Exhibit 10(a)
SECOND AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT (this “ Agreement ”) dated
September 16, 2008 between Comtech Telecommunications Corp. (the
“ Company ”) and Fred Kornberg (“
Kornberg ”).
Kornberg is presently Chairman of
the Board of Directors, President and Chief Executive Officer of
the Company and is employed pursuant to an amended and restated
employment agreement dated September 17, 2007, as amended (the
“ Prior Agreement ”). The Company and
Kornberg now desire to enter into a further amended and restated
employment agreement on the terms and conditions set forth
herein.
Accordingly, the Company and
Kornberg hereby amend and restate the Prior Agreement to read in
its entirety as follows:
1. The Company hereby
employs Kornberg as general manager and chief executive officer of
its business for the period (hereinafter referred to as the “
Employment Period ”) commencing as of August 1, 2008
and, except as otherwise provided in Paragraph 6 hereof,
terminating at the close of business on July 31,
2011. Kornberg shall have supervision over the business
and affairs of the Company and its subsidiaries, shall report and
be responsible only to the Board of Directors of the Company, and
shall have powers and authority superior to those of any other
officer or employee of the Company or any of its
subsidiaries. Kornberg accepts such employment and
agrees to devote his full business time and effort to the business
and affairs of the Company and, subject to his election as such, to
serve as a director and as Chairman of the Board and President of
the Company. He shall not be required to relocate his
principal residence or to perform services which would make the
continuance of such residence inconvenient to
him. Except as otherwise specifically provided herein,
if Kornberg remains employed by the Company following the
expiration of the Employment Period, his employment with the
Company shall be “at will.”
2. The Company shall
pay to Kornberg, for all services rendered by him during the
Employment Period, compensation as follows:
(a) Salary (“
Base Salary ”) at the annual rate of $695,000,
commencing as of August 1, 2008, plus such additional amounts, if
any, as the Board of Directors may from time to time determine,
payable in accordance with the Company’s current
practice. Once increased, the Base Salary may not be
decreased without Kornberg’s prior written
consent.
(b) Incentive
compensation (“ Incentive Compensation ”) for
each fiscal year in which any part of the Employment Period falls
in an amount equal to 3.0% of the Company’s Pre-Tax Income
for each such fiscal year; provided, however, that (1) the
amount payable under this Paragraph 2(b) in respect of a completed
fiscal year and paid at a time that Kornberg remains employed shall
be reduced such that the amount, together with Base
Salary
projected to be payable in that fiscal year,
will equal $1 million (references to “Incentive
Compensation” elsewhere in this Agreement refer to the amount
calculated without regard to this reduction); and (2) if the
Employment Period terminates earlier than at the end of a fiscal
year, Incentive Compensation shall be based upon the
Company’s Pre-Tax Income for the then current fiscal year
through the date of termination of employment, but without
duplication of any payout of an annual incentive award authorized
under the Company's 2000 Stock Incentive Plan (the “ 2000
Plan ”). In addition, Kornberg may receive
from time to time, in the sole discretion of the Compensation
Committee of the Board of Directors of the Company (the “
Compensation Committee ”), additional incentive
compensation, which may be intended to comply with the
“performance-based compensation” exception under
Section 162(m) of the Internal Revenue Code, under the 2000 Plan on
such terms and conditions as determined by the Compensation
Committee. For purposes of this Paragraph
2(b):
(i) The
Company’s “Pre-Tax Income” for any fiscal year or
period shall be the consolidated earnings of the Company and its
subsidiaries for such fiscal year or period, as determined by the
independent accounting firm employed by the Company as its regular
auditors in accordance with generally accepted accounting
principles applied on a consistent basis, before:
(1) for fiscal years
prior to 2009: (A) any extraordinary item, (B) provision
for federal, state or municipal income taxes thereon, (C) provision
for any Incentive Compensation payable to Kornberg hereunder, (D)
any write-off of in-process research and development acquired, (E)
at the discretion of the Compensation Committee, any non-recurring
items, (F) any amortization of intangibles relating to future
acquisitions, and (G) any stock-based compensation expense before
income tax benefit under SFAS 123(R).
(2) for fiscal year
2009 and thereafter: (A) any extraordinary item, (B)
stock-based compensation expense before income tax benefit under
SFAS 123R, (C) provision for federal, state or municipal income
taxes thereon, (D) provision for any Incentive Compensation payable
to Kornberg hereunder, (E) costs associated with exit or disposal
activities under SFAS 146, (F) impairment loss on Goodwill under
SFAS 142, (G) e xpenses relating to a
potential or actual Change in Control (as defined in Section 14.2
of the 2000 Plan), (H) expenses in connection with a purchase
business combination under EITF 95-3 or other accounting
literature, (I) expenses associated with termination of
employees under FASB Staff Position FAS 146-1, (J)
write-off of purchased in-process research and development under
FASB Interpretation No. 4 (FIN 4), (K) amortization of newly
acquired intangibles with finite lives relating to the acquisition
of a trade or business, (L) any adjustment to income before
provision of income taxes as required by adoption of a new
accounting standard (M) at the discretion of the Committee, any
non-recurring items, and (N) any amortization of intangibles
relating to future acquisitions.
(ii) Incentive
Compensation payable with respect to any fiscal year shall be paid
in cash to Kornberg. Incentive Compensation payable
under clause (1) of the preamble of this Paragraph 2(b) shall be
paid in the fiscal year following the fiscal year to
which
it relates
promptly after completion of the Company’s audited year-end
financial statements for such fiscal year (but in any event by the
end of that following fiscal year) and at the same time as
incentive compensation is paid to the other most senior executive
officers of the Company. Incentive Compensation payable
under clause (2) of the preamble of this Paragraph 2(b) shall be
paid on the 60 th day after his termination of employment based on
unaudited financial information for the relevant period, subject to
Paragraph 15(c). If Kornberg voluntarily terminates his
employment with the Company other than as permitted by Paragraph
6(b) of this Agreement, or if the Company terminates his employment
for “cause” as defined in Paragraph 6(a) hereof,
Kornberg shall forfeit his right to receive any Incentive
Compensation accrued but unpaid in accordance with this Paragraph
2(b)(ii).
3. During the
Employment Period, Kornberg shall be entitled to participate in,
and receive benefits in accordance with, the Company’s
employee benefit plans and programs at the time maintained by the
Company for its executives, subject to the provisions of such plans
and programs. In addition, d uring the Employment Period, the Company will provide
Kornberg, at the Company’s expense, with an automobile
similar to the automobile currently furnished to Kornberg or,
alternatively, a monthly automobile allowance equal to an amount
required to lease such an automobile.
4. During the
Employment Period, Kornberg shall be entitled to receive
reimbursement for all expenses reasonably incurred by him in
connection with his duties hereunder in accordance with the usual
procedures of the Company.
5.
(a) During the Employment Period, Kornberg shall be
entitled to annual reimbursement from the Company of the cost of
premiums paid by Kornberg to secure such life insurance coverage on
Kornberg’s life as Kornberg determines in his discretion;
provided that the Company’s maximum annual reimbursement
obligation under this Paragraph 5(a) shall be capped based on the
annual cost of a customary term life insurance policy with a
maximum face amount of $3.5 million (or, if higher, five times
Kornberg’s then Base Salary) purchased for a five-year term
for a non-smoker at the same age as Kornberg as of the date hereof,
such cost to be determined within six months after the date
hereof. This benefit is intended to be in addition to,
and not in lieu of, any group life insurance coverage provided by
the Company.
(b) In addition to the
insurance provided for in Paragraph 5(a) hereof, the Company, in
its discretion, and at its own cost and expense, may also obtain
insurance covering Kornberg’s life in such amount as it
considers advisable, payable to the Company, and Kornberg agrees to
cooperate fully to enable the Company to obtain such
insurance.
6. The Employment
Period may be earlier terminated only as follows:
(a) By action of the
Board of Directors of the Company, upon notice to Kornberg, if
during the Employment Period Kornberg shall fail to render the
services provided for hereunder for a continuous period of 12
months because of his physical or mental incapacity, or for
“cause,” which shall mean (i) willful misconduct, gross
negligence, dishonesty, misappropriation, breach of fiduciary duty
or fraud by Kornberg with regard to the Company or any of its
assets or businesses; (ii) conviction of Kornberg or the pleading
of nolo contendere with regard to any felony or crime
(for the purpose hereof, traffic violations and
misdemeanors
shall not be
deemed to be a crime); or (iii) any material breach by Kornberg of
the provisions of this Agreement which is not cured within thirty
days after written notice to Kornberg of such breach from the Board
of Directors of the Company.
(b) By Kornberg, on
thirty days notice to the Company within two years after a Change
in Control of the Company, as defined in Paragraph 7(d) hereof,
occurs.
(c) By Kornberg,
voluntarily upon ninety days prior written notice other than under
Paragraph 6(b).
7. If either (A)
Kornberg terminates the Employment Period in accordance with
Paragraph 6(b) hereof, or (B) following the Employment Period
Kornberg remains employed by the Company and during the two year
period following the end of the Employment Period he terminates his
employment on thirty days notice to the Company within two years
after a Change in Control of the Company that occurred during the
Employment Period, the following provisions shall apply
(a) The Company shall
pay to Kornberg, on the 60 th day after the effective date of the termination
(the “ Effective Date ”), subject to Paragraph
15(c) hereof, a lump sum equal to:
(i) the greater of (x)
Kornberg’s Base Salary, at the rate in effect at the time
such notice is given, for the full unexpired term of the Employment
Period, and (y) 2.5 times Kornberg’s Base Salary then in
effect; plus
(ii) an amount equal to
2.5 times Kornberg’s average Incentive Compensation plus
annual incentive awards under the 2000 Plan actually paid or
payable for performance in the three fiscal years preceding the
year in which the Change in Control occurs (which for this purpose
shall also include any annual incentive amounts paid to Kornberg
for service to the Company or to a subsidiary that was at the time
of such service wholly owned (directly or indirectly) by the
Company); plus
(iii) the amount of any
unpaid Incentive Compensation (x) accrued with respect to any
fiscal year ended prior to the Effective Date, and/or (y) accrued
with respect to the then current fiscal year, pursuant to the
proviso in Paragraph 2(b).
(b) Subject to
Paragraph 15(c) hereof to the extent considered to result in the
“deferral of compensation” under Code Section 409A, for
the greater of (x) the full unexpired term of the Employment Period
(but not beyond the December 31, of the second calendar year
following termination) or (y) the two year period following
Kornberg’s termination (the “ Continuation
Period ”), the Company shall continue Kornberg’s
participation in each employee benefit plan or reimbursement
arrangement (including, without limitation, life insurance (and the
life insurance reimbursement provided in Paragraph 5(a) above) and
medical plans and including, to the extent allowed, amending such
plans) in which Kornberg was entitled to participate immediately
prior to the Effective Date as if he continued to be employed by
the Company hereunder. If the terms of any benefit plan
of the Company may not under Section 401(a) or other similar
provisions of the Internal Revenue Code of 1986, as amended (the
“ Code ”), permit continued participation by
Kornberg, the Company will arrange to credit to
Kornberg
benefits substantially equivalent to, as to time and amount, and no
less favorable than, on an after-tax basis, the benefits he would
have been entitled to receive under such plan (assuming he had
elected to participate voluntarily to the maximum extent
permissible) if he had been continuously employed by the Company
during the Continuation Period with payment of any accrued amount
on the date of the end of the Continuation
Period. Kornberg shall have the option to have assigned
to him, at no cost and with no apportionment of prepaid premiums,
any assignable insurance policies owned by the Company that relate
specifically to Kornberg and are payable to his estate or his
designee(s).
(c) Notwithstanding
any other provision of this Agreement, in the event Kornberg
becomes entitled to any amounts or benefits payable in connection
with a Change in Control (whether or not such amounts are payable
pursuant to this Agreement) (the “ Change in Control
Payments ”), if any of such Change in Control Payments
are subject to the tax (the “ Excise Tax ”)
imposed by Section 4999 of the Code (or any similar federal,
state or local tax that may hereafter be imposed), the Company
shall pay to Kornberg at the time specified in Paragraph 7(c)(iii)
below, an additional amount (the “ Gross-Up Payment
”) such that the net amount retained by Kornberg, after
deduction of any Excise Tax on the Total Payments (as hereinafter
defined) and any federal, state and local income tax and Excise Tax
upon the payment provided for by Paragraph 7(a), shall be equal to
the Total Payments.
(i) For purposes of
determining whether any of the Change in Control Payments will be
subject to the Excise Tax and the amount of such Excise
Tax:
a) any other payments
or benefits received or to be received by Kornberg in connection
with a Change in Control or Kornberg’s termination of
employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person
whose actions result in a Change in Control or any person
affiliated with the Company or such person) (which, together with
the Change in Control Payments, constitute the “ Total
Payments ”) shall be treated as “parachute
payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess
parachute payments” within the meaning of
Section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless in the opinion of a
nationally-recognized tax counsel selected by the Company such
other payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not
subject to the Excise Tax;
b) the amount of the
Total Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (x) the total amount of the Total
Payments and (y) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) of the Code (after applying
Paragraph 7(c)(i)(a) hereof); and
c) the value of any
non-cash benefits or any deferred payments or benefit shall be
determined by a nationally-recognized accounting firm selected by
the Company in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
(ii) For purposes of
determining the amount of the Gross-Up Payment, Kornberg will be
deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
Kornberg’s residence on the date of termination, net of the
maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of the
Change in Control, Kornberg will repay to the Company within ten
days after the time that the amount of such reduction in Excise Tax
is finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and
local income tax imposed on the Gross-Up Payment being
