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Comtech Telecommunications Corp.
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COMTECH
TELECOMMUNICATIONS CORP.
105 Baylis Road
Melville, New York 11747
November 3, 2003
To Our Stockholders:
On behalf of the Board of Directors and management, I cordially invite you to
attend the Annual Meeting of Stockholders of Comtech Telecommunications Corp.
The meeting will be held at 10:00 a.m. on December 9, 2003 at the Marriott
Hotel, 1350 Walt Whitman Road, Melville, New York 11747. Copies of the Notice of
Annual Meeting of Stockholders, Proxy Statement and proxy card are enclosed.
I believe that the annual meeting provides an excellent opportunity for
stockholders to become better acquainted with Comtech and its directors and
officers. I hope that you will be able to attend and I look forward to greeting
as many stockholders as possible.
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 or submission of your proxy and voting
instructions over the internet or by telephone will both assure that your shares
are represented at the meeting and minimize the cost of proxy solicitations.
(Instructions for voting via the internet or by telephone are set forth on the
enclosed proxy card.) If you later decide to attend the annual meeting, you may
revoke your proxy and vote in person.
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 9, 2003
The annual meeting of Stockholders of COMTECH TELECOMMUNICATIONS CORP. (the
"Company") will be held at the Marriott Hotel, 1350 Walt Whitman Road, Melville,
New York 11747, on Tuesday, December 9, 2003 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 2000 Stock Incentive Plan
increasing the number of shares of the Company's Common Stock
subject to awards under the Plan or with respect to which awards may
be granted;
3. To ratify the selection of auditors for the current fiscal year; and
4. To transact such other business as may properly come before the
meeting.
The Board of Directors unanimously recommends that the Stockholders vote "for"
Proposals 1, 2 and 3 to be presented to Stockholders at the Annual Meeting.
All stockholders are invited to attend the meeting. Stockholders of record at
the close of business on October 10, 2003, 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,
Gail Segui
Secretary
November 3, 2003
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD IN ORDER THAT WE HAVE A QUORUM, WHETHER OR NOT YOU
PLAN TO BE PRESENT AT THE MEETING IN PERSON. PLEASE COMPLETE, SIGN, DATE AND
MAIL THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE (TO WHICH THE SENDER NEED
AFFIX NO POSTAGE IF MAILED WITHIN THE UNITED STATES) OR SUBMIT YOUR PROXY AND
VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE. (INSTRUCTIONS FOR VOTING
VIA THE INTERNET OR BY TELEPHONE ARE SET FORTH ON THE ENCLOSED PROXY CARD.)
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 9, 2003, 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. If no directions are specified,
the proxies will be voted for the nominees for election as directors and in
favor of the matters set forth in the accompanying Notice of Annual Meeting. A
stockholder may choose to strike the names of the proxy holders named in the
enclosed proxy and may insert other names.
Only stockholders of record of the Company's Common Stock, par value $.10 (the
"Common Stock"), at the close of business on October 10, 2003 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting, or any
adjournment thereof, with each holder having one vote per share. The Annual
Meeting may be adjourned from time to time without notice other than by
announcement at the Annual Meeting. A list of stockholders entitled to vote at
the Annual Meeting will be available for inspection by any stockholder, for any
reason germane to the Annual Meeting, during ordinary business hours during the
ten days prior to the Annual Meeting at the Company's offices, 105 Baylis Road,
Melville, New York 11747. As of the Record Date, approximately 13,995,072 shares
of Common Stock were outstanding. It is anticipated that the mailing to
Stockholders of this Proxy Statement and the enclosed proxy will commence by
November 3, 2003.
The presence, in person or by proxy, of the holders of record at the close of
business on the Record Date of a majority of the outstanding shares of Common
Stock will constitute a quorum at the Annual Meeting. Directors will be elected
by a plurality of the votes cast (i.e., the two nominees receiving the greatest
number of votes will be elected as directors). Stockholder approval of the
amendment to the Company's 2000 Stock Incentive 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 proposal.
Abstentions and broker non-votes with respect to any proposal (which occur when
a nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner) will be counted for purposes of determining the presence or absence of a
quorum. Abstentions also will be counted in determining the number of shares
present and entitled to vote on such proposal, but broker non-votes are not
counted as entitled to vote thereon.
1
PRINCIPAL STOCKHOLDERS OF COMTECH TELECOMMUNICATIONS CORP.
To the Company's knowledge, the following person beneficially owns more than 5%
of the Company's outstanding Common Stock (its only outstanding class of voting
securities) as of October 10, 2003.
Name and Address of Beneficial Owner Amount of Beneficial Ownership Percent of Class
------------------------------------ ------------------------------- ----------------
Paradigm Capital Management (1) 861,900 6.2
9 Elk Street
Albany, NY 12207-1002
(1) The information is based upon a Schedule 13F, filed by Paradigm Capital
Management with the Securities and Exchange Commission on August 11, 2003.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. Members of the
Board are elected for three-year terms, with the term of office of one class
expiring at each Annual Meeting of Comtech's stockholders. Dr. Bugliarello and
Mr. Goldberg are in the class whose term of office expires in 2003, Mr. Kornberg
and Mr. Kantor are in the class whose term of office expires in 2004 and Mr.
Nocita and Mr. Kaplan are in the class whose term of office expires in 2005.
Certain information concerning the directors who are being nominated for
election or reelection at the meeting and the incumbent directors whose terms of
office continue after the Annual Meeting and executive officers of the Company
and all directors and executive officers as a group, is set forth below.
While the Board of Directors has no reason to believe that Dr. Bugliarello or
Mr. Goldberg 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.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Shares
For Served Beneficially
Term As Owned Percent
Expiring Director October 10, of
Name Principal Occupation Age In Since 2003 Class
---- -------------------- --- -- ----- ---- -----
George Bugliarello (3)(4)(5) President Emeritus and 76 3 years 1977 43,650 *
Professor, Polytechnic
University
Richard L. Goldberg (1)(2)(5) Partner, Proskauer Rose 67 3 years 1983 62,515 *
LLP
(Footnotes on next page)
2
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE
ANNUAL MEETING AND EXECUTIVE OFFICERS
Shares
For Served Beneficially
Term As Owned Percent
Expiring Director October 10, of
Name Principal Occupation Age In Since 2003 Class
---- -------------------- --- -- ----- ---- -----
Fred Kornberg (1)(2) Chairman, Chief 67 1 year 1971 696,750 4.9
Executive Officer and
President of the Company
Edwin Kantor (1)(2)(4) Chairman, BK Financial 71 1 year 2001 18,150 *
Services LLC
Gerard R. Nocita (1)(3)(4)(5) Private Investor 67 2 years 1993 22,500 *
Ira Kaplan (1)(3) Retired 67 2 years 2002 4,500 *
Richard L. Burt (1) Senior Vice President; 62 -- -- 179,106 1.3
President of Comtech
Systems, Inc.
Robert L. McCollum (1) Senior Vice President; 54 -- -- 114,750 *
President of Comtech EF
Data Corp.
Robert G. Rouse (1) Senior Vice President 39 -- -- 40,500 *
and Chief Financial
Officer of the Company
J. Preston Windus, Jr. (1) Senior Vice President; 60 -- -- 118,875 *
President of Comtech
Mobile Datacom Corp.
Gail Segui (1) Secretary and Treasurer 57 -- -- 19,425 *
of the Company
Michael D. Porcelain (1) Vice President of 34 -- -- 8,272 *
Finance and Internal
Audit of the Company
All directors and executive 9.2
officers as a group (12 persons)
----------
* Less than one percent
(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: Mr. Goldberg 24,750 shares; Mr. Kornberg 224,250 shares;
Mr. Kantor 14,250 shares; Mr. Nocita 22,500 shares; Mr. Kaplan 4,500
shares; Mr. Burt 30,000 shares; Mr. McCollum 67,500 shares; Mr. Rouse
33,000 shares; Mr. Windus 45,750 shares; Ms. Segui 7,000 shares; Mr.
Porcelain 7,500 shares and all directors and officers as a group 481,000
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
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Mr. Kornberg has been Chief Executive Officer and President of the Company
since 1976. Prior to that, he was the Executive Vice President of the Company
from 1971 to 1976 and the General Manager of the telecommunications transmission
segment.
Dr. Bugliarello has been a director of the Company since 1977. He is
currently President Emeritus and University Professor at Polytechnic University.
Prior to that he was Chancellor of the University from 1994 to 2003 and
President of the University from 1973 to 1994. He is also a director of the Lord
Corporation, the Jura Corporation and Symbol Technologies Inc.
Mr. Goldberg has been a director of the Company since 1983. He has also
been a partner since 1990 in the law firm of Proskauer Rose LLP, which renders
legal services to the Company. Prior to 1990, Mr. Goldberg was a partner since
1966 of the firm Botein Hays & Sklar.
Mr. Kantor has been a director since 2001. He is Chairman of BK Financial
Services LLC. Previously he served as Co-Chief Executive Officer of TPB
Financial Services and was Co-Chairman and Co-Chief Executive Officer of
HCFP/Brenner Securities from 1999 to 2001. He was Vice Chairman of Barington
Capital Group from 1993 to 1999. Prior to joining Barington, Mr. Kantor spent 37
years in the securities industry with Drexel Burnham Lambert and its predecessor
firms, where he held various positions, including serving as the firm's Vice
Chairman.
Mr. Kaplan has been a director since 2002. He retired from EDO Corporation
in July 2001. Prior to his retirement he held several executive positions at EDO
Corporation for over 40 years, most recently as Executive Vice President and
Chief Operating Officer from 2000 to 2001. EDO Corporation is a supplier of
products and systems for defense, aerospace and industry.
Mr. Nocita has been a director of the Company since 1993. He is a private
investor. He was Treasurer of the Incorporated Village of Patchogue from 1993 to
1996. He was affiliated with the Company from our inception in 1967 until 1993.
Mr. Burt has been Senior Vice President of Comtech Telecommunications
since 1998 and had been a Vice President since 1992. He has been President of
Comtech Systems since 1989 and Vice President since its founding in 1984. Mr.
Burt first joined Comtech in 1979.
Mr. McCollum has been Senior Vice President of Comtech Telecommunications
since 2000 and had been a Vice President since 1996. He founded Comtech
Communications Corp. in 1994 and had been its President since its formation. In
July 2000, the Company combined Comtech Communications Corp. with Comtech EF
Data Corp., and appointed Mr. McCollum President of the combined entities.
Mr. Rouse has been Senior Vice President and Chief Financial Officer of
the Company since 2001. He was previously employed by KPMG LLP in various
capacities for 15 years, including as a partner in the firm's assurance practice
from July 1998 to July 2001. KPMG LLP are the Company's independent auditors.
Mr. Windus has been Senior Vice President since 1998. He served as Chief
Financial Officer of Comtech Telecommunications from 1993 to July 2001. He
became President of Comtech Mobile Datacom in June 2002. Mr. Windus was
President of Fairchild Data Corp., a satellite modem manufacturer, from 1989 to
1993.
Ms. Segui has been the Secretary and Treasurer of the Company since 1998
and the Corporate Controller of the Company since 1990. She joined Comtech
Telecommunications in 1987 as Accounting Manager. Prior to joining the Company,
Ms. Segui served as Accounting Manager of Photronics from 1984 to 1987.
Mr. Porcelain has been Vice President of Finance and Internal Audit since
March 2002. Prior to joining the Company, Mr. Porcelain was Director of
Corporate Profit and Business Planning for Symbol Technologies, a mobile
wireless information solutions company, where he was employed from 1998 to 2002.
Previously, he spent five years in public accounting holding various positions,
including Manager in the Transaction Advisory Services Group of
PricewaterhouseCoopers.
During the past fiscal year, the Audit Committee of the Board of Directors held
seven meetings. The functions of the Committee include engaging the independent
auditors, directing investigations into matters relating to audit functions,
reviewing the plan and results of audits with the Company's auditors, overseeing
the Company's internal
4
audit function, reviewing the Company's internal accounting controls and
approving services to be performed by the Company's auditors and related fees.
The Board of Directors has determined that all members of the Audit Committee
are "independent" as defined by the NASD listing standards. The Board of
Directors has adopted a written charter for the Audit Committee. A copy of the
current charter is attached hereto as Appendix A.
The Board of Directors has determined that Gerard R. Nocita, Chairman of the
Audit Committee, qualifies as an "audit committee financial expert," as defined
by Securities and Exchange Commission rules, based on his education, background
and experience.
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 stock option plans. The Committee held four meetings
during the past fiscal year.
The Executive Committee of the Board of Directors did not hold any meetings
during the past fiscal year. Except as limited by law, the Executive Committee
has the authority to act upon all matters requiring Board approval.
The Nominating Committee identifies and evaluates candidates for election as
members of the Board of Directors and reports its findings to the full Board.
The Committee will consider recommendations sent to the Corporate Secretary at
105 Baylis Road, Melville, New York 11747. The Nominating committee did not hold
any meetings during the past fiscal year.
The Board of Directors held ten meetings during the past fiscal year, including
regularly scheduled and special meetings.
The Board of Directors recommends a vote FOR the election of George Bugliarello
and Richard L. Goldberg to the Board of Directors.
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
2000 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve the adoption of an
amendment to the Comtech Telecommunications Corp. 2000 Stock Incentive Plan (the
"Plan"). All share information below reflects the 3 for 2 stock split that
occurred in July 2003.
On September 18, 2003, the Company's Board of Directors unanimously approved the
amendment to the Plan, subject to stockholder approval, to provide that the
aggregate number of shares of the Company's Common Stock subject to awards under
the Plan or with respect to which awards may be granted be increased by 350,000
shares. As of October 10, 2003, options to purchase 2,100,205 shares were
outstanding under the Plan, and only 352,040 shares remain available for future
issuance or for reference purposes under the Plan or with respect to which
awards may be granted (excluding any shares that may become available as a
result of the expiration or termination without exercise of currently
outstanding options). Currently, 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 2,025,000 shares of Common
Stock plus 1,324,402 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 3,349,402 shares of
Common Stock.
The Board of Directors believes the amendment to the Plan is in the best
interests of the Company and its stockholders and is intended to enhance the
profitability and value of the Company for the benefit of its stockholders. The
Board of Directors believes that in a competitive environment for qualified
technical, sales, marketing and other personnel, the ability of the Company to
make equity-based awards will continue to be a key factor in the recruitment and
retention of such personnel.
On September 18, 2003, the Company's Board of Directors also adopted an
amendment to the Plan, for which stockholder approval is not required or being
sought at the Annual Meeting, to (i) increase the number of shares of Common
Stock subject to a stock option granted to a non-employee director each August 1
from 7,500 shares to
5
10,000 shares, commencing August 1, 2004, and (ii) authorize the grant, on
November 3, 2003 to each non-employee director of a stock option to purchase
2,500 shares of Common Stock.
The Board of Directors recommends approval of the amendment to the Plan
increasing the number of shares thereunder. The following description of the
Plan is a summary and is qualified in its entirety by reference to the Plan and
the amendment. A copy of the Plan is available from Investor Relations at the
Corporate Offices, 105 Baylis Road, Melville, NY 11747.
Administration
The Plan is administered and interpreted by a committee or subcommittee of the
Board appointed from time to time by the Board (the "Committee"), 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 Securities Exchange Act
of 1934, as amended, and an outside director as defined under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). Currently, the
Executive Compensation Committee serves as the Committee for the Plan. With
respect to awards to non-employee directors, the Plan is 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 has 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 are set forth in written
agreements which are consistent with the terms of the Plan. Awards under the
Plan may not be made on or after October 19, 2009, the tenth anniversary of the
adoption of the Plan, 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 ("ISOs") under the Plan. Non-employee directors of the Company are
eligible to receive nondiscretionary grants of nonqualified stock options.
Available Shares
Under the Plan, as amended, 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 2,375,000 shares of Common Stock plus
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 3,699,402 shares of Common
Stock. The terms applicable to these awards in effect prior to the Plan's
assumption of these awards continue to apply.
The maximum number of shares of Common Stock with respect to which any option,
stock appreciation right or award of performance shares or award of restricted
stock for which the grant of such award or lapse of the relevant 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 to any individual is 150,000 shares per type of
award, provided that the maximum number of shares of Common Stock for all types
of awards does not exceed 150,000 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 any individual is $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.
6
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 determines 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 are 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
the Company 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 a stock option which may be exercised only at such times
and to the extent the related option is exercisable ("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 is the
exercise price per share of the related option in the case of a Tandem SAR and
is 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 sole 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
enter into a restricted stock agreement with the Company which states the
restrictions to which the shares are subject and the criteria or date or dates
on which such restrictions will lapse.
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
7
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.
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 4,500 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 10,000 shares of Common
Stock commencing on August 1, 2004 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; and (iii) options to purchase 2,500 shares will
be granted to each non-employee director serving on the Board as of November 3,
2003. 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 upon death and 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.
8
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.
The following outstanding options have been granted under the Plan during the
fiscal year ended July 31, 2003 to each of the following executive officers of
the Company named in the Summary Compensation Table below, all named executive
officers as a group, all current directors who are not executive officers as a
group, and all other employees.
Group or Individual Number of Shares
------------------- ----------------
Fred Kornberg 105,000
Robert G. Rouse 60,000
Richard L. Burt 37,500
Robert L. McCollum 30,000
J. Preston Windus, Jr. 18,750
All executive officers, as a group (5 persons) 251,250
All directors who are not executive officers, as a group (5 persons) 30,000
All other employees 224,250
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 provide 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 either 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 employee and will not result in a tax deduction to the
Company.
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
9
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
the Code, which excess amounts may be subject to excise taxes.
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 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 recipient during a specified
period and the plan under which the options are granted is approved by
stockholders and is administered by a Committee comprised of outside directors.
The Plan is intended to satisfy these requirements with respect to options.
Vote Required and Board Recommendation
The affirmative vote of the holders 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 amendment will be required for
approval of the Plan amendment.
The Board of Directors recommends that the stockholders vote FOR approval of the
Amendment to the Company's 2000 Stock Incentive Plan.
SELECTION OF AUDITORS
The Board of Directors has selected KPMG LLP as the Company's auditors for the
2004 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 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 LLP as the Company's auditors for the
current fiscal year.
Principal Accountant Fees and Services
The following is a summary of the fees billed to the Company by KPMG LLP for
professional services rendered for the fiscal years ended July 31, 2003 and July
31, 2002:
Fee Category Fiscal 2003 Fees Fiscal 2002 Fees
------------ ---------------- ----------------
Audit Fees $243,000 $180,000
Audit-Related Fees 30,000 101,000
Tax Fees 132,000 158,000
-------- --------
Total Fees $405,000 $439,000
======== ========
Audit Fees. Consists of fees for assurance and related services that are
reasonably related to the performance of the audit of the Company's annual
financial statements and review of the interim financial statements included in
quarterly reports or services that are normally provided in connection with
statutory and regulatory filings or engagements.
Audit-Related Fees. Consists of fees for assurance and related services that are
reasonably related to the audit of the Company's annual financial statements and
review of the interim financial statements included in quarterly reports that
are not reported under "Audit Fees," including the audit of our employee benefit
plan and risk assessment services.
Tax Fees. Consists of fees billed for professional services regarding federal
and state tax compliance, tax advice and tax planning.
10
Pre-Approval Policies
Our Audit Committee has determined not to adopt any blanket pre-approval
policies. Instead, the Committee will review each service on a case-by-case
basis before approving the engagement of KPMG LLP for all audit or permissible
non-audit services.
Consideration of Non-Audit Services Provided by the Independent Accountant
The Audit Committee has concluded that the non-audit services provided by KPMG
LLP are compatible with maintaining the auditors' independence.
The Board of Directors recommends that the stockholders vote FOR the
ratification of the selection of KPMG LLP as the Company's auditors.
CODE OF ETHICS
Comtech has adopted a written Standards of Business Conduct that applies to the
Company's principal executive officer, principal financial officer, principal
accounting officer, controller and to all its other employees. These standards
are a guide to help ensure that all our employees live up to our high ethical
standards. A copy of the Standards of Business Conduct is maintained on our
website at www.comtechtel.com.
We intend to post on our website, as required, any amendment to or waiver from
any provision in our Standards of Business Conduct that applies to our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, and that relates to any
element of the standards enumerated in the rules of the Securities and Exchange
Commission.
11
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of the
executive officers whose compensation is required to be disclosed pursuant to
Securities and Exchange Commission regulations (collectively, the "named
executive officers").
Summary Compensation Table for the Fiscal Years Ended
July 31, 2003, 2002 and 2001
Annual Long Term
Compensation Compensation
---------------------------- ------------------------
Stock Restricted
Fiscal Options # Stock
Name and Principal Position Year Salary Bonus Other of Shares Awards
--------------------------- ---- ------ ----- ----- --------- ------
Fred Kornberg (1) 2003 $395,000 $ 517,221 * 105,000 --
Chairman, Chief Executive 2002 385,000 104,020 * 45,000 --
Officer and President 2001 332,000 370,000 * 105,000 --
Robert G. Rouse (2) 2003 270,000 217,383 * 60,000 --
Senior Vice President and 2002 260,000 29,720 * 7,500 --
Chief Financial Officer 2001 9,615 5,000 * 75,000 --
Richard L. Burt (3) 2003 270,000 77,080 * 37,500 --
Senior Vice President; 2002 260,000 10,000 * 11,250 --
President of Comtech Systems, Inc. 2001 210,000 103,000 * 33,750 --
Robert L. McCollum (3) 2003 267,500 204,931 * 30,000 --
Senior Vice President; President 2002 260,000 10,000 * 22,500 --
Comtech EF Data Corp. 2001 210,000 110,000 * 37,500 --
J. Preston Windus, Jr. (3) 2003 267,500 147,100 * 18,750 --
Senior Vice President; 2002 260,000 5,000 * 7,500 --
President of Comtech Mobile Datacom 2001 210,000 20,000 * 45,000 --
----------
* Less than 10% of the total salary and bonus reported for such officer.
(1) Mr. Kornberg is employed pursuant to an agreement which was amended and
restated in June 2003 and which provides, among other things, for his
employment until July 31, 2008; provided, however, that the employment
period shall be automatically extended for successive two year periods
unless either party gives notice of non-extension to the other at least
six months in advance of the then scheduled termination date; at a current
base compensation of $475,000 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 base compensation) equal to 3.5%
of the Company's pre-tax income, plus such additional amounts as the Board
of Directors may from time to time determine. 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 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 280G of the Code) equal to
the sum of (i) his then basic compensation for the balance of the
employment period or three times his basic compensation, whichever is
greater, (ii) accrued but unpaid incentive compensation with respect to
prior fiscal years and (iii) if he so elects, the market value less the
applicable exercise price, of any stock option then held by him. The
aggregate of (i), (ii) and (iii), as of October 10, 2003, would have been
$11,314,692. 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.
12
(2) Mr. Rouse is employed pursuant to an agreement which was amended and
restated in June 2003 and which provides, among other things, for his
employment until July 31, 2005; provided, however, that the employment
period shall be automatically extended for successive one year periods
unless either party gives notice of non-extension to the other at least
three months in advance of the then scheduled termination date; at a
current base compensation of $285,000 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 base compensation, equal to
1.5% of the Company's pre-tax income, plus such additional amounts as the
Board of Directors may from time to time determine. If the Company
terminates Mr. Rouse's employment other than for cause, disability or
Change in Control (as defined in his employment agreement), Mr. Rouse is
entitled to receive (i) any accrued but unpaid compensation, (ii) benefits
under the Company's benefit plans and (iii) as severance, continued
payment of his then annual base salary through the expiration of his
employment period, subject to reductions under certain circumstances as
described in the employment agreement. If the Company terminates Mr.
Rouse's employment or if Mr. Rouse voluntarily terminates his employment,
in certain circumstances, due to a Change in Control, Mr. Rouse is
entitled to receive a lump sum equal to 299% of his then annual base
salary.
(3) Mr. Burt, Mr. McCollum and Mr. Windus 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 plus such additional amounts, if any, as the
Board of Directors may from time to time determine. 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.
OPTION GRANTS IN THE FISCAL YEAR ENDED JULY 31, 2003
Number of Potential Realizable
Securities % of Total Value at Assumed Annual
Underlying Options Granted Rates of Stock
Options to Employees in Exercise Price Expiration Price Appreciation for
Name Granted (1) Fiscal Year Per Share (2) Date Option Term (3)
---- ----------- ----------- ------------- ---- ---------------
5% 10%
-- ---
Fred Kornberg 105,000 20.77% $ 5.37 8/6/12 $354,585 $898,590
Robert G. Rouse 60,000 11.87% 5.37 8/6/12 202,620 513,480
Richard L. Burt 37,500 7.42% 5.37 8/6/12 126,638 320,925
Robert L. McCollum 30,000 5.93% 5.37 8/6/12 101,310 256,740
J. Preston Windus, Jr. 18,750 3.71% 5.37 8/6/12 63,319 160,463
(1) The options have ten-year terms and become exercisable in five equal
annual installments beginning on the first anniversary of the date of
grant.
(2) The exercise price is the market price on the date the options were
granted.
(3) In accordance with SEC rules, these columns show gains that might exist
for the respective options, assuming the market price of Comtech's Common
Stock appreciates from the date of grant over a period of ten years at the
annualized rates of five and ten percent, respectively. If the stock price
does not increase above the exercise price at the time of exercise,
realized value to the named executives from these options will be zero.
13
AGGREGATE OPTION EXERCISES IN
FISCAL YEAR ENDED JULY 31, 2003
AND OPTION VALUES AS OF JULY 31, 2003
Shares Value of Unexercised
Acquired Value Number of Unexercised In-the-Money Options at
Name on Exercise Realized (1) Options at July 31, 2003 July 31, 2003 (2)
---- ----------- ------------ --------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Fred Kornberg 30,000 $ 348,300 203,250 213,000 $2,827,128 $2,376,310
Robert G. Rouse -- -- 31,500 111,000 274,955 1,206,370
Richard L. Burt 132,000 2,159,655 20,250 71,250 219,623 824,358
Robert L. McCollum 7,500 125,452 57,000 115,500 798,440 1,494,185
J. Preston Windus, Jr. 73,125 1,217,888 37,500 92,250 422,335 1,188,148
(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 July 31,
2003 for which the fair market value of the Common Stock on such date
($18.07) exceeded the exercise price of the options.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information as of July 31, 2003 with respect to
compensation plans under which equity securities of Comtech Telecommunications
Corp. may be issued. All equity securities to be issued under the plans are with
respect to Common Stock. Comtech is seeking stockholders' approval to amend
Comtech Telecommunications Corp. 2000 Stock Incentive Plan. The table below does
not include shares reserved for issuance under the plan amendment being
submitted to stockholders for approval.
EQUITY COMPENSATION PLAN INFORMATION
Number of securities to be Weighted-average Number of securities remaining
issued upon exercise of exercise price of available for future issuance under
outstanding options, outstanding options, equity compensation plans (excluding
Plan Category warrants and rights warrants and rights securities reflected in column (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders 1,734,855 $6.27 821,940
Equity compensation
plans not approved by
security holders -- -- --
--------- -------
Total 1,734,855 $6.27 821,940
========= =======
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Executive Compensation Committee has furnished the following report, which
describes the Committee's compensation policies applicable to the Company's
executive officers and provides specific information regarding the compensation
of the Company's Chief Executive Officer. (The information contained in the
"Executive Compensation Committee Report" is not to be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor is
such information to be incorporated by reference into any future filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates it
by reference into such filing.)
14
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"). Under the Incentive Compensation Plan, the President of
each of the Company's 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 orders, and cash flow targets and
personal performance targets that are proposed by senior management and
established by the Executive Compensation Committee, plus such additional
amounts, if any, as the Board of Directors may from time to time determine. The
other executive officers' 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, or in
the case of the Chief Financial Officer, his employment agreement, plus such
additional amounts, if any, as the Board of Directors may from time to time
determine.
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
2003, 146,250 options to purchase shares of the Company's Common Stock were
granted to the Company's four named executive officers other than the Chief
Executive Officer.
CEO's Compensation. Pursuant to Mr. Kornberg's employment agreement referred to
in Note (1) to the Summary Compensation Table in "Executive Compensation," Mr.
Kornberg received a base salary of $395,000 for fiscal 2003. Under his
agreement, Mr. Kornberg is entitled to receive a bonus (not to exceed his base
salary) of 3.5% of the Company's pre-tax income, plus such additional amounts as
the Board of Directors may determine. The Executive Compensation Committee
awarded Mr. Kornberg a bonus of $517,221 for fiscal 2003, inclusive of the
amount to which he is entitled under his employment agreement. In addition, Mr.
Kornberg was awarded options to purchase an aggregate of 105,000 shares of the
Company's Common Stock. The options are vested equally over five years and
expire on the tenth anniversary of the date of grant.
The Executive Compensation Committee
George Bugliarello, Chairman
Edwin Kantor
Gerard R. Nocita
15
COMPENSATION OF DIRECTORS
Each Director who is not a salaried employee of the Company receives an annual
retainer of $25,000. Under the Company's 2000 Stock Incentive Plan, each
director who is not already an employee of the Company receives an option grant
to purchase: (i) 4,500 shares of Common Stock as of the date the director begins
service on the Board and (ii) 10,000 shares of Common Stock on each August 1st,
commencing August 1, 2004 (before such date 7,500 shares) during the term of the
Plan and 2,500 shares of Common Stock as of November 1, 2003. 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 the date of grant.
AUDIT COMMITTEE REPORT
The Audit Committee has furnished the following report. The information
contained in the "Audit Committee Report" is not to be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor is
such information to be incorporated by reference into any future filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates it
by reference into such filing.
The Audit Committee reviews the Company's financial reporting process on behalf
of the Board of Directors. Management is responsible for the financial
statements and the reporting process, including the system of internal controls.
The independent auditors are responsible for expressing an opinion on the
conformity of the audited financial statements with accounting principles
generally accepted in the United States of America.
In fulfilling its responsibilities:
o The Audit Committee reviewed and discussed the audited financial
statements contained in the 2003 Annual Report on SEC Form 10-K with
the Company's management and the independent auditors.
o The Audit Committee discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees).
o The Audit Committee received from the independent auditors written
disclosures regarding the auditors' independence, as required by
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and discussed with the auditors their independence from
the Company and its management.
In reliance on the reviews and discussions noted above, the Audit Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Company's Annual Report on SEC
Form 10-K for the year ended July 31, 2003, for filing with the Securities and
Exchange Commission.
Audit Committee of the Board of Directors
Gerard R. Nocita, Chairman
George Bugliarello
Ira Kaplan
16
STOCK COMPARISON GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG COMTECH TELECOMMUNICATIONS CORP., THE S & P 500 INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
Begin: 7/31/1998
Period End: 7/31/2003
COMTECH TELECOMMUNICATIONS CP End: 7/31/2003
Cumulative Total Return
----------------------------------------------------------
7/98 7/99 7/00 7/01 7/02 7/03
COMTECH TELECOMMUNICATIONS CORP. 100.00 274.04 331.73 335.77 215.31 625.47
S & P 500 100.00 120.20 130.99 112.22 85.71 94.83
NASDAQ TELECOMMUNICATIONS 100.00 153.41 157.37 68.01 24.83 40.13
* $100 invested on 7/31/98 in stock or index-including reinvestment of
dividends. Fiscal year ending July 31.
Copyright (C) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its facilities in Melville, New York from a partnership
controlled by the Company's Chairman and Chief Executive Officer. The lease, as
amended, provides for the Company's use of the premises as they now exist for a
term of ten years through December 2011. The Company has a right of first
refusal in the event of a sale of the facility. The annual rental under the
lease ($494,000 in fiscal 2003) is subject to adjustments.
Richard L. Goldberg, a director, is a Partner in the law firm of Proskauer Rose
LLP, which renders legal services to the Company.
17
VOTING OF PROXIES AND 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. A complete list of stockholders entitled
to vote at the Annual Meeting will be available for inspection beginning
November 29, 2003 at the Company's headquarters located at 105 Baylis Road,
Melville, New York 11747.
SECTION 16(a) BENEFICIAL OWNERSHIP VOTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, if any, to
file with the Securities and Exchange Commission ("SEC") reports of ownership,
and reports of changes in ownership, of equity securities of the Company. Such
persons are also required to furnish the Company with copies of all such reports
that they file. Based solely on such reports and written representations of the
Company's directors and executive officers, the Company believes that during the
two fiscal year period ended July 31, 2003, the Company's executive officers and
directors complied with all applicable Section 16(a) filing requirements.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Eligible stockholders wishing to have a proposal for action by the stockholders
at the 2004 Annual Meeting included in the Company's proxy statement must submit
such proposal at the principal offices of the Company not later than July 2,
2004. It is suggested that any such proposals be submitted by certified mail,
return receipt requested. Under the Company's By-Laws, a stockholder nomination
for election to the Board of Directors may not be made at the 2004 Annual
Meeting unless notice (including all information that would be required in
connection with such nomination under the Securities and Exchange Commission's
proxy rules if such nomination were the subject of a proxy solicitation and the
written consent of each nominee for election to the Board of Directors named
therein to serve if elected) and the name, address and number of shares of
Common Stock held of record or beneficially by the person proposing to make such
nomination is delivered in person or mailed to the Company and received by it
not earlier than August 10, 2004 or later than September 9, 2004; provided,
however, that such notice must be received not more than 90 days prior to the
2004 Annual Meeting or less than 60 days prior to the 2004 Annual Meeting if the
2004 Annual Meeting is not held within 30 days before or after the anniversary
date of the 2003 Annual Meeting. Under the Securities and Exchange Commission's
proxy rules, proxies solicited by the Board of Directors for the 2004 Annual
Meeting may be voted at the discretion of the persons named in such proxies (or
their substitutes) with respect to any shareholder proposal not included in the
Company's proxy statement if the Company does not receive notice of such
proposal on or before September 14, 2004, unless the 2004 Annual Meeting is not
held within 30 days before or after the anniversary date of the 2003 Annual
Meeting.
By order of the Board of Directors
Gail Segui
Secretary
Date: November 3, 2003
18
Appendix A
Comtech Telecommunications Corp.
Amended and Restated Charter of the
Audit Committee of the Board of Directors
(As of October 21, 2003)
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are:
1. Monitor the integrity of the Company's financial reporting processes
and systems of internal controls regarding finance, accounting and
legal compliance.
2. Monitor the independence and performance of the Company's
independent auditors.
3. Provide an avenue of communication between the Board and the
independent auditors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access
to the independent auditors as well as anyone in the organization. The
Audit Committee has the ability to retain, at the Company's expense,
special legal, accounting or other consultants or experts it deems
necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the requirements of the NASDAQ Stock
Market Inc. The Audit Committee shall be comprised of three or more
directors as determined by the Board, each of whom shall be an
"independent director" as defined by NASDAQ and in the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules promulgated
thereunder, and free from any relationship that would interfere with the
exercise of his or her independent judgment. Additionally, no member of
the Committee shall be an "affiliated person" within the meaning of that
term under Section 301 of the Sarbanes-Oxley Act of 2002, and no member of
the Committee may receive any payment from the Company other than payment
for Board or Committee service. All members of the Committee shall have at
least a basic understanding of finance and accounting and be able to read
and understand fundamental financial statements. At least one member of
the Committee shall have financial sophistication as that term is used by
NASDAQ and shall be "an audit committee financial expert" as defined in
the rules of the Securities and Exchange Commission (the "SEC").
Audit Committee members shall be appointed by the Board on recommendation
of the Chairman of the Committee. If the Audit Committee Chair is not
present at any meeting of the Committee, the members of the Committee may
designate a chair by majority vote of the Committee membership.
The Committee shall meet at least quarterly or as often as circumstances
dictate. The Committee shall meet privately in executive session at least
annually with management, the independent auditors and as a committee to
discuss any matters that the Committee or each of these groups believes
should be discussed.
III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have
the document published at least every three years in accordance with
regulations of the Securities and Exchange Commission.
2. Review the Company's periodic and annual financial statements prior
to filing or distribution. Review should include discussion with
management and the independent auditors of significant issues
regarding accounting principles, practices and judgments.
A-1
3. In consultation with management and the independent auditors,
consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures
and the steps management has taken to monitor, control and report
such exposures. Review significant findings prepared by the
independent auditors together with management's responses.
Independent Auditors
4. Assume direct responsibility for the appointment, compensation,
retention, and oversight of the work of the independent auditors
engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company.
The independent auditors must report directly to the Audit
Committee.
5. Review the independence and performance of the auditors and assume
sole authority to approve any discharge of auditors when
circumstances warrant.
6. Approve, in advance, all auditing and non-auditing services provided
by the independent auditors and the fees and other significant
compensation to be paid to the independent auditors.
7. Confirm and assure the independence of the independent auditors, and
in furtherance of such responsibility, on an annual basis, the
Committee should review and discuss with the independent auditors
all significant relationships they have with the Company that could
impair the auditors' independence.
8. At least annually, obtain and review a report by the independent
auditors addressing: (i) the audit firm's internal quality-control
procedures; and (ii) any material issues raised by the most recent
internal quality-control review, or peer review, of the audit firm,
or by any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or more
independent audits carried out by the firm and any steps taken to
deal with any such issues.
9. Review the independent auditors' audit plan and discuss scope,
staffing, locations, reliance upon management and general audit
approach.
10. Prior to releasing the audited year-end earnings, discuss the
results of the audit with the independent auditors. Discuss certain
matters required to be communicated to audit committees in
accordance with Statements on Auditing Standards No. 61 ("SAS No.
61").
11. Discuss with the independent auditors their observations relative to
the quality and appropriateness of the Company's accounting
principles as applied in its financial reporting.
12. Discuss the annual audited financial statements and quarterly
financial statements, including the assessment of the integrity of
such financial statements, with management and the independent
auditors, including the Company's disclosures in the "Management's
Discussion Analysis of Financial Condition and Results of
Operations" in each Form 10-Q and 10-K to be filed with the SEC.
Assure that the auditor's reasoning is described and documented in
determining the appropriateness of changes in accounting principles
and disclosure practices.
13. Conduct open and frank discussions with the Company and the
independent auditors regarding the auditors' evaluation about the
quality of the Company's accounting principles and essential
estimates in its financial statements. This dialogue will include
discussion of the consistency, clarity and completeness of the
financial statements and related disclosures. The discussion will
also include items that may impact the representational
faithfulness, verifiability, and neutrality of the information shown
in the financial statements such as changes in accounting policies,
estimates, judgments, uncertainties, and unusual transactions (SAS
No. 61 as amended by Statements on Auditing Standards No. 90 ("SAS
No. 90")).
14. Review reports from the independent auditors concerning critical
accounting policies, all alternative treatments of financial
information under generally accepted accounting principles ("GAAP")
that were discussed with management and other material written
communications between the auditors and management.
15. Review with the independent auditors any audit problems or
difficulties and management's response.
A-2
Review and Assessment of Internal Controls
16. Discuss with management policies and programs with respect to risk
management and risk assessment.
17. Review management's annual Internal Control Report which:
(i) acknowledges management's responsibility for establishing and
maintaining an adequate internal control structure and
procedures for financial reporting; and
(ii) contains an assessment, as of the end of the most recent
fiscal year, of the internal control structure and procedures
for financial reporting.
18. Establish procedures for the (i) receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls and auditing matters and (ii) confidential,
anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
19. Consider and review with the independent auditor:
(i) the adequacy of the Company's and its subsidiaries internal
controls, including computerized information system controls
and security; and
(ii) related findings and recommendations of the independent
auditor together with management's responses.
20. In order to enable the CEO and the CFO to provide required SEC
certification, before each filing of the Company's reports on Form
10-Q and 10-K, the Audit Committee will discuss with the CEO and CFO
(i) significant deficiencies in the design or operation of the
Company's internal controls that could adversely affect the
Company's ability to gather and report financial data and (ii) any
fraud involving management or employees who have significant roles
in the Company's internal controls.
21. Perform an annual evaluation of the Audit Committee and its
individual members.
22. Prepare a report for the annual proxy statement that states:
(i) whether the Committee has reviewed and discussed the financial
statements with management;
(ii) whether the Committee has discussed issues in SAS No. 61, as
amended by SAS No. 90, with the independent auditors;
(iii) whether the Committee has reviewed the disclosures and letter
from the independent auditors required by Independence
Standards Board Standard No. 1, and has discussed the audit
firm's independence with the auditor; and
(iv) based on the review of (i)-(iii) above, whether the Committee
recommended to the Board that the financial statements be
included in the 10-K.
Legal Compliance
23. On at least an annual basis, review with the Company's outside
counsel any legal matters that could have a significant impact on
the organization's financial statements, the Company's compliance
with applicable laws and regulations and inquiries received from
regulators or governmental agencies.
Other Audit Committee Responsibilities
24. Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
25. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
26. Review and approve all related-party transactions.
27. Engage and determine funding for independent counsel and other
advisors.
A-3
The Annual Meeting of Stockholders of
Comtech Telecommunications Corp.
will be held at 10:00 a.m. on December 9, 2003 at the
Melville Marriott/Long Island
[MAP OMITTED]
1350 WALT WHITMAN ROAD, MELVILLE, (LONG ISLAND), NEW YORK 11747
(631) 423-1600
FROM KENNEDY AIRPORT
JFK EXPRESSWAY EAST TO BELT PARKWAY EAST (BECOMES SOUTHERN STATE PARKWAY AT
NASSAU COUNTY BORDER). SOUTHERN STATE PARKWAY EAST TO EXIT 32 NORTH (ROUTE 110).
ROUTE 110 NORTH TO THE WESTBOUND SERVICE ROAD OF THE LONG ISLAND EXPRESSWAY
(495). MAKE A LEFT AND THE HOTEL IS ON THE RIGHT.
FROM LAGUARDIA AIRPORT
GRAND CENTRAL PARKWAY TO EASTERN LONG ISLAND (BECOMES NORTHERN STATE PARKWAY AT
NASSAU COUNTY BORDER). FOLLOW NORTHERN STATE PARKWAY EAST TO EXIT 40 SOUTH
(ROUTE 110). TAKE ROUTE 110 SOUTH TO THE WESTBOUND SERVICE ROAD OF LONG ISLAND
EXPRESSWAY (495). MAKE A RIGHT AND THE HOTEL IS ON THE RIGHT.
FROM MANHATTAN
MID-TOWN TUNNEL TO LONG ISLAND EXPRESSWAY (495). TAKE LONG ISLAND EXPRESSWAY
EAST TO EXIT 49S (ROUTE 110). FOLLOW TO FIRST LIGHT (WALT WHITMAN ROAD) TURN
LEFT. CONTINUE ON THE ROAD TO THE NEXT LIGHT, GO STRAIGHT. THE HOTEL IS AHEAD ON
THE RIGHT.
[LOGO] COMTECH
TELECOMMUNICATIONS CORP.(R)
COMTECH TELECOMMUNICATIONS CORP.
105 Baylis Road
Melville, New York 11747
TEL: (631) 777-8900 o FAX: (631) 777-8877
WEB: www.comtechtel.com
COMTECH TELECOMMUNICATIONS CORP.
C/O AMERICAN STOCK TRANSFER
6201 15TH AVENUE
BROOKLYN, NY 11219
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site and follow the simple instructions to obtain your records and to create
an electronic voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call and then follow the simple instructions the
Vote Voice provides you.
VOTE BY MAIL -
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Comtech Telecommunications Corp., c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS: COMTC1 KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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COMTECH TELECOMMUNICATIONS CORP.
PROPOSAL 1. For Withhold For All
All All Except
1. Election of Directors.
Nominees: 01) George Bugliarello |_| |_| |_|
02) Richard L. Goldberg
To withhold authority to vote, mark
"For All Except" and write the
nominee's number on the line below.
___________________________________
This proxy will be voted or withheld from being voted in accordance with the
instructions specified. WHERE NO CHOICE IS SPECIFIED, THIS PROXY WILL CONFER
DISCRETIONARY AUTHORITY AND WILL BE VOTED FOR THE NOMINEES LISTED AT ABOVE LEFT
AND FOR APPROVAL OF PROPOSALS 2 AND 3.
PROPOSAL 2. For Against Abstain
2. Approval of amendment to the Company's
2000 Stock Incentive Plan. |_| |_| |_|
PROPOSAL 3.
3. Ratification of selection of KPMG LLP
as auditors. |_| |_| |_|
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears hereon. When signing as executor,
administrator, attorney, trustee or guardian, please give your full title
as such. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership
name by authorized person. If a joint tenancy, please have both tenants
sign.
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| |
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Please SIGN HERE Date SIGNATURE (IF HELD JOINTLY) Date
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
COMTECH TELECOMMUNICATIONS CORP.
December 9, 2003
--------------------------------------------------------------------------------
================================================================================
COMTECH TELECOMMUNICATIONS CORP.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Fred Kornberg and Robert G. Rouse, and
each of them, full power of substitution, proxies to vote at the Annual Meeting
of Stockholders of Comtech Telecommunications Corp. (the "Company") to be held
at the Marriott Hotel, 1350 Walt Whitman Road, Melville, New York 11747 on
December 9, 2003, at 10:00 a.m., local time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of Common Stock of the Company held or owned by the undersigned as
directed on the reverse side of this proxy card and in their discretion, upon
such other matters as may come before the meeting.
This proxy will be voted as specified and, unless otherwise specified in
the spaces provided, this proxy will be voted FOR the election of directors and
FOR the proposals referred to in items 2 and 3 hereon.
(To be Signed on Reverse Side.)
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