This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. Moreover, this summary is qualified in its entirety by reference to the more detailed information contained elsewhere in this proxy statement/prospectus including the annexes attached hereto, and incorporated by reference herein. You are urged to read carefully this entire proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus in order to fully understand the merger agreement, the voting and standstill agreement and the proposed merger. See “Where You Can Find More Information” beginning on page [l] of this proxy statement/prospectus. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

 

Comtech Telecommunications Corp.

 

Comtech Telecommunications Corp., which is referred to in this proxy statement/prospectus as Comtech, designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. Comtech believes many of its solutions play a vital role in providing or enhancing communication capabilities when terrestrial communications infrastructure is unavailable, inefficient or too expensive. Comtech conducts business through three complementary segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. Comtech sells products to a diverse customer base in the global commercial and government communications markets. Comtech believes it is a leader in the market segments that it serves.

 

The principal trading market for Comtech’s common stock (NASDAQGS: CMTL) is the NASDAQ Global Select Market.

 

The principal executive offices of Comtech are located at 68 South Service Road, Suite 230, Melville, New York 11747; its telephone number is (631) 962-7000; and its web site is www.comtechtel.com.

 

Angels Acquisition Corp.

 

Angels Acquisition Corp., which is referred to in this proxy statement/prospectus as Merger Sub, is a Delaware corporation and a wholly owned subsidiary of Comtech. Merger Sub was formed solely for the purpose of consummating the merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the merger.

 

The principal executive offices of Merger Sub are located at 68 South Service Road, Suite 230, Melville, New York 11747, and its telephone number is (631) 962-7000.

 

CPI International, Inc.

 

CPI International, Inc., which is referred to in this proxy statement/prospectus as CPI, is the parent company of Communications & Power Industries, Inc., a leading provider of microwave, radio frequency, power and control solutions for critical defense, communications, medical, scientific and other applications. Communications & Power Industries, Inc. develops, manufactures and distributes products used to generate, amplify, transmit and receive high-power/high-frequency microwave and radio frequency signals and/or provide power and control for various applications. End-use applications of these systems include the transmission of radar signals for navigation and location; transmission of deception signals for electronic countermeasures; transmission and amplification of voice, data and video signals for broadcasting, Internet and other types of commercial and military communications; providing power and control for medical diagnostic imaging; and generating microwave energy for radiation therapy in the treatment of cancer and for various industrial and scientific applications.

 

The principal trading market for CPI’s common stock (NASDAQGS: CPII) is the NASDAQ Global Select Market.

The principal executive offices of CPI are located at 811 Hansen Way, Palo Alto, California 94303; its telephone number is (650) 846-2900; and its web site is www.cpii.com.

 

Comtech, Merger Sub and CPI have entered into the Agreement and Plan of Merger, dated as of May 8, 2010, which, as it may be amended from time to time, is referred to in this proxy statement/prospectus as the merger agreement. Subject to the terms and conditions of the merger agreement and in accordance with Delaware law, Merger Sub will be merged with and into CPI, with CPI continuing as the surviving corporation. Upon completion of this transaction, which is referred to in this proxy statement/prospectus as the merger, CPI will be a wholly owned subsidiary of Comtech, and CPI common stock will no longer be outstanding or publicly traded.

 

A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. You should read the merger agreement carefully because it is the legal document that governs the merger.

 

Meeting

 

The special meeting will be held at [l], on [l], 2010 at 10:00 a.m., local time. At the special meeting, CPI stockholders will be asked to vote on the following proposals:

 

 

Record Date

 

Only CPI stockholders of record at the close of business on [l], 2010 will be entitled to receive notice of and to vote at the special meeting or any adjournment of the special meeting. As of the close of business on the record date of [l], 2010, there were [l] shares of CPI common stock outstanding and entitled to vote at the special meeting. Each holder of CPI common stock is entitled to one vote for each share of CPI common stock owned as of the record date.

 

Required Vote

 

To adopt the merger agreement, holders of a majority of the shares of CPI common stock outstanding and entitled to vote on the proposal must vote in favor of adoption of the merger agreement. CPI cannot complete the merger unless its stockholders adopt the merger agreement. Because approval is based on the affirmative vote of a majority of the outstanding shares of CPI common stock entitled to vote thereon, a CPI stockholder’s failure to vote, an abstention from voting or the failure of a CPI stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee will have the same effect as a vote “AGAINST” adoption of the merger agreement.

 

If there are not sufficient votes to adopt the merger agreement at the time of the special meeting, a majority of the votes present in person or by proxy (whether or not a quorum is present) may adjourn the meeting to another time and place in order to solicit additional proxies. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal to adjourn the special meeting. Shares not in attendance at the special meeting will have no effect on the outcome of any vote to adjourn the special meeting.

 

See “— The Voting and Standstill Agreement” below for information regarding CPI stockholders who have committed to vote shares of CPI common stock in favor of the two proposals described above, subject to certain exceptions.

 

Stock Ownership of and Voting by CPI’s Directors and Executive Officers

 

At the close of business on the record date for the special meeting, CPI’s directors and executive officers and their affiliates beneficially owned [l] shares of CPI common stock, and have the right to vote [l] of those shares at

the special meeting, which represents approximately [l]% of the shares of CPI common stock entitled to vote at the special meeting.

 

Except with respect to the shares held by entities affiliated with CPI director Jeffrey Hughes, none of the directors or executive officers of CPI has entered into any agreement requiring them to vote for or against the merger proposal. See “— The Voting and Standstill Agreement” below for information regarding CPI stockholders who have committed to vote shares of CPI common stock in favor of the two proposals described above.

 

If the merger is completed, each share of CPI common stock will be cancelled and converted automatically into the right to receive $9.00 in cash and between 0.2132 and 0.2382 shares of Comtech common stock (and dividends, if any, on Comtech common stock with a record date after the date of the merger agreement and before the effective time of the merger). The exact number of shares of Comtech common stock to be received in the merger will be determined based on a conversion ratio (rounded to four decimal places) equal to $8.10 divided by the average closing price of Comtech’s stock over the five consecutive trading days ending on (and including) the second trading day prior to closing, provided that if such average closing price of Comtech common stock is greater than $38.00, then the conversion ratio will equal 0.2132, and if such average closing sale price is less than $34.00, then the conversion ratio will equal 0.2382. The fraction of a share of Comtech common stock delivered in respect of each share of CPI common stock in the merger is referred to in this proxy statement/prospectus as the conversion ratio. Comtech will not issue any fractional shares of its common stock in the merger. Instead, the total number of shares of Comtech common stock that each CPI stockholder will receive in the merger will be rounded down to the nearest whole number, and each CPI stockholder will receive cash, without interest, for any fractional shares of Comtech common stock that he or she would otherwise receive in the merger. The amount of cash for fractional shares will be based on the prevailing prices at which Comtech common stock will be sold on the NASDAQ Global Select Market by Comtech’s exchange agent as soon as practicable after the effective time of the merger. The Comtech common stock received based on the conversion ratio, together with the cash consideration (including any cash received in lieu of fractional shares and dividends, if any, on Comtech common stock with a record date after the date of the merger agreement and before the effective time of the merger), is referred to in this proxy statement/prospectus as the merger consideration. Below are three illustrative examples of the merger consideration that a CPI stockholder will receive depending on different per-share prices of Comtech common stock:

 

Example 1:  If at closing you own 100 shares of CPI common stock and the average closing price of Comtech’s shares over the five consecutive trading days ending on (and including) the second trading day prior to closing is $36.00, you will be entitled to receive 22 shares of Comtech common stock, $900 in cash and an additional amount of cash in respect of 0.50 shares of Comtech common stock at the prevailing sale price of a share of Comtech common stock as soon as practicable after closing.

 

Example 2:  If at closing you own 100 shares of CPI common stock and the average closing price of Comtech’s shares over the five consecutive trading days ending on (and including) the second trading day prior to closing is $30.00, you will be entitled to receive 23 shares of Comtech common stock, $900 in cash and an additional amount of cash in respect of 0.82 shares of Comtech common stock at the prevailing sale price of a share of Comtech common stock as soon as practicable after closing.

 

Example 3:  If at closing you own 100 shares of CPI common stock and the average closing price of Comtech’s shares over the five consecutive trading days ending on (and including) the second trading day prior to closing is $42.00, you will be entitled to receive 21 shares of Comtech common stock, $900 in cash and an additional amount of cash in respect of 0.32 shares of Comtech common stock at the prevailing sale price of a share of Comtech common stock as soon as practicable after closing.

 

Using only the closing price of $31.06 for Comtech common stock on the NASDAQ Global Select Market on May 7, 2010, the last trading day before the public announcement of the merger agreement, the merger consideration represented approximately $16.40 in value for each share of CPI common stock. Based on the closing price of $[l] for Comtech common stock on the NASDAQ Global Select Market on [l], 2010, the most recent practicable trading day prior to the date of this proxy statement/prospectus, the merger consideration represented approximately $[l] in value for each share of CPI common stock.

 

Each option to purchase shares of CPI common stock that were granted under CPI’s equity compensation plans and are outstanding immediately prior to the closing, whether or not exercisable or vested, will be canceled at the closing in exchange for cash, equal to the excess, if any, of (i) the sum of (A) $9.00 and (B) the average per-share closing prices of Comtech common stock for the 10 consecutive trading days immediately preceding the date that is two days before the closing, as reported on the NASDAQ Global Select Market, multiplied by the conversion ratio, reduced by (ii) the per-share exercise price of such option.

 

Each restricted stock award and restricted stock unit granted under CPI’s equity compensation plans outstanding immediately prior to the closing will be canceled at the closing in exchange for a payment, in cash, equal to the sum of (i) $9.00 and (ii) the average per-share closing prices of Comtech common stock for the 10 consecutive trading days immediately preceding the date that is two days before the closing, as reported on the NASDAQ Global Select Market, multiplied by the conversion ratio.

 

The CPI board of directors has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of CPI and its stockholders and unanimously recommends that you vote “FOR” the adoption of the agreement and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the special meeting.

 

In connection with the merger, CPI’s financial advisor, J.P. Morgan Securities Inc., referred to as J.P. Morgan in this proxy statement/prospectus, delivered its oral opinion, subsequently confirmed in writing, to the CPI board of directors as to the fairness, from a financial point of view, as of the date of such opinion, and based upon and subject to the various factors, assumptions and limitations set forth in such written opinion, of the per share merger consideration to be received by the holders of CPI common stock (other than the Cypress Group and its affiliates) in the proposed merger. The full text of J.P. Morgan’s written opinion, dated May 7, 2010, is attached to this proxy statement/prospectus as Annex D and sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken.

 

In connection with the merger, CPI engaged Moelis & Company LLC, referred to as Moelis in this proxy statement/prospectus, to act as financial advisor to the special committee of CPI’s board of directors. Moelis delivered its oral opinion, subsequently confirmed in writing, to the special committee of the CPI board of directors as to the fairness, from a financial point of view, as of the date of such opinion, and based upon and subject to the various factors, assumptions, limitations and qualifications set forth in such opinion, of the per share merger consideration to be received by CPI’s stockholders (other than the Cypress Group and its affiliates) pursuant to the terms and subject to the conditions set forth in the merger agreement. The full text of Moelis’ written opinion, dated May 7, 2010, is attached to this proxy statement/prospectus as Annex E and sets forth, among other things, the procedures followed, assumptions made, matters considered and limitations on the scope of review undertaken.

 

The opinions of J.P. Morgan and Moelis are directed to the board of directors of CPI and the special committee of the CPI board of directors, respectively, and each opinion addresses only the fairness, from a financial point of view, of the consideration to be paid to the holders of common stock of CPI (other than the Cypress Group stockholders) in the proposed merger, and does not address any other aspect of the merger. The opinions of J.P. Morgan and Moelis do not constitute a recommendation as to how any stockholder should vote with respect to the proposed merger.

 

Based on the number of shares of CPI common stock outstanding as of [l], 2010, Comtech expects to issue approximately [l] shares of its common stock to CPI stockholders pursuant to the merger. The actual number of shares of Comtech common stock to be issued pursuant to the merger will be determined at the completion of the

merger based on the conversion ratio then in effect and the number of shares of CPI common stock outstanding at such time. Immediately after completion of the merger, it is expected that former CPI stockholders will own approximately [l]% of the [l] then outstanding shares of Comtech common stock, based on the number of shares of CPI and Comtech common stock outstanding, on a fully diluted basis, as of [l], 2010.

 

 

Comtech stockholders are not required to adopt the merger agreement or approve the merger or the issuance of the shares of Comtech common stock in connection with the merger.

 

 

In considering the recommendation of the CPI board of directors with respect to the merger agreement, CPI stockholders should be aware that the executive officers of CPI and certain members of the CPI board of directors have interests in the transactions contemplated by the merger agreement that are different from, or in addition to, the interests of CPI stockholders generally. These interests include certain CPI executive officers being entitled to receive specified severance and other benefits following the effective time of the merger. The CPI board of directors was aware of these interests, and considered them, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that CPI stockholders adopt the merger agreement.

 

Comtech is presently in negotiations with CPI’s executive officers regarding the terms of their continued employment and the treatment of their existing equity awards, and, if no such agreement is reached, some or all of the executive officers might not continue with the surviving company or its subsidiaries in their current capacity or otherwise.

 

 

Comtech will use reasonable best efforts to cause the shares of Comtech common stock to be issued in connection with the merger to be approved for listing on the NASDAQ Global Select Market (where Comtech common stock is currently listed), subject to official notice of issuance. If the merger is completed, CPI shares will no longer be listed on the NASDAQ Global Select Market, and will be deregistered under the Securities Exchange Act of 1934, as amended, which is referred to in this proxy statement/prospectus as the Exchange Act.

 

 

Under Delaware law, record holders of CPI common stock who do not vote in favor of the adoption of the merger agreement and who otherwise comply with the procedures for exercising appraisal rights under Delaware law will be entitled to seek appraisal rights in connection with the merger, and if the merger is completed, obtain payment in cash of the fair value of their shares of common stock as determined by the Delaware Chancery Court, instead of the merger consideration. To exercise your appraisal rights, you must strictly follow the procedures described by Delaware law. Due to the complexity of these procedures, CPI stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. These procedures are summarized under the heading, “The Merger — Appraisal Rights,” beginning on page [l] of this proxy statement/prospectus. In addition, the text of the applicable provisions of Delaware law is included as Annex C to this proxy statement/prospectus. Failure to strictly comply with these provisions will result in loss of the right of appraisal.

 

 

The obligation of each of Comtech, CPI and Merger Sub to complete the merger is subject to the satisfaction, at or prior to the effective time of the merger, of a number of conditions, including the following:

 

 

 

In addition, the obligations of Comtech and Merger Sub to complete the merger are subject to the satisfaction of the following condition:

 

 

Comtech and CPI cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

Completion of the merger is conditioned upon the receipt of certain governmental clearances or approvals, including, but not limited to, the expiration or termination of the applicable waiting period relating to the merger under the HSR Act.

 

Comtech and CPI have agreed to use their reasonable best efforts to obtain all regulatory approvals required to consummate the merger. However, in using its reasonable best efforts to obtain these required regulatory approvals, Comtech will not be required to license, sell or dispose of any assets or submit to any limitation on the conduct of the business of Comtech or CPI that, in either case, arise out of this merger and would be reasonably expected after the closing to result in the divestiture of a material asset of Comtech or CPI or have a material adverse effect on Comtech, CPI or the benefits which Comtech reasonably expects to be realized from the merger. Comtech and CPI have agreed that any business or assets acquired or to be acquired by Comtech after May 8, 2010 will not be deemed material for purposes of the previous sentence.

 

CPI and Comtech have filed their required HSR Act notification and regulatory forms in other jurisdictions with respect to the merger and various governmental reviews are underway.

 

CPI will not, nor will it permit any of its subsidiaries to, nor will it authorize or knowingly permit any of its or any of its subsidiaries’ officers, directors, employees or representatives to (i) solicit, initiate or otherwise knowingly facilitate or encourage the submission of any acquisition proposal (as defined under “The Merger Agreement — Covenants and Agreements — No Solicitation of Transactions by CPI” beginning on page [l] of this proxy statement/prospectus), (ii) participate in any discussions or negotiations regarding any acquisition proposal or furnish to any person any non-public information with respect to or access to the properties of CPI in connection with an acquisition proposal, (iii) enter into any agreement or other understanding with respect to any acquisition proposal or enter into any agreement requiring CPI to terminate or otherwise fail to consummate the merger or (iv) fail to make, or withdraw or modify in a manner adverse to Comtech, the recommendation of the CPI board of directors in favor of the adoption of the merger agreement. Notwithstanding these restrictions, however, the merger agreement provides that, under specified circumstances at any time prior to the adoption of the merger agreement by CPI stockholders:

 

 

Notwithstanding the two bullet points above, the CPI board of directors or a committee thereof may not change its recommendation or approve an unsolicited acquisition proposal unless CPI notifies Comtech of its intention to do so (together with a copy of the agreement for any proposed acquisition proposal) at least three business days prior to taking such action and Comtech does not, within three business days of receipt of such notice, make an offer that the CPI board of directors or a committee thereof determines, in good faith, after consultation with its outside financial and legal advisors, is at least as favorable to CPI stockholders as the acquisition proposal (if the intended recommendation change relates to a acquisition proposal) or that would obviate the need for the recommendation change (if the intended recommendation change relates to any other event). Furthermore, the actions described in the preceding two bullet points may be taken only if the CPI board of directors or a committee thereof determines in good faith, after consultation with its outside legal advisors, that failure to take such action would be reasonably likely to constitute a violation of its fiduciary duties under Delaware law. See “The Merger — Background of the Merger” and “The Merger — CPI’s Reasons for the Merger; Recommendation of the CPI Board of Directors” beginning on pages [l] and [l], respectively, of this proxy statement/prospectus.

 

CPI’s board of directors also may respond to any tender offer that may be made in order to comply with the requirements of Rule 14e-2 or Rule 14d-9 under the Exchange Act and make any disclosure to its stockholders if required by law or by the rules and regulations of the NASDAQ Global Select Market or, if the board of directors, after consultation with counsel, concludes in good faith that making such disclosure is required in order for the board to comply with its fiduciary duties under applicable law.

 

Comtech has the right to terminate the merger agreement if, prior to the special meeting, the CPI board of directors or a committee of the board of directors changes its recommendation in favor of the adoption of the merger agreement in a manner adverse to Comtech. CPI has the right to terminate the merger agreement in order to enter

into an acquisition that is a superior acquisition proposal. See “The Merger Agreement — Termination of the Merger Agreement” beginning on page [l] of this proxy statement/prospectus.

 

The merger agreement may be terminated at any time before the completion of the merger by mutual written consent of Comtech and CPI.

 

The merger agreement may also be terminated prior to the completion of the merger by either Comtech or CPI if:

 

 

The merger agreement may also be terminated prior to the completion of the merger by Comtech (provided that Comtech is not then in breach of any of its representations, warranties, covenants or agreements, such that Comtech could not satisfy the applicable conditions to the closing related to its representations, warranties and obligations under the merger agreement) if:

 

 

The merger agreement may also be terminated prior to the completion of the merger by CPI (provided that CPI is not then in breach of any of its representations, warranties, covenants or agreements, such that CPI could not satisfy the applicable conditions to the closing related to its representations, warranties and obligations under the merger agreement):

 

 

CPI has agreed to pay a termination fee of $12 million to Comtech if the merger agreement is terminated under any of the following circumstances:

 

 

In addition, CPI has agreed to pay liquidated damages of $15 million to Comtech if Comtech terminates the merger agreement because the CPI board of directors or a committee thereof changes its recommendation in favor of the adoption of the merger agreement in a manner adverse to Comtech in response to a material event, development, circumstance, occurrence or change in circumstances or facts not related to a competing acquisition proposal that was not known to CPI’s board of directors or a committee thereof on the date of the merger agreement (or if known, the magnitude or material consequences of which were not known or understood as of that date).

 

If the merger agreement is terminated and pursuant to the terms of the merger agreement, Comtech is entitled receive a termination fee or liquidated damages, the receipt of the termination fee or liquidated damages, as applicable, will be Comtech’s exclusive remedy, and Comtech will not be entitled to any further or other rights, claims or remedies at law or in equity, all of which further or other rights, claims and remedies Comtech has irrevocably waived in the merger agreement.

 

The CPI board of directors, after consultation with CPI’s legal and financial advisors, believed that, among other things, the termination fees and liquidated damages payable by CPI in all the above circumstances, as a percentage of the equity value of the transaction, were reasonable and would not unduly impede the ability of a third party to make a superior bid to acquire CPI if such third party were interested in doing so, and were at a level consistent with, or favorable to, the fees payable in customary and comparable merger transactions. See “The Merger — CPI’s Reasons for the Merger; Recommendation of the CPI Board of Directors” beginning on page [l] of this proxy statement/prospectus.

 

Pursuant to a voting and standstill agreement entered into concurrently with the merger agreement, the Cypress Group stockholders have agreed to vote 49.9% of the outstanding shares of CPI common stock in favor of the merger. However, if the CPI board of directors changes its recommendation with respect to the merger in connection with a superior acquisition proposal (as such term is described in “The Merger Agreement — Covenants and

Agreements — No Solicitation of Transactions by CPI” beginning on page [l] of this proxy statement/prospectus), the Cypress Group stockholders will be obligated to vote only 25% of the outstanding shares of CPI common stock in favor of the merger and the remaining shares may be voted at the discretion of the Cypress Group stockholders. If the CPI board of directors changes its recommendation for any reason other than in connection with a superior acquisition proposal, the Cypress Group stockholders will still be obligated to vote 49.9% of the outstanding shares of CPI common stock in favor of the merger unless the five-day average closing price of Comtech common stock immediately prior to the change of recommendation is less than $24.00. In addition, the voting and standstill agreement includes restrictions on the ability of the Cypress Group stockholders to transfer their shares of CPI’s common stock before the merger and on their ability to transfer shares of Comtech common stock received in the merger following the closing of the merger. The voting and standstill agreement terminates upon the earliest of (i) the mutual agreement of the Cypress Group stockholders and Comtech, (ii) the termination of the merger agreement or (iii) the second anniversary of the merger.

 

Accordingly, the adoption of the merger agreement by CPI stockholders is substantially assured as long as the voting and standstill agreement remains in effect and the CPI board of directors does not change its recommendation (i) in response to a superior acquisition proposal or (ii) for any other reason following a decline in the five-day average closing price of Comtech’s common stock below $24.00. For a more complete description of the voting and standstill agreement, see “The Voting and Standstill Agreement” beginning on page [l] of this proxy statement/prospectus. The voting and standstill agreement is also attached to this proxy statement/prospectus as Annex B.

 

The merger generally will be a taxable transaction, and U.S. holders will generally recognize gain or loss in an amount equal to the difference, if any, between (i) the sum of any cash received (including cash received in lieu of a fractional share of Comtech common stock) and the fair market value, as of the effective time of the merger, of the shares of Comtech common stock received by such holder in the exchange and (ii) such holder’s tax basis in the shares of CPI common stock exchanged therefor.

 

CPI stockholders are urged to consult their tax advisors as to the specific tax consequences to them of the merger, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws in their particular circumstances.

 

Additional information is provided under “The Merger — Certain Material U.S. Federal Income Tax Consequences of the Merger” beginning on page [l].

 

The merger will be accounted for as an acquisition of a business. Comtech will record net tangible and identifiable intangible assets acquired and liabilities assumed from CPI at their respective fair values at the date of the completion of the merger. Any excess of the purchase price, which will equal the market value, at the date of the completion of the merger, of the Comtech common stock issued as consideration for the merger, over the net fair value of such assets and liabilities will be recorded as goodwill.

 

The financial condition and results of operations of Comtech after completion of the merger will reflect CPI’s balances and results after completion of the transaction but will not be restated retroactively to reflect the historical financial condition or results of operations of CPI. The earnings of Comtech following the completion of the merger will reflect acquisition accounting adjustments, including the effect of changes in the carrying value for assets and liabilities on depreciation and amortization expense. Intangible assets with indefinite useful lives and goodwill will not be amortized but will be tested for impairment at least annually, and all assets including goodwill will be tested for impairment when certain indicators are present. If in the future, Comtech determines that tangible or intangible assets (including goodwill) are impaired, Comtech would record an impairment charge at that time.

 

CPI stockholders will have different rights once they become Comtech stockholders due to differences between the organizational documents of Comtech and CPI. These differences are described in more detail under “Comparison of Stockholder Rights” beginning on page [l] of this proxy statement/prospectus.

 

Comtech intends to repay in full all existing outstanding indebtedness of CPI either upon the closing or shortly following closing, in each case in accordance with the terms of such indebtedness. Assuming that the appropriate notices required under the indentures governing CPI’s existing floating rate senior notes and senior subordinated notes outstanding are provided on the date of closing of the merger, these notes may be outstanding for up to 75 days following the closing of the merger.

 

The following table presents selected historical consolidated financial data of Comtech. The data as of, and for, the years ended July 31, 2009, 2008, 2007, 2006 and 2005 are derived from Comtech’s audited consolidated financial statements for those periods, as adjusted for the retroactive application of FSP APB 14-1. The data as of, and for, the nine months ended April 30, 2010 and 2009 (as adjusted for the retroactive application of FSP APB 14-1) are derived from Comtech’s unaudited condensed consolidated financial statements for those periods. Comtech’s management believes that the company’s interim unaudited financial statements have been prepared on a basis consistent with its audited financial statements and include all normal and recurring adjustments necessary for a fair presentation of the results for each interim period.

 

The information in the following table is only a summary and is not indicative of the results of future operations of Comtech. You should read the following information together with Comtech’s Annual Report on Form 10-K for the year ended July 31, 2009, Comtech’s Quarterly Reports on Form 10-Q for the quarterly periods ended April 30, 2010, January 31, 2010 and October 31, 2009, and the other information that Comtech has filed with the Securities and Exchange Commission, which is referred to as the SEC in this proxy statement/prospectus, and incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page [l] of this proxy statement/prospectus.

 

 

The following table presents selected historical consolidated financial data of CPI. The data as of, and for, the years ended October 2, 2009, October 3, 2008, September 28, 2007, September 29, 2006 and September 30, 2005 are derived from CPI’s audited consolidated financial statements for those periods. The data as of, and for, the six months ended April 2, 2010 and April 3, 2009 are derived from CPI’s unaudited condensed consolidated financial statements for those periods. CPI’s management believes that the company’s interim unaudited financial statements have been prepared on a basis consistent with its audited financial statements and include all normal and recurring adjustments necessary for a fair presentation of the results for each interim period.

 

The information in the following table is only a summary and is not indicative of the results of future operations of CPI. You should read the following information together with CPI’s Annual Report on Form 10-K for the year ended October 2, 2009, CPI’s Quarterly Reports on Form 10-Q for the quarterly periods ended April 2, 2010 and January 1, 2010, and the other information that CPI has filed with the SEC and incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page [l] of this proxy statement/prospectus.

 

 

The following selected unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction with, the consolidated financial statements and the related notes of both Comtech and CPI incorporated herein by reference, together with the more detailed unaudited pro forma condensed combined financial information provided in the section titled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page [l]. The following table presents selected unaudited pro forma condensed combined balance sheet data, as of April 30, 2010, and selected unaudited pro forma condensed combined statements of operations data for the nine months ended April 30, 2010 and for the fiscal year ended July 31, 2009, which are based on the historical financial statements of Comtech and CPI. Because of different fiscal period ends, and in accordance with the SEC’s 93-day conformity rule, information is presented as outlined below:

 

 

 

The unaudited pro forma combined financial information set forth above is based on preliminary estimates of the fair values of assets acquired and liabilities assumed and is based on the net book value of CPI’s assets and liabilities as of April 2, 2010. The preliminary estimates are based on available information, certain assumptions and preliminary valuation work and may change upon finalization of the fair values of assets acquired and liabilities assumed. In addition, because a portion of the purchase price is to be paid in the form of Comtech common stock, purchase accounting rules require that some of the merger and integration related charges and the value of CPI’s intangible assets (including goodwill) be determined based on the fair value of merger consideration on the date the acquisition closes.

 

The following table presents, for the nine months ended April 30, 2010 and the fiscal year ended July 31, 2009, selected historical per share data of Comtech and CPI as well as similar information, reflecting the combination of Comtech and CPI as if the transaction had been effective for the periods presented, which we refer to as “pro forma combined” information. The hypothetical CPI equivalent per share data presented below is calculated by multiplying the pro forma combined amounts for Comtech by the exchange ratio of 0.2382 of a share of Comtech for each share of CPI.

 

The ultimate amount of consideration that CPI shareholders will receive will be equal to a combination of $9.00 in cash plus a fraction of Comtech common stock equal to $8.10 divided by the average closing price of Comtech common stock over a specified period of time prior to closing, provided that the fraction shall not be greater than 0.2382 nor less than 0.2132. The hypothetical CPI equivalent per share data does not take into account the cash portion of the merger consideration.

 

The pro forma combined information is provided for informational purposes only and is not necessarily an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The July 31, 2009 selected comparative per share information of Comtech and CPI set forth below was derived from audited financial statements of Comtech (as adjusted for the adoption of FASB ASC 470-20, “Debt — Debt with Conversion and Other Options”) combined with CPI’s historical statement of operations data for the fiscal year ended October 2, 2009. The April 30, 2010 selected comparative share information of Comtech and CPI set forth below was derived from unaudited interim financial statements. In the opinion of Comtech and CPI’s management, respectively, the unaudited interim financial statements have been prepared on the same basis as their respective audited financial statements. You should read the information in this section along with Comtech and CPI’s historical consolidated financial statements and accompanying notes for the period referred to above included in the documents described under “Where You can Find More Information” beginning on page [l]. You should also read the unaudited pro forma condensed combined financial information and accompanying discussion and notes included in this proxy statement/prospectus beginning on page [l].

 

 

The unaudited pro forma combined financial information set forth above is based on preliminary estimates of the fair values of assets acquired and liabilities assumed and is based on the net book value of CPI’s assets and liabilities as of April 2, 2010. The preliminary estimates are based on available information, certain assumptions and preliminary valuation work and may change upon finalization of the fair values of assets acquired and liabilities assumed. In addition, because a portion of the purchase price is to be paid in the form of Comtech common stock, purchase accounting rules require that some of the merger and integration related charges and the value of CPI’s intangible assets (including goodwill) be determined based on the fair value of merger consideration on the date the acquisition closes.

 

Market Prices

 

The following table sets forth, for the fiscal periods indicated, the intra-day high and low sales prices per share for Comtech and CPI common stock as reported on the NASDAQ Global Select Market, which is the principal trading market for both Comtech and CPI common stock.

 

 

 

The following table sets forth the closing sale price per share of Comtech and CPI common stock as reported on the NASDAQ Global Select Market as of May 7, 2010, the last trading day before the public announcement of the merger agreement, and as of [l], 2010, the most recent practicable trading day prior to the date of this proxy statement/prospectus. The table also shows the implied value of the merger consideration proposed for each share of CPI common stock using only the closing price of CPI common stock as of the same two dates. The actual value of

the merger consideration will be determined by the average closing price of Comtech’s stock over the five consecutive trading days ending on (and including) the second trading day prior to closing.

 

 

No assurance can be given concerning the market prices of Comtech or CPI common stock before the completion of the merger or Comtech common stock after the completion of the merger.

 

Dividends

 

Comtech has never paid cash dividends on its common stock. Although Comtech currently expects to use earnings and cash on hand to finance the development and expansion of its business, Comtech’s board of directors reviews its dividend policy periodically. The payment of dividends in the future will depend upon Comtech’s earnings, capital requirements, financial condition, compliance with its credit facility, and other factors considered relevant by Comtech’s board of directors.

 

CPI currently expects to retain future earnings for use in the operation and expansion of its business and does not anticipate paying any cash dividends on its common stock in the foreseeable future.