SCHEDULE 14A
(RULE 14A-101)(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Check the appropriate box:|X|
Filed by a Party other than the Registrant [_] [ ]|_|
Check the appropriate box:
|_| Preliminary Proxy Statement
[_]|_| Confidential, Forfor Use of the Commission Only (as permit-
tedpermitted by Rule
14a-6(e)(2))
[x]|X| Definitive Proxy Statement
[_]|_| Definitive Additional Materials
[_]|_| Soliciting Material Pursuant to Rule 14a-11(c)Section 240.14a-11(c) or Rule 14
a-12
COMTECH TELECOMMUNICATIONS CORP.
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240.14a-12
Comtech Telecommunications Corp.
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(Name of Registrant as Specified in Itsits Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrantother than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]|X| No fee required.
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined): - --------------------------------------------------------------------------------
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4) Proposed maximum aggregate value of transaction: - --------------------------------------------------------------------------------
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[_]materials.
|_| 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 formForm or scheduleSchedule and the date
of its filing.
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(2)Previously Paid:
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(3)---------------------
3) Filing Party:
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4) Date Filed:
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COMTECH
TELECOMMUNICATIONS CORP.
105 Baylis Road
Melville, New York 11747
November 3, 199712, 1998
To Our Stockholders:
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting of Stockholders of Comtech Telecommunications Corp.
The meeting will be held at 10:00 a.m. on December 16, 199715, 1998 at the Mariott
Hotel, 1350 Old Walt Whitman Road, Melville, New York 11747. Copies of the
Notice of Annual Meeting of Stockholders, Proxy Statement and proxy card are
enclosed.
I believe that the annual meeting provides an excellent opportunity for
stockholders to become better acquainted with Comtech and its directors and
officers. I hope that you will be able to attend.
This year, in addition to electing directors and ratifying the selection of the
Company's auditors for the fiscal year ending July 31, 1998,It is important that your shares are voted at this meeting. Whether or not you
are being
askedable to act on several other matters describedattend in person, the prompt execution and return of your enclosed
proxy card in the Noticeenvelope provided will both assure that your shares are
represented at the meeting and minimize the cost of Meeting and
Proxy Statement.
IT IS IMPORTANT THAT YOUR SHARES ARE VOTED AT THIS MEETING. WHETHER OR NOT YOU
ARE ABLE TO ATTEND IN PERSON, THE PROMPT EXECUTION AND RETURN OF YOUR ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED WILL BOTH ASSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING AND MINIMIZE THE COST OF PROXY SOLICITATIONS.proxy solicitations.
Sincerely,
FRED KORNBERG
Chairman, Chief
Executive Officer
and President
COMTECH
TELECOMMUNICATIONS CORP.
105 Baylis Road
Melville, New York 11747
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 16, 199715, 1998
The Annual Meeting of Stockholders of COMTECH TELECOMMUNICATIONS CORP. (the
"Company") will be held at the Marriott Hotel, 1350 Old Walt Whitman Road,
Melville, New York 11747, on Tuesday, December 16, 199715, 1998 at 10:00 a.m., local
time, for the following purposes:
1. To elect two directors;
2. To approve an amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Common Stock;
3. To approve amendments to the Company's 1993 Incentive Stock Option Plan;
4. To ratify the selection of auditors for the current fiscal year; and
5.3. To transact such other business as may properly come before the
meeting.
All stockholders are invited to attend the meeting. Stockholders of record at
the close of business on October 17, 1997,November 9, 1998, the record date fixed by the Board of
Directors, are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
J. Preston Windus, Jr.
Secretary
November 3, 199712, 1998
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. ACCORDINGLY,
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE STAMPED AND ADDRESSED ENVELOPE ENCLOSED FOR YOU
CONVENIENCE.
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COMTECH
TELECOMMUNICATIONS CORP.
105 Baylis Road
Melville, New York 11747
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Comtech
Telecommunications Corp. (the "Company") for use at the Annual Meeting of
Stockholders to be held on December 16, 1997,15, 1998, and at any adjournment thereof
(the "Annual Meeting"). It may be revoked at any time before exercise by
delivering a written notice of revocation to the Secretary of the Company, by
executing a subsequent proxy and presenting it to the Secretary of the Company,
or by attending the Annual Meeting and voting in person. All proxies will be
voted in accordance with the stockholders' instructions, and if no directions
are specified, the proxies will be voted for the nominees for election as
directors and in favor of the matters set forth in the accompanying Notice of
Annual Meeting. A stockholder may choose to strike the names of the proxy
holders named in the enclosed proxy and insert other names.
Only holders of record of the Company's Common Stock, par value $.10 (the
"Common Stock"), at the close of business on October 17, 1997November 9, 1998 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting, with each
holder having one vote per share. As of the Record Date, a total of 2,650,4042,673,504
shares of Common Stock were outstanding. It is anticipated that the mailing to
stockholders of this Proxy Statement and the enclosed proxy will commence by
November 3, 1997.12, 1998.
The presence, in person or by proxy, of the holders of record at the close of
business on the Record Date of a majority of the outstanding shares of Common
Stock will constitute a quorum at the Annual Meeting. Directors will be elected
by a plurality of the votes cast (i.e., the two nominees receiving the greatest
number of votes will be elected as directors). Stockholder approval of the
amendments to the Company's 1993 Incentive Stock Option Plan and theThe ratification of the selection
of auditors will require the affirmative vote of a majority of the shares
present at the Annual Meeting and entitled to vote on such proposals and adoption of the proposed amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of the
Company's Common Stock will require the affirmative vote of a majority of the
shares of Common Stock outstanding as of the Record Date.proposals.
Abstentions and broker non-votes with respect to any proposal (which occur when
a nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner) will be counted for purposes of determining the presence or absence of a
quorum. Abstentions also will be counted in determining the number of shares
present and entitled to vote on such proposal, but broker non-votes are not
counted as entitled to vote thereon.
1
PRINCIPAL STOCKHOLDERS OF COMTECH TELECOMMUNICATIONS CORP.
To the Company's knowledge, the following persons individually, or as a group,
beneficially own more than 5% of the Company's outstanding Common Stock (its
only outstanding class of voting securities) as of October 17, 1997:November 2, 1998. Except as
indicated below, each person has sole voting and dispositive power with respect
to these shares.
Amount of
-----------------------------------
Name of Beneficial Owner Beneficial Ownership Percent OF CLASS
- ----------------------------------------- ----------------------------------- -----------------------------------
Fred Kornberg (1) 155,000 5.8
105 Baylis Road
Melville, New York 11747
James A. Mitarotonda (2) 50,000 1.9
c/o Barington Capital
888 Seventh Avenue
New York, New York 10019
Edmund H. Shea, Jr. (2) 83,528 3.2
655 Brea Canyon Road
Walnut, CA 91789
Barington Capital Group, L.P. (2) 161,415 5.9
888 Seventh Avenue - 17th Floor
New York, NY 10019
Gary Gelman 138,300 5.2Amount of
Name of Beneficial Owner Beneficial Ownership Percent of Class
------------------------ -------------------- ----------------
Fred Kornberg (1) 165,000 6.2
105 Baylis Road
Melville, New York 11747
James A. Mitarotonda (2) 40,000 1.5
c/o Barington Capital
888 Seventh Avenue
New York, New York 10019
Edmund H. Shea, Jr. (2) 58,528 2.2
655 Brea Canyon Road
Walnut, CA 91789
Barington Capital Group, L.P. (2) 46,893 1.8
888 Seventh Avenue - 17th Floor
New York, NY 10019
Gary Gelman 193,150 7.2
c/o American Claims Evaluation, Inc.
One Jericho Plaza
Jericho, NY 11753
________________- ----------
(1) Does not include 2,000 shares held in a trust for which Mr.KornbergMr. Kornberg is a
trustee, and has a 1% ownership in, and for which he disclaims beneficial
ownership.
(2) According to a Schedule 13D, as amended, filed with the Securities and
Exchange Commission ("SEC") by Messrs. James A. Mitarotondo and Edmund H.
Shea, Jr. and Barington Capital Group, L.P. ("Barington"), each has sole
power to vote and dispose of the number of shares set forth opposite their
name, but may be deemed to constitute a "group" within the meaning of SEC
Rule 13d-5(b) by virtue of their intention to consult with each other from
time to time and exchange information concerning the Company and their
respective investments in the Company's Common Stock. Barington's shares
include 100,000 shares issuable upon the on exercise of warrants. Mr. Mitarotonda is
the Chairman of the general partner of Barington.
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation, the Board of Directors is
divided into three classes, with the number of directors in each class fixed by
the Board of Directors, and with the term of office of one class expiring each
year. There are presently six Board members, two in the class holding office
until the Annual Meeting, two in the class holding office until the next
succeeding Annual Meeting, and two in the class holding office until the second
succeeding Annual Meeting.
Certain information concerning the directors who are being nominated for
reelection at the meeting and the incumbent directors whose terms of office
continue after the Annual Meeting and executive officers of the Company named in
the section "Executive Compensation" and all directors and executive officers as
a group, is set forth below.
While the Board of Directors has no reason to believe that either Messrs.
BugliarelloKornberg or GoldbergWeiner will not be available as a candidate for election, should
such a situation arise, the enclosed proxy may be voted for the election of
another nominee or nominees in the discretion of the persons acting pursuant to
the proxy.
2
Under an amendment to the Company's By-Laws adopted earlier this year,
nominations of individuals for election to the Board of Directors may be made at
an Annual Meeting by any stockholder who is eligible to vote for the election of
directors at such Annual Meeting, provided that such stockholder gave timely
written notice of such nominations to the Secretary of the Company and was a
stockholder of record at the time such notice was given. With respect to the
Annual Meeting of Stockholders to be held on December 15, 1998, such notice must
be received at the Company's principal executive offices prior to the close of
business on the tenth day following the mailing of this proxy Statement to
stockholders. For subsequent Annual Meetings, such written notice must be
received not more than 120 days or less than 90 days prior to the anniversary
date of the immediately preceding Annual Meeting, unless the Annual Meeting at
which such nominations are to be made is not being held within 30 days of such
anniversary date, in which case notice must be received not more than 90 days
nor less than 60 days prior to the date of the Annual Meeting. Such notice must
include the written consent of each individual to be nominated and the
information with respect to the proposed nominees and the nominating stockholder
required under the By-Laws.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
SHARESShares
Served Beneficially
For Term As Owned Percent
Principal Expiring Director October 17,16, of
Name OCCUPATION AGE IN SINCE 1997 (1) CLASS
- --------------------------- ------------------Occupation Age In Since 1998 Class
---- ---------- --- -------- -------- --------------------------- -------
George Bugliarello(3)(4) Chancellor, 70Fred Kornberg (2) Chairman, Chief 62 3 years 1977 17,400 *
Polytechnic
University
Richard L. Goldberg (2) Partner, Proskauer 611971 165,000 6.2
Executive Officer
& President
of the Company
Sol S. Weiner (1)(3)(4) President, Sol S. 79 3 years 1983 15,7851980 25,000 *
Rose LLPWeiner Investments,
Inc.
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
AND CERTAIN EXECUTIVE OFFICERS
Shares
Served Beneficially
Term As Owned Percent
Principal Expires Director October 17,16, of
Name OCCUPATION AGE IN SINCE 1997 (1) CLASS
- -------------Occupation Age In Since 1998 Class
---- ---------- --- ------- -------- -------------------- -------------- -------
Fred Kornberg Richard Goldberg (1)(2) Chairman, Chief Executive 61 1 year 1971 155,000 5.8
Officer & President(5) Partner, Proskauer 62 2 years 1983 16,785 *
Rose LLP
George Bugliarello (1)(3)(4)(5) Chancellor, 71 2 years 1977 18,400 *
Polytechnic
University of the
CompanyN.Y.
Gerard R. Nocita (1)(2)(3)(2) Retired -(5) Private Investor 61 2 years62 1 year 1993 17,00018,000 *
John B. Payne (1)(4) President and CEO 62 2 years 1993 13,000 *
of Nucomm, Inc.
Sol S. Weiner (3)(4) President, Sol S. Weiner 7863 1 year 1980 20,000 *
Investments,1993 26,700 1.0
of Nucomm, Inc.
Richard L. Burt (1) Vice President; President 5657 -- -- 27,955 1.044,947 1.7
President of
Comtech Systems, Inc.
3
Shares
Served Beneficially
Term As Owned Percent
Principal Expiring Director October 16, of
Name Occupation Age In Since 1998 Class
---- ---------- --- -------- -------- -------------- -------
Glenn F. Higgins (1) Vice President; President 6364 -- -- 13,50015,600 *
President of
Comtech Antenna
Systems, Inc.
J. Preston Windus, Jr. (1) Vice President; Chief 5455 -- -- 17,000 *35,000 1.3
Chief Financial
Officer and
Secretary; President
of Comtech PST Corp.
Robert L. Mc Collum Vice President; President 4849 -- -- 48,000 1.851,000 1.9
President of Comtech
Communications Corp.
All present directors and
officers (10 344,640 12.7
persons) 416,432 15.0
- -----------------------------------------------------
* Less than one percent
3
(1) Includes the following shares of Common Stock with respect to which such
persons have the right to acquire beneficial ownership within sixty days
from such date: Dr. Bugliarello 3,000Mr. Weiner 4,000 shares; Mr. Goldberg 3,0004,000 shares; Dr.
Bugliarello 4,000 shares; Mr. Nocita 5,0006,000 shares; Dr. Payne 5,000 shares; Mr. Weiner 3,0006,000 shares;
Mr. Burt 18,98435,976 shares; Mr. Higgins 11,4008,500 shares; Mr. Windus 17,000
shares;33,000 shares
and all directors and officers as a group 66,384101,476 shares. These respective
shares were deemed to be outstanding for purposes of calculating the
respective percentages owned.
(2) Member of Executive Committee.
(3) Member of Audit Committee.
(4) Member of Executive Compensation Committee.
(5) Member of Nominating Committee
Dr. Bugliarello has been Chancellor of Polytechnic University since 1994 and was
President of the University since 1978.from 1978 to 1994. He is also a director of Long Island
Lighting Company,KeySpan
Energy, Symbol Technologies Inc., and Spectrum Information Technologies.
Mr. Goldberg has been a partner since 1990 in the law firm of Proskauer Rose
LLP, which renders legal services to the Company. Prior to that, Mr. Goldberg
had been a partner in the law firm of Botein Hays & Sklar since 1966. He is also
a director of Schein Pharmaceutical, Inc.
Mr. Kornberg has been Chief Executive Officer and President of the Company for
more than the past five years.
Mr. Nocita is retired and is a private investor. Previously, heHe was Treasurer of the Incorporated Village
of Patchogue from 1993 to 1996. He was affiliated with the Company since its
inception in 1967 until his retirement in 1993. He had
been Treasurer of the Company since 1987 and Vice President and Secretary since
1990.
Dr. Payne has been President and CEO of Nucomm, Inc. since 1990. Nucomm, Inc.
produces products for satellite news gathering services. From 1973 through 1990
he had been President and CEO of Communications Technologies, Inc.
4
Mr. Weiner is President of Sol S. Weiner Investments, Inc. Previously he was
Managing Director of Stenhouse, Weiner, Sherman, Ltd., commodity pool managers,
from 1982 to 1994. He is also a director of Universal Automotive Industries,
Inc.
During the past fiscal year, the Audit Committee of the Board of Directors held
two meetings. The functions of the Committee include recommending to the Board
the engagement of independent auditors, directing investigations into matters
relating to audit functions, reviewing the plan and results of audits with the
Company's auditors, reviewing the Company's internal accounting controls and
approving services to be performed by the Company's auditors and related fees.
The Executive Compensation Committee of the Board of Directors considers and
authorizes remuneration arrangements for senior management; the Committee also
constitutes the Stock Option Committee of the Board of Directors, which
administers the Company's Incentive Stock Option Plans. The Committee held threefour
meetings during the past fiscal year.
The Executive Committee of the Board of Directors did not hold any meetings
during the past fiscal year. Except as limited by law, the Executive Committee
has the authority to act upon all matters requiring Board approval.
The Nominating Committee identifies and evaluates candidates for election as
members of the Board of Directors has noand reports its findings to the full Board.
The Nominating Committee.Committee held one meeting during the past fiscal year.
The Board of Directors held fourfive meetings during the past fiscal year.
4
PROPOSAL TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
On October 14, 1997, the Board of Directors unanimously approved an amendment
to the Company's Certificate of Incorporation increasing the number of
authorized shares of the Company's Common Stock from 10,000,000 to 15,000,000,
and authorized the submission of the amendment for approval at the Annual
Meeting of Stockholders. Under the proposed amendment, paragraph (a) of Article
Fourth of the Company's Certificate of Incorporation would be amended to read in
its entirety as follows:
"FOURTH:(a) The aggregate number of shares which the Corporation shall have
authority to issue is Seventeen Million (17,000,000) shares, of which Fifteen
Million (15,000,000) shares shall be Common Stock, par value ten cents ($.10)
)("Common Stock"), and Two Million (2,000,000) shares shall be Preferred Stock,
par value ten cents ($.10) ("Preferred Stock")."
As of October 17, 1997, an aggregate of 2,650,404 shares of Common Stock were
issued and outstanding, and an additional 212,480 shares were reserved for
issuance under the Company's 1993 Incentive Stock Option Plan and 200,000
pursuant to the exercise of outstanding warrants, leaving 6,937,116 authorized
shares available for additional issuances.
The Board of Directors considers the proposed increase in the number of
authorized shares of Common Stock desirable because it would give the Board the
necessary flexibility to issue Common Stock, if it so determined, in connection
with stock dividends and splits, acquisitions, financings, employee benefits and
other appropriate corporate purposes without the expense and delay that could
arise if there were insufficient authorized shares for a specific issuance,
thereby requiring stockholder approval before such issuance could proceed.
The Company has no present plans, agreements or understandings for the
issuance of additional shares of Common Stock, but reviews and evaluates
potential corporate actions on an on-going basis to determine if such actions
would be in the best interest of the Company and its stockholders. Depending on
the nature of any future issuance of Common Stock, further stockholder
authorization may be required under Delaware law or the rules of NASDAQ or any
stock exchange on which the Common Stock may then be listed.
If the proposed amendment to the Company's Certificate of Incorporation is
approved by the Company's stockholders, it would become effective upon the
filing of a Certificate of Amendment with the Delaware Secretary of State, which
filing would occur promptly after the Annual Meeting. The affirmative vote of
the holders of record at the close of business on the Record Date of a majority
of the outstanding shares of Common Stock will be required to approve the
amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION.
5
APPROVAL OF AMENDMENTS TO THE COMPANY'S
1993 INCENTIVE STOCK OPTION PLAN
On October 14, 1997, the Board of Directors adopted amendments (the
"Plan Amendments") to the Company's 1993 Incentive Stock Option Plan (the
"Plan") that: (i) increased the total number of shares of Common Stock that may
be acquired pursuant to the exercise of options granted under the Plan from
245,000 to 695,000, and (ii) conformed the Plan to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and to changes in Rule
16b-3 promulgated under the Securities Exchange Act of 1934 ("Rule 16b-3"),
subject, in the case of the total number of shares that may be issued under the
Plan and the amendments to comply with Section 162(m) of the Code, to the
approval of the stockholders of the Company at the Annual Meeting.
The Company believes that the increase in the number of shares that
may be issued upon the exercise of the options granted under the Plan is
appropriate and in the best interests of the Company and its stockholders. The
increase will augment the Company's ability to use option grants to provide
long-term incentives to executive officers and other valuable staff,
managerial, professional and technical employees of the Company and its
subsidiaries ("Key Employees") and foster a mutuality of interests between such
Key Employees and the stockholders of the Company. The Company believes that
the ability to provide Key Employees with options is important to its ability to
attract and retain such employees.
The Plan Amendments relating to Section 162(m) of the Code are
designed to preserve, should it be needed at some point in the future, the
Company's ability to claim a tax deduction for certain compensation that may be
recognized by certain of its executive officers. In general, Section 162(m) of
the Code denies a publicly held corporation a deduction for federal income tax
purposes for compensation in excess of $1,000,000 per year per person to its
chief executive officer and the four other officers whose compensation is
disclosed in its proxy statement, subject to certain exceptions. Options will
generally qualify under one of these exceptions if they are granted under a plan
that states the maximum number of shares with respect to which options may be
granted to any employee during a specified period, if they are granted with an
exercise price equal to at least 100% of the fair market value on date of grant
of the shares of Common Stock subject to such options, and if the plan under
which the options are granted is approved by stockholders and administered by a
compensation committee comprised of outside directors. The Plan Amendments
relating to Section 162(m) are designed to permit grants of options which are
exempt from Section 162(m) of the Code.
Finally, the changes to conform to changes in Rule 16b-3 are intended
to maintain the exemption from potential "short-swing" liability for certain
transactions under the Plan afforded by Rule 16b-3, to provide greater
flexibility in the administration of the Plan, and to permit options to be
transferred where permitted by the Committee (as defined below).
If the stockholders approve the increase in the number of shares that
may be issued under the Plan, an aggregate of 530,140 shares (after taking into
account shares subject to outstanding options and options previously exercised
as of October 17, 1997) will be available for future option grants. On October
17, 1997, the fair market value of a share of Common Stock, determined in
accordance with the Plan, was $4.50.
The following summary describes the principal provisions of the Plan,
indicating the changes effected by the Plan Amendments. It does not purport to
be complete, and is qualified in its entirety by the full text of the Plan, as
amended, set forth as Appendix A to this proxy statement. References to the
Company in the summary include both the Company and its subsidiaries.
ADMINISTRATION OF THE PLAN
The Plan is administered by a committee (the "Committee") of two or
more directors appointed by the Board of Directors of the Company. Pursuant to
the Plan Amendments, each member of the Committee must qualify as an "outside
director" within the meaning of Section 162(m) of the Code and, to the extent
required by Rule 16b-3, a "non-employee director" within the meaning of Rule
16b-3. Except with respect to the formula grants to directors who are not
employees of the Company ("Eligible Directors"), the Committee has the authority
to determine, in its sole discretion, (i) the recipients of option grants, (ii)
whether a grant shall consist of options intended to qualify as incentive stock
options ("ISOs") within the meaning of Section 422 of the Code, non-qualified
options or a combination thereof, (iii) the number of shares to be subject to
each grant, and (iv) subject to
6
certain limitations described below, the exercise price and other terms of the
options. Except with respect to Eligible Directors, the Committee is not bound
to any standards of uniformity or similarity of action, interpretation or
conduct in administering the Plan.
STOCK SUBJECT TO THE PLAN
Pursuant to the Plan Amendments, the total number of shares of Common
Stock that may be purchased pursuant to the exercise of options granted under
the Plan has been increased (subject to stockholder approval) from 245,000 to
695,000. As of October 17, 1997, without giving effect to such increase, only
80,140 Shares remained available under the plan for option grants. Shares of
Common Stock issuable upon the exercise of options granted under the Plan may be
either authorized and unissued shares or treasury shares. If options granted
under the Plan are for any reason canceled, or expire or terminate unexercised,
the shares subject to such options will be available for the grant of new
options, subject to the 695,000 share limit. The Plan Amendments provide that
the aggregate number of shares subject to options that may be granted to a Key
Employee in any calendar year cannot exceed 100,000, except that to the extent
that options to purchase fewer shares are granted to a Key Employee in any
calendar year, the excess shares shall be available for option grants to such
Key Employee in future calendar years. The total number of shares available
under the Plan as well as the maximum number of shares that may be granted to a
Key Employee are subject to appropriate adjustment by the Committee in the event
of recapitalizations, stock splits, stock dividends and other similar corporate
transactions.
ELIGIBILITY
The Committee may grant options under the Plan to Key Employees,
including officers or other Key Employees who are also directors of the Company.
The Company believes that all of its approximately 220 employees qualify as Key
Employees, of whom five are officers.
The Plan provides for automatic fixed grants of options to Eligible
Directors, and the Committee has no discretion over such awards. Each Eligible
Director who first joins the Board on or after October 27, 1993 automatically
receives, on the date he or she becomes a director, options to purchase 2,000
shares of Common Stock. In addition, each Eligible Director serving in August
of any year during the term of the Plan will automatically receive options to
purchase 1,000 shares of Common Stock, provided that he or she has been a
director for at least six months. However, no Eligible Director may receive
options to purchase more than an aggregate of 10,000 shares of Common Stock.
EXERCISE PRICE
The exercise price of options granted to Key Employees that are
intended to qualify as ISOs cannot be less than the fair market value on the
date of grant of the shares of Common Stock subject to such options (110% of
fair market value in the case of options granted to any person owning more than
10% of the Company's Common Stock). Non-qualified options may be granted at any
price not less than the Common Stock's par value of $.10 per share; provided,
however, that the purchase price of any option intended to qualify for an
exception under Section 162(m) cannot be less than 100% of the fair market value
on the date of grant of the shares of Common Stock subject to such option.
The exercise price of each option granted to an Eligible Director must
be equal to the fair market value on the date of grant of the shares of Common
Stock subject to such options. Options granted to Eligible Directors are non-
qualified options.
7
DURATION AND EXERCISE OF OPTIONS
The Committee determines when and on what terms and conditions options
granted to Key Employees under the Plan become exercisable. In the case of
options that are not immediately exercisable in full upon grant, the Committee
may at any time accelerate the exercisability of such options in whole or in
part. No option may be exercised more than 10 years after its date of grant
(five years for ISOs granted to any person owning more than 10% of the Company's
Common Stock).
All options granted to Eligible Directors become exercisable in full
one year after the date of grant, and may not be exercised more than 10 years
after the date of grant.
The Plan provides that each outstanding option will become immediately
exercisable upon a Change in Control of the Company. A Change in Control will
be deemed to have occurred if (i) any person or group of persons acting in
concert become the beneficial owners of 30% or more of the Company's outstanding
voting securities or securities convertible into such amount of voting
securities, or (ii) within two years after a tender offer or exchange offer, or
as the result of a merger, consolidation, sale of substantially all of the
Company's assets or a contested election of the Board of Directors, or any
combination of such transactions, the persons who are directors of the Company
immediately prior to such transactions cease to constitute a majority of the
Board after such events, unless such transactions are approved by two-thirds of
the directors in office immediately prior thereto or by successors recommended
by such directors.
Except as follows, options granted under the Plan to Key Employees may
be exercised only while the holder is employed by the Company. If a Key
Employee holding outstanding options dies or retires at or after age 65 (or,
with the consent of the Committee, before age 65), or if his or her employment
terminates due to disability, the participant's options will remain exercisable
for one year or such longer period, not exceeding 3 years, as the Committee may
allow (but in no event may such options be exercised more than ten years after
the date of grant). The Committee may also cause all of such Key Employee's
options that were not yet exercisable on the date of termination to become
exercisable for such period.
If a Key Employee's employment with the Company terminates other than
by death, disability or retirement, his or her options (but only to the extent
exercisable on the date of termination) will remain exercisable for three months
after termination or such longer period, not exceeding one year, as the
Committee may provide, except that all of a participant's options will be
immediately canceled if the participant terminates his or her employment in
violation of an agreement with the Company or if the participant's employment is
terminated by the Company for cause.
Except as follows, options granted to an Eligible Director may be
exercised by the Eligible Director only while he serves on the Board. If an
Eligible Director ceases to be a director of the Company for any reason other
than removal for cause, such Eligible Director's options may be exercised at any
time within one year after the date he or she leaves the Board, but only to the
extent exercisable on such date, and in no event may such options be exercised
more than ten years after the date of grant.
In accordance with the changes to Rule 16b-3, the Plan Amendments
provide that, while options granted under the Plan are generally not
transferable by the optionee, the Committee may, at the time of grant or
thereafter, permit transfers of an option on such terms and conditions as the
Committee may specify.
8
EXERCISE AND PAYMENT
A Key Employee or Eligible Director may exercise one or more
exercisable options granted under the Plan by giving written notice of exercise
to the Committee specifying the number of shares with respect to which such
options are being exercised. Notice of exercise must be accompanied by payment
in full of the applicable exercise price, which may be paid, in the case of Key
Employees (i) in cash or by certified check, bank draft or money order payable
to the order of the Company, (ii) if permitted by the Committee, through the
delivery of unencumbered shares of Common Stock (including shares being acquired
pursuant to the options then being exercised), (iii) if permitted by the
Committee, by delivery of the Key Employee's promissory note payable to the
order of the Company (although the aggregate par value of the shares must be
paid in cash), (iv) by a combination of the foregoing, (v) by delivery of
irrevocable instructions to a broker to deliver promptly to the Company an
amount equal to the aggregate exercise price, or (vi) on such other terms and
conditions permitted under Delaware law as may be approved by the Committee.
Upon receipt of payment, the Company will deliver certificates representing the
shares purchased to the participant. Eligible Directors may pay the applicable
exercise price only in accordance with clauses (i) or (ii) of the preceding
sentence or a combination thereof.
TERMINATION AND AMENDMENT
The Plan will terminate on November 16, 2002 (unless earlier
discontinued by the Board of Directors), and no options may be granted under the
Plan after that date. Options granted prior to November 16, 2002, however, may
extend beyond such date and the provisions of the Plan will continue to apply to
such options. The Board of Directors or the stockholders of the Company may
from time to time alter, amend, suspend or discontinue the Plan; provided,
however, that no amendment may be made by the Board that would require the
approval of the stockholders of the Company under Rule 16b-3 or Section 162(m)
of the Code or, with respect to ISOs, Section 422 of the Code, or under the
rules of any exchange or system on which the Company's securities are listed or
traded at the request of the Company, unless such approval is obtained.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal U.S. federal income tax
consequences with respect to options under the Plan is based on statutory
authority and judicial and administrative interpretations as of the date of this
Proxy Statement, which are subject to change at any time (possibly with
retroactive effect) and may vary in individual circumstances. Therefore, the
following is designed to provide only a general understanding of the federal
income tax consequences (state and local income tax and estate tax consequences
are not addressed below). This discussion is limited to the U.S. federal income
tax consequences to individuals who are citizens or residents of the U.S., other
than those individuals who are taxed on a residence basis in a foreign country.
NON-QUALIFIED OPTIONS. In general, the recipient of a non-qualified
---------------------
option under the Plan will realize no taxable income upon grant, but will
recognize ordinary income at the time the option is exercised in an amount equal
to the difference between the fair market value of the shares of Common Stock on
the date of exercise and the aggregate exercise price. Upon a subsequent sale
of the Common Stock by the participant, any gain or loss recognized upon the
subsequent sale of such stock will be short-term or long-term capital gain or
loss depending on the Participant's holding period. Subject to the limitation
under Section 162(m) of the Code (as described above), the Company will
generally be allowed a deduction equal to the amount recognized by the
participant as ordinary income in connection with the exercise of the non-
qualified option.
INCENTIVE STOCK OPTIONS. The grant of an ISO has no tax consequences
-----------------------
for a Key Employee or the Company. Moreover, no taxable income will generally
result from the exercise of an ISO if the ISO is exercised during the period of
the Key Employee's employment or within three months thereafter, except in the
case of death or disability (in which case the three-month period is extended to
one year). The amount by which the fair market value of the stock acquired
pursuant to exercise of an ISO exceeds the exercise price, however, is an
adjustment item for purposes of the Alternative Minimum Tax. If no disposition
of the acquired shares is made within either two years from the date the ISO was
granted or one year from the date of exercise, any gain realized upon
disposition of the shares will be treated as a long-term capital gain by the Key
Employees.
The Company will not be entitled to a tax deduction upon the exercise
of an ISO or upon a subsequent disposition of the shares unless, subject to the
limitation under Section 162(m) of the Code, such disposition occurs prior to
the expiration of the holding periods described above. In general, if a Key
Employee does not satisfy the
9
foregoing holding periods, the gain equal to the spread between the option price
and the fair market value of the acquired stock on the date of exercise (or, if
a lesser amount, the amount realized on disposition over the option price) will
constitute ordinary income. If disposition occurs before the holding periods are
satisfied, the Company will be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee, subject to the limitation under
Section 162(m) of the Code.
CERTAIN OTHER TAX ISSUES. In general, Section 162(m) of the Code
------------------------
denies a publicly held corporation a deduction for federal income tax purposes
for compensation in excess of $1,000,000 per year per person to its chief
executive officer and the four other officers whose compensation is disclosed in
its proxy statement, subject to certain exceptions. As discussed above, the
Plan Amendments are designed to permit grants of options which are exempt from
Section 162(m) of the Code.
In addition, any entitlement to a tax deduction on the part of the
Company is subject to the applicable federal tax rules, and in the event that
the exercisability of an option is accelerated because of a change in control,
payments relating to the options, either alone or together with certain other
payments may constitute parachute payments under Section 280G of the Code, which
excess amounts may be subject to excise taxes and be nondeductible by the
Company.
The Company will be entitled to withhold, or secure payment from Key
Employees in cash, shares of Common Stock or other property of, the amount of
any federal, state or local taxes required to be withheld by the Company in
connection with the exercise of options. The Committee may permit Key Employees
to elect to have his or her withholding obligations satisfied by subtracting
from the shares of Common Stock otherwise deliverable upon exercise that number
of shares having a fair market value on the date of exercise equal to the amount
of such withholding obligation.
The Plan is not subject to any of the requirements of the Employee
Retirement Income Security Act of 1974, as amended, and is not, nor is it
intended to be, qualified under Section 401(a) of the Code.
REQUIRED VOTE
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting of Stockholders and entitled to vote
on the Plan Amendments will be required for approval of the Plan Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PLAN
AMENDMENTS.
10
SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as the Company's
auditors for the current fiscal year, subject to ratification by the
stockholders. If the stockholders do not ratify such selection, it will be
reconsidered by the Board. Representatives of KPMG Peat Marwick LLP are expected
to be present at the Annual Meeting of Stockholders, with the opportunity to
make a statement, should they so desire, and to be available to respond to
appropriate questions.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon will be
required to ratify the selection of KPMG Peat Marwick LLP as the Company's
auditors for the current fiscal year.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTEThe Board of Directors recommends that the stockholders vote FOR THE
RATIFICATION OF THE SELECTION OFthe
ratification of the selection of KPMG PEAT MARWICKPeat Marwick LLP AS THE COMPANY'S
AUDITORS.as the Company's
auditors.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE FOR THE FISCAL YEARS ENDED JULYSummary Compensation Table for the Fiscal Years Ended July 31, 1998, 1997 and
1996 AND
1995
Long Term
Annual Compensation COMPENSATION
------------------- ------------
Long Term
Annual Compensation Compensation
---------------------------- ------------------------------
Name Fiscal Options Restricted
and Principal Position Year Salary Bonus Other (1) (No. Ofof Shares) Stock Awards
- ---------------------- --------- -------------- ------------- ------------- -------------------- -------------------------- ------ ----- ----- --------------- ------------
Fred Kornberg (2) 1998 $240,000 $44,940 * 100,000 ---
Chairman, Chief Executive 1997 $210,000210,000 5,400 * --- ---
Chairman, ChiefOfficer and President 1996 185,000 990 * --- ---
Executive
Officer and President 1995 185,000 --- * --- ---
J. Preston Windus, Jr. (3) 1998 150,000 56,700 * 40,000
Vice President, Chief Financial 1997 130,000 16,300 * --- ---
Jr. (3)
Vice President, ChiefOfficer and Secretary; 1996 115,000 2,500 * 5,000 ---
Financial Officer and 1995 100,000 --- * 15,000 ---
Secretary; President of Comtech PST Corp.
5
Richard L. Burt (3) 1998 150,000 19,600 * 40,000 ---
Vice President; President 1997 130,000 --- * --- ---
Vice President; 1996 115,000 12,500 --- 5,000 ---
President
of Comtech Systems, 1995Inc. 1996 115,000 12,500 --- --- 4,960 ---
Inc.5,000 ---
6
Long Term
Annual Compensation Compensation
---------------------------- ------------------------------
Name Fiscal Options Restricted
and Principal Position Year Salary Bonus Other (No. of Shares) Stock Awards
- ---------------------- ------ ------ ----- ----- --------------- ------------
Glenn F. Higgins (1)(3) 1998 100,000 --- * 2,000 ---
Vice President; President of 1997 98,400 --- --- --- ---
Vice President;Comtech Antenna Systems, Inc. 1996 96,425 3,427 11,481 --- ---
President
of Comtech Antenna 1995 96,425 --- 11,521 2,500 ---
Systems, Inc.
Robert L. Mc CollumMcCollum (3) 1998 135,000 --- * 40,000
Vice President; President of 1997 110,000 9,800 * --- ---
(3)
Vice President;
President of Comtech Communications Corp.
_____________________- ----------
* Less than 10% of the total salary and bonus reported for such officer.
11
(1) Mr. Higgins' amount in fiscal 1996 and 1995 represents payments for unused accrued
vacation and an automobile allowance.
(2) Mr. Kornberg is employed pursuant to an agreement which was amended and
restated in August 1992January 1998 and which provides, among other things, for his
employment until August 1997;2003; provided, however, that the employment period shall
be automatically extended for successive two-year periods unless either
party gives notice of non-extension to the other at least six months in
advance of the then scheduled termination date; at a current basic
compensation of $210,000$240,000 per annum plus such additional amounts, if any,
as the Board of Directors may from time to time determine and incentive
compensation, not to exceed his basic compensation, equal to 1%3.5% of the
Company's pre-tax income plus such additional amounts as the Board of
Directors may from time to time determine. Fifty percent of any such
incentive compensation is payable to Mr. Kornberg in the November
following the fiscal year to which such compensation relates, an additional 25%the balance
is payable on the first anniversary of the initial 50% payment, and the final
25% is payable on the second anniversary of the initial payment. If Mr.
Kornberg voluntarily terminates his employment with the Company other than
after a Change in Control (as defined in his employment agreement), or if
the Company terminates his employment due to disability or for cause, he
will forfeit his right to receive accrued but unpaid incentive
compensation. If a Change in Control of the Company occurs, Mr. Kornberg
is entitled to terminate his employment and receive a lump sum payment
(subject to possible adjustments to avoid the characterization of the
payment as excess parachute payments and the consequent imposition of
taxes under Section 4999280G of the Internal Revenue Code of 1986) equal to
the sum of (i) his then basic compensation for the balance of the
employment period or three times his basic compensation, whichever is
greater, (ii) accrued but unpaid incentive compensation with respect to
prior fiscal years and (iii) if he so elects, the market value less the
applicable exercise price, of any stock option then held by him. The
aggregate of (i), (ii) and (iii), as of October 17, 1997,26, 1998, would have been
$635,648.$1,778,720. Mr. Kornberg would also be entitled to receive benefits under
the Company's benefit plans, or substantially equal benefits, for the
remainder of the employment period.
(3) Mr. Windus, Mr. Burt, Mr. Higgins and Mr. McCollum are eligible to
receive, in addition to their respective base compensation amounts, a
percentage of the relevant subsidiary's pre-tax profits based principally
upon the attainment of various goals. These goals which may include target
levels of sales, pre-tax profits, customer orders or cash flow, are
developed by senior management and submitted to the Executive Compensation
Committee for annual approval. Mr. McCollum became an executive officer of
the Company effective August 1, 1996.
7
OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 1997
No1998
Number of % of Total
Securities Options Potential Realizable Value at
Underlying Grantd to Exercise Assumed Annual Rates of
Options Employees in Price Expiration Stock Price Appreciation
Granted(1) Fiscal Year ($/Share)(2) Date for option term(3)
---------- ----------- ------------- ---------- -----------------------------
5% 10%
-- ---
Fred Kornberg............... 100,000 25.72% $4.50 01/14/08 $283,000 $717,200
J. Preston Windus, Jr....... 40,000 10.29% 4.50 01/14/08 113,200 286,880
Richard L. Burt............. 40,000 10.29% 4.50 01/14/08 113,200 286,880
Glenn F. Higgins............ 2,000 .51% 4.50 01/14/08 5,660 14,344
Robert McCollum............. 40,000 10.29% 4.50 01/14/08 113,200 286,880
(1) The options granted to Mr. Kornberg will expire on January 14, 2008,
subject to earlier expiration in the event Mr. Kornberg's employment with
the Company terminates, and may not be exercised unless they have vested.
The options will vest on December 15, 2008, subject to accelerated vesting
in 25,000 share increments if, prior to March 31, 2001, the market value
of the Company's Common Stock for any 20 consecutive day trading period
exceeds successive thresholds of $10, $15, $20 and $30. The options
granted to each of Mr. Windus, Mr. Burt, Mr. Higgins and Mr. McCollum will
expire on January 14, 2008, subject to earlier expiration in the event an
individual's employment with the Company terminates, and may not be
exercised unless they have vested. The options will vest on December 15,
2008, subject to accelerated vesting based upon the achievement of net
income and cash flow targets for the subsidiary headed by the recipient
during 1998, 1999 and 2000 fiscal years. Pursuant to such accelerated
vesting, 9,000 of the options granted to Mr. Windus and 12,000 of the
options granted to Mr. Burt have vested to date.
(2) The exercise price is the market price on the date the options were
grantedgranted.
(3) In accordance with SEC rules, these columns show gains that might exist
for the respective options, assuming the market price of Comtech's Common
Stock appreciates from the date of grant over a period of ten years at the
annualized rates of five and ten percent, respectively. If the stock price
does not increase above the exercise price at the time of exercise,
realized value to any of the named executive officers.
12
executives from these options will be zero.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED JULY 31, 19971998
AND OPTION VALUES AS OF JULY 31, 19971998
Shares
Value of Unexercised
AcquiredShares Number of Unexercised In-the-Money Options at
- -------------------- on ValueAcquired Options at July 31, 19971998 July 31, 1997(2)1998(2)
on Value --------------------------- ---------------------------
Name Exercise Realized(1) --------------------------------- ---------------------------------
NameExercisable Unexercisable Exercisable Unexercisable
- ---- -------- ----------- ----------- ------------- ----------------- Exercisable UNEXERCISABLE Exercisable UNEXERCISABLE
- -------------------- --------------------------------- -------------------------------------------- -------------
Fred Kornberg 24,000 $16,400--- $ --- -- 100,000 $ --- $--- $---$ 200,000
J. Preston Windus, Jr. --- --- 16,000 19,000 6,000 9,000
Jr.32,000 43,000 78,040 99,110
Richard L. Burt 4,040 3,030 26,955 10,976 1,987 2,98134,976 35,984 75,287 76,808
Glenn F. Higgins 2,000 1,500 12,500 5,100 810 1,2155,000 13,460 7,900 2,600 14,805 6,120
Robert Mc Collum --- --- --- 40,000 --- --- ---80,000
- --------------------------------------------
(1) "Value Realized" is calculated by determining the difference between the
fair market value of the Common Stock on the date the options are
exercised and the exercise price of the options.
(2) "In-the-Money Options" would be options outstanding at the end of the last
fiscal yearJuly 31,
1998 for which the fair market value of the Common Stock on such date
($3.44)6.50) exceeded the exercise price of the options.
8
Executive Compensation Committee Report
Compensation Policies. The principal goal of the Company's compensation
program as administered by the Executive Compensation Committee is to help the
Company attract, motivate and retain the executive talent required to develop
and achieve the Company's strategic and operating goals with a view to
maximizing shareholder value. The key elements of this program and the
objectives of each element are as follows:
Base Salary. Base salaries paid to the Company's executive officers are
intended to be competitive with those paid to executives holding comparable
positions in the marketplace. Individual performance and the performance of the
Company or the applicable operating subsidiary are considered when setting
salaries within the range for each position. Annual reviews are held and
adjustments are made based on attainment of individual goals in a manner
consistent with operating and financial performance.
Bonuses. Annual cash bonuses are intended to motivate performance by
creating the potential to earn annual incentive awards that are contingent upon
personal and business performance. Excluding the Chief Executive Officer,
bonuses are paid to the Company's executive officers pursuant to the Company's
Incentive Compensation Plan for Subsidiary Presidents and Key Employees (the
"Incentive Compensation Plan"). Each of the Company's executive officers other
than the Chief Executive Officer is a President of one of the Company's
operating subsidiaries. Under the Incentive Compensation Plan, the President of
each of these subsidiaries is entitled to receive a bonus of up to a fixed
percentage of each subsidiary's pre-tax profit each year, subject to the
attainment of subsidiary pre-tax profit, new order, and cash flow targets and
personal performance targets that are proposed by senior management and
established by the Executive Compensation Committee.
Long Term Incentives. The Company provides its executive officers with
long-term incentive compensation through grants of stock options under the
Company's stock option plan. The grant of stock options aligns the executive's
interests with those of the Company's stockholders by providing the executive
with an opportunity to purchase and maintain an equity interest in the Company
and to share in the appreciation of the value of the Company's Common Stock. In
fiscal 1998, options to purchase an aggregate of 122,000 shares of the Company's
Common Stock were granted to the Company's four executive officers other than
the Chief Executive Officer. Each of these options will vest in full thirty days
prior to its expiration on the tenth anniversary of the date of grant, subject
to accelerated vesting based upon the achievement of net income and cash flow
targets for the subsidiary headed by the recipient during the 1998, 1999 and
2000 fiscal years, thereby tying the receipt of long-term compensation directly
to performance of the business for which the recipient is responsible. Of the
options that were subject to accelerated vesting, options in the aggregate of
21,000 shares vested in 1998.
CEO's Compensation. As discussed in Note (2) to the Summary Compensation
Table in "Executive Compensation", the Company and Mr. Kornberg amended and
restated his employment agreement in January 1998. Pursuant to such agreement,
Mr. Kornberg received a base salary of $240,000 for fiscal 1998 and bonus of
$44,940 equal to 3.5% of the Company's pre-tax income required under the
agreement. In addition, Mr. Kornberg was awarded an option to purchase an
aggregate of 100,000 shares of the Company's Common Stock, which option will
vest in full 30 days prior to its expiration on the tenth anniversary of the
date of grant, subject to accelerated vesting in 25,000 share increments if the
average per share market value of the Company's Common Stock for any 20
consecutive day trading period prior to March 31, 2001 exceeds successive
thresholds of $10, $15, $20 and $30.
The Executive Compensation Committee
George Bugliarello, Chairman
John B. Payne
Sol S. Weiner
9
COMPENSATION OF DIRECTORS
DirectorsEach Director who areis not a salaried officersemployee of the Company receivereceives an annual
retainer of $8,000, plus $500 for each Board meeting attended by them (up to an
additional $2,000 per annum). Effective beginning with fiscal year 1999, the
annual retainer will be $10,000 and they will receive an additional $1,250 for
each Board meeting attended by them (up to an additional $5,000 per annum).
Under the Company's 1993 Incentive Stock Option Plan, each director who is not
already an officer or other employee of the Company will receive optionsreceives an option grant to purchase 1,000
shares of Common Stock on each August 1st during the term of the Plan. The
exercise price of all such options is equal to the stock's fair market value on
such date.
STOCK PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock against the cumulative total return of the
Standard & Poor's 500 Stock Index and the Nasdaq Stock Market Telecommunications
Stock Index for the period of five years commencing July 31, 1993 and ending
July 31, 1998. The graph and table assume that $100 was invested on July 31,
1993 in the Company's Common Stock, the Standard & Poor's 500 Stock Index and
the Nasdaq Stock Market Telecommunication Stock Index and that all dividends
were reinvested.
- --------------------------------------------------------------------------------
[The following table was depicted as a line graph in the printed materials.]
Comtech S&P 500 Nasdaq Telecom
------- ------- --------------
1993 $100 $100 $100
1994 47 105 101
1995 30 133 120
1996 48 154 119
1997 45 235 160
1998 87 280 269
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1991, theThe Company entered into a lease forleases its facilities in Melville, New York withfrom a partnership
controlled by the Company's Chairman and Chief Executive Officer. The lease, as
amended, provides for the Company's exclusive use of the premises for an initial
term of ten years. The Company has the option to extend the term of the lease
for an additional ten-year period, and a right of first refusal in the event of
a sale of the facility. The annual rental under the lease ($434,000439,000 in fiscal
1997)1998) is subject to adjustments.
In September 1988, theThe Company sold and simultaneously leased backleases its St. Cloud, Florida facility. The buyer/lessor isfacility from a partnership in which
J. Preston Windus, Jr., Vice President, Secretary and CFO of the Company, is a
general partner. The annual rental under the lease ($197,000205,000 in fiscal 1997)1998) is
subject to adjustments.
1310
As part of the terms of his employment and in connection with his relocation
from Arizona, the Company made loans to Mr. Windus totaling $120,000. The
interest on the loans which was a fluctuating rate equal to the rate the Company
earns on its investments ranged from 4.69% to 5.55% through April 1996 at which
time it became the prime rate in effect. The highest aggregate amount
outstanding in fiscal 1997 was $80,000 and the amount outstanding at September
15, 1997 was $55,000.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented at the
meeting. If other matters do come before the meeting, the persons acting
pursuant to the proxy will vote on them in their discretion.
Proxies may be solicited by mail, telephone, telegram, and personally by
directors, officers and other employees of the Company. The cost of soliciting
proxies will be borne by the Company.
Certain information regarding the Company's executive officers has been omitted
from this Proxy Statement in accordance with applicable regulations because such
information is set forth in the Company's Annual Report on Form 10-K for fiscal
1997.1998.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, if any, to file with the
Securities and Exchange Commission ("SEC") reports of ownership, and reports of
changes in ownership, of equity securities of the Company. Such persons are also
required to furnish the Company with copies of all such reports that they file.
Based solely on such reports and written representations of the Company's
directors and executive officers, the Company believes that during the two
fiscal year period ended July 31, 1997.1998. the Company's executive officers and
directors complied with all applicable Section 16(a) filing requirements.
Proposals of stockholders intended to be presented at next year's Annual Meeting
must be received by the Company no later than July 7, 199815, 1999 to be included in
the proxy material for such meeting.
Date: November 3, 1997
14
APPENDIX A
----------
COMTECH TELECOMMUNICATIONS CORP.
1993 INCENTIVE STOCK OPTION PLAN, AS AMENDED
1. PURPOSES OF THE PLAN
The purposes of this Comtech Telecommunications Corp. 1993 Incentive Stock
Option Plan, as amended (the "Plan") are to enable Comtech Telecommunications
Corp. (the "Company") and its Subsidiaries (as defined herein) to attract,
retain and motivate the Key Employees (as defined herein) who are important to
the success and growth of the business of the Company, to enable the Company to
attract, retain and motivate the most qualified individuals to serve as
directors, and to create a long-term mutuality of interest between the
stockholders of the Company and such Key Employees and directors by granting
them options (which may, in the case of Key Employees, be either incentive stock
options (as defined herein) or non-qualified stock options) to purchase the
Company's Common Stock.
2. DEFINITIONS
(a) "Act" means the Securities Exchange Act of 1934.
(b) "Annual Grant Date" means August 1 of each year during the term of the
Plan; provided, however, that if such date is not a date on which NASDAQ or any
exchange on which the Common Stock is then traded is open for trading, the
Annual Grant Date shall be the immediately succeeding date on which such trading
occurs.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means such committee, if any, appointed by the Board to
administer the Plan, consisting of two or more directors as may be appointed
from time to time by the Board, each of whom shall qualify as an "outside
director" within the meaning of Section 162(m) of the Code and, to the extent
required by Rule 16b-3 promulgated under Section 16(b) of the Act as then in
effect, or any successor provisions ("Rule 16b-3"), as a "non-employee director"
within the meaning of Rule 16b-3. If for any reason the appointed Committee
does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such
non-compliance shall not affect the validity of the Options, grants,
interpretations or other actions of the Committee. If the Board does not
appoint a committee for this purpose, "Committee" means the Board.
(f) "Common Stock" means the common stock of the Company, par value $.10,
any common stock into which such Common Stock may be converted, and any common
stock resulting from any reclassification of the Common Stock.
(g) "Company" means the Company and its Subsidiaries, any of whose
employees are Participants in the Plan.
(h) "Disability" means permanent and total disability, as determined by the
Committee in its sole discretion, provided that in no event shall any disability
that is not a permanent and total disability within the meaning of Section
22(e)(3) of the Code be treated as a Disability. A Disability shall be deemed
to occur at the time of the determination by the Committee of the Disability.
(i) "Eligible Director" means a director of Comtech Telecommunications
Corp. who is not an officer or employee of the Company or any of its
Subsidiaries.
(j) "Fair Market Value" means the value of a Share (as defined herein) on a
particular date, determined as follows:
(i) If the Common Stock is listed on such date on a national
securities exchange or quoted on the National Market System of The Nasdaq
Stock Market, Inc. ("NASDAQ"), the closing sales price of a Share on such
exchange or on the National Market System, as the case may be, on such
date, or in the absence of reported sales on such day, the mean between the
reported bid and asked prices on such exchange or on the National Market
System, as the case may be, on such date; or
(ii) If the Common Stock is not listed or quoted as described in the
preceding clause, but bid and asked prices are quoted through NASDAQ, the
mean between the closing bid and asked prices as quoted through NASDAQ on
such date; or
(iii) If the Common Stock is not listed or quoted as described in
clauses (i) or (ii) above, by such other method as the Committee determines
to be reasonable and consistent with applicable law; or
(iv) If the Common Stock is not publicly traded, such amount as is set
by the Committee in good faith.
(k) "Incentive Stock Option" means any Option which is intended to qualify
as an "incentive stock option" as defined in Section 422 of the Code.
(l) "Key Employee" means any person who is an executive officer or other
valuable staff, managerial, professional or technical employee of the Company,
as determined by the Committee. A Key Employee may also be a director of the
Company.
(m) "Option" means the right to purchase one Share at a prescribed purchase
price on the terms specified in the Plan. An Option may be an Incentive Stock
Option or a non-qualified option.
(n) "Participant" means an Eligible Director or a Key Employee of the
Company who is granted Options under the Plan.
2
(o) "Purchase Price" means the purchase price per Share payable upon
exercise of an option.
(p) "Securities Act" means the Securities Act of 1933, as it may be amended
from time to time, or any successor statute.
(q) "Share" means a share of Common Stock.
(r) "Subsidiary" means any "subsidiary corporation" within the meaning of
Section 424(f) of the Code. An entity shall be deemed a Subsidiary of the
Company only for such periods as the requisite ownership relationship is
maintained.
(s) "Substantial Stockholder" means any Participant who is a Key Employee
and who, at the time of grant, owns directly or is deemed to own, by reason of
the attribution rules set forth in Section 424(d) of the Code, Shares possessing
more than 10% of the total combined voting power of all classes of stock of the
Company, a Subsidiary, or any "parent corporation" within the meaning of Section
424(e) of the Code.
(t) "Termination of Employment" means that an individual is no longer an
employee of the Company or any Subsidiary. In the event an entity shall cease
to be a Subsidiary of the Company, any individual who is not otherwise an
employee of the Company or another Subsidiary shall suffer a Termination of
Employment at the time the entity ceases to be a Subsidiary. A leave of absence
approved by the Committee shall not constitute a Termination of Employment.
3. EFFECTIVE DATE/EXPIRATION OF PLAN
The Plan became effective on November 16, 1992 (the "Effective Date"), and
was amended by the Board of Directors on October 27, 1993, subject to the
approval of the stockholders of the Company which was obtained at the Annual
Meeting of Stockholders held January 18, 1994, to, among other things, increase
the total number of Shares that may be issued under the Plan by 120,000 to
245,000, and to provide for formula grants of Options to Eligible Directors in
accordance with Section 8. The Plan was further amended by the Board of
Directors on October 14, 1997 to increase the total number of Shares that may be
issued under the Plan by 450,000 to 695,000 and to, among other things, conform
the Plan to 162(m) of the Code and to changes to Rule 16b-3, subject, in the
case of the increase in the total number of Shares that may be issued under the
Plan and the amendments to comply with 162(m) of the Code, to the approval of
the stockholders of the Company at the next succeeding Annual Meeting of
Stockholders. Grants of Options with respect to such 450,000 additional shares
are subject to such stockholder approval of such amendments. The Plan will
terminate on the tenth anniversary of the Effective Date, unless earlier
terminated in accordance with Section 12. No Option shall be granted under the
Plan on or after the tenth anniversary of the Effective Date, but Options
previously granted may extend beyond that date.
3
4. ADMINISTRATION
(a) DUTIES OF THE COMMITTEE. The Plan shall be administered by the
Committee. The Committee shall have full authority, subject to the terms of the
Plan: to interpret the Plan and to decide all questions and settle all
controversies and disputes that may arise in connection with the Plan; to
establish, amend, and rescind rules for carrying out the Plan; to administer the
Plan; to select Key Employees to participate in, and grant Options to Key
Employees under, the Plan; to determine the terms, exercise price and permitted
forms of payment for each Option granted under the Plan; to determine which
Options granted under the Plan to Key Employees shall be Incentive Stock
Options; to prescribe the form or forms of the agreements evidencing Options and
any other instruments required under the Plan and to change such forms from time
to time; and to make all other determinations and take all such steps in
connection with the Plan and the Options as the Committee, in its sole
discretion, deems necessary or desirable. Except with respect to Options
granted to Eligible Directors under Section 8, the Committee shall not be bound
to any standards of uniformity or similarity of action, interpretation or
conduct in the discharge of its duties, regardless of the apparent similarity of
the matters coming before it. The determination, action or conclusion of the
Committee in connection with the foregoing shall be final and conclusive.
(b) ADVISORS. The Committee may designate officers or other employees of
the Company or competent professional advisors to assist it in the
administration of the Plan, and may grant authority to such persons to execute
Option Agreements (as defined herein) or other documents on behalf of the
Committee. The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan, and may rely upon
any opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultants and agents shall be paid by the
Company.
(c) INDEMNIFICATION. No officer, member or former member of the Committee
shall be liable for any action taken or made in good faith with respect to the
Plan or any Option granted under it. To the maximum extent permitted by
applicable law, each officer, member or former member of the Committee and the
Board shall be indemnified and held harmless by the Company against any cost or
expense (including reasonable fees of counsel reasonably acceptable to the
Company) or liability (including any sum paid in settlement of a claim), and
advanced all amounts necessary to pay the foregoing at the earliest time and to
the fullest extent permitted by applicable law, arising out of any act or
omission to act in connection with the Plan. Such indemnification shall be in
addition to any rights of indemnification the officers, members or former
members may have as officers or directors under applicable law or under the
Certificate of Incorporation or By-Laws of the Company.
(d) MEETINGS OF THE COMMITTEE. The Committee shall select one of its
members as a Chairman and shall adopt such rules and regulations as it shall
deem appropriate concerning the holding of its meetings and the transaction of
its business. Any member of the Committee may be removed at any time, either
with or without cause, by resolution adopted by the Board, and any vacancy on
the Committee may at any time be filled by resolution adopted by the Board. All
determinations by the Committee shall be made by the affirmative vote of a
majority of its members.
4
Any such determination may be made at a meeting duly called and held at which a
majority of the members of the Committee are in attendance in person or through
telephonic communication. Any determination set forth in writing and signed by
all of the members of the Committee shall be as fully effective as if it had
been made by a majority vote of the members at a meeting duly called and held.
5. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
(a) SHARES TO BE DELIVERED; FRACTIONAL SHARES. Shares to be issued under
the Plan shall be made available, at the discretion of the Board, either from
authorized but unissued Shares or from issued Shares reacquired by the Company
and held in treasury. No fractional Shares will be issued or transferred upon
the exercise of any Option. In lieu thereof, the Company shall pay a cash
adjustment equal to the same fraction of the Fair Market Value on the date of
exercise.
(b) NUMBER OF SHARES. Subject to adjustment as provided below in this
Section 5, the maximum aggregate number of Shares that may be issued under the
Plan shall be 695,000. If Options are for any reason canceled, or expire or
terminate unexercised, the Shares covered by such Options shall again be
available for the grant of Options, subject to the limit provided in the
preceding sentence. Subject to adjustment as provided below in this Section 5,
the maximum number of Shares subject to any Option which may be granted under
the Plan to each Key Employee shall not exceed 100,000 Shares in each calendar
year during the entire term of the Plan. Notwithstanding the foregoing, inBy order
to comply with Section 162(m) of the Code, the Committee shall take into account
that (i) if an Option is canceled, the canceled Option continues to be counted
against the maximum number of Shares for which Options may be granted to a Key
Employee under this Section 5(b) of the Plan, and (ii) if after the grant of an
Option, the Committee or the Board reduced the Purchase Price, the transaction
is treated as a cancellation of the Option and a grant of a new Option, and in
such case, both the Option that is deemed to be canceled and the Option that is
deemed to be granted, reduce the maximum number of Shares for which Options may
be granted to a Key Employee under the Option. To the extent that Shares for
which Options are permitted to be granted to a Key Employee during a calendar
year are not covered by a grant of an Option in the calendar year, such Shares
shall be available for grant or issuance to the Key Employee in any subsequent
calendar year during the term of the Plan.
(c) ADJUSTMENTS; RECAPITALIZATION, ETC. The existence of the Plan and
Options granted hereunder shall not affect in any way the right or power of the
Board or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting Common
Stock, the dissolution or liquidation of the Company, or any sale or transfer of
all or part of its assets or business or any other corporate act or proceeding.
If the Company takes any such action, however, the following provisions shall,
to the extent applicable, govern:
(i) If and whenever the Company shall effect a stock split, stock
dividend, subdivision, recapitalization or combination of Shares or other
change in the Company's capital stock, (x) the Purchase Price (as defined
herein) per Share and the number and class of Shares and/or other
securities with respect to which outstanding Options thereafter may
5
be exercised, and (y) the total number and class of Shares and/or other
securities that may be issued under the Plan, shall be proportionately
adjusted by the Committee. The Committee may also make such other
adjustments as it deems necessary to take into consideration any other
event (including, without limitation, accounting changes) if the Committee
determines that such adjustment is appropriate to avoid distortion in the
operation of the Plan.
(ii) Subject to Section 5(c)(iii), if the Company merges or
consolidates with one or more corporations, then, from and after the
effective date of such merger or consolidation, upon exercise of Options
theretofore granted, the Participant shall be entitled to acquire under
such Options, in lieu of the number of Shares as to which such Options
shall then be exercisable but on the same terms and conditions of exercise
thereof, the number and class of Shares and/or other securities or property
(including cash) which the Participant would have held or been entitled to
receive immediately after such merger or consolidation if, immediately
prior to such merger or consolidation, the Participant had been the holder
of record of the total number of Shares receivable upon exercise of such
Options (whether or not then exercisable) had such merger or consolidation
not occurred.
(iii) In the event of a merger or consolidation in which the Company is
not the surviving entity or any transaction that results in the acquisition
of substantially all of the Company's outstanding Common Stock by a single
person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of all of the Company's
assets (all of the foregoing being referred to as "Acquisition Events"),
then the Committee may, in its sole discretion, terminate all outstanding
Options granted to Key Employees by delivering notice of termination to
each such Key Employee, provided that, during the twenty (20) day period
following the date on which such notice of termination is delivered, each
Participant who is a Key Employee shall have the right to exercise in full
all of his or her Options that are then outstanding (without regard to any
limitations on exercisability otherwise contained in the Option
Agreements). If an Acquisition Event occurs and the Committee does not
terminate the outstanding Options pursuant to the preceding sentence, then
the provisions of Section 5(c)(ii) shall apply.
(iv) In the event of an Acquisition Event, then each outstanding
Option granted to Eligible Directors shall terminate on the date
immediately preceding the date of the Acquisition Event or, if applicable,
the record date set in connection with such Acquisition Event; provided
that, during the twenty day period ending on the date of such termination,
each Eligible Director shall have the right to exercise in full all of his
or her then outstanding Options, whether or not such Options are otherwise
then exercisable, and the Committee shall give notice of such Acquisition
Event and termination as promptly as is reasonably practicable under the
circumstances.
(v) Subject to Section 5(b), the Committee may grant Options under
the Plan in substitution for options held by employees of another
corporation who concurrently become employees of the Company as the result
of a merger or consolidation of the employing corporation with the Company,
or as the result of the acquisition by the Company of property
6
or stock of the employing corporation. Such substitute awards be granted on
such terms and conditions as the Committee considers appropriate in the
circumstances.
(vi) If, as a result of any adjustment made pursuant to the preceding
paragraphs of this Section 5, any Participant shall become entitled upon
the exercise of Options to receive any securities other than Common Stock,
then the number and class of securities thereafter receivable upon exercise
shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Common Stock set forth in this Section 5, as determined by the Committee in
its sole discretion.
(vii) Except as expressly provided above, the issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, for cash, property, labor or services, whether upon
direct sale, upon the exercise of rights or warrants to subscribe
therefore, or upon conversion of shares or other securities, and in any
case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number and class of
Shares and/or other securities or property subject to Options theretofore
granted or the Purchase Price per Share.
6. AWARDS AND TERMS OF OPTIONS FOR KEY EMPLOYEES
(a) GRANT. The Committee may grant Options, including Options intended to
be Incentive Stock Options, to Key Employees of the Company. Each Option shall
be evidenced by an Option agreement (the "Option Agreement") in such from not
inconsistent with the Plan as the Committee shall approve from time to time.
(b) EXERCISE PRICE. The purchase price per share (the "Purchase Price")
deliverable upon the exercise of an Option granted to a Key Employee shall be
determined by the Committee (but in no event less than the par value of the
Share), except that the Purchase Price of an Incentive Stock Option shall not be
less than 100% (110% for an Incentive Stock Option granted to a Substantial
Stockholder) of the Fair Market Value at the time the Incentive Stock Option is
granted. To the extent that the grant of an Option is intended to comply with
the exception for performance-based compensation under Section 162(m) of the
Code, the Purchase Price of the Option shall not be less than 100% of the Fair
Market Value at the time the Option is granted.
(c) NUMBER OF SHARES. Each Option Agreement shall specify the number of
Options granted to the Key Employees, as determined by the Committee in its sole
discretion.
(d) EXERCISABILITY. At the time of grant, the Committee shall specify when
and on what terms the Options granted to a Key Employee shall be exercisable.
In the case of Options not immediately exercisable in full, the Committee may at
any time accelerate the time at which all or any part of the Options may be
exercised. No Option shall be exercisable after the expiration of ten (10)
years from the date of grant (five years (5) in the case of an Incentive Stock
Option granted to a Substantial Stockholder). Every Option shall be subject to
earlier termination as provided in Section 7 below.
7
(e) SPECIAL RULE FOR INCENTIVE OPTIONS. If required by Section 422 of the
Code or any successor provision, to the extent the aggregate Fair Market Value
of the Shares with respect to which Incentive Stock Options are exercisable for
the first time by a Key Employee during any calendar year (under all plans of
his or her employer corporation and its parent and subsidiary corporations)
exceeds $100,000, such Options shall not be treated as Incentive Stock Options.
Nothing in this special rule shall be construed as limiting the exercisability
of any Option.
(f) ACCELERATION OF EXERCISABILITY ON CHANGE OF CONTROL. Upon a Change of
Control of the Company (as defined herein) all outstanding Options granted to
Key Employees not then fully exercisable shall immediately become fully
exercisable. For this purpose, a "Change of Control" shall be deemed to have
occurred if:
(i) any person (or group of persons acting in concert) becomes the
beneficial owner of 30% or more of the Company's outstanding voting
securities or securities convertible into such amount of voting securities;
or
(ii) within two years after a tender offer or exchange offer, or as
the result of a merger, consolidation, sale of substantially all of the
Company's assets or a contested election of the Board of Directors
or any
combination of such transactions, the persons who were directors of the
Company prior to such transaction do not constitute a majority of the Board
of Directors of the Company or its successor; provided, however, that no
transaction shall be deemed to constitute a Change in Control if such
transaction is approved by two-thirds of the Prior Directors of the Company
and the Successor Directors (each as hereafter defined), if any, voting
together. For purposes of this Agreement, Prior Directors are those
directors of the Company in office immediately prior to such event, and
Successor Directors are successors to Prior Directors who were recommended
to succeed Prior Directors by a majority of the Prior Directors then in
office.
(g) EXERCISE OF OPTIONS.
(i) A Key Employee may elect to exercise one or more Options by
giving written notice to the Committee of such election and the number of
Options such Participant has elected to exercise, accompanied by payment in
full of the aggregate Purchase Price for the number of shares for which the
Options are being exercised.
(ii) Shares purchased pursuant to the exercise of Options granted to
Key Employees shall be paid for at the time of exercise as follows:
(A) in cash or by check, bank draft or money order payable to the order
of the Company;
(B) if so permitted by the Committee: (x) through the delivery of
unencumbered Shares (including Shares being acquired pursuant to the
Options then being exercised), provided such Shares (and such Options)
have been owned by the Key Employee for such periods as may be required
by applicable accounting standards to
8J. Preston Windus, Jr.
Secretary
Date: November 12, 1998
avoid a charge to earnings, (y) through a combination of Shares and
cash as provided above, (z) by delivery of a promissory note of the Key
Employee to the Company, such promissory note to be payable, in the
case of an Incentive Stock Option, on such terms as are specified in
the Option Agreement (except that, in lieu of a stated rate of
interest, an Incentive Stock Option may provide that the rate of
interest on the promissory note will be such rate as is sufficient, at
the time the note is given, to avoid the imputation of interest under
the applicable provisions of the Code), or by a combination of cash (or
cash and Shares) and the Key Employee's promissory note; provided,
that, if the Shares delivered upon exercise of the Option is an
original issue of authorized Shares, at least so much of the exercise
price as represents the par value of such Shares shall be paid in cash
or by a combination of cash and Shares;
(C) through the delivery of irrevocable instructions to a broker to
deliver promptly to the Company an amount equal to the aggregate
Purchase Price; or
(D) on such other terms and conditions as may be acceptable to the
Committee and in accordance with the law of the State of Delaware. Upon
receipt of payment, the Company shall deliver to the Participant as
soon as practicable a certificate or certificates for the Shares then
purchased.
7. EFFECT OF TERMINATION OF EMPLOYMENT
(a) DEATH, DISABILITY, RETIREMENT, ETC. Upon the Termination of Employment
of a Key Employee, all outstanding Options then exercisable (and any outstanding
Options not previously exercisable but made exercisable by the Committee at or
after the Termination of Employment) shall remain exercisable by the Key
Employee for the following time periods (subject to the ten year limit set forth
in Section 6(d)):
(i) In the event of the Key Employee's death, such Options shall
remain exercisable (by the Key Employee's estate or by the person given
authority to exercise such Options by the Key Employee's will or by
operation of law) for a period of one (1) year from the date of the Key
Employee's death, provided that the Committee, in its sole discretion, may
at any time extend such time period to up to three years from the date of
the Key Employee's death.
(ii) In the event the Key Employee retires at or after age 65 (or,
with the consent of the Committee, before age 65), or if the Key Employee's
employment terminates due to Disability, such Options shall remain
exercisable for one (1) year from the date of the Key Employee's
termination of employment, provided that the Committee, in its sole
discretion, may at any time extend such time period to up to three years
from the date of the Key Employee's Termination of Employment.
(b) OTHER TERMINATION. In the event of a Termination of Employment for any
reason other than as provided in Section 7(a) or in 7(c), all outstanding
Options shall remain exercisable after such Termination of Employment (but only
to the extent exercisable immediately prior thereto)
9
for a period of three (3) months after such termination, provided that the
Committee, in its sole discretion, may extend such time period to up to one year
from the date of the Key Employee's Termination of Employment.
(c) CAUSE. Upon the Termination of Employment of a Key Employee for Cause
(as defined herein) or if it is discovered after his other Termination of
Employment that such Key Employee had engaged in conduct that would have
justified a Termination of Employment for Cause, all outstanding Options held by
the Key Employee shall immediately be canceled. Termination of Employment shall
be deemed to be for "Cause" for purposes of this Section 7(c) if (i) the Key
Employee shall have committed fraud or any felony in connection with his or her
duties as an employee of the Company, willful misconduct or any act of
disloyalty, dishonesty, fraud or breach of trust or confidentiality as to the
Company, or any other act which is intended to cause or may reasonably be
expected to cause economic or reputational injury to the Company or (ii) such
termination is or would be deemed to be for Cause under any employment agreement
between the Company and the Key Employee.
8. AWARDS AND TERMS OF OPTIONS FOR ELIGIBLE DIRECTORS
(a) GRANT. Without further action by the Committee, the Board of Directors
or the stockholders of the Company, (i) each individual who first becomes an
Eligible Director on or after October 27, 1993 shall be automatically granted
Options to purchase 2,000 shares of Common Stock, and (ii) on each Annual Grant
Date during the term of this Plan, each person who is then serving as an
Eligible Director shall be automatically granted options to purchase 1,000
shares of Common Stock; provided, however, that no Eligible Director shall
receive Options on any Annual Grant Date if he or she has not been an Eligible
Director for at least six months as of such date, and no Eligible Director shall
receive Options under the Plan to purchase more than an aggregate of 10,000
Shares.
(b) EXERCISE PRICE. The Purchase Price deliverable upon the exercise of an
Option granted under this Section 8 shall be the greater of (i) one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant of such
Option, or (ii) the par value of the Share.
(c) EXERCISABILITY. Subject to Section 3, each Option granted under this
Section 8 shall become exercisable one year after the date of grant, and no
Option shall be exercisable after the expiration of ten (10) years from the date
of grant. Except as provided in Section 8(e), Options granted to any Eligible
Director may be exercised only during the continuance of his or her service as a
director of Comtech Telecommunications Corp.
(d) EXERCISE OF OPTIONS. An Eligible Director electing to exercise one or
more Options shall give written notice of such election and of the number of
Options he or she has elected to exercise to the Secretary of the Company,
accompanied by payment in full of the aggregate Purchase Price for such Shares.
Such payment or provision for payment may be made either (i) in cash or by
check, bank draft or money order payable to the order of the Company; or (ii)
through the delivery of unencumbered Shares (including Shares being acquired
pursuant to the Options then being exercised), provided such Shares (and such
Options) have been owned by the Eligible Director for
10
such period as may be required by applicable accounting standards to avoid a
charge to earnings, or a combination of Shares and cash as provided above.
(e) EFFECT OF TERMINATION OF SERVICES. If an Eligible Director shall cease
to be a director of the Comtech Telecommunications Corp. for any reason other
than removal for cause, including, without limitation, as a result of death,
disability, resignation, failure to stand for reelection or failure to be
reelected, Options theretofore granted to such Eligible Director may be
exercised by such Eligible Director or, in the case of death, by his or her
estate or the person given authority to exercise such Options by will or by
operation of law, at any time within one year from the date he or she ceased to
be an Eligible Director; provided, however, that (i) such Options may be
exercised only to the extent that they were exercisable on the date the Eligible
Director ceased to serve on the Board, and (ii) no Option shall be exercisable
more than ten years after the date of grant.
9. NONTRANSFERABILITY
No Option shall be transferable by the Participant otherwise than by will
or under applicable laws of descent and distribution, and during the lifetime of
the Participant may be exercised only by the Participant or his or her guardian
or legal representative. In addition, no Option shall be assigned, negotiated,
pledged or hypothecated in any way (whether by operation of law or otherwise),
and no Option shall be subject to execution, attachment or similar process.
Upon any attempt to transfer, assign, negotiate, pledge or hypothecate any
Option, or in the event of any levy upon any Option by reason of any execution,
attachment or similar process contrary to the provisions hereof, such Option
shall immediately become null and void. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter that an Option (other
than an Incentive Stock Option) that is otherwise not transferable pursuant to
this Section 9, is transferable in whole or in part and in such circumstances
and under such conditions, as specified by the Committee.
10. RIGHTS AS A STOCKHOLDER
A Participant (or a permitted transferee of his or her Options) shall have
no rights as a stockholder with respect to any Shares covered by such
Participant's Options until such Participant shall have become the holder of
record of such Shares, and no adjustments shall be made for dividends in cash or
other property or distributions or other rights in respect to any such Shares
except as otherwise specifically provided for in this Plan.
11. DETERMINATIONS
Each determination, interpretation or other action made or taken pursuant
to the provisions of this Plan by the Committee shall be final and binding for
all purposes and upon all persons, including, without limitation, the
Participants, the Company, the directors, officers and other employees of the
Company, and their respective heirs, executors, administrators, personal
representatives and other successors in interest.
11
12. TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall terminate at the close of business on the tenth anniversary
of the Effective Date, unless terminated sooner as hereinafter provided, and no
Option shall be granted under the Plan on or after that date. The termination
of the Plan shall not terminate any outstanding Options that by their terms
continue beyond the termination date of the Plan. At any time prior to that
date, the Board or the stockholders of the Company may terminate, suspend or
amend the Plan; provided, however, that no amendment may be made that would
require the approval of the stockholders of the Company under Rule 16b-3,
Section 162(m) of the Code or, with respect to Incentive Stock Options, Section
422 of the Code, or under the rules of any exchange or system on which the
Company's securities are listed or traded at the request of the Company, unless
any such amendment is subject to such stockholder approval.
The amendments to the Plan providing for compliance with 162(m) of the Code
and for the additional Shares of stock authorized for issuance adopted by the
Board on October 14, 1997, and any Options granted with respect to the
additional Shares of stock authorized for issuance by such amendment, shall
terminate and be void if such amendments are not approved by the stockholders of
the Company at the next succeeding Annual Meeting of Stockholders. No such
Option may be exercised prior to the receipt of such stockholder approval.
Nothing contained in this Section 12 shall be deemed to prevent the Board
or the Committee from authorizing amendments of outstanding Options of Key
Employees, so long as all Options outstanding at any one time shall not call for
issuance of more Shares than the remaining number provided for under the Plan,
and so long as the provisions of any amended Options would have been permissible
under the Plan if such Option had been originally granted or issued as of the
date of such amendment with such amended terms.
Notwithstanding anything to the contrary contained in this Section 12, no
termination, amendment or modification of the Plan may without the consent of
the Participant (or any transferee of such Participant's Options), alter or
impair the rights and obligations arising under any then outstanding Option.
13. NON-EXCLUSIVITY
Neither the adoption nor the amendment of the Plan by the Board, nor the
submission of the Plan or such amendments to the stockholders of the Company for
approval, shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting or issuance of stock options, Shares
and/or other incentives otherwise than under the Plan, and such arrangements may
be either generally applicable or limited in application.
12
14. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options under the Plan are to
be added to the general funds of the Company and used for its general corporate
purposes as the Board shall determine.
15. GENERAL PROVISIONS
(a) RIGHT TO TERMINATE EMPLOYMENT. Neither the adoption or the amendment
of the Plan nor the grant of Options shall impose any obligations on the Company
to continue the employment of any Key Employee or to retain any Eligible
Director, nor shall it impose any obligation on the part of any Key Employee to
remain in the employ of the Company or any Eligible Director to continue to
serve on the Board, subject, however, to the provisions of any agreement between
the Company and a Key Employee.
(b) PURCHASE FOR INVESTMENT. If the Board determines that the law so
requires, the holder of Options granted hereunder shall, upon any exercise or
conversion thereof, execute and deliver to the Company a written statement, in
form satisfactory to the Company, representing and warranting that such
Participant is purchasing or accepting the Shares then acquired for such
Participant's own account and not with a view to the resale or distribution
thereof, that any subsequent offer for sale or sale of any such Shares shall be
made either pursuant to (i) a registration statement on an appropriate form
under the Securities Act of 1933 (the "Securities Act"), which registration
statement shall have become effective and shall be current with respect to the
Shares being offered and sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, and that in claiming such
exemption the holder will, prior to any offer for sale or sale of such Shares,
obtain a favorable written opinion from counsel approved by the Company as to
the availability of such exception.
(c) TRUSTS, ETC. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and any Participant or the executor,
administrator or other personal representative, or designated beneficiary of
such Participant, or any other persons. Any reserves that may be established by
the Company in connection with the Plan shall continue to be part of the general
funds of the Company, and no individual or entity other than the Company shall
have any interest in such funds until paid to a Participant. If and to the
extent that any Participant or such Participant's executor, administrator, or
other personal representative, as the case may be, acquires a right to receive
any payment from the Company pursuant to the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company.
(d) NOTICES. Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing to such
Participant of notices and the deliver to such Participant of agreements, Shares
and payments. Any notices required or permitted to be given shall be deemed
given if directed to the person to whom addressed at such address and mailed by
regular United States mail, first class and prepaid. If any item mailed to such
address is returned as
13
undeliverable to the addressee, mailing will be suspended until the Participant
furnishes the proper address.
(e) SEVERABILITY OF PROVISIONS. If any provisions of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed and
enforced as if such provisions had not been included.
(f) PAYMENT TO MINORS, ETC. Any benefit payable to or for the benefit of a
minor, an incompetent person or other person incapable of receipting therefor
shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
(g) HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only. They shall not be considered part of the
Plan and shall not be employed in the construction of the Plan.
(h) CONTROLLING LAW. The Plan shall be construed and enforced according to
the laws of the State of New York.
16. ISSUANCE OF STOCK CERTIFICATES; LEGENDS AND PAYMENT OF EXPENSES
(a) STOCK CERTIFICATES. Upon any exercise of Options and payment of the
aggregate Purchase Price as provided in the relevant Option Agreements, a
certificate or certificates for the Shares as to which Options have been
exercised shall be issued by the Company in the name of the person or persons
exercising such Options and shall be delivered to or upon the order of such
person or persons.
(b) LEGENDS. Certificates for Shares issued upon exercise of Options shall
bear such legend or legends as the Committee, in its discretion, determines to
be necessary or appropriate to prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act or to
implement the provisions of any agreements between the Company and a Key
Employee with respect to such Shares.
(c) PAYMENT OF EXPENSES. The Company shall pay all issue or transfer taxes
with respect to the issuance or transfer of Shares, as well as all fees and
expenses necessarily incurred by the Company in connection with such issuance or
transfer and with the administration of the Plan.
17. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board shall determine in its sole discretion that the
listing, registration or qualification of the Shares covered by the Plan upon
any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the award or sale of Shares
under the Plan, no Shares will be delivered unless and until such listing,
registration, qualification, consent or approval
14
shall have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
18. WITHHOLDING TAXES
The Company shall be entitled to withhold (or secure payment from the Key
Employee in cash or other property, including Shares already owned by the Key
Employee for six (6) months or more (valued at the Fair Market Value thereof on
the date of delivery) in lieu of withholding) the amount of any Federal, state
or local taxes required to be withheld by the Company in connection with any
Shares or cash payments deliverable under this Plan in respect of Options
granted to any Key Employee, and the Company may defer delivery unless such
withholding requirement is satisfied. The Committee may permit any such
withholding obligation to be satisfied by reducing the number of Shares
otherwise deliverable to the Key Employee.
15
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
COMTECH TELECOMMUNICATIONS CORP.
DECEMBER 16, 1997
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
Please mark your
A [X] votes as in this
example.
PROPOSAL 1.
FOR WITHHELD
1. Election of
Directors. [_] [_] Nominees: George Bugliarello
Richard L. Goldberg
For nominees listed at right (except as
marked to the contrary below).
- ---------------------------------------
PROPOSAL 2.
2. Approval of amendment to increase FOR AGAINST ABSTAIN
authorized shares of Common Stock. [_] [_] [_]
PROPOSAL 3.
3. Approval of amendments to 1993 FOR AGAINST ABSTAIN
Incentive Stock Option Plan. [_] [_] [_]
PROPOSAL 4.
4. Approval of selection of KPMG Peat FOR AGAINST ABSTAIN
Marwick LLP as auditors. [_] [_] [_]
This proxy will be voted or withheld from being voted in accordance with
the instructions specified. WHERE NO CHOICE IS SPECIFIED, THIS PROXY WILL
CONFER DISCRETIONARY AUTHORITY AND WILL BE VOTED FOR THE NOMINEES LISTED
AT LEFT AND FOR APPROVAL OF PROPOSALS 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
________________________ _________________________________ DATED: _______, 1997
PLEASE SIGN HERE SIGNATURE (IF HELD JOINTLY)
NOTE: Please sign exactly as name appears hereon. When signing as executor,
administrator, attorney, trustee or guardian, please give your full title
as such. If a corporation, please sign in full corporation name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person. If a joint tenancy, please have
both tenants sign.
- --------------------------------------------------------------------------------
COMTECH TELECOMMUNICATIONS CORP.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Fred Kornberg and J. Preston Windus, Jr.
and each of them with full power of substitution, proxies to vote at the Annual
Meeting of Stockholders of Comtech Telecommunications Corp. (the "Company") to
be held on December 16, 1997,15, 1998 at 10:00 a.m., local time, and at any adjournment
or adjournments thereof, hereby revoking any proxies heretofore given, to vote
all shares of Common Stock of the Company held or owned by the undersigned as
directed on the reverse side of this proxy card, and in their discretion upon
such other matters as may come before the meeting.
This proxy will be voted as specified and, unless otherwise specified in
the spaces provided, this proxy will be voted FOR the election of directors and
FOR the proposalsproposal referred to in items 2,3item 2 hereon.
(To be Signed on Reverse Side.)
Please Detach and 4Mail in the Envelope Provided
|X| Please mark your
votes as in this
example
FOR WITHHELD
Proposal 1 - Election of |_| |_| Nominees: Fred Kornberg
Directors. Sol S. Weiner
For nominees listed at right (except
as marked to the contrary below.)
- ------------------------------------
FOR AGAINST ABSTAIN
Proposal 2 - Ratification of selection |_| |_| |_|
of KPMG Peat Marwick LLP
as auditors
This proxy will be voted or withheld from being voted in accordance with the
instructions specified. WHERE NO CHOICE IS SPECIFIED, THIS PROXY WILL CONFER
DISCRETIONARY AUTHORITY AND WILL BE VOTED FOR THE NOMINEES LISTED AT LEFT AND
FOR APPROVAL OF PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
_____________________________ __________________________ Dated ___________, 1998
Please SIGN HERE SIGNATURE (IF HELD JOINTLY)
NOTE: Please sign exactly as name appears hereon. (TO BE SIGNED ON REVERSE SIDE.)When signing as executor,
administrator, attorney, trustee or guardian, please give your full title
as such. If a corporation, please sign in full corporation name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person. If a joint tenancy, please have
both tenants sign.