SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENTSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X] Check the appropriate box:|X|
Filed by a Party other than the Registrant [_] [X]|_|
Check the appropriate box:
|X| Preliminary Proxy Statement [_]|_| Definitive Proxy Statement
|_| Definitive Additional Materials |_| Soliciting Materials Pursuant to
|_| Confidential, For Usefor use of the Commission 240.14a-11(c) or 240.14a-12
Only (as permit-
tedpermitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional
Materials
[_] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14
a-12
COMTECH TELECOMMUNICATIONS CORP.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.
[_]|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)(4) and 0-11.
(1)1) Title of each class of securities to which transaction applies:
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(2)_____
2) Aggregate number of securities to which transaction applies:
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(3)________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set(Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4)____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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(5)____________________
5) Total fee paid:
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[_]_____________________________________________________
|_| Fee paid previously with preliminary materials:
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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.
(1)1) Amount previously paid:
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(2)Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement no.:
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(3)No:________________________
3) Filing Party:
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(4)_______________________________________________________
4) Date Filed:
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COMTECH
TELECOMMUNICATIONS CORP.
105 Baylis Road
Melville, New York 11747
November 3, 19971, 1999
To Our Stockholders:Shareholders:
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, 199714, 1999 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
stockholdersshareholders 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, 199714, 1999
The Annual Meetingannual meeting of StockholdersShareholders of COMTECH TELECOMMUNICATIONS CORP. (the
"Company") will be held at the MarriottMariott Hotel, 1350 Old Walt Whitman Road,
Melville, New York 11747, on Tuesday, December 16, 199714, 1999 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 Incentive2000 Stock Option Plan.Plan;
4. To ratify the selection of auditors for the current fiscal year; and
5. To transact such other business as may properly come before the
meeting.
All stockholdersshareholders are invited to attend the meeting. Stockholders of record at
the close of business on October 17, 1997,15, 1999, 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.Gail Segui
Secretary
November 3, 19971, 1999
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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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2
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, 1997,14, 1999, 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 stockholderStockholder 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, 199715, 1999 (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 2,650,404[4,487,193]
shares of Common Stock were outstanding. It is anticipated that the mailing to
stockholdersStockholders of this Proxy Statement and the enclosed proxy will commence by
November 3, 1997.1, 1999.
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 casecast (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 19932000 Incentive Stock Option Plan and the 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 andproposal.
Stockholder 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.
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.
13
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: 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 5.215, 1999.
Amount of
Name of Beneficial Owner Beneficial Ownership Percent of Class
------------------------ -------------------- ----------------
Fred Kornberg (1) 322,500 7.1
105 Baylis Road
Melville, New York 11747
Gary Gelman 242,302 5.4
c/o American Claims Evaluation, Inc.
One Jericho Plaza
Jericho, NY 11753
- ---------------------
(1) Includes 75,000 shares, which Mr. Kornberg could acquire by exercise of
stock options. Does not include 2,000the unvested portion of options described
elsewhere in this proxy statement. Does not include 3,000 shares held in a
trustFamily Limited Partnership for which Mr. Kornberg is a trustee,General Partner,
and has a 1% ownership in, and for which he disclaims beneficial
ownership.
(2) According to a Schedule 13D 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 on exercise of warrants. Mr. Mitarotonda is the
Chairman of the general partners of Barington.
ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation, theComtech's Board of Directors is divided into three classes, with the number of directors in each class
fixed byhaving two members. Members of the Board of Directors, andare elected for three year terms, with
the term of office of one class expiring at each year. ThereAnnual Meeting of Comtech's
stockholders. Mr. Nocita and Dr. Payne are presently six Board members, two in the class holdingwhose term of office
until the Annual Meeting, twoexpires in 1999. Dr. Bugliarello and Mr. Goldberg are in the class holdingwhose term of
office until the next
succeeding Annual Meeting,expires in 2000 and twoMr. Kornberg and Mr. Weiner are in the class holding office until the second
succeeding Annual Meeting.whose
term expires in 2001.
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.
BugliarelloMessers.
Nocita or GoldbergPayne 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.
2Under the Company's By-Laws, 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. Such written notice must be received at the Company's principal
executive offices, 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
4
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
Shares
Served Beneficially
For Term As Owned
Percent
Principal Expiring Director October of
NAME15, Percent
Name Occupation Age In Since 17, 1997(1)1999 of Class
---- --------------------- --- -- ----- ----------- --------- --------
George BugliarelloGerard R. Nocita (3)(4) Chancellor, Polytechnic 70(5) Private Investor 63 3 years 1977 17,4001993 7,187 *
University
Richard L. Goldberg John B. Payne (1)(2) Partner, Proskauer Rose 61(3) President and CEO of 64 3 years 1983 15,7851993 41,550 *
LLPNucomm, Inc.
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
AND CERTAIN EXECUTIVE OFFICERS
Shares
Term Served As Beneficially
Term AsExpires Director Owned Percent Principal Expiring Director October of
NAMEName Principal Occupation Age INIn Since 17, 1997(1)October 15, 1999 Class
---- ------------------------------- --- -- ----- --------------------------- -----
Fred Kornberg (1)(2) Chairman, Chief 61 1 year63 2 years 1971 155,000 5.8322,500 7.1
Executive Officer &
President of the Company
Gerard R. Nocita (3)(2) Retired - Private Investor 61 2 years 1993 17,000 *
John B. Payne (4) President and CEO 62 2 years 1993 13,000 *
of Nucomm, Inc.
Sol S. Weiner (1)(3)(4) President, Sol S. 78 1 yearWeiner 80 2 years 1980 20,000 *
Weiner46,500 1.0
Investments, Inc.
Richard L. Goldberg (1)(2)(5) Partner, Proskauer Rose 63 1 year 1983 26,677 *
LLP
George Bugliarello (1)(4)(5) Chancellor, Polytechnic 72 1 year 1977 29,100 *
University of N.Y.
Richard L. Burt (1) Senior Vice President; 5658 -- -- 27,955 1.088,408 1.9
President of Comtech
Systems, Inc.
Glenn F. Higgins Vice President; 63 -- -- 13,500 *
President of Comtech
Antenna
Systems, Inc.
J. Preston Windus, Jr. (1) Senior Vice President; Chief 54President, 56 -- -- 17,000 *84,000 1.8
Chief Financial Officer and
Secretary;Officer;
President of Comtech PST
Corp.
Robert L.McCollum Vice President; 48President 50 -- -- 48,000 1.8
Robert L. Mc Collum President76,500 1.7
of Comtech Communication
Corp.
Gail Segui (1) Secretary and Treasurer 53 -- -- 8,250 *
of the Company
All present directors 344,640 12.7
and officers (10
persons)
- -------------------------------------------and
officers (10 persons)
* Less than one percent
35
(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. Kornberg 75,000 shares; Mr. Weiner 7,500 shares; Mr.
Goldberg 3,0007,500 shares; Mr. Weiner 3,000Dr. Bugliarello 7,500 shares; Dr. Payne 10,500
shares; Mr. Burt 18,98471,952 shares; Mr. Higgins 11,400 shares;
Mr. Nocita 5,000 shares; Dr. Payne 5,000Ms. Segui 4,500 shares; Mr. Windus 17,00081,000
shares; and all directors and officers as a group 66,384265,452 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 1973 to 1994. He is also a director of Long Island
Lighting Company,KeySpan
Energy, The Lord Corporation and 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.
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
twothree 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.
6
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.
The Board of Directors held fourcommittee did not hold any meetings during the past fiscal year.
4
PROPOSAL TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCKThe Board of Directors held six meetings during the past fiscal year.
Proposal to Increase the Authorized Shares of Common Stock
On October 14, 1997,19, 1999, 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 10,000,00015 million to 15,000,000,30 million, and
authorized the submission of the amendment for approvedapproval at the Annual Meeting of
Stockholders. Under the proposed amendment, paragraph (a) of Article Fourth of
the Company'scompany's Certificate of Incorporation would be amended to read in its
entirety as follows:
"FOURTH:"Fourth: (a) The aggregate number of shares which the Corporation shall
have authority to issue is SeventeenThirty Two Million (17,000,000)(32,000,000) shares, of which
FifteenThirty Million (15,000,000)(30,000,000) 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, 1997,19, 1999, an aggregate of 2,650,4044,484,393 shares of Common Stock were
issued and outstanding, and an additional 412,4801,124,455 shares were reserved for
issuance under the Company's 1993 Incentive Stock Option Plan or pursuant to the exercise of other outstanding options or warrants, leaving
6,937,1169,391,152 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,financing, 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, agreementsagreement or understandingsunderstanding for the issuance of
additional shares of Common Stock, but reviews and evaluates potential corporate
actions on an on-goingongoing basis to determine if such actions would be in the best
interestinterests 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 BOARDThe Board of Directors recommends a vote FOR the proposed amendment to the
Company's Certificate of Incorporation.
APPROVAL OF DIRECTORS RECOMMENDS A VOTE FOR
THE PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
5
APPROVAL OF AMENDMENTS TO THE COMPANY'S
19932000 INCENTIVE STOCK OPTION PLAN
On October 14, 1997,19, 1999, the Company's Board of Directors adopted amendments (the
"Plan Amendments") toapproved the Company's 19932000 Stock
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 augmentPlan is
intended to enhance the Company's abilityprofitability and value of the Company for the benefit
of its stockholders by
7
enabling the Company (i) to use option grants to provide
long-termoffer employees of and consultants stock based
incentives to executive officers and other valuable staff,
managerial, professionalequity interests in order to attract, retain and technicalreward
such individuals and strengthen the mutuality of interests between such
individuals and the stockholders and (ii) to grant nondiscretionary,
nonqualified stock options to non-employee directors (on the same basis as done
in the past) in order to attract, retain and reward such non-employee directors
and strengthen the mutuality of interests between non-employee directors and the
stockholders.
The Board recommends approval of the Plan. The following description of the Plan
is a summary and is qualified in its entirety by reference to the Plan, a copy
of which is attached hereto as Appendix A to this proxy statement.
Administration
The Plan will be administered and interpreted by a committee or subcommittee of
the Board appointed from time to time by the Board, consisting of two or more
non-employee directors, each of whom is intended to be a non-employee director
as defined in Rule 16b-3 under the Exchange Act ("Rule 16b-3") and an outside
director as defined under Section 162(m) of the Code (the "Committee").
Currently, the Stock Option Committee will serve as the Committee for the Plan.
With respect to awards to non-employee directors, the Plan will be administered
by the Board of Directors and all references to the Committee are deemed to
refer to the Board of Directors for this purpose.
The Committee will have the full authority to administer and interpret the Plan
to grant discretionary awards under the Plan, to determine the persons to whom
awards will be granted, to determine the types of awards to be granted, to
determine the terms and conditions of each award, to determine the number of
shares of Common Stock to be covered by each award and to make all other
determinations in connection with the Plan and the awards thereunder as the
Committee, in its sole discretion, deems necessary or desirable.
The terms and conditions of individual awards will be set forth in written
agreements which will be consistent with the terms of the Plan. Awards under the
Plan may not be made on or after the tenth anniversary of the earlier of the
adoption of the Plan or the date of stockholder approval, but awards granted
prior to such date may extend beyond that date.
Eligibility and Types of Awards
All employees and consultants of the Company and its affiliates (including
prospective employees and consultants) are eligible to be granted nonqualified
stock options, stock appreciation rights, restricted stock, performance shares,
performance units, other stock-based awards and awards providing benefits
similar to those listed above which are designed to meet the requirements of non
U.S. jurisdictions under the Plan. In addition, employees of the Company and its
affiliates that qualify as subsidiaries or parent corporations (within the
meaning of Section 424 of the Code) are eligible to be granted incentive stock
options ("Key Employees"ISOs") and foster a mutualityunder the Plan. Non-employee directors of interests between such
Key Employeesthe Company are
eligible to receive nondiscretionary grants of nonqualified stock options.
Available Shares
The aggregate number of shares of Common Stock which may be issued or used for
reference purposes under the Plan or with respect to which awards may be granted
may not exceed 500,000 shares of Common Stock plus 882,935 shares of Common
Stock relating to outstanding awards that were previously granted under the 1982
Incentive Stock Option Plan and the 1993 Incentive Stock Option Plan, as amended
(the "Existing Option Plans") which have been transferred to the Plan, for a
total share limit of 1,382,935 shares of Common Stock. The terms applicable to
these awards in effect prior to the Plan's assumption of these awards continue
to apply. If the stockholders approve the Plan, an aggregate of 500,000 shares
of Common Stock will be available for grant (after taking into account the
transfer of shares subject to outstanding awards granted under the Existing
Plans).
8
The maximum number of shares of Common Stock with respect to which any option,
stock appreciation right or award of performance shares or award or restricted
stock for which the grant of such award or lapse of the Company. Therelevant restriction
period is subject to attainment of pre-established performance goals (in
accordance with Code Section 162 (m)) which may be granted under the Plan during
any fiscal year of the Company believesto any individual will be 100,000 shares per type
of award, provided that the abilitymaximum number of shares of Common Stock for all
types of awards does not exceed 100,000 during any fiscal year. The maximum
value at grant of performance units which may be granted under the Plan during
any fiscal year of the Company to provide Key Employeesany individual will be $100,000. To the extent
that shares of Common Stock for which awards are permitted to be granted to an
individual during a fiscal year are not covered by an award in a fiscal year,
the number of shares of Common Stock available for awards to such individual
will automatically increase in subsequent fiscal years until used.
The aggregate number of shares of Common Stock available under the Plan as well
as the maximum number of shares that may be granted are subject to appropriate
adjustment by the Committee in the event of changes in the Company's capital
structure or business by reason of certain corporate transactions or events.
Awards Under the Plan
Stock Options. The Committee may grant nonqualified stock options and ISOs to
purchase shares of Common Stock. The Committee will determine the number of
shares of Common Stock subject to each option, the term of each option (which
may not exceed 10 years (or five years in the case of an ISO granted to a 10%
shareholder)), the exercise price, the vesting schedule (if any), and the other
material terms of each option. No ISO or nonqualified stock option which is
intended to be performance based for purposes of Code Section 162(m) may have an
exercise price less than the fair market value of the Common Stock at the time
of grant (or, in the case of an ISO granted to a 10% shareholder, 110% of fair
market value).
Options will be exercisable at such time or times and subject to such terms and
conditions as determined by the Committee at grant and the exercisability of
such options may be accelerated by the Committee in its sole discretion. Payment
of an option's exercise price may be made: (i) in cash or by check, bank draft
or money order, (ii) through a "cashless exercise" procedure whereby the
recipient delivers irrevocable instructions to a broker to deliver promptly to
an amount equal to the purchase price, or (iii) on such other terms and
conditions as may be acceptable to the Committee.
Stock Appreciation Rights. The Committee may grant stock appreciation rights
("SARs") either with optionsa stock option which may be exercised only at such times
and to the extent the related option is importantexercisable ("Tandem SAR") or
independent of a stock option ("Non-Tandem SARs"). An SAR is a right to receive
a payment either in cash or common stock, as the Committee may determine, equal
in value to the excess of the fair market value of one share of Common Stock on
the date of exercise over the exercise price per share established in connection
with the grant of the SAR. The exercise price per share covered by a SAR will be
the exercise price per share of the related option in the case of a Tandem SAR
and will be the fair market value of the Common Stock on the date of grant in
the case of a Non-Tandem SAR.
Restricted Stock. The Committee may award "restricted" shares of Common Stock.
Upon the award of restricted stock, the recipient has all rights of a
stockholder with respect to the shares, including the right to receive
dividends, the right to vote the shares of restricted stock and, conditioned
upon full vesting of shares of restricted stock, the right to tender such
shares, subject to the conditions and restrictions generally applicable to
restricted stock or specifically set forth in the recipient's restricted stock
agreement. The Committee may, in its abilitysole discretion, determine at grant, that
the payment of dividends, if any, shall be deferred until the expiration of the
applicable restriction period. Recipients of restricted stock are required to
attractenter into a restricted stock agreement with the Company which states the
restrictions to which the shares are subject and retainthe criteria or date or dates
on which such employees.
The Plan Amendments relatingrestrictions will lapse.
9
If the grant of restricted stock or the lapse of the relevant restriction is
based on the attainment of objective performance goals, the Committee shall
establish the performance goals, formulae or standards and the applicable
vesting percentage for the restricted stock award applicable to each recipient
while the outcome of the performance goals are substantially uncertain. Such
performance goals may incorporate provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar events or
circumstances. Section 162(m) of the Code requires that performance awards be
based upon objective performance measures. The performance goals will be based
on one or more of the following criteria ("Performance Criteria"): (i) revenues,
income before income taxes and extraordinary income, net income, earnings before
income tax, earnings before interest, taxes, depreciation and amortization or a
combination of any or all of the foregoing; (ii) after-tax or pre-tax profits;
(iii) operational cash flow; (iv) level of, reduction of, or other specified
objectives with regard to the Company's bank debt or other long-term or
short-term public or private debt or other similar financial obligations; (v)
earnings per share or earnings per share from continuing operations; (vi) return
on capital employed or return on invested capital; (vii) after-tax or pre-tax
return on stockholders' equity; (viii) economic value added targets; (ix) fair
market value of the shares of Common Stock; and (x) the growth in the value of
an investment in Common Stock assuming the reinvestment of dividends. In
addition, such performance goals may be based upon the attainment of specified
levels of Company (or a subsidiary, division or other operational unit of the
Company) performance under one or more of the measures described relative to the
performance of other corporations. To the extent permitted under the Code, the
Committee may: (i) designate additional business criteria on which the
performance goals may be based; or (ii) adjust, modify or amend the
aforementioned business criteria.
Performance Units and Performance Shares. The Committee may grant performance
shares entitling recipients to receive a fixed number of shares of Common Stock
or the cash equivalent thereof, as determined by the Committee in its sole
discretion, upon the attainment of performance goals established by the
Committee (based on the Performance Criteria), based on a specified performance
period. The Committee may also grant performance units entitling recipients to
receive a value payable in cash or shares of Common Stock, as determined by the
Committee, upon the attainment of performance goals established by the Committee
(based on the Performance Criteria), for a specified performance cycle. The
Committee may subject such grants of performance shares and performance units to
such vesting and forfeiture conditions as it deems appropriate.
Other Stock-Based Awards. The Committee may grant awards of Common Stock and
other awards that are valued in whole or in part by reference to, or are payable
in or otherwise based on, Common Stock and may be granted either alone or in
addition to or in tandem with stock options, stock appreciation rights,
restricted stock, performance shares or performance units.
The Committee also determines the purchase price to be paid, if any, by a
recipient to purchase other stock-based awards (including, without limitation,
shares of Common Stock). The purchase of shares of Common Stock or other
stock-based awards may be made on either an after-tax or pre-tax basis, as
determined by the Committee; provided, however, that if the purchase is made on
a pre-tax basis, such purchase will be made pursuant to a deferred compensation
program established by the Committee, which will be deemed to be part of the
Plan.
Change in Control
Unless determined otherwise by the Committee at the time of grant, and except to
the extent provided in the applicable award agreement, the recipient's
employment agreement or other agreement approved by the Committee, accelerated
vesting or lapsing of restrictions of awards will occur upon a change in control
of the Company (as defined in the Plan). Upon a change in control of the
Company, options granted to non-employee directors will be subject to the rules
described below.
10
Non-Employee Director Stock Option Grants
The Plan authorizes the automatic grant of nonqualified stock options to each
non-employee director, without further action by the Board or the stockholders,
as follows: (i) options to purchase 3,000 shares of Common Stock will be granted
to each non-employee director as of the date he or she begins service as a
non-employee director on the Board, provided that such service begins after the
Plan's effective date; and (ii) options to purchase 1,500 shares of Common Stock
will be granted to each non-employee director as of each August 1, provided that
the non-employee director has served as a director for at least 6 months.
However, no non-employee director may receive options under the Plan to purchase
more than an aggregate of 15,000 shares of Common Stock (including any options
awarded to the non-employee director under the 1993 Incentive Stock Option Plan,
as amended). The exercise price per share of such options will be the fair
market value of the Common Stock at the time of grant. The term of each such
option will be 10 years. Options granted to non-employee directors will vest and
become exercisable one year after the date of grant, provided that the option
may be vested only during the continuance of his or her service as a director of
the Company. All options granted to non-employee directors and not previously
exercisable will become fully exercisable immediately upon a change in control
of the Company (as defined in the Plan).
Amendment and Termination
The Board or Committee may at any time, amend any or all of the provisions of
the Plan, or suspend or terminate it entirely, retroactively or otherwise.
However, no amendment may be made without the approval of the Company's
stockholders in accordance with the laws of the State of Delaware, to the extent
required under Section 162(m) of the Code, or to the extent applicable to ISOs,
Section 422 of the Code, which would: (i) increase the aggregate number of
shares of Common Stock that may be issued; (ii) increase the maximum individual
participant share limitations for a fiscal year; (iii) change the classification
of employees or consultants eligible to receive awards; (iv) decrease the
minimum exercise price of any stock option or SAR; (v) extend the maximum option
term; (vi) materially alter the Performance Criteria; or (vii) require
stockholder approval in order for the Plan to continue to comply with the
applicable provisions of Section 162(m) of the Code or, to the extent applicable
to ISOs, Section 422 of the Code.
11
Miscellaneous
Awards granted under the Plan are generally nontransferable, except that the
Committee may provide for the transferability of nonqualified stock options to a
recipient's family member (as defined in the Plan) at the time of grant or
thereafter.
The Plan is not subject to any of the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). The Plan is not, nor is it
intended to be, qualified under Section 401(a) of the Code.
Certain Federal Income Tax Consequences Relating to the Plan
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 preserve, should it be neededprovide only a general understanding of the material federal income
tax consequences (state, local, estate and social security 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.
Incentive Stock Options. In general, an employee will not realize taxable income
upon either the grant or the exercise of an ISO and the Company will not realize
an income tax deduction at some pointeither time. If the employee does not sell the Common
Stock received pursuant to the exercise of an ISO within either (1) two years
after the date of the grant of the ISO or (2) one year after the date of
exercise, a subsequent sale of the Common Stock will result in long-term capital
gain or loss to the future, the
Company's ability to claimemployee and will not result in a tax deduction for certain compensation thatto the
Company. Capital gains rates may be reduced in the case of a longer holding
period.
If the employee disposes of the Common Stock acquired upon exercise of the ISO
within either of the above-mentioned time periods, the employee will generally
realize as ordinary income an amount equal to the lesser of: (1) the fair market
value of the Common Stock on the date of exercise over the option's exercise
price, or (2) the amount realized upon disposition over the exercise price.
In this event, the Company generally will be entitled to an income tax deduction
equal to the amount recognized as ordinary income. Any gain in excess of the
amount realized by the employee as ordinary income will be taxed at the rates
applicable to short-term or long-term capital gains, depending on the holding
period.
Nonqualified Stock Options. A recipient (i.e., an employee, consultant or
director) will not realize any taxable income upon the grant of a nonqualified
stock option and the Company will not receive a deduction at the time of grant
unless the option has a readily ascertainable fair market value (as determined
under applicable tax law) at the time of grant. Upon the exercise of a
nonqualified stock option, the recipient generally will realize ordinary income
in an amount equal to the excess of the fair market value of the Common Stock on
the date of exercise over the option's exercise price. Upon a subsequent sale of
the Common Stock by the recipient, the recipient will recognize short-term or
long-term capital gain or loss depending upon his or her holding period for the
Common Stock. The Company will generally be allowed a deduction equal to the
amount recognized by the recipient as ordinary income.
Other Tax Consequences. In addition, (i) any officers and directors of the
Company subject to Section 16(b) of the Exchange Act may also be subject to
special tax rules regarding the income tax consequences concerning their
options, (ii) any entitlement to a tax deduction on the part of the Company is
subject to the applicable tax rules (including, without limitation, Section
162(m) of the Code regarding a $1,000,000 limitation on deductible
compensation), (iii) the exercise of an ISO may have implications in the
computation of alternative minimum taxable income, and (iv) in the event that
the exercisability or vesting of any option is accelerated because of a change
of control, payments relating to the option, either alone or together with
certain other payments, may constitute parachute payments under Section 280G of
its executive officers.the Code, which excess amounts may be subject to excise taxes.
12
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 employeerecipient 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 is administered by a compensation committeeCommittee 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 areis 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. Exceptsatisfy these requirements with respect to the formula grants to directors who are not
employeesoptions.
Vote Required and Board Recommendation
The affirmative vote 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 certain limitations described below, the
exercise price and other terms of the options. Except with respect to Eligible
Directors, the
6
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 ___ 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 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
9
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 voteholders of a majority of the outstanding shares of
Common Stock 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 VOTEPlan.
The Board of Directors recommends that the stockholders vote FOR THE PLAN
AMENDMENTS.
10
approval of the
Plan.
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 MARWICK LLP AS THE COMPANY'S
AUDITORS.as the Company's auditors.
13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE FOR THE FISCAL YEARS ENDED JULYSummary Compensation Table for the Fiscal Years Ended
July 31, 1999, 1998 and 1997 1996 AND
1995
Long Term
Annual Compensation Compensation
-------------------------------------------- ------------------------------------------
Name--------------------------------- -------------
Fiscal Options Restricted
andName of Principal Position Year Salary Bonus Other (1) (No.No. Of Shares)Shares Stock Awards
- ---------------------- --------- ---------------------------------------- ---- ------ ----- ----- ------------- ------------- -------------------- --------------------------------
Fred Kornberg (2) 1997 $210,000 5,400(1) 1999 $265,000 $ 95,445 * --- ---30,000 --
Chairman, Chief 1996 185,000 990Executive 1998 240,000 44,940 * --- ---
Executive150,000(4) --
Officer and President 1995 185,000 ---1997 210,000 5,400 * --- ----- --
J. Preston Windus, Jr. (3)(2) 1999 170,000 29,200 * 15,000 --
Senior Vice President, Chief 1998 150,000 56,700 * 60,000(4) --
Financial Officer and 1997 130,000 16,300 * --- ---
Vice President, Chief 1996 115,000 2,500 * 5,000 ---
Financial Officer and 1995 100,000 --- * 15,000 ---
Secretary;-- --
President of
Comtech PST Corp.
Richard L. Burt (3)(2) 1999 160,000 69,600 15,000 --
Senior Vice President; 1998 150,000 19,600 * 60,000(4) --
President of 1997 130,000 ----- * --- ----- --
Comtech Systems, Inc.
Robert Mc Collum (2) 1999 135,000 -- -- --
Vice President; President 1996 115,000 12,500 --- 5,000 ---
of1998 135,000 -- * 60,000(4) --
Comtech Systems, Inc. 1995 115,000 --- --- 4,960 ---
Glenn F. Higgins (3) 1997 98,400 --- --- --- ---
Vice President;
President 1996 96,425 3,427 11,481 --- ---
of Comtech Antenna 1995 96,425 --- 11,521 2,500 ---
Systems, Inc.
Robert L. Mc Collum (3)Communications 1997 110,000 9,800 * --- ---
Vice President;
President of Comtech
Communications-- --
Corp.
Gail Segui (3) 1999 80,000 6,300 * -- --
Secretary and Treasurer
_____________________- ---------------------
* 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 1992 for the purpose of, among other things, extending
his employment for an additional five years. As so amended, the agreementJanuary 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-yeartwo
year periods unless either party gives notice of non-extensionnon- extension to
the other at least six months in advance of the then scheduled
termination date; at a current basic compensation of $210,000$295,000 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
14
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, 1997,15, 1999, would have been $635,648.$2,759,000.
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)(2) 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.
(3) Ms. Segui is eligible to receive incentive compensation based upon
the attainment of certain corporate goals and personal performance
targets that are developed by senior management and submitted to the
Executive Compensation Committee for annual approval.
(4) On January 14, 1998, the Company granted Mr. Kornberg, Mr. Windus,
Mr. Burt, Mr. McCollum and Ms. Segui options of 150,000; 60,000;
60,000; 60,000 and 9,000 respectively. The options granted to Mr.
Kornberg and Ms. Segui will expire on January 14, 2008, subject to
earlier expiration in the event their 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 37,500 and 2,250 share increments, respectively, 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 $6.34, $10, $13.33 and $20. The options granted to
each of Mr. Windus, Mr. Burt, and Mr. McCollum will expire on
January 14, 2008, subject to earlier expiration in the event an
individual's employment with the Company terminates, and may not be
exercised unless they have vested. The options will vest on December
15, 2008, subject to accelerated vesting based upon the achievement
of net income and cash flow targets for the subsidiary headed by the
recipient during 1998, 1999 and 2000 fiscal years. Pursuant to such
accelerated vesting, 75,000 of the options granted to Mr. Kornberg,
4,500 of the options granted to Ms. Segui, 36,000 of the options
granted to Mr. Windus and 33,000 of the options granted to Mr. Burt
have vested to date.
OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 1997
No1999
Number of % of Total
Securities Options Potential Realizable Value at
Underlying Granted to Exercise Assumed Annual Rates of
Options Employees in Price Expiration Stock Price Appreciation
Granted Fiscal Year ($/Share) (1) Date For Option Term (2)
------- ----------- ------------- ---- -------------------
5% 10%
-- ---
Fred Kornberg 30,000 22.10% $7.50 6/29/09 $159,825 $358,593
J. Preston Windus, Jr. 15,000 11.05% $7.50 6/29/09 79,912 179,296
Richard L. Burt 15,000 11.05% $7.50 6/29/09 79,912 179,296
(1) The exercise price is the market price on the date the options were
grantedgranted.
15
(2) 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, 19971999
AND OPTION VALUES AS OF JULY 31, 19971999
Value of Unexercised
Shares Number of Unexercised In-the-Money Options at
Acquired Options at July 31, 19971999 July 31, 1997(2)1999(2)
on Value --------------------------------- --------------------------------------------------------------- ------------------------------
Name Exercise Realized(1)Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ -------- ------------ ----------- ----------------- --------------------------------- ---------------------------------------------- ----------- -------------
Fred Kornberg 24,000 $16,400 -- --- $--- $---$ -- 75,000 105,000 $665,250 $796,350
J. Preston Windus, Jr. --- --- 16,000 19,000 6,000 9,000Jr -- -- 81,000 46,500 732,940 390,135
Richard L. Burt 4,040 3,030 26,955 10,976 1,987 2,981
Glenn F. Higgins 2,000 1,500 12,500 5,100 810 1,215-- -- 71,952 46,488 637,224 348,396
Robert Mc Collum --- --- --- --- --- ---L. McCollum -- -- -- 60,000 -- 532,200
Gail Segui 4,200 45,061 4,500 6,300 39,915 57,343
- ----------------------------------
(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,
1999 for which the fair market value of the Common Stock on such date
($3.44)11.87) exceeded the exercise price of the options.
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 and the Secretary,Treasurer 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. The Secretary, Treasurer's
incentive compensation is subject to attainment of certain corporate goals and
personal performance targets that are proposed by senior management and
established by the Executive Compensation Committee.
16
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
1999, options to purchase an aggregate of 30,000 shares of the Company's Common
Stock were granted to the Company's four executive officers other than the Chief
Executive Officer. One fifth of the options vest each year for five years
commencing one year after the date of grant. The options expire on the tenth
anniversary of the date of grant.
CEO's Compensation. As discussed in Note (1) 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 $265,000 for fiscal 1999 and bonus of $95,445
equal to 3.5% of the Company's pre-tax income required under the agreement. In
addition, on June 29, 1999, Mr. Kornberg was awarded an option to purchase an
aggregate of 30,000 shares of the Company's Common Stock, one fifth of which
vest each year for five years. The options expire on the tenth anniversary of
the date of grant.
The Executive Compensation Committee
George Bugliarello, Chairman
Gerard R. Nocita
Sol S. Weiner
COMPENSATION OF DIRECTORS
DirectorsEach Director who areis not a salaried officersemployee of the Company receivereceives an annual
retainer of $8,000,$10,000, plus $500$1,250 for each Board meeting attended by them (up to
an additional $2,000$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 1,0001,500 shares of Common Stock on each August 1st during
the term of the Plan. The options are exercisable one year after the date of
grant. The exercise price of all such options is equal to the stock's fair
market value on such date.
17
Stock Performance Graph
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG COMTECH TELECOMMUNICATIONS CORP., THE S & P 500 INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPHIC OMITTED]
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 as they now
exist 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 ($434,000448,000 in fiscal 1997)1999) 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., Senior Vice President Secretary and CFOChief Financial Officer of the
Company, is a general partner. The annual rental under the lease ($197,000207,000 in
fiscal 1997)1999) is subject to adjustments.
13
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.
18
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
1997.1999.
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
securitiesSecurities 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, 1997.1999, 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, 199814, 2000 to be included in
the proxy material for such meeting.
By order of the Board of Directors
Gail Segui
Secretary
Date: November 3, 1997
141, 1999
19
APPENDIX - A
----------THE COMTECH TELECOMMUNICATIONS CORP.
1993--------------------------
2000 STOCK INCENTIVE STOCK OPTION PLAN
AS AMENDED
1. PURPOSES OF THE PLAN--------------------------
ARTICLE I
PURPOSE
The purposespurpose of thisThe Comtech Telecommunications Corp. 19932000 Stock Incentive
Stock
Option Plan as amended (the "Plan") areis to enable Comtech Telecommunications
Corp. (the "Company")enhance the profitability and value of the Company for the benefit of
its stockholders by enabling the Company: (i) to offer employees of and
Consultants to the Company and its Subsidiaries (as defined herein)Affiliates stock-based incentives and other
equity interests in the Company, thereby creating a means to raise the level of
stock ownership by employees and Consultants in order to attract, retain and
motivatereward such individuals and strengthen the Key Employees (as defined herein) who are importantmutuality of interests between such
individuals and the Company's stockholders; and (ii) to the success and growth of the business of the Company,make equity based awards
to enable the CompanyNon-Employee Directors, thereby creating a means to attract, retain and
motivatereward such Non-Employee Directors and strengthen the most qualified individuals to serve as
directors, and to create a long-term mutuality of interestinterests
between Non-Employee Directors and the stockholdersCompany's stockholders.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
II.1 "Acquisition Event" has the meaning set forth in Section 4.2(d).
II.2 "Affiliate" means each of the following: (i) any Subsidiary; (ii) any
Parent; (iii) any corporation, trade or business (including, without limitation,
a partnership or limited liability company) which is directly or indirectly
controlled 50% or more (whether by ownership of stock, assets or an equivalent
ownership interest or voting interest) by the Company or one of its Affiliates;
and such Key Employees(iv) any other entity in which the Company or any of its Affiliates has a
material equity interest and directorswhich is designated as an "Affiliate" 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 termresolution
of the Plan; provided, however, that if such date is notCommittee.
II.3 "Award" means any award under this Plan of any: (i) Stock Option;
(ii) Stock Appreciation Right; (iii) Restricted Stock; (iv) Performance Share;
(v) Performance Unit; (vi) Other Stock-Based Award; or (vii) other award
providing benefits similar to (i) through (vi) designed to meet the requirements
of 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)Foreign Jurisdiction.
II.4 "Board" means the Board of Directors of the Company.
(d)II.5 "Cause" means, with respect to a Participant's Termination of
Employment or Termination of Consultancy: (i) in the case where there is no
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award (or where there is such an
agreement but it does not define "cause" (or words of like import)), termination
due to a Participant's commission of a fraud or a felony in connection with his
or her duties as an employee of the Company or an Affiliate, willful misconduct
or any act of disloyalty, dishonesty, fraud, breach of trust or confidentiality
as to the Company or an Affiliate or any other act which is intended to cause or
may reasonably be expected to cause economic or reputational injury to the
Company or an Affiliate; or (ii) in the case where there is an
20
employment agreement, consulting agreement, change in control agreement or
similar agreement in effect between the Company or an Affiliate and the
Participant at the time of the grant of the Award that defines "cause" (or words
of like import), as defined under such agreement; provided, however, that with
regard to any agreement that conditions "cause" on occurrence of a change in
control, such definition of "cause" shall not apply until a change in control
actually takes place and then only with regard to a termination thereafter. With
respect to a Participant's Termination of Directorship, "cause" shall mean an
act or failure to act that constitutes cause for removal of a director under
applicable Delaware law.
II.6 "Change in Control" has the meaning set forth in Article XIII or
Article XIV, as applicable.
II.7 "Code" means the Internal Revenue Code of 1986, as amended. (e)Any
reference to any section of the Code shall also be a reference to any successor
provision.
II.8 "Committee" means suchmeans: (a) with respect to the application of this Plan
to Eligible Employees and Consultants, a committee if any, appointed byor subcommittee of the Board to
administer the Plan, consisting of two or more directors as may be
appointed from time to time by the Board, which committee or subcommittee shall
consist of two or more non-employee directors, each of whom shall qualify as an "outside
director" within the meaning of Section 162(m) of the Code and,is intended to be,
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 ofas defined in
Rule 16b-3 orand, to the extent required by Section 162(m) of the Code such
non-compliance shall not affect the validityand any
regulations thereunder, an "outside director" as defined under Section 162(m) of
the Options, grants,
interpretations or other actionsCode; provided, however, that if and to the extent that no Committee exists
which has the authority to administer this Plan, the functions of the Committee. IfCommittee
shall be exercised by the Board does not
appoint a committee forand all references herein to the Committee shall
be deemed to be references to the Board; and (b) with respect to the application
of this purpose, "Committee" meansPlan to Non-Employee Directors, the Board.
(f)II.9 "Common Stock" means the common stock, $.10 par value per share, 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.
II.10 "Company" means Comtech Telecommunications Corp., a Delaware
corporation, and its successors by operation of law.
II.11 "Consultant" means any advisor or consultant to the Company andor its
Subsidiaries, any of whose
employees are Participants in the Plan.
(h)Affiliates.
II.12 "Disability" means, with respect to an Eligible Employee, Consultant
or Non-Employee Director, a 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 ofas defined in Section 22(e)(3) of
the Code, shall be treated as a Disability. A Disability shall only be deemed to
occur at the time of the determination by the Committee of the Disability.
II.13 "Effective Date" means the effective date of this Plan as defined in
Article XVIII.
II.14 "Eligible Employee" means each employee of the Company or an
Affiliate.
II.15 "Exchange Act" means the Securities Exchange Act of 1934, as
amended. Any references to any section of the Exchange Act shall also be a
reference to any successor provision.
II.16 "Family Member" shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employee's household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, a foundation in which
these persons (or the employee) control the management of assets, and any other
entity in which these persons (or the employee) own more than 50% of the voting
interests.
II.17 "Fair Market Value" means, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, as of any
date, the last sales price for the Common Stock on the applicable date: (i) "Eligibleas
reported on the principal national securities exchange on which it is then
traded or the Nasdaq Stock Market, Inc. or
21
(ii) if not traded on any such national securities exchange or the Nasdaq Stock
Market, Inc. as quoted on an automated quotation system sponsored by the
National Association of Securities Dealers, Inc. If the Common Stock is not
readily tradable on a national securities exchange, the Nasdaq Stock Market,
Inc. or any automated quotation system sponsored by the National Association of
Securities Dealers, Inc., its Fair Market Value shall be set in good faith by
the Committee. Notwithstanding anything herein to the contrary, "Fair Market
Value" means the price for Common Stock set by the Committee in good faith based
on reasonable methods set forth under Section 422 of the Code and the
regulations thereunder including, without limitation, a method utilizing the
average of prices of the Common Stock reported on the principal national
securities exchange on which it is then traded during a reasonable period
designated by the Committee. For purposes of the grant of any Stock Option, the
applicable date shall be the date for which the last sales price is available at
the time of grant. For purposes of the conversion of a Performance Unit to
shares of Common Stock for reference purposes, the applicable date shall be the
date determined by the Committee in accordance with Section 10.1. For purposes
of the exercise of any Stock Appreciation Right, the applicable date shall be
the date a notice of exercise is received by the Committee or, if not a day on
which the applicable market is open, the next day that it is open.
II.18 "Foreign Jurisdiction" means any jurisdiction outside of the United
States including, without limitation, countries, states, provinces and
localities.
II.19 "Incentive Stock Option" means any Stock Option awarded to an
Eligible Employee under this Plan intended to be and designated as an "Incentive
Stock Option" within the meaning of Section 422 of the Code.
II.20 "Limited Stock Appreciation Right" means an Award of a limited
Tandem Stock Appreciation Right or a Non-Tandem Stock Appreciation Right made
pursuant to Section 7.5 of this Plan.
II.21 "Non-Employee Director" means a director of Comtech Telecommunications
Corp.the Company who is not
an active employee of the Company or an Affiliate and who is not an officer,
director or employee of the Company or any of its
Subsidiaries.
(j) "Fair Market Value"Affiliate.
II.22 "Non-Qualified Stock Option" means the value ofany Stock Option awarded under
this Plan that is not an Incentive Stock Option.
II.23 "Non-Tandem Stock Appreciation Right" means a Share (as defined herein) onStock Appreciation
Right entitling a particular date, determined as follows:
(i) If theParticipant to receive an amount in cash or 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(as
determined by the Committee in good faith.
(k) "Incentiveits sole discretion) equal to the excess of: (i)
the Fair Market Value of a share of Common Stock Option"as of the date such right is
exercised, over (ii) the aggregate exercise price of such right.
II.24 "Other Stock-Based Award" means an Award of Common Stock and other
Awards made pursuant to Article XI that are valued in whole or in part by
reference to, or are payable in or otherwise based on, Common Stock, including,
without limitation, an Award valued by reference to performance of an Affiliate.
II.25 "Parent" means any Option which is intended to qualify
as an "incentive stock option" as defined inparent corporation of the Company within the
meaning of Section 422424(e) of the Code.
(l) "Key Employee"II.26 "Participant" means any person who isEligible Employee or Consultant to whom an
executive officer or other
valuable staff, managerial, professional or technical employeeAward has been made under this Plan and each Non-Employee Director of the
Company,Company; provided, however, that a Non-Employee Director shall be a Participant
for purposes of the Plan solely with respect to awards of Stock Options pursuant
to Article XIII.
II.27 "Performance Criteria" has the meaning set forth in Exhibit A.
II.28 "Performance Cycle" has the meaning set forth in Section 10.1.
II.29 "Performance Goal" means the objective performance goals established
by the Committee in accordance with Section 162(m) of the Code and based on one
or more Performance Criteria.
22
II.30 "Performance Period" has the meaning set forth in Section 9.1.
II.31 "Performance Share" means an Award made pursuant to Article IX of
this Plan of the right to receive Common Stock or, as determined by the
Committee. A Key Employee may also be a directorCommittee in its sole discretion, cash of an equivalent value at the end of the
Company.
(m) "Option"Performance Period or thereafter.
II.32 "Performance Unit" means an Award made pursuant to Article X of this
Plan of the right to purchase one Sharereceive a fixed dollar amount, payable in cash or Common
Stock (or a combination of both) as determined by the Committee in its sole
discretion, at the end of a prescribed purchase
price onspecified Performance Cycle or thereafter.
II.33 "Plan" means The Comtech Telecommunications Corp. 2000 Stock
Incentive Plan.
II.34 "Reference Stock Option" has the terms specifiedmeaning set forth in Section 7.1.
II.35 "Restricted Stock" means an Award of shares of Common Stock under
this Plan that is subject to restrictions under Article VIII.
II.36 "Restriction Period" has the Plan. An Optionmeaning set forth in Section 8.3(a)
with respect to Restricted Stock.
II.37 "Retirement" means a Termination of Employment or Termination of
Consultancy without Cause by a Participant at or after age 65 or such earlier
date after age 50 as may be an Incentive Stock
Optionapproved by the Committee with regard to such
Participant. With respect to a Participant's Termination of Directorship,
Retirement shall mean the failure to stand for reelection or the failure to be
reelected at or after a non-qualified option.
(n) "Participant" means an Eligible DirectorParticipant has attained age 65 or, a Key Employeewith the consent of
the Company who is granted OptionsBoard, before age 65 but after age 50.
II.38 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Plan.
2
(o) "Purchase Price"Exchange
Act as then in effect or any successor provisions.
II.39 "Section 162(m) of the Code" means Section 162(m) of the purchase price per Share payable upon
exercise of an option.
(p)Code and
any Treasury regulations thereunder.
II.40 "Securities Act" means the Securities Act of 1933, as it mayamended. Any
reference to any section of the Securities Act shall also be amended
from timea reference to time, or any
successor statute.
(q) "Share"provision.
II.41 "Stock Appreciation Right" or "SAR" means a sharethe right pursuant to an
Award granted under Article VII.
II.42 "Stock Option" or "Option" means any option to purchase shares of
Common Stock.
(r)Stock granted to Eligible Employees or Consultants under Article VI or to
Non-Employee Directors under Article XIII.
II.43 "Subsidiary" means any "subsidiary corporation"subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code.
An entity shall be deemedII.44 "Tandem Stock Appreciation Right" means a SubsidiaryStock Appreciation Right
entitling the holder to surrender to the Company all (or a portion) of a Stock
Option in exchange for an amount in cash or Common Stock (as determined by the
Committee in its sole discretion) equal to the excess of: (i) the Fair Market
Value, on the date such Stock Option (or such portion thereof) is surrendered,
of the Company only forCommon Stock covered by such periods asStock Option (or such portion thereof), over
(ii) the requisite ownership relationship is
maintained.
(s) "Substantialaggregate exercise price of such Stock Option (or such portion
thereof).
II.45 "Ten Percent 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, Sharesperson owning stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company, a Subsidiary,its Subsidiaries or any "parent corporation" within the meaning of Section
424(e) of the Code.
(t)its Parent.
23
II.46 "Termination of Employment"Consultancy" means, with respect to a Consultant,
that an individualthe Consultant is no longer an
employee ofacting as a consultant to the Company or any Subsidiary.an
Affiliate. In the event an entity shall cease to be an Affiliate, there shall be
deemed a SubsidiaryTermination of the Company,Consultancy of any individual who is not otherwise an
employee ofa
Consultant to the Company or another Subsidiary shall suffer a Termination of
EmploymentAffiliate at the time the entity ceases to
be an Affiliate. In the event that a Subsidiary. AConsultant becomes an Eligible Employee
upon the termination of his consultancy, the Committee, in its sole and absolute
discretion, may determine that no Termination of Consultancy shall be deemed to
occur until such time as such Consultant is no longer a Consultant or an
Eligible Employee.
II.47 "Termination of Directorship" means, with respect to a Non-Employee
Director, that the Non-Employee Director has ceased to be a director of the
Company.
II.48 "Termination of Employment" means: (i) a termination of employment
(for reasons other than a military or personal leave of absence approvedgranted by the
Company) of a Participant from the Company and its Affiliates; or (ii) when an
entity which is employing a Participant ceases to be an Affiliate, unless the
Participant otherwise is, or thereupon becomes, employed by the Company or
another Affiliate. In the event that an Eligible Employee becomes a Consultant
upon the termination of his employment, the Committee, shall not constitute ain its sole and absolute
discretion, may determine that no 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 OptionEmployment shall be granted under the
Plan ondeemed to
occur until such time as such Eligible Employee is no longer an Eligible
Employee or after the tenth anniversary of the Effective Date, but Options
previously granted may extend beyond that date.
3
4.a Consultant.
II.49 "Transfer" means anticipate, alienate, attach, sell, assign, pledge,
encumber, charge, hypothecate or otherwise transfer and "Transferred" has a
correlative meaning.
ARTICLE III
ADMINISTRATION
(a) DUTIES OF THE COMMITTEE.III.1 The Committee. The Plan shall be administered and interpreted by the
Committee. If for any reason the appointed Committee does not meet the
requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance
with the requirements of Rule 16b-3 and Section 162(m) of the Code shall not
affect the validity of Awards, grants, interpretations or other actions of the
Committee.
III.2 Grants of Awards. The Committee shall have full authority to grant
to Eligible Employees and Consultants, pursuant to the terms of this Plan: (i)
Stock Options; (ii) Tandem Stock Appreciation Rights and Non-Tandem Stock
Appreciation Rights; (iii) Restricted Stock; (iv) Performance Shares; (v)
Performance Units; (vi) Other Stock-Based Awards; and (vii) other awards
providing benefits similar to (i) through (vi) designed to meet the requirements
of Foreign Jurisdictions. All Awards shall be granted by, confirmed by, and
subject to the terms of, a written agreement executed by the Plan:Company and the
Participant. In particular, the Committee shall have the authority:
(a) to interpretselect the PlanEligible Employees and Consultants to whom Awards may
from time to time be granted hereunder;
(b) to determine whether and to decide all questions and settle all
controversies and disputes that may arisewhat extent Awards, including any
combination of two or more Awards, are to be granted hereunder to one or more
Eligible Employees or Consultants;
(c) to determine, in connectionaccordance with the Plan;terms of this Plan, the number of
shares of Common Stock 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;be covered by each Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of this Plan, of any Award granted hereunder (including, but not limited to, the
exercise or purchase price (if any), any restriction or limitation, any vesting
schedule or acceleration thereof and permitted
formsany forfeiture restrictions or waiver
thereof, regarding any Award and the shares of payment for each Option granted underCommon Stock relating thereto,
based on such factors, if any, as the Plan;Committee shall determine, in its sole
discretion);
24
(e) to determine whichwhether and under what circumstances a Stock Option may
be settled in cash, Common Stock and/or Restricted Stock under Section 6.3(d)
or, with respect to Stock Options granted to Non-Employee Directors, Section
13.4(d);
(f) to determine whether, to what extent and under what circumstances to
provide loans (which shall bear interest at the rate the Committee shall
provide) to Eligible Employees and Consultants in order to exercise Stock
Options under this Plan or to Key Employees shall bepurchase Awards under this Plan (including shares
of Common Stock);
(g) to determine whether a Stock Option is an Incentive Stock Options;Option or
Non-Qualified Stock Option, whether a Stock Appreciation Right is a Tandem Stock
Appreciation Right or Non-Tandem Stock Appreciation Right or whether an Award is
intended to prescribe the form or formssatisfy Section 162(m) of the agreements evidencing Options andCode;
(h) to determine whether to require an Eligible Employee or Consultant, as
a condition of the granting of any other instruments required underAward, not to sell or otherwise dispose of
shares of Common Stock acquired pursuant to the Plan and to change such forms fromexercise of an Option or an
Award for a period of time to time; and to make all other determinations and take all such steps in
connection with the Plan and the Options as determined by the Committee, in its sole
discretion, following the date of the acquisition of such Option or Award;
(i) to modify, extend or renew an Award, subject to Article XV herein,
provided, however, that if an Award is modified, extended or renewed and thereby
deemed to be the issuance of a new Award under the Code or the applicable
accounting rules, the exercise price of an Award may continue to be the original
exercise price even if less than the Fair Market Value of the Common Stock at
the time of such modification, extension or renewal; and
(j) to offer to buy out an Option previously granted, based on such terms
and conditions as the Committee shall establish and communicate to the
Participant at the time such offer is made.
III.3 Guidelines. Subject to Article XV hereof, the Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing this Plan and perform all acts, including the delegation
of its administrative responsibilities, as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan and
any Award issued under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in this Plan or
in any agreement relating thereto in the manner and to the extent it shall deem
necessary to effectuate the purpose and intent of this Plan. The Committee may
adopt special guidelines and provisions for persons who are residing in, or
subject to, the taxes of, Foreign Jurisdictions to comply with applicable tax
and securities laws and may impose any limitations and restrictions that it
deems necessary to comply with the applicable tax and securities laws of such
Foreign Jurisdictions. To the extent applicable, this Plan is intended to comply
with Section 162(m) of the Code and the applicable requirements of Rule 16b-3
and shall be limited, construed and interpreted in a manner so as to comply
therewith.
III.4 Decisions Final. Any decision, interpretation or desirable. Exceptother action made
or taken in good faith by or at the direction of the Company, the Board or the
Committee (or any of its members) arising out of or in connection with this Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.
III.5 Reliance on Counsel. The Company, the Board or the Committee may
consult with legal counsel, who may be counsel for the Company or other counsel,
with respect to Options
grantedits obligations or duties hereunder, or with respect to Eligible Directors under Section 8,any
action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
III.6 Procedures. If the Committee is appointed, the Board shall designate
one of the members of the Committee as chairman and the Committee shall not be boundhold
meetings, subject to any standards of uniformity or similarity of action, interpretation or
conduct in the discharge of its duties, regardlessBy-Laws of the apparent similarity of
the matters coming before it. The determination, action or conclusionCompany, at such times and places as it
shall deem advisable. A majority of the Committee members shall constitute a
quorum. All
25
determinations of the Committee shall be made by a majority of its members. Any
decision or determination reduced to writing and signed by all the Committee
members in connectionaccordance with the foregoingBy-Laws of the Company, shall be finalfully as
effective as if it had been made by a vote at a meeting duly called and conclusive.
(b) ADVISORS.held.
The Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
III.7 Designation of Consultants/Liability.
(a) The Committee may designate officers or other employees of the Company or competentand professional
advisors to assist itthe Committee in the administration of thethis Plan and may
grant authority to such personsofficers to execute Option Agreements (as defined herein)agreements or other documents on behalf
of the Committee.
(b) The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of thethis 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 any such counsel, consultants and agentsconsultant or agent shall be paid by the
Company. (c) INDEMNIFICATION. NoThe Committee, its members and any employee of the Company designated
pursuant to paragraph (a) above shall not be liable for any action or
determination made in good faith with respect to this Plan. To the maximum
extent permitted by applicable law, no officer of the Company or member or
former member of the Committee shall be liable for any action taken or determination
made in good faith with respect to thethis Plan or any OptionAward granted under it. To
the maximum extent permitted by applicable law or the Certificate of
Incorporation or By-Laws of the Company and to the extent not covered by
insurance, each officer and 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)claim with the approval of
the Company), 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 this Plan, except to the Plan.extent arising out
of such officer's, member's or former member's own fraud or bad faith. Such
indemnification shall be in addition to any rights of indemnification the
officers, directors or members or former officers, directors or 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 concerningCompany or any Affiliate. Notwithstanding anything else herein, this
indemnification will not apply to the holding of its meetings and the transaction of
its business. Any member of the Committee may be removed at any time, either
withactions 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 votean
individual with regard to Awards granted to him or her under this Plan.
26
ARTICLE IV
SHARES AND OTHER LIMITATIONS
IV.1 Shares.
(a) General Limitation. The aggregate number of a
majorityshares of its members.
4
Any such determinationCommon Stock
which 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 uponused for reference purposes under this Plan or with
respect to which Awards may be granted shall not exceed 500,000 shares of Common
Stock (subject to any increase or decrease pursuant to Section 4.2) with respect
to all types of Awards, plus _____ shares of Common Stock relating to
outstanding awards assumed by this Plan under Section 4.4 for a total of _____
shares of Common Stock. The shares of Common Stock available under this Plan may
be either authorized and unissued Common Stock or Common Stock held in or
acquired for the exercise of any Option. In lieu thereof, the Company shall pay a cash
adjustment equal to the same fractiontreasury of the Fair Market Value on the date of
exercise.
(b) NUMBER OF SHARES. Subject to adjustment as provided below inCompany. If any Stock Option or Stock
Appreciation Right granted under this Section 5, the maximum aggregate number of Shares that may be issued under the
Plan shall be 695,000. If Options areexpires, terminates or is canceled
for any reason canceled,without having been exercised in full or, expirewith respect to Stock
Options, the Company repurchases any Stock Option, the number of shares of
Common Stock underlying such unexercised or terminaterepurchased Stock Option or any
unexercised the Shares covered by such OptionsStock Appreciation Right shall again be available for the purposes
of Awards under this Plan. If any shares of Restricted Stock, Performance Shares
or Performance Units awarded under this Plan to a Participant are forfeited or
repurchased by the Company for any reason, the number of forfeited or
repurchased shares of Restricted Stock, Performance Shares or Performance Units
shall again be available for the purposes of Awards under this Plan. If a Tandem
Stock Appreciation Right is granted or a Limited Stock Appreciation Right is
granted in tandem with a Stock Option, such grant of Options, subject to the limit provided in the
preceding sentence. Subject to adjustment as provided below in this Section 5,shall only apply once against
the maximum number of Sharesshares of Common Stock which may be issued under this
Plan. In determining the number of shares of Common Stock available for Awards
other than Awards of Incentive Stock Options, if Common Stock has been exchanged
by a Participant as full or partial payment of exercise price or withholding
taxes, or if the number shares of Common Stock otherwise deliverable has been
reduced for the payment of exercise price or withholding taxes, the number of
shares of Common Stock exchanged as payment for the payment of exercise price or
withholding taxes, or reduced, shall again be available for purposes of Awards
under this Plan.
(b) Individual Participant Limitations. (i) The maximum number of shares
of Common Stock subject to any OptionAward of Stock Options, Stock Appreciation
Rights, Performance Shares or shares of Restricted Stock for which the grant of
such Award or the lapse of the relevant Restriction Period is subject to the
attainment of Performance Goals in accordance with Section 8.3(a)(ii) herein
which may be granted under this Plan during any fiscal year of the PlanCompany to
each KeyEligible Employee or Consultant shall not exceedbe 100,000 Shares in each calendar
year during the entire termshares per type of the Plan. Notwithstanding the foregoing, in orderAward
(subject to comply withany increase or decrease pursuant to Section 162(m) of the Code, the Committee shall take into account4.2), provided that (i) if an Option is canceled, the canceled Option continues to be counted
against the
maximum number of Sharesshares of Common Stock for all types of Awards does not exceed
100,000 during any fiscal year of the Company. If a Tandem Stock Appreciation
Right is granted or a Limited Stock Appreciation Right is granted in tandem with
a Stock Option, it shall apply against the Eligible Employee's or Consultant's
individual share limitations for both Stock Appreciation Rights and Stock
Options.
(ii) There are no annual individual Eligible Employee or Consultant share
limitations on Restricted Stock for which Optionsthe grant of such Award or the lapse
of the relevant Restriction Period is not subject to attainment of Performance
Goals in accordance with Section 8.3(a)(ii) hereof.
(iii) The maximum value at grant of Performance Units which may be granted
under this Plan during any fiscal year of the Company to each Eligible Employee
or Consultant shall be $100,000. Each Performance Unit shall be referenced to
one share of Common Stock and shall be charged against the available shares
under this Plan at the time the unit value measurement is converted to a
Key
Employee underreferenced number of shares of Common Stock in accordance with Section 10.1.
(iv) The individual Participant limitations set forth in 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 Option4.1(b) shall be cumulative; 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 Sharesshares of Common Stock
for which OptionsAwards are permitted to be granted to an Eligible Employee or a
Key EmployeeConsultant during a calendarfiscal year are not covered by an Award to such Eligible
Employee or Consultant in a grantfiscal year, the number of an Optionshares of Common Stock
available for Awards to such Eligible Employee or Consultant shall automatically
increase in the calendar year, such Shares
shall be available for grant or issuance to the Key Employee in any subsequent calendar yearfiscal years during the term of the Plan.
(c) ADJUSTMENTS; RECAPITALIZATION, ETC.Plan until used.
27
IV.2 Changes.
(a) The existence of thethis Plan and Optionsthe Awards 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 or its business, any merger or
consolidation of the Company or any Affiliate, any issue of bonds, debentures,
preferred or prior preference stocksstock ahead of or affecting Common Stock, the
dissolution or liquidation of the Company or any Affiliate, any sale or transfer
of all or part of itsthe assets or business of the Company or any Affiliate or any
other corporate act or proceeding.
If(b) Subject to the provisions of Section 4.2(d), in the event of any such
change in the capital structure or business of the Company takesby reason of any
such action, however, the following provisions shall,
to the extent applicable, govern:
(i) If and whenever the Company shall effect astock split, reverse stock split, stock dividend, subdivision,combination or
reclassification of shares, recapitalization, or combination of Shares or other change in the Company's capital
stock, (x)structure of the Purchase Price (as defined
herein) per ShareCompany, merger, consolidation, spin-off, reorganization,
partial or complete liquidation, issuance of rights or warrants to purchase any
Common Stock or securities convertible into Common Stock, or any other corporate
transaction or event having an effect similar to any of the foregoing and
effected without receipt of consideration by the Company, then the aggregate
number and classkind of Shares and/or other
securities with respect toshares 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 this Plan, the
Plan, shallnumber and kind of shares or other property (including cash) to 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,issued upon
exercise of Options
theretoforean outstanding Stock Option or other Awards granted under this Plan
and the Participantpurchase price thereof shall be entitledappropriately adjusted consistent with
such change in such manner as the Committee may deem equitable to acquire under
such Options, in lieuprevent
substantial dilution or enlargement of the number of Shares asrights granted to, whichor available for,
Participants under this Plan, and any such Optionsadjustment determined by the
Committee in good faith shall then be exercisable butfinal, binding and conclusive on the same termsCompany
and conditionsall Participants and employees and their respective heirs, executors,
administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any adjustment in
Options or Awards pursuant to Section 4.2(a) or (b) shall be aggregated until,
and eliminated at, the time of exercise thereof,by rounding-down for fractions less than
one-half and rounding-up for fractions equal to or greater than one-half. No
cash settlements shall be made with respect to fractional shares eliminated by
rounding. Notice of any adjustment shall be given by the numberCommittee to each
Participant whose Award has been adjusted 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
Optionsadjustment (whether or not
then exercisable) had such merger or consolidation
not occurred.
(iii)notice is given) shall be effective and binding for all purposes of this
Plan.
(d) In the event of a merger or consolidation in which the Company is not
the surviving entity or in the event of 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 or substantially 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 Stock Options granted to Key Employeesand Stock Appreciation Rights, effective as of the
date of the Acquisition Event, by delivering notice of termination to each
such Key Employee, provided that,Participant at least 30 days prior to the date of consummation of the
Acquisition Event, in which case during the twenty (20) day period followingfrom the date on which such
notice of termination is delivered to the consummation of the Acquisition Event,
each such Participant who is a Key Employee shall have the right to exercise in full all of his or her
Stock Options and Stock Appreciation Rights that are then outstanding (without
regard to any limitations on exercisability otherwise contained in the Stock
Option or Award Agreements)., but any such exercise shall be contingent upon and
subject to the occurrence of the Acquisition Event, and, provided that, if the
Acquisition Event does not take place within a specified period after giving
such notice for any reason whatsoever, the notice and exercise pursuant thereto
shall be null and void.
If an Acquisition Event occurs andbut the Committee does not terminate the
outstanding Stock Options and Stock Appreciation Rights pursuant to the preceding sentence,this Section
4.2(d), then the provisions of Section 5(c)(ii)4.2(b) shall apply.
(iv) InIV.3 Minimum Purchase Price. Notwithstanding any provision of this Plan to
the eventcontrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
IV.4 Assumption of Awards. Awards that were granted prior to the Effective
Date under the (i) Comtech Telecommunications Corp. 1982 Incentive Stock Option
Plan (the "1982 Plan"), and (ii) Comtech Telecommunications
28
Corp. 1993 Incentive Stock Option Plan, as amended (the "1993 Plan"), shall be
transferred and assumed by this Plan as of the Effective Date. Notwithstanding
the foregoing, such Awards shall continue to be governed by the terms of the
applicable agreement in effect prior to the Effective Date.
ARTICLE V
ELIGIBILITY
V.1 General Eligibility. All Eligible Employees and Consultants and
prospective employees of and Consultants to the Company and its Affiliates are
eligible to be granted Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units, Other Stock-Based
Awards and awards providing benefits similar to each of the foregoing designed
to meet the requirements of Foreign Jurisdictions under this Plan. Eligibility
for the grant 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,Award 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 forthactual participation in this Section 5, asPlan shall be
determined by the Committee in its sole discretion. (vii) Except as expressly provided above, the issuance byThe vesting and exercise of
Awards granted to a prospective employee or Consultant are conditioned upon such
individual actually becoming an Eligible Employee or Consultant.
V.2 Incentive Stock Options. All Eligible Employees of 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 warrantsits
Subsidiaries and its Parent (if any) are eligible 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 ofunder this Plan. Eligibility for 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 exercisegrant of an Option granted to a Key EmployeeAward and actual
participation in this Plan shall be determined by the Committee (but in no event less than the par valueits sole
discretion.
V.3 Non-Employee Directors. Non-Employee Directors are only eligible to
receive an Award of Stock Options in accordance with Article XIII of the Share), except that the Purchase PricePlan.
ARTICLE VI
STOCK OPTIONS
VI.1 Stock Options. Each Stock Option granted hereunder shall be one of
two types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code; or (ii) a Non-Qualified Stock Option.
VI.2 Grants. The Committee shall have the authority to grant to any
Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not be
less than 100% (110% forqualify as an
Incentive Stock Option (whether because of its provisions or the time or manner
of its exercise or otherwise), such Stock Option or the portion thereof which
does not qualify, shall constitute a separate Non-Qualified Stock Option. The
Committee shall have the authority to grant any Consultant one or more
Non-Qualified Stock Options (with or without Stock Appreciation Rights).
Notwithstanding any other provision of this Plan to the contrary or any
provision in an agreement evidencing the grant of a Stock Option to the
contrary, any Stock Option granted to an Eligible Employee of an Affiliate
(other than an Affiliate which is a Substantial
Stockholder)Parent or a Subsidiary) shall be a
Non-Qualified Stock Option.
VI.3 Terms of Stock Options. Stock Options granted under this Plan shall
be subject to the Fair Market Value atfollowing terms and conditions, and shall be in such form and
contain such additional terms and conditions, not inconsistent with the timeterms of
this Plan, as the Committee shall deem desirable:
(a) Exercise Price. The exercise price per share of Common Stock
purchasable under an Incentive Stock Option is
granted. To the extent that the grant of anor a Stock Option is intended to comply with
the exceptionbe
"performance-based" for performance-based compensation underpurposes of Section 162(m) of the Code shall be
determined by the Purchase PriceCommittee at the time of the Optiongrant, but shall not be less than
100% of the Fair Market Value of the share of Common Stock at the time theof grant;
provided, however, that if an Incentive Stock Option is granted.
(c) NUMBER OF SHARES. Each Option Agreement shall specify the number of
Options granted to a Ten Percent
Stockholder, the Key Employees, asexercise price shall be no less than 110% of the Fair Market
Value of the Common Stock. The exercise price per share of Common Stock
purchasable under a Non-Qualified Stock Option shall be determined by the
Committee in its sole
discretion.
(d) EXERCISABILITY. At the timeCommittee.
29
(b) Stock Option Term. The term of grant, the Committee shall specify when
and on what terms the Options granted to a Key Employeeeach Stock Option shall be exercisable.
Infixed by 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. NoCommittee; provided, however, that no Stock Option shall be exercisable more
than 10 years after the expiration of ten (10)
years fromdate such Stock Option is granted; and further provided
that the date of grant (five years (5) in the caseterm of an Incentive Stock Option granted to a Substantial Stockholder). Every OptionTen Percent Stockholder
shall not exceed 5 years.
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to earlier terminationsuch terms and conditions as providedshall be determined by the
Committee at grant. If the Committee provides, in Section 7 below.
7
(e) SPECIAL RULE FOR INCENTIVE OPTIONS. If required by Section 422its discretion, that any Stock
Option is exercisable subject to certain limitations (including, without
limitation, that such Stock Option is exercisable only in installments or within
certain time periods), the Committee may waive such limitations on the
exercisability at any time at or after grant in whole or in part (including,
without limitation, waiver of the Codeinstallment exercise provisions or
any successor provision, to the extent the aggregate Fair Market Valueacceleration of the Shares with respecttime at which such Stock Option may be exercised), based on
such factors, if any, as the Committee shall determine, in its sole discretion.
(d) Method of Exercise. Subject to which Incentivewhatever installment exercise and
waiting period provisions apply under subsection (c) above, Stock Options are exercisable formay be
exercised in whole or in part at any time and from time to time during 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 OptionsOption term by giving written notice of exercise to the Committee of such election andspecifying the
number of Options such Participant has electedshares to exercise,be purchased. Such notice shall be 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 exercisepurchase price 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
8
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; (ii) if the Common Stock is
traded on a national securities exchange, the Nasdaq Stock Market, Inc. or
(ii)quoted on a national quotation system sponsored by the National Association of
Securities Dealers, through a "cashless exercise" procedure whereby the
delivery of unencumbered Shares (including Shares being acquired
pursuantParticipant delivers irrevocable instructions to a broker to deliver promptly to
the Company an amount equal to the purchase price; or (iii) on such other terms
and conditions as may be acceptable to the Committee (including, without
limitation, the relinquishment of Stock Options then being exercised), provided such Shares (and such
Options) have beenor by payment in full or in part
in the form of Common Stock owned by the Eligible DirectorParticipant for 10
a period of at least 6
months or such other period as may be required to avoid an accounting charge
against the Company's earnings (and for which the Participant has good title
free and clear of any liens and encumbrances) based on the Fair Market Value of
the Common Stock on the payment date as determined by the Committee). No shares
of Common Stock shall be issued until payment therefor, as provided herein, has
been made or provided for.
(e) Incentive Stock Option Limitations. To the extent that the aggregate
Fair Market Value (determined as of the time of grant) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
an Eligible Employee during any calendar year under this Plan and/or any other
stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000,
such Options shall be treated as Non-Qualified Stock Options. In addition, if an
Eligible Employee does not remain employed by the Company, any Subsidiary or any
Parent at all times from the time an Incentive Stock Option is granted until 3
months prior to the date of exercise thereof (or such other period as required
by applicable accounting standardslaw), such Stock Option shall be treated as a Non-Qualified Stock
Option. Should any provision of this Plan not be necessary in order for the
Stock Options to avoid a
charge to earnings,qualify as Incentive Stock Options, or a combinationshould any additional
provisions be required, the Committee may amend this Plan accordingly, without
the necessity of Shares and cash as provided above.
(e) EFFECT OF TERMINATION OF SERVICES. If an Eligible Director shall cease
to be a directorobtaining the approval of the Comtech Telecommunications Corp. forstockholders of the Company.
(f) Form, Modification, Extension and Renewal of Stock Options. Subject to
the terms and conditions and within the limitations of this Plan, Stock Options
shall be evidenced by such form of agreement or grant as is approved by the
Committee, and the Committee may (i) modify, extend or renew outstanding Stock
Options granted under this Plan (provided that the rights of a Participant are
not reduced without his consent), and (ii) accept the surrender of outstanding
Stock Options (up to the extent not theretofore exercised) and authorize the
granting of new Stock Options in substitution therefor (to the extent not
theretofore exercised).
(g) Other Terms and Conditions. Stock Options may contain such other
provisions, which shall not be inconsistent with any reason other
than removal for cause,of the terms of this Plan,
as the Committee shall deem appropriate including, without limitation,
permitting "reloads" such that the same number of Stock Options are granted as
the number of Stock Options exercised, shares used to pay for the exercise price
of Stock Options or shares used to pay withholding taxes ("Reloads"). With
respect to Reloads, the exercise price of the new Stock Option shall be the Fair
Market Value on the date of the "reload"
30
and the term of the Stock Option shall be the same as the remaining term of the
Stock Options that are exercised, if applicable, or such other exercise price
and term as determined by the Committee.
ARTICLE VII
STOCK APPRECIATION RIGHTS
VII.1 Tandem Stock Appreciation Rights. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a "Reference Stock
Option") granted under this Plan ("Tandem Stock Appreciation Rights"). In the
case of a resultNon-Qualified Stock Option, such rights may be granted either at or
after the time of death,
disability, resignation, failure to standthe grant of such Reference Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only at the time of the grant
of such Reference Stock Option. Consultants shall not be eligible for reelectiona grant of
Tandem Stock Appreciation Rights granted in conjunction with all or failure topart of an
Incentive Stock Option.
VII.2 Terms and Conditions of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall be reelected, Options theretofore grantedsubject to such Eligible Directorterms and conditions, not
inconsistent with the provisions of this Plan, as shall be determined from time
to time by the Committee, including Article XII and the following:
(a) Term. A Tandem Stock Appreciation Right or applicable portion thereof
granted with respect to a Reference Stock Option shall terminate and no longer
be exercisable upon the termination or exercise of the Reference Stock Option,
except that, unless otherwise determined by the Committee, in its sole
discretion, at the time of grant, a Tandem Stock Appreciation Right granted with
respect to less than the full number of shares covered by the Reference Stock
Option shall not be reduced until and then only to the extent the exercise or
termination of the Reference Stock Option causes the number of shares covered by
the Tandem Stock Appreciation Right to exceed the number of shares remaining
available and unexercised under the Reference Stock Option.
(b) Exercisability. Tandem Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Reference Stock Options to
which they relate shall be exercisable in accordance with the provisions of
Article VI and this Article VII.
(c) Method of Exercise. A Tandem Stock Appreciation Right may be exercised
by a Participant by surrendering the applicable portion of the Reference Stock
Option. Upon such Eligible Directorexercise and surrender, the Participant shall be entitled to
receive an amount determined in the manner prescribed in this Section 7.2. Stock
Options which have been so surrendered, in whole or in part, shall no longer be
exercisable to the caseextent the related Tandem Stock Appreciation Rights have been
exercised.
(d) Payment. Upon the exercise of death,a Tandem Stock Appreciation Right, a
Participant shall be entitled to receive up to, but no more than, an amount in
cash and/or Common Stock (as chosen by histhe Committee in its sole discretion at
grant, or her
estatethereafter if no rights of a Participant are reduced) equal in value
to the excess of the Fair Market Value of one share of Common Stock over the
option price per share specified in the Reference Stock Option, multiplied by
the number of shares in respect of which the Tandem Stock Appreciation Right
shall have been exercised.
(e) Deemed Exercise of Reference Stock Option. Upon the exercise of a
Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to
which such Stock Appreciation Right is related shall be deemed to have been
exercised for the person given authoritypurpose of the limitation set forth in Article IV of this Plan
on the number of shares of Common Stock to exercisebe issued under this Plan.
VII.3 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Option granted under
this Plan.
31
VII.4 Terms and Conditions of Non-Tandem Stock Appreciation Rights.
Non-Tandem Stock Appreciation Rights shall be subject to such Optionsterms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by willthe Committee, including Article XII and the
following:
(a) Term. The term of each Non-Tandem Stock Appreciation Right shall be
fixed by the Committee, but shall not be greater than ten (10) years after the
date the right is granted.
(b) Exercisability. Non-Tandem Stock Appreciation Rights shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by operation of law,the Committee at grant. If the Committee provides, in its
discretion, that any such right is exercisable subject to certain limitations
(including, without limitation, that it is exercisable only in installments or
within certain time periods), the Committee may waive such limitation on the
exercisability at any time withinat or after grant in whole or in part (including,
without limitation, waiver of the installment exercise provisions or
acceleration of the time at which rights may be exercised), based on such
factors, if any, as the Committee shall determine, in its sole discretion.
(c) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (b) above, Non-Tandem Stock
Appreciation Rights may be exercised in whole or in part at any time and from
time to time during the option term, by giving written notice of exercise to the
Company specifying the number of Non-Tandem Stock Appreciation Rights to be
exercised.
(d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation Right a
Participant shall be entitled to receive, for each right exercised, up to, but
no more than, an amount in cash and/or Common Stock (as chosen by the Committee
in its sole discretion at grant, or thereafter if no rights of a Participant are
reduced) equal in value to the excess of the Fair Market Value of one year fromshare of
Common Stock on the date hethe right is exercised over the Fair Market Value of
one share of Common Stock on the date the right was awarded to the Participant.
VII.5 Limited Stock Appreciation Rights. The Committee may, in its sole
discretion, grant a Tandem Stock Appreciation Right or she ceased to
be an Eligible Director; provided, however, that (i) such Optionsa Non-Tandem Stock
Appreciation Right as a Limited Stock Appreciation Right. Limited Stock
Appreciation Rights may be exercised only upon the occurrence of a Change in
Control or such other event as the Committee may, in its sole discretion,
designate at the time of grant or thereafter. Upon the exercise of limited Stock
Appreciation Rights, except as otherwise provided in an Award agreement, the
Participant shall receive in cash or Common Stock, as determined by the
Committee, an amount equal to the amount (i) set forth in Section 7.2(d) with
respect to Tandem Stock Appreciation Rights, or (ii) set forth in Section 7.4(d)
with respect to Non-Tandem Stock Appreciation Rights, as applicable.
ARTICLE VIII
RESTRICTED STOCK
VIII.1 Awards of Restricted Stock. Shares of Restricted Stock may be
issued to Eligible Employees or Consultants either alone or in addition to other
Awards granted under this Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted Stock will
be made, the number of shares to be awarded, the price (if any) to be paid by
the recipient (subject to Section 8.2), the time or times within which such
Awards may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the Awards. The
Committee may condition the grant or vesting of Restricted Stock upon the
attainment of specified performance goals, including established Performance
Goals in accordance with Section 162(m) of the Code, or such other factors as
the Committee may determine, in its sole discretion.
VIII.2 Awards and Certificates. An Eligible Employee or Consultant
selected to receive Restricted Stock shall not have any rights with respect to
such Award, unless and until such Participant has delivered to the Company a
fully executed copy of the applicable Award agreement relating thereto and has
otherwise complied with the applicable terms and conditions of such Award.
Further, such Award shall be subject to the following conditions:
32
(a) Purchase Price. The purchase price of Restricted Stock shall be fixed
by the Committee. Subject to Section 4.3, the purchase price for shares of
Restricted Stock may be zero to the extent permitted by applicable law, and, to
the extent not so permitted, such purchase price may not be less than par value.
(b) Acceptance. Awards of Restricted Stock must be accepted within a
period of 90 days (or such shorter period as the Committee may specify at grant)
after the Award date by executing a Restricted Stock Award agreement and by
paying whatever price (if any) the Committee has designated thereunder.
(c) Legend. Each Participant receiving shares of Restricted Stock shall be
issued a stock certificate in respect of such shares of Restricted Stock, unless
the Committee elects to use another system, such as book entries by the transfer
agent, as evidencing ownership of shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge of the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) of The Comtech
Telecommunications Corp. 2000 Stock Incentive Plan (the "Plan") and an Agreement
entered into between the registered owner and the Company dated _______. Copies
of such Plan and Agreement are on file at the principal office of the Company."
(d) Custody. The Committee may require that they were exercisableany stock certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition to the grant of such Award of
Restricted Stock, the Participant shall have delivered a duly signed stock
power, endorsed in blank, relating to the Common Stock covered by such Award.
VIII.3 Restrictions and Conditions on Restricted Stock Awards. Shares of
Restricted Stock awarded pursuant to this Plan shall be subject to Article XII
and the following restrictions and conditions:
(a) Restriction Period; Vesting and Acceleration of Vesting. (i) The
Participant shall not be permitted to Transfer shares of Restricted Stock
awarded under this Plan during the period or periods set by the Committee (the
"Restriction Period") commencing on the date of such Award, as set forth in the
Restricted Stock Award agreement and such agreement shall set forth a vesting
schedule and any events which would accelerate vesting of the shares of
Restricted Stock. Within these limits, based on service, attainment of
Performance Goals pursuant to Section 8.3(a)(ii) below and/or such other factors
or criteria as the Committee may determine in its sole discretion, the Committee
may provide for the lapse of such restrictions in installments in whole or in
part, or may accelerate the vesting of all or any part of any Restricted Stock
Award and/or waive the deferral limitations for all or any part of any
Restricted Stock Award.
(ii) Objective Performance Goals, Formulae or Standards. If the grant of
shares of Restricted Stock or the lapse of restrictions is based on the
attainment of Performance Goals, the Committee shall establish the Performance
Goals and the applicable vesting percentage of the Restricted Stock Award
applicable to each Participant or class of Participants in writing prior to the
beginning of the applicable fiscal year or at such later date as otherwise
determined by the Committee and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate provisions for
disregarding (or adjusting for) changes in accounting methods, corporate
transactions (including, without limitation, dispositions and acquisitions) and
other similar type events or circumstances. With regard to a Restricted Stock
Award that is intended to comply with Section 162(m) of the Code, to the extent
any such provision would create impermissible discretion under Section 162(m) of
the Code or otherwise violate Section 162(m) of the Code, such provision shall
be of no force or effect. The applicable Performance Goals shall be based on one
or more of the Performance Criteria set forth in Exhibit A hereto.
(b) Rights as Stockholder. Except as provided in this subsection (b) and
subsection (a) above and as otherwise determined by the Committee, the
Participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a holder of shares of Common Stock of the Company including,
without limitation, the right to receive any
33
dividends, the right to vote such shares and, subject to and conditioned upon
the full vesting of shares of Restricted Stock, the right to tender such shares.
The Committee may, in its sole discretion, determine at the time of grant that
the payment of dividends shall be deferred until, and conditioned upon, the
expiration of the applicable Restriction Period.
(c) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such Restriction
Period, the certificates for such shares shall be delivered to the Participant.
All legends shall be removed from said certificates at the time of delivery to
the Participant except as otherwise required by applicable law.
ARTICLE IX
PERFORMANCE SHARES
IX.1 Award of Performance Shares. Performance Shares may be awarded either
alone or in addition to other Awards granted under this Plan. The Committee
shall, in its sole discretion, determine the Eligible Director ceasedEmployees and Consultants
to servewhom and the time or times at which such Performance Shares shall be awarded,
the duration of the period (the "Performance Period") during which, and the
conditions under which, a Participant's right to Performance Shares will be
vested and the other terms and conditions of the Award in addition to those set
forth in Section 9.2.
Each Performance Share awarded shall be referenced to one share of Common
Stock. Except as otherwise provided herein, the Committee shall condition the
right to payment of any Performance Share Award upon the attainment of objective
Performance Goals established pursuant to Section 9.2(c) below and such other
non-performance based factors or criteria as the Committee may determine in its
sole discretion.
IX.2 Terms and Conditions. A Participant selected to receive Performance
Shares shall not have any rights with respect to such Awards, unless and until
such Participant has delivered a fully executed copy of a Performance Share
Award agreement evidencing the Award to the Company and has otherwise complied
with the following terms and conditions:
(a) Earning of Performance Share Award. At the expiration of the
applicable Performance Period, the Committee shall determine the extent to which
the Performance Goals established pursuant to Section 9.2(c) are achieved and
the percentage of each Performance Share Award that has been earned.
(b) Payment. Following the Committee's determination in accordance with
subsection (a) above, shares of Common Stock or, as determined by the Committee
in its sole discretion, the cash equivalent of such shares shall be delivered to
the Participant, in an amount equal to such Participant's earned Performance
Share Award. Notwithstanding the foregoing, except as may be set forth in the
agreement covering the Award, the Committee may, in its sole discretion and in
accordance with Section 162(m) of the Code, award an amount less than the earned
Performance Share Award and/or subject the payment of all or part of any
Performance Share Award to additional vesting and forfeiture conditions as it
deems appropriate.
(c) Objective Performance Goals, Formulae or Standards. The Committee
shall establish the objective Performance Goals for the earning of Performance
Shares based on a Performance Period applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable Performance
Period or at such later date as permitted under Section 162(m) of the Code and
while the outcome of the Performance Goals are substantially uncertain. Such
Performance Goals may incorporate, if and only to the extent permitted under
Section 162(m) of the Code, provisions for disregarding (or adjusting for)
changes in accounting methods, corporate transactions (including, without
limitation, dispositions and acquisitions) and other similar type events or
circumstances. To the extent any such provision would create impermissible
discretion under Section 162(m) of the Code or otherwise violate Section 162(m)
of the Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the Performance Criteria set
forth in Exhibit A hereto.
34
(d) Dividends and Other Distributions. At the time of any Award of
Performance Shares, the Committee may, in its sole discretion, award an Eligible
Employee or Consultant the right to receive the cash value of any dividends and
other distributions that would have been received as though the Eligible
Employee or Consultant had held each share of Common Stock referenced by the
earned Performance Share Award from the last day of the first year of the
Performance Period until the actual distribution to such Participant of the
related share of Common Stock or cash value thereof. Such amounts, if awarded,
shall be paid to the Participant as and when the shares of Common Stock or cash
value thereof are distributed to such Participant and, at the discretion of the
Committee, may be paid with interest from the first day of the second year of
the Performance Period until such amounts and any earnings thereon are
distributed. The applicable rate of interest shall be determined by the
Committee in its sole discretion; provided, however, that for each fiscal year
or part thereof, the applicable interest rate shall not be greater than a rate
equal to the four-year U.S. Government Treasury rate on the Board,first day of each
applicable fiscal year.
ARTICLE X
PERFORMANCE UNITS
X.1 Awards of Performance Units. Performance Units may be awarded either
alone or in addition to other Awards granted under this Plan. The Committee
shall, in its sole discretion, determine the Eligible Employees to whom and (ii) no Optionthe
time or times at which such Performance Units shall be exercisable
more than ten years afterawarded, the duration of
the period (the "Performance Cycle") during which, and the conditions under
which, a Participant's right to Performance Units will be vested and the other
terms and conditions of the Award in addition to those set forth in Section
10.2.
Performance Units shall be awarded in a dollar amount determined by the
Committee and shall be converted for purposes of calculating growth in value to
a referenced number of shares of Common Stock based on the Fair Market Value of
shares of Common Stock at the close of trading on the first business day
following the announcement of the annual financial results of the Company for
the fiscal year of the Company immediately preceding the fiscal year of the
commencement of the relevant Performance Cycle, provided that the Committee may
provide that the minimum price for such conversion shall be the Fair Market
Value on the date of grant.
9. NONTRANSFERABILITY
No OptionEach Performance Unit shall be transferablereferenced to one share of Common Stock.
Except as otherwise provided herein, the Committee shall condition the right to
payment of any Performance Unit Award upon the attainment of objective
Performance Goals established pursuant to Section 10.2(a) and such other
non-performance based factors or criteria as the Committee may determine in its
sole discretion. The cash value of any fractional Performance Unit Award
subsequent to conversion to shares of Common Stock shall be treated as a
dividend or other distribution under Section 10.2(e) to the extent any portion
of the Performance Unit Award is earned.
X.2 Terms and Conditions. The Performance Units awarded pursuant to this
Article 10 shall be subject to the following terms and conditions:
(a) Performance Goals. The Committee shall establish the objective
Performance Goals for the earnings of Performance Units based on a Performance
Cycle applicable to each Participant or class of Participants in writing prior
to the beginning of the applicable Performance Cycle or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals are substantially uncertain. Such Performance Goals may
incorporate, if and only to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisitions) and other similar type events or circumstances. To the extent any
such provision would create impermissible discretion under Section 162(m) of the
Code or otherwise violate Section 162(m) of the Code, such provision shall be of
no force or effect. The applicable Performance Goals shall be based on one or
more of the Performance Criteria set forth in Exhibit A hereto.
35
(b) Vesting. At the expiration of the Performance Cycle, the Committee
shall determine and certify in writing the extent to which the Performance Goals
have been achieved, and the percentage of the Performance Units of each
Participant that have vested.
(c) Payment. Subject to the applicable provisions of the Award agreement
and this Plan, at the expiration of the Performance Cycle, cash and/or shares of
Common Stock (as the Committee may determine in its sole discretion at grant, or
thereafter if no rights of a Participant are reduced) shall be delivered to the
Participant in payment of the vested Performance Units covered by the
Performance Unit Award. Notwithstanding the foregoing, except as may be set
forth in the agreement covering the Award, the Committee may, in its sole
discretion, and to the extent applicable and permitted under Section 162(m) of
the Code, award an amount less than the earned Performance Unit Award and/or
subject the payment of all or part of any Performance Unit Award to additional
vesting and forfeiture conditions as it deems appropriate.
(d) Accelerated Vesting. Based on service, performance and/or such other
factors or criteria, if any, as the Committee may determine, the Committee may,
at or after grant, accelerate the vesting of all or any part of any Performance
Unit Award and/or waive the deferral limitations for all or any part of such
Award.
(e) Dividends and Other Distributions. At the time of any Award of
Performance Units, the Committee may, in its sole discretion, award an Eligible
Employee or Consultant the right to receive the cash value of any dividends and
other distributions that would have been received as though the Eligible
Employee or Consultant had held each share of Common Stock referenced by the
earned Performance Unit Award from the last day of the first year of the
Performance Cycle until the actual distribution to such Participant of the
related share of Common Stock or cash value thereof. Such amounts, if awarded,
shall be paid to the Participant as and when the shares of Common Stock or cash
value thereof are distributed to such Participant and, at the discretion of the
Committee, may be paid with interest from the first day of the second year of
the Performance Cycle until such amounts and any earnings thereon are
distributed. The applicable rate of interest shall be determined by the
Committee in its sole discretion; provided, however, that for each fiscal year
or part thereof, the applicable interest rate shall not be greater than a rate
equal to the four-year U.S. Government Treasury rate on the first day of each
applicable fiscal year.
ARTICLE XI
OTHER STOCK-BASED AWARDS
XI.1 Other Awards. Other Stock-Based Awards may be granted either alone or
in addition to or in tandem with Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares or Performance Units.
Subject to the provisions of this Plan, the Committee shall have authority
to determine the persons to whom and the time or times at which such Awards
shall be made, the number of shares of Common Stock to be awarded pursuant to
such Awards, and all other conditions of the Awards. The Committee may also
provide for the grant of Common Stock under such Awards upon the completion of a
specified performance period.
XI.2 Terms and Conditions. Other Stock-Based Awards made pursuant to this
Article XI shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of the Award
agreement and this Plan, shares of Common Stock subject to Awards made under
this Article XI may not be Transferred prior to the date on which the shares are
issued, or, if later, the date on which any applicable restriction, performance
or deferral period lapses.
(b) Dividends. Unless otherwise determined by the Committee at the time of
Award, subject to the provisions of the Award agreement and this Plan, the
recipient of an Award under this Article XI shall be entitled to
36
receive, currently or on a deferred basis, dividends or dividend equivalents
with respect to the number of shares of Common Stock covered by the Award, as
determined at the time of the Award by the Committee, in its sole discretion.
(c) Vesting. Any Award under this Article XI and any Common Stock covered
by any such Award shall vest or be forfeited to the extent so provided in the
Award agreement, as determined by the Committee, in its sole discretion.
(d) Waiver of Limitation. The Committee may, in its sole discretion, waive
in whole or in part any or all of the limitations imposed hereunder (if any)
with respect to any or all of an Award under this Article XI.
(e) Price. Common Stock or Other Stock-Based Awards issued on a bonus
basis under this Article XI may be issued for no cash consideration; Common
Stock or Other Stock-Based Awards purchased pursuant to a purchase right awarded
under this Article XI shall be priced as determined by the Committee. Subject to
Section 4.3, the purchase price of shares of Common Stock or Other Stock-Based
Awards may be zero to the extent permitted by applicable law, and, to the extent
not so permitted, such purchase price may not be less than par value. The
purchase of shares of Common Stock or Other Stock-Based Awards may be made on
either an after-tax or pre-tax basis, as determined by the Committee; provided,
however, that if the purchase is made on a pre-tax basis, such purchase shall be
made pursuant to a deferred compensation program established by the Committee,
which will be deemed a part of this Plan.
ARTICLE XII
NON-TRANSFERABILITY AND TERMINATION OF
EMPLOYMENT/CONSULTANCY
XII.1 Non-Transferability. No Stock Option, Stock Appreciation Right,
Performance Unit, Performance Share or Other Stock-Based Award shall be
Transferable by the Participant otherwise than by will or under applicableby the laws of descent
and distribution,distribution. All Stock Options and all Stock Appreciation Rights shall be
exercisable, during the Participant's lifetime, of
the Participant may be exercised only by the Participant or his or her guardian
or legal representative. In addition, no OptionParticipant. Tandem
Stock Appreciation Rights shall be assigned, negotiated,
pledgedTransferable, to the extent permitted above,
only with the underlying Stock Option. Shares of Restricted Stock under Article
VIII may not be Transferred prior to the date on which shares are issued, or, hypothecatedif
later, the date on which any applicable restriction, performance or deferral
period lapses. No Award shall, except as otherwise specifically provided by law
or herein, be Transferable in any way (whether by operation of law or otherwise),manner, and any attempt to Transfer any such
Award shall be void, and no Optionsuch Award shall in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or torts of any person
who shall be entitled to such Award, nor shall it be subject to execution, attachment or
similar process.
Upon any attempt to transfer, assign, negotiate, pledgelegal process for 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,against such Option
shall immediately become null and void.person. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter, that ana Non-Qualified
Stock Option (other
than an Incentive Stock Option) that is otherwise not transferable pursuant to this Section 9,12.1 is
transferable to a Family Member in whole or in part and in such circumstances,
and under such conditions, as specified by the Committee. 10. RIGHTS AS A STOCKHOLDER
ANon-Qualified Stock
Option that is transferred to a Family Member pursuant to the preceding sentence
may not be subsequently transferred otherwise than by will or by the laws of
descent and distribution.
XII.2 Termination of Employment or Termination of Consultancy. The
following rules apply with regard to the Termination of Employment or
Termination of Consultancy of a Participant:
(a) Rules Applicable to Stock Options and Stock Appreciation Rights.
Unless otherwise determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter:
(i) Termination by Reason of Death, Disability or Retirement. If a
Participant's Termination of Employment or Termination of Consultancy is by
reason of death, Disability or Retirement, all Stock Options and Stock
Appreciation Rights held by such Participant may be exercised, to the extent
exercisable at the Participant's Termination of Employment or Termination of
Consultancy, by the Participant (or, in the case of death, by the legal
representative of the Participant's estate) at any time within a permitted transfereeperiod of hisone
year from the date of such Termination of
37
Employment or her Options) shall haveTermination of Consultancy, but in no rights as a stockholder with respect to any Shares coveredevent beyond the expiration
of the stated terms of such Stock Options and Stock Appreciation Rights;
provided, however, that, in the case of Retirement, if the Participant dies
within such exercise period, all unexercised Stock Options and Non-Tandem Stock
Appreciation Rights held by such
Participant's Options until such Participant shall have becomethereafter be exercisable, to
the holderextent to which they were exercisable at the time of recorddeath, for a period of
one year from the date of such Shares,death, but in no event beyond the expiration of
the stated term of such Stock Options and no adjustments shallNon-Tandem Stock Appreciation Rights.
(ii) Involuntary Termination Without Cause. If a Participant's Termination
of Employment or Termination of Consultancy is by involuntary termination
without Cause, all Stock Options and Stock Appreciation Rights held by such
Participant may 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 pursuantexercised, to the extent exercisable at Termination of
Employment or Termination of Consultancy, by the Participant at any time within
a period of 90 days from the date of such Termination of Employment or
Termination of Consultancy, but in no event beyond the expiration of the stated
term of such Stock Options and Stock Appreciation Rights.
(iii) Voluntary Termination. If a Participant's Termination of Employment
or Termination of Consultancy is voluntary (other than a voluntary termination
described in Section 12.2(a)(iv)(B) below), all Stock Options and Stock
Appreciation Rights held by such Participant may be exercised, to the extent
exercisable at Termination of Employment or Termination of Consultancy, by the
Participant at any time within a period of 30 days from the date of such
Termination of Employment or Termination of Consultancy, but in no event beyond
the expiration of the stated terms of such Stock Options and Stock Appreciation
Rights.
(iv) Termination for Cause. If a Participant's Termination of Employment
or Termination of Consultancy (A) is for Cause or (B) is a voluntary termination
(as provided in subsection (iii) above) within 90 days after an event which
would be grounds for a Termination of Employment or Termination of Consultancy
for Cause, all Stock Options and Stock Appreciation Rights held by such
Participant shall thereupon terminate and expire as of the date of such
Termination of Employment or Termination of Consultancy.
(b) Rules Applicable to Restricted Stock. Subject to the applicable
provisions of the Restricted Stock Award agreement and this Plan, upon a
Participant's Termination of Employment or Termination of Consultancy for any
reason during the relevant Restriction Period, all Restricted Stock still
subject to restriction will vest or be forfeited in accordance with the terms
and conditions established by the Committee shall be finalat grant or thereafter.
(c) Rules Applicable to Performance Shares and binding for
all purposes and upon all persons, including, without limitation,Performance Units. Subject
to the Participants, the Company, the directors, officers and other employeesapplicable provisions of the Company,Award agreement and their respective heirs, executors, administrators, personal
representativesthis Plan, upon a
Participant's Termination of Employment or Termination of Consultancy for any
reason during the Performance Period, the Performance Cycle or other period or
restriction as may be applicable for a given Award, the Performance Shares or
Performance Units in question will vest (to the extent applicable and other successors in interest.
11
12. TERMINATION, AMENDMENT AND MODIFICATION
The Plan shall terminate atto the
close of business on the tenth anniversaryextent permissible under Section 162(m) of the Effective Date, unless terminated sooner as hereinafter provided,Code) or be forfeited in
accordance with the terms and no
Option shall be granted underconditions established by the Plan onCommittee at grant
or after that date. The terminationthereafter.
(d) Rules Applicable to Other Stock-Based Awards. Subject to the
applicable provisions of the Award agreement and this Plan, upon a Participant's
Termination of Employment or Termination of Consultancy for any reason during
any period or restriction as may be applicable for a given Award, the Other
Stock-Based Awards in question will vest or be forfeited in accordance with the
terms and conditions established by the Committee at grant or thereafter.
ARTICLE XIII
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
XIII.1 Stock Options. The terms of this Article XIII shall not terminate any outstandingapply only to
Stock Options thatgranted to Non-Employee Directors.
38
XIII.2 Grants. Without further action 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, each Non-Employee Director shall, subject to the terms of the Plan,
be granted:
(a) Stock Options to purchase 3,000 shares of Common Stock as of the date
the Non-Employee Director begins service as a Non-Employee Director on the
Board, provided that the Non-Employee Director began service on or after the
Effective Date; and
(b) In addition to Stock Options granted pursuant to (a) above, Stock
Options to purchase 1,500 shares of Common Stock as of the August 1 of each
year, provided he or she has not, as of such day, experienced a Termination of
Directorship and provided further that he or she has been a Non-Employee
Director for at least six months as of such August 1 date. Notwithstanding
anything herein to the contrary, no Non-Employee Director shall receive Stock
Options to purchase more than 15,000 shares of Common Stock under this Plan
including any Stock Options awarded to the Non-Employee Director under the 1993
Plan, as defined under Section 4.4).
XIII.3 Non-Qualified Stock Options. Stock Options granted under this
Article XIII shall be Non-Qualified Stock Options.
XIII.4 Terms of Stock Options. Stock Options granted under this Article
XIII shall be subject to the following terms and conditions, and shall be in
such form and contain such additional terms and conditions, not inconsistent
with the terms of this Plan, as the Board shall deem desirable:
(a) Stock Option Price. The Stock Option price per share of Common Stock
purchasable under a Stock Option shall equal 100% of the Fair Market Value of
the share of Common Stock at the time of grant.
(b) Stock Option Term. The term of each Stock Option shall be ten (10)
years.
(c) Exercisability. Stock Options granted to Non-Employee Directors
pursuant to Section 13.2 shall vest and become exercisable on the first
anniversary of date of grant, provided that the Stock Option may terminate, suspendbecome vested
only during the continuance of his or amendher service as a director of the Plan; provided, however, that no amendmentCompany.
(d) Method of Exercise. Subject to whatever waiting period provisions
apply under subsection (c) above, Stock Options may be exercised in whole or in
part at any time and from time to time during the Stock Option term, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price as follows: (i) in cash or by check, bank draft or money order payable to
the Company; (ii) if the Common Stock is traded on a national securities
exchange, through a "cashless exercise" procedure whereby the Participant
delivers irrevocable instructions to a broker to deliver promptly to the Company
an amount equal to the purchase price; or (iii) such other arrangement for the
satisfaction of the purchase price, as the Board may accept. If and to the
extent determined by the Board in its sole discretion at or after grant, payment
in full or in part may also be made in the form of Common Stock owned by the
Participant for at least 6 months (or such other period as may be required to
avoid an accounting charge against the Company's earnings) (and for which the
Participant has good title free and clear of any liens and encumbrances) based
on the Fair Market Value of the Common Stock on the payment date. No shares of
Common Stock shall be issued until payment, as provided herein, therefor has
been made or provided for.
(e) Form, Modification, Extension and Renewal of Stock Options. Subject to
the terms and conditions and within the limitations of the Plan, a Stock Option
shall be evidenced by such form of agreement or grant as is approved by the
Board, and the Board may modify, extend or renew outstanding Stock Options
granted under the Plan (provided that the rights of a Participant are not
reduced without his consent).
39
XIII.5 Termination of Directorship. The following rules apply with regard
to Stock Options upon the Termination of Directorship:
(a) Termination of Directorship by Reason of Death, Disability or
Otherwise Ceasing to be a Director. Except as otherwise provided herein, upon
the Termination of Directorship by reason of death, Disability, resignation,
failure to stand for reelection or failure to be reelected or otherwise, all
outstanding Stock Options exercisable and not exercised shall remain exercisable
to the extent exercisable on such date of Termination of Directorship by the
Participant or, in the case of death, by the Participant's estate or by the
person given authority to exercise such Stock Options by his or her will or by
operation of law, at any time within a period of one year from the date of such
Termination of Directorship, but in no event beyond the expiration of the stated
term of such Stock Option.
(b) Cancellation of Options. Except as provided in (a) above, no Stock
Options that were not exercisable as of the date of Termination of Directorship
shall thereafter become exercisable upon a Termination of Directorship for any
reason or no reason whatsoever, and such Stock Options shall terminate and
become null and void upon a Termination of Directorship. If a Non-Employee
Director's Termination of Directorship is for Cause, all Stock Options held by
the Non-Employee Director shall thereupon terminate and expire as of the date of
termination.
XIII.6 Acceleration of Exercisability. All Stock Options granted to
Non-Employee Directors and not previously exercisable shall become fully
exercisable immediately upon a Change in Control (as defined in Section 14.2).
XIII.7 Changes.
(a) The Awards to a Non-Employee Director shall be subject to Sections
4.2(a), (b) and (c) of the Plan and this Section 13.7, but shall not be subject
to Section 4.2(d).
(b) If the Company shall not be the surviving corporation in any merger or
consolidation, or if the Company is to be dissolved or liquidated, then, unless
the surviving corporation assumes the Stock Options or substitutes new Stock
Options which are determined by the Board in its sole discretion to be
substantially similar in nature and equivalent in terms and value for Stock
Options then outstanding, upon the effective date of such merger, consolidation,
liquidation or dissolution, any unexercised Stock Options shall expire without
additional compensation to the holder thereof; provided, that, the Board shall
deliver notice to each Non-Employee Director at least 30 days prior to the date
of consummation of such merger, consolidation, dissolution or liquidation which
would requireresult in the approvalexpiration of the Stock Options and during the period from
the date on which such notice of termination is delivered to the consummation of
the merger, consolidation, dissolution or liquidation, such Participant shall
have the right to exercise in full, effective as of such consummation, all Stock
Options that are then outstanding (without regard to limitations on exercise
otherwise contained in the Stock Options) but contingent on occurrence of the
merger, consolidation, dissolution or liquidation, and, provided that, if the
contemplated transaction does not take place within a 90 day period after giving
such notice for any reason whatsoever, the notice, accelerated vesting and
exercise shall be null and void and, if and when appropriate, new notice shall
be given as aforesaid.
ARTICLE XIV
CHANGE IN CONTROL PROVISIONS
XIV.1 Benefits. In the event of a Change in Control of the Company, except
as otherwise provided by the Committee upon the grant of an Award, the
Participant shall be entitled to the following benefits:
(a) Except to the extent provided in the applicable Award agreement, the
Participant's employment agreement with the Company or an Affiliate, as approved
by the Committee, or other written agreement approved by the Committee (as such
agreement may be amended from time to time), (i) Awards granted and not
previously exercisable shall become exercisable upon a Change in Control, (ii)
restrictions to which any shares of Restricted Stock
40
granted prior to the Change in Control are subject shall lapse upon a Change in
Control, and (iii) the conditions required for vesting of any unvested
Performance Units and/or Performance Shares shall be deemed to be satisfied upon
a Change in Control.
(b) The Committee, in its sole discretion, may provide for the purchase of
any Stock Option by the Company or an Affiliate for an amount of cash equal to
the excess of the Change in Control Price (as defined below) of the shares of
Common Stock covered by such Stock Options, over the aggregate exercise price of
such Stock Options. For purposes of this Section 14.1, Change in Control Price
shall mean the higher of (i) the highest price per share of Common Stock paid in
any transaction related to a Change in Control of the Company, or (ii) the
highest Fair Market Value per share of Common Stock at any time during the sixty
(60) day period preceding a Change in Control.
(c) Notwithstanding anything to the contrary herein, unless the Committee
provides otherwise at the time a Stock Option is granted hereunder or
thereafter, no acceleration of exercisability shall occur with respect to such
Stock Options if the Committee reasonably determines in good faith, prior to the
occurrence of the Change in Control, that the Stock Options shall be honored or
assumed, or new rights substituted therefor (each such honored, assumed or
substituted stock option hereinafter called an "Alternative Option"), by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such Alternative
Option must meet the following criteria:
(i) The Alternative Option must be based on stock which is traded on an
established securities market, or which will be so traded within 30 days of the
Change in Control;
(ii) The Alternative Option must provide such Participant with rights and
entitlements substantially equivalent to or better than the rights, terms and
conditions applicable under such Stock Option, including, but not limited to, an
identical or better exercise schedule; and
(iii) The Alternative Option must have economic value substantially
equivalent to the value of such Stock Option (determined at the time of the
Change in Control).
For purposes of Incentive Stock Options, any assumed or substituted Stock
Option shall comply with the requirements of Treasury Regulation ss. 1.425-1
(and any amendments thereto).
(d) Notwithstanding anything else herein, the Committee may, in its sole
discretion, provide for accelerated vesting of an Award or accelerated lapsing
of restrictions on shares of Restricted Stock at any time.
XIV.2 Change in Control. A "Change in Control" shall be deemed to have
occurred:
(a) Upon any "person" as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Common Stock of the Company), becoming
the owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities;
(b) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the Board of Directors, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in paragraph (a), (c), or (d)
of this section) or a director whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such term is used
in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board of Directors of the Company whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the two-year period
41
or whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the Board of Directors;
(c) Upon a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; provided, however,
that a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person (other than those covered by
the exceptions in (a) above) acquires more than 50% of the combined voting power
of the Company's then outstanding securities shall not constitute a Change in
Control of the Company; or
(d) Upon the stockholders of the Company approval of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets other than the sale
or disposition of all or substantially all of the assets of the Company to a
person or persons who beneficially own, directly or indirectly, at least 50% or
more of the combined voting power of the outstanding voting securities of the
Company at the time of the sale.
ARTICLE XV
TERMINATION OR AMENDMENT OF PLAN
Notwithstanding any other provision of this Plan, the Board or the
Committee may at any time, and from time to time, amend, in whole or in part,
any or all of the provisions of this Plan (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article XVII), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required by law or
specifically provided herein, the rights of a Participant with respect to Awards
granted prior to such amendment, suspension or termination, may not be impaired
without the consent of such Participant and, provided further, without the
approval of the shareholders of the Company in accordance with the laws of the
State of Delaware, to the extent required by the applicable provisions of Rule
16b-3 or Section 162(m) of the Code, or, with respectto the extent applicable to Incentive
Stock Options, Section 422 of the Code, no amendment may be made which would (i)
increase the aggregate number of shares of Common Stock that may be issued under
this Plan; (ii) increase the maximum individual Participant limitations for a
fiscal year under Section 4.1(b); (iii) change the classification of employees
or Consultants eligible to receive Awards under this Plan; (iv) decrease the
minimum option price of any Stock Option or Stock Appreciation Right; (v) extend
the maximum option period under Section 6.3; (vi) materially alter the
Performance Criteria for the Award of Restricted Stock, Performance Units or
Performance Shares as set forth in Exhibit A; or (vii) require stockholder
approval in order for this Plan to continue to comply with the applicable
provisions of Section 162(m) of the Code or, to the extent applicable to
Incentive Stock Options, Section 422 of the Code. In no event may this Plan be
amended without the approval of the stockholders of the Company in accordance
with the applicable laws of the State of Delaware to increase the aggregate
number of shares of Common Stock that may be issued under this Plan, decrease
the minimum exercise price of any Stock Option or Stock Appreciation Right, or
to make any other amendment that would require stockholder approval under the
rules of any exchange or system on which the Company's securities are listed or
traded at the request of the Company.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.
42
ARTICLE XVI
UNFUNDED PLAN
XVI.1 Unfunded Status of Plan. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, unlessnothing contained herein shall
give any such amendmentParticipant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XVII
GENERAL PROVISIONS
XVII.1 Legend. The Committee may require each person receiving shares
pursuant to an Award under this Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by this Plan, the
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under this Plan
shall be subject to such stockholder approval.
The amendments tostock transfer orders and other restrictions as the
Plan providing for compliance with 162(m)Committee may deem advisable under the rules, regulations and other requirements
of the CodeSecurities and forExchange Commission, any stock exchange upon which the
additional Shares of stock authorized for issuance adopted byStock is then listed or any national securities association system upon whose
system the Board on October 14, 1997,Stock is then quoted, any applicable Federal or state securities law,
and any Options granted with respectapplicable corporate law, and the Committee may cause a legend or
legends to the
additional Shares of stock authorized for issuance bybe put on any such amendment, shall
terminate and be void ifcertificates to make appropriate reference to 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.restrictions.
XVII.2 Other Plans. Nothing contained in this Section 12Plan shall be deemed to prevent the Board
from adopting other 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 Planadditional compensation arrangements, subject to
stockholder approval 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,is required; and such arrangements may be
either generally applicable or limitedapplicable only in application.
12
14. USE OF PROCEEDS
The proceeds of the sale of Shares subjectspecific cases.
XVII.3 No Right 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.Employment/Consultancy. Neither the adoption or the amendment
of thethis Plan nor the grant
of Optionsany Award hereunder shall imposegive any obligationsParticipant or other employee or
Consultant any right with respect to continuance of employment or Consultancy by
the Company or any Affiliate, nor shall they be a limitation in any way 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 employright of the Company or any Eligible DirectorAffiliate by which an employee is employed or a
Consultant is retained to continueterminate his employment or Consultancy at any time.
XVII.4 Withholding of Taxes. The Company shall have the right to serve on the Board, subject, however,deduct
from any payment to be made to a Participant, or to otherwise require, prior to
the provisionsissuance or delivery of any agreement betweenshares of Common Stock or the payment of any
cash hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Upon the vesting of Restricted Stock, or upon
making an election under Code Section 83(b), a Participant shall pay all
required withholding to the Company.
Any such withholding obligation with regard to any Participant may be
satisfied, subject to the consent of the Committee, by reducing the number of
shares of Common Stock otherwise deliverable or by delivering shares of Common
Stock already owned. Any fraction of a share of Common Stock required to satisfy
such tax obligations shall be disregarded and the amount due shall be paid
instead in cash by the Participant.
XVII.5 Listing and Other Conditions.
(a) As long as the Common Stock is listed on a national securities
exchange or system sponsored by a national securities association, the issue of
any shares of Common Stock pursuant to an Award shall be conditioned upon such
shares being listed on such exchange or system. The Company shall have no
obligation to issue such shares
43
unless and a Key Employee.until such shares are so listed, and the right to exercise any Stock
Option with respect to such shares shall be suspended until such listing has
been effected.
(b) PURCHASE FOR INVESTMENT. If the Board determines that the law so
requires, the holder of Options granted hereunder shall, uponat any exercise or
conversion thereof, execute and delivertime counsel to the Company a written statement,shall be of the opinion that any
sale or delivery of shares of Common Stock pursuant to an Award is or may in form satisfactory tothe
circumstances be unlawful or result in the imposition of excise taxes on the
Company representing and warranting thatunder the statutes, rules or regulations of any applicable jurisdiction,
the Company shall have no obligation to make 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 ofdelivery, or to make
any such Shares shall be
made either pursuantapplication or to (i) aeffect or to maintain any qualification or 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 currentor otherwise with respect to shares of Common Stock or
Awards, and the Shares being offeredright to exercise any Stock Option shall be suspended until, in
the opinion of said counsel, such sale or delivery shall be lawful or will not
result in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section 17.5,
any Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and sold, or (ii) a specific exemption fromas to shares which would otherwise have become available during the registration requirementsperiod
of such suspension, but no such suspension shall extend the term of any Stock
Option.
XVII.6 Governing Law. This Plan shall be governed and construed in
accordance with the laws of the Securities Act, andState of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
XVII.7 Construction. Wherever any words are used 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 containedthis Plan in the
Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder)masculine gender they shall create or be construed to create a trust ofas though they were also used in the
feminine gender in all cases where they would so apply, and wherever any kind, or a
fiduciary relationship, betweenwords
are used herein in the Company and any Participant orsingular form they shall be construed as though they were
also used in 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 Companyplural form in connection with theall cases where they would so apply.
XVII.8 Other Benefits. No Award payment under this Plan shall continue to be partdeemed
compensation for purposes of the general
fundscomputing benefits under any retirement plan of the
Company and no individual or entityits subsidiaries nor affect any benefits under any other thanbenefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
XVII.9 Costs. The Company shall havebear all expenses included in
administering this Plan, including expenses of issuing Common Stock pursuant to
any interestAwards hereunder.
XVII.10 No Right to Same Benefits. The provisions of Awards need not be
the same with respect to each Participant, and such Awards to individual
Participants need not be the same in such funds until paidsubsequent years.
XVII.11 Death/Disability. The Committee may in its discretion require the
transferee of a Participant to a Participant. Ifsupply it with written notice of the
Participant's death or Disability and to supply it with a copy of the extent that any Participantwill (in
the case of the Participant's death) or such Participant's executor, administrator, or
other personal representative,evidence as the case may be, acquires a rightCommittee
deems necessary to receive
any payment fromestablish the Company pursuant tovalidity of the Plan, such right shall be no
greater than the righttransfer of an unsecured general creditorAward. The
Committee may also require that the agreement of the Company.
(d) NOTICES. Each Participant shalltransferee to be responsible for furnishingbound by
all of the terms and conditions of this Plan.
XVII.12 Section 16(b) of the Exchange Act. All elections and transactions
under this Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with any applicable exemptive
condition under Rule 16b-3. The Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the current andExchange Act, as it may deem necessary or proper address for the mailing to such
Participantadministration
and operation of noticesthis Plan and the deliver to such Participanttransaction 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.business thereunder.
XVII.13 Severability of Provisions. 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 provisionsprovision of thethis Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan,hereof, and thethis 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,44
XVII.14 Headings and such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
(g) HEADINGS AND CAPTIONS.Captions. The headings and captions herein are
provided for reference and convenience only. Theyonly, shall not be considered part of
thethis Plan, and shall not be employed in the construction of thethis Plan.
(h) CONTROLLING LAW.ARTICLE XVIII
EFFECTIVE DATE OF PLAN
The Plan shall be construed and enforced accordingbecome effective upon adoption by the Board (i.e., October
__, 1999), subject to the approval of this Plan by the stockholders of the
Company in accordance with the requirements of 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 PriceDelaware
or such later date as provided in the relevant Option Agreements, a
certificate or certificates for the Shares as to which Options have been
exercisedadopting resolution.
ARTICLE XIX
TERM OF PLAN
No Award shall be issued bygranted pursuant to this Plan on or after the Company in the nametenth
anniversary 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 requirementsearlier of the Securities Actdate this Plan is adopted 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)stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date.
45
EXHIBIT A
PERFORMANCE CRITERIA
Performance Goals established for purposes of conditioning the grant of an
Award of Restricted Stock based on performance or the vesting of
performance-based Awards of Restricted Stock, Performance Units and/or
Performance Shares shall be based on one or more of the following performance
criteria ("Performance Criteria"): (i) the attainment of certain target levels
of, or a specified percentage increase in, lieu of withholding) the amountrevenues, income before income taxes
and extraordinary items, net income, earnings before income tax, earnings before
interest, taxes, depreciation and amortization or a combination of any Federal, state
or local taxes requiredall of
the foregoing; (ii) the attainment of certain target levels of, or a percentage
increase in, after-tax or pre-tax profits including, without limitation, that
attributable to continuing and/or other operations; (iii) the attainment of
certain target levels of, or a specified increase in, operational cash flow;
(iv) the achievement of a certain level of, reduction of, or other specified
objectives with regard to limiting the level of increase in, all or a portion
of, the Company's bank debt or other long-term or short-term public or private
debt or other similar financial obligations of the Company, which may be
calculated net of such cash balances and/or other offsets and adjustments as may
be established by the Committee; (v) the attainment of a specified percentage
increase in earnings per share or earnings per share from continuing operations;
(vi) the attainment of certain target levels of, or a specified increase in
return on capital employed or return on invested capital; (vii) the attainment
of certain target levels of, or a percentage increase in, after-tax or pre-tax
return on stockholders' equity; (viii) the attainment of certain target levels
of, or a specified increase in, economic value added targets based on a cash
flow return on investment formula; (ix) the attainment of certain target levels
in the fair market value of the shares of the Company's common stock; and (x)
the growth in the value of an investment in the Company's common stock assuming
the reinvestment of dividends. For purposes of item (i) above, "extraordinary
items" shall mean all items of gain, loss or expense for the fiscal year
determined to be withheldextraordinary or unusual in nature or infrequent in occurrence
or related to a corporate transaction (including, without limitation, a
disposition or acquisition) or related to a change in accounting principle, all
as determined in accordance with standards established by Opinion No. 30 of the
Accounting Principles Board.
In addition, such Performance Criteria may be based upon the attainment of
specified levels of Company in connection(or subsidiary, division or other operational unit
of the Company) performance under one or more of the measures described above
relative to the performance of other corporations. To the extent permitted under
Code Section 162(m), but only to the extent permitted under Code Section 162(m)
(including, without limitation, compliance with any Sharesrequirements for stockholder
approval), the Committee may: (i) designate additional business criteria on
which the Performance Criteria may be based or cash payments deliverable under this Plan in respect of Options
granted to any Key Employee, and(ii) adjust, modify or amend 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.
15aforementioned business criteria.