11,538 in the case of Mr. Gautier, which amounts were
earned in respect of the fiscal transition period but not credited to their respective
accounts until fiscal 2020.
|
(3)
|
None of the earnings in this column are
included in the Fiscal 2020 Summary Compensation Table on page 62 because no preferential
or above-market amounts are paid on balances in our ERSP or the SSP-II.
|
(4)
|
Includes amounts reported as
compensation in the Fiscal 2020 Summary Compensation Table for our fiscal transition
period, fiscal 2019 and fiscal 2018 as follows: Mr. Brown — $1,756,723; Mr. Kubasik —
$117,517; Mr. Malave — $0; Mr. Gautier — $61,858; and Mr. Zoiss — $278,039.
|
72 L3HARRIS 2021
PROXY STATEMENT
|
|
|
COMPENSATION TABLES POTENTIAL PAYMENTS UPON
TERMINATION OR A CHANGE IN CONTROL
|
>
|
A substantial and continual failure or refusal by him to perform his material
duties under his employment agreement (other than
any failure resulting from illness or disability);
|
>
|
A willful breach by him of any material
provision of his employment agreement;
|
>
|
Any reckless or willful misconduct
(including action or failures to act) by him that causes material harm to our business or
reputation;
|
>
|
Any unexcused, repeated or prolonged
absence from work by him (other than as a result of, or in connection with, sickness, injury
or disability) during a period of 90 consecutive days;
|
>
|
A conviction of him for the commission
of a felony (including entry of a nolo contendere plea) or an indictment of him for the
commission of a felony under the U.S. Federal securities laws;
|
>
|
Embezzlement or willful
misappropriation by him of our property;
|
>
|
A willful and substantial violation by him of a material Company policy that is
generally applicable to all employees or all of our officers (including our Code of Conduct); or
|
>
|
A failure by him to cooperate in an
internal investigation after being instructed by our Board to cooperate.
|
>
|
A reduction in his annual base salary
or current annual cash incentive target award, other than a reduction also applicable in a
substantially similar manner and proportion to our other senior executive officers;
|
>
|
Our removal of him from his position as
Chief Executive Officer or President (The Brown Letter Agreement providing for Mr. Brown’s
transition to Chair and CEO following the Merger and then to Executive Chair during the
Subsequent Period constituted Mr. Brown’s consent to removal from those positions in
connection with the applicable transition.);
|
>
|
Our assignment to him of duties or
responsibilities that are materially inconsistent with his positions with us;
|
>
|
Any requirement by us that he relocate
his principal place of employment to a location other than our principal headquarters;
|
>
|
Our failure to nominate him for
reelection to our Board upon expiration of his term at any annual meeting of our
shareholders during the term of his employment;
|
>
|
Our failure to obtain an assumption of
his employment agreement by a successor of the Company;
|
>
|
Our delivery of a notice not to renew
his employment term pursuant to his employment agreement; or
|
>
|
Our termination of the indemnification
agreement we have entered into with him without entering into a replacement or successor
agreement, or making other appropriate indemnification arrangements in favor of him, on
terms reasonably acceptable to him and no less favorable to him than to our other senior
executives.
|
|
|
L3HARRIS 2021 PROXY STATEMENT 73
|
COMPENSATION TABLES POTENTIAL
PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
|
>
|
Pro-rated annual cash
incentive compensation for the fiscal year of termination based on the achievement of
performance objectives;
|
>
|
Severance payments, paid in
substantially equal monthly installments over a 24-month period, in an aggregate
amount equal to two times the sum of his then-current base salary and target annual
cash incentive compensation for the year of termination;
|
>
|
COBRA continuation medical
benefits for a period of 18 months following the termination date;
|
>
|
Each unvested time-based vesting
stock option will continue to vest in accordance with its ordinary vesting schedule
for the two-year period following the date of termination, at which time any remaining
unvested portion of the stock options will be forfeited, and to the extent
|
>
|
Each performance share unit will
remain outstanding and eligible to vest for the remainder of the applicable
performance period if the termination date is prior to the end of the applicable
performance period, with vesting subject to attainment of the applicable performance
goals and to pro-ration based on the portion of the applicable performance period
which has elapsed as of the termination date (with the remainder of the award
forfeited); and
|
>
|
Each other equity award will be
treated in the manner set forth in the applicable plan and award agreement.
|
|
> |
Accrued but unpaid base salary and unpaid vacation
time through the date of termination;
|
> |
Earned but unpaid annual cash incentive
compensation under our Annual Incentive Plan (or any successor plan) for the prior
fiscal year;
|
> |
Reimbursement of reasonable business expenses
incurred prior to the date of termination; and
|
> |
Other or additional compensation benefits, if any,
in accordance with the terms of our applicable plans or employee benefit programs for
terminated employees.
|
>
|
Hold a 5% or greater equity, voting or profit
participation interest in, or associate with, an enterprise that competes with us; or
|
>
|
Solicit any customer or any employee to leave us.
|
> |
Mr. Brown will serve as Chair and Chief Executive
Officer of L3Harris through the two-year Initial Period following the Merger. For the
one-year Subsequent Period, he will serve as Chair of L3Harris. On the third
anniversary of the closing of the Merger, he will retire as an officer and employee of
L3Harris and will resign as a member of L3Harris’ Board of Directors.
|
> |
During the Initial Period, Mr. Brown’s annual base
salary is $1,450,000, his target annual cash bonus award is $2,500,000, the target
value of his annual long-term incentive awards is $10,250,000 and in no case will any
such compensation element be less than that paid or granted to Mr. Kubasik. (Our Board
maintains discretion to increase those amounts.)
|
>
|
After the closing of the Merger, L3Harris would
grant Mr. Brown a one-time integration award composed of performance stock units with
a target value of $2,500,000 (subject to certain performance-based multipliers) and
performance-based non-qualified stock options with a grant date value of $5,000,000
and a ten-year term. Both components of the integration
|
74 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION
TABLES POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
|
>
|
If during the Initial
Period there is a qualifying termination of Mr. Brown (as defined in his
Executive Change in Control Severance Agreement entered into with Harris), or if
during the Subsequent Period Mr. Brown’s employment is terminated by us without
“cause” or by him as a result of a “constructive termination” (such terms having
the meanings outlined above under the Brown Original Agreement), then Mr. Brown
would be eligible for the compensation, benefits and other rights provided under
that Executive Change in Control Severance Agreement, with such amounts
determined using a “3X” multiple. In addition, his outstanding stock options
(other than those granted as part of the integration award) and restricted stock
units would become fully vested, exercisable, issuable and payable (as
applicable), and options would remain exercisable for their full remaining term.
Outstanding performance stock units (other than those granted as part of the
integration award) would remain outstanding and eligible to vest for the
remainder of the applicable perfomance period based on the attainment of
performance goals. Mr. Brown would also receive benefit continuation payments in
lieu of providing in-kind medical and prescription drug coverage after the end
of the three year benefit continuation period until he reaches the age of 65
(or, if earlier, the date he becomes eligible to receive comparable benefits
from another employer). Additionally, if such qualifying termination occurs
during the Initial Period, the integration award components would remain
outstanding and eligible to vest as to a portion of the award based on the date
of termination and attainment of applicable performance goals. If such
qualifying termination occurs during the Subsequent Period, the integration
award components would remain outstanding and eligible to vest based on the
greater of target performance and the actual attainment of applicable
performance goals. The integration award options that vest would remain
exercisable for their full remaining term.
|
>
|
Upon his retirement at the
end of the Subsequent Period, Mr. Brown will not receive any cash severance, but
his equity awards (other than those comprising the integration award) will be
treated as described above regarding a qualifying termination, and his
integration award will pay or vest, as applicable, based on actual performance.
In addition, Mr. Brown will receive the benefit continuation payments described
above regarding a qualifying termination, and for 12 months following his
retirement, have access to office space and administrative support provided by
L3Harris.
|
>
|
The definition of “cause”
under the Brown Original Agreement and Mr. Brown’s pre-Merger Executive Change
in Control Severance Agreement with Harris was modified to include an act of
misconduct in violation of certain L3Harris policies or federal or applicable
state law regarding discrimination or sexual harassment of subordinate employees
that creates a material risk of meaningful harm to L3Harris.
|
>
|
Except as expressly
modified by the Brown Letter Agreement, the terms of Mr. Brown’s pre-Merger
Executive Change in Control Severance Agreement with Harris and the Brown
Original Agreement remain in full force and effect, including the restrictive
covenants and confidentiality provisions of those agreements.
|
>
|
Mr. Kubasik will serve as
Vice Chair, President and Chief Operating Officer of L3Harris through the
Initial Period. Upon the commencement of the Subsequent Period (or, if earlier,
the date that Mr. Brown ceases to serve as the Chief Executive Officer of
L3Harris), Mr. Kubasik will become the Chief Executive Officer of L3Harris. On
the third anniversary of the closing of the Merger, Mr. Kubasik will also become
Chair of L3Harris.
|
>
|
During the Initial Period,
Mr. Kubasik’s annual base salary is $1,450,000, his target annual cash bonus
award is $2,500,000, the target value of his annual long-term incentive awards
is $10,250,000 and in no case will any such compensation element be less than
that paid or granted to Mr. Brown. (Our Board maintains discretion to increase
those amounts.)
|
>
|
After the closing of the
Merger, L3Harris would grant Mr. Kubasik a one-time integration award composed
of performance stock units with a target value of $2,500,000 (subject to certain
performance-based multipliers) and performance-based non-qualified stock options
with a grant date value of $5,000,000 and a ten-year term. Both components of
the integration award will be subject to three-year cliff vesting and will vest
(if at all) subject to continued employment and achievement of performance
conditions established by the L3Harris Compensation Committee. (This award was
granted in August 2019.)
|
>
|
In the event that L3Harris
terminates him without “cause” or he terminates his employment for “good
reason,” Mr. Kubasik’s outstanding stock options (other than those granted as
part of the integration award) and restricted stock units would become fully
vested, exercisable, issuable and payable (as applicable), and options would
remain exercisable for their full remaining term. Outstanding performance stock
units (other than those granted as part of the integration award) would remain
outstanding and eligible to vest for the remainder of the applicable perfomance
period based on the attainment of performance goals. Additionally, if such
qualifying termination occurs in the Initial Period, the integration award would
remain outstanding and eligible to vest as to a portion of the award based on
the date of termination and attainment of
|
|
L3HARRIS 2021
PROXY STATEMENT 75
|
COMPENSATION TABLES POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE
IN CONTROL
|
>
|
The protection period
under which Mr. Kubasik will be covered by the L3 CIC Plan was extended until
the fourth anniversary of the closing of the Merger, in the event of his
termination without “cause” or for “good reason” (each as defined in the L3
CIC Plan and modified in the Kubasik Letter Agreement).
|
>
|
The definition of
“cause” under the L3 CIC Plan as applicable to Mr. Kubasik was modified to
include an act of misconduct in violation of certain L3Harris policies or
federal or applicable state law regarding discrimination or sexual harassment
of subordinate employees that creates a material risk of meaningful harm to
L3Harris.
|
>
|
The definition of “good
reason” under the L3 CIC Plan as applicable to Mr. Kubasik was modified to
include the following events: failure to promote him to the contemplated new
roles upon and after the closing of the Merger; failure of Mr. Brown to cease
providing services to L3Harris on or before the third anniversary of the
closing of the Merger; or L3Harris’ material breach of the Kubasik Letter
Agreement. Mr. Kubasik also agreed to a limited waiver of his “good reason”
rights related to his contemplated relocation to Florida, certain
across-the-board changes in employee benefits and his transition to the role
of Vice Chair, President and Chief Operating Officer at the closing of the
Merger.
|
>
|
Mr. Kubasik is eligible
to receive an additional payment of up to $1,250,000 for relocation-related
expenses, with gross up of amounts taxed as ordinary income.
|
>
|
Certain restrictive covenants and confidentiality provisions of the L3
CIC Plan apply as a condition to severance benefits under the L3 CIC Plan
and are extended to 24 months following termination of employment.
|
>
|
base salary at the
annual rate of $625,000 (We maintain discretion to increase this amount.);
|
>
|
eligibility to receive
an annual cash incentive under our Annual Incentive
Plan with a target value of 100% of his base salary;
|
>
|
commencing with
calendar year 2020, eligibility to receive annual equity awards granted
under our Equity Incentive Plan with a target value of $2,000,000;
|
>
|
one-time restricted
stock unit award granted in August 2019 under our Equity Incentive Plan with
a grant date value of $950,000 (“One-Time RSU Award”), subject to ratable
vesting over three years;
|
>
|
a one-time momentum
equity award granted in August 2019 under our Equity Incentive Plan
comprised of (a) performance share units with a target value of $660,000;
and (b) performance-based stock options with a grant date value of
$1,340,000 and a term of ten years. Both components of the momentum equity
award will be subject to three-year cliff vesting and will vest (if at all)
subject to achievement of applicable cost synergy goals for the Merger
established by the Compensation Committee;
|
>
|
a one-time cash sign-on
bonus of $200,000;
|
>
|
eligibility to
participate in our retirement and employee health and welfare plans; and
|
>
|
certain relocation benefits.
|
76 L3HARRIS 2021
PROXY STATEMENT
|
|
|
COMPENSATION TABLES POTENTIAL PAYMENTS UPON
TERMINATION OR A CHANGE IN CONTROL
|
>
|
a lump sum cash payment equal to the
participant’s base pay (as determined under the Severance Pay Plan) and annual
bonus target; and
|
>
|
12 months of COBRA coverage at active
employee rates.
|
> |
a lump sum cash payment equal to a multiple
(two times in the case of employees at the officer level, including executive
officers) of the participant’s base salary and target bonus;
|
> |
a lump sum cash payment equal to the
participant’s pro-rata target bonus;
|
> |
continued participation in our group
medical, dental and vision plans for the number of years equal to the
applicable severance multiple; and
|
>
|
if immediately prior to the date of
termination or change in control, the participant is eligible for professional
finance and tax planning assistance services offered by us, continued
participation in such services for the balance of the calendar year in which
the termination occurs and the calendar year thereafter.
|
L3HARRIS 2021 PROXY STATEMENT 77
|
COMPENSATION
TABLES POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN
CONTROL
|
>
|
Our current CEO and
COO are not included as participants (due to the change in control severance
benefits provided for under their respective employment agreements and Legacy
CIC Severance Arrangements), unless otherwise expressly designated by our
Compensation Committee as participants in the future; and
|
>
|
Other individuals (including Messrs.
Gautier and Zoiss) who are covered by a Legacy CIC Severance Arrangement as of
March 1, 2020 are not entitled to severance benefits under the CIC Severance
Plan until after June 29, 2021 (2 years following the Merger, when their
Legacy CIC Severance Arrangement expires).
|
>
|
The executive terminates employment for
“good reason;” or
|
>
|
We terminate the executive’s employment for
any reason other than for “cause” (all terms as defined in the change in
control severance agreement and summarized below).
|
>
|
Any
person becomes the beneficial owner of 20% or more of the combined voting power
of our outstanding common stock;
|
> |
A change in the majority of our Board not approved by two-thirds of our
incumbent directors;
|
>
|
The
consummation of a merger, consolidation or reorganization, unless immediately
following such transaction: (1) more than 60% of the total voting power
resulting from the transaction is represented by shares that were our voting
securities immediately prior to the transaction; (2) no person becomes the
beneficial owner of 20% or more of the total voting power of our outstanding
voting securities as a result of the transaction; and (3) at least a majority of
the members of the board of directors of the company resulting from the
transaction were our incumbent directors at the time of our Board’s approval of
the execution of the initial agreement providing for the transaction;
|
>
|
Our
shareholders approve a plan of complete liquidation or dissolution of
L3Harris; or
|
>
|
We
consummate a sale or disposition of all or substantially all of our assets.
|
>
|
A
reduction in the executive’s annual base salary or current annual incentive
target award;
|
>
|
The
assignment of duties or responsibilities that are inconsistent in any material
adverse respect with the executive’s position, duties, responsibility or
status with us immediately prior to the change in control;
|
>
|
A
material adverse change in the executive’s reporting responsibilities, titles
or offices with us as in effect immediately prior to the change in control;
|
>
|
Any
requirement that the executive: (1) be based more than 50 miles from the
facility where the executive was located at the time of the change in control
or (2) travel on L3Harris business to an extent substantially greater than the
travel obligations of the executive immediately prior to the change in
control; or
|
>
|
Failure
by us to continue in effect any employee benefit or compensation plans or
provide the executive with employee benefits as in effect for the executive
immediately prior to the change in control.
|
>
|
A material breach by the
executive of the duties and responsibilities of the executive’s position; or
|
>
|
The conviction of the
executive of, or plea of nolo contendere by the executive to, a felony
involving willful misconduct that is materially injurious to us.
|
78 L3HARRIS 2021 PROXY STATEMENT
|
|
|
COMPENSATION TABLES POTENTIAL PAYMENTS UPON
TERMINATION OR A CHANGE IN CONTROL
|
>
|
Unpaid base salary
through the date of termination;
|
>
|
A pro-rated annual bonus
(as determined under the change in control severance agreement);
|
>
|
Any unpaid accrued vacation pay;
|
>
|
To the extent permitted
under Section 409A of the Internal Revenue Code, any other benefits or awards
that have been earned or became payable pursuant to the terms of any
compensation plan but that have not yet been paid to the executive;
|
>
|
Two times the executive’s
highest annual rate of base salary during the 12-month period prior to the
date of termination (following the Merger, “three times” in the case of Mr.
Brown pursuant to the Brown Letter Agreement); and
|
>
|
Two times the greatest of
the executive’s (1) highest annual bonus in the three years prior to the
change in control, (2) target bonus for the year in which the change in
control occurred or (3) target bonus for the year in which the executive’s
employment is terminated (following the Merger, “three times” in the case of
Mr. Brown pursuant to the Brown Letter Agreement).
|
>
|
Receipt of the same
level of medical, dental, accident, disability and life insurance and any
similar benefits as are in effect on the date of termination (or the
highest level of coverage provided to active executives immediately prior
to the change in control, if more favorable), for the two years following
the date of termination, but in no event later than age 65 (benefit
continuation payments in lieu of providing in-kind medical and
prescription drug coverage, in the case of Mr. Brown pursuant to the Brown
Letter Agreement);
|
>
|
Reimbursement for any
relocation expense related to the pursuit of other business opportunities
incurred within two years following the date of termination;
|
>
|
Reimbursement for
recruitment or placement services of up to $4,000; and
|
>
|
Reimbursement for
professional financial or tax planning services of up to $5,000 per year for
the calendar year in which the termination occurs and the next calendar year.
|
> |
The executive terminates employment for
“good reason”; or
|
>
|
The executive’s employment is terminated
without “cause” (all terms as defined in the L3 CIC Plan and summarized
below).
|
> |
the acquisition by any person or group
(including a group within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), other than L3 or any of its subsidiaries, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of a majority of the combined voting power of L3’s then outstanding
voting securities, other than by any employee benefit plan maintained by L3;
|
>
|
the sale of all or substantially all of
the assets of L3 and its subsidiaries taken as a whole; or
|
>
|
the election, including the filling of
vacancies, during any period of 24 months or less, of 50% or more of the
members of the board of directors of L3, without the approval of L3’s
incumbent directors at the beginning of such period.
|
> |
A reduction in the executive’s base
salary or annual or long-term incentive opportunity (including target bonus,
if applicable);
|
> |
An adverse change to the calculation
methodology for determining bonuses or long-term incentives which is
reasonably likely to have an adverse impact on the amounts the executive has
the potential to earn under such programs;
|
L3HARRIS 2021 PROXY STATEMENT 79
|
COMPENSATION TABLES POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
|
> |
Any failure by the acquiror to
continue to provide employee benefits that are substantially
similar in the aggregate to those afforded to the executive
immediately prior to the change in control;
|
> |
A material adverse change in
executive’s duties or responsibilities;
|
> |
A relocation of executive’s
principal place of business of 50 miles or more, provided that such
relocation also increases the executive’s commute by at least 25
miles;
|
> |
A failure to pay the executive’s
base salary and other amounts earned by the executive within 10 days
after the date such compensation is due; or
|
> |
Failure of any successor or
assignee to all or substantially all of the business and/or assets of
L3 in connection with any change in control, by agreement in writing
in form and substance reasonably satisfactory to the executive,
expressly, absolutely and unconditionally to assume and agree to
perform all obligations under the L3 CIC Plan.
|
> |
Intentional failure
to perform reasonably assigned duties;
|
> |
Dishonesty or willful misconduct in
the performance of duties;
|
> |
Engaging in a transaction in
connection with the performance of duties to L3 or its affiliates
which transaction is adverse to the interests of L3 and is engaged in
for personal profit; or
|
> |
Willful violation of any law, rule
or regulation in connection with the performance of duties (other than
traffic violations or similar offenses).
|
> |
A multiple of current annual salary
and average annual incentive plan awards for the prior three years:
(a) chief executive officer, chief operating officer, chief financial
officer and chief legal officer – three times (including for Mr.
Kubasik), and (b) segment presidents – two and a half times (including
for Mr. Gautier). The annual incentive plan award for the year of
termination is a pro rata award based on (a) the number of months
worked in the year of termination and (b) the average annual incentive
plan awards for the prior three years (or the actual annual incentive
plan award payable for the full year of termination, if performance is
determinable at the time of termination).
|
> |
Receipt of continued medical and
life insurance benefits at the same cost to the executive, or cash
equal to any increased premiums, for the same period as the severance
multiple described above;
|
> |
Reasonable outplacement services
paid for by L3; and
|
> |
If eligible, L3-paid financial
planning services for the one-year period after a change in control
under an L3 policy that is separate from the L3 CIC Plan.
|
>
|
Do not provide for a tax gross-up of excise taxes;
|
> |
Do provide for a “best net after-tax” payment approach that reduces
payments and benefits to an executive if the reduction would result in
the executive receiving higher payments and benefits on a net
after-tax basis;
|
>
|
Do provide that we will reimburse the
executive for any legal fees and costs with respect to any dispute
arising under the arrangement; and
|
>
|
With respect to our change in control
severance agreements approved by the Harris Board prior to the Merger,
do provide that, not later than the date on which a change in control
occurs, we are required to contribute to an irrevocable “rabbi trust”
in cash or other liquid assets, an amount equal to the total payments
expected to be paid under the agreements, assuming that the employment
of the executives is terminated, plus the amount of trust
administration and trustee fees reasonably expected to be incurred (in
recognition that in certain situations payments under the agreements
will be required to be deferred for up to six months following the
triggering event to comply with Section 409A of the Internal Revenue
Code). (This funding requirement was waived in respect of the Merger.)
|
80 L3HARRIS 2021 PROXY STATEMENT
|
|
COMPENSATION TABLES POTENTIAL PAYMENTS
UPON TERMINATION OR A CHANGE IN CONTROL
|
>
|
Accrued salary and pay for unused
vacation;
|
>
|
Earned but unpaid bonuses;
|
>
|
Distributions of vested plan balances
under our RSP and ERSP (and the SSP-II, where applicable); and
|
>
|
Payments under the Legacy L3 Link
Pension Plan and the Legacy L3 SERP Pension Plan that do not change as a
result of termination of employment for any reason, as applicable.
|
>
|
Unvested options, as well as unvested
performance stock options, are forfeited, although a pro-rata portion
of unvested performance stock options (based on the period worked
during the performance period) will remain outstanding and eligible to
be earned and to vest based on satisfaction of the performance vesting
condition and become exercisable upon expiration of the service
period;
|
>
|
Vested options, as well as vested
performance stock options granted in fiscal 2015, may be exercised for
up to 90 days following such termination but not later than the
regularly scheduled expiration date;
|
>
|
Vested performance stock options granted
in our fiscal transition period may be exercised until the regularly
scheduled expiration date;
|
>
|
Unvested performance share units are
forfeited, although a pro-rata portion (based on the period worked
during the performance period) will remain outstanding and eligible to
be earned based on attainment of applicable performance targets,
subject to a minimum one-year vesting period in the case of
performance share units granted after our fiscal transition period;
and provided that, in the case of performance share units granted in
our fiscal transition period, if termination occurs on or after June
29, 2021 and through June 29, 2022, vesting shall be at not less than
the target level;
|
>
|
Unvested restricted stock units granted
in our fiscal transition period immediately fully vest and are paid as
soon as practicable; and
|
>
|
Unvested restricted stock units granted
after our fiscal transition period vest pro-rata based on the period
worked during the restriction period, subject to a minimum one-year
vesting period, with the vested portion generally paid out as soon as
practicable and the unvested portion forfeited.
|
L3HARRIS 2021 PROXY STATEMENT 81 |
COMPENSATION TABLES POTENTIAL
PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
|
>
|
The named executive officer is not
entitled to any compensation or benefits other than those generally
paid to all of our salaried employees upon any termination of
employment as described above;
|
>
|
Annual incentive awards, unvested
stock options, unvested performance stock options, unvested
performance share units, unvested restricted stock units and unvested
shares of restricted stock are automatically forfeited;
|
>
|
Vested options, as well as vested
performance stock options, in each case granted prior to the Merger
may be exercised for up to 30 days following such termination or
resignation but not later than the regularly scheduled expiration
date; and
|
>
|
Vested options, as well as vested
performance stock options, in each case granted after the Merger may
be exercised for up to 90 days following such termination or
resignation but not later than the regularly scheduled expiration
date.
|
>
|
Unvested performance stock options are
forfeited, although a pro-rata portion (based on the period worked
during the performance period) will remain outstanding and eligible
to be earned and to vest based on satisfaction of the performance
vesting condition and become exercisable upon termination of the
service period;
|
>
|
Vested performance stock options
granted in our fiscal transition period may be exercised until the
regularly scheduled expiration date;
|
>
|
Unvested performance share units
granted in our fiscal transition period are forfeited, although a
pro-rata portion (based on the period worked during the performance
period) will remain outstanding and eligible to be earned based on
attainment of applicable performance targets; provided that if
termination occurs on or after June 29, 2021 and through June 29,
2022, vesting shall be at not less than the target level; and
|
>
|
Unvested restricted stock units granted
in our fiscal transition period immediately fully vest in the case
of employees not covered by the L3 CIC Plan and are paid as soon as
practicable.
|
>
|
Account balances in our RSP and ERSP
become fully vested;
|
>
|
If the
executive was employed for a minimum of 180 days during the fiscal
year, annual incentive compensation awards are paid pro-rata based on
the period worked during such fiscal year, with payment made after the
fiscal year end based on our performance;
|
>
|
Unvested options granted after our fiscal transition
period immediately fully vest, and unvested performance stock
options granted in our fiscal transition period immediately vest
at target;
|
>
|
Vested options, as well as vested
performance stock options, granted prior to the Merger may be
exercised, in the case of death, for up to 12 months following the
date of death but not later than the regularly scheduled
expiration date (by the beneficiaries), and in the case of
disability, until the regularly scheduled expiration date;
|
>
|
Vested options, as well as vested
performance stock options, granted after the Merger may be
exercised for up to 12 months following the date of death (by the
beneficiaries) or disability but not later than the regularly
scheduled expiration date;
|
>
|
Unvested performance share units
immediately vest at target and are paid out as soon as
administratively practicable following death and, in the case of
disability, generally following expiration of the service period
but may be paid out earlier in certain circumstances; and
|
>
|
Unvested restricted stock units
immediately fully vest and are paid out as soon as
administratively practicable, and subject to a minimum one-year
holding period, unvested shares of restricted stock immediately
fully vest.
|
82 L3HARRIS 2021 PROXY STATEMENT
|
|
COMPENSATION
TABLES POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN
CONTROL
|
>
|
Account balances in our
RSP and ERSP become fully vested;
|
>
|
If the executive was
employed a minimum of 180 days during the fiscal year,
annual incentive compensation awards are paid pro-rata
based on the period worked during such fiscal year, with
payment made after the fiscal year end based on our
performance;
|
>
|
Unvested options,
as well as unvested performance stock options, are
forfeited;
|
>
|
If after age 55
with 10 or more years of full-time service, vested
options, as well as vested performance stock
options, in each case granted prior to the Merger
may be exercised until the regularly scheduled
expiration date;
|
>
|
If after
age 55 with 10 or more years of full-time
service on or after June 29, 2020, vested
performance stock options granted in our
fiscal transition period may be exercised
until the regularly scheduled expiration date;
|
>
|
If
after age 60 with 5 or more years of
full-time service and satisfaction of
certain advance notice and other criteria,
vested options granted after our fiscal
transition period may be exercised until
the regularly scheduled expiration date;
|
>
|
Unvested
performance share units are forfeited;
although in the case of performance
share units granted after our fiscal
transition period, if after age 60
with 5 or more years of full-time
service and satisfaction of certain
advance notice and other criteria, and
subject to a minimum one-year vesting
period, a pro-rata portion (based on
the period worked during the
performance period) will remain
outstanding and eligible to be earned
based on attainment of applicable
performance targets;
|
>
|
If
after age 55 with 10 or more years
of full-time service on or after
June 29, 2020, unvested restricted
stock units granted in our fiscal
transition period vest pro-rata
based on the period worked during
the restriction period, with the
vested portion generally paid out
as soon as practicable and the
unvested portion forfeited; and
|
>
|
If after age 60 with 5
or more years of full-time
service and satisfaction of
certain advance notice and
other criteria, and subject to
a minimum one-year holding
period, unvested restricted
stock units granted after our
fiscal transition period vest
pro-rata based on the period
worked during the restriction
period, with the vested
portion generally paid out as
soon as practicable and the
unvested portion forfeited.
|
>
|
Whether
or not a termination occurs, annual cash
incentive compensation awards under our
Annual Incentive Plan are fully earned and
paid out promptly following the change in
control or, in certain instances, following
the end of the fiscal year, in each case at
not less than the target level;
|
>
|
If
the “double trigger” qualifying
termination of employment also occurs,
unvested options granted after our
fiscal transition period immediately
vest and may be exercised until the
regularly scheduled expiration date;
|
>
|
Unvested
performance stock options granted in
our fiscal transition period vest at
not less than the target level and
become exercisable upon expiration
of the service period, subject to
accelerated exercisability if the
“double trigger” qualifying
termination of employment or death
or disability also occurs and to
forfeiture in certain other
employment termination
circumstances;
|
>
|
Unvested
performance share units granted
after the Merger are deemed fully
earned at not less than the target
level and will vest and be paid
out as soon as administratively
practicable following expiration
of the service period, subject to
accelerated vesting and payout if
the “double trigger” qualifying
termination of employment or
certain other employment
terminations also occur and to
forfeiture in certain other
employment termination
circumstances;
|
>
|
Unvested shares of
restricted stock immediately
fully vest and will be paid
out as soon as
administratively practicable
following the change in
control; and
|
>
|
If the “double
trigger” qualifying
termination of employment
also occurs, unvested
restricted stock units
granted after our fiscal
transition period
immediately fully vest and
are paid out as soon as
administratively
practicable.
|
L3HARRIS 2021 PROXY STATEMENT 83
|
COMPENSATION
TABLES POTENTIAL
PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
|
>
|
The
assumption that the
hypothetical
termination event
occurred as of January
1, 2021, the last day
of fiscal 2020, and
that the value of our
common stock was
$189.02 per share
based on the closing
market price on
December 31, 2020, the
last trading day of
fiscal 2020;
|
>
|
The
applicable
provisions as of
January 1, 2021 in
the agreements and
other arrangements
between the named
executive officer
and us, which are
summarized on
pages 73-80;
|
>
|
Cash
severance
includes
multiples of
salary and
annual
incentive
compensation,
but does not
include paid
or unpaid
salary or
annual
incentive
compensation
or cash
incentives
earned for
service
through the
end of fiscal
2020;
|
>
|
The
value of any
options that
were vested
prior to
January 1,
2021 is not
included;
|
>
|
The
assumption
that all
unvested,
in-the-money
options that
were not
automatically
forfeited on
January 1,
2021 and that
were entitled
to vesting on
such day
vested and
were exercised
on such day
(there were no
such
in-the-money
options on
January 1,
2021);
|
>
|
The
value of
accelerated
restricted
stock units
includes the
dollar value
of dividend
equivalents
paid in cash
with respect
to such
accelerated
restricted
stock units;
|
>
|
The
value of
accelerated
performance
share units is
based on the
target number
of performance
share units
previously
granted and
includes the
dollar value
of dividend
equivalents
paid in cash
with respect
to such
accelerated
performance
share units;
|
>
|
Any
payment of the
aggregate
balance shown
in the Fiscal
2020
Nonqualified
Deferred
Compensation
Table on page
72 of this
proxy
statement is
not included;
|
>
|
Any
payments under
the Legacy L3
Link Pension
Plan and the
Legacy L3 SERP
Pension Plan
that do not
change as a
result of
termination of
employment for
any reason or
a change in
control are
not included;
|
>
|
The
estimated
value of
continuation
of health and
welfare
benefits and
perquisites is
included,
where
applicable;
|
>
|
For a
termination by
us without
cause or by
the named
executive
officer for
good reason,
including
following a
change in
control (which
includes the
Merger), the
“Other
Benefits” line
includes, in
the case of
Messrs. Brown
and Zoiss,
$6,595 for
outplacement
services,
$10,000
($5,000 per
year for two
years) for
financial or
tax planning
services,
$300,000 for
estimated
relocation
assistance and
an estimate of
reimbursement
for taxes
associated
with
relocation
assistance,
pursuant to
their
executive
change in
control
severance
agreements; in
the case of
Messrs.
Kubasik and
Gautier,
$20,000 for
financial
planning
services from
a designated
third-party
provider for
one year
following
separation
(pursuant to
current
practice) and
$18,000 for
outplacement
services
(pursuant to
the L3 CIC
Plan); and in
the case of
Mr. Malave,
following
termination by
us without
cause, $20,000
for financial
planning
services from
a designated
third-party
provider for
one year and
$18,000 for
outplacement
services
(pursuant to
current
practice and
the Severance
Pay Plan), and
following
termination by
us without
cause or by
Mr. Malave for
good reason
following a
change in
control,
$20,000 for
financial
planning
services from
a designated
third-party
provider for
two years
(pursuant to
the CIC
Severance
Plan); and
|
>
|
With
respect to a
named
executive
officer over
the age of 60
and who has
completed at
least 5 years
of full-time
service (none
of our named
executive
officers as of
January 1,
2021), a
termination of
such
executive’s
employment
with us that
is within such
executive’s
control would
be expected to
be designated
as retirement,
as opposed to
voluntary
termination
(resignation)
or termination
by such
executive for
good reason.
|
84 L3HARRIS 2021 PROXY STATEMENT
|
|
COMPENSATION
TABLES POTENTIAL PAYMENTS UPON TERMINATION OR A
CHANGE IN CONTROL
|
Executive Benefits
and Payment
|
Termination
by L3Harris
for Cause
|
Voluntary
Termination/
Resignation
|
Termination
by
Executive for
Constructive
Termination
|
Involuntary
Termination
by L3Harris
without Cause
|
Death
|
Disability
|
Change in
Control without
Termination
|
Termination by
L3Harris without
Cause/by Executive
for Good Reason
Following a
Change in Control
|
||||||||||||||||||||||||
Cash Severance
|
$
|
0
|
$
|
0
|
$
|
15,705,000
|
$ |
15,705,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
15,705,000
|
||||||||||||||||
Value of Accelerated
or Continued Vesting of
Unvested Options
|
$
|
0
|
$
|
0
|
$
|
0
|
$ |
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||||||||||
Value of Accelerated
Vesting of Unvested
Restricted Stock Units
|
$
|
0
|
$
|
0
|
$
|
4,851,684
|
$ |
4,851,684
|
$
|
5,552,487
|
$
|
5,552,487
|
$
|
0 |
$
|
7,345,448
|
||||||||||||||||
Value of Accelerated
Vesting of Unvested
Performance Share Units
|
$
|
0
|
$
|
0
|
$
|
1,577,862
|
$ | 3,244,926 |
$
|
4,033,857
|
$
|
4,033,857
|
$
|
0 |
$
|
7,345,320
|
||||||||||||||||
Health and Welfare
Benefits
|
$
|
0
|
$
|
0
|
$
|
172,614
|
$ |
172,614
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
172,614
|
||||||||||||||||
Other Benefits
|
$
|
0
|
$
|
0
|
$
|
511,237
|
$ |
511,237
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
511,237
|
||||||||||||||||
TOTAL
|
$
|
0
|
$
|
0
|
$
|
22,818,397
|
$ |
24,485,461
|
$
|
9,586,344
|
$
|
9,586,344
|
$
|
0 |
$
|
31,088,618
|
Executive Benefits
and Payment
|
Termination
by L3Harris
for Cause
|
Voluntary
Termination/
Resignation
|
Termination
by
Executive
for
Constructive
Termination
|
Involuntary
Termination
by
L3Harris
without
Cause
|
Death
|
Disability
|
Change
in
Control
without
Termination
|
Termination
by
L3Harris
without
Cause/by
Executive
for
Good Reason
Following
a
Change in
Control
|
||||||||||||||||||||||||
Cash Severance
|
$
|
0
|
$
|
0
|
$
|
12,240,000
|
$ |
12,240,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
12,240,000
|
||||||||||||||||
Value of Accelerated
Vesting of Unvested
Options
|
$
|
0
|
$
|
0
|
$
|
0
|
$ |
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
||||||||||||||||
Value of Accelerated
Vesting of
Unvested
Restricted Stock and
Restricted Stock Units
|
$
|
0
|
$
|
0
|
$
|
6,235,365
|
$ |
6,235,365
|
$
|
6,936,167
|
$
|
6,936,167
|
$
|
0 |
$
|
8,729,128
|
||||||||||||||||
Value of Accelerated
Vesting of
Unvested
Performance Share Units
|
$
|
0
|
$
|
0
|
$
|
1,577,862
|
$ |
3,244,926
|
$
|
4,033,857
|
$
|
4,033,857
|
$
|
0 |
$
|
7,354,320
|
||||||||||||||||
Health and Welfare
Benefits
|
$
|
0
|
$
|
0
|
$
|
169,844
|
$ |
169,844
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
169,844
|
||||||||||||||||
Other Benefits
|
$
|
0
|
$
|
0
|
$
|
38,000
|
$ | 38,000 |
$
|
20,000
|
$
|
20,000
|
$
|
0
|
$
|
38,000
|
||||||||||||||||
TOTAL
|
$
|
0
|
$
|
0
|
$
|
20,261,071
|
$ |
21,928,135
|
$
|
10,990,024
|
$
|
10,990,024
|
$
|
0 |
$
|
28,531,292
|
L3HARRIS 2021 PROXY STATEMENT 85
|
COMPENSATION TABLES POTENTIAL PAYMENTS
UPON TERMINATION OR A CHANGE IN CONTROL
|
Jesus Malave, Jr.
Executive
Benefits
and Payment
|
Termination
by L3Harris
for Cause
|
Voluntary
Termination/
Resignation
|
Termination
by
Executive
for
Constructive
Termination
|
Involuntary
Termination
by
L3Harris
without
Cause
|
Death
|
Disability
|
Change
in
Control
without
Termination
|
Termination
by
L3Harris
without
Cause/by
Executive
for
Good Reason
Following
a
Change in
Control
|
||||||||||||||||||||||||
Cash Severance
|
$
|
0
|
$
|
0
|
$
|
700,000
|
$ |
1,400,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
2,800,000
|
||||||||||||||||
Value of
Accelerated
Vesting of Unvested
Options
|
$
|
0
|
$
|
0
|
$
|
0
|
$ |
0
|
$
|
0
|
$
|
0
|
$
|
0 |
$
|
0
|
||||||||||||||||
Value of
Accelerated
Vesting
of Unvested
Restricted
Stock Units
|
$
|
0
|
$
|
0
|
$
|
599,601
|
$ |
599,601
|
$
|
743,222
|
$
|
743,222
|
$
|
0 |
$
|
1,110,668
|
||||||||||||||||
Value of
Accelerated
Vesting
of Unvested
Performance
Share Units
|
$
|
0
|
$
|
0
|
$
|
416,540
|
$ |
758,121
|
$
|
966,391
|
$
|
966,391
|
$
|
0 |
$
|
1,646,753
|
||||||||||||||||
Health and
Welfare
Benefits
|
$
|
0
|
$
|
0
|
$
|
0
|
$ |
17,117
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
34,234
|
||||||||||||||||
Other
Benefits
|
$
|
0
|
$
|
0
|
$
|
0
|
$ | 38,000 |
$
|
20,000 |
$
|
20,000
|
$
|
0
|
$
|
40,000
|
||||||||||||||||
TOTAL
|
$
|
0
|
$
|
0
|
$
|
1,716,141
|
$ |
2,812,838
|
$
|
1,729,613
|
$
|
1,729,613
|
$
|
0
|
$
|
5,631,655
|
Executive
Benefits
and Payment
|
Termination
by L3Harris
for Cause
|
Voluntary
Termination/
Resignation
|
Termination
by
Executive
for
Constructive
Termination
|
Involuntary
Termination
by
L3Harris
without
Cause
|
Death
|
Disability
|
Retirement
|
Change
in
Control
without
Termination
|
Termination
by
L3Harris
without
Cause/
by
Executive for
Good
Reason
Following
a
Change in
Control
|
|||||||||||||||||||||||||
Cash Severance
|
$
|
0
|
$
|
0
|
$
|
3,276,667
|
$ |
3,276,667
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
3,276,667
|
||||||||||||||||
Value of
Accelerated
Vesting of Unvested
Options
|
$
|
0
|
$
|
0
|
$
|
0
|
$ |
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0 |
$
|
0
|
||||||||||||||||
Value of
Accelerated
Vesting
of Unvested
Restricted Stock
Units
|
$
|
0
|
$
|
0
|
$
|
1,604,540
|
$ |
1,604,540
|
$
|
1,713,932
|
$
|
1,713,932
|
$
|
0
|
$
|
0
|
$
|
1,933,805
|
||||||||||||||||
Value of
Accelerated
Vesting
of Unvested
Performance
Share
Units
|
$
|
0
|
$
|
0
|
$
|
416,540
|
$ |
676,762
|
$
|
885,032
|
$
|
885,032
|
$
|
0
|
$
|
0 |
$
|
1,403,342
|
||||||||||||||||
Health and
Welfare
Benefits
|
$
|
0
|
$
|
0
|
$
|
151,140
|
$ |
151,140
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
151,140
|
||||||||||||||||
Other Benefits
|
$
|
0
|
$
|
0
|
$
|
38,000
|
$ | 38,000 |
$
|
20,000 |
$
|
20,000 |
$
|
0
|
$
|
0
|
$
|
38,000
|
||||||||||||||||
TOTAL
|
$
|
0
|
$
|
0
|
$
|
5,486,886
|
$ |
5,747,108
|
$
|
2,618,963
|
$
|
2,618,963
|
$
|
0
|
$
|
0 |
$
|
6,862,953
|
86 L3HARRIS 2021 PROXY STATEMENT
|
COMPENSATION TABLES CEO PAY RATIO
|
Executive
Benefits
and Payment
|
Termination
by L3Harris
for Cause
|
Voluntary
Termination/
Resignation
|
Termination by
Executive for
Constructive
Termination
|
Involuntary
Termination
by L3Harris
without Cause
|
Death
|
Disability
|
Retirement
|
Change in
Control without
Termination
|
Termination
by L3Harris
without Cause/
by Executive for
Good Reason
Following a
Change in Control
|
|||||||||||||||||||||||||
Cash Severance
|
$
|
0
|
$
|
0
|
$
|
2,792,000
|
$ |
2,792,000
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
2,792,000
|
||||||||||||||||
Value of Accelerated
Vesting of Unvested
Options
|
$
|
0
|
$
|
0
|
$
|
0
|
$ |
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0 |
$
|
0
|
||||||||||||||||
Value of Accelerated
Vesting of Unvested
Restricted Stock Units
|
$
|
0
|
$
|
0
|
$
|
757,452
|
$ |
757,452
|
$
|
866,844
|
$
|
866,844
|
$
|
358,684 |
$
|
0 |
$
|
1,146,717
|
||||||||||||||||
Value of Accelerated
Vesting of Unvested
Performance Share
Units
|
$
|
0
|
$
|
0
|
$
|
416,540
|
$ |
676,762
|
$
|
885,032
|
$
|
885,032
|
$
|
0
|
$
|
0 |
$
|
1,403,342
|
||||||||||||||||
Health and Welfare
Benefits
|
$
|
0
|
$
|
0
|
$
|
34,682
|
$ |
34,682
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
34,682
|
||||||||||||||||
Other Benefits
|
$
|
0
|
$
|
0
|
$
|
511,237
|
$ |
511,237
|
$
|
20,000
|
$
|
20,000
|
$
|
0
|
$
|
0
|
$
|
511,237
|
||||||||||||||||
TOTAL
|
$
|
0
|
$
|
0
|
$
|
4,511,911
|
$ |
4,772,132
|
$
|
1,771,875
|
$
|
1,771,875
|
$
|
358,684
|
$
|
0
|
$
|
5,887,978
|
1
|
Of our total employee population of 49,396
employees, 44,050 were located, and 5,346 were not
located, in the United States as of January 1,
2021. These same numbers were used in calculating
the de minimis exemption to determine the
SEC-permitted number of excluded employees. The
approximate number of employees excluded, by
jurisdiction, were as follows: Great Britain
(1,331), Italy (255), Germany (225), Portugal (103),
India (82), Thailand (60), New Zealand (49), United
Arab Emirates (46), Pakistan (23), France (14), Hong
Kong (14), Saudi Arabia (11) and 10 or fewer in each
of Algeria, Brazil, Chile, China, Egypt, Estonia,
Hungary, Ireland, Japan, Jordan, Republic of Korea,
Lithuania, Mexico, Malaysia, Netherlands, Oman,
Philippines, Poland, Romania, Singapore, Spain,
Sweden, Switzerland, Taiwan and Turkey.
|
L3HARRIS
2021 PROXY
STATEMENT 87
|
>
|
the
integrity of
L3Harris’
financial
statements;
|
>
|
L3Harris’
compliance
with relevant
legal and
regulatory
requirements;
|
>
|
L3Harris’
internal
control over
financial
reporting;
|
>
|
the
qualifications
and
independence
of L3Harris’
independent
registered
public
accounting
firm; and
|
>
|
the
performance of
L3Harris’
internal audit
function and
independent
registered
public
accounting
firm.
|
>
|
reviewed
and discussed
with management
and EY L3Harris’
internal control
over financial
reporting,
including a
review of
management’s
report on its
assessment and
EY’s audit of
the
effectiveness of
L3Harris’
internal control
over financial
reporting and
any significant
deficiencies or
material
weaknesses;
|
>
|
considered,
reviewed and
discussed the
audited
financial
statements
with
management and
EY, including
a discussion
of the quality
of the
accounting
principles,
the
reasonableness
thereof,
significant
adjustments,
if any, and
the clarity of
disclosures in
the financial
statements, as
well as
critical
accounting
policies and
other
financial
accounting and
reporting
principles and
practices;
|
>
|
discussed
with EY the
matters
required to be
discussed
under the
Public Company
Accounting
Oversight
Board Auditing
Standard No.
1301,
Communications
with Audit
Committees,
and No. 2410,
Related
Parties;
|
88 L3HARRIS 2021 PROXY STATEMENT |
|
REPORT OF THE AUDIT COMMITTEE OF L3HARRIS
|
>
|
received,
reviewed and
discussed the
written
disclosures
and the letter
from EY
required by
applicable
requirements
of the Public
Company
Accounting
Oversight
Board
regarding EY’s
communications
with an audit
committee
concerning
independence,
and discussed
with EY its
independence;
|
>
|
reviewed
the services
provided by EY
other than its
audit services
and considered
whether the
provision of
such other
services by EY
is compatible
with
maintaining
its
independence,
discussed with
EY its
independence,
and concluded
that EY is
independent
from L3Harris
and its
management;
and
|
>
|
reviewed
the contents
of
SEC-required
certification
statements
from the Chief
Executive
Officer and
Chief
Financial
Officer and
also discussed
and reviewed
the process
and internal
controls for
providing
reasonable
assurances
that the
financial
statements
included in
L3Harris’
Annual Report
on Form 10-K
for the fiscal
year ended
January 1,
2021 are true
in all
important
respects, and
that the
report
contains all
appropriate
material
information of
which they are
aware.
|
L3HARRIS
2021
PROXY STATEMENT 89
|
Our Board
unanimously recommends voting FOR
ratification of appointment of Ernst & Young LLP
as our independent registered public accounting firm
for the fiscal
year ending December 31, 2021.
|
> Independent accounting firm with breadth of knowledge, support and expertise of accessible national office. > Significant industry and government
contracting expertise.
> Periodic mandated rotation of audit
firm’s lead engagement partner.
|
90 L3HARRIS 2021 PROXY
STATEMENT
|
|
PROPOSAL 3: RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
|
Fiscal 2020
|
Fiscal Transition Period
|
Fiscal 2019
|
||||||||||
Audit Fees(1)
|
$
|
13,437,957
|
$
|
14,922,674
|
$
|
9,679,000
|
||||||
Audit-Related Fees(2)
|
$
|
302,049
|
$
|
6,431 |
$
|
0
|
||||||
Tax Fees(3)
|
$
|
1,997,183
|
$
|
460,529
|
$
|
455,000
|
||||||
All Other Fees(4)
|
$
|
6,705
|
$
|
10,615 |
$
|
0
|
||||||
Total
|
$
|
15,743,894
|
$
|
15,400,249
|
$
|
10,134,000
|
(1)
|
Audit
fees included fees associated with the annual audit and
the audit of internal control over financial reporting,
as well as reviews of our quarterly reports on Form
10-Q, SEC registration statements and other filings,
comfort letter procedures, accounting and reporting
consultations and statutory audits required
internationally for certain of our subsidiaries.
|
(2)
|
Audit-related
services in fiscal 2020 primarily related to audits of
stand-alone financial statements of business within the
consolidated group. No audit- related services were
rendered or fees billed for fiscal 2019.
|
(3)
|
Tax fees for fiscal
2020 consisted of $1,474,612 related to tax compliance,
including foreign and domestic return preparation and
transfer pricing studies, and $522,571 related to tax
planning and tax advisory services. Tax fees for our
fiscal transition period consisted of $204,142 related
to tax compliance, including foreign and domestic return
preparation and transfer pricing studies, and $256,387
related to tax planning and tax advisory services. Tax
fees for fiscal 2019 consisted of $125,000 related to
tax compliance, including foreign and domestic return
preparation and transfer pricing studies, and $330,000
related to tax planning and tax advisory services.
|
(4)
|
For fiscal 2019, no
professional services were rendered or fees billed for
services not included within Audit Fees, Audit-Related
Fees or Tax Fees.
|
L3HARRIS 2021 PROXY STATEMENT
91
|
Name
|
Shares Beneficially Owned
|
|||
Shares
Owned(1)
|
Shares Under
Exercisable Options(2)
|
Total Shares
Beneficially Owned(3)
|
Percentage
of Shares
|
|
DIRECTORS AND NOMINEES
|
||||
Sallie B. Bailey
|
2,490 |
—
|
2,490
|
*
|
Peter W. Chiarelli
|
2,298
|
—
|
2,298
|
*
|
Thomas A. Corcoran
|
21,465
|
—
|
21,465
|
*
|
Thomas A. Dattilo
|
4,298
|
—
|
4,298
|
*
|
Roger B. Fradin
|
2,208
|
—
|
2,208
|
*
|
Lewis Hay III
|
16,326
|
—
|
16,326
|
*
|
Lewis Kramer
|
14,576
|
—
|
14,576
|
*
|
Rita S. Lane
|
3,112
|
—
|
3,112
|
*
|
Robert B. Millard
|
225,670
|
—
|
225,670
|
*
|
Lloyd W. Newton
|
12,310
|
—
|
12,310
|
*
|
NAMED EXECUTIVE OFFICERS
|
||||
William M. Brown†
|
367,476 |
1,228,728
|
1,596,204
|
*
|
Christopher E. Kubasik†
|
80,397
|
433,146
|
513,543
|
*
|
Jesus Malave, Jr.
|
1,169 |
5,074
|
6,243
|
* |
Todd W. Gautier
|
16,739
|
32,595
|
49,334
|
*
|
Edward J. Zoiss
|
21,327
|
52,955
|
74,282
|
*
|
All Directors and Executive
Officers, as a group (20 persons)(4)
|
974,439
|
1,968,971
|
2,943,410
|
1.4%
|
(1)
|
Includes shares over which the
individual or his or her immediate family
members hold or share voting and/or investment
power and excludes shares listed under the
“Shares Under Exercisable Options” column. For
each non-employee director, also includes
approximately 881 unvested director share
units in respect of an award granted on April
24, 2020 under our Equity Incentive Plan
(including accrued reinvested divided
equivalents thereon), which generally will
fully vest on the one-year anniversary of the
grant date, subject to the non-employee
director’s continued service and the terms and
conditions of the non-employee director’s
director share unit agreement. For our named
executive officers and other executive
officers, includes shares owned through our
retirement plan. For Mr. Kubasik, also
includes 31,792 shares of restricted stock
converted from L3 shares of restricted stock
that have been reported as beneficially owned
on Form 4 and as to which the restriction
period has not expired and he has sole voting
power but no investment power. For Mr.
Gautier, also includes 8,181 shares in respect
of restricted stock units converted from L3
restricted stock units that have been reported
as beneficially owned on Form 4 and as to
which the restriction period has not expired
and he has no voting power or investment
power.
|
(2)
|
Includes shares
underlying options granted by us that are exercisable as
of February 5, 2021 and shares underlying options that
become exercisable within 60 days thereafter.
|
(3)
|
Represents the total
of shares listed under the “Shares Owned” and “Shares
Under Exercisable Options” columns.
|
(4)
|
For all directors and
executive officers, as a group, also includes 6,239
shares in respect of restricted stock units converted
from L3 restricted stock units that have been reported
as beneficially owned on Form 4 and as to which the
restriction period has not expired and the executive
officer has no voting power or investment power. No
directors or executive officers have pledged any shares
of our common stock, nor are any such persons permitted
to make any such pledge under our policies.
|
92 L3HARRIS 2021 PROXY STATEMENT
|
|
SHARE OWNERSHIP PRINCIPAL
SHAREHOLDERS
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership
|
Percent of Class
|
The Vanguard Group
|
17,310,496(1)
|
8.24%(1)
|
100 Vanguard Boulevard
|
||
Malvern, PA 19355
|
||
BlackRock, Inc.
|
16,868,838(2)
|
8.0%(2)
|
55 East 52nd Street
|
||
New York, NY 10055
|
||
(1)
|
Based on
information contained in Amendment No. 10 to
Schedule 13G filed with the SEC on February 10, 2021
by The Vanguard Group indicating that, as of
December 31, 2020, The Vanguard Group had sole
voting power over 0 shares, shared voting power over
337,817 shares, sole dispositive power over
16,406,881 shares and shared dispositive power over
903,615 shares.
|
(2)
|
Based on
information contained in Amendment No. 1 to Schedule
13G filed with the SEC on January 29, 2021 by
BlackRock, Inc. indicating that, as of December 31,
2020, BlackRock, Inc. had sole voting power over
15,216,994 shares, shared voting power over 0
shares, sole dispositive power over 16,868,838
shares and shared dispositive power over 0 shares.
|
L3HARRIS 2021 PROXY STATEMENT
93
|
94 L3HARRIS 2021 PROXY STATEMENT
|
>
|
Our
name changed
from “Harris
Corporation”
to “L3Harris
Technologies,
Inc.”;
|
>
|
Shares
of our common
stock, which
previously
traded under
ticker symbol
“HRS” on the
NYSE prior to
completion of
the Merger,
now are traded
under ticker
symbol “LHX”;
|
>
|
Our
Board now is
comprised of
12 directors:
William M.
Brown, Chair
and CEO
(formerly
Harris’
Chairman,
President and
CEO);
Christopher E.
Kubasik, Vice
Chair,
President and
COO (formerly
L3’s Chairman,
CEO and
President); 5
independent
directors from
the Harris
Board; and 5
independent
directors from
the L3 Board;
and
|
>
|
We
transitioned
to a calendar
year oriented
financial
reporting
cycle, and our
fiscal year
now ends on
the Friday
nearest
December 31.
|
|
L3HARRIS 2021
PROXY STATEMENT 95
|
INFORMATION
ABOUT THE ANNUAL MEETING
|
|
|
96 L3HARRIS 2021
PROXY STATEMENT
|
|
INFORMATION ABOUT
THE ANNUAL MEETING
|
> |
Before the Annual
Meeting:
|
■
|
Over
the Internet
at www.proxyvote.com,
following the voting
instructions on that website;
|
■
|
By telephone; or
|
■
|
By
mail; or
|
> |
During the
virtual Annual Meeting:
|
■
|
Over
the Internet at www.virtualshareholdermeeting.com/LHX2021,
following the
voting
instructions on
that website.
|
> |
By sending a
written notice of revocation to our
Secretary at L3Harris Technologies,
Inc., Attention: Secretary, 1025
West NASA Boulevard, Melbourne,
Florida 32919;
|
> |
By duly signing
and delivering a proxy/voting
instruction card that bears a later
date;
|
> |
By
subsequently voting over the
Internet or by telephone as
described above; or
|
> |
By
attending the virtual Annual Meeting
and following the voting
instructions on the virtual meeting
website.
|
|
L3HARRIS 2021
PROXY STATEMENT 97
|
INFORMATION
ABOUT THE ANNUAL MEETING
|
> |
FOR election
of all 12 of the
nominees for director
named in this proxy
statement for a one-year
term expiring at the
2022 Annual Meeting of
Shareholders (see
Proposal 1);
|
> |
FOR approval, in
an advisory vote, of the
compensation of our
named executive officers
as disclosed in this
proxy statement (see
Proposal 2); and
|
> |
FOR ratification
of our Audit Committee’s
appointment of
Ernst & Young LLP as
our independent
registered public
accounting firm for our
fiscal year 2021 (see
Proposal 3).
|
|
98
L3HARRIS
2021
PROXY STATEMENT
|
|
INFORMATION
ABOUT THE
ANNUAL MEETING
|
Proposals
|
Vote
Required for
Approval
|
Effect
of Abstentions
|
Effect
of Broker
Non-Votes
|
Proposal
1: Elect
our Board's 12
nominees for
director for a
one-year term
expiring at
the 2022
Annual Meeting
of
Shareholders
|
A
nominee must
receive more
FOR votes than
AGAINST votes
|
None
|
None
|
Proposal
2: Approve,
in an advisory
vote, the
compensation
of our named
executive
officers as
disclosed in
this proxy
statement
|
A
majority of
the shares
present or
represented at
the Annual
Meeting and
entitled to
vote on this
proposal must
vote FOR this
proposal
|
Counted
as a vote
AGAINST
|
None
|
Proposal
3: Ratify
appointment of
Ernst &
Young LLP as
our
independent
registered
public
accounting
firm for
fiscal year
2021
|
A
majority of
the shares
present or
represented at
the Annual
Meeting and
entitled to
vote on this
proposal must
vote FOR this
proposal
|
Counted
as a vote
AGAINST
|
None
|
|
L3HARRIS
2021
PROXY
STATEMENT 99
|
Dollars
in Millions
|
Fiscal
2020
|
Pro
Forma 2019
|
Fiscal
Transition
Period
|
|||||||||
Net
income
|
$
|
1,086
|
$
|
1,650
|
$
|
834
|
||||||
Adjustments:
|
||||||||||||
Discontinued
operations,
net of income
taxes
|
2
|
2
|
1
|
|||||||||
Net
interest
expense
|
254
|
253
|
123
|
|||||||||
Income
taxes
|
234
|
189
|
73
|
|||||||||
Pre-merger
integration
costs,
including
change in
control
charges
|
—
|
100
|
70
|
|||||||||
L3Harris
Merger-related
transaction
costs
|
—
|
83
|
83
|
|||||||||
L3Harris
Merger
integration
costs
|
130
|
102
|
72
|
|||||||||
Restructuring
charges and
other items
|
29
|
117
|
117
|
|||||||||
Charges
related to
consolidation
of facilities,
including
right-of-use
asset
impairment
|
—
|
48
|
48
|
|||||||||
Gain on
pension plan
curtailment
|
—
|
(23
|
)
|
(23
|
)
|
|||||||
Amortization
of
acquisition-related
intangibles
|
709
|
601
|
289
|
|||||||||
Additional
cost of sales
related to the
fair value
step-up in
inventory sold
|
31
|
142
|
142
|
|||||||||
Business
divestiture-related
losses (gains)
|
51
|
(229
|
)
|
(229
|
)
|
|||||||
Other
divestiture-related
expenses
|
13
|
—
|
—
|
|||||||||
Impairment
of goodwill
and other
assets related
to
divestitures
and COVID
impacts
|
767
|
—
|
—
|
|||||||||
Gain on
sale of
property,
plant and
equipment
|
(22
|
)
|
—
|
—
|
||||||||
Gain on
sale of asset
group
|
—
|
(12
|
)
|
(12
|
)
|
|||||||
Non-cash
cumulative
adjustment to
lease expense
|
(2
|
)
|
10
|
10
|
||||||||
(Gains)
losses and
other costs
related to
debt
refinancing
|
(2
|
)
|
6
|
3
|
||||||||
Total
adjustments
|
2,194
|
1,389
|
767
|
|||||||||
Adjusted
EBIT
|
$
|
3,280
|
$
|
3,039
|
$
|
1,601
|
L3HARRIS
2021
PROXY
STATEMENT A-1
|
APPENDIX
A: RECONCILIATION
OF GAAP TO
NON-GAAP
FINANCIAL
MEASURES
|
Dollars
in Millions
|
Fiscal
2020
|
Pro
Forma 2019
|
Fiscal
Transition
Period
|
|||||||||
Net cash
provided by
operating
activities
|
$
|
2,790
|
$
|
1,655
|
$
|
939
|
||||||
Additions
of property,
plant and
equipment
|
(368
|
)
|
(267
|
)
|
(173
|
)
|
||||||
Proceeds
from sale of
property,
plant and
equipment, net
|
91
|
—
|
—
|
|||||||||
Free
cash flow
|
2,513
|
1,388
|
766
|
|||||||||
Cash
used for
L3Harris
Merger
transaction
and
integration
costs,
including
change
in control
payments
|
—
|
278
|
254
|
|||||||||
Cash
used for
L3Harris
Merger
integration
costs
|
173
|
127
|
127
|
|||||||||
Voluntary
contribution
to defined
pension plans
|
—
|
302
|
302
|
|||||||||
Adjusted
free cash flow
|
$
|
2,686
|
$
|
2,095
|
$
|
1,449
|
Fiscal
2020
|
Pro
Forma 2019
|
|||||||
GAAP
income from
continuing
operations per
diluted common
share
attributable
to L3Harris
Technologies,
Inc. common
shareholders
|
$
|
5.19
|
$
|
7.25
|
||||
Adjustments:
|
||||||||
Pre-merger
integration
costs,
including
change in
control
charges
|
—
|
0.45
|
||||||
L3Harris
Merger-related
transaction
costs
|
—
|
0.37
|
||||||
L3Harris
Merger
integration
costs
|
0.60
|
0.45
|
||||||
Restructuring
charges and
other items
|
0.13
|
0.52
|
||||||
Charges
related to
consolidation
of facilities,
including
right-of-use
asset
impairment
|
—
|
0.22
|
||||||
Gain on
pension plan
curtailment
|
—
|
(0.10
|
)
|
|||||
Amortization
of
acquisition-related
intangibles
|
3.29
|
2.68
|
||||||
Additional
cost of sales
related to the
fair value
step-up in
inventory sold
|
0.14
|
0.64
|
||||||
Business
divestiture-related
(gains) losses
|
0.24
|
(1.02
|
)
|
|||||
Other
divestiture-related
expenses
|
0.06
|
—
|
||||||
Impairment
of goodwill
and other
assets related
to
divestitures
and COVID
impacts
|
3.56
|
—
|
||||||
Gain on
sale of
property,
plant and
equipment
|
(0.10
|
)
|
—
|
|||||
Gain on
sale of asset
group
|
—
|
(0.05
|
)
|
|||||
Non-cash
cumulative
adjustment to
lease expense
|
(0.01
|
)
|
0.04
|
|||||
(Gains)
losses and
other costs
related to
debt
refinancing
|
(0.01
|
)
|
0.02
|
|||||
Noncontrolling
interests
portion of
adjustments
|
(0.19
|
)
|
—
|
|||||
Total
pre-tax
adjustments
|
7.71
|
4.22
|
||||||
Income
taxes on above
adjustments
|
(1.30
|
)
|
(1.21
|
)
|
||||
Total
adjustments
after-tax
|
6.41
|
3.01
|
||||||
Non-GAAP
income from
continuing
operations per
diluted common
share
|
$
|
11.60
|
$
|
10.26
|
A-2 L3HARRIS
2021
PROXY
STATEMENT
|
|